Contract analysis

1. TSL objects to Assessment Notice AADE/ADAN/2022/0074 in its entirety and requests its complete annulment, or in the alternative, its substantial reduction and the suspension of proceedings pending the resolution of interlinked classification and Binding Tariff Information proceedings, as more fully set forth herein.

2. The Assessment Notice purports to adjust the customs value of marine cargo-handling equipment imported by TSL from Hailong Heavy Industries Co., Ltd. ("Hailong" or the "Seller"), a company organized under the laws of the People's Republic of China (Unified Social Credit Code: 91330211MA2GR8KT5X), with its principal place of business at No. 288 Gangkou Road, Zhenhai District, Ningbo, Zhejiang Province 315200, Peopl

3. The Assessment Notice identifies three distinct categories of valuation adjustment, which AADE contends should be added to the declared customs value of the imported equipment. The aggregate amount of these adjustments totals €9,940,000, broken down as follows: (a) Technology License Fees: €4,900,000, calculated by AADE as 5% of the aggregate equipment purchase price of €98,000,000, representing fees paid by TSL t

4. On the basis of these valuation adjustments, the Assessment Notice imposes the following additional financial obligations on TSL: (a) Additional customs duty: €9,940,000 × 2.2% = €218,680. The 2.2% duty rate applied presupposes the reclassification of the imported equipment from CN 8426 41 00 (carrying an MFN duty rate of 0%) to CN 8428 90 90 (carrying an MFN duty rate of 2.2%), as set forth in the concurrent clas

5. The equipment at issue was imported under four master purchase contracts between TSL and Hailong, as follows:

6. All equipment covered by the above contracts was imported through the Port of Piraeus and cleared through Greek customs by Peloros Customs Agency S.A. (EORI: GR801234567000), acting as TSL's licensed customs broker. The responsible broker of record was Stavros Liapis (Licensed Customs Broker, License No. GR-CB-1287). Peloros prepared and filed all relevant Single Administrative Documents (SADs) in connection with

7. TSL maintains that the declared customs values were correct at the time of importation and that AADE's valuation adjustments are legally unfounded for the reasons set forth in detail in Section III below. SECTION II: SUMMARY OF AADE'S POSITIONS

8. For the purposes of clarity and completeness, TSL sets forth below a brief summary of AADE's three principal grounds for the valuation adjustments contained in the Assessment Notice. This summary is based on TSL's understanding of the Assessment Notice and the underlying audit report (AADE/DTE/2022/PIR-04518). TSL does not concede the accuracy or legal validity of any of AADE's characterizations or conclusions. A.

9. AADE contends that the fees paid by TSL under the Technology License Agreement dated January 10, 2019 (the "TLA"), entered into between Hailong (as Licensor) and TSL (as Licensee), should be added to the customs value of the imported equipment pursuant to Article 71(1)(c) of the Union Customs Code (Regulation (EU) No. 952/2013). AADE characterizes these fees as royalties or license fees that are "related to the go

10. The license fee under the TLA is calculated as 5% of the aggregate equipment purchase price, yielding a total of 5% × €98,000,000 = €4,900,000. AADE's audit report notes that TSL paid this fee in three installments: €1,960,000 on or about March 2019, €1,470,000 on or about July 2020, and €1,470,000 on or about March 2022.

11. In support of its position that the TLA fees constitute a dutiable addition to customs value, AADE relies principally on the following factual and legal arguments: (a) The temporal proximity of the TLA's execution date (January 10, 2019) to the date of the first equipment purchase contract, HHI-TSL-2019-001 (January 15, 2019), which AADE argues demonstrates that the two agreements were negotiated as a single comm

12. AADE contends that the procurement coordination fee paid by TSL to Nereus Maritime Advisory Limited ("Nereus") does not constitute a genuine "buying commission" deductible from customs value under Article 72(a) of the UCC. Instead, AADE characterizes the fee as either a selling commission or a procurement markup that should be included in the customs value of the imported goods under Article 71(1)(a)(i) UCC.

13. AADE's position rests primarily on the related-party relationships between Nereus, TSL, and Hailong, which AADE argues undermine the characterization of Nereus as a genuine buying agent acting on behalf of TSL: (a) Andreadis family ownership: Nereus is 40% owned by Andreadis Family Holdings LLC ("AFH"), a Delaware limited liability company (Delaware File No. 5847291). AFH also holds a 62% equity interest in TSL.

14. Accordingly, AADE concluded that the 3% coordination fee paid to Nereus (3% × €98,000,000 = €2,940,000) should be added to the customs value of the imported equipment as a non-deductible procurement cost or, in the alternative, as a selling commission. C. Commissioning Services (€2,100,000)

15. AADE contends that the commissioning and installation services component of Contract HHI-TSL-2021-004 should be added to the customs value of the underlying base equipment (imported under Contracts HHI-TSL-2019-001, HHI-TSL-2019-002, and HHI-TSL-2020-003) under Article 71(1)(b) UCC, characterizing these services as a "condition of sale" cost that forms part of the price actually paid or payable for the imported g

16. As part of its audit, AADE unbundled Contract HHI-TSL-2021-004 into three components: (a) Spare parts: Reclassified under CN 8431 49 80 (MFN duty rate: 0%); (b) Proprietary control software: Reclassified under CN 8471 49 00 (MFN duty rate: 0%); and (c) Commissioning services: €2,100,000, which AADE determined should be added to the customs value of the base equipment imported under the prior purchase contracts.

17. AADE's rationale for including the commissioning costs in the customs value is that these services were necessary to render the imported equipment operational and that the equipment as imported was not in a completed, functional state without the commissioning work. AADE further argues that the commissioning was performed by the original manufacturer (Hailong) and was therefore an integral part of the overall sal

18. AADE's determination that the technology license fees paid under the TLA should be added to the customs value of the imported equipment is legally unfounded and factually unsupported. TSL submits that the TLA is a separate and independent commercial agreement, that the license fees cover predominantly post-importation services, that the fees do not constitute a "condition of sale" within the meaning of Article 71

1. The TLA Is a Separate and Independent Contract.

19. The Technology License Agreement dated January 10, 2019 is a contractually independent agreement from the four equipment purchase contracts listed in paragraph 5 above. The TLA was negotiated separately from the purchase contracts, through a distinct negotiation track that involved TSL's technology and operations teams, as opposed to the procurement team that negotiated the equipment purchases. The TLA required s

20. Article 3.2 of the TLA expressly provides that the TLA is "independent of and supplemental to" any purchase agreement between Hailong and TSL, and that the termination, expiration, or modification of either agreement shall not affect the validity, enforceability, or continued performance of the other. This contractual language reflects the commercial reality that the TLA addresses a fundamentally different subjec

21. The TLA has its own independent term of ten (10) years, commencing from the date of first commercial operation of the last installed piece of equipment procured under the purchase contracts. Based on current project timelines, the estimated expiry of the TLA is approximately January 2032. This ten-year term is entirely distinct from and substantially longer than the delivery terms specified in the equipment purch

22. The scope of the licensed technology under the TLA consists of a non-exclusive license to use and deploy the following Hailong proprietary technologies in TSL's Greek terminal operations: (a) The HaiControl Suite v4.2 crane control software platform, which provides automated operational capabilities for the STS gantry cranes and ASC systems; (b) The HaiPredict predictive maintenance algorithm suite, which enables

23. AADE's reliance on the temporal proximity of the TLA's execution (January 10, 2019) to the first purchase contract (January 15, 2019) is insufficient to establish that the TLA was a component of or conditioned upon the equipment purchase. The five-day gap between the two agreements reflects the practical reality that TSL was conducting parallel commercial negotiations with Hailong across multiple workstreams duri

2. The License Fees Cover Predominantly Post-Importation Services.

24. The TLA provides for a comprehensive package of technology licensing and technical support services to be delivered over the ten-year term of the agreement. The vast majority of these services are post-importation in nature and relate to the ongoing operation, maintenance, and optimization of the equipment in Greece, well after the goods were imported and cleared through customs: (a) Software updates and upgrades

25. Critically, the initial installation and configuration of the HaiControl Suite v4.2 software on the imported equipment is included in the equipment purchase price and is not charged under the TLA. Article 4.1 of the TLA expressly provides that the initial software load and factory configuration are performed by Hailong as part of the equipment manufacturing and delivery process and are covered by the equipment pu

26. The post-importation services described above are not "related to the goods" at the time of importation within the meaning of Article 71(1)(c) UCC. They relate to the ongoing operation, maintenance, and technological development of the equipment after its importation and customs clearance in Greece. Post-importation services of this nature are properly excludable from customs value under the general principles of

3. The License Fees Are Not a "Condition of Sale".

27. Under Article 71(1)(c) of the Union Customs Code and Articles 136 and 137 of the UCC Implementing Regulation (EU) 2015/2447, the inclusion of royalties and license fees in the customs value of imported goods requires the satisfaction of two cumulative conditions: (1) the fees must be "related to the goods being valued," and (2) the fees must be paid by the buyer "as a condition of sale" of the goods. Both conditi

28. TSL submits that the TLA license fees fail to satisfy the "condition of sale" requirement for the following reasons: (a) No contractual cross-reference or conditionality: The four equipment purchase contracts (HHI-TSL-2019-001, HHI-TSL-2019-002, HHI-TSL-2020-003, and HHI-TSL-2021-004) do not reference, incorporate, or require the execution of the TLA as a precondition to the sale, delivery, or transfer of ownersh

29. The temporal proximity of the TLA's execution to the first purchase contract, while noted by AADE, reflects the parallel commercial negotiations that are characteristic of large-scale industrial procurement transactions. TSL was simultaneously negotiating equipment acquisition terms and technology support arrangements with Hailong during the same period, which naturally resulted in near-contemporaneous execution

4. Alternative Argument: Apportionment.

30. In the alternative, should the DED determine that any portion of the TLA license fees is "related to the goods being valued" and constitutes a "condition of sale" within the meaning of Article 71(1)(c) UCC, TSL submits that apportionment of the license fees is both appropriate and legally required.

31. Consistent with WCO Advisory Opinion 4.17, where a royalty or license fee payment covers both elements that are includable in the customs value (i.e., rights related to the imported goods at the time of importation) and elements that are not includable (i.e., post-importation services and technology support), only the component attributable to the imported goods should be added to the customs value. The remaining

32. In the present case, the only component of the TLA fee that could arguably be said to relate to the imported goods at the time of importation is the right to use the pre-installed HaiControl Suite v4.2 software as initially configured and loaded onto the equipment at Hailong's factory prior to shipment. All other components of the TLA — including software updates and upgrades, remote technical support, on-site en

33. TSL estimates that the post-importation service components represent approximately 80% of the total TLA fee, based on a preliminary economic analysis of the relative value of each component. On this basis, only approximately 20% of the total license fee — or approximately €980,000 — could potentially be attributed to the pre-importation software component. The remaining approximately €3,920,000 constitutes paymen

34. TSL will submit a supporting economic analysis prepared by Kestrel & Palladian LLP (Spyros Makris, Partner, Indirect Tax & Customs Valuation Practice; 8 Voukourestiou Street, 106 71 Athens, Greece) to substantiate the apportionment methodology and the allocation of the TLA fee between pre-importation and post-importation components. TSL reserves the right to supplement its submissions with the final customs valua

35. In support of its position regarding the technology license fees, TSL relies on the following legal authorities: (a) Article 71(1)(c) of Regulation (EU) No. 952/2013 (Union Customs Code) — setting forth the conditions under which royalties and license fees must be added to the customs value; (b) Articles 136 and 137 of the UCC Implementing Regulation (EU) 2015/2447 — providing detailed rules on the application of

36. AADE's determination that the procurement coordination fee paid by TSL to Nereus constitutes a selling commission or non-deductible procurement markup is legally unsupported and contradicted by the factual record. TSL submits that Nereus acted as a genuine buying agent on behalf of TSL, that the fee is a deductible buying commission under Article 72(a) UCC, and that the related-party relationships between Nereus,

1. Nereus Was Engaged as TSL's Buying Agent.

37. Nereus was engaged by TSL under a Procurement Services Agreement dated December 1, 2018 (the "PSA"), which was executed approximately six weeks before the first Hailong equipment purchase contract (HHI-TSL-2019-001, dated January 15, 2019). The PSA was negotiated at arm's length between TSL's procurement department, under the supervision of Vice President Dimitrios Sarantopoulos, and Nereus's Managing Director, K

38. The PSA expressly defines Nereus's mandate as follows: to "identify, evaluate, and recommend suitable manufacturers of marine cargo-handling equipment and to coordinate the procurement process on behalf of TSL." The PSA further specifies that Nereus shall act exclusively as TSL's agent in all procurement activities and shall owe a duty of loyalty to TSL in the performance of its services.

39. The fee payable to Nereus under the PSA is 3% of the aggregate purchase price of equipment procured through Nereus's services, yielding a total fee of 3% × €98,000,000 = €2,940,000. This fee is payable by TSL (the buyer) and is not reimbursed, offset, or otherwise borne by Hailong (the seller).

40. Under Article 72(a) of the Union Customs Code, buying commissions — defined as fees paid by the importer to its agent for the service of representing the importer in the purchase of goods — shall not be included in the customs value, provided that such commissions are distinguished from the price actually paid or payable for the goods. Article 127(1) of the UCC Implementing Regulation (EU) 2015/2447 further clari

41. TSL submits that the Nereus fee satisfies all the requirements for classification as a deductible buying commission under Article 72(a) UCC and Article 127(1) of UCC Implementing Regulation 2015/2447.

2. Nereus Performed Genuine Procurement Services.

42. The characterization of a fee as a buying commission depends not merely on the contractual label applied by the parties, but on the substance of the services actually performed by the agent and the agent's role in the transaction. TSL submits that Nereus performed genuine, substantive procurement services on behalf of TSL throughout the equipment procurement process, as evidenced by contemporaneous documentation:

43. TSL reserves the right to supplement its production with additional documentation substantiating the nature and scope of Nereus's procurement services, including a comprehensive Functions-Assets-Risks ("FAR") analysis prepared by Kestrel & Palladian LLP, which will demonstrate that Nereus bore limited economic risk in the transactions and functioned as an agent — not a principal — in the procurement process.

3. Related-Party Status Does Not Automatically Disqualify the Fee.

44. AADE's position rests heavily on the ownership and related-party relationships between Nereus, TSL, and the Andreadis family. While TSL acknowledges that these relationships exist, TSL submits that the existence of a related-party relationship between the buyer and its buying agent does not, as a matter of law, disqualify the agent's fee from being treated as a deductible buying commission.

45. Article 127(1) of the UCC Implementing Regulation (EU) 2015/2447 does not contain any exclusion for related-party agents, nor does it impose any presumption that fees paid to related-party agents cannot constitute buying commissions. The relevant test under EU customs law is whether the agent genuinely acted on behalf of the buyer in the procurement of the goods, assessed on the basis of all the relevant facts an

46. The combined Andreadis family economic interest in both TSL and Nereus reflects a deliberate commercial decision by TSL's controlling shareholders to engage a trusted procurement coordinator with relevant industry expertise and market access. It is commercially rational for a major shipping and logistics company to channel its procurement activities through a group entity that has specialized knowledge of the rel

47. Nereus's ownership structure — 40% held by AFH (the TSL majority shareholder), 30% held by Eleni Andreadis (a family member), and 30% held by Konstantinos Melas (the Managing Director with relevant industry expertise) — is consistent with the structure of a legitimate procurement advisory firm that combines family capital with independent management expertise.

4. Konstantinos Melas's Background Does Not Transform the Commission.

48. AADE places particular emphasis on the fact that Konstantinos Melas, Nereus's Managing Director and 30% shareholder, previously served as a sales agent for Hailong in the Southern European market. TSL acknowledges this historical relationship but submits that it is irrelevant to the characterization of the Nereus fee for the following reasons: (a) Temporal separation: Melas's engagement as a Hailong sales agent e

5. Nereus Did Not Act on Behalf of the Seller.

49. The distinction between a buying commission (deductible under Article 72(a) UCC) and a selling commission (includable under Article 71(1)(a)(i) UCC) depends on whether the agent acts on behalf of the buyer or the seller. TSL submits that the factual record unambiguously establishes that Nereus acted on behalf of TSL, not Hailong: (a) Nereus did not take title to the goods at any point in the transaction. The equi