Engine-Room Fire, Salvage and General Average
A bulk carrier loaded 12,000 metric tonnes of steel coils (cargo value USD 7.2 million) and 3,000 metric tonnes of bagged rice (cargo value USD 1.8 million) at Paradip for Antwerp. An engine-room fire disabled the main engine. The master engaged a salvage tug under LOF 2020; the tug towed the vessel to Colombo, where the fire was extinguished and temporary repairs were made. During entry to Colombo, 300 tonnes of rice were jettisoned after becoming wet and heated, and 1,200 tonnes of steel coils were discharged for inspection and re-stowed at extraordinary cost. The shipowner declared general average. The ship's sound value at termination is USD 9 million; freight at risk is USD 300,000; GA allowances are USD 1.1 million, including salvage remuneration and port-of-refuge expenses. The rice is insured under ICC(B) for USD 2.0 million; the steel under ICC(A) for USD 8.0 million. Both policies are subject to English law and incorporate the Institute Cargo Clauses. The steel arrived sound; the rice arrived short.
1. Distinguish which losses and expenses are general average, particular average or salvage, and explain why. Consider the jettisoned rice and the steel discharge costs.
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General average requires a deliberate extraordinary sacrifice or expenditure for the common safety. The salvage tug under LOF is a classic GA expenditure: it was incurred to save ship, cargo and freight from a common peril. Port-of-refuge expenses such as firefighting, temporary repairs, discharge and re-stow are likely GA to the extent reasonably incurred for common safety and allowed by the applicable York-Antwerp Rules. Salvage is the reward for preserving property at sea; it is often allowed in GA when the property is saved. Particular average is accidental damage to a particular interest, borne by that interest alone.
The 300 t of rice: if jettisoned deliberately to lighten the vessel or prevent fire damage and for common safety, it is GA sacrifice. If merely dumped because it was already wet and heated and worthless, it is particular average. The steel discharge: the cost of discharging at a port of refuge for common safety is GA; inspection costs solely for the steel's own condition may be particular average unless required for common safety. Re-stow and reloading costs that enable the voyage to continue are generally GA. The surveyor must separate invoices by purpose and time; a lump-sum port invoice is not enough.
2. Using the stated values, calculate approximate general average contributions and explain how each cargo policy responds.
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Using the stated values as contributory values: ship USD 9,000,000; freight USD 300,000; steel USD 7,200,000; rice USD 1,800,000 (including the amount made good for the jettisoned rice). Total = USD 18,300,000. GA allowances = USD 1,100,000, so the rate = 1.1/18.3 = 6.01%. Contributions: ship USD 540,984; freight USD 18,033; steel USD 432,787; rice USD 108,197.
The rice owner has a sacrifice claim for 300 t: 300/3,000 x USD 1.8m = USD 180,000 made good. Set off its contribution of USD 108,197, leaving a net GA receivable of about USD 71,803 before deductible. The steel owner pays about USD 432,787; its ICC(A) policy responds to GA contribution. The rice ICC(B) policy also covers GA contribution and sacrifice, subject to deductible and any under-insurance. The shipowner bears the ship and freight contributions, or recovers under its hull policy. Check that allowances are not double-counted: salvage remuneration and port expenses may both be allowed, but the same invoice cannot be claimed twice. Also check contributory values at destination, not invoice values; if the steel arrived damaged, its contributory value falls and the rate rises.