The Federal Maritime Commission (FMC) is an independent federal agency responsible for the rules and regulations of ocean-borne international shipping. Due to universal recognition of international shipping laws amongst NVOCCs, importers, and exporters, many don’t pay attention to the fine print released by the FMC; some of which may impact your potential earnings and costs. Whether or not you are aware of it, you may end up paying for others’ cargo on a steamship in a case of disaster.
General average is a law released by the Federal Maritime Commission which specifies that all parties involved in a sea venture assume equal proportional costs in the case of a voluntary sacrifice of the ship’s cargo. In other words, should an emergency such as a storm or engine failure occur whereby a reduction in weight may save the ship, steamships are allowed and protected under general average legal principle to throw cargo overboard in order to spare the vessel. In this case, the cost of the cargo thrown overboard will be distributed proportionally amongst all parties shipping on that particular vessel.
Although steamship lines have improved their vessels’ technology and transport practices, general average principles come into play from time to time. In 2008, the M/V MSC Sabrina steamship was grounded in an attempt to cross the St. Lawrence River, resulting in the ship being stuck in 2-feet of clay. In order to get the ship with its $100 million in cargo out of the clay, another ship with onboard cranes unloaded 400 containers to save the ship. After being stuck for a month, the plan was successful and the ship escaped with the rest of its cargo. However, the shipper’s owners declared general average, thus distributing the cost of the 400 containers amongst the rest of the parties involved in the vessels shipment. Another example occurred in 2012 when the Hanjin Osaka had an engine incident. When in transit from Pusan to the US east coast, the ship’s engine exploded leaving the vessel and its 2,000+ containers stranded in the ocean. After being towed to shore, the ship owners declared general average on account of the costs being required to fulfill the maritime adventure.
Although these cases are not common, it’s important to understand the risk you assume whenever you put your goods on a ship. While it can be a bit of work, we strongly encourage those involved in any part of the international shipping process to familiarize themselves with Federal Maritime Commission regulations and legal principles. Having a better understanding of the laws associated with each mode of shipping can give you better knowledge and power in deciding the best shipping solutions for your company.