In an educational video, Trade Risk Guaranty explains the General Average claims process and how an adjuster calculates each party’s contribution.
The law of General Average (GA) can be a very confusing concept, especially if you are new to international trade or don’t have to deal with it on a regular basis. But a general average event can have a drastic effect on importers in the time immediately following the even and even years after.
General average claims can take multiple years to finalize so having an understanding of how general average claims are processed can help you understand the potential long term effects of being involved in a general average event. So in this post and in the video embedded at the bottom, we will look at a very simplified example for a breakdown of each party’s contribution.
Assigning a General Average Adjuster
Once General Average is declared an average adjuster is assigned to the case. A General Average Adjuster is a Sworn Expert for General Average acts and they deal with the practical handling of the General Average. The General Average process can take about 5 years and it is the Adjuster that will calculate and collect the amounts due from all parties concerned in the salved property.
So let’s take a look at a very general example of how an adjuster will work through a General Average event that arose from a fire onboard the ship.
First, the adjustor is going to put together a figure for the Total General Average Claim Value. This figure will include all the expenses that went into the effort to save the ship from peril. In the case of a fire, these might include but are not limited to, the expense of safe harbor fees, a tugboat to safe harbor, or the cost of forwarding the cargo on if the voyage cannot continue. For the sake of simplicity, let’s say those expenses equal $5,000,000. This is the total amount that must be paid by all parties involved in the sea venture.
In order to calculate how much each party must contribute, the adjuster will look at the total value of the voyage and what percent of that belongs to each party. Those percentages will then be applied to the General Average Claim Value. The resulting amounts are the General Average contributions for each party involved in the voyage. A General Average contribution is separate from a claim for any lost cargo.
Watch the video below for a more in-depth breakdown of the general average claims process.
Learn the General Average Claims Process
Watch the following video to learn the General Average claims process and the breakdown of each party’s contribution.
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