What Is a Joint Marine Loss Agreement
Interlink編集部What is a General Average Bond?
A General Average Bond is a document in which the shipper or cargo rights holder promises to pay the properly adjusted general average contribution to the shipping company or general average adjuster in cases where general average has been declared.
In English, it is called an Average Bond, General Average Bond, or G.A. Bond.
A General Average Bond differs from a General Average Guarantee issued by an insurance company. The General Average Bond is signed by the shipper’s side, while the General Average Guarantee is a document in which the insurance company guarantees payment of the general average contribution.
In actual logistics practice, the General Average Bond is an important document often required to be submitted before cargo release. Late submission can affect the exchange of D/O, cargo removal, and delivery scheduling, potentially resulting in additional charges such as storage fees, Demurrage, and Detention.
The Role of the General Average Bond
The role of the General Average Bond is for the shipper to participate in the general average procedure and to indicate their willingness to pay the general average contribution that will be determined at a later date.
The adjustment of general average is not completed immediately after an incident. The general average adjuster reviews salvage costs, sacrifice damages, port expenses, values of the vessel, cargo, and freight, and finalizes the contribution amounts later.
Therefore, shipping companies and general average adjusters obtain the General Average Bond from the shipper as a precondition before releasing the cargo, preparing for future general average claim demands.
| Item | Details |
|---|---|
| Signer | Shipper, cargo rights holder, consignee, importer, etc. |
| Submission to | Shipping company, their agents, general average adjuster, etc. |
| Purpose | Promise to pay the properly adjusted general average contribution |
| Submission timing | Often requested after the general average declaration but before cargo release |
| Related documents | General Average Guarantee, cargo value declaration, invoice, insurance policy, etc. |
It is Not a Document That Creates New Obligations
Signing a General Average Bond does not impose entirely new obligations on the shipper.
The obligation to contribute to general average generally arises from the B/L clauses, carriage contracts, or general average rules. The General Average Bond functions as a pledge to pay the properly adjusted amount for an already existing general average contribution issue.
Therefore, refusal to sign does not eliminate the general average contribution obligation. However, refusal to sign may result in a halt to cargo release.
Differences Between Signing and Refusing to Sign
A common misunderstanding regarding the General Average Bond is that signing means no disputes over the contribution can be made afterward, or refusing to sign eliminates the need to pay the contribution.
| Item | If Signed | If Signature Is Refused |
|---|---|---|
| General average contribution obligation | Indicates willingness to pay the properly adjusted contribution | Refusal to sign alone does not eliminate the obligation |
| Cargo release | Easier to proceed if other necessary documents and guarantees are in place | High possibility cargo release will be halted |
| Later disputes | If issues such as carrier liability or unseaworthiness arise, they can be disputed separately | Refusal to sign is not guaranteed to be a valid defense |
| Additional costs | If documents are complete, it is easier to control expansion of storage fees, Demurrage, and Detention | Delays in delivery are likely to incur additional charges |
| Practical handling | Submitted to proceed with cargo release; validity of contribution is confirmed later | Refusal requires cooperation with insurers and experts for decision making |
In practice, the General Average Bond is submitted to proceed with cargo release, while the payment eligibility, carrier liability, and recovery possibilities are examined after.
Differences from General Average Guarantee and Cargo Value Declaration
The General Average Bond, General Average Guarantee, and Cargo Value Declaration may be submitted during the same general average procedure, but each has a different role.
| Document | Prepared by | Main role | Submitted to | Notes |
|---|---|---|---|---|
| General Average Bond | Shipper, cargo rights holder, consignee, etc. | Promise to pay the properly adjusted general average contribution | Shipping company or general average adjuster | Should confirm correctness of the signer |
| General Average Guarantee | Insurance company | Guarantees payment of the general average contribution | Shipping company or general average adjuster | Not automatically issued even if cargo insurance is in place |
| Cargo Value Declaration | Shipper, cargo rights holder, importer, etc. | Declares the cargo value as the basis for contribution calculation | General average adjuster | Invoice value, freight, insurance premium, and valuation terms need to be checked |
| Invoice | Seller, exporter, etc. | Base document to confirm cargo value | General average adjuster, insurer, etc. | Incoterms such as FOB, CFR, CIF should be reviewed |
In summary, the General Average Bond represents a pledge from the shipper’s side, the General Average Guarantee is a payment assurance from the insurer’s side, and the Cargo Value Declaration is the declaration of value.
Relation to the Cargo Value Declaration
The cargo owner may be asked to submit the Cargo Value Declaration together with the General Average Bond.
The Cargo Value Declaration Form is a document where the shipper declares the value of their cargo to calculate the general average contribution. Since the general average contribution is apportioned according to the value of the saved vessel, cargo, freight, etc., declaring the cargo value is important for settlement purposes.
It is necessary to confirm not only the invoice value, but also trade terms such as FOB, CFR, CIF, marine freight charges, insurance premiums, and the value upon arrival. Even if only the General Average Bond is submitted, if the Cargo Value Declaration Form is not submitted, cargo delivery may be delayed.
The Importance of Confirming the Signatory
With the General Average Bond, it can become an issue who should sign it. This is because the consignee on the B/L, the actual importer, the cargo rights holder, the insured party on the insurance policy, and the NVOCC’s customer may not align.
| Subject for Confirmation | What to Verify | Common Issues |
|---|---|---|
| Consignee on B/L | Is this consistent with the signatory of the General Average Bond? | The consignee name may differ from the actual importer’s name. |
| Notify Party | Are they just a notification party, or the actual cargo rights holder? | The Notify Party may not be an appropriate signatory. |
| Actual Importer | Do they have the position of cargo owner or cargo receiver? | Confusion is common when trading companies, agents, or warehouse companies are intermediaries. |
| Insured Party on Insurance Policy | Is this aligned with the party for whom the insurer issues the guarantee letter? | If the insured party name differs from the B/L holder, insurer confirmation is necessary. |
| NVOCC Customer | The relationship between the shipper/consignee on the House B/L and the party named on the Master B/L | The NVOCC may be required by the carrier to provide consolidated handling. |
If the signatory is unclear, do not proceed with signing unilaterally. It is important to confirm with the general average adjuster, carrier, insurer, or experts as needed.
Common Patterns for Signatory Discrepancies
| Pattern | Typical Issues | What to Check |
|---|---|---|
| Cargo via NVOCC | The consignee on the Master B/L and the consignee on the House B/L differ. | Who has the actual cargo rights? Who should sign the bond? |
| Import via Trading Company | The buyer on the invoice, the actual importer, and the delivery destination differ. | The relationship between the final general average contribution payer and the signatory. |
| Insured Party Name on Insurance Policy Differs | The insurer’s general average guarantee letter and the bond name do not match. | Is the name eligible for the insurer to issue the guarantee letter? |
| Name Changes or Rights Transfers Occur | The B/L name and the actual cargo receiver differ. | Check endorsements, D/O exchange, and cargo rights holders. |
| LCL Consolidated Cargo | Submission status of documents varies among multiple shippers. | Manage the general average bond, value declaration, and insurance status individually for each shipper. |
Relationship to Cargo Delivery
When general average is declared, the carrier or the general average adjuster may require the following documents before releasing cargo.
| Required Documents / Security | Main Role |
|---|---|
| General Average Bond | The shipper agrees to contribute to the general average. |
| Cargo Value Declaration Form | Declares the cargo value that is the basis for calculating the contribution. |
| Invoice | Serves as the primary reference for confirming cargo value. |
| General Average Guarantee Letter | The insurer guarantees payment of the general average contribution. |
| General Average Deposit | If uninsured, the shipper may provide cash security. |
| Salvage Charge Guarantee/Security | May be requested if salvage charges become a separate issue. |
If submission of the General Average Bond is delayed, cargo delivery may be halted, leading to storage fees, Demurrage, Detention, redelivery costs, and delivery delays.
Points to Note with LCL Consolidated Cargo
With LCL consolidated cargo, multiple shippers’ goods are mixed in the same container, so submission statuses of the General Average Bond and Cargo Value Declaration Form may affect cargo delivery.
| Situation | Potential Issues | Countermeasures |
|---|---|---|
| Some shippers do not submit the Bond | Delivery or sorting at the CFS may be delayed. | Manage the submission status for each shipper. |
| Mix of insured and uninsured shippers | The handling differs between cargo covered by guarantee letters and those requiring deposits. | Confirm each shipper’s insurance status early. |
| Late submission of Cargo Value Declaration | Verification of contribution value is delayed, and delivery conditions are not met. | Collect invoice, contract price, and cargo value early. |
| NVOCC is required by the shipper to provide consolidated handling | NVOCC is pressed to act before collecting from the actual cargo owner. | Check scope of responsibility under House B/L, quotation terms, and standard trading conditions. |
Submission Flow of General Average Bond
The General Average Bond is not handled alone but is usually submitted together with the General Average Guarantee Letter, Cargo Value Declaration Form, Invoice, and related documents.
| Step | Actions | Points to Note |
|---|---|---|
| 1. Receipt of General Average Declaration | Check notifications from the shipping line, agent, and general average adjuster | Verify vessel name, voyage number, B/L number, and container number |
| 2. Verify the General Average Bond Form | Confirm the form specified by the general average adjuster | It is not always acceptable to use a proprietary form |
| 3. Confirm Signatory | Verify the relationship between consignee, importer, cargo rights holder, and insured | Confirm before submission if the name differs |
| 4. Prepare Related Documents | Gather cargo value declaration, invoice, packing list, insurance policy, etc. | Submitting only the general average bond often does not complete the procedure |
| 5. Coordination with the Insurance Company | If marine cargo insurance is in place, request issuance of a general average guarantee letter | Manage the insurance company’s guarantee letter separately from the shipper’s signed documents |
| 6. Submission | Submit to the shipping line or general average adjuster | Check submission destination, whether originals are required, if PDF is acceptable, and deadlines |
| 7. Confirm Cargo Delivery | Verify D/O exchange, cargo removal, and delivery approval | A salvage bond or Salvage Security may be additionally required |
Key Points to Confirm at Signing
| Check Item | What to Confirm | Common Issues |
|---|---|---|
| Vessel Name & Voyage Number | Matches the general average declaration document | Processing documents from a different voyage or vessel by mistake |
| B/L Number | Which number is used as reference: Master B/L or House B/L | Mismatches in NVOCC-related shipments |
| Shipper Name & Consignee Name | Clear relationship between signatory and cargo rights holder | Signatory may not be accepted due to name discrepancies |
| Cargo Details | Consistent with invoice, packing list, and B/L | Discrepancies in quantity, description, or container number |
| Submission Destination | Where to submit: shipping line, agent, or general average adjuster | Misidentifying submission party can delay acceptance confirmation |
| Submission Deadline | Is there a deadline affecting cargo release | Late submission can cause storage fees or Demurrage |
| Related Documents | Whether cargo value declaration, guarantee letter, invoice attachments are necessary | Submitting only the bond may halt the process |
| Salvage Bond | Whether Salvage Security is additionally required | Goods may not be released if only general average documents are provided |
Relationship with Marine Cargo Insurance
Even if marine cargo insurance is in place, the general average bond may still require signing by the shipper.
The insurance company issues a general average guarantee letter and covers payment of the final general average contribution. Meanwhile, the general average bond and cargo value declaration are documents signed and prepared by the shipper or cargo rights holder.
In other words, the general average guarantee letter is the insurance company’s document, whereas the bond is the shipper’s document. Having marine cargo insurance does not necessarily eliminate the need for shipper-signed documents.
Common Trouble Patterns
| Issue | Cause | Countermeasure |
|---|---|---|
| Refusal to sign causes cargo release delay | Submission of the bond is a condition for cargo release | Explain the purpose of signing, clarifying it is separate from disputes over contributions |
| Signatory name is not accepted | Name does not match B/L consignee or cargo rights holder | Check signatory’s authority and align document names |
| Procedure halts when only bond is submitted | Cargo value declaration or guarantee letter not submitted | List all required documents and manage submission simultaneously |
| Cargo not released despite guarantee letter from insurer | Shipper’s bond or cargo value declaration not submitted | Confirm insurance company documents separately from shipper’s signed documents |
| Delay in response from partial shipper in LCL consolidated cargo | Cannot manage submission status for multiple shippers collectively | Manage submission, insurance status, and deposit requirements by shipper |
| Salvage bond not arranged, causing cargo hold | Confusing general average documents with Salvage Security | Confirm guarantees separately between general average and salvage security |
Common Misunderstandings
| Misunderstanding | Correct Understanding |
|---|---|
| Signing the general average bond creates a new payment obligation | It typically confirms acceptance to pay a duly assessed general average contribution that is already an issue. |
| Refusing to sign means no need to pay the general average contribution | Refusal to sign alone does not eliminate the obligation. It may cause delays in cargo delivery. |
| If there is a general average guarantee letter from the insurer, the bond is unnecessary | The guarantee letter is the insurer’s document; the bond is the shipper’s—both may be required. |
| The general average bond is a simple confirmation document like an invoice | It is a pledge regarding future payment of general average contributions, where verifying the signatory and content is critical. |
| Signing completes all general average procedures | Additional documents such as cargo value declarations, guarantee letters, deposits, and salvage bonds may still be needed. |
Key Points for Freight Forwarders / NVOCCs to Confirm
| Check Item | Check Details |
|---|---|
| General Average Declaration | Check the declaration letter, vessel name, voyage number, B/L number, and container number |
| Covenant Form | Confirm if it is the form specified by the General Average Adjuster and that all required information is included |
| Signer | Confirm the relationship with the Consignee, importer, cargo rights holder, and the insured |
| Submission Destination | Check whether to submit to the shipping company, agent, or General Average Adjuster |
| Submission Deadline | Check if there is a deadline affecting cargo release |
| Cargo Value Declaration | Confirm Invoice, freight charges, insurance premiums, Incoterms, and prepare the value declaration form |
| General Average Guarantee | Check whether marine cargo insurance has been purchased and whether the insurer can issue a guarantee letter |
| No Insurance | Check if a General Average deposit or bank guarantee is required |
| LCL Consolidation | Manage covenant forms, value declarations, and insurance status by shipper |
| Salvage Security | Confirm if a Salvage Security or separate Salvage Guarantee letter is necessary |
Documents to Verify in Practice
- General Average Declaration
- General Average Covenant Form
- B/L and back clauses
- House B/L and Master B/L
- Invoice
- Packing List
- Cargo Value Declaration
- Insurance Policy or Insurance Certificate
- General Average Guarantee
- Information on General Average Deposit
- Documents from General Average Adjuster
- Salvage Guarantee or information on Salvage Security
Example
For example, assume a container ship carrying imported cargo runs aground, and the shipping company issues a General Average Declaration. The General Average Adjuster then requests submission of the General Average Covenant, Cargo Value Declaration, Invoice, and the insurer's General Average Guarantee letter.
The cargo owner hesitates to sign the covenant, worrying that signing would mean unconditionally accepting payment of the contribution. However, refusing to sign does not eliminate the obligation to pay General Average contributions; rather, cargo release could be delayed and storage charges or Demurrage may accrue.
In practice, the General Average Covenant’s content, the signer, and submission destination are checked, and it is submitted as a document required for cargo release. The validity of the General Average contribution and carrier liability are then handled separately, usually in coordination with the insurer and experts.
Notes
The General Average Covenant is an important document signed by the cargo owner. Even if the insurer issues a General Average Guarantee letter, the cargo owner’s covenant and cargo value declaration may still be required.
Also, the decision to sign the covenant and whether to dispute the validity of the General Average contribution determined later are separate matters. Refusing to sign does not cancel the obligation and may cause delays in cargo release and additional costs.
Particularly with NVOCC cargo, LCL shipments, and transactions via trading companies, the name on the B/L, the actual cargo rights holder, and the insured on the insurance policy often differ. Failure to verify the signer may result in rejection after submission and delayed cargo release.
Summary
The General Average Covenant is a document whereby the cargo owner or rights holder promises to pay the properly adjusted General Average contribution when General Average is declared.
While the General Average Guarantee is a payment guarantee issued by the insurer, the General Average Covenant is a pledge signed by the cargo owner. The Cargo Value Declaration specifies the cargo value forming the basis for contribution calculation. Each has a distinct role.
In practice, refusing to sign does not eliminate the General Average contribution obligation and may delay cargo release. Freight forwarders and NVOCCs should, upon receiving notice of General Average declaration, organize details such as the signer, submission destination, deadlines, relevant documents, insurer guarantees, and salvage securities, and promptly inform the cargo owner.
