The short version
General average (GA) is the most counter-intuitive rule in maritime law: it does not ask whose fault it was, or whose cargo was damaged — only whose property was saved. When the master deliberately jettisons cargo, beaches the ship or diverts to a port of refuge to save the whole adventure, those intentional, reasonable and extraordinary sacrifices and expenses are shared by ship, cargo and freight in proportion to the value each of them saved.
For an exporter, three things matter: 1) Undamaged cargo still contributes, because the basis is value saved, not damage suffered. 2) No security, no release — the carrier has a lien, and until an average bond or an insurer's guarantee is in place the container stays at the terminal while storage and detention charges keep running. 3) Insurance is the cheapest answer — ICC(A), (B) and (C) and China's PICC FPA cover GA sacrifice, contribution and salvage charges, so with a policy in place your insurer signs the guarantee instead of your cash.
This guide runs through the four conditions → GA versus particular average → what is admissible → how contribution is calculated → the timeline → security → insurance → the mistakes we see → the DALI case → a 48-hour checklist.
1. What makes a general average: the four conditions
Article 193 of the Chinese Maritime Code defines it as extraordinary sacrifice or expenditure intentionally and reasonably made or incurred for the common safety of ship, cargo and other property in the same maritime adventure. Unpacked, that is four conditions which must all be met — if one fails, the whole item drops out of the adjustment.
| Condition | Meaning | How it is tested | Common failure |
|---|---|---|---|
| ① Real common peril | Ship and cargo face the same danger, and it is real, substantial and imminent | Deck and engine logs, sea protest, weather records, class survey reports | Jettisoning merely because a fire was feared; a danger affecting the ship alone |
| ② Intentional and reasonable | The master chose the measure; it was not the accident itself, and it was reasonable in the circumstances | What alternatives existed at the time, their relative cost, whether advice was taken | Jettisoning where tugs were available; discarding far more cargo than needed |
| ③ Extraordinary sacrifice or expense | Beyond ordinary operation of the voyage | Compare with normal cost for that route and vessel — would it have been spent anyway? | Crew wages, ordinary port charges and bunkers on a normal voyage are operating costs, not GA |
| ④ The measure worked | Some property was saved and the adventure preserved or completed | Whether anything survived to contribute | Total loss of ship and cargo: no contribution, though salvage is dealt with separately |
One procedural point is often missed: the party claiming contribution bears the burden of proof (Article 196). The carrier and adjuster must justify every item. That does not mean "whatever the shipowner says goes" — but objections must be raised in writing during the adjustment, because reopening figures afterwards is far more expensive.
What usually fails, or is excluded
| Situation | Why it is excluded |
|---|---|
| Loss of time, market depreciation, business interruption, customer claims | Indirect losses. Excluded by Article 193(2) and by every version of the York-Antwerp Rules |
| Cargo burnt in the fire itself, damage from the collision itself | Damage caused by the casualty, i.e. particular average. Only damage deliberately caused to fight the fire is GA |
| Environmental damage, clean-up costs, pollution prevention measures | Excluded by Rule C of the York-Antwerp Rules, subject to a narrow exception in Rule XI(d) |
| Sacrifice of undeclared or misdescribed cargo | Article 200: such cargo contributes, but its own sacrifice is not allowed — a double penalty |
| Expenditure solely for the ship's benefit (deviation or repairs for owners alone) | Not "common", so it stays with the shipowner |
| Loss caused by a fault for which the carrier is exempt | GA can still stand, but the innocent party may pursue the party at fault separately (Article 197) |
2. Don't confuse: GA, particular average, salvage and sue-and-labour
These four are routinely mixed up in day-to-day claims work, yet the payer, the legal basis and the insurance route are all different. One table:
| General average | Particular average | Salvage | Sue & labour | |
|---|---|---|---|---|
| Trigger | Deliberate measure for common safety | Accidental casualty | Voluntary service by a third-party salvor | Insured acting to avert or minimise loss |
| Deliberate act? | Yes, by the master | No | Yes, by the salvor | Yes, by the insured |
| Who pays | Ship, cargo and freight in proportion to contributory value | The party whose property is damaged | Saved property, in proportion to salved value | Insurer, over and above the sum insured |
| Basis | Maritime Code Ch. 10 + York-Antwerp Rules | General maritime law / bill of lading terms | Salvage Convention 1989 + LOF | Insurance law and policy terms |
| Insured? | Yes: sacrifice + contribution + salvage charges | Only if a covered peril | Yes: salvage charges | Yes: reasonable sue-and-labour costs |
All four in one incident: an engine-room fire breaks out. Cargo destroyed by the flames is particular average; cargo ruined by water used to fight the fire is general average; the firefighting tug's reward is salvage (allowable in GA where the conditions are met); and the extra tug kept on standby to limit the loss may be sue-and-labour. Four different numbers on one casualty statement is normal.
3. What can be allowed in general average
The York-Antwerp Rules (the 2016 revision is the current market standard) list admissible items rule by rule. You do not need to memorise them, but you should be able to read every line of the adjustment:
| Category | Typical items | What cargo owners should watch |
|---|---|---|
| Jettison | Cargo thrown overboard to refloat or stabilise the ship, including containers lost overboard | Deck cargo must be carried where customary and not improperly stowed; undeclared or misdescribed cargo is not allowed |
| Firefighting | Water, foam and cutting away bulkheads — damage to cargo and ship | Only damage caused by the firefighting; what burned is not GA |
| Voluntary stranding and refloating | Damage from deliberately beaching to avoid sinking; tugs, lightening and barging to refloat | "Voluntary" turns on the master's decision as logged; cargo damaged during lightening is also GA |
| Machinery and boiler damage | Damage from forced full astern or overloading to refloat | Only the common-safety portion; ordinary wear is excluded |
| Port of refuge | Inward and outward port charges, pilotage, towage, berth; crew wages, maintenance, fuel and stores during the extra detention | The largest and most disputed block; it accumulates daily and is easily inflated |
| Discharge, storage, reloading | Cost and damage from handling cargo for repairs | Whether the storage period was necessary and the rates reasonable is a frequent argument |
| Repairs | Temporary repairs in full; the GA portion of permanent repairs, with new-for-old deductions (bottom cleaning and painting usually half, and only if done within 24 months) | Repair accounts are the core evidence; yard estimates must tie to completion invoices |
| Substituted expenses | Extra cost incurred to avoid an expense that would itself have been allowable | Article 195: capped at the expense avoided (Rule F) |
| Salvage remuneration | Where the conditions are met, the reward paid to salvors is allowed in GA and shared (Rule VI) | Salvage security and GA security are separate; DALI required both |
| Funds and interest | Interest on disbursements, cost of insuring them | Under the 2016 Rules: 12-month ICE LIBOR + 4%, running to three months after the adjustment; the old 2% commission is gone |
| Adjusting fees | The average adjuster's fees and expenses | Normally allowed as GA and shared; scales with the complexity of the case |
The rule version changes the answer. The 1994, 2004 and 2016 rules differ on port-of-refuge expenses, interest and whether low-value cargo may be excluded. Which version applies is set by the GA clause in the bill of lading or charter party, not by the adjuster's preference. When an adjustment lands on your desk, the first check is which version your B/L incorporates.
4. How the money is split: values, rate and a worked example
There is only one formula: a party's contribution = its contributory value × the rate, where the rate = total allowable GA sacrifice and expenditure ÷ total contributory values. So the question is never "who lost the most" but "what was each interest worth once the casualty was over".
4.1 The three contributory values
| Interest | Contributory value (Article 199) | In practice |
|---|---|---|
| Ship | Sound value at termination of the adventure less non-GA damage; or actual value plus GA sacrifice | Class or market valuation, less the cost of repairing non-GA damage |
| Cargo | Value at shipment + insurance + freight, less non-GA loss and freight at carrier's risk | Normally the CIF commercial invoice value, adjusted to arrival value where required |
| Freight | Freight at the carrier's risk and earned at termination, less operating costs incurred to earn it, plus GA sacrifice | Prepaid freight usually contributes nothing (risk already transferred); freight collect does |
Passengers' luggage and personal effects do not contribute. Note also that the owner of sacrificed cargo still contributes — on saved value plus the amount made good — while recovering its sacrifice from the GA fund; the net position is usually positive. That is "pay first, then be indemnified", not a contradiction.
4.2 A complete example
Assume an adjuster has agreed the following figures for a casualty (illustrative only, not a real case):
| Item | Amount (CNY) |
|---|---|
| Contributory value — ship | 180,000,000 |
| Contributory value — cargo (total) | 450,000,000 |
| Contributory value — freight | 15,000,000 |
| Total contributory value | 645,000,000 |
| Allowable GA sacrifice and expenditure (incl. interest and adjusting fees) | 12,000,000 |
| Rate | 12,000,000 ÷ 645,000,000 ≈ 1.86% |
Therefore:
- Ship: 180,000,000 × 1.86% ≈ CNY 334,800
- Cargo, all owners: 450,000,000 × 1.86% ≈ CNY 837,000
- Freight: 15,000,000 × 1.86% ≈ CNY 27,900
- One shipment with a CIF value of CNY 500,000: 500,000 × 1.86% ≈ CNY 9,300
What that means commercially: rates in the 1%–5% band are typical, and major casualties go well beyond — in the 2006 Hyundai Fortune case cargo was asked for cash security of up to 75% of value. For any single shipment the real exposure is not "total loss of the cargo" but "cargo value × rate, plus storage and detention while the box is held". The first is usually low single digits; the second can add thousands of dollars within days in peak season and is often more expensive than the contribution itself.
5. What happens after the declaration
| Stage | Who acts | What reaches you |
|---|---|---|
| Day 0 Casualty and declaration | Master/owner declares GA and appoints an average adjuster (Richards Hogg Lindley, Charles Taylor, Braemar, or the CCPIT averaging office for Chinese cases) | Usually a "General Average Declaration" forwarded by the carrier or your forwarder |
| Day 1–7 Security notice | Adjuster issues security requirements and opens a case page | Security list: average bond, average guarantee, deposit amount, submission inbox, case reference |
| Day 7–30 Security provided | Cargo owner and cargo insurer | Insurer's guarantee, or a signed bond plus cash deposit |
| On security Release | Carrier releases against the adjuster's confirmation | Release list updated (often a public case page), then collection |
| 1–6 months Evidence | Adjuster collects logs, sea protest, survey reports, repair accounts, cargo value documents | Requests to you for invoices, packing lists, B/L copies, policy |
| 6 months–3 years Adjustment | Adjuster fixes allowances, contributory values and the rate | The adjustment, showing each bill of lading's contribution |
| Settlement | Parties settle; deposits refunded or topped up | Refund or additional payment; insurer closes the claim |
Manage the expectation: one to three years to an adjustment is normal, two to four years for a large container casualty, and DALI is widely expected to run for years. Interest stops three months after the adjustment issues; contribution claims are time-barred one year after the adjustment and in any event six years after the adventure ended (Rule XXIII). "Wait for it to close itself" is not a strategy.
6. Security: three routes and one red line
In a GA case the first question is not "how much do I owe" but "how do I get the cargo out". The carrier has a lien over cargo for unpaid general average where no adequate security is given (Article 87), and Article 202 requires the contributing parties to provide security on request. Three routes dominate:
| Route | Issued by | When | Cost and effect |
|---|---|---|---|
| Average bond | Signed by the cargo owner | The base document in every case; mandatory for uninsured cargo | No cash, but an unqualified promise to pay, including interest and adjusting fees |
| Average guarantee | Cargo insurer | First choice where insured; most adjusters accept only the insurer's own document | No cash tied up, usually no separate charge; the contribution is recorded against the policy |
| Cash deposit | Cargo owner | Uninsured cargo, or where the insurer will not issue | Typically 10%–20% of cargo value including freight, higher in severe cases; cash out, no interest, slow refund |
The red line: never sign a blank form or one with the amount left open just to get the box moving. An average bond is a payment undertaking — signing creates the obligation. The cap, whether interest and adjusting fees are included, and whether salvage is covered must be confirmed in writing by your insurer and the adjuster. Fake GA notices asking for payment to a private account are a real fraud pattern: verify the sender domain and case reference, and call the carrier or your booking agent back on a known number.
One document that is most often missed: the Non-Separation Agreement (NSA). Where the voyage is abandoned at a port of refuge and cargo is forwarded on another vessel, the shipowner will ask cargo interests to sign an NSA — a promise that the general average will be adjusted as if the original voyage had been completed. Without it the cargo may not be forwarded. The NSA and the average bond are two separate documents: signing the bond does not entitle you to release or transhipment.
What happens without security
- No release: the container stays at the terminal or on board while storage and detention accrue (see demurrage and detention explained)
- Possible auction: where charges and security remain outstanding 60 days after arrival, the carrier may apply to court to sell the liened cargo
- Cascading breach: missed delivery windows, customer claims, letter of credit discrepancies — usually a multiple of the contribution itself
- No leverage: by the time the adjustment issues, there is almost nothing left to argue about
7. How cargo insurance responds: three questions that matter
7.1 General average is not an "all risks only" cover
This is the most common misconception. All three sets of Institute Cargo Clauses — ICC(A), (B) and (C) — cover GA sacrifice, contribution and salvage charges. Under the PICC ocean marine cargo clauses, FPA (Free of Particular Average) already includes "general average sacrifice, contribution and salvage charges"; WA and All Risks simply add partial loss from natural calamities and extraneous causes. So "I only bought the cheapest cover, therefore I have no GA protection" is wrong — the real problems are no cover at all, or under-insurance.
7.2 Insure for the full value
Where the sum insured is below the insurable value, the insurer pays in proportion. Insure 80% of a CNY 1,000,000 cargo and a CNY 30,000 GA contribution returns CNY 24,000, leaving CNY 6,000 with you. Since the contribution base is the CIF value, declaring a low value or insuring on an FOB basis amplifies the gap at exactly the wrong moment.
Run the numbers: CIF value CNY 1,000,000, sum insured CNY 800,000 (80%), GA rate 3% → contribution CNY 30,000 → insurer pays 30,000 × 80% = CNY 24,000, you bear CNY 6,000. Insured in full, the contribution is recoverable in full (whether a deductible applies depends on the policy wording — confirm with your insurer).
7.3 Order of events: guarantee first, settlement later
The standard sequence is insurer issues the guarantee so cargo is released → adjustment issues → insurer pays the contribution. So the first call after a GA notice goes to your cargo insurer, not to the carrier's claims department. Where the buyer insures (common under FOB and CIF), press the buyer to activate its insurer immediately — otherwise the cargo sits at destination and the cost eventually comes back to the shipper.
8. Seven mistakes we see exporters make
| Mistake | Consequence | Do this instead |
|---|---|---|
| ① Declaring a low value to save premium | Article 200: sacrifice is assessed on the declared value while contribution is on the actual value — you lose twice | Insure the real transaction value (CIF) and keep invoice, customs declaration and policy consistent |
| ② No cargo insurance at all | Cash deposit of 10%–20% of value locked up for years | Insure by default and price it into the quote; at minimum ICC(C) or FPA |
| ③ Assuming FOB means it is not your problem | The buyer walks away and the carrier pursues the shipper on the B/L, with a lien over the cargo | Verify the buyer's cover, add GA and abandonment fallback clauses, retain control documents where needed |
| ④ Ignoring the notice | No release, and storage plus detention compound — thousands of dollars within days in peak season | Reply to the adjuster within 24 hours, start the security process, keep every message |
| ⑤ Paying a cash deposit out of your own pocket | Cash tied up, no interest, refund only after the adjustment | Have the insurer issue an average guarantee first; negotiate staged or reduced security only if that fails |
| ⑥ LCL without a house-bill breakdown | The whole container is held and every co-loader is affected; the forwarder carries the blame | Send the adjuster HBL numbers, descriptions, weights and parties immediately |
| ⑦ Not tracking the file or the time bar | Contribution rights lapse one year after the adjustment; deposits sit unclaimed | Keep a case log, review quarterly, and check the adjustment within 30 days of receipt |
9. Case review: DALI and the Baltimore bridge (2024)
On 26 March 2024 the 9,900 TEU container ship DALI lost power while leaving Baltimore and struck the Francis Scott Key Bridge, which collapsed onto the bow. The owner, Grace Ocean, declared general average and appointed Richards Hogg Lindley to collect security and prepare the adjustment — running in parallel with the owner's petition to limit liability.
| What cargo parties were asked for | Detail |
|---|---|
| Insured cargo | An average guarantee signed by the cargo insurer, plus a copy of the commercial invoice; where the invoice excludes ocean freight, the freight figure separately |
| Uninsured cargo | An average bond signed by the cargo owner plus a cash deposit, the level set later by the adjuster |
| Scope of security | General average security and salvage security — the salvors claimed separately |
| Release condition | Cargo released only once security was accepted; the adjuster published a daily list of containers cleared |
| LCL and groupage | Forwarders were required to submit house-bill breakdowns urgently (HBL numbers, descriptions, weights, parties) or the container could not move |
Three lessons worth keeping. First, GA covers only the extraordinary cost of saving the ship and cargo — not bridge damage, injury or pollution, which sit with the owner's liability limitation and P&I cover; do not merge the two discussions. Second, even a container that arrived perfectly intact had to provide security before delivery. Third, salvage security and GA security are separate documents, and missing either one still stops the box.
10. Your first 48 hours after a GA notice
Hours 0–24: verify and mobilise
- □ Confirm the vessel, voyage and B/L numbers actually fall within the GA declaration (one vessel, several declarations is possible)
- □ Verify the source: sender domain, case reference, adjuster's website — call your booking agent back on a known number if in doubt
- □ Notify your cargo insurer or broker and request the average guarantee template plus the document list
- □ Assemble commercial invoice, packing list, B/L copy and policy
- □ Check that invoice, customs declaration and policy values agree, and confirm the CIF figure
Hours 24–48: security and release
- □ Sign the average bond where required, after reading the cap, interest and fee wording
- □ Have the insurer send the guarantee directly to the adjuster's case inbox (most will not accept a forwarder relay)
- □ Confirm you appear on the "security accepted" list and obtain the release instruction
- □ Coordinate collection and storage with the destination agent to avoid a second layer of charges
- □ Open a case log: adjuster contact, reference, security amount, expected release date, expected adjustment date
For LCL, one extra step: send the house-bill breakdown immediately. A single missing shipment can hold an entire container, and that is where forwarders most often get blamed.
11. How Mighty Shipping can help
- Notice verification: confirm the declaration is genuine, which rule version applies and what security is really required, so you are not led by a fake adjuster or an overstated demand.
- Security execution: coordinate insurer and adjuster, prepare invoices, B/Ls and house-bill breakdowns, and push for same-day issue and same-day confirmation.
- Release chasing: track the destination release list and collection slots so storage and detention stay minimal.
- Contribution review: check contributory value bases, CIF and freight figures, exchange rates, exclusion of low-value cargo and interest periods, and object in writing to anything unsupported.
- Insurance design: structure cargo cover by trade lane, commodity and value so a GA contribution is fully backed rather than partly self-funded.
Received a general average notice and not sure what comes next?
Send us the vessel and voyage, B/L number, cargo value and the adjuster's email. Our ops team will advise on the security route, check the figures and help you get the release back on schedule.
Talk to usFAQ
What is the difference between general average and particular average?
General average covers extraordinary sacrifice or expenditure intentionally and reasonably incurred for the common safety of ship and cargo, shared by ship, cargo and freight in proportion to contributory value. Particular average is accidental damage to one party's property, borne by that party or claimed from its own insurer. The tests are whether a deliberate act is involved and whether the loss is shared. They coexist: cargo burnt in a fire is particular average, cargo damaged by firefighting water is general average.
My cargo arrived undamaged — why contribute?
Because the basis is who was saved, not who was damaged. Jettison, refloating and port-of-refuge costs were incurred for the whole adventure, and your cargo arrived intact because of them. You contribute on the value saved, not on your loss — Article 199 of the Chinese Maritime Code and the York-Antwerp Rules.
How much is a typical contribution?
Rate = total allowable GA ÷ total contributory values. Low single digits (about 1%–5%) are common, higher in major casualties — cargo security in the 2006 Hyundai Fortune case reached 75% of value. Security is collected against an estimate and trued up in the final adjustment.
What if I have no insurance?
You sign the average bond yourself and lodge a cash deposit, typically 10%–20% of invoice value including freight, tied up until the adjustment issues. Insurance bought after the event will not normally respond retrospectively, so first verify the value and the deposit demanded and negotiate the security format with the adjuster.
How does the insurer's guarantee work, and does it cost extra?
Send the notice, invoice, packing list and B/L copy to your insurer, which signs an Average Guarantee and sends it directly to the adjuster. Issuing it is normally part of the policy service; the eventual contribution is recorded against the policy. It does not tie up cash.
How long does the adjustment take?
One to three years typically, two to four for large container casualties. Interest stops three months after issue; contribution claims are time-barred one year after the adjustment and six years after the adventure ended (Rule XXIII, YAR 2016).
Under FOB, who pays?
Incoterms put the risk on the buyer once cargo is on board, so the buyer in principle contributes. But the carrier bills on the bill of lading, so a non-paying or abandoning consignee can push the carrier back to the shipper, with a lien over the cargo. Verify the buyer's insurance and add a fallback clause.
Can I refuse to contribute?
Not simply by refusing — without security the carrier may lien the cargo under Article 87, with storage and detention accruing and possible court sale. What you can do is challenge the case or the figures: no real peril, unreasonable measures, indirect or environmental losses, items outside GA, wrong contributory values. Raise it in writing during the adjustment.
Sources and further reading
Sources checked 2026-10-19. They were used to verify the rules and the security process; rates, security percentages and case durations are industry orders of magnitude, not a forecast for any particular case. Always rely on the adjuster's notice, the bill of lading terms and the policy in force.
- CMI — York-Antwerp Rules (text and cargo-owner guidelines)
- China Maritime Law Association — York-Antwerp Rules 2016 (Chinese text)
- Chinese Maritime Code, Chapter 10 — General Average (Articles 193–203)
- Richards Hogg Lindley — DALI general average security instructions (12 April 2024)
- AP — Baltimore bridge collapse: owner asks cargo owners to help cover salvage costs
- Practice note on GA deposits and the Hyundai Fortune 75% security call
- Related from Mighty Shipping: Demurrage and detention explained, Marine cargo insurance, Incoterms 2020 explained, Types of bill of lading, Destination clearance and DDU/DAP costs, Ocean freight
Disclaimer: this article is a general practical introduction to general average. Rates, security percentages and timelines are industry orders of magnitude and illustrative calculations, not a prediction for any specific case and not legal advice. Whether general average exists, what it covers and how it is apportioned depend on the adjusting rules incorporated in the bill of lading or charter party, the average adjustment, and the findings of the competent court or tribunal. For a live case, consult the average adjuster and a maritime lawyer as well.