News / 'I paid ridiculous charges, my cargo still got rolled and the carrier wanted more'

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• Jose Guerrero

  June 26, 2021 at 10:40 pm

  There are so many factors that financially impact the cargo owners, and one of them, as pointed out by this article, is the ever-increasing freight rates and the delays on the front end.
  Unfortunately, once their cargo is in transit aboard the carrying ships, the cargo owners are faced with a significant financial risk, and the cost is a hundred times the freight charges paid. It comes from when the ship declares general average. And the sad part is that the cargo owners, in most cases, are passive participants in the unfortunate loss occurrence. I have shared these thoughts with various organizations, and there is extraordinarily little reaction to what I see as an inequity that cargo faces during a ship’s voyage.
  There are two recent examples.
  The Ever Given, in which general average was declared after the ship got stuck in the Suez Canal, is the best example. A massive loss and claims arose from that incident, which could reach half a billion dollars. And with the declaration of general average, the cargo owners, based on what is being revealed at this time, may have to pay up to 50 percent of every dollar in their commercial invoice (subject to reduction for some losses sustained by cargo owners). So, for example, if the average adjuster values a particular shipment at USD100,000, the cargo owner will have to pay USD50,000. And cargo interest contribution increases as the general average claim increases. Of course, it will be a lot more on goods in which the value is greater than that amount. It would not be too much pain for cargo owners with insurance, but will their premium stay the same? It will be disastrous for cargo owners without insurance or when there is an issue regarding when insurance/transfer of risk occurs. And what about the expenses incurred both by the cargo owners and their insurers and ship owners and their insurers for the cost of processing the release as well as the cost of the general average adjustment? In this case, some cargo interests hired the law firm Clyde & Co to assist the cargo interest. It is a good move. In the past, I hired this firm to question the validity of general average, and that increased the loss adjustment expense on the loss
  There is another case of general average in the pipeline. The owners of NYK Delphinus declared general average following an engine room fire on their voyage to San Francisco. Again, the cargo interests did not contribute to the cause of this incident, the engine room fire. And yet, the cargo interest will have to pay for a significant proportion of the cost, e.g., towage to San Francisco, etc.
  Because of the advent of mega-ships, there is now the disproportionate sharing of this general average claim. But what if one looks at this cost of continuing the voyage by the shipowner as one of their responsibilities as a “carrier” then the shipowner should take responsibility for all expenses incurred to continue the voyage to deliver the cargo in their custody to the consignee. Just imagine a trucker, a common carrier, demanding from the cargo owners to share the trucker’s expenses they incurred for towage of the truck, etc., to continue the transit to its final destination based on the principle of general average.
  I advocate that the best solution is to eliminate general average. This view has been pushed by United Nations and other marine claims professionals. Instead, the one that sustains the loss (including sue & labour clause expense) should pick up their own cost, or by their insurers and stop this ancient sharing of cost concept.

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