Contract analysis

I. Issue This memorandum addresses whether Thessaloniki Shipping & Logistics S.A. ("TSL") properly classified its twelve (12) ship-to-shore ("STS") gantry cranes and eight (8) automated stacking crane ("ASC") systems under Combined Nomenclature ("CN") code 8426 41 00 on all forty-seven (47) Single Administrative Documents ("SADs") filed by TSL's customs broker, Peloros Customs Agency S.A., in connection with the impo

II. Short Answer TSL's classification of both the STS gantry cranes and the ASC systems under CN heading 8426 is defensible and, in our view, correct for the STS cranes and more likely than not correct for the ASC systems. The STS gantry cranes are, by any reasonable measure, "cranes" within the ordinary and technical meaning of that term as used in heading 8426 of the Combined Nomenclature. Their classification unde

III. Applicable Legal Framework A. Combined Nomenclature Structure The European Union's Combined Nomenclature is the EU's tariff and statistical classification system. It is based on, and incorporates, the World Customs Organization's ("WCO") Harmonized Commodity Description and Coding System (the "Harmonized System" or "HS"), which provides the framework for the first six digits of each classification code. The CN a

Section XVI, Note 3 addresses composite machines: "Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function." This Note

Section XVI, Note 5 provides that references to machines in Section XVI cover both manual and power-operated machines, unless the context requires otherwise. By analogy, and although Note 5 does not expressly address automation, it supports the principle that the mode of operation (manual, powered, semi-automated, or fully automated) does not, without more, alter the classification of a machine. Chapter 84, Note 6 do

IV. Analysis A. STS Gantry Cranes (12 Units)

1. Description and Function. The twelve STS gantry cranes at issue are Hailong Model QC-65 Super Post-Panamax Ship-to-Shore Container Cranes, manufactured by Hailong Heavy Industries Co., Ltd. and imported under Contract HHI-TSL-2019-001, dated January 15, 2019. The contract technical annex and the manufacturer's product data sheets describe the cranes as follows: • Outreach: 65 meters (equivalent to approximately 22

2. Classification Under CN Heading 8426. The classification of the STS gantry cranes under heading 8426 of the Combined Nomenclature is supported by multiple independent bases, each of which is independently sufficient. (a) The STS gantry cranes are "cranes" within the ordinary and technical meaning of the term. The STS gantry crane is universally known in the maritime logistics industry, in mechanical engineering, a

3. AADE's Basis for Reclassification to CN 8428 90 90. In the Additional Duty Assessment Notice AADE/ADAN/2022/0073, AADE contends that the STS gantry cranes should be reclassified under heading 8428 on the basis that their primary function is to "load and unload" vessels, which AADE characterizes as a handling function more properly classified under heading 8428 rather than a "lifting" function within heading 8426.

4. Conclusion — STS Gantry Cranes. The classification of the twelve STS gantry cranes under heading 8426 of the Combined Nomenclature is clearly correct. The STS gantry cranes are cranes by every measure: by their manufacturer's designation, by their structural and mechanical characteristics, by their mode of operation, and by the ordinary and technical meaning of the term "crane" as used in heading 8426 and the asso

1. Description and Function. The eight ASC systems at issue are Hailong Model ASC-40R Automated Stacking Cranes, manufactured by Hailong Heavy Industries Co., Ltd. and imported under Contract HHI-TSL-2020-003, dated June 10, 2020. The ASC systems are deployed in the container yards at TSL's terminal facilities and serve the function of automated stacking of containers within yard blocks. The contract technical annex

2. Classification Analysis. The classification of the ASC systems presents a more complex question than the classification of the STS gantry cranes. While the fundamental mechanical characteristics of the ASC systems are those of a gantry crane — a trolley-mounted spreader suspended by wire ropes from a horizontal crossbeam supported by a gantry structure — the full automation of the systems and their integration wit

1. The heading text controls under GIR 1. Under GIR 1, classification is determined first and foremost by the terms of the headings. Heading 8426 covers "cranes." The term "crane" is not defined in the heading text, nor is it defined in the Section or Chapter Notes. When a term used in the Combined Nomenclature is undefined, it is to be given its ordinary meaning, as supplemented by the Explanatory Notes. See Case C-

2. Section XVI, Note 3 supports classification under heading 8426. If the ASC is viewed as a composite machine performing the functions of both physical lifting (a heading 8426 function) and automated handling and storage management (arguably a heading 8428 function), then Section XVI, Note 3 requires classification based on the machine's "principal function." The principal function of the ASC is the physical lifting

3. The Dutch BTI ruling NL-BTI-2021-01234 supports TSL's position. The Dutch BTI ruling, issued by Douane Nederland on June 14, 2021, expressly considered the argument that automation changes the classification of an ASC system and rejected it. The ruling stated, in relevant part: "The addition of automated control systems does not alter the fundamental mechanical nature of the machine as a crane. The machine lifts c

4. The German BTI ruling DE-BTI-2020-05678 is analytically flawed. The German ruling, while reaching the opposite conclusion, applied what we believe is an erroneous analytical framework. The German ruling focused primarily on the "end use" of the ASC — characterizing it as a machine for "automated container handling and storage" — rather than on the objective characteristics of the machine itself. The HS classificat

3. Conclusion — ASC Systems. The classification of the eight ASC systems under heading 8426 is, in our assessment, more likely than not correct. The ASC systems are mechanically and structurally cranes — they employ a gantry structure, a trolley, and a wire rope lifting mechanism to hoist, traverse, and place containers. Their automation, while sophisticated, does not alter their fundamental nature as cranes. However

V. Subheading Correction Regardless of the heading-level classification outcome, TSL's declared subheading of CN 8426 41 00 ("Other self-propelled machinery — On tyres") is technically inaccurate for both the STS gantry cranes and the ASC systems. Both types of equipment are rail-mounted on steel wheels running on crane rails, not mounted on pneumatic or solid rubber tyres. The subheading "On tyres" is appropriate fo

VI. Comparative BTI Rulings A separate memorandum (the Comparative BTI Rulings Analysis Memorandum) provides a detailed analysis of the Dutch and German BTI rulings referenced throughout this memorandum. For convenience, a summary of the key rulings is provided below. Dutch Ruling — NL-BTI-2021-01234: • Issuing authority: Douane Nederland • Date of issuance: June 14, 2021 • Product classified: STS cranes and ASC-type

VII. Recommendations Based on the analysis set forth in this memorandum, we recommend the following course of action:

1. Proceed with the BTI application. TSL should proceed with BTI application BTI-GR-2022-003847, filed November 15, 2022, with AADE. The application should emphasize the clear status of the STS gantry cranes as cranes within heading 8426 and the structural and functional identity of the ASC systems as gantry cranes. The application narrative should address the Dutch and German BTI rulings directly, arguing that the D

2. Engage Argonaut Trade Consulting GmbH to prepare a formal expert report. We recommend engaging Dr. Lukas Brenner of Argonaut Trade Consulting GmbH to prepare a formal expert report supporting classification of both the STS gantry cranes and the ASC systems under heading 8426. Dr. Brenner is a former member of the WCO Harmonized System Committee, on which he served from 2008 to 2016. He holds a doctorate in mechani

3. Proactively address the subheading correction. As discussed in Section V, TSL should proactively correct the declared subheading from CN 8426 41 00 ("On tyres") to CN 8426 19 00 or CN 8426 49 00 (as appropriate for each equipment type) in the BTI application and in the administrative objection to ADAN/2022/0073. This correction should be accompanied by an explanation that the subheading error was inadvertent and h

4. Prepare for the possibility of a split classification outcome. TSL should prepare for the possibility that the BTI ruling or DG TAXUD classification decision may split the outcome — confirming heading 8426 for the STS gantry cranes while reclassifying the ASC systems under heading 8428. Under this scenario, the duty impact would be limited to the eight ASC units: • 8 ASC units × €3,600,000 per unit = €28,800,000 •

5. Coordinate with Garrett Simmons (Tax Group) on classification-valuation interplay. The classification outcome has a direct bearing on the significance of the valuation dispute under ADAN/2022/0074. If all equipment remains classified at 0% under heading 8426, the €9,940,000 valuation adjustment asserted by AADE would have no customs duty impact whatsoever (0% × €9,940,000 = €0), rendering the valuation dispute moo

6. Coordinate with Vournas & Theodorakis on procedural matters. TSL's Greek counsel, Alexandros Vournas (Athens Bar No. 18744) and Maria-Christina Georgiou (Athens Bar No. 42917) of Vournas & Theodorakis, should be coordinated with on all procedural aspects of the BTI application filing and the administrative objection to ADAN/2022/0073 before the Directorate of Resolution of Disputes ("DED") within AADE. In particul