Order 2013-7-5

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

On the Fifth day of July, 2013

Korean Air Lines Co., Ltd. Docket OST 2013-0004

Violations of Articles 17 and 19 of the Montreal 

Convention and 49 U.S.C. § 41712 Served July 5, 2013

 

CONSENT ORDER

This consent order concerns violations by Korean Air Lines Co., Ltd., (Korean Air) of 

Articles 17 and 19 of the Montreal Convention1 and the statutory prohibition against 

unfair and deceptive trade practices 49 U.S.C. § 41712, in connection with monetary 

claims resulting from mishandled checked baggage on Korean Air flights to and from the 

United States. It directs Korean Air to cease and desist from future similar violations of 

Articles 17 and 19 and section 41712 and assesses the carrier a compromise civil penalty 

of $60,000. 

Applicable Law

The Montreal Convention, to which the Republic of Korea and the United States are

signatories, imposes restrictions on an air carrier’s ability to limit its liability with respect 

to mishandled checked baggage. Baggage claims arising from flights between the two 

countries are subject to the provisions of the Montreal Convention. The liability limit for 

lost, delayed, or damaged checked baggage under Article 22 of the Montreal Convention 

 1 Convention for the Unification of Certain Rules for International Carriage by Air, adopted on 

May 28, 1999.
2

is currently 1,131 Special Drawing Rights (SDRs) for each passenger.2 Article 17 of the 

Montreal Convention provides that carriers are liable for loss of or damage to checked 

baggage in the custody of the carrier, except to the extent that the loss or damage 

“resulted from an inherent defect, quality, or vice” of the baggage. With respect to claims 

for compensation resulting from delayed baggage, Article 19 of the Montreal Convention 

provides that carriers are liable up to the limits of Article 22, except in cases in which the 

carrier can show that it took all reasonable measures to avoid such delay or that it was not 

feasible to take such steps. Nothing in the Montreal Convention permits blanket 

exclusions or otherwise allows carriers to disclaim liability for any class or category of 

item, such as jewelry, electronics, or high value goods, that they have accepted for 

transport as checked baggage, or to limit to a pre-set amount compensation for expenses 

resulting from delayed baggage based on, e.g., class of service or length of delay. Such 

exclusions contravene Articles 17 and 19 because they have the effect of limiting—with 

respect to items falling within their ambit—a carrier’s liability to an amount lower than 

that set by Article 22. Under Departmental enforcement case precedent, violations of 

Articles 17 and 19 also constitute an unfair and deceptive practice and an unfair method 

of competition in violation of 49 U.S.C. § 41712.3

Background

Based on a consumer complaint, the Office of Aviation Enforcement and Proceedings 

(Enforcement Office) investigated Korean Air’s policies and practices in connection with 

its handling of monetary claims for mishandled checked baggage on flights to and from 

the United States. A review of consumer baggage claims received by Korean Air 

disclosed that in some instances, the carrier limited reimbursement for delayed baggage 

to between $50 and $150, based on the passenger’s class of service, regardless of the 

amount of the expenses claimed, the length of the delay, or how many passengers were 

impacted by the delay. Additionally, we discovered that in a few instances, Korean Air 

improperly disclaimed liability for the loss of items that were included in the passengers’ 

checked baggage and accepted by Korean Air. 

Korean Air’s actions effectively limited its liability for damage occasioned by the delay 

of checked baggage and the loss of items in checked baggage to an amount far less than 

the 1,131 SDRs for each passenger in violation of Articles 17 and 19 of the Montreal 

Convention and 49 U.S.C. § 41712.

 Mitigation

In mitigation, Korean Air states that it takes its obligations to settle mishandled baggage 

claims in accordance with the requirements of the Montreal Convention seriously, and 

 2 Inflation Adjustments to Liability Limits Governed by the Montreal Convention Effective 

December 30, 2009, 74 Fed. Reg. 59017 (Nov. 16, 2009) available at www.dot.gov/airconsumer/guidanceaviation-rules-and-statutes. 

3 See British Airways Plc, Order 2012-10-1 (October 1, 2012); Caribbean Airlines Limited, Order 

2011-10-20 (October 28, 2011); and Emirates, Order 2011-8-24 (August 30, 2011).
3

strives at all times to minimize passenger hardships resulting from baggage irregularities. 

Korean Air maintains that, based on the Department’s own air travel consumer data, the 

carrier has infrequently been the subject of consumer complaints to the Department. 

Korean Air asserts that any alleged violations were the result of inadvertent mistakes and 

were not the result of a practice to deny passengers the compensation to which they were 

entitled under the Montreal Convention. Nevertheless, Korean Air notes that as soon as it 

became aware of the Department’s concerns, it undertook several immediate and proactive remedial measures in direct response to those concerns, including, but not limited 

to, enhancing initial and recurrent training for carrier personnel with responsibility for 

administering and settling mishandled baggage claims, introducing a completely redesigned passenger claim form, revising its customer handling manual to more precisely 

articulate the requirements of the Montreal Convention pertaining to mishandled baggage 

settlements, and strengthening internal claim file documentation requirements. Korean 

Air avers that these remedial measures have come at a significant cost to the carrier and 

will improve the overall claims handling process. Finally, Korean Air emphasizes that it 

has cooperated fully with the Department throughout the course of this investigation and 

seeks to maintain a positive compliance disposition with respect to all matters pertaining 

to the Department’s consumer protection requirements. 

Decision

The Enforcement Office has carefully considered the information provided by Korean 

Air, but continues to believe that enforcement action is warranted. In order to avoid 

litigation, the Enforcement Office and Korean Air have reached a settlement of this 

matter. Without admitting or denying the violations described above, Korean Air 

consents to the issuance of this order to cease and desist from future violations of Articles 

17 and 19 of the Montreal Convention and 49 U.S.C. § 41712 and to the assessment of 

$60,000 in compromise of potential civil penalties otherwise due and payable pursuant to 

49 U.S.C. § 46301.

This compromise assessment is appropriate considering the nature and extent of the 

violations described herein and serves the public interest. It represents a strong deterrent 

against future noncompliance with the Montreal Convention by Korean Air, as well as by

other carriers. 

This order is issued under the authority contained in 49 CFR Part 1.

ACCORDINGLY,

1. Based on the above information, we approve this settlement and the provisions of this 

order as being in the public interest;

2. We find that Korean Air Lines Co., Ltd., violated Article 17 of the Montreal 

Convention by disclaiming liability for certain classes of items, thereby effectively 

limiting its liability to an amount lower than that set forth in Article 22 of the 

Convention for the loss of items in checked baggage;
4

3. We find that Korean Air Lines Co., Ltd., violated Article 19 of the Montreal 

Convention by limiting reimbursement for expenses resulting from delays in 

returning checked baggage to amounts significantly less than the potential liability set 

forth in the Montreal Convention;

4. We find that by engaging in the conduct described in ordering paragraphs 2 and 3, 

above, Korean Air Lines Co., Ltd., engaged in unfair and deceptive practices and 

unfair methods of competition in violation of 49 U.S.C. § 41712;

5. We order Korean Air Lines Co., Ltd., its successors and assignees, to cease and desist 

from further similar violations of Articles 17 and 19 of the Montreal Convention and 

49 U.S.C. § 41712;

6. We assess Korean Air Lines Co., Ltd., $60,000 in compromise of civil penalties that 

might otherwise be assessed for the violations described in ordering paragraphs 2 

through 4, above. Of this total penalty amount, $30,000 shall be due and payable 

within thirty (30) days of the date of this issuance of this order. The remaining 

portion of the civil penalty amount, $30,000, shall become due and payable 

immediately if, within one year of the date of issuance of this order, Korean Air Lines 

Co., Ltd., violates this order’s cease and desist provisions or fails to comply with the 

order’s payment provisions, in which case Korean Air Lines Co., Ltd., may be subject 

to additional enforcement action for violation of this order; and

7. We order Korean Air Lines Co., Ltd., to pay the penalty through Pay.gov to the 

account of the U.S. Treasury. Payments shall be made in accordance with the 

instructions contained in the Attachment to this order. Failure to pay the penalty as 

ordered shall subject Korean Air Lines Co., Ltd., to the assessment of interest, 

penalty, and collection charges under the Debt Collection Act and to further 

enforcement action for failing to comply with this order.

This order will become a final order of the Department 10 days after its service date 

unless a timely petition for review is filed or the Department takes review on its own 

motion.

BY:

SAMUEL PODBERESKY 

Assistant General Counsel for 

 Aviation Enforcement and Proceedings

An electronic version of this document is available at 

www.regulations.gov