1. Presented By: POTENTIAL WEST COAST DOCK STRIKE

2. Agenda The Issues The Issues Parties Involved Parties Involved Speculations Speculations Learning from the past Learning from the past What to plan for… What to plan for… Contingency recommendations Contingency recommendations POTENTIAL WEST COAST DOCK STRIKE

3. Potential West Coast Port Strike – The Issues What are the issues surrounding this potential strike?? Chassis Business – Carriers are getting out of the chassis business and transitioning to 3 rd party chassis rental companies. – Repair work will be a large job sector in the future as cranes and cargo handling machinery at ports become more automated. Jurisdiction – ILWU sees this as a trend which will cause job loss for union members. – ILWU will aggressively protect existing jobs repairing chassis at ports and will go after new jobs performing maintenance work at third party chassis companies and operating newly introduced automated machinery. – Inter-Union rivalry over reduced number of jobs. – ILWU also looking for jurisdiction on jobs at grain terminals

4. Potential West Coast Port Strike - The Issues – cont’d Pay & Benefits – Healthcare & welfare cost and coverage are additional sticking points As a result of the Affordable Care Act, federal taxes of an estimated $150M will be imposed on ILWU healthcare plans to take effect in 2018. Any new contract would likely only have validity to mid 2017 as the sides argue who will be responsible for the increased taxes. – Wages are not a major issue in this particular negotiation.

5. Parties Involved PMA (Pacific Maritime Association) –Otherwise referred to as “the Employers” –Represent the West Coast terminal operators and shipping companies in their dealings with the labor unions. –President and CEO of the PMA – James McKenna ILWU (International Longshore and Warehouse Union) –Otherwise referred to as “the Union” –Represent the West Coast Dockworkers –President Robert McEllrath

6. Speculations PMA President Jim McKenna predicted that an agreement will be reached in mid to late July. This prediction may still make cargo interests nervous, given the fact that the current six-year contract will expire on July 1, but it reflects the reality of the negotiation process. –Bill Mongelluzzo, Senior Editor, Journal of Commerce (JoC March 2014) “The issues are tough, so prepare for a slowdown in July and August. Ship early on because there will be major slowdowns.” –Robert Lanier, executive director of the Waterfront Coalition (JoC November 2013) “Unfortunately, uncertainty has become all too common over the past year on the West Coast… The result is that today exports and importers remain continuously concerned that a disruption of the supply chain could occur at the ports, at any time, with little if any warning.” –Peter Friedmann, executive director of the Agriculture Transportation Coalition (American Shipper October 2013)

7. Learning from the past The 2002 lockout was 10 days and estimated to have cost upwards of $10B.. No one wants nor can afford a repeat (still fragile economy and competitive market with East Coast and Canada ports expanding market share in past 3 years) The ILWU did not strike in 2002, the PMA locked the Union out. 2008 contract negotiations produced framework for technology, which facilitates negotiations in 2014. Both James McKenna and Robert McEllrath negotiated the 2008 contract for their respective sides.

8. What to plan for… Slowdowns are expected Backlogs at the ports Extended rail transit due to backlogs Equipment shortages Increased costs –Significant carrier congestion surcharges –Additional warehouse costs

9. Contingency Recommendations Ship Early –Bring product in prior to the strike to avoid delays and missed customer commitments Considerations –Potentially Additional Warehouse Space Needed Solutions –Additional Space may be available in both our St. Louis and Minneapolis facilities if needed

10. Contingency Recommendations Alternate Routings –Ship via Vancouver and/or Tacoma/Seattle Considerations –Tacoma/Seattle and Vancouver Longshoremen are also part of the ILWU and all took part in the work slowdown that lead to the PMA Lockout of 2002. –In the event of a strike or slowdown, booking far in advance will be key as these routings will be inundated quickly. –Some carriers currently routing via Seattle/Tacoma may naturally divert via Vancouver should strike/slowdown occur. –Cost – Possible transshipment costs. –Ship via Houston Considerations –Longer transit time (Add’l 15-20 days) –Increased cost – Transshipment / Trucking –Approx $1100 - $1500/CTNR additional –This routing will also be quickly inundated, planning is key.