1 Delivery of cargo
With regard to general average security, it should be remembered that the shipowner retains his lien on the cargo only for so long as it remains in his custody.
If the cargo is forwarded from a port of refuge to destination in a vessel belonging to the same owners as the original carrying vessel, those owners will retain custody and control of the cargo. For practical purposes this will be equally true if the forwarding is arranged by the original shipowners on a vessel of different ownership, provided the former remain the holders of any fresh bills of lading issued.
Where, however, the custody and control of the cargo is handed over by the shipowner to another party for onward carriage either by land or sea at anyplace short of the original destination, this should be regarded from the point of view of obtaining general average security in the same light as delivery at destination. Where cargo is sold short of destination the same considerations apply in this respect to the handing over of the proceeds as would have applied to the delivery of the cargo itself.
2 Declaration of general average
It is often a matter of concern as to whether or not general average should be ‘declared’ in a particular case.
Whenever a general average act takes place general average exists, whether it is declared or not. There are some countries where it is necessary to make a formal declaration of general average but agents should be aware of any local requirements in this respect and should advise the shipowners accordingly and await their instructions as to whether the case warrants these formalities being complied with. In most cases, however, a declaration of general average means no more than a decision by the shipowner to collect general average security from the concerned in cargo. It occasionally happens that such security is taken as a precautionary measure only, in particular when the general average occurs shortly prior to normal delivery and time does not permit a full assessment of what is involved. Thus, though it usually means that when general average security is collected adjustment and settlement will follow in due course, this is not invariably the case.
Agents should also be aware, from their local knowledge, of what formalities are necessary in regard to noting protest, etc. and should ensure that action is taken accordingly.
3 Decision to obtain security
The decision whether general average security is to be obtained will be made in consultation with the general average adjusters. The adjusters will advise the shipowner, having regard to the likely size of the general average, whether there are cargo sacrifices, the cost of collecting security and the total contributory values.
4 Form of security required
The form of general average security required will be decided by the shipowners in consultation with the general average adjusters and full
detailed instructions will be sent to agents at ports of discharge. These instructions should be closely followed and any queries referred to the head office of the shipowners or to the average adjusters, as appropriate. Such security will normally be required in one of the following ways:
(a) By consignees’ signatures to Lloyd’s form of average bond only. This may be the procedure in cases where the amount involved is not large.
(b) By consignees’ signatures to Lloyd’s form of average bond together with payment of cash deposits or provision of satisfactory guarantees by reputable underwriters in lieu of such deposits. Bank guarantees are not normally acceptable since these are invariably limited as to duration or amount.
(c) The is basic procedure may be departed from in special circumstances or in case of urgency, but only on the specific instructions of the shipowner’s head office on advice from the average adjusters.
In cases where non-separation agreements are required appropriate instructions will be given by the average adjusters.
5 Cargo for which security required
Here again detailed instructions will be sent to agents by head office when time permits. Unless specific advices are received to the contrary, security will he required from all cargo which is liable to contribute to general average. Where any doubt exists the matter should be referred to the head office of the shipowners or to the adjusters.
Cargo which has been totally lost by general average sacrifice (e.g. cargo jettisoned) will be involved in or ‘contribute’ to the general average. Since the shipowner is unable to give delivery of such cargo, the parties concerned may refuse to sign an average bond or provide an underwriters’ guarantee and it is doubtful whether they can be compelled to do so. Nevertheless, an attempt should be made to obtain signatures to these documents, since they establish the identity of the parties with whom settlement under the adjustment is to be effected in due course. Moreover by signing Lloyd’s average bond the consignees undertake to provide such particulars of the value of their goods as will in due course be required. Since the concerned parties in these shipments will be creditors under the adjustment, there is no question of collecting cash deposits in such instances.
6 When security required
It cannot be too strongly emphasised that the appropriate security must in all cases be obtained before delivery of cargo.
A promise to sign the relevant documents is not sufficient, the actual signature of the parties being necessary before cargo is released, unless specific instructions otherwise are received from head office.
In theory the shipowner’s remedy in the event of failure to provide security is to hold the cargo. In practice, however, shipowners are reluctant to hold cargo for failure to provide general average security, both for commercial reasons and because this is likely to result in additional charges being incurred. Head office should be advised of all cases where any significant delay in delivery of cargo due to failure to provide security is likely to arise.
7 Average bonds
In many cases specially printed forms of average bond will be sent to destination ports by the shipowners or average adjusters and where this is done these forms should, of course, be used. In all other cases the standard Lloyd’s form of average bond as reproduced should be adopted. Supplies of these forms can usually be obtained from the local Lloyd’s agents.
It is important that all the details of the cargo entered on the average bond should be clearly shown with a view to avoiding confusion and further enquiries in the future. In particular the full name and address of the consignees’ firm and not merely the name of the individual signing on their behalf should be included. Where a consignee is signing for only part of a bill of lading shipment this should be made clear, as should the precise quantity of the goods for which he is signing. It should be remembered that hill of lading numbers are often duplicated in each section of the manifest. Thus in order to identify a shipment by the bill of lading number it is necessary to quote the port of shipment and the port of destination a well as the number itself.
In all cases of general average, agents should ensure that a photocopy of the invoice(s) is attached to each average bond signed. The invoice required is that rendered to the receiver of the goods ex the carrying vessel.
8 Underwriters’ guarantees
It is a common practice to accept underwriters’ guarantees instead of cash deposits and it has many advantages including the saving of administrative costs. It is emphasised that the provision of a guarantee is an alternative to the payment of a cash deposit and not an alternative to the consignees’ signature to an average bond. Both bond and guarantee must be signed before the goods in question can be released.
The form in which guarantees are provided varies but where special forms are provided by the average adjusters these should be used if practicable. Many insurance companies have their own printed form of guarantee and this is acceptable provided it is in no way limited, i.e. provided the underwriters guarantee the whole of the consignees’ liability for general average, salvage and charges whatever that may be. Thus a guarantee limited to the insured value of the goods is not acceptable.
Guarantees should be accepted only from reputable underwriters. The policy of shipowners in accepting or refusing a guarantee varies, particularly where collection under such a guarantee can only be made in a currency which is not readily transferable and where the guarantee is signed by agents acting on behalf of underwriters instead of by underwriters themselves. Any specific instructions in this respect which are given to agents in an individual case should be followed and any doubts as to the acceptability of a guarantee should be referred to the head office of the shipowners or the average adjusters.
It frequently happens that guarantees are provided in a country different horn that where the average bond is obtained. Since the cargo cannot be relay until both documents have been signed this will necessitate collation of information by the agent who has control of the release of the goods. The information usually has to be passed by fax and as a result the shipments have often to be identified only by the bill of lading number. The necessity of stating the ports of shipment and destination when quoting that number is again emphasised. This will greatly assist the average adjusters who will i.e. coordinating the collection of security and the release of the cargo.
9 Cash deposits
The rate of deposit to be collected will be advised as a percentage on arrived values, normally invoice values. Where goods are damaged and the agents are not satisfied that an accurate assessment of the damage can be made at the time, the deposit should be collected on the full value and the consignees advised to apply for a partial refund, if worthwhile, in due course.
Lloyd’s form of deposit receipt should be used in all cases. It should be remembered that this receipt is a bearer document which entitles the holder to any refund applicable thereto. For this reason no duplicate or copy receipts should under any circumstances be issued and no full or partial refund of deposit should ever be made except against production of the original deposit receipt. If the original receipt is mislaid the matter should be referred to the adjusters who may recommend payment against a letter of indemnity. Refunds of deposit prior to final adjustment and settlement may be required in the following circumstances:
a) When a satisfactory underwriters’ guarantee is provided after a deposit has already been collected. In such cases it is essential that the original deposit receipt be first obtained from the party to whom refund is made, cancelled and kept for sending to the adjusters in due course.
b) Partial refunds may become necessary in individual instances where deduction from the arrived value for damage was not made originally or generally in certain cases where it is later found that the rate of deposit fixed initially was too high. The original deposit receipts should again be obtained and suitably endorsed to show both the amount of the refund and the amount of the deposit remaining.
c) A separate deposit receipt should be issued for each individual shipment and the counterfoils to the receipts should be accurately completed and kept in all cases and sent to the adjusters in due course.
Rule XXII of the York-Antwerp Rules 1974 deals with the treatment of cash deposits. As regards trustees, the usual practice when the deposits are held other than in the country of adjustment is to appoint the ship’s agents as trustees on behalf of ship and Lloyd’s agents as trustees on behalf of cargo. The funds should be placed in an interest earning account whenever possible. Special instructions will be given in each individual case as to the trustees to be appointed and as to treatment of the deposit funds generally. It is important that funds should not without prior reference to the shipowners or adjusters is placed in an account where withdrawal at short notice is impracticable, because of the possibility of refunds or transfer being required. Deposit funds should be kept in the country and currency in which they are deposited and transfer of funds to another country should never be made without the authority of the shipowner’s head office as well as the consent in writing of the depositors to such transfer.
Deposit funds remain the property of the depositors and should not be used to settle disbursements, even general average disbursements, without the express agreement of the cargo interests.
If the general average clause contained in the contract of affreightment does not specify the currency in which deposits are to be collected the shipowner should, before collecting deposits, consider carefully the currency in which the deposits should be paid. It should be to the advantage of all to have the deposits paid in a strong and freely transferable currency, even if this has to be obtained in a country other than the destination of the cargo.
10 Security from other interests
Where the vessel is a container ship the containers on board may have a substantial value, which has been preserved by the general average act, and it will be necessary to consider whether security in the form of average bond, underwriters’ guarantee or letter of undertaking should be obtained. This is particularly the case when cargo has been sacrificed for the common safety.
A similar consideration should he given in respect of time charterers’ bunkers which have been saved by the general average act. Particularly where cargo has been sacrificed it may be important to obtain security from the time charterers.
11 Time bar
Most countries have legislation which provides for a limit on the time during which claims in general average may be made. The differences in the periods between countries vary considerably and care should be taken, at the time general average security is obtained, to enquire what the limitation period is in each case.
Takis Kalogerakos
Marine Underwriter
