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ii 2 0 1 6 A N N U A L R E P O R T WELCOME Hello, and welcome to the 2016 USMX Annual Report. Over- all, 2016 was a very challenging year for the industry and for USMX—certainly, possibly one the most difficult years ever. Looming largest on the list of challenges is the upheaval among the USMX Carrier class, with eight of our 24 carrier members [American President Lines; China Shipping (North America) Holding Company; Hamburg Süd North America; Hanjin Shipping Company; "K" Line America; MOL (Amer- ica); NYK Line (North America); and United Arab Shipping Company] transi oning, beginning a transi on and/or con- solida ng during 2016. These changes are marking a trend that we expect will con nue as we move into the new year. We have included a new sec on in this year's report called USMX CARRIER MEM- BERS, with company profiles submi ed by each organiza on, star ng on Pg. 6. HANJIN BANKRUPTCY The Hanjin bankruptcy was, without a doubt, the single most trauma c and chal- lenging event for USMX in 2016. Despite the loss of the world's sixth-largest interna onal carrier and the largest carrier bankruptcy in world history, we were able to maneuver through the poten ally devasta ng event quite skillfully, while keeping our Board abreast of our progress and with minimal effects to our members. MEMBER SUCCESSES Even with the carrier challenges, USMX did mark many significant events/ successes throughout 2016: Tonnage: We saw a posi ve overall increase of 2.6% in tonnage volume for con- tract year ending (CYE) 9-30-16, with minimal labor disrup ons. For a look back at tonnage/manhour trends from 2006 through 2016, see Pg. 21. Technology: Technology implementa ons by USMX members were also on the plus-side of the equa on. We worked closely with our ILA partners on these deployments and we believe, in the end, that the process of modernizing parts of our industry worked to the advantage of both labor and management—illustra ng that our 2012 technology agreement is working well for our employers as well as for the union. Caribbean Basin Ini a ve (CBI): The par es successfully nego ated an 18- month extension of the popular CBI, extending it un l the expira on of the current Master Contract on 9-30-18. PERSONNEL TRANSITIONS USMX is a rela vely small organiza on, with just 11 staff members. In 2016, we saw the transi on of Ole Sweedlund, from Execu ve Vice President, Administra- on, to Ole Sweedlund, re ree. Ole was one of the pillars of the USMX manage- ment team for 11 years, and losing that much experience and dedica on to re re- ment is never an easy thing for any organiza on. I am pleased to report that the excellent work done by all involved resulted in a very successful transi on. We thank Ole for his many years of contribu ons to the industry and to USMX, in par cular. We wish him all the best in this next phase of his life. Over the course of his re re- ment transi on, he and his wife became grandparents to twin boys. We enjoyed watching Ole's an cipa on grow as grandfatherhood got closer and closer, and we know those boys will keep him and Stella busy in the days and years to come! In the mean me, we are happy to welcome Anissa Frucci, Ole's replacement, to the USMX management team. She has successfully se led into her role as the "keeper of the numbers," and her exper se and business acumen make her an excellent fit. Numbers are the lifeblood of USMX's business, and Anissa has done a great job in this area. Welcome aboard, Anissa! BOARD TRANSITIONS With the loss of Hanjin Shipping, a transi on took place on our Board of Directors— the departure of Michael Radak as Hanjin Shipping's representa ve to the USMX Board. As a director, Mike provided years of valuable guidance to USMX and always seemed to add great insight to our Board delibera ons. We appreciate the me that Mike served in this role and we wish him all the success in his new endeavors. He will always have a friend in USMX. In 2016, we welcomed two new directors to the USMX Board. Frank Grossi, Execu- ve Vice President, Opera ons Management Division for COSCO SHIPPING Lines (North America), from the Carrier member class, and Nathan Wesely, President of the West Gulf Mari me Associa on, from the Port Associa on class. We look for- ward to working with them and the Board moving forward. MASTER CONTRACT Over the course of 2016, the current Master Contract con nued to prove itself as one of the best Master Contracts of recent history. We con nue to believe it was a very fair contract for both management and union, and we expect it will con nue to serve the par es well un l we nego ate a new one between now and October 2018. LABOR RELATIONS We con nue to maintain a professional, produc ve rela onship with the ILA at ev- ery level. They work very closely with us to address issues as they arise, so that in the best interest of ALL par es, poten al problems can be mi gated. See more details about LABOR RELATIONS on Pg. 18. DATA COLLECTION EFFORTS USMX con nues working closely with our member Port Associa ons to gather coastwise data around wages, manhours, assessments, training and safety. This will dras cally improve our ability to provide cogent reports and business tools for our members and to properly assess cost impact to contract changes as we prepare for bargaining. David F. Adam Chairman & CEO CHAIRMAN & CEO'S MESSAGE

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