Real-life Examples of General Average

General Average is declared when a sacrifice is taken to save a vessel from total loss (e.g. when the captain makes a decision to lose some containers in order to save the vessel). 

It is based on the idea that the sacrifice made for the common good should be shared proportionately among all parties involved, including shipowners, cargo owners, and insurers.

In the case of general average cargo owners share the financial burden of the loss even if their goods were not damaged and without cargo insurance they may be liable for a substantial out-of-pocket cash amount.

Notable Incidents

Maersk Honam Fire

In March 2018, the vessel caught fire while sailing in the Arabian Sea carrying nearly 8,000 containers.The General Average declared for cargo owners with cargo aboard the Maersk Honam was 54% - meaning for every $100,000 of cargo on board, cargo owners would have to pay $54,000 to have their goods released.

Ever Given (Suez Canal)

In March 2021, the large container vessel ran aground while transiting the Suez Canal. The Ever Given was stuck in the canal for six days, and the effort to get it moving again resulted in Egyptian authorities seeking compensation of close to $2 billion.Whilst General Average is still being finalised, cargo owners are expecting to face charges upwards of 20% of the cargo value they had aboard the vessel.

MS Dali (Baltimore Bridge)

In March 2024, the 9,000 TEU capacity vessel struck the Baltimore Bridge, which subsequently collapsed on top of the bow of the vessel. Whilst the salvage operation is expected to last months, General Average was declared mid April meaning cargo owners face large costs to recover their cargo on board.

Example of General Average Claim adjustment for a piracy event

This example is sourced from Allianz Global

Statistics show that importers will be involved in a General Average claim once every 8 years. History has repeatedly shown the most powerful oceangoing vessels piloted by expert captains can run into unforeseen trouble on a voyage.

So the best way to protect your investment in your imported goods is to be prepared for the unpredictable with cargo insurance. Follow this link to learn more or contact us for more information!

The Top 3 Questions to Ask Your Customs Broker & How Capito Enterprises, Inc. Can Help you

1. How will you help my company ensure proper compliance with Customs regulations?

   When selecting a Customs Broker for your business, you want to make sure that they have a finger on the pulse of U.S. Customs and Border Protection. Get the details behind how they are monitoring new compliance protocols being released by CBP and if they are part of any key trade compliance organizations. 

   Capito Enterprises, Inc. is a member of the Chicago Customs Broker & Freight Forwarder Association (CCBFAA) and the National Customs Brokers & Forwards Association of America (NCBFAA).  Being part of these associations helps us stay abreast of what is going on in the industry as well as be involved in helping improve the compliance process.  We help build the bridge between trade and customs by facilitating conversations and helping importers and exporters navigate through the various standards CBP enforces.  Our VP Rosette Capito is also a Certified Customs Specialist and is working on obtaining her Masters Customs Specialist certification through the NCBFAA. 

2. Do you have any pending lawsuits, violations, and/or have you been sanctioned by Customs?

   It is our policy at Capito Enterprises, Inc. to uphold the regulations set forth from U.S. Customs and help protect the safety and economic stability of our nation.  We work hard to ensure our processes adhere to customs regulations, and we have built protocols to check and double check the accuracy of our customs transmissions.  If there is any question, we make sure to reach out to CBP or any partner government agency to clarify what is needed to process shipments correctly and with the correct information.  We have aided customers in their own customs audits and have recently implemented our own internal audit processes.

3. How much do you cost?

   This may seem like an obvious one, but it is important to know how much your Customs Broker is going to charge you and, specifically, asking for a breakdown of fees. 

Security Summit Wrap-up

American engineer, inventor and businessman Dean Kamen once said, “Every once in a while, a new technology, an old problem, and a big idea turns into an innovation.”

Over the past few years, international trade has seen a need for innovation and change within the industry, and unprecedented situations have caused many businesses to rethink the flow of their supply chain.

U.S. Customs and Border protection has also seen this need for change as the global trade environment has evolved and technology advanced. Thus spurring the creation of the 21st Century Customs Framework initiative.  Goals of this initiative are to:

1. Achieve end to end supply chain transparency.

2. Drive data-centric decision-making.

3. Identify and allocate risk to appropriate parties.

At his year’s Trade Facilitation and Cargo Security, CBP stressed the importance of communication and partnership between U.S. customs and the trade community, which will continue further progress of the 21CCF initiative.

CBP addressed many topics at this year’s summit advising on their continued efforts to secure supply chains and combat the ongoing issue with illicit opioids crossing our borders.

Here is a more in-depth summary of the TFCS summit from the U.S. Customs and Border Protection.

As importers, there are a few initiatives to be aware of going forward as more information may be required in order to process your shipments. 

CBP Addressed many topics

Including their continued efforts to secure supply chains and combat the ongoing issue with illicit opioids crossing our borders.

Global Business Identifier Test

This test “examines the functionality and effectiveness of identifiers as a tool to improve U.S. government visibility into imports and facility supply chain traceability amid a trading system that is increasingly complex, globalized, and comprised of multiple actors.”  CBP has partnered with Dun andB, and the Global Legal Entity Identifier Foundation to utilize data collected by these parties to assist in supply chain visibility. 

Under the test, the trade can voluntarily submit one or more of the following three identifiers for certain party types on an entry (manufacturer, shipper, seller, exporter, distributor and packager):

1. The Global Location Number (GLN) from GS1

2. The Data Universal Numbering System (DUNS) from Dun & Bradstreet (D&B)

3. The Legal Entity Identifier (LEI) from the Global Legal Entity Identifier Foundation (GLEIF)

How to Participate in the Test: Importers of record and licensed customs brokers seeking to participate should email the GBI Inbox (GBI@cbp.dhs.gov) with the subject heading “Request to Participate in the GBI Test.” Please reference 89 FR 9859, issued on February 12, 2024, for details.

“...businesses have to decide and figure out who are “friends”,
and defining “friend” is more complicated.”

— Bill Reinsch

Supply Chain Resiliency

Another important area to assess is supply chain resiliency.  COVID and other global unrest has shown the trade how important it is to prepare and plan for any and all issues that can disrupt supply chain movement.  Doing a risk assessment of your supply chain would help provide insight into the areas that need fortifying or if business practices need to be changed.  Areas to consider review would be investing in freight and cargo insurance, diversifying the supply chain and routing options, and assessing cyber security risks.

Cyber security, which CBP recently created and provided guidance, is a major topic within the trade community given the breaches experienced by steamship lines in the past couple of years.  Securing data and networks is imperative to avoid and deter bad actors from stealing data and committing fraud.  We have seen many notices from steamship lines and other forwarders noting that banking details have not been changed, or to check email addresses when receiving requests for funds as there are frauds impersonating legit vendors. You can find more details on the CBP Trade Cybersecurity Website and also in our recent issue of Capito’s Update (click here to subscribe).

“10 years from now the supply chain will look much different than it does now…this shift in supply chains is due to multiple impetuses, and businesses have to decide and figure out who are “friends”, and defining “friend” is more complicated,” said trade expert Bill Reinsch in a panel discussion with Executive Assistant Commissioner AnnMarie Highsmith.  Reinsch is senior advisor and School Chair in International Business at the Center for Strategic & International Studies.  He is also one of the hosts of The Trade Guys podcast where they discuss various trade topics and insights.

For more information on any of these topics, please contact our team and we can help provide more insight and information on these areas.

The Top 3 Questions to Ask Your Freight Forwarder & How Capito Enterprises, Inc. Can Help You

You have a wide range of freight forwarding companies in the Chicagoland area. As an NVOCC and Freight Forwarder, Capito Enterprises Inc. can help take care of your logistics needs from the moment you place the order with the supplier to the day your cargo is delivered. As you research freight forwarding partners, start with these 3 questions to help you make the right choice.

Do they offer the services you require?

First, determine what services you may need and then find out if that Freight Forwarder offers them. 

At Capito Enterprises, Inc. we utilize our network and resources to find you the services you need.  The clearer you are about your needs, the better we can ensure your cargo arrives to final destination as expected.  When requesting quotes or rates, be sure to include details like incoterms, final destination location, and delivery deadline time frames.  If you give us a scenario, we can find out if we can make it happen.  We aren’t afraid to ask, “what if?” or “is this possible?” 

How will they manage your shipments, how will you interact with them?

In general, you want to get a feel for how they handle their Customer Service. Remember these are your goods at risk, so you want to ensure that they’ll be available to support you should an issue arise during their contracted segment of the supply chain.

Our sales and operations specialists work closely together in order to ensure smooth and consistent handling of your shipments.  Once the rates and bookings are confirmed with our sales team, the shipment is handed off to our operations specialists.  Your shipments will be handled by the same operations specialist from start to finish, ensuring that your expectations are met and each operations specialist has a clear understanding of your needs.  Our team is reachable via email or telephone should any issues arise during business hours.  Weekend coverage is available for urgent shipments upon request (weekend service fees will apply).

How much experience do they have?

Start with a basic Google search and get a wealth of information including reviews from Customers.

Capito Enterprises, Inc has been in business since 2010; however, our team has over 50 years of experience in the freight forwarding and logistics industry.  Our company is able to exist due to customer loyalty and shows how much we value building relationships with our customers.  Our oldest customer has been working with our founder Sally Capito for over 30 years.