Smart ULDs are being introduced in an effort to improve management and efficiency in air cargo handling. However, their use raises important questions around carrier liability, legal and financial exposure, and the balance of risk throughout the supply chain. This article examines some of the benefits and risks involved in their adoption.
What are ULDs?
Unit load devices (ULDs) refer to the standardised pallets and containers designed for the loading and offloading of cargo, mail and baggage onto aircraft in a timely and cost-effective manner. ULDs enable carriers to minimise turnaround times by streamlining pre-flight preparation and optimising fuel spend by loading the aircraft in the most efficient manner.
ULDs are also expensive. According to the International Air Transport Association ("IATA"), there are currently around 1 million ULDs deployed by cargo carriers with a total replacement value of approximately US$1bn. The total annual cost associated with the repair and loss of ULDs is also estimated at US$330m, which excludes other related costs such as aircraft damage, delays and cancellations caused by ULD operations.[1]
Additionally, ULDs are subject to airworthiness and safety regulations as they are classified as aircraft parts. Their use (or abuse) and condition can impact the ability of an aircraft to remain in service. Unlike other aircraft parts, they regularly leave a carrier's control and pass through a web of handlers – many of whom are unregulated – making their location and maintenance difficult to manage.
Enter smart ULDs
In an effort to combat the problems faced with regular ULDs, smart ULDs emerged in the late 2010s with widespread adoption accelerating after 2020. They contain sensors which collect and transmit real-time data about an individual ULD such as its location, shock or impact events and the internal and external environment (including temperature, humidity and light exposure).
They have been designed with the intention of enabling carriers to better manage their ULD fleet depending on demand and capacity by minimising dwell times, improving stock reporting and reducing overall ULD fleet size.
They also provide carriers with greater control over critical shipments such as pharmaceuticals, perishables and dangerous goods, with better data to identify causes of delay, loss of or damage to cargo or aircraft.
So, what's the catch?
Despite these benefits, smart ULDs may prove to be a double-edged sword for air carriers and ground handlers.
- Easier to defend? On the one hand, smart ULDs enhance visibility and traceability, helping carriers to investigate and where appropriate to defend claims. Typically, a shipper or freight forwarding agent is responsible for the packaging and protection of their cargo which may include placing temperature and humidity recorders or shock and vibration sensors inside the cargo to record the conditions of shipment.
For example, in the case of pharmaceutical cargo, a shipper might insert a temperature recorder inside of the packaging in order to monitor the temperatures inside of the shipment during transit. Improper packing by the shipper or their agent might cause the temperatures inside of the packaging to increase disproportionately to the temperatures outside of the cargo which may be within the carrier's control. Smart ULDs may provide carriers with the data to counter these claims, where they can demonstrate that any temperature excursions were a fault of the packaging rather than any errant handling by the carrier or their agents.
- An uptick in claims? Whilst smart ULDs might streamline claims handling and increase the number of claims that can be successfully defended, they could also lead to an increase in the number of (successful) claims. Article 18 of the Montreal Convention 1999 ("MC99"), which provides a framework for international air carrier liability, imposes a strict liability regime on carriers for cargo loss or damage caused by an "event" during the carriage by air; Article 19 extends the carrier's liability to damage caused by delay in the carriage.
Last year, the High Court of England & Wales, by judicial interpretation, expanded the meaning of a qualifying "event" under Article 18 in a case concerning a shipment of asparagus and its exposure to excessive temperatures during carriage by air (see our article on the decision here).[2] This decision fosters broader carrier exposure under Article 18. Twinned with the fact that data collected by smart ULDs are likely to be discoverable in proceedings potential claimants now have a lower Article 18 liability hurdle and, by reason of smart ULD data, better evidence to prove a qualifying "event" which caused the damage or loss of the cargo.
- Shifting the blame. The data collected from smart ULDs could provide carriers with the opportunity to shift legal liability to another handler in the cargo chain, such as road carriers, ground handlers or warehousing providers, but only if the recorded data show that the cargo was mishandled whilst in the custody of that party (subject to any contractual terms that exist between the carrier and the third party handler). With data from smart ULDs, liability for damage can be established more coherently and so there is greater scope for targeted subrogated claims against responsible third parties in the cargo handling chain.
What it all means
Carriers adopting smart ULDs should be cognisant of the risks in order to take advantage of the legal, financial and operational benefits. This may involve reviewing their insurance or revisiting the terms of liability with their third party handlers to ensure they are fully protected if there is a qualifying "event" under Article 18 of MC99.
[1] IATA, 'Unit Load Devices (ULD)' <https://www.iata.org/en/programs/cargo/cargo-operations/unit-load-devices/>; IATA, < https://www.iata.org/en/publications/manuals/uld-regulations/>
[2] Wealmoor Limited v KLM Royal Dutch Airlines [2025] EWHC 1706 (Comm), [2026] 1 W.L.R. 261
