Following the container explosion that occurred on the MV YM Mobility vessel at Ningbo Port on August 9th, Yang Ming has confirmed that General Average has been declared.
In an update on its website on Wednesday, the shipping line stated that thanks to the fire-fighting operation carried out by the local port authorities, the fire on the vessel was put out. The company also added that inspections are currently being conducted in relation to the explosion.
“Apparently, the incident has given rise to General Average and the Shipowners have decided to declare General Average (GA) and have appointed Richards Hogg Lindley to collect the necessary GA securities from the concerned in cargo, etc,” said Yang Ming, in its statement.
What does the declaration of General Average mean?
In reaction to Yang Ming’s statement, Sungreen Logistics Group, an international logistics service provider for dangerous goods, wrote on its website that “shippers are out of luck.”
“This means that all the owners of the cargo loaded on the “Moving Bright” ship are responsible for the resulting losses and liabilities. In particular, the shippers are required to provide a general average guarantee before taking delivery of the goods to ensure that their goods can be taken smoothly,” said the company.
What should one do when General Average is declared?
In a blog post on the subject of General Average, Röhlig Logistics stresses that a logbook must be carefully kept for every case of General Average.
“If all the conditions for General Average are fulfilled, the losses incurred must be determined and apportioned among the parties concerned in proportion to their salvaged values. This very complex task of determining the relevant values and their participation is usually carried out by experts (the so-called General Average adjuster or General Average commissioner). After being commissioned by the shipping company, charterer or transport insurer, the General Average adjuster draws up a loss distribution plan (the General Average) for the parties involved in the average. As a rule, all parties involved submit to the adjudication of the General Average adjuster. In Germany, the General Average procedure is assigned to the voluntary jurisdiction,” writes Röhlig Logistics.
How significant can the cost of a General Average declaration be?
According to Röhlig Logistics, as all parties involved share the costs of the cargo onboard and the expenses of refloating the ship, the total General Average costs can sometimes surpass the actual value of the goods, even if the cargo itself arrives undamaged. “Total losses of 50 million euros to the billions are not uncommon in cases of serious Average,” warns the company.
Röhlig Logistics adds that under General Average rules, the shipping company has the right to withhold undamaged goods until the owner pays their share of the General Average costs. Moreover, as the final calculation and settlement of these costs can take years, Röhlig Logistics states that consignees often need to secure the immediate release of the cargo by providing a guarantee.
Photo: Solomon203, CC BY-SA 3.0, via Wikimedia Commons