General Average is declared in the aftermath of a maritime catastrophe and is very costly for shippers without cargo insurance.
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What is General Average?
General Average (GA) is a term that is used in the maritime industry to describe a situation in which the cost of saving a vessel or its cargo is shared equally among all parties that have an interest in the vessel or cargo. This concept is based on the principle that all parties who benefit from the successful completion of a voyage should bear an equal share of the costs of preserving the vessel or cargo in the event of an emergency.
GA situations may arise in a variety of circumstances, such as when a vessel is stranded or disabled, when cargo is jettisoned in order to save the vessel, or when cargo is damaged in order to protect the vessel. To determine the amount that each party is required to contribute towards the GA, a GA adjustment is conducted by a GA adjuster. The GA adjustment considers the value of the vessel, the value of the cargo, and the value of any other interests that are involved in the voyage.
GA is a complex legal concept that is governed by international maritime law and is typically not covered by standard cargo insurance policies. Policyholders who are concerned about potential GA losses should consider purchasing a separate GA guarantee or bond in order to protect against this risk.
York-Antwerp Rules - 2016 edition - Rules of General Average