You may have heard that a “General Average” (GA) was recently declared for a ship moored at the Port of LA. This is a big deal for importers owning freight on the vessel. While there are a lot of companies that don’t know what general average is, it could be just a matter of time before their freight is affected by it. So, what is a general average, and why is it so important for every shipper to know about?

Interesting (at least to supply chain nerds) is that general average is a very old maritime law concept that is still enforced in modern container shipping. In basic terms, GA becomes relevant when something bad happens to cargo on a ship and sets the rules for how to deal with the cost impact those issues create. The process and enforcement of General Average are primarily set through the York–Antwerp Rules. Developed in 1890 and currently in their 2016 version, these rules define what constitutes a general average act, how to calculate values, and which expenses are shared, ensuring fairness when a qualified incident takes place.

What happens when a general average is declared?

Declaring general average means that shipowners and all those with goods on a vessel must proportionally share the losses from a “voluntary” or “extraordinary” sacrifice made for the common safety of the parties involved.

As a simple example, if the ship’s crew decides it is necessary to jettison a portion of the cargo onboard to save the ship from sinking, the cost of that lost cargo is shared equally by all parties with cargo on board, based on the value of their respective interests. Additional expenses may also be shared beyond the cost of goods damaged or lost, including water or other damage from extinguishing a fire, transit to a port of refuge, and, in some cases, the cost of salvage.

Another key part of the process is that, once general average is declared, an “Average Adjuster” is appointed. That party is responsible for collecting data on the value of goods on the ship and other costs and then calculating each party’s required contribution.

Why is general average an important mechanism for ocean shippers?

Ocean shipping comes with a great deal of risk, financial and otherwise. General average protects individual parties from bearing the total burden of all the things that can go wrong during transit. It is a form of security for a risky venture.

GA ensured fairness, too, by ensuring that those who have a stake in the voyage contribute fairly to the costs of dealing with major problems. And with some ships carrying tens of thousands of containers, it’s good to have such a large group to share the burden.

As a final note, be aware that general average is not a replacement for insurance. Shippers are always strongly encouraged to have marine cargo insurance or a general average guarantee to cover potential costs, as those without insurance may have to provide a security deposit (and face potentially large costs) to get their cargo released when working with the Average Adjuster.

General average’s role in modern ocean shipping

The risks of modern shipping have changed a great deal in 135+ years, so how general average is typically triggered has changed with it. What constitutes a major incident has evolved to include bigger problems, literally, such as groundings and collisions. Both of which have gotten more attention as ships have grown larger.

The most notable recent example includes the aforementioned Port of Los Angeles fire involving the ONE Henry Hudson. On November 21, the container ship suffered a serious fire involving hazardous materials, prompting shelter-in-place orders and a major emergency response.

Other recent memorable general average events include the Ever Given’s grounding in the Suez in 2021. The event blocked one of the world’s main trade arteries. The owner declared general average after the ship was refloated with the help of multiple tugs and dredgers. Thousands of containers were tied up while adjusters assessed values and required GA bonds and guarantees.

Another was the MV Dali striking and collapsing the Baltimore Key Bridge in 2024. Cargo interests are sharing in costs like towage, debris removal, temporary repairs, and related salvors’ charges. Expectations are that port-infrastructure damage will cost as much as the damage to the ship itself.

What should a BCO do when their cargo is on a GA-declared vessel?

If you’re a BCO and are notified that your cargo is on a vessel where general average has been declared (like ONE Henry Hudson), you should immediately notify your cargo insurer and provide the documentation needed. This will likely include the bill of lading, commercial invoice, and packing list. Instruct them to issue the “GA guarantee” on your behalf and coordinate with the carrier/forwarder and the named average adjuster to complete any “GA bond” or security forms.

Depending on the situation, you may need to quickly arrange for a survey or inspection to determine if your cargo is damaged. Cargo owners should also watch for fees such as storage, demurrage, and other port charges while container(s) are held pending disposition.

Most importantly, acting quickly and through your freight forwarder and insurer is the best way to get your cargo released with minimal time and costs.

General average may be a century-old principle, but today’s high-stakes supply chains make its relevance greater than ever. As vessels grow larger and incidents become more complex, general average remains a vital framework for fairly distributing the financial consequences of maritime emergencies. In a business where a single incident can shut down a company’s operations, being prepared for a GA declaration is a core part of responsible supply chain management.