Contract analysis

I. Issue This memorandum addresses whether the €2,940,000 "procurement coordination fee" paid by Thalassa Shipping & Logistics SA ("TSL") to Nereus Maritime Advisory Limited ("Nereus") qualifies as a deductible "buying commission" under Article 72(a) of the Union Customs Code (Regulation (EU) No. 952/2013) ("UCC") or, alternatively, constitutes a selling commission or procurement markup that must be included in the c

II. Short Answer TSL's characterization of the Nereus procurement coordination fee as a buying commission faces significant obstacles on multiple fronts. The related-party ownership structure — in which the Andreadis family holds a combined 70% economic interest in Nereus through Andreadis Family Holdings LLC ("AFH") (40%) and Eleni Andreadis individually (30%), while AFH simultaneously controls TSL with a 62% equity

III. Legal Framework A. Buying Commission Definition Under the UCC

Article 72(a) of the Union Customs Code (Regulation (EU) No. 952/2013) provides that "buying commissions" — that is, fees paid by an importer to its agent for the service of representing the importer in the purchase of goods — shall not be included in the customs value of imported goods. This provision reflects the longstanding international customs valuation principle, derived from Article 8.1(a)(i) of the WTO Valua

1. The agent acts on behalf of the buyer, not the seller. The fundamental requirement is that the agent's loyalties, obligations, and economic incentives are aligned with the buyer's interests. The agent must be acting as the buyer's representative in the purchasing transaction, not as an intermediary advancing the seller's commercial interests.

2. The agent is independent of the seller. A genuine buying agent must maintain independence from the manufacturer or supplier of the goods. Where the agent has a relationship with the seller — whether through ownership, employment, contract, or prior business dealings — the independence of the agent is called into question, and the burden on the importer to demonstrate genuine buying-agent status is correspondingly

3. The agent performs genuine purchasing services. The buying agent must provide substantive value-added services on behalf of the buyer in connection with the procurement. Such services typically include, but are not limited to: locating and identifying potential suppliers, evaluating supplier capabilities and product quality, soliciting competitive quotations, negotiating prices and commercial terms, inspecting goo

4. The agent's fee is separately identified and distinguishable from the purchase price. The buying commission must be invoiced and paid separately from the price of the goods. If the commission is embedded in the purchase price or paid through the seller, it is unlikely to qualify as a deductible buying commission.

5. The agent does not take title to the goods. A genuine buying agent acts as a representative and does not acquire ownership of the goods at any point in the transaction chain. If the agent purchases goods in its own name and resells them to the importer, the agent is acting as a principal, not as a buying agent.

6. The agent does not bear the commercial risk of the transaction. A buying agent's exposure should be limited to its agency fee. If the agent bears risks typically associated with ownership — such as inventory risk, price fluctuation risk, or the risk of non-payment by the buyer — the agent is more likely to be characterized as a principal or intermediary rather than as a genuine buying agent. Commentary 17.1 furthe

Article 71(1)(a)(i) of the UCC provides that the customs value of imported goods must include "commissions and brokerage, except buying commissions," to the extent that they are incurred by the buyer but not already included in the price actually paid or payable for the imported goods. Under this provision, a selling commission — that is, a commission paid to a person who represents the seller or who acts as an inter

Article 70(3)(d) of the UCC provides that the transaction value of goods imported between related persons may be accepted as the basis for customs valuation only if the relationship between the parties did not influence the price. This provision establishes a general principle of heightened scrutiny for transactions between related parties, which extends to the assessment of commissions and intermediary fees where th

Article 127(1) of the UCC Implementing Regulation (EU) 2015/2447 and WCO Commentary 17.1 reinforce this principle by identifying the related-party status of an alleged buying agent as a significant factor in assessing whether the agent genuinely acted on behalf of the buyer. Under the Implementing Regulation, a buying commission is deductible only if the agent acts exclusively on behalf of the buyer. Where the agent

IV. Factual Analysis of Nereus's Role A. Ownership Structure Nereus Maritime Advisory Limited was incorporated in Cyprus in 2018 as a private limited company. Based on the company's incorporation documents and shareholder register, the ownership structure of Nereus is as follows: This ownership structure gives rise to a dual concern that poses substantial challenges for TSL's buying commission defense. Buyer-side rel

1. Initial market assessment report (November 2018). Nereus prepared a market assessment report, dated November 2018, that purportedly surveyed the landscape of marine cargo-handling equipment manufacturers. We have not yet reviewed this document and cannot assess its scope, depth, or whether it reflects genuine buyer-side research or a pro forma exercise designed to justify the Nereus engagement.

2. Correspondence between Nereus and TSL regarding the Hailong procurement. Sarantopoulos has indicated that there is email correspondence between Nereus (primarily Melas) and TSL's procurement team in which Nereus provided updates on the procurement process. The volume, substance, and frequency of this correspondence remain to be assessed upon production.

3. Three quality inspection reports from site visits to Hailong's Ningbo facility. Sarantopoulos confirmed that Nereus personnel (or contractors engaged by Nereus) conducted site visits to Hailong's manufacturing facility in Ningbo, resulting in inspection reports dated approximately February 2019, mid-2019 (exact date not confirmed), and September 2020. These activities provide some evidence of buyer-side services.

V. WCO and CJEU Guidance A. WCO Technical Committee Commentary 17.1 WCO Technical Committee on Customs Valuation Commentary 17.1 is the primary interpretive source for the buying commission/selling commission distinction under the WTO Valuation Agreement and the customs legislation of WTO member states, including the UCC. The Commentary identifies a series of criteria and "red flags" that customs authorities should c

VI. Risk Assessment The following table provides a structured assessment of the key factors bearing on whether the Nereus procurement coordination fee will be treated as a buying commission (deductible under Article 72(a) UCC) or a selling commission (includable under Article 71(1)(a)(i) UCC): Overall Risk Assessment. Based on the cumulative weight of the factors identified above, this memorandum assesses an approxim

VII. Mitigation Strategies Based on the analysis set forth in this memorandum, the following mitigation strategies are recommended:

1. Factual Development (Highest Priority) The single most important step in assessing and potentially improving TSL's position on the Nereus issue is a comprehensive factual development effort. The current documentation is insufficient to support the buying commission defense, and the strength of that defense will depend entirely on whether Nereus can produce contemporaneous evidence of genuine buyer-side procurement

2. Functions-Assets-Risks (FAR) Analysis by Kestrel & Palladian LLP We recommend commissioning Spyros Makris, Partner in the Indirect Tax & Customs Valuation Practice at Kestrel & Palladian LLP (Athens office, 8 Voukourestiou Street, 106 71 Athens), to prepare a formal Functions-performed, Assets-used, Risks-assumed analysis of Nereus's role in the Hailong procurement. The FAR analysis is a structured methodology com

3. Interview of Konstantinos Melas An interview with Konstantinos Melas, Nereus's managing director and 30% owner, is essential to developing the factual record on several critical issues. The interview should seek to establish: • The circumstances and timing of his departure from Hailong, including whether the departure was voluntary or initiated by Hailong, and whether Melas was subject to any non-compete covenant,

4. Alternative Argument — "Assists" Treatment Under Article 71(1)(b) UCC As a secondary and fallback argument, if the buying commission defense ultimately fails, we should consider whether the Nereus fee could be treated as an "assist" under Article 71(1)(b) of the UCC rather than as a selling commission under Article 71(1)(a)(i). Article 71(1)(b) provides for the inclusion in customs value of the value of certain go

5. Settlement Leverage and Strategic Positioning The engagement team should recognize that the Nereus issue may ultimately serve as a concession point in an overall settlement with AADE, depending on the resolution of the other dispute issues. Several strategic considerations bear on this analysis: • Classification interaction. If TSL prevails on the classification dispute — maintaining the equipment under CN heading

VIII. Interaction with Other Dispute Issues The Nereus valuation issue does not exist in isolation but interacts with several other components of TSL's customs dispute with AADE. The engagement team should be aware of the following interconnections: Classification dependency. The valuation adjustment under ADAN/2022/0074 is calculated at a 2.2% duty rate, which presupposes the reclassification under ADAN/2022/0073 fr

IX. Conclusion The Nereus procurement coordination fee is TSL's weakest valuation position among the three AADE valuation adjustments asserted under ADAN/2022/0074. The combination of the related-party ownership structure — with the Andreadis family holding a combined 70% economic interest in Nereus while simultaneously controlling TSL through AFH's 62% equity stake — the seller-side history of Konstantinos Melas, Ne

1. Request all Nereus service documentation from TSL, coordinated through Elena Papadimitriou (CFO), including the categories of documents identified in Section VII.1 of this memorandum.

2. Schedule interview with Dimitrios Sarantopoulos, Vice President of Procurement & Supply Chain at TSL, to obtain a firsthand account of Nereus's role and activities.

3. Schedule interview with Konstantinos Melas, Managing Director of Nereus, to develop the factual record on Melas's departure from Hailong, his ongoing relationship (if any) with Hailong, the establishment of Nereus, and the services Nereus performed.

4. Engage Kestrel & Palladian LLP (Spyros Makris, Partner, Indirect Tax & Customs Valuation Practice, Athens office) to prepare the Functions-Assets-Risks (FAR) analysis of Nereus's role in the Hailong procurement.

5. Coordinate with Christy Bauer (Lead Associate) on how the Nereus issue interacts with the overall dispute strategy, including the classification challenge, the technology license fee analysis, and the pending BTI application (BTI-GR-2022-003847).

6. Inform James Prentice (Responsible Partner) of the elevated risk assessment on this issue (70–80% probability of adverse outcome) and discuss resource allocation and strategic positioning. Garrett Simmons Associate, Tax Group Calderwood & Harkness LLP PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum has been prepared in anticipation of litigation and is protected by the attorney-client privilege