Recently, a small partner in the customer service department reported that some sea freight foreign trade customers do not understand what general average is, and Xiaoyi specially opened a pit to explain it.

General average refers to the loss that is shared by all the owners of the ship (that is, the common interests) when the ship suffers damage, loss or expense during the sea voyage. Generally, general average is related to marine insurance. When a ship encounters unforeseen accidents such as shipwreck, collision, fire, and capsizing during voyage, it will lead to damage to the ship, loss of cargo, and the need to pay for rescue expenses. These losses will be shared by the parties with common interests, and each person will share the loss expenses in accordance with the proportion of their interests in the ship.

for example!

Assume that a ship carries goods of multiple cargo owners, including goods of Company A, Company B and Company C. During the voyage, the ship encountered a shipwreck, resulting in some damage to the cargo. According to the principle of general average, each owner of the cargo will jointly bear the responsibility for the loss of the cargo.

Suppose there are 10 cargo containers in total, 3 of which belong to Company A, 4 belong to Company B, and 3 belong to Company C. Each container is worth $10,000. In the shipwreck, 2 containers of cargo were damaged and the value of each container was reduced by $5,000.

According to the principle of general average, when determining the loss apportionment ratio, the apportionment can be made in proportion to the value of the goods. In this case, Company A would bear 3/10 of the loss, or $3,000; Company B would bear 4/10 of the loss, or $4,000; and Company C would bear 3/10 of the loss, or $3,000.

Therefore, according to the principle of general average, companies A, B and C will share the loss, and each company will share the loss in proportion to the value of its goods. This approach ensures fairness and balance, with each cargo owner taking responsibility in proportion to the value of their cargo.

Foreign trade enterprises can report losses to insurance companies and file claims to obtain reasonable compensation for losses. The insurance company will compensate for the loss according to the agreed ratio according to the principle of general average.

At this time, there are cuties who will ask questions again? If you don't buy general average related insurance, then you don't need to share the loss. The boss doesn't want to pay for the insurance... Obviously it's too ideal.

The fact that the cargo owner has not purchased general average insurance does not mean that he can be completely exempted from liability, but that he will not enjoy the protection and compensation of general average insurance. Under the principle of general average, cargo owners who have not purchased general average insurance still need to bear the loss in proportion to the value of their cargo.

A simple understanding is that if you buy general average insurance, everyone will bear it together if you have an accident. If you don’t buy it, not only will you not be compensated, but you will also have to share the loss. This principle also applies to foreign trade companies that purchase insurance for the goods alone, which can be said to be quite domineering.

Finally, what Xiaoyi wants to say is that foreign trade partners should carefully evaluate their cargo insurance needs when shipping by sea, and choose appropriate insurance coverage according to their own risk management strategies to prevent problems before they happen. Generally speaking, the types of insurance that can be selected include total loss insurance, total loss plus partial loss insurance, severe weather insurance, and insurance bonus. Relatively speaking, total loss insurance and total loss plus partial loss insurance are more cost-effective.