Effective December 28, 2024, the liability limitation for international air carriers will increase by approximately 18% under the Montreal Convention. The Montreal Convention is a multilateral treaty that, among other things, sets limitations on damages recoverable from air carriers for loss or damage to persons, baggage, or cargo.
The revised limits of liability established under Article 22 of the Convention increases the Special Drawing Rights (SDRs) from 22 to 26 per kilogram. This means that the new limit of liability has increased from about $28 per kilogram to approximately $34 per kilogram, which will increase the air carrier’s cargo claims exposure.
SDRs are the International Monetary Fund's units of account. They allow international obligations to be defined without tying them to the use of one single currency. Currently, the SDR is worth approximately $1.32.
To calculate an air carrier’s liability exposure, the total weight of the package or packages concerned must be taken into consideration. According to the Convention, an air carrier may agree to higher limits of liability or no limits of liability. Air carriers should make sure that their limits of liability are listed on their terms and conditions, contracts, and other shipping documents to ensure the increase to 26 SDRs is properly communicated to their clients.
Under the Montreal Convention, air carriers will pay 26 SDRs per kilogram if it can be proven they were negligent. The shipper bears the burden of proof, and it can be difficult to prove that the air carrier was at fault.
Did you know that “All-Risk” Shippers Interest Coverage provides the cargo owner with coverage for direct physical loss or damage to the cargo without the need to prove liability? Contact your local Avalon representative to learn more about our cargo insurance policies.