General average declared after ship engine explosion

   The owner of the containership Hanjin Osaka has declared “general average,” following an explosion in its main engine on Jan. 8.
   MS Pelapas GmbH & Co. KG is the vessel owner, according to the shipping information database Equasis. It lists F. Laeisz as the ship manager, and a brochure on the F. Laeisz Website says the 1992-built Pelapas and its sister ships Perugia and Pereira are under long-term time charters to Hanjin. The vessels have a capacity of 4,024 TEUs and Sulzer RTA84C/37.976 KW engines.
   Hanjin and Laeisz did not immediately respond to requests for an interview.
   According to a “Declaration of General Average,” dated Feb. 7, the ship sailed from Pusan on Jan. 5 with 2,072 containers (or 3,742 TEUs) bound for ports in the United States.
   American Shipper’s affiliate Compair Data said the ship operates in Hanjin’s AWE-1 service from Asia to the U.S. East Coast. The CKYH alliance service has COSCO, “K” Line, and Yang Ming as space-sharing partners and normally has a Ningbo, Shanghai, Busan, New York, Wilmington, Savannah, Busan, and Ningbo rotation.
   In a letter over the signatures of Volker Redersborg and Roland Pallutz, the following account of the casualty was provided:
   At 3:40 a.m. on Jan. 8, “the main engine crankcase oil mist alarm was activated and three minutes later there was an explosion. After initial attempts, it was not considered possible to carry out any repairs at sea and a contract was signed with Nippon Salvage to tow the vessel to a port of refuge.”
   The tug Kaiko made contact with the vessel around midday on Jan. 15 and commenced towing the ship 2:42 p.m.
   “After lengthy negotiations with the Japanese authorities, the vessel was finally taken to the Hakodate anchorage,” off the coast of the northern Japanese island of Hokkaido, the letter said. The ship arrived at 7 p.m. on Jan. 26, 18 days after the explosion. The letter did not explain why it took so long for the ship to get to an anchorage.
   Repairs were carried out at the anchorage with tugs standing by. After the repairs were completed the ship resumed its voyage on Feb. 4, 28 days after the engine explosion.
   The ship is now transiting the Pacific and instead of sailing directly through the Panama Canal to the U.S. East Coast, it is now due to arrive in Long Beach, Calif., next week, according to David Clancey of Clancey Vanguard, a London-based company that’s acting as the general average adjusters.
   The letter said “as a result of the considerable costs incurred to preserve the common maritime adventure, the shipowners have declared general average.”
   As might be gleaned by the terminology, “common maritime adventure,” general average is an archaic maritime doctrine, described by Lloyds of London this way:
   “A loss that arises from the reasonable sacrifice at a time of peril of any part of a ship or its cargo for the purpose of preserving the ship and the remainder of its cargo together with any expenditure made for the same purpose. An example of a general average loss would include jettisoning cargo to keep a ship afloat and an example of general average expenditure would include towing a stricken vessel into port. An average adjuster calculates the value of each saved interest to each interested party which is then obliged to contribute towards the general average loss or expenditure proportionately. Subject to the terms of the policy, insurance will generally only apply if the loss was incurred to avoid or in connection with the avoidance of an insured peril.”
   Cargo policies usually provide coverage for general average. The notice of general average being distributed by Clancey Vanguard said before cargo and containers on the ship can be released and forwarded to their final destination, shippers or consignees will have to submit the following security to Clancey Vanguard, or the appointed port agents Norton Lilly:

• A general average bond signed and completed by the cargo receivers.
• Where the cargo is insured, an average guarantee must be signed and completed by the cargo insurers.
• Where the cargo is not insured, a cash deposit amounting to 3 percent of the commercial value of the cargo must be lodged with the port agents
• A copy of the commercial invoice.

   Shippers are unhappy when general average is declared and, as in this case, their cargo is long delayed in reaching its destination. Hanjin and the other liner companies sharing space on the ship are likely to take the brunt of any shipper or consignee ire, even if they did not make the general average declaration.
   A discussion of general average on the Website of the Illinois-based insurance broker Roanoke Trade noted potential financial loss from general average is one of the reasons that even shippers of low-value merchandise purchase cargo insurance.
   “Without all risk or free of particular average (FPA) cargo insurance, cargo owners would be forced to post a cash deposit with the vessel owner to have the cargo released,” Roanoke said, adding that “such a deposit would likely be tied up for two or more years until the general average adjustment was completed.”
   While declarations of general average are not frequent, they do occur regularly.
   James W. Carbin, an attorney at Duane Morris in Newark, N.J., said general average cases involving engine damage are sometimes contentious because cargo interests and their insurers may feel they are being made responsible for repairs on engines that may not have been properly maintained or needed to be replaced, even if that is not the case.
   Roanoke said the International Union of Marine Insurers has warned that slow-steaming has prompted concerns about damage to main engines which are not designed to run at slower speeds. It adds that while “slow steaming upgrade kits are available from many engine manufacturers, it is questionable whether upgrades are being made. A concern in the industry is that main engine failures due to slow steaming may increase the number of general average claims.”
   Roanoke noted “some underwriters have also voiced concern about ‘cold’ lay-up of vessels, and the possibility that this may give rise to equipment failure when those vessels re-enter service.”
   In addition, the insurance company said while “it is generally agreed that piracy ransoms fall within the scope of general average, the debate over ransom legality will ultimately be the deciding factor in how insurers will respond.” — Chris Dupin