Air cargo liability is changing, and your insurance could be affected

The revised International Air Transport Association (IATA) Direct Air Waybill (DAWB) framework, which came into force on 1 July, has triggered one of the strongest responses from the freight forwarding industry in recent years.

Much of the debate has focused on the way the changes were introduced and the transfer of contractual liability from airlines towards freight forwarders. However, another issue is now coming into sharper focus: insurance.

The changes apply only to shipments moving under a Direct Air Waybill, where the airline contracts directly with the shipper, rather than through a House Air Waybill. While this represents a clearly defined portion of global air freight, it is a common tool for urgent, high-value and time-critical shipments where speed and simplicity are paramount.

Industry challenges both the process and the outcome

The International Federation of Freight Forwarders Associations (FIATA) has been one of the strongest critics of the revised framework, arguing that implementation proceeded before the agreed industry consultation and review process had concluded.

Its concern is straightforward. Freight forwarders arrange transport, but they rarely manufacture, package or prepare the goods they ship. Despite that, the revised framework could leave them assuming greater contractual responsibility for failures originating elsewhere in the supply chain.

The US Air forwarders association has issued similar warnings, advising members that they could face increased exposure where cargo has been incorrectly declared, inadequately packaged or containing concealed dangerous goods.

Adding further uncertainty, airlines are not expected to implement the revised framework consistently. Rather than introducing a single global standard, different contractual approaches may emerge across carrier networks, increasing complexity for companies moving freight internationally.

Liability is moving closer to the freight forwarder

Under traditional Direct Air Waybill arrangements, freight forwarders have generally acted as agents on behalf of their customers.

The revised framework changes that position by allowing airlines, in certain circumstances, to regard the freight forwarder as the principal contracting party.

That distinction has significant implications.

Where cargo is mis-declared, packaging fails to meet airline requirements or dangerous goods have not been correctly identified, airlines may now seek recovery directly from the freight forwarder, even where the original error lies with the shipper or manufacturer.

The concern for the forwarding industry is that contractual responsibility is moving further away from those who prepare the goods and closer to those arranging their transport.

As a result, freight forwarders should be asking more detailed questions before accepting cargo. Information about product declarations, packaging standards, dangerous goods, export documentation and the level of cargo insurance already in place will become increasingly important. These types of checks will be critical to identifying potential risks before shipments enter the airline network, helping to protect the shipper and forwarder should a claim arise.

Insurance is the critical issue

The revised DAWB framework has implications that extend well beyond contractual liability.

Historically, freight forwarder liability insurance has been designed to cover professional negligence and errors in arranging transport, not liabilities arising from a customer's product declarations, packaging or manufacturing processes.

If airlines increasingly regard freight forwarders as the principal contracting party, insurers are likely to reassess the level of risk they are underwriting. That could lead to higher premiums, tighter policy conditions and greater scrutiny of how shipments are accepted before they enter the air cargo network.

For freight forwarders, the emphasis will shift towards understanding much more about every shipment at the point of booking.

Questions that were once considered routine may become essential. Is the cargo correctly declared? Has it been packaged in accordance with airline requirements? Does it contain dangerous goods? Who prepared the documentation? What insurance protection is already in place? Are there any gaps in cover that could leave either party exposed?

The more thoroughly these questions are addressed before cargo is accepted, the lower the likelihood of disputes, uninsured losses or unexpected liabilities later in the supply chain.

Why shippers should review their insurance arrangements

The revised framework also provides an opportunity for cargo owners to review how their shipments are insured.

Many businesses assume that carrier liability automatically protects the full value of their goods. In practice, carrier liability is limited under international conventions and rarely reflects the true commercial value of high-value, specialist or time-critical cargo.

As contractual responsibilities evolve, understanding where responsibility begins and ends becomes increasingly important for both shippers and logistics providers.

Reviewing cargo insurance alongside shipping procedures can help identify potential gaps before they become costly claims, and ensuring goods are protected to their full commercial value.

Logicall can review your existing cargo insurance arrangements to determine whether they provide sufficient protection under the revised framework. Where additional cover is required, Logicall’s All Risk Cargo Insurance, protects goods for their full commercial value throughout transportation and storage, available on either a per-shipment or annual policy basis.

Speak to Logicall's air freight specialists to review your current cargo insurance and discuss how the revised Direct Air Waybill framework could affect your business.