Freight forwarders face increased liability exposure after a change to airline industry guidelines governing cargo airway bills shifted responsibility for misdeclared goods, concealed dangerous goods, unsafe packaging and other shipping errors from businesses to the agents tendering shipments, trade associations and insurers are warning.
The International Air Transport Association’s revised framework for direct airway bills took effect on July 1. In a statement, IATA said the “rebalancing of benefits and responsibilities between forwarders and airlines” was necessary because of the growth of B2C e-commerce shipments of dangerous goods, such as lithium batteries.
Logistics providers complain that IATA’s decision was rushed through with little consultation, making it difficult for freight forwarders to prepare for the change. They also said it creates an inconsistent operating environment because liability regimes could differ by airline.
“Without a doubt, this represents a significant reallocation of risk,” said Matthew Phillips, chief commercial officer at Breeze, a digital cargo insurance provider, in a news release.
An on a waybill is a legally binding document between a carrier or freight intermediary and a shipper, which confirms the airline has received the goods and outlines the terms and conditions of transport like a contract. It is sometimes described as a boarding pass for goods to fly. Forwarders issue “house” waybills to their customers after receiving shipments. Airlines issue master air waybills to forwarders for consolidation of multiple house bills representing individual shipments. The airfreight agent at origin and its handling partner at destination are listed as the shipper and consignee.
Airlines usually create a direct air waybill when a shipment is given to an airline from a shipper and the forwarder is just listed as an intermediary party or when freight is not consolidated with other cargo and there is no house on waybill. In that case, the cargo owner and its customer are designated as the shipper and consignee. The arrangement is preferred for dangerous goods, perishables, urgent shipments and goods which require no special handling.
IATA proposed the change to direct air waybills in January, arguing that forwarders tend to insert the originating shipper’s name in the shipper field instead of their name when the shipment is high risk, in effect stepping out of their role as a customer and acting as agents of the shipper.
“This creates a dilemma for carriers. They no longer have a direct commercial relationship with the original shipper, yet they accept these high-risk shipments from the forwarder under a direct AWB that makes it appear as though they do have a contractual relationship with the original shipper,” IATA said in the November issue of its Airlines magazine.
Concerns raised over risk transfer
Forwarders should be responsible for shipments because a direct air waybill essentially creates a contract with an entity the airline doesn’t know and hasn’t vetted for its financial condition, criminal record or regulatory compliance. If something goes wrong it is difficult to seek recourse against the original shipper because it is an unknown party, IATA said.
It is unclear whether a major incident, such as a lithium-battery fire, has involved a direct AWB. Airlines usually settle claims, but it is increasingly difficult to pinpoint blame in the event of dangerous goods being mis-labeled or mishandled, especially considering the growing number of e-commerce and co-loaded shipments, according to the article.
“”Freight forwarders should not be expected to assume liability for cargo they neither own, pack, nor control,” said Brandon Fried, executive director of the Airforwarders Associationin a news release.
Phillips said existing freight forwarder liability policies have traditionally been designed around risks that forwarders control, including their own errors, omissions, and negligence when arranging transport, rather than obligations that sit with shippers. If the revised contractual framework results in forwarders assuming responsibilities previously associated with shippers, insurers may review how those risks are assessed. This could include changes to underwriting, policy terms, or pricing as the market gains a clearer understanding of the practical implications of the new arrangements.
The Airforwarders Association is advising members to obtain written confirmation from every airline on which contractual framework will apply to their shipments before tendering cargo, and to consult their insurers to determine whether existing liability policies remain appropriate under the revised arrangements.
“The advice we are giving members is that your insurance agent should be your new best friend. You should be sitting down with your insurance people and understand what your liability is, your contractual obligations and where your coverage may lie” before accepting shipments under the revised framework, Fried said on Monday’s FreightWaves Today program.
The International Federation of Freight Forwarders Associations (FIATA) said it asked IATA to postpone the implementation date of the air waybill amendments until Oct. 1 to allow for more review of the potential legal, operational and insurance implications.
IATA guidance calls for freight forwarders wishing to use direct air waybills to engage directly with airlines to clarify contractual arrangements, allocation of responsibilities and liability that will apply before cargo is accepted for transport.
The new procedure creates trouble for forwarders because it is becoming increasingly apparent that implementation of the direct airway bill guidelines will differ between airlines. In response to inquiries, some airlines have said they do not intend to implement the revised framework on July 1, FIATA said in a statement.
“The possibility that all airlines may not implement these changes in the same way creates unnecessary confusion at a time when the industry needs clarity,” said Fried in a news release. “We strongly encourage freight forwarders to seek written confirmation from every airline regarding the contractual framework being applied, rather than assuming a consistent approach across the market.”
He stressed that the Airforwarders Association supports industry efforts to strengthen air cargo safety, including measures to address the transport of dangerous goods, but any change that fundamentally alters contractual liability should only take place after full industry consultation and be accompanied by clear legal and operational guidance.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Write to Eric Kulisch at [email protected].
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