General average: the bill that arrives when nothing happened to your cargo

A rule of maritime law older than insurance itself. When something is sacrificed to save the whole venture, everybody whose property was saved pays a share — including the cargo owner whose goods arrived in perfect condition.

York-Antwerp Rules 2016Covered at (A), (B) and (C)Bond before release

The principle, in one sentence

Where an extraordinary sacrifice or expenditure is intentionally and reasonably made for the common safety of the ship, the cargo and the freight at risk, the loss is shared by every interest in proportion to its value. Ship, freight and every consignment on board contribute — whether or not their own goods were touched.

The modern codification is the York-Antwerp Rules, a private set of rules maintained by the Comité Maritime International. They are not a statute and no state enacts them: they apply because the contract of carriage incorporates them, which is why the edition named on the back of the bill of lading matters so much.

What happens, in order

  1. 1

    The general average act

    A casualty happens — a fire, a grounding, a machinery failure — and the master intentionally and reasonably incurs an extraordinary sacrifice or expenditure for the common safety. Cargo jettisoned to refloat a grounded ship, water damage from fighting a hold fire, a tow to a port of refuge, the cost of discharging and reloading there.

  2. 2

    General average is declared

    The shipowner declares general average and appoints an average adjuster. From this moment the shipowner has a lien on every consignment on board for its eventual contribution, and the containers do not move until that contribution is secured.

  3. 3

    Security is demanded

    Each cargo owner is asked for an average bond, signed by them, together with an average guarantee from their cargo insurer. Where there is no insurer, a cash deposit is demanded instead — a percentage of the value of the goods, paid before release.

  4. 4

    The adjustment

    The adjuster establishes what qualifies as general average under the York-Antwerp Rules edition named in the bill of lading, values every contributing interest at destination, and apportions the allowed loss across ship, cargo and freight at risk in proportion to those values. Adjustments on a large casualty routinely take years.

  5. 5

    Contribution is paid

    Each interest pays its share. Where the cargo was insured on Institute Cargo Clauses (A), (B) or (C), the insurer pays the contribution under the general average clause of the wording, so the cargo owner sees a bond and not a bill.

Insured

  • Sign the average bond.
  • Your insurer issues the average guarantee.
  • Your cargo is released.
  • The insurer pays the contribution when the adjustment lands, under the general average clause of the wording.
  • You pay the deductible, if the wording applies one.

Uninsured

  • Sign the average bond yourself.
  • Post a cash deposit — a percentage of the value of your goods, demanded up front.
  • Wait for release until the money clears.
  • Wait years for the adjustment, with your deposit held.
  • Receive whatever is left over, if anything is.

How the York-Antwerp Rules are built

Lettered rules state the principles; numbered rules deal with specific situations. Where the two conflict, the numbered rules prevail — except that the Rule Paramount, requiring the sacrifice or expenditure to have been reasonably made, overrides everything.

Rule A
Defines the general average act: an extraordinary sacrifice or expenditure intentionally and reasonably made or incurred for the common safety, to preserve from peril the property involved in a common maritime adventure.
Rule B
Deals with towage and with vessels that are part of a common adventure, including tug and tow.
Rule C
Limits allowance to direct consequence of the general average act. Loss or damage from delay, and any indirect loss such as loss of market, is expressly excluded.
Rule D
Rights to contribution are not affected even where the event was somebody's fault. Remedies over fault are pursued separately, and the adjustment still happens.
Rule E
Puts the burden of proof on the party claiming an allowance, and sets the deadline by which claims and values must be notified to the adjuster.
Rule F
Allows substituted expense — money spent instead of an expense that would itself have been allowable, up to the amount saved.
Rule G
Adjustment is made on the basis of values at the time and place where the adventure ends.
Rule Paramount
No allowance is made unless the sacrifice or expenditure was reasonably made or incurred. It overrides the numbered rules.
Rules I–XXIII
The numbered rules deal with specific situations — jettison, damage from extinguishing fire, cutting away wreck, a port of refuge, temporary repairs, salvage, and the treatment of wages, fuel and stores. Where a numbered rule conflicts with a lettered rule, the numbered rule prevails, subject to the Rule Paramount.

Common questions

Do I contribute even if my cargo was not damaged?
Yes. That is the defining feature of general average: contribution is owed by every interest that was at risk and was saved, in proportion to its value. Undamaged cargo contributes on its full value.
What happens if I have no cargo insurance?
The shipowner will not release the goods without security. An insured cargo owner signs an average bond and their insurer provides a guarantee. An uninsured one has to post a cash deposit, calculated as a percentage of the value of their goods, before the containers are released.
Is general average covered by Institute Cargo Clauses (C)?
Yes. General average and salvage charges are covered at all three clause levels — (A), (B) and (C) alike. It is one of the few things the narrowest standard cover does respond to.
Which edition of the York-Antwerp Rules applies to my shipment?
Whichever edition the bill of lading incorporates. The 2016 edition was adopted by the Comité Maritime International on 6 May 2016, but the 1994 and 2004 editions remain in use because bills of lading still name them. The edition changes what is allowable, and therefore what you contribute.
How long does a general average adjustment take?
On a major casualty, years rather than months. The security posted at the start is what releases the cargo; the adjustment that follows decides the final numbers long afterwards.
Get an indicative premium Average bond and guarantee

Sources

The York-Antwerp Rules apply because the contract of carriage incorporates them. Check which edition your bill of lading names — 1994, 2004 and 2016 are all still encountered.

This page summarises the instruments above. It is not the wording, and it is not legal advice. Where a summary conflicts with a convention text, a policy wording or a certificate, that document governs.

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