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What is General Average? Conditions for declaration and factors of common losses
The following content will help you understand General Average, the statement conditions and factors of General Average:
What is General Average?
What is General Average? General Average means sacrificing common losses. As a type of risk in shipping insurance, the sacrifice of assets to save the remaining assets during the freight.
Conditions needed to declare general losses
To declare the common loss requires the following conditions:
- The common loss must be a self -employed and voluntary behavior;
- General losses must be reasonable;
- General losses must be the act of protecting the safety of ships and cargo;
- The danger for the common loss must be real.
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Specific factors of general losses
Specific factors of general losses include:
- Voluntary sacrifice: Voluntary Sacrifice):
As a requirement for decisions made to be an intentional act, taken to save the whole ship, and not a coincidence or unintended thing.
- General danger (Common Peril):
It is a situation when ships and goods are in danger and serious. This danger can come from natural factors such as storms, strong sea, or serious accidents such as fire and explosion.
- Success results:
Is to help the ship and cargo get rid of danger. If the action does not achieve the desired results, it is not considered a common loss. In this case, after the sacrifice, the ship must continue the journey and arrive at a safe place with most of the goods or the value on the ship is protected.
What are the common losses? What are the benefits and impacts of general losses?
Next will be classifying common losses, benefits and common losses:
Classification of common loss value
The value of a general loss consists of 2 parts:
- Sacrifice common loss:
These are damage or costs incurred as the direct consequences of common losses. For example, the ship must throw goods into the sea because of the big storm to save the ship, save the entire journey, the goods are thrown into the sea to sacrifice the common loss.
- Costs for general losses:
These are the costs to be paid to third parties in rescuing ships and cargo to escape so that ships continue the journey. The general cost of losses includes: cost of rescue, the cost of making ships when stranded, the cost of rent, hybrid, and the ship when in distress, ...
Benefits and impacts of general losses
What is the benefits and impacts of general losses of General Average? That is:
- General Average minimizes financial risks:
When the general loss costs are paid by insurance companies, it helps minimize the financial impact for ship owners and shippers.
- General Average encourages international cooperation:
This principle is internationally recognized and helps reduce tensions, legal disputes between parties from many different countries.
- General Average ensures fairness:
The general loss helps to ensure that no one will suffer completely damage if sacrificed is to protect the common interests. All related parties share responsibilities appropriately.
Content and procedures for declaring general losses General Average
Related content and procedures, papers to prepare for the statement of General Average's common loss as follows:
Content of general losses
General Average Costs is the cost of consequences of general losses/costs related to general losses including:
- Expenses of rescue;
- Expenses at the harbor;
- Temporary cost of ship repair;
- Extra costs on salary of sailors and fuel officers;
- The interest of the amount is recognized as a general loss, with an interest rate of 7%/year as for 3 months after the issuance of the general loss allocation (G/A Adjustment).
Procedures, papers related to General Average
When a common loss occurs, the ship owner or the captain must conduct:
- Declaration of common loss (Notice of Ga);
- Send the shippers the committed to contributing the common loss (Average Bond), the assured to contribute the common loss (Average Guarantee) so that the shippers and the insurer will fill and produce when receiving the goods;
- Invite examiners to inspect losses of ships and cargo;
- Make a maritime protest (Sea Protest) (if necessary);
- Determine a calculating staff, allocate general losses.
On the owner, it is necessary to do the following:
- Declaration of goods value;
- Get Average Bond and Average Guarantee.
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The process of general losses General Average
General loss of General Average is done according to the following process:
Stage 1 - Declaration of General Average)
When an incident occurs, the captain or ship owner must make an official statement about the general loss and notify the stakeholders including the owner and the insurance company.
Stage 2 - Adjust General Average Adjustment)
Adjustment of general losses will check the entire loss and calculate the necessary amount that each party must contribute. Then require documents on the value of ships, cargo and costs incurred to calculate the cost allocation rate.
Stage 3 - General Average Guarantee
The ship owner requires the shippers or their representatives to provide a general loss guarantee from their insurance or banking company. This guarantee is a financial commitment to the costs that the owner must contribute to the love of the common loss.
Stage 4 - Payment and completion (Settlement and completion)
After completing the overall loss adjustment process, the parties are required to pay the costs. Insurance companies often pay most of these expenses under cargo insurance or hull insurance contracts.
What is General Average in import and export, which has been answered, along with the procedure process of preparing the general loss of loss in shipping that enterprises and import -export businesses need to know. Contact immediately 0909 344 247 for answers to all questions related to shipping terminology and advice on utilities of the North -South and International Sea Products Transportation Service, the best price only available at Proship Logistics.
