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Highlights:.
- General Average is a cost-sharing mechanism for maritime incidents.
- Shippers must contribute to expenses based on their cargo’s value.
- Contributions are calculated after a maritime casualty, like a ship rescue
General Average is a well-established principle in maritime law that ensures fair financial distribution among all parties involved in a sea transport when a ship encounters an unforeseen event, such as a shipwreck, fire, or collision. This mechanism helps distribute the costs of saving a ship, its cargo, or other property involved in the incident. It is typically applicable when a sacrifice or expense is made to protect the ship and its cargo from a greater peril.
When a ship faces a crisis, and an emergency measure is taken — for instance, jettisoning cargo overboard to save the vessel — the expenses and losses incurred are not solely borne by the owner of the sacrificed property. Instead, all parties with goods on the ship must share the financial burden according to the proportion of their cargo’s value. This process of shared costs is called the General Average Contribution.
The General Average Contribution is determined by calculating the value of the cargo onboard, including the ship and its freight charges. Each shipper must contribute an amount proportional to the value of the goods they have on board. For example, if a ship carrying cargo from various shippers incurs expenses of saving the vessel or cargo, those costs are spread evenly based on the declared value of the goods each shipper has entrusted to the ship.
The calculation of the contribution is often facilitated by a General Average Adjuster, a professional who assesses the circumstances and determines the appropriate contribution for each party. Once the contributions are determined, shippers must pay their share before they can reclaim their goods.
This method ensures fairness, as no single party carries the full financial burden. Without this system, the owner of the vessel or the goods that were damaged or sacrificed might end up being left with an insurmountable financial burden. For example, if a cargo ship carrying expensive goods has to jettison a portion of its cargo to prevent further damage, the General Average system ensures that all the involved shippers will equally share the costs of this action, based on their cargo's value.
Conclusion: The concept of General Average Contribution is essential to maintaining fairness in the maritime industry during times of crisis. It allows for equitable distribution of the costs incurred in saving a ship and its cargo. Understanding this system ensures that all stakeholders are aware of their financial responsibilities, reducing potential disputes and ensuring smoother operations in maritime trade.
