Difference Between General Average and Salvage Charges

The difference between General Average and salvage charges is an important practical distinction in maritime casualty handling.

Both may arise after a marine casualty, and both may affect cargo owners, insurers, forwarders, NVOCCs and cargo release. However, they are not the same. The payee, security documents, procedure, insurer handling and timing may differ.

General Average is a system under which the parties whose property was saved from a common danger share certain extraordinary sacrifices or expenses. Salvage charges are remuneration payable to salvors for saving the vessel, cargo or other property at sea.

Overview

In maritime casualty practice, General Average and salvage charges are often discussed together because the same accident may involve both.

For example, a vessel may require salvage assistance after grounding, fire, machinery failure or another serious casualty. After the ship and cargo are saved, the carrier may declare General Average and the salvors may also require security for their salvage remuneration.

For forwarders, the key point is to avoid mixing up the two processes. A General Average Guarantee does not necessarily resolve the salvage security issue, and Salvage Security does not necessarily replace General Average security.

What Is General Average?

General Average is a maritime principle under which extraordinary sacrifices or expenses made intentionally and reasonably for the common safety of the maritime adventure are shared among the saved interests.

Typical examples include expenses for refloating a grounded vessel, emergency measures at a port of refuge, cargo jettison, firefighting damage and other extraordinary costs incurred to protect the vessel and cargo from a common danger.

The General Average adjustment is usually prepared by an average adjuster. The adjustment may be based on the York-Antwerp Rules, the B/L terms, the contract of carriage and the relevant governing law.

General Average is therefore a contribution system among the interests that benefited from the common safety action.

What Are Salvage Charges?

Salvage charges are remuneration payable to salvors who have rendered services to save a vessel, cargo or other maritime property from danger.

Salvors may provide services such as towage, firefighting, refloating, emergency assistance, escort to a port of refuge or other operations to save the property.

If the salvage service benefits the cargo, the cargo interest may also be required to contribute to the salvage remuneration or provide security.

Salvage contracts may use Lloyd’s Open Form, often called LOF. Under LOF, the salvage award may be determined later through arbitration or agreement, and the salvor may require security from the property interests.

Main Difference

Item	General Average	Salvage Charges
Nature	Contribution system for extraordinary sacrifices or expenses incurred for common safety	Remuneration payable to salvors for salvage services
Main counterparty	Carrier, shipowner or average adjuster	Salvor or salvage company
Main security documents	General Average Guarantee, General Average Bond, cargo value declaration	Salvage Security or salvage guarantee
Calculation	Prepared by the average adjuster through the General Average adjustment	Determined under the salvage contract, agreement, arbitration or other procedure
Timing	Final adjustment may take a long time, sometimes several years	May be determined separately from the General Average adjustment
Cargo insurance	May respond to General Average contribution and GA security	May respond to salvage charges and Salvage Security

General Average Security

When General Average is declared, the carrier or average adjuster may require security before cargo release.

The required documents may include a General Average Guarantee from the cargo insurer, a General Average Bond signed by the cargo owner, a cargo value declaration and related commercial documents.

If the cargo is uninsured, the cargo owner may be required to provide a cash deposit or other form of security.

The purpose of General Average security is to secure the cargo interest’s possible General Average contribution until the final adjustment is completed.

What Is Salvage Security?

Salvage Security is security requested by salvors to secure payment of their salvage remuneration.

Unlike a General Average Guarantee, which is normally submitted to the carrier, shipowner or average adjuster, Salvage Security is directed toward the salvor or the salvage claim process.

This means that the purpose and recipient of the documents are different. In a serious casualty, both General Average security and Salvage Security may be required separately.

Where environmental protection or special compensation issues arise, SCOPIC may also become relevant. In such cases, P&I insurers and shipowner-side insurance arrangements may also be involved, in addition to cargo insurers.

Relationship with Cargo Release

General Average and salvage security may both affect cargo release.

For General Average, the cargo owner may need to submit a General Average Bond, cargo value declaration, General Average Guarantee or cash deposit.

For salvage, the salvor may request Salvage Security or a salvage guarantee before cargo is released or before the property interest is fully discharged from the salvage claim process.

If these security arrangements are delayed, cargo release may be delayed. This may lead to storage charges, demurrage, detention, delivery delay and customer complaints.

Relationship with Cargo Marine Insurance

Cargo marine insurance is highly important in both General Average and salvage cases.

If the cargo is insured under appropriate cargo insurance, the insurer may issue a General Average Guarantee or arrange security for salvage charges, depending on the policy and the case circumstances.

The insurer may also pay the final General Average contribution or salvage charge if it falls within the policy coverage.

If the cargo is uninsured, the cargo owner may need to deal directly with cash deposits, bank guarantees, Salvage Security, average adjusters, salvors and later contribution or award payments.

Forwarder and NVOCC Practical Notes

Forwarders and NVOCCs should clearly explain to cargo owners that General Average and salvage charges are separate issues.

A common misunderstanding is that submission of a General Average Guarantee solves all casualty-related security issues. In fact, Salvage Security may still be required separately.

Salvage Security requests may arrive soon after the salvage operation and may require urgent handling even before the General Average process is fully organized.

When a marine casualty notice is received, forwarders should encourage the cargo owner to contact the cargo insurer or insurance broker immediately, whether or not General Average has formally been declared.

Forwarders should also check the sender, recipient, deadline and required documents for each security request. General Average documents and salvage documents may arrive through different channels.

Documents to Check

The following documents may need to be checked separately:

• General Average declaration
• Notice or instructions from the average adjuster
• Salvage Security request from the salvor or salvage representative
• Salvage contract information, including LOF where relevant
• B/L and reverse-side terms
• Commercial invoice
• Packing list
• Cargo insurance policy or certificate
• General Average Guarantee
• General Average Bond
• Cargo value declaration
• Salvage guarantee or security documents

Forwarders should not assume that one set of documents satisfies both processes. Each request should be checked by purpose, recipient and deadline.

Common Problems

• The cargo owner believes General Average and salvage charges are the same.
• The cargo owner submits GA documents but overlooks Salvage Security.
• The cargo insurer is contacted too late.
• The forwarder does not identify whether the request came from the average adjuster or the salvor.
• The deadline for security submission is missed.
• The cargo owner is uninsured and cannot prepare cash security quickly.
• Cargo release is delayed while different security requests are being clarified.
• Storage charges, demurrage or detention arise due to document delays.

These problems may lead to cargo release delay, additional costs, customer complaints and disputes between the cargo owner, forwarder, insurer, carrier and salvor.

Practical Notes for Japan-Related Shipments

For Japan-related shipments, it is important to separate the communication routes for General Average and salvage charges.

The average adjuster may request GA documents, while the salvor or salvage representative may request Salvage Security. The insurer or insurance broker may need to handle both, but the document flow and security wording may differ.

Japanese cargo owners may be unfamiliar with the distinction. Forwarders should explain that both processes may arise from the same casualty but are not the same claim.

Early insurance contact is particularly important. If the cargo owner has cargo marine insurance, the insurer can usually guide the security process more efficiently.

Key Takeaway

General Average and salvage charges are both related to maritime casualties, but they are different concepts.

General Average is a contribution system among the saved interests for extraordinary sacrifices or expenses incurred for common safety. Salvage charges are remuneration payable to salvors for saving maritime property.

A General Average Guarantee is normally directed to the carrier, shipowner or average adjuster, while Salvage Security is directed toward the salvor or salvage claim process.

Forwarders, NVOCCs and cargo owners should distinguish the two processes, contact cargo insurers early and arrange the required security documents promptly to avoid cargo release delay and additional costs.