There is 63.3 million metric tons a year worth of cargos flying in the sky. The information flow of the cargo through to multiple parties revolves around a single piece of paper; The Air Waybill.
Without a doubt, much of the structure of an Air Waybill is based on the contract of carriage by sea, the ocean bill of lading.
In essence, an Air Waybill musters its significance by being a document that represents a contract of carriage. This is why we contend that this guide is meant to be an overview of what an Air Waybill is, and what are the legal aspects of an Air Waybill.
Tens of thousands of Freight Forwarders, and millions of shippers/consignees from large multinational companies to Amazon E-Commerce sellers, will encounter, prepare, receive, or endorse an air waybill.
Therefore, we see fit to provide, to the best of our ability, a reference point for you to refer to as a general yet complete guide about an Air Waybill document.
Hopefully, after skimming through this guide, you are able to nurture a fresh understanding of this document and more importantly, able to avoid the pitfalls and liabilities that come with an Air Waybill.
Components Air Waybill Document
The best place to begin understanding an air waybill is by scrutinizing the details on the air waybill itself. Line by line, and column by column.
For simplicity, we can break the document down to five main categories: –
- Shipper and Consignee Details
- Air Voyage Details
- Cargo Details
- Freight Arrangement Details
- Terms and Liabilities of Contract
Quite a lot to fit into a piece of paper, but an air waybill does not carry its weight if any one of the details above is missing. Let’s look at the broad details above.
Shipper and Consignee Details
The shipper refers to the initial cargo owner and the consignee indicates the cargo’s intended owner. A point of note is that an air waybill is a non-negotiable contract of carriage.
This implies that the intended owner of the cargo cannot be anyone other than the entity, or its appointed agent described in the air waybill.
Air Voyage Details
This section informs the users of the waybill the flight details and the schedules that were planned.
A unified code system is used so that all users around the world understand what are they looking at.
It is very much like a learned language, if there is no universal language such as English to communicate, we couldn’t imagine a world where advanced civilization exists.
The ICAO (International Civil Air Organization), and the IATA (International Air Transport Association) provides a prefix for Airline Codes as well as Destination Codes that have 2 or 3 alphabets representing the country/airline carrier.
For example: –
Airport Destination Codes
|Airport Name||IATA Code||ICAO Code|
|London Heathrow Airport||LHR||EGLL|
|London Luton Airport||LTN||EGGW|
|London City Airport||LCY||EGLC|
|London Gatwick Airport||LGW||EGKK|
Notice all the London Airports above, all four of them actually are in different places. To avoid confusion on the air waybill.
The industry has 2 universal codes designated for each airport.
A similar concept applies, the Airline Codes provide a unique identifier in order to avoid confusion.
|Airline Name||IATA Code||ICAO Code|
|American Airlines, USA||AA||AAL|
|Virgin Airlines, USA||VS||VIR|
|Emirates Air, UAE||EK||UAE|
|Cathay Pacific, HK||CX||CPA|
Why Do We Have 2 Codes? The IATA Code and The ICAO Code
To our understanding, ICAO’s primary concern is safety and traffic control, whereas the IATA is formed to provide an associated voice for airliners to promote their commercial interests.
We have consulted a few pilots about this matter, they said that it was a legacy issue.
ICAO is formed in 1944, as one of the many specialized agencies under the United Nation’s umbrella. Shortly after, the IATA association is formed in 1945. Right after World War 2 has officially ended when the Japanese surrendered to the Allies.
Since its beginning IATA trotted upwards in popularity and gain more members among airline carriers, they maintained the airline and airport code that has a different logic when compared to the ICAO codes.
The ICAO codes affixed alphabets that signifies
- Airport’s Country
- Airport’s Area in Country
- The Actual Airport itself
Whereas the IATA Code does not have any of that symbolic representation.
Over the years, the two codes are used interchangeably within the commercial sector, but for the purpose of air traffic control and safety, they refer to the ICAO Code.
It is no wonder that in an Air Waybill, we sometimes see that both codes are documented on the document in order to avoid any confusion.
In the air waybill, the route in which the cargo travels are also detailed. If there is a via-point that the route stops by, the airport code is mentioned in the air waybill.
During transit, the cargo may also be transhipped using another aircraft carrier. If that is the case, the second aircraft carrier code is also mentioned in the waybill.
Cargo Item Details
The items listed as cargo items in the air waybill may not necessarily be similar to the one reflected in the commercial invoice
A general guide for preparing air waybill’s cargo items is to treat it as a manifest of the items shipped.
It’s about grouping cargos together that falls in the same Tariff Code (Harmonised System Tariff Code) and summarising its weight, its packaging information, and its nature of goods whether classified as hazardous or not.
Ultimately, you have to know that the users of the air waybill will not have the same access to the commercial invoice as you do.
Additional fields are allocated in the air waybill to describe the handling methods best suited for the cargo shipped. For example, fragile cargoes, hazardous cargoes, seal-packed cargoes, etc…
Similar to the cargo description details, once the cargos are separated by category, each weight is determined and listed on the air waybill. The issuer of the air waybill will refer to the packing list prepared by the shipper to fill in this section.
Cargo weights come in: –
- Volumetric Weight – Length x Width x Height
- Net Weight – Without Packing Material
- Gross Weight – Together with the packing material
Universally, the cargo’s volumetric and actual weight is computed in the metric system instead of the imperial system. It is just easier and the scales are more understandable.
Nevertheless, there are still some airline carriers that use the imperial system, mostly domestic flights within the United States.
The weight category on the air waybill is important in the eye of air carriers and service providers, as the air freights applicable is based on the chargeable weight of the transported goods.
Simply put, the chargeable weight is whichever is the highest among the volumetric weight and the gross weight.
This is where the air waybill differs slightly from a standard ocean carrier bill of lading. In the interest of administrative speed, the cargo value is also inserted into the air waybill.
This allows the customs officers and airport crews to quickly scan through all details of the transported goods, without having to shuffle over multiple documents at a time.
Difference Between Value for Customs and Value for Carriage
There are two separate columns to fill with regard to cargo value.
Declared Value for Carriage
For insurance and liability purposes, the value per unit measured weight (per pound or per kilogram) of the cargo has to be declared before undergoing the contract of carriage, this is declared to ensure there is no ambiguity in determining the value of the cargo should there be any damages incurred.
Certain aircraft carriers charge a premium on high-value cargos, the reason for that is mostly to cover any handling fee or damages incurred on a high-value cargo.
The way aircraft carriers determine whether a cargo is high value is not from the total declared value, but the value per pound/kg shipped.
If there is no declared value for the cargo, for the case where the cargo is a personal item or parcel goods, the column is filled “NVD”. Abbreviated for no value declared
Declared Value for Customs
Conventionally, the declared value for customs must not be lower than the declared value for carriage.
The Declared Value for Customs is used to calculate duty and tax applicable to the cargo.
There are several aspects that will make the Declared Value for Customs different from the Declared Value for Carriage. Chiefly for the declared value for customs, the shipper/consignee has to declare the sum of: –
- Declared Value of Carriage
- Declared Value of Insurance
- Declared Value of Freight
Again, if there is no declared value for the cargo, the column is filled “NCV” (No Commercial Value).
Nothing is left for ambiguous interpretation. Roughly 40 columns are there for details that cannot be left out from the carriage contract. It is a wonder how all of this can fit into one tiny piece of paper.
No less important than the other details are the endorsement of the shipper or the appointed agents, this signifies that all the details on the air waybill are up to standard and the shipper has thoroughly read through the document details.
That said, this is not a bulletproof method for the issuers of the air waybill to transfer the risk of documentary mistakes to the shipper itself.
Countless cases of endorsed air waybill do not go in favor of the air carriers due to the mistake on details on the air waybill
You can read further of the air waybill details disputes. Despite the fact that shippers endorsed the air waybill, the fault of omitted details or misrepresented details befalls upon the air carrier.
The account information in question relates to the IATA organization’s Cargo Account Settlement System (CASS).
Additional Reading: https://www.iata.org/en/youandiata/freight-forwarders/
Freight Forwarders, Consolidators, and Main Air Carriers issue air waybill, as an IATA’s Cargo Agency Program, the account number is assigned by IATA for all of the aforementioned parties.
It is used to foster a transparent working relationship between agencies and aircraft carriers. The CASS system also is designed to simplify billing and bill settlement between airliners and freight forwarders.
Having the account number mentioned in the air waybill simply saves administrative time.
Freight Arrangement Details
Freight Prepaid or Freight Collect, generally indicates whether the shipper or the consignee is responsible for the air freight chargeable.
In a contract with freight prepaid arranged, the shipper pays for the air freight before taking on the transport consignment.
In contrast, a freight collect arrangement means that the issuer of the air waybill collects air freight charges from the importer. In case the consignee did not pay for the incurred air freight charges, freight transporters can hold the cargo as collateral.
In addition, the Air Waybill also includes other applicable charges that the air carrier may impose. It could be an insurance charge, an overweight cargo surcharge, or high-value cargo surcharge.
Knowing which party is responsible for paying the affreightment charges is a strong indicator of who is responsible for that stage of transportation.
If the shipper is responsible for the air freight charges and undertakes the arrangement and payment of the air transport, we can imply that in an unlikely event of cargo loss or damage, the cargo is not effectively transferred to the importer yet.
Hence the shipper has the unfavorable task of pursuing further action to cover the monetary damages that come from the failure of delivery.
The clearer the line is drawn on the sand on who is responsible for which stage of transportation, the better. The INCOTERM is used for exactly that motive.
The four most commonly used INCOTERMs in shipment arrangements are: –
Additional INFO on INCOTERM:
Terms and Liability Details
Equally as important is the terms and conditions of the contract, it is prominently displayed at the back of the air waybill in tiny font sizes, to fit in any conceivable conditions of carriage.
The terms and conditions of an air waybill do not differ much from that of a sea bill of lading, they cover: –
- The Rules and Conventions of the Condition of Carriage
- Responsibilities and Liabilities of the Carrier
- Responsibilities and Liabilities of the Cargo owner
- Limited liabilities of the Carrier
Rules and Convention of Carriage
Generally speaking, the terms and conditions of the carriage is drawn out in reference to two main conventions
- Warsaw Convention or Warsaw-systems Convention
- Montreal Convention 1999
There are many other conventions that the carrier may choose to ratify, but the majority of air carriers follow one or both of the conventions that we mentioned above.
The Montreal Convention 1999
International Air Transport Conventions cover the following: –
“it applies to all international carriage of person, luggage or goods performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking.”
The purpose of the Conventions is to: –
- Unifying the format and documents of carriage
- Outlines monetary compensation and limit for cargo damages or loss
- Time limitations and jurisdiction
In our opinion, we don’t have to delve into the origins and the interpretations of each convention.
This is a practical guide, and we are only interested in the application and implication of these two main conventions to our shipment.
Furthermore, we are only looking at the cargo liabilities of the conventions, and exclude the coverage for passengers and luggage.
However, the Warsaw Convention 1929 has slowly become obsolete and further development is necessary.
Here are the developments and amendments of the International Convention: –
- The original Warsaw Convention of 1929, unamended;
- The Warsaw Convention as amended by the Hague Protocol of 1955;
- The Warsaw Convention as amended by the Guadalajara Convention 1961;
- The Warsaw Convention as amended by the Guatemala City Protocol 1971;
- The Warsaw Convention as amended by Montreal Additional Protocol No. 1,2,3,4 of 1975;
- The Montreal Convention of 1999
The most important development in the field of international air transport law was the Montreal Convention of 1999. The Montreal Convention 1999 represents the most modern international convention in the field. It consolidates the various earlier legal instruments known as the “Warsaw-system conventions”
|Details||Montreal Convention 1999|
|Ratifying Country (at 2015)||70 Nations|
|Year of Enforcement||2003|
|Compensation for Cargo Loss||17 Special Drawing Rights per Kilogram with a maximum of 1000 SDR per consignment|
*Unless a Special Value is declared
|Electronic Documentation||Permits the use of E-Air Waybill|
|Coverage||International Carriage only|
|Form of claim||The claimant has to complain in writing to the air carrier with specific details|
|The time limit of claim||A claimant has 2 years to claim damage compensation from the date of arrival of goods to destination|
|Proof of Loss||The extent of loss claimed has to be proved by the claimant|
|Burden of Proof||The carrier is responsible for proof its innocence with 3 general defense and the 4 specific cargo carriage defense|
|Carrier’s specific defence against claim||Specific defences for carriage of cargo: – |
1) Inherent defect, quality or vice of the goods;
2) Defective packing of the goods;
3) Act of war; and
4) Act of public authority
General defence: –
1) Defence of “all necessary measure”
2) Defence of “negligent pilotage”
3) Defence that the claimant was “contributory negligent”
How to determine the applicable international air convention?
In an air waybill, it is common for us to see the following clause: –
“If the carriage involves an ultimate destination or stops in a country other than the country of departure, the Montreal Convention or the Warsaw Convention may be applicable to the liability of the Carrier in respect of loss of, damage or delay to cargo.”
Effectively speaking, the air carriers makes it clear that either of the Warsaw or the Montreal Convention will apply to the underlying shipment. It all depends on the destination of the voyage.
To determine which international air convention, we undergo 2 litmus tests: –
- Determine if the cargo is an “International Carriage” by checking if the place of departure, destination and stoppage are contracting states to the same version of Warsaw or Montreal Convention
- If there is more than one International Convention in place, we determine the “lowest common denominator” and therefore the “latest” treaty relationship between both states.
UNCTAD has outlined several scenarios that we can ascribe to: –
*Insert Picture here*
Note: In summary, Since the Montreal Convention is relatively newer, there are fewer contracting states that ratified the convention. As a cargo owner, you need to ensure that all contracting nations in the place of departure, destination and stoppage have one common convention ratified. Or else, the “latest” convention rules will apply (the Montreal 1999 Convention)
What are Special Drawing Rights
Think of Special Drawing Rights as an index of currency, where a basket of weighted currency is used as a reference to give value to the currency.
Similar to any other currency, an SDR has a daily spot rate, a nominal value to proxy against other currencies. But this is only the extent of the similarities between SDR and any other standard currency.
The difference is that, while acting as a currency, it does not operate as a currency, but rather in units of account that are monitored and maintained by the International Monetary Fund (IMF) since 1969.
The initiation of the Special Drawing Rights is mainly to act as a financial tool for the IMF to buoy the asset reserves held by the IMF.
In the broader view, it is not sensible for the IMF to only rely on the Gold and US Dollar as a foreign exchange reserve. As we all know, the value of these two assets is volatile and therefore may expose the IMF to sudden devaluation, dwindling the capacity of the IMF to secure global financial stability.
So, every 5 years, the IMF convene and decide on a basket of currency that is the most suitable, and more importantly, most stable to represent the SDR.
The most recent basket of currency are: –
- US Dollar
- Japanese Yen
- British Pound
The stability of an SDR is the biggest drawing point for international conventions to use as a guide to determine the nominal value of compensation.
So long as the IMF remains in existence, the SDR will remain as a unit of accounts. Instead of a currency as it’s existence and value depend on the sovereign nation’s economic prowess.
193 member states are a part of ICAO, the International Civil Aviation Organization, practically covers almost all states in the world. It is a specialized agency under the arm of the United Nation.
In a nutshell, the ICAO develops standards for the aviation industry to adhere to. It is not feasible for multiple standards from multiple states or groups of states to subsist. The aviation industry is in a particularly unique position due to its global reach, and the fact that any slight mistake or misrepresentation may spell disaster in death and loss of billions of dollars.
The world needs a unifying standard, and the ICAO obliges by developing standards (SARPS) for its member states to ratify. Those standards, among others, span to cover the following: –
- Airline Safety Standards
- Documentation Standards (Passports and other logistical documents)
- Aircraft Registry Standards
- Safety Standards
While the ICAO exists in the interest of safety standards, the IATA exists for the predominant purpose of commercial interest.
The IATA, International Air Transport Association, has 290 airline members, in addition, freight forwarders and travel agencies also participate in the association in the interest of trade facilitation, recognition, and insurance.
For the Freight Forwarders and Travel Agencies, IATA provides accreditation to those that meet their stringent service level requirements, which aids as a cushion of assurance for the customers of all kind engaging with them. In addition, accredited service training and courses are provided for the freight forwarders, consolidators, and travel agents.
For the airliners, the IATA serves to provide structure for: –
- Cargo and Passenger Safety
- Environmental endeavors
- Documentation standards and business safety
- Dangerous Goods Standards
We barely scratched the surface. But it wasn’t our intent to cover all details pertaining to the simple yet sophisticated shipping document that is the air waybill. We hope that in your journey of understanding the form and functions of an air waybill. This can be the first touchpoint for you to zone in and study more about.
Additional Reading: Guide to Air Freight Procedure