General average: a bill for somebody else's emergency

The message nobody expects

On 10 November, the day after the stack collapsed, the master of the MV Nordvahl Sirius threw three more containers overboard from the damaged bay, to stop the ship leaning further, and put into Vigo. The vessel lay there from 11 to 15 November while the stow was made safe. Port charges, a salvage tug on standby, a stevedore gang, a surveyor.

The same afternoon, Nordvahl Line declared general average and appointed Norbury and Vale as average adjusters.

Thistlewood's merchandiser had never heard the phrase. Two things about it are hard to believe the first time, and both are true.

Your cargo does not have to be damaged. A container that arrives in perfect condition contributes exactly as one that was flooded.

Nothing has to have happened to you at all. General average is not a claim about your goods. It is a bill for a decision the master took for everybody's benefit, and you are on the invoice because your goods were on the ship.

The oldest rule in commercial law, and what sets it off

The principle is simple and very old. Where an extraordinary sacrifice or expense is made deliberately and reasonably for the common safety of the ship, the cargo and the freight at risk, the cost is shared by everyone who benefited, in proportion to their values.

The word average here has nothing to do with arithmetic. It is the old commercial word for a loss.

Three conditions must be met, and each one is a real filter.

• Extraordinary. Ordinary voyage expenses do not count. Fuel does not count. A tug that is always used to berth does not count.
• Deliberate and reasonable. A container that falls overboard in a storm is a particular average — a loss to whoever owned it. A container thrown overboard to save the ship is a general average sacrifice, and it is shared. That is the whole distinction, and on our voyage the ship produced both on consecutive days.
• For the common safety. Not for the convenience of one interest.

The adjustment itself is done under the York-Antwerp Rules, a private code written by the international maritime community and revised from time to time. It applies because your bill of lading refers to it. Which edition applies to you is written on your own bill of lading. Go and read it rather than assuming, because the editions differ on real questions, such as which salvage and port-of-refuge costs come in.

The lien, and how you get your container back

Here is the part that arrives before any of the law does. Until security is provided, the carrier holds a lien over every consignment on board. That means they keep the goods until they are paid. Yours sit where they are.

Security has two pieces:

1. An average bond, signed by the cargo owner. It is a promise to pay whatever the adjustment finds, and to declare the value of the goods honestly.
2. Either an average guarantee from your cargo underwriter, or — if you have no cargo policy — a cash deposit, in the amount the adjuster demands, held until the adjustment is published.

That is the fork in the road, and it is worth more than any other single argument for buying cargo insurance.

Read the Ockford column as a cash-flow event, not as a loss. Their final bill is USD 4,416.00 on cargo that arrived perfect. But to see the cargo at all, they had to find USD 7,680.00 in five working days, carry USD 1,078.00 of demurrage while they found it, and then wait 2 years 7 months for USD 3,264.00 of their own money to come back. A company with tight working capital may simply be unable to do that, and there is no appeal.

Thistlewood's underwriter issued the guarantee on a telephone call and an email, at no charge, because it is part of the cover.

The contribution, and the value it is charged on

The contribution is proportional to contributory value. That is the value of the cargo at the destination at the end of the voyage, less the charges that would not have been paid if the cargo had been lost. It is not your insured value, and it is not your invoice.

On TW-8807 the adjusters put the contributory value at USD 158,340.00 and the general average contribution at 4.60%, which is USD 7,283.64. Vasteral paid it under the policy, as they had to, and Thistlewood never saw a demand.

Two consequences follow, and both are worth carrying.

A high-value cargo pays more. The contribution goes by value, so a container of garments contributes more than a container of tiles of the same weight. That is the mirror image of lesson 1, where the carrier's limit went by weight and garments came off worst. The two instruments are tied to different things, and garments happen to be on the wrong side of both.

It has nothing to do with anything you control. Nothing in your packing, your choice of carrier or your own care of the goods changes whether a general average is declared. It is the purest example in this course of a risk that is not yours and arrives anyway.

Salvage, which travels with it

Where salvors save the vessel rather than her own crew, a salvage award follows. It is shared across the same interests on the same principle: everybody whose property was saved contributes in proportion to its value. In practice it reaches a cargo owner the same way — a demand for security before release, then a bill.

The point for a merchandiser is not the law. It is that an incident on a vessel three bays away can hold your goods, cost you cash on a deadline, and produce an invoice years later, on cargo nothing ever touched. That is what a cargo policy quietly removes, and it is invisible in any comparison of premium against expected damage. Which is exactly where the next lesson has to start.