Where goods are shipped by sea and the carrying vessel encounters some kind of difficulty (for example an engine breakdown, a fire, a piracy event or a collision) it may be necessary for that vessel to seek third party assistance from other vessels or third parties. Those third parties and vessels offering assistance are likely to be considered as “salvors” and become entitled to salvage compensation. As potential salvors, they are entitled to exercise a lien over the vessel and any cargo saved as security for their claim to salvage compensation. In order to obtain the release of your cargo, you are likely to be required to provide a salvage guarantee. If you don’t do so, the cargo can be sold and the proceeds held as security for any final salvage liability.

An shipowner who has suffered such an event, and regardless of whether salvage assistance was required, is likely to suffer significant other expenses in dealing with the consequences. Very often, the shipowner will declare “general average”, which is a lengthy process by which a “general average adjuster” will collate all of the costs and eventually publish a “general average adjustment” which will determine what proportion of those costs are to be paid by the owners of the cargo on board. This note is not intended to explain the intricacies of general average – to do so would be very difficult. Suffice to say that the general average contribution from the overall cargo interests is pro-rated between the individual cargo owners, according to the cargo values. You will be required to make that payment.

Much like the salvors can seek security for the likely salvage compensation, the shipowner can seek security for the likely general average contribution and can refuse to release your cargo until you provide such security (and sell it if you do not).

It is impossible to be precise, as each incident is different. However, it would not be unlikely that security in the region of 50% of your cargo value may be required to be provided, before you can obtain the release of your cargo. Considering that delivery has most likely already been delayed due to the incident, this only serves to compound the loss and inconvenience to you.

If you have obtained cargo insurance for the goods for the subject shipment, the insurers will take care of any salvage or general average guarantees that are required and will pay any eventual salvage or general average contributions that may finally be determined against you. This is a significant benefit of cargo insurance, and such is the aggravation and perceived unfairness, almost anyone ever involved with an uninsured cargo in a salvage/general average situation will invariably choose to insure their cargoes for all subsequent shipments. We strongly suggest that you make that choice before you encounter the harsh consequences of such a situation.