Expeditors International of Washington, Inc. (EXPD) Earnings Call Transcript & Summary

Good morning, everyone. We appreciate you guys joining us. We are right at the top of the hour at 11 a.m. here on the East Coast at least, 8 a.m. Pacific. So I imagine many of you are getting the alerts on your calendar, popping off to tell you what is next on your agenda. So we're going to let everyone start to roll in. And as we do that, I will go over a few bits of housekeeping. Just so in case you're new to these webinars with Expeditors, you'll understand kind of how the flow will work. So my name is Samantha Hurst. I am one of our marketing and bid managers for the Americas Team with Expeditors, and I will support in the background here. So first, to go on to the next slide with a bit of our housekeeping. If you've not joined us before, just to let you know the webinar content will typically go about 45 minutes and then we will do about 10 to 15 minutes of questions, just depending on how many of those you all have. [Operator Instructions] One of the first questions we almost always get from several people is whether or not we will provide the presentation slides, which we will do so. We do ask that you just fill out a quick survey for us, which we will send you typically within about an hour after the webinar has completed. And that survey just helps us make sure that we are doing everything we can to ensure that the webinars we provide you are incredibly valuable. So then again, if you are curious about future webinars, there is also this QR code that you'll see here on the bottom right of the screen. And again, that will just make sure that you are subscribed to any of the future events invites that we [do] sent out. So now we're going to introduce our speakers and get started with actual content of today's webinar. So here with us, we do have Diane Grand. She is our regional risk and insurance manager for the Northeast region. And just to tell you a little bit about Diane and Jeremy both. We've got lots of experience here with these 2 speakers today. So Diane has been with us at Expeditors for 29 years. She spent a lot of that time originally in our export team. And then she worked as a global account manager before she moved over to our risk management team where she's worked for the last few years. So Diane, we appreciate having you with us. And then Jeremy Stovin is an account manager with our risk management team. Jeremy has also been with Expeditors for about 26 years. So plenty of knowledge there. A majority of that time has been in risk management with Expeditors and of course, ECIB, which Diane will tell you a little bit more about that specific group here in just a moment. And with Jeremy, his experience, he's working with the Risk Management team has specifically learned a lot about general average. And how risk management kind of pulls all of the parties together, being the carriers the freight forwarders such as ourselves as well as the insurance companies. So I turn it over to Diane now, and she will give you a little bit more of an intro on ECIB before Jeremy gets into our content.

Thank you, Samantha. That's a great intro. I really appreciate it. Good morning, everyone. I'm Diane Grand. I'm happy to be here today. I have one slide out of the whole presentation, and I'm going to talk about ECIB. ECIB is an acronym for Expeditors Cargo Insurance Brokers. And we are the wholly owned subsidiary of our parent company, Expeditors International or Washington Inc. And what we do is we are a specialty cargo insurance broker. So we can place cargo policies with very, very large insurance companies, right? And it will cover all of your risk in the global supply chain, whether you move it air, ocean, rail or truck. It can also cover stock throughput like it says up there and simply stock throughput is your inventory, whether you have your inventory in your own warehouses or at a third-party warehouse and we also do a program called Claims Management services. So if you are a large company or even a small company and you have a very large deductible let's say, anywhere from $50,000 to $5 million, right, who's going to manage all of your claims under the deductible. We could do both under an over deductible, but the Claims Management Program is a TPA service and TPA stands with third-party administrator. We're licensed in the United States, we're licensed in Mexico and in Amsterdam. We have operation teams in Seattle, most of our operational teams based at our corporate office in Seattle. But we do have a team in Amsterdam that services all of our European customers and clients and a team in Mexico, with regional producers. So I'm considered a producer, someone that goes out, retail customers, right, and will secure cargo marine policies for them. We handle 31,000 cargo claims a year. I want to say that's probably larger than any insurance company on the cargo claims side, but I'm just guessing at that, right? We are very large so we handle both insured claims and liability claims. And lastly, we have very strong relationships with the insurance carriers, meaning the insurance companies. So when we go out to place coverage, they know who ECIB is, right, and they're happy that we're involved as possibly the insurance broker. So that's who we are from a very high level. So with that, I want to just turn it over to my colleague, Jeremy Stovin, who is our resident expert on general average. So take it away, Jeremy.

Thank you. Now there's a lot of pressure there. Thank you, everybody. I know enough to cause a lot of trouble here is what it is. This meeting here today is we're going to be talking about just the basics. General average is a very detailed, very complicated, complex issue or concept, so we really like to just touch on the very, very basic, the whats, wheres and whys and especially at the beginning parts of when a general average is declared just so you know what you're into. And also the beginning is usually where a lot is happening all at once. So -- and I also going to apologize, I'm going to turn off my camera just because I sometimes have more problems when my camera is running as well. So first, what is general average? Well, it's a very old concept that is based in maritime tradition. So I mean we're back to the time of sales ships and also back in the time where cargo owners moved with their freight. So they kind of accompanied their freight on the ship, and it really got to the point of, oh, there was something wrong going -- something happened. Maybe it's a bad storm or something in the ship was maybe in danger of sinking and they needed to get off some extra weight and so they needed to eject some cargo. So well, who's cargo do you eject while we suddenly one cargo owner is like not my stuff, it's too valuable. Take his stuff. And that guy is like, no, not this stuff, take his stuff. And meanwhile, it's a big fight and then the ship sinks and everybody loses. So this kind of came -- grew out of that. Currently, it is governed by the York [ Inter approvals ] of 1877, last revised 2004. I don't know if it's been revised since then. And actually, if you look at -- if you were to look, get your magnifying glass out and look at the back of your bills of lading that you're moving your freight on, it will make mention of general average. It usually doesn't go into detail and maybe references to York [inter approvals ]. So by coming to this contract of carriage, you are in a sense of agreeing to the general average per concept. And we'll go into a little bit of that later as well. So what it is in a nutshell. All parties in a sea venture will proportionately share any losses or any expenditures resulting from actions by the ship to save the entire venture. One thing that doesn't say here, but I'm going to repeat this a couple of times along the way, and it has to be successful in that -- those actions. So not only do they have to say -- they're trying to save the vessel, they have to succeed in saving the vessel. So one thing that a lot of people don't think about or don't realize, the general average can be declared by the vessel owner only if there is a General Average Act, and we're going to go into a General Average Act in a second. But -- so this is something that's initiated by the vessel owner. It's not initiated by the freight forwarder or even the carrier. I know a lot of people see those big vessels out there that may say Maersk on the side or Hanjin or something of that nature. Very unlikely that they actually own that vessel. So it's usually owned by another company and it's leased to Hanjin or it could be any other carrier that has stuff on that freight -- on that ship. So it's the vessel owner is the one that initiates it because they're the ones that man the ship and are dealing with saving the venture. So more of a technical definition, General Average Act, is when any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from parallel property involved in the venture. So it's a very technical legal way of saying what I just said before. So -- but keep in mind, and I kind of treated here with the italics, there are 2 main points in this to remember for general average. One -- and these are the 2 costs that are allowed. One is sacrifice. Sacrifice is for the reasonable discharge or intentional disposal of cargo to ensure the safety of the vessel. Now the first thing people think of who've heard about general average or think about sacrifices on ships. I even mentioned it in my very first example is Jettisoning cargo. To be honest. And now in the day of these large gigantic cargo vessels, container vessels. Jettisoning cargo is very -- is not done very much anymore. They have to discharge a lot of them. They'd have to jettison a lot of it to make a difference. So the more common form of sacrifice today, I'm not sure you've heard about situations where there might be a fire on the vessel. And in order to put the fire out, they have to flood the hold or their fire suppression systems go on, and that gets everything wet. So a good -- more common form of sacrifice these days is damaging your freight by getting it wet in order to save the whole vessel from burning and sinking. So your -- the sacrifice is the wet cargo. I know some years ago, we had a vessel, and I wanted to say it was APL Peru. I could be wrong on that one, where there was a vessel fire and actually at the Port of Seattle. And one of the big things that had to be done was to inspect and differentiate cargo that was damaged by fire versus cargo that was damaged by the fire suppression by the -- pouring the water over everything. So -- and the reason why that makes a big difference is because the value for the general average purposes, those value of the goods that were damaged by the sprinkler system and the firefighting was something that's part of the general average where the regular damage due to the fire was not part of the general average. So just a reminder, and we'll go this and I'll -- something I'll be repeating it again, again, the general average is about the expenditures in order to save the vessel. If something gets damaged in the incident that is occurring, that is not part of the general average. That's a claim you could file for damages with your insurance or with the carrier or such, but it's not part of the general average process. Now the second cost, and this is a lot more common, you see is the expenditure. So costs that commonly result from the vessel either entering a part of refuge or cost associated with towing or rescuing a disabled vessel. So if your vessel is out on the water or at the vessels out on the water, and it's disfloating, it can't move. It employs these tugboats to come and pull it to shore or pull it to the port -- I apologize, pull it to port, that's a form of saving it or if it's sometimes when you've heard, especially in the news about vessels running a ground those ships that are involved in helping save it, getting it free. Those are all expenses that would be incurred in order to save the vessel. People ask what a port of refuge is. Now if this was going to -- you're on your way to the next port and something happens and you get towed to that port you were heading to anyway, that's just a regular -- that's just the normal stop. Port of refuge is an unplanned stop at a port. So if it's a port that was not expecting you. You didn't -- and need -- but you needed to stop there. That would be the port of refuge and they usually charge some fees for that in order to use that port as a refuge. So hopefully, that makes sense. So these 2 costs sacrificed expenditures, that's what kind of makes up the general average cost. So how does the process work? Well, first and foremost, as I mentioned before, the general average is declared by the vessel owner. An average adjuster is then appointed to oversee the discharge of the remaining cargo and calculate the cost for each party. So they hire someone call them an average adjuster and there's a few -- there's a number of companies out there that do general average adjusting. It's a very specialized field. And they are appointed and their job at the onset is to oversee, basically collect all the information on all the cargo owners and all the vessel owner and everything that's on to the ship. So they look at cost, they look at the value of the vessel, they look at the value of some major equipment that's on the vessel as well as all of the cargo in that's on the -- currently on the vessel. And they add -- take -- they're collecting all those values and basically coming up with total -- large total value of every -- basically all the cost and all the value of the goods and equipment in the vessel and they determine what everybody's little proportion is. That's your overall goal. So what they do also, that's their plan, but then still on the onset, once they've been appointed, they're going to give notice to the cargo owners that they're asked to complete appropriate documents and post security. This is all part of them collecting this information. Now the notice usually does not go directly to the cargo owner. So usually the adjuster will get the name of all the shipments, all the goods that are on there, and they will send a notice to the carriers, the carriers then send a notice to their forwarders that are involved and then the forwarders will usually get that notice to the cargo owners. Now that is about the extent of the freight forwarders or cargo or the carriers involvement in the general average process. Typically, they have no legal requirements. Good forwarders will usually stay in communication and try to assist where they can, help facilitate information back and forth. Otherwise, from a legal standpoint of obligations, it's really between the cargo owners and the vessel owner. So notice is given and they send out these documents, and we're going to go over those documents. And then the cargo owner is going to need to fill out some appropriate documents and post the security deposit. Now they don't have to form a security deposit if they have insurance, and that's one of the many reasons why cargo insurance is always a good idea when moving stuff. So about these documents, there are 2 basic documents. One is the average bond, also known as Form A and the other one is an average guarantee, which is Form B. And I personally think they're kind of -- they're named a little opposite of what they do, and we'll go into that. So what do these documents are? As I said, these are usually provided with instructions from your forwarder or your carrier over to the cargo owner and they're the ones who are required to address these documents. First and foremost, the general average bond, Form A. So this is a form and this is just one of many examples that you see here. This is completed by the cargo owner. No one else fills this out when this is pretty much saying you are agreeing to participate in the general average. Now I mentioned before that if you have a airway -- or sorry, ocean bill of lading, you have the contract of carriage. It does refer to general average that you would be -- that you would agree to -- agree to participate. The average bond is really just an extra step for the cargo owners just to help -- not the cargo owner, for the average adjuster to help facilitate the process. And I'll get to a little bit more of why that's important, a little bit later. So they need you to fill this out. And basically, in a sense you're guaranteeing that you're going to participate in this process. It also has you spell out some of the information as well that all the -- on your cargo, gives a little information of what cargo you have and the value. So -- and then the second one, which applies to, I say most people, but not all cargo owners is the average guarantee Form B. So this is something if you have cargo insurance, you're going to want to have them fill out. If you don't have cargo insurance, then you wouldn't be filling out, there wouldn't be a Form B for you to fill out. So this is really designed for your cargo insurer and so your cargo insurance will then fill this out, and that's kind of them guaranteeing that they're going to participate. They are going to pay whatever portion you owe on your behalf. And I say it's kind of backwards because they usually are posting a bond if -- depending on how say, solvent that insurance company is. So anyway, so you see there, that's why I kind of say, one is kind of a guarantee and one is a bond and sometimes they're seen as kind of the opposite. Now what if you don't have insurance, I mentioned so you don't fill out Form B, and if that's the case, you would have to put down a cash deposit. And they usually come up with a percentage of the value of your freight to put down, and they will give you more direction. They have added directions. If you don't have insurance, then they will tell you how much of a deposit you have to pay. And as I said, it's usually a percentage of the value of your cargo. I know a question that does come up a lot is, well, what's the percentage? Now I have seen this vary a lot in my time dealing with this. Typically, it has been 8% to 10% of the value. That has been the more common area of the value of your freight. But I have seen it sometimes go as high as 100%. And it really can vary depending on the situation, and we'll get into a little bit more of why. But the more participants in the general average. So there more cargo owners that would be participating? Typically, it's a smaller value. And we'll touch on this a little bit more as well as we go along. So these are the 2 main forms, but sometimes there is a third form, and there's a third kind of concept that comes up. And it's technically separate than general average, but it works in conjunction. And this gets back to what I was saying about tugboats and barges that come and save vessels. You've all kind of seen movies and stories about the tugboat that someone comes across a ship in the open water and it's abandoned and the law of the sea says that they can just take over that boat and it's all theirs and for the rights of salvage, they can own the boat and everything on it because they latched on to it. Well, it's -- this is kind of working very similar. It does have to do with salvage rights and tug boats and barges, most of them nowadays will just charge a fee to tug your boat into the port, but some of them still do like to go and negotiate more of what's -- I call it, a right of reward, right, not really a salvage rights but a right of reward. So in lieu of that flat fee that they charge, they would have a right to negotiate their fee based on the right of reward, which would be a percentage of the overall value. So as I mentioned, it is a process separate but similar to general average where they would then take all the values of all the goods on the ship, including the vessel itself, and they determine based on the percentage of what their fee/reward would be. And there actually is a part of Lloyd -- Lloyd's of London that it's called the Lloyd's Arbitration Council that oversees that in just about all situations. And so if that does happen, there would be a third form, which here is a sample right now. And again, that would be filled out by the cargo owner and then possibly a separate deposit would have to be made to the Lloyd's Arbitration Council. And then that would be held and then that would be kind of all part of the -- kind of put together as part of the general average process. So it doesn't happen that much these days, but sometimes it does happen. So what happens next? So -- if the cargo owners as I mentioned, if the cargo owner does not have insurance, they must post a cash deposit with the general average adjuster. So -- and then we talked about -- and what normally happens is that they would send funds that gets held in escrow until the whole process is taken care of, which can be a long time, and we'll touch on that too. So thing to know, and the reason why everything is very urgent at the first part of the process, the general average process is your cargo will not be released until the appropriate security has been posted by the -- and approved by the average adjuster. So basically, once the general average process is starting, you really want to get your ducks in a row, get with your insurance company, if you have insurance, and get these forms put in as quickly as possible. So once that gets submitted to the general average adjuster, they have a big long list and they say, "Oh, I got everything from these guys." So they get a check mark and then when the vessel finally gets to port and your goods are being offloaded. It will be offloaded from the vessel, but it won't be released from the port until they are -- the average adjuster has you checked off. And if it doesn't, let's say you're running a little slower and it's not, you guys could -- the cargo owners could still be liable for any demurrage charges. You have only so many free days at the port before it has to be moved. If it doesn't, certain charges get applied and those could be applied as well. And there's really no other remedy for that. Your insurance typically does not cover those charges. So that's why it's very important to try to get this process in as quickly as possible. Now typically, if you do have insurance and you fill out the form, the average bond usually, they take care of a lot of this, so they'll fill out their form and you send them the Form A and they usually will be the ones to submit everything to you -- to the average adjuster for you. So if you don't have insurance, then you'll have to follow more directions and kind of engage with the average adjuster directly. So if the cargo owner chooses not to participate, they say, well, jeez, I'm not -- my cargo isn't worth it. I don't want to deal with this. I don't agree with this. you definitely have that right to do that, but then your goods would be considered abandoned. And if you guys -- and if your goods are considered abandoned, basically, you're walking away from your goods, you have no recourse. You can't file a claim for it. Your insurance won't coverage it because you're willfully abandoning the goods. And usually, since your deposit is a lot smaller than the value of -- overall value of your goods, doesn't happen -- we don't see why people would do this very often anyway, but it does happen. The other thing I wanted to step on or touch on when I was mentioning the cargo will not be released until appropriate securities have been posted. Thing to keep in mind, if you are a cargo owner that is moving goods, LTL freight. So you don't have a lot of stuff moving to fit into a whole container. So you have your forwarders consolidated your goods with other cargo owners in one container, there is potentially added problems with that with regards to general average because, let's say, you and 4 other cargo owners, 4 out of 5 of the cargo owners that have goods in that one container, all submitted your documents and your deposits, everything is okay. But one cargo owner that's in that same container has not. The whole container will be held until all the cargo owners have submitted their documents. The carriers in the port will not unload partial goods and move them out at the port. So if it's an LTL, less than trailer, it's a consolidated container, yours is kind of stuck until everyone has participated. And usually, the freight forwarder will keep track of this and be aware of this and they can help facility talking to the outliers and try to encourage them to move forward. So the other question is we get, well, what if your goods, there was an event and your goods fell overboard or damage in the process. Your cargo was damaged, then you don't really have to participate in the general average process. Because remember, it's a percentage -- based on a percentage of the value of your goods. And if your goods are, let's say, at the bottom of the ocean, their value is now zero. So another way of looking at this is, let's say, you have 2 containers, $5,000 each. One of them is falls overboard in, let's say, heavy storm that led to this general average, then you do have to participate, but the value of your goods is only $5,000 comp because you only have $5,000 worth of goods, the other stuff again, at the bottom of the ocean is not worth anything anymore. Again, and also just a reminder, the general average process is just about the expenditures to save the vessel. If your goods had fallen off the vessel in a storm or for some other reason, you can still file a claim with your insurance or liability claim with your forwarder. It is a separate thing from general average. So hopefully, that's making some sense. What happens now? So once the proper documents and securities have been received, the average adjuster will then begin their general average calculation. So everything up until now has been fast, fast, fast because you got timing of this, you can't -- You need to get your cargo released if you have cargo. So you need to get everything in, so you can get your cargo released and then you can track and make sure everything is A-OK with your cargo. After the average adjuster has collected all those documents and all the values of everything and all those deposits, then he begins the actual calculation. And this basically, as I was saying, goes through everything and works out. I mean, there's 2 sides to it, mainly he's taking all those values that he's collected of everybody's cargo and determines what everybody's little percentage is proportion down to the 0.0001% and then at the same time, they're negotiating -- they're helping negotiate with all the, say, the tugboats or the port of refuge, all the people that are charging these expenditures, these expenses that are being shared. They try to negotiate the best deal and everything. And then once that is done, then they have to apply all that proportion to that -- those expenditures to figure out what everybody's portion is. So -- and once they do that, they take that money from the deposit. So if there was a cash deposit, they would take the money from the cash deposit. If there is -- deposit was more than what was owed then they would reimburse whatever is left over back to the cargo owner. If it's too little, the balance would be owned by owed by the cargo. So additional money would be owed by the cargo owner. That's if there's no insurance. This is also why usually, the average adjuster is going to lean towards the side of taking -- getting too much of a deposit rather than too little because it's easier to try to give money back than to try to collect money afterwards. Obviously, if you have insurance, your insurance company takes care of all this part of it. And usually, you're not even aware that it's still going on. And the reason why is because general averages can take a very, very long time. I know someone has taken as long and longer than 10 years, just because there's lots of negotiation. There are lots of number crunching. I think they also get paid by the hour. I'm not 100% sure, but I wouldn't be surprised, but they do that. It can take a very, very long time to check and double-check and then go collect things from working with insurance companies and sometimes lawyers can get in. Another question that comes up to is, well, what if they declare general average, but it's really not a General Average Act or they don't agree that what happened is something that was out of their control. And so there's a dispute of whether this is a General Average act. Well, if that does happen, typically, cargo owner doesn't have to do anything. They can complain. Typically, especially if you have insurance, the insurance companies and have their lawyers and they're all on top of those things. And they say, Oh, well, and they just kind of swoop down and file lawsuits and things like that. And it's either reverse, the general average declaration is reversed or it succeeds. One example I have, in my time has been -- I don't remember the vessel, I'm sorry, it was a Costco vessel that, I think, run into the Golden Gate Bridge. And I know everyone was thinking I was going to talk about Baltimore. But no, this is before Baltimore, there is a ship that actually hit the Golden Gate Bridge and they declared general average right away. But by the time the vessel was brought to port, they had -- because all the lawyers swoop down. And I think the reason why they hit the bridge was because of piloting negligence. And so they reversed it and they reversed their declaration and it wasn't a General Average Act anymore. So -- anyway, so this is the process in a nutshell. Now I always like to make sure everyone is listening, and I have a little quiz for everybody. So I'm going to put up a scenario from a past scenario, some of them I've actually dealt with, some of them just are out there. And we're going to determine by poll and said anonymous poll that whether general average was declared or not declared. So first, some of you might have heard of these. So first was the Hyundai Fortune lovely picture. I don't -- unfortunately, I don't have pictures for all of them. So this was an accidental fire on March 21, 2006. 1/3 of the cargo was damaged or lost. The crew evacuated multiple firefighting vessels and tugs provided aid. So the question is, was general average declared. Give you guys a little time to give an answer.

And just to remind everybody, Jeremy, this is anonymous. So this is just to kind of gauge everyone's understanding of the instances provided.

Yes, exactly. Thank you. I would hum the jeopardy music, but I don't, but no one wants to hear me hum anything.

So far, about 58% have participated. So if anyone else wants to throw their thoughts in just really quickly, and we'll close it out.

5, 4, 3, 2, 1 Okay. Samantha, what was the final call. Okay. Wow, you have about 81% say was declared. And you guys would be right. Yes. And the reason is why, so it's nothing to do with the fire, nothing to do with the damage, the crew had to evacuate. So there are people that had to save them. They're firefighting vessels, which actually do charter services and tug boats provided aid all those people. We like to think that everyone is altruistic, but those people get -- do charge for these services. So because of that, there were these expenses, expenditures to save the vessel. It doesn't look like the vessel was saved, but at least the portion you don't see in the picture was saved. Next one. This one unfortunately I don't have photos. This is the Conti Harmony, this was stern tube damage back in 2007. If anyone who wants to know what a stern tube is, it's a tube that goes to the stern kind of has the I want to say the -- goes to the stern. Has the propeller connected to this big shaft that goes through the tube and it turns it. So Engine was disabled and the vessel was set adrift. There was no heavy weather, no collision, no fires, no containers were jettisoned or lost. No cargo was damaged. Multiple tugboats were used to bring the vessel to port So the question is was general average declared? And there should be a new question thing to answer. There it is.

At about 50% have answered so far. This one feels a little tricky.

Would I be making these 2 obvious, they have to be a little hard, come on.

Okay. We're at 62%. Anyone else want to throw in their thoughts or guesses?

Okay. Okay. let's call it, what do we say. We have a little tough one here. 39% said it was declared 61% said it was not declared. And the answer is actually it was declared because remember, this has nothing to do with damages to cargo or anything like that. In this case, even though there was no heavy weather, no outward issue, they did need to have call in tug boats to bring the vessel to port and that incurred the cost of the tug boats because they needed outside help that charge them for their services. And so therefore, it was declared. So they get easier. No, they don't. Example number three, Hyundai confidence this cut, I don't get another one. I don't have pictures on, heavy weather on January 30, engine was disabled and set adrift. Roughly 100 containers were washed overboard because of the heavy weather. The crew eventually repaired the engines and the vessel moved to port for further repairs. Was general average declared? They do progressively get harder and harder. I always have to hum the jeopardy theme song on unless the quiz time final jeopardy.

Everyone started answering this one quickly. So I can't decide if we're getting more confident or less, so we're just guessing.

No, more confident because everyone was listening on the edge of your seat at every word that they say.

Of course.

Because I am that interesting. Now I'm kidding here.

We're at 64%, Jeremy. Anybody else want to throw their last bit? Okay. I'll end this one.

Okay. So we have 61%. Similar to the last one. 61% said not declare 39% said declared. And guess what? People are learning because you're right, it was not declared. And the reason why is because the vessel was saved by their own crew. They did not seek -- they did not incur the added expenditures in order to save the vessel. So -- and people might ask, well, it was moved to the port for further repair. But once they're at the port, the vessel is no longer in parallel. It's no longer needing to be saved. So those are no longer -- those expenditures after it gets the port is not part of a general average. It's not a general average expenditure. Okay. The last one, and this is the most fun because I remember this, I can't say finally, but I do remember this one. And some of you might remember this one, too, the MOL Comfort. This broke in half in 2013, crew abandoned ship and called for help. The stern section sank 10 days later, and then the tugboats arrived and towed the bout section as far as the Arabian Gulf when it burst into flames and sank. Was general average declared? It's my favorite example. Let's see if we can get more than 60 people. Can I sure take a guess. What do you think? We got a 50-50 shot.

We -- now it's almost 70% of everyone has thrown in an answer.

Okay. I give you 10 more seconds. Everybody, anybody everybody. Okay. 82% said it was declared and 18% said it was not declared. And guess what? Against all odds, we're going to have it to give it to that 18%. General Average was not declared. I know everyone's scratching their heads going wait a minute. They were tugboats. They were -- tugboats were involved and it was towing, they must have incurred these expenditures for that tugboat. Well, the thing to remember, and I mentioned this at the very beginning, I think a couple of times, General Average Act has to be successful. So it's incurring these expenditures to save the vessel and they have to actually save the vessel. In this case, they may be effort, but they didn't succeed. It actually -- because both ends -- both halves end up sinking before it got anywhere. So since nothing was saved, there was no General Average Act. And even by some chance, let's say, there was considered General Average Act. As I mentioned earlier, participation is based on the value of the goods. Well, if everyone's good there at the bottom of the ocean, including the vessel, and that there is no value to anything anymore. So there's no percentage to participate. So anyway, hopefully, those questions were a little entertaining, a little edge extra educational. Now we go to our question-and-answer.

And again, we just encourage everyone to put their questions down into the Q&A box. If you don't feel like you were completely clear on all the content that Jeremy covered.

Or if you had any questions about current or real experiences, feel free to ask. I know one question. One of these things that brought up -- having this webinar was the events in Baltimore with that vessel. And a lot of questions are, well, does general average being declared, do they have to help pay for the bridge and all that stuff. And the answer to that would be the only expenditures would be -- included in general average would be to save that vessel, to remove -- probably to remove the parts of the bridge that are on the vessel as well as ungrounding it because it was grounded and bringing it back to port.

So Jeremy, we do have 2 questions that have come into the Q&A box. It always just has to see who's going to be willing to go first. So the first question is, in the last example, who compensates the services that attempted to save the vessel?

That's a very, very good question. And honestly, I don't have a definitive answer. I believe, though, since the vessel is the one that called out for the tow, it would be them. They are the ones to retain the tugboat. So it would be the vessel owners and likely their insurance.

Very good. So the next question is asking for clarity on whether the price you are charged for general average can ever exceed the value of your freight?

That's a very good question. And normally, I would say no, but I have seen it happen at least once. But then again, the lawyers swoop down and there were fights about it, and I think they finally came down to about 100%. It's a very -- it's a big rarity. And again, this gets to the what I was saying earlier about the larger the vessel, the larger the participants, the less people have to participate. So this one was a vessel. It was a fire and a lot of the ship burned, but not all of it. So what was left was a lot of expenditure, but there was not a lot of participants in the general average. And because of that, the average adjuster was calling for higher, higher values. So it doesn't happen very often, but I have seen it happen. It's usually when there's more of a bigger issue. Let's say, with the last example I had, the last quiz, the Comfort. Let's say they did save that 1/2 of the vessel, then the people that had goods on that vessel will probably have a higher percentage that they would have had to participate with.

Interesting. The next question, do you know of a situation where a nation state or government would force a general average?

No, I am not aware of any of that because usually, I mean, I know the closest one was the Suez Canal had a lot of more government involvement, but they were just interested in the vessel or someone paying their fines and penalties. They weren't forcing general average. I don't know anybody who has that kind of -- what country has that control over that because the York Inter Approvals and everything governing it are international conventions, so.

So here's an interesting one, someone mentioned that during the peak of COVID, there are, of course, ships that dropped anchor and waited several weeks to dock for several of those, I guess, that required additional fuel and food for the crew? Would that be able to claim general average?

I have not heard of anything being declared general average. I would think not because it wouldn't be considered a General Average Act because they're not really saving the vessel. I mean if it's kind of similar to just back up traffic in -- so that is an interesting and I don't say that too loud because you might have hopefully given -- not given somebody some ideas, but I wouldn't see that as being accepted as a general average expenditure because the vessel isn't in parallel. It's just there.

If the cargo is at the bottom of the ocean and considered a loss, insurance would then kick in from that portion. Is that correct?

If -- yes, because again, this is separate than your actual cargo loss or damage. So if your cargo, let's say, it was heavy weather that led to a general average event and in that heavy weather, your cargo fell overboard and thank to the bottom of the sea. You wouldn't have to participate in the general average, but you would be able to file your standard claim with your insurance or a liability claim with the carrier to try to get some reimbursement.

If the cargo owner chooses not to participate and cargo is abandoned, how is the abandoned cargo then treated? Is it treated the same as when cargo arrives to the port with no issues? What does it mean to be abandoned? I think this kind of question.

Yes. No, that's a good question, and I thought I should have touched on that before. So if it is abandoned, basically, you're walking away from the goods. So the general average adjuster, it becomes property of the general average process. So what would likely happen is the general average adjuster would then salvage the goods off, sell it for salvage. And then any funds from that would go towards the general average process. They go into escrow, go to pay off those expenditures.

Okay. We've got 2 more. So actually 3 now. In the case of the Dali, who would be responsible for the cost of rebuilding the bridge? Would that be the vessel operator?

Well, that is going to be -- I don't 100% know that's not really going to be part of the general average at all, as I said, it's -- it depends. It's really that's going to be discussions between the vessel owner and the government and or Baltimore City sake or whoever is making that. So it's really worth for them, but it's not related to the general average. The vessel owner can't turn around and goes, "hey, everybody needs to help pay for this." No, because that's not saving the vessel, that's other side penalties.

Certainly a tricky situation there. Okay. So curious one here. And as I think about it, I'm kind of wondering it myself. So someone asked how do they actually do the jettisoning of the containers? They just let them fall overboard. How does that work?

Well, and that's a very good question because that's why -- another reason why it doesn't happen very often anymore. And I really haven't heard about it happening in quite a long while. Typically, they would unlatch the containers. I don't know if they use any other special tools, but I think they would just unlatch it and try to hope gravity would do the rest. They really -- any situation where there would be something to jettison is a very dangerous situation. So that's another of the reason why it's really rarely done anymore and rarely needs to be done. Because I said if the vessel was listing it would -- you would have to let go a lot of containers in order to make any kind of difference in that case. And they also have a lot more ballast controls to help with that as well. So it really is not something that I've seen, and I don't know if that is a significant -- I'm not sure if vessels actually have processes for that. They might.

Another question about LCL cargo. This one is asking if one party abandons their cargo. Would the vessel owner continue to release the container to the other parties involved in that consolidation?

I was thinking I was going to touch on that, but I said, no, wait till it's asked. That is a very, very good question. The answer is, once the cargo is abandoned, yes, they will end up releasing it, releasing the container. The problem, though, is even if the cargo owner that's abandoning it and send the letter that says we are hereby abandoning our cargo, it takes a while for it to get officially considered abandoned. So yes, it would eventually get released, but it's still going to create delays, which the cargo owner -- the other cargo owners may still have to pay for in the way of demurrage charges.

So many details that kind of go into all of that, right? One last question. I'm really impressed by all the questions that have flooded in and somebody just took the first step and we have lots of good questions. So the last one is who is responsible for the loss of the actual container. I think they're talking about the container.

The container itself -- well, if it's a general average incident, I don't know any carrier that will hold -- try to hold the cargo owner liable, if that's what you're asking for. I think that's something that they -- that cargo owners -- usually, it's a -- sorry, usually it's the vessel or the carrier that owns the container and if the carrier usually deals with it on a property value -- kind of a property claim type of thing. Very rarely have I seen someone try to take -- try to hold a cargo owner responsible for a loss of a container. And typically, that's if -- only if somehow the damage to the container or the loss of container was attributed to either the product inside or the way the product was stored -- load and stored.

Different angle to consider.

Yes.

Well, that brings us to the end of our questions. Again, thank you all so much for your participation. Always makes these webinars more interesting when you bring your own questions to our speakers. So Jeremy and Diane, thank you both so much for your contributions today. We appreciate it.

And if anybody does have other questions that come up afterwards, I am free to -- happy to try to answer any of those things at any time you guys can shoot me in e-mail. I think my e-mail will get dispensed with the information or you can contact Diane or one of our regional risk insurance managers as well here to help.

Absolutely. We'll be happy to get your questions to them. Thank you all so much for joining again. We will send you out a quick survey just to get your feedback on today's event. We greatly appreciate you joining us. Have a great rest of your day.