General average adjustment

General average adjustment. This is a very complicated task because of the many interests that may be involved. Average adjusters are appointed before or after GA is declared and they proceed with adjustment.

This includes the obtaining of security from the various interests. Adjustment means that calculations are made for the contributions of all the interests. The adjustment is bound by the law of the port of destination of the vessel and cargo unless the contract of carriage provides that adjustment is to be made under the York Antwerp Rules. The adjuster may also take into account other clauses in the contract of carriage such as the New Jason clause which allows a shipowner to claim general average contributions from a cargo interest despite the vessel being negligently navigated and suffering a casualty, the consequent repairs being normally allowed as GA. The reason for the clause is to avoid any problems if general average is adjusted in the United States. The firm of average adjusters may also be bound by the “Rules of Practice of Average Adjusters” which lay down accepted procedures.

General average security is required by the shipowners from other interests, mainly cargo, before releasing their lien on the property. This security is against general average sacrifices, disbursements and expenses incurred and settled by them and, in certain circumstances, for salvage services performed without a contract having been signed.

The shipowners will require security in the following form from the consignee, called the “Concerned in Cargo”, before the delivery of each consignment at port of discharge:

(a) Signature of consignees or duly authorised representatives to the usual form of Lloyd’s Average Bond.

(b)A cash general average deposit from consignees in such amount advised to ship’s agents or consignees by the shipowners and/or their adjusters. This can be required additionally to the average bond.

(c) The alternative to a cash deposit from consignees, where goods are insured, is the cargo underwriter’s signature to an unlimited average guarantee.

Where the shipowners require a cash deposit as security, the ship’s or charterer’s agents entrusted with collection of security will be advised of the amount required. This is usually expressed as a percentage of the sound arrived or commercial invoice value of the goods.

Upon receiving a cash deposit from the consignees a general average deposit receipt must be given in exchange. These deposit receipts are “bearer” documents and therefore are not issued in duplicate. The deposits, as and when received by the agents, are placed with a first class bank in an interest earning account in the joint names of the ship’s agents and local Lloyd’s agents or such other party nominated.

Cash deposits collected cannot be used to settle disbursements or any other expenses incurred unless special authorisation instructions are received from the adjusters.

Subsequently the agents may receive instructions to remit the total deposits collected by them to the adjusters and they will be held in an interest earning account in the joint names of the shipowners and adjusters pending final adjustment.

In addition to the average bond, guarantee or cash deposits the shipowners and/or their adjusters will require .the consignees or receivers of the goods to complete a “Valuation Form”. When completing that form the consignees should attach a copy of the commercial or shipping invoice as the contributory value of the goods will be based on this value in accordance with York Antwerp Rules. Present average bonds have valuation forms attached.

When average is adjusted, all property that is at risk and saved by the general average act or sacrifice or expenditure contributes to GA according to its “arrived value” at the termination of the adventure, normally the end of the voyage. Cargo loaded after the general average act or discharged before the general average do not contribute. Cargo on board which is required to be delivered at a port of refuge does not contribute if the general average expenses arise after the vessel reaches the port, because for that cargo the voyage is completed and the safe prosecution of the remainder of the voyage is not the concern of that cargo owner.

The marine adventure is terminated on completion of discharge of the cargo at the destination. However, if the voyage is abandoned at an intermediate port, the adventure terminates at that port. The cargo may be discharged and forwarded to its destination. The value of the cargo would normally be calculated on arrival at the intermediate port. However, an internationally accepted “non-separation agreement” is generally used and attached to the general average security documents.


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General Average

General average and marine insurance