‘Ever Given’ vessel owner declares ‘general average’

Cargo owners and their representatives with containers on the Evergreen container ship Ever Given are preparing for a potentially complicated process to get freight released after the vessel’s owner declared ‘general average’ on the ship, with owners of uninsured cargo having to wait weeks or months to recover their cargo.

Indeed, the grounding of the Ever Given is shaping up as potentially the most complex ‘general average’ (GA) claim of all time, with litigation potentially involving 20,000 teu and up to 20 cargo interests per container, Lloyd’s List has reported.

Various sources have confirmed that the Ever Given’s Japanese shipowner Shoei Kisen declared ‘general average’ on 1 April. General Average is a legal principle of maritime law and requires that all cargo owners on a vessel to contribute to the costs of any loss, even if their cargo is not damaged, explained insurance specialist Avalon Risk Management.

Lloyd’s List has reported that Egypt is looking to claim around $1bn in compensation for the casualty that closed the Suez Canal for six days last month, according to the head of the Suez Canal Authority. The money relates to lost income from transit fees, damage to the canal during the dredging and salvage efforts, and equipment and labour costs.

Ever Given, the boxship whose grounding caused the shutdown, is owned by Shoei Kisen Kaisha of Japan, and was on charter to Taiwanese operator Evergreen at the time of the incident.

Avalon highlighted that insurance can speed up the cargo release process by posting the General Average Guarantee to meet the cargo owner’s contribution and facilitate release of the cargo. Once the vessel owner declares General Average, appointed General Average adjusters will assess each shipment's value on board and apply a formula that determines the financial contribution of each cargo owner. Cargo owners will then need to post a General Average guarantee.

The website forwardersmatter.com noted that insured customers will receive their cargo first, while uninsured shippers need the full costs to obtain release. It said that in this instance, “that cost is likely to be large and complex to work out. The costs include claims from other parties which will delay claims adjustors assessing the level of costs incurred. Those with insurance in place will simply provide an insurance certificate. Those without insurance need the final figures to pay their deposit. Difficult to provide a time-frame – could be weeks or months.” 

Maersk Honam example

It cited the example of the Maersk Honam, in which the claims adjustor settled the fixed salvage security at 42.5% of cargo value and 11.5% as a GA deposit – meaning that for cargo valued at $100,000 the deposit to obtain release of cargo was US$54,000 – which allowed the vessel owner to put a ‘lien’ on the cargo, authorising them to sell where the security bond is not paid by the cargo owner. 

GA procedures

In response to the uncertainty caused by the declaration of general average by the owners of Ever Given, the British International Freight Association (BIFA) today alerted its members to follow GA procedures, “even though there is no certainty that any cargo has actually been lost, and there are likely to be further legal actions regarding blame and salvage”.

BIFA told members that have been affected by the news that general average has been declared by the owner of the Ever Given “that if they have incorporated the BIFA Standard Trading Conditions into their contract with their clients, there is an indemnity concerning General Average costs in clause 20 D.”

It added: “Furthermore, Clause 22 states: ‘Where liability arises in respect of claims of a General Average nature in connection with the Goods, the Customer shall promptly provide security to the Company, or to any other party designated by the Company, in a form acceptable to the Company’.”

Robert Keen, director general of BIFA, said: “When our members receive notification that a General Average has been declared for a vessel, whatever the position, their first action must be to give the importer immediate notice. The appointed average adjusters will need to be in possession of completed guarantees and bond forms, or a cash deposit before release of cargo, so it is vital that the importer takes immediate action.

“Our advice to members is that with General Average being declared, any standard marine policy will include General Average losses, so if the goods have been insured the importer should obtain a General Average guarantee from the insurers. 

“If no insurance has been organised then a cash deposit will be needed.”