Contract analysis

I. Issues Presented This memorandum analyzes three discrete categories of valuation adjustments proposed by the Independent Authority for Public Revenue (Ανεξάρτητη Αρχή Δημοσίων Εσόδων, "AADE") in Additional Duty Assessment Notice AADE/ADAN/2022/0074, dated August 12, 2022. AADE contends that each of the following amounts should be added to the customs value of marine cargo-handling equipment imported by Thalassa Sh

1. Technology license fees of €4,900,000 paid by TSL to Hailong under a Technology License Agreement ("TLA") dated January 10, 2019, calculated at 5% of the aggregate equipment purchase price of €98,000,000. AADE contends these fees constitute royalties and license fees related to the imported goods and paid as a condition of sale, includable in customs value under Article 71(1)(c) UCC.

2. Procurement coordination fees of €2,940,000 paid by TSL to Nereus Maritime Advisory Limited ("Nereus"), a Cyprus-registered company, under a Procurement Services Agreement dated December 1, 2018, calculated at 3% of the aggregate contract value of €98,000,000. AADE contends that this fee is not a deductible buying commission under Article 72(a) UCC but rather a selling commission or procurement markup includable u

3. Commissioning services costs of €2,100,000 invoiced by Hailong under Contract HHI-TSL-2021-004, dated February 28, 2021. AADE contends these costs constitute a "condition of sale" cost properly added to the customs value of the imported equipment under Article 71(1)(b) UCC. The total valuation adjustment contended by AADE across all three categories is €9,940,000 (€4,900,000 + €2,940,000 + €2,100,000). These adjus

II. Short Answers Technology license fees (€4,900,000): AADE's position that the technology license fees should be added to customs value under Article 71(1)(c) UCC has substantial merit but is not clearly correct. TSL's defense — that the TLA relates primarily to post-importation services and constitutes a separate, independent contract — is viable but faces significant factual headwinds. The five-day gap between ex

III. Legal Framework A. Transaction Value Method (Article 70 UCC) The primary method of customs valuation under Regulation (EU) No. 952/2013 (the Union Customs Code) is the transaction value method set forth in Article 70. This method reflects the longstanding principle — adopted from Article VII of the General Agreement on Tariffs and Trade (GATT) and codified in the WTO Agreement on Implementation of Article VII of

Article 70(1) UCC provides that the customs value of imported goods shall be their "transaction value, that is the price actually paid or payable for the goods when sold for export to the customs territory of the Union, adjusted, where appropriate, in accordance with Articles 71 and 72." The price actually paid or payable is defined as the total payment made or to be made by the buyer to or for the benefit of the sel

Article 71 UCC mandates that certain costs be added to the price actually paid or payable in order to arrive at the customs value, provided those costs are not already included in the declared price. The additions relevant to this analysis are as follows:

Article 71(1)(a)(i) — Commissions and brokerage, except buying commissions. All commissions and brokerage fees, other than buying commissions, incurred by the buyer in connection with the importation of goods must be added to the transaction value. This provision captures selling commissions (fees paid to agents acting on behalf of the seller) and procurement intermediary fees where the intermediary does not qualify

Article 71(1)(b) — Assists and "condition of sale" costs. The value of goods and services supplied by the buyer free of charge or at reduced cost for use in connection with the production or sale for export of the imported goods must be added to the transaction value. This category encompasses "assists" — including materials, tools, engineering, development work, artwork, design work, and plans and sketches undertake

Article 71(1)(c) — Royalties and license fees. Royalties and license fees related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods being valued, must be added to the transaction value to the extent that such royalties and license fees are not already included in the price actually paid or payable. This provision is central to AADE's challenge to TSL

Article 72 UCC identifies certain costs that shall not be included in the customs value, provided they are distinguishable from the price actually paid or payable for the imported goods. The deductions relevant to this analysis include:

Article 72(a) — Buying commissions. The cost of buying commissions — defined as fees paid by an importer to its agent for the service of representing the importer in the purchase of the goods being valued — may be deducted from or excluded from the customs value. This exclusion is the basis for TSL's characterization of the Nereus procurement fee as a buying commission. The burden of establishing that a payment const

Article 72(e) — Post-importation charges. Charges for construction, erection, assembly, maintenance, or technical assistance, undertaken after importation of the goods into the customs territory of the Union, may be excluded from customs value. This provision is the foundation of TSL's defense regarding the commissioning services costs. The rationale is straightforward: costs incurred after the goods have entered the

Article 127(1) — Definition of buying commission. Article 127(1) defines a "buying commission" as a fee paid by an importer to its agent for the service of representing the importer in the purchase of the goods being valued. For a commission to qualify as a buying commission excludable under Article 72(a) UCC, the agent must act exclusively on behalf of the buyer. The agent must not simultaneously represent the selle

IV. Analysis A. Technology License Fees (€4,900,000)

1. Factual Background. TSL and Hailong entered into a Technology License Agreement ("TLA") on January 10, 2019. Under the TLA, Hailong grants TSL a non-exclusive license to use Hailong's proprietary crane control software, known as the "HaiControl Suite v4.2," together with Hailong's predictive maintenance algorithms (the "HaiPredict module") and access to Hailong's technical documentation library, comprising approxi

Article 3.2 of the TLA provides that the agreement is "independent of and supplemental to any equipment purchase agreement that may be entered into between the parties." TSL relies on this provision to support its position that the TLA is a standalone contract, separate from the purchase agreements. However, this independence clause is substantially undermined by Article 8.1 of the TLA, which contains a cross-default

2. AADE's Position. AADE relies on Article 71(1)(c) UCC, which requires that royalties and license fees related to the goods being valued, paid as a condition of sale, be added to the transaction value. AADE's analysis proceeds along two axes. First, AADE contends that the license fees are "related to the goods" because the HaiControl Suite v4.2 is essential to the operation of the imported equipment. Without the sof

3. TSL's Defense. TSL's defense proceeds along several lines, each designed to challenge one or both of the cumulative requirements for inclusion under Article 71(1)(c) UCC. First, TSL argues that the license fees relate primarily to post-importation services rather than to the imported goods themselves. The TLA has a ten-year term and covers an extensive suite of ongoing services — software updates and upgrades, rem

4. Assessment — Factor-by-Factor Analysis. The following table summarizes the factor-by-factor assessment of the technology license fee issue: On balance, the factors favoring AADE's position outnumber and outweigh the factors favoring TSL. The cross-default provision, the temporal proximity, the fee calculation methodology, and the essential nature of the licensed software to the equipment's operation collectively c

5. Possible Mitigation — Apportionment Argument. Even if AADE establishes that the technology license fees are, in principle, includable in customs value under Article 71(1)(c) UCC, TSL may argue that only a portion of the fee — the component attributable to the pre-installed software at the time of importation — should be added to customs value. The remainder of the fee, attributable to post-importation services (so

1. Factual Background. Nereus Maritime Advisory Limited ("Nereus") is a Cyprus private limited company, registered under Company No. HE 387214, with its registered office at 12 Griva Digeni Avenue, Office 302, 3106 Limassol, Cyprus. Nereus was incorporated in 2018, shortly before the commencement of TSL's procurement process for marine cargo-handling equipment. The ownership structure of Nereus is as follows: • 40% —

2. AADE's Position. AADE rejects TSL's characterization of the Nereus fee as a buying commission and contends that the fee is properly classified as either a selling commission or an intermediary procurement markup, includable in customs value under Article 71(1)(a)(i) UCC. AADE's position rests on the following grounds: • Nereus did not act exclusively on behalf of the buyer. Under Article 127(1) of Implementing Reg

3. TSL's Defense. TSL defends the characterization of the Nereus fee as a deductible buying commission under Article 72(a) UCC, advancing the following arguments: • Nereus acted as TSL's buying agent. The PSA expressly provides that Nereus shall act as TSL's agent for the purpose of identifying, evaluating, and recommending suitable manufacturers and coordinating the procurement process on behalf of TSL. The language

4. Critical Weaknesses in TSL's Defense. Notwithstanding TSL's arguments, the Nereus buying commission defense is subject to several critical weaknesses that significantly undermine its viability: Related-party ownership. The Andreadis family's combined 70% economic interest in Nereus creates a strong inference that Nereus is not a genuine independent agent but a related-party vehicle. The fact that the same family t

5. Risk Assessment. Risk of inclusion: 70–80% probability that AADE prevails on this issue. This is TSL's weakest valuation position among the three issues analyzed in this memorandum. The combination of related-party ownership, Melas's prior seller-side role, the temporal coincidence of Nereus's incorporation with the procurement timeline, and the limited contemporaneous documentation of genuine buyer-side services

6. Mitigation Strategies (Summary). Given the strength of AADE's position, TSL's mitigation strategy should focus on both factual development (to strengthen the buying commission defense to the extent possible) and alternative positioning (to minimize exposure if the buying commission defense fails). Factual development (highest priority). Request from TSL all documents showing Nereus's actual activities in connectio

1. Factual Background. Contract HHI-TSL-2021-004, dated February 28, 2021, is a bundled contract between Hailong and TSL covering three categories of goods and services: • Spare parts: €2,100,000 • Proprietary control software (additional modules): €1,400,000 • Commissioning and installation services: €2,100,000 • Total contract value: €5,600,000 AADE proposes to unbundle Contract HHI-TSL-2021-004 and treat each comp

2. AADE's Position. AADE contends that the commissioning services costs of €2,100,000 should be added to the customs value of the base equipment under Article 71(1)(b) UCC as a "condition of sale" cost. AADE's reasoning proceeds as follows: • The base equipment purchase contracts (HHI-TSL-2019-001 for STS cranes and HHI-TSL-2020-003 for ASC systems) specify that Hailong is responsible for "delivery, assembly, testing

3. TSL's Defense. TSL defends the exclusion of commissioning services costs from customs value on the basis of Article 72(e) UCC, which expressly permits the exclusion from customs value of "charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation." TSL's defense rests on the following grounds: • Express statutory text. Article 72(e) UCC provides clear textual au

4. Assessment — Factor-by-Factor Analysis. On balance, TSL's position on the commissioning services issue is its strongest of the three valuation positions analyzed in this memorandum. The express language of Article 72(e) UCC directly supports the exclusion of post-importation assembly and technical assistance costs from customs value. The services were indisputably performed in Greece after the equipment was import