Introduction to General Average: Why it’s Critical in Maritime Shipping

In the world of maritime shipping, few concepts are as critical yet as misunderstood as General Average. This centuries-old principle of maritime law can have far-reaching and financial and operational impacts, affecting not just shipowners, but also shippers, freight forwarders, and carriers, even when their cargo appears undamaged.

What is General Average? A Centuries-Old Maritime Law Principle

In its simplest terms, General Average, often abbreviated as simply ‘GA’, refers to a practice where all losses sustained in a maritime emergency in which the ship or cargo must be sacrificed (either in whole or in part) are shared proportionally among all stakeholders. The practice signifies that the carrier is not at fault, and places financial responsibility on the cargo owners.

The practice’s earliest form was included in the Lex Rhodia, the Rhodes Maritime Code of Conduct, in 800 BC. More recently, the term came into the public consciousness once again on Monday, December 1st, 2025, after a late-November electrical fire on the ONE Henry Hudson resulted in a blaze that took five days to extinguish. Other well-known instances of General Average declarations include the Key Bridge Collapse in Baltimore in April 2024 and the grounding of the Ever Given in the Suez Canal in March 2021.

While it may seem counterproductive to have those whose cargo experienced no direct impact share the losses in the event of a disaster, the practice allows for a mutual commitment to maritime safety, and shared interest in success of the voyage. Furthermore, it reduces the complexity of insurance procedures and ensures equitable financial impact for all parties involved.

How General Average Works in Practice

In the event of General Average, all cargo is seized and only released when cargo owners provide a guarantee, usually in the form of a cash deposit or bond. For insured cargo, this amount is typically paid by the insurance company. In order to determine how much each party owes, a specialized insurance professional called General Average adjuster is hired. This calculation process is lengthy and complex, often taking years, and the adjuster’s fees are also shared by all relevant parties.

Real-World Case Study: The ONE Henry Hudson Incident

Overview of the ONE Henry Hudson Case

On November 21, 2025, an electrical fire broke out aboard the ONE Henry Hudson as the vessel was docked at the Port of Los Angeles. The resulting blaze took five days to extinguish, with operations at multiple terminals temporarily suspended until the ship was relocated a mile offshore on the day following the initial ignition. 

On November 27, 2025, the ship returned to Yusen terminal under the guidance of an escort team made up of Coast Guard units, Port Police, and Tug Operators. Ocean Network Express (ONE) declared General Average on December 1st, 2025, when the shipping giant known for its iconic magenta containers announced it had appointed Richards Hogg Lindley to oversee the process. 

The Ripple Effects on Shippers and Cargo Owners

Even for those shippers whose cargo remains undamaged, a declaration of General Average can result in long-term financial and logistical consequences reaching far beyond the initial incident, including unexpected delays, additional costs, or legal obligations. While the ONE Henry Hudson incident is still unfolding, there is no doubt that the owners of the cargo onboard can expect some or all of these consequences to impact their business. 

For shippers, the most immediate consequence of General Average is the delay in the receipt of goods. Delays from the direct efforts to address an emergency and assess the damage to the cargo are obvious, but further delays resulting from the seizure of the cargo until the shipper is able to pay their deposit can add up, with cargo ultimately being delayed by weeks or months. This disruption to one area of the supply chain can result in cascading delays to manufacturing and production schedules that can cause significant harm to businesses not prepared for the consequences.

The financial burden of such a scenario can also cause friction for unprepared stakeholders. Cargo owners are often required to contribute to the shared losses regardless of whether their goods were directly damaged. Called General Average guarantees, these contributions are calculated based on the value of the cargo, often resulting in significant unplanned expenses that can be particularly challenging to absorb for businesses operating under tight margins.

The complex legal requirements surrounding General Average are another area that often surprises businesses new to this process. Documentation required to reconcile the obligations of all parties can be detailed, and the unfamiliar nature of the legal processes involved compounded with the costs and delays described above often make General Average a difficult pill to swallow. 

Businesses with cargo aboard the ONE Henry Hudson will likely experience some or all of these impacts in the coming months, and the case serves as a stark reminder of the importance of maritime safety and the hidden challenges that can arise in situations where an emergency occurs.

Why Vigilance is Key: What Shippers and Forwarders Need to Know

Although a situation in which General Average may be declared is impossible to predict, there are proactive steps that shippers can take in order to ensure they are adequately prepared in the event of an emergency.

First and most important is ensuring that adequate insurance coverage has been obtained. This process can be done through insurance brokers, freight forwarders, or carriers. There are multiple types of insurance policy types that can be purchased, including per-shipment coverage for less frequent shippers, or “open cargo” annual policies for those who ship regularly. The latter typically includes more comprehensive, automatic coverage, lower premiums, and less paperwork.

As maritime shipping contracts typically always include a General Average clause, it’s also important to understand the content and meaning of this portion. Many GA clauses are based on the York-Antwerp Rules, first codified in 1890 and subsequently updated in 1994, 2004, and 2016. However, other types of rules for General Average also exist, such as the Hamburg Rules of 1978, which apply to costs incurred in the pursuit of saving life or property.

The United States has law that takes the fault of the shipowner into account, which directly contradicts rule D of the York-Antwerp rules. As such, when US law applies to the contract, a New Jason clause, which specifies the shipowners’ inclusion in the general average, is included.

Why General Average is Essential

General Average is a centuries-old maritime principle that continues to play a critical role in modern shipping. While it ensures shared responsibility in times of crisis, it can also lead to unexpected costs, delays, and legal complexities for shippers, freight forwarders, and carriers. The ripple effects of a General Average declaration, as seen in cases like the ONE Henry Hudson, highlight the importance of being prepared for the financial and operational challenges that can arise.

To minimize disruption and protect your business, proactive planning is key. Ensure you have comprehensive marine insurance coverage, understand the General Average clauses in your shipping contracts, and work with experienced freight forwarders or brokers who can guide you through the process. By taking these steps, you can safeguard your operations and navigate the complexities of General Average with confidence.

Don’t wait for an emergency to catch you off guard. Review your shipping contracts, consult with your insurance provider, and partner with trusted logistics experts like Sumisho Global Logistics USA to ensure you’re prepared for any scenario. Taking action today can save you time, money, and stress tomorrow.