General Average

General average is a principle of maritime law that dates back thousands of years, with origins in the Rhodian Sea Law of approximately 800 BC. When a vessel faces a serious peril at sea and the captain must sacrifice cargo or incur extraordinary expenses to save the ship and its remaining cargo, the financial loss is shared proportionally among all parties with goods on board. This means that even if your specific containers were untouched, you may owe a share of the total loss simply because your freight was on the same vessel.

When General Average Gets Declared

A shipowner or vessel operator declares general average when an intentional sacrifice or extraordinary expenditure is made to preserve the vessel and cargo from a common danger. Common triggers include:

Jettisoning cargo overboard to stabilize a listing ship. Intentional grounding to prevent a worse outcome such as capsizing. Emergency towing fees after engine failure in open water. Firefighting efforts and related salvage operations when a container fire threatens the entire vessel. Port of refuge expenses when a damaged ship diverts to an unplanned port for emergency repairs.

The 2021 Ever Given grounding in the Suez Canal and the 2018 Maersk Honam fire (where 69 containers burned) are two high-profile cases where general average was declared. In both instances, thousands of shippers with cargo aboard were required to contribute to the shared loss.

How the Contribution Is Calculated

General average adjustments follow the York-Antwerp Rules, the internationally recognized framework last updated in 2016. A professional average adjuster (typically a specialized firm such as Richards Hogg Lindley or Charles Taylor) is appointed to assess the total loss, catalog all cargo aboard, and calculate each party’s proportional share.

The formula works roughly like this: if a vessel carries $100 million worth of cargo and the total general average loss (sacrificed cargo, salvage fees, emergency repairs) amounts to $10 million, each cargo owner contributes approximately 10% of their cargo’s declared value. A shipper with $50,000 in goods aboard would owe around $5,000.

The adjustment process is notoriously slow. Final settlements for major general average cases often take two to five years. During this time, cargo owners who want their goods released must post a general average bond or provide a cash deposit, typically ranging from 10% to 100% of the cargo’s CIF (cost, insurance, freight) value, depending on the severity of the incident.

What Happens to Your Cargo

When general average is declared, the shipping line will not release any containers until each consignee provides acceptable security. This typically requires three documents: a general average bond (a guarantee from your marine insurance provider), a completed general average guarantee form from the adjuster, and proof of cargo value (commercial invoice, packing list). Shippers without marine cargo insurance face the worst outcome: they must post a cash deposit to retrieve their goods, and those funds remain tied up until the adjustment concludes years later.

Insurance and Protection

Marine cargo insurance is the primary protection against general average exposure. A standard “all risk” policy covers both direct physical loss and general average contributions. Annual policies for regular importers typically cost between 0.15% and 0.50% of cargo value, depending on commodity type, trade lane, and loss history. For a seller importing $500,000 in goods per year, that translates to $750 to $2,500 annually for coverage that could prevent a five-figure cash deposit requirement.

Sellers who ship FOB (Free On Board) sometimes assume the buyer’s responsibility begins only at destination, but general average obligations attach to whoever owns the cargo at the time of the incident. Under FOB terms, ownership transfers at the port of origin, making the buyer liable for any general average contribution during the ocean voyage.

Practical Advice for FBA Sellers and Importers

Never ship ocean freight without marine cargo insurance. The cost is minimal relative to the potential exposure. Keep commercial invoices and packing lists organized and accessible, because the adjuster will request them, sometimes months after the incident. When booking freight, confirm that your forwarder can facilitate the general average documentation process. Some budget forwarders lack the infrastructure to handle these situations efficiently, leading to additional delays in cargo release. Services like MeisterPrep that coordinate freight and prep can help ensure documentation stays organized from origin through final delivery to Amazon fulfillment centers, reducing friction if a general average situation arises.