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ICAO’s revised liability
Context
The International Civil Aviation Organization (ICAO), a global UN agency that sets rules for international air transport, has increased the liability limits for airlines under the Montreal Convention. This change, effective from December 28, will have an impact on Indian exporters and those involved in air freight.
Revised Liability Limits
- The updated limits are measured in Special Drawing Rights (SDR), a currency unit used by the International Monetary Fund (IMF). The conversion rate for 1 SDR is roughly ?111.66. The changes are as follows:
- Passenger death/injury: The compensation limit increases from SDR 1,28,821 to SDR 1,51,880.
- Delay in passenger/baggage/cargo transport: The limit increases from SDR 5,346 to SDR 6,303.
- Loss or damage to checked baggage: The limit increases from SDR 1,288 to SDR 1,519.
- Loss or damage to cargo: The limit increases from SDR 22 per kg of gross weight to SDR 26 per kg.
- This means that if Indian cargo is lost or damaged, the airline will now be liable to pay compensation of about ?2,900 per kg of cargo (compared to ?2,600 earlier).
Why This Matters for India?
- Benefit to Indian Exporters: The higher liability limits will help Indian exporters negotiate better insurance premiums for air shipments.
- In simple terms, if something goes wrong (like cargo getting lost or damaged), the airline will now have to compensate more, which in turn helps underwriters (insurance companies) recover more from the airline, reducing costs for shippers.
- Impact on Exporters and Insurers: For exporters, this higher compensation means they may negotiate lower premiums for marine insurance (the insurance that covers cargo during transport). If something goes wrong with the shipment, insurers can recover a larger amount from the airline, meaning less financial burden for the exporter.
- How Does This Help Shippers?
- Insurance: If the shipment gets lost or damaged, shippers (exporters) can now claim higher compensation from the airline. This also means that exporters can pay lower premiums for insurance, as the airlines' liability is higher.
- Improved Coverage for Cargo: For example, if a shipment of 1 kg of goods is lost or damaged, the airline would be liable to pay about ?2,900 (increased from ?2,600). Exporters can also seek additional liability limits by paying a higher valuation charge.
Fact Box:Montreal Convention
International Civil Aviation Organization (ICAO)
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