The Air Waybill’s Conditions of Contract: What You Agree To When Cargo Flies

Almost nobody reads the back of an air waybill. It is a wall of small print headed “Conditions of Contract,” and it is the actual agreement between you and the airline for carrying your goods. When a shipment is damaged, delayed, or lost, the compensation you can claim is decided by that small print — not by what the cargo was worth and not by what the forwarder told you. This article explains what you are agreeing to every time you ship by air from China.

It builds on our guides to the house and master air waybill, the air freight documentation checklist, and chargeable weight.

The air waybill is a contract, not a title document

Unlike an original ocean bill of lading, an air waybill (AWB) is not a document of title. Holding it does not give you ownership of the cargo and you do not surrender an original to collect the goods. The consignee named on the AWB takes delivery against identity and the arrival notification. What the AWB does is three things: it is the contract of carriage, it is the receipt proving the airline took the goods, and it carries the handling and customs information for the shipment. Because it is not negotiable, air shipments avoid the “cargo arrived but the paper has not” problem that dogs sea freight — but they carry their own liability trap instead.

Liability is capped by weight, not by value

This is the single most important line on the back of the AWB. International air carriage is governed by the Montreal Convention (or, for a few older route pairs, the Warsaw Convention). Under Montreal, the carrier’s liability for loss, damage, or delay to cargo is limited to a fixed amount per kilogram of the affected goods, expressed in Special Drawing Rights (SDR), a currency basket published daily by the IMF. That limit is currently 22 SDR per kilogram (it is reviewed periodically and was raised from 19 SDR).

Work through what that means. If a 5 kg parcel of high-value electronics worth USD 4,000 is lost, the carrier’s liability is capped at 22 SDR × 5 kg — roughly USD 150 depending on the exchange rate that day. The other USD 3,850 is your loss unless you did something about it in advance. The cap is on the gross weight of the lost or damaged package, so a dense, valuable item is badly served by a weight-based limit.

The two ways to lift the cap

The Convention itself gives you one route, and the market gives you another:

• Declared value for carriage. On the face of the AWB there is a box for “Declared Value for Carriage.” If you declare a value higher than the weight-based limit and pay a valuation charge (a small percentage of the declared amount), the carrier’s liability rises to that declared figure. Most shippers leave this box marked “NVD” (no value declared) to save the charge — and thereby accept the 22 SDR/kg cap.
• Cargo insurance. A separate marine/air cargo policy covers the goods for their full commercial value plus freight, on an all-risk basis, independent of whose fault the loss is. This is almost always cheaper than the carrier’s valuation charge for the same cover and it responds even when the carrier has a defence. For anything valuable, this is the real answer.

Our note on air freight cargo insurance covers what a policy does and does not pay.

Time limits that kill claims

The small print also sets deadlines, and missing them ends the claim regardless of merit:

• Visible damage or partial loss: written complaint to the carrier within 14 days of receiving the goods.
• Delay: written complaint within 21 days from the date the goods were placed at the consignee’s disposal.
• Total loss: generally treated from the date the goods should have arrived.
• Any lawsuit: within two years of arrival, or the date the aircraft should have arrived, or the date carriage stopped.

The practical lesson is to inspect air cargo the day it is collected, photograph any damage before you sign, note the damage on the delivery receipt, and send a written notice within days — not weeks.

What the conditions say about routing and delay

Two more clauses that surprise shippers. First, the carrier reserves the right to route the shipment as it sees fit, including via other carriers and other airports; the routing on the AWB is indicative. Second, the carrier “undertakes to complete the carriage with reasonable dispatch” but does not guarantee a flight or a delivery date, and the conditions specifically exclude schedules shown anywhere from being part of the contract. If your buyer imposes a hard deadline, the AWB is not the instrument that protects you against a missed flight — only a commercial agreement with your forwarder, or insurance covering delay, does that.

Dangerous goods and the shipper’s declaration

By signing the AWB, the shipper certifies that the goods are properly described and that anything restricted — lithium batteries, aerosols, magnets, flammable liquids — is declared, packed, marked, and labelled to the IATA Dangerous Goods Regulations. If an undeclared hazard causes an incident, the liability caps protecting the shipper fall away and the exposure becomes the shipper’s. This is why lithium-battery shipments need the specific handling described in our lithium battery air freight guide, and why a truthful shipper’s declaration matters more than a faster booking.

What to do before your next air shipment

Three habits cover most of the risk. Decide, per shipment, whether the goods are worth insuring for full value — if the cargo is worth more than about USD 20 per kilogram, the weight-based cap will not make you whole, so insure it. Put your insurance certificate number and your forwarder’s claims contact in the same folder as the AWB. And treat the delivery-day inspection as part of the job: check, photograph, annotate the receipt, and give written notice fast. The conditions of contract are not negotiable, but knowing them tells you exactly where you are exposed and what to buy to close the gap.

Who can claim, and against whom

The right to claim under the air waybill sits with the party named as consignee, or the shipper before the goods are handed over. If you bought on CIF or CFR terms the seller arranged carriage, so check whose name is in the shipper and consignee boxes before you assume you can act. Under a house air waybill the freight forwarder is your contractual carrier and the airline’s master air waybill sits behind it; you claim against the forwarder, who claims up the chain. This is one reason the distinction in our house-versus-master air waybill guide is not academic — it decides who you send the written notice to and within which deadline.

A worked example of the two options

Say you are shipping 80 kg of consumer electronics worth USD 12,000. Left as “no value declared,” the carrier’s exposure if the shipment is lost is 22 SDR × 80 kg — on the order of USD 2,400, leaving you about USD 9,600 short. Declaring a value for carriage of USD 12,000 lifts the cap but adds a valuation charge levied as a percentage of the declared amount on every shipment, whether or not anything goes wrong. A separate all-risk cargo policy typically costs a small fraction of one percent of the insured value, covers the full USD 12,000 plus freight, and pays regardless of whether the carrier has a defence. For anything above roughly USD 20 per kilogram, the insurance route is both cheaper and wider.

DE International runs China sourcing, quality control, and door-to-door air and sea freight into Bangladesh, with customs clearance handled end to end. If you want help planning a shipment or untangling one that is stuck, contact our team, see our full service list, or start with our China sourcing and buying agent service. Ready lines are in our shop. Rates, timelines, and allowances in this article vary by carrier, route, and season — ask us for a quote built around your cargo.