AI in the Workplace: Legal Considerations

The enthusiastic adoption of artificial intelligence (AI) in the workplace has given rise to a cascade of applications that leverage the technology. Companies considering adopting a new AI-based software solution face decisions about which solutions to adopt and what to consider when evaluating these options. In addition to technical and functional decisions, adopting an AI solution may have legal implications because governments have increased their focus on regulating AI.

AI can be leveraged for a variety of uses within transportation, including fleet monitoring and maintenance, shipping statistics, routing programs that monitor weather and road conditions, and deep analysis of various elements of a company’s business. Contract drafting and review, and virtual “AI assistants” are two rapidly expanding applications that rely upon generative AI. . Virtual “AI assistants” can monitor meetings, record transcriptions, take meeting notes, and suggest follow-up tasks to participants.

Understanding how AI is integrated into a particular product or solution will help ensure that a company does not inadvertently increase legal exposure or risk exposing confidential information. A company implementing a new generative AI solution should consider the following:

• What type of AI is being used? Is the AI predicting patterns, analyzing trends, or doing other complex data analysis, or is it generating a unique output based on the input provided?
• What are the capabilities and limitations of the product? For example, contract review and drafting software may be able to “issue spot” based on the parameters you provide, or it may suggest redline language based on standard contract terms from a playbook. What can the software consistently produce, and how is it presented for the company’s use?
• What does the software do with the data that is collected? Many AI solutions recognize that companies do not want their confidential or proprietary data used to train an AI model. The best practice is to ensure that the AI model does not store, retain, or use data in training outside your enterprise.
• Are there any limitations based on the output that it generates? What are the terms of use of the work product created by the software? Does the software rely on or is it trained by data that may have intellectual property protections? If so, does the software provider provide protections for potential liability from this use?
• During implementation, it is essential to provide guidelines for using AI products. We suggest a company consider the following:
  • When may generative AI be used? Are there instances where the company does not want AI to be used for some reason?
  • What processes are in place to check the work of the AI product? While AI-based products are incredibly powerful, AI is still a developing technology. Companies should establish methods to check materials produced by AI while implementing software.
  • Is AI being used for automated decision-making? AI-based products can analyze huge amounts of data to provide input on your workers and prospective job applicants. While the space remains mostly unregulated in the United States, regulators are beginning to focus on preventing bias and requiring human input in AI decision-making, especially where the decision-making impacts an individual’s job or finances. For example, the California Privacy Protection Agency has issued draft regulations that may require certain opt-out rights or other notices. Likewise, the Colorado AI Act (set to go into effect in 2026) has similar provisions regarding notice and opt-out requirements. Similar provisions are in place or being considered in other states, including Virginia.
  • How is the information shared? AI assistants and contract review platforms can quickly create a large volume of information. However, this work product may contain confidential or privileged information. Care should be taken to ensure that confidential and privileged information is protected and that strict controls on the use of AI functionality are in place to protect this sensitive data.

Changes to the ACAS Program Impacts Airfreight Forwarders

The Air Cargo Advance Screening (ACAS) program evaluates shipments for threats to aviation. Messages describing upcoming shipments are sent to the Department of Homeland Security (DHS) in advance of the cargo’s departure for the United States. This data is reviewed jointly by Customs and Border Protection (CBP) and Transportation Security Administration (TSA) personnel to identify threats.

The public regulations governing ACAS require that certain “mandatory” elements be reported in connection with air cargo moving inbound to the U.S. See 19 C.F.R. § 122.48a. CBP recently updated the ACAS Implementation Guide (IG) to state it is “strongly recommended” that ACAS filers include additional data elements regarding such shipments, including customer and party-contact information. CBP has also increased its scrutiny of cargo descriptions provided in ACAS filings.

Indirect Air Carriers and other businesses that make ACAS filings should ensure they are consulting the most up-to-date version of the IG (currently Version 2.3.3 released on October 15, 2024) to avoid possible delays when shipping air cargo.

California Limits 90-Day BIT Inspections to Large Commercial Motor Vehicles

The Governor of California recently signed Assembly Bill No. 3278, which amended California’s mandatory 90-day vehicle inspection program. Currently, motor carriers must conduct systematic inspection, maintenance, and lubrication services at least every 90 days on any California-based vehicle used to transport property for compensation. Effective January 1, 2025, only commercial motor vehicles (CMVs) with a gross vehicle weight rating (GVWR) of 26,001 lbs or more will be subject to the mandatory 90-day BIT inspection requirement. Vehicles under 26,001 lbs. GVWR are not subject to the 90-day BIT inspection but still need to comply with the federal requirement under 49 C.F.R. § 396.17, requiring annual inspections.

Ocean Shipping Disputes

The Federal Maritime Commission (FMC) has jurisdiction over certain ocean freight-related disputes, including disputes involving violations of the Shipping Act found at 46 U.S.C. Chapter 411. The FMC offers several options to pursue dispute resolution. For example, complaints about charges assessed by a common carrier can be submitted via email to the FMC through its “charge complaint” process. In response, the FMC will decide at its discretion whether to take any action, which may result in assessing civil penalties or ordering a refund of charges paid. FMC also offers alternative dispute resolution (ADR) services, which can assist with mediating the parties’ dispute. This allows the parties greater involvement in fashioning the outcome by providing them with a mechanism to resolve the matter and avoiding the issuance of any legally binding decisions by the FMC. There are two options for a party seeking a legally binding decision from the FMC. First, FMC offers a small claims complaint process whereby the parties can submit their supporting documents to the FMC and, provided there is no objection, an FMC settlement officer can decide the matter based on the submitted materials. Second, a party may submit a formal complaint to be heard and decided by an administrative law judge. This latter process can be lengthy and is more akin to traditional litigation.

Spotlight: Ocean Cargo

In today’s global supply chain, chances are that if you’re using it, a truck delivered it. However, many goods moving in the stream of U.S. commerce may well have traveled via ocean before being trucked to their destination. If you are arranging ocean transportation or transporting goods that are also moving via ocean, you need attorneys who understand the entire supply chain, not merely licenses and permits but also operational and commercial practices. At Scopelitis, our ocean transportation practice is here to help you keep goods moving through the entire supply chain.

Ocean Cargo Regulations

The regulatory landscape can be surprisingly complex for clients arranging or wishing to arrange ocean transportation directly. Air and highway transportation are generally deregulated from a commercial perspective while being heavily regulated from a safety perspective. Unlike most other modes of transportation, international ocean transportation to and from the United States remains heavily regulated from a commercial perspective, making it difficult for unlicensed entities to enjoy a “soft entry” into a business practice that may involve the arrangement of ocean transportation.

The Federal Maritime Commission (FMC) requires that any entity in the United States that arranges or even holds itself out as arranging international ocean transportation must be licensed by the FMC as an Ocean Transportation Intermediary (OTI). While non-compliance is rather common, FMC is on record as saying that because it is unlawful for an unlicensed entity to invoice a customer for ocean transportation, the unlicensed entity cannot avoid the licensure requirement by engaging a licensed entity to essentially subcontract performance of ocean transportation services. Rather, according to FMC, ocean transportation must be performed and invoiced in the name of the licensed OTI. These limitations against subcontracting, coupled with high barriers to becoming licensed (including a requirement that the applicant have an officer on staff with at least three years of ocean transportation intermediary experience), can stand as an obstacle for logistics companies that are asked to arrange ocean transportation on a limited “one-off” basis.

Types of Ocean Transportation Intermediaries

For those wishing to be licensed, there are two types of OTI: Ocean Freight Forwarders (OFFs) and Non-Vessel Operating Common Carriers (NVOCCs). Each is subject to its own set of regulations and limitations.

Ocean Freight Forwarders

By regulation, OFFs essentially act as agents of their customers, arranging ocean transportation with NVOCCs and steamship lines in the customer’s name. There is a nuance to OFF operations that can create difficulty with respect to import shipments where the forwarder wishes to operate as an OFF; specifically, by regulation, OFFs only handle exports from the U.S. In addition to regulatory hurdles, OTIs face any number of commercial issues, including the need to negotiate shipper-drafted contracts that do not take into account FMC regulations addressing how OTIs can contract for services, issues arising from disputes between buyers and sellers while goods are “on the water,” demurrage and detention charges caused by events beyond the OTI’s control, and even the difficulty of drafting default terms and conditions for transactions that will involve multiple modes of transportation across multiple countries.

Non-Vessel Operating Common Carriers

NVOCCs, on the other hand, can arrange both imports and exports but are subject to rules regarding how they can contract for services and assess charges. Both NVOCCs and steamship lines are still defined as “common carriers” under federal law. They are still generally subject to rules requiring that all shippers receive the same service levels pursuant to the same rules and charges as published in a tariff and corresponding bill of lading. There are exceptions to these tariff requirements, with some options providing more flexibility than others, but there is limited freedom of contract unless the shipper is willing to commit to tendering the NVOCC a minimum quantity of cargo, which many are not willing to do.

One option a non-OTI logistics provider may want to consider for “one-off” requests for ocean transportation is to work as the “sales agent” for a licensed OTI. This option is not necessarily ideal because the work should be performed and invoiced in the name of the licensed OTI (rather than the unlicensed party that has the direct relationship with the customer), but it can avoid regulatory foot-faults.

Who do the requirements affect?

For entities involved in the arrangement or performance of inland transportation of ocean freight moving to/from the U.S., existing operating authorities (e.g., FMCSA-issued motor carrier, broker, or freight forwarder authority) will generally suffice. However, motor carriers may be required to hold port-specific credentials or participate in the Uniform Intermodal Interchange Agreement (UIIA). Carriers accessing ports and brokers/forwarders arranging drayage moves should be aware of these requirements to avoid delays and operational disruptions. Motor carriers and logistics companies arranging drayage transportation also need to ensure good processes for tracking container free time to minimize potential exposure for demurrage and detention charges related to storage or use of intermodal equipment (or should consider contractual terms and conditions shifting the risk of such charges to customers in appropriate circumstances).

At Scopelitis, we understand that the global supply chain is interconnected and is only as strong as its weakest link. Let us help you build interconnected solutions to keep your customer’s cargo moving.

Scopelitis Quarterly Headline Roundup

A roundup of this quarter’s headlines authored by or featuring Scopelitis attorneys.

• Case Note: South Carolina District Court holds that plaintiff’s claims were all preempted by the FAAAA
• Case Note: Federal District Court holds recent BIPA amendment applies to claims arising before its effective date.
• The Trucker: Carriers must protect themselves against ever-increasing jury awards
• FleetOwner: Tariffs and emissions: What the different election outcomes mean for trucking
• C-TPAT Pilot Program Act Update
• HDT: What Happens if I Fail a U.S. DOT Compliance Review?
• Case Note: Recent BIPA summary judgment decision addresses biometric identifiers, biometric information, data collection and possession, and intent requirements.
• IBJ: Auto insurance rates keep rising
• CCJ: Mitigating legal risks against collecting truck drivers’ biometric data
• FreightWaves: Court decision impacting Illinois could snare any carrier crossing the state
• FTC Noncompete Ban: Steps to Take Now
• TSA Clarifies STA Requirements for Noncitizens
• Case Note: Illinois District Court Clarifies IWPCA’s Extraterritoriality and Deduction Provisions
• Case Note: California Supreme Court Blocks PAGA Intervenors From Contesting Settlements