Contract analysis

I. Purpose This memorandum provides Calderwood & Harkness LLP's preliminary assessment of the customs classification and valuation dispute arising from the Independent Authority for Public Revenue's (Ανεξάρτητη Αρχή Δημοσίων Εσόδων, "AADE") issuance of Additional Duty Assessment Notices AADE/ADAN/2022/0073 (Classification) and AADE/ADAN/2022/0074 (Valuation), each dated August 12, 2022. The Assessment Notices were is

II. Executive Summary AADE has assessed additional customs duties, value-added tax ("VAT") adjustments, administrative penalties, and late-payment interest against TSL in connection with the importation of 47 units of specialized marine cargo-handling equipment from Hailong Heavy Industries Co., Ltd. ("Hailong") of Ningbo, Zhejiang Province, People's Republic of China. In total, AADE's claims amount to approximately

III. Background — TSL's Equipment Imports A. Overview of Equipment Procurement Between March 2019 and January 2022, TSL imported 47 units of specialized marine cargo-handling equipment from Hailong Heavy Industries Co., Ltd. ("Hailong"), a Chinese manufacturer headquartered in Ningbo, Zhejiang Province, People's Republic of China. The equipment was imported for use at TSL's container terminal operations at the ports

IV. AADE Assessment — Summary A. Classification Dispute (ADAN/2022/0073)

1. Scope of Reclassification AADE contends that 20 of the 47 imported units were misclassified under CN 8426 41 00 and should be reclassified under a different tariff heading. Specifically, AADE's reclassification applies to: • 12 STS Gantry Cranes (Model QC-65 Super Post-Panamax Ship-to-Shore Container Crane), imported under Contract HHI-TSL-2019-001, with a total declared CIF value of €38,400,000 (€3,200,000 per un

2. Proposed Reclassification AADE contends that the 12 STS gantry cranes and 8 ASC systems should be reclassified under CN 8428 90 90, a residual subheading within heading 8428 of the Combined Nomenclature, described as "Other lifting, handling, loading, or unloading machinery" — specifically, the "other" residual subheading. Heading 8428 carries an MFN duty rate of 2.2%, compared to the 0% rate applicable under head

3. AADE's Classification Reasoning AADE's classification reasoning, as set forth in the Assessment Notice and supporting audit workpapers, rests on several arguments: (a) AADE contends that heading 8426, as interpreted through the Harmonized System Explanatory Notes, covers machines that lift loads using "ropes, chains, or other lifting gear suspended from a jib or boom." While AADE acknowledges that STS gantry crane

4. Contract HHI-TSL-2021-004 — Unbundling AADE further contends that Contract HHI-TSL-2021-004, which covers spare parts, proprietary control software, and commissioning services in a single bundled contract valued at €5,600,000, should be unbundled for customs purposes and the component elements classified separately: • Spare parts (€2,100,000): Reclassified under CN 8431 49 80 ("Parts of machinery of heading 8426 o

1. Royalty / Technology License Fees (€4,900,000) TSL paid Hailong a separate "technology licensing fee" of €4,900,000 under a Technology License Agreement ("TLA") dated January 10, 2019. The TLA was executed between TSL and Hailong and covers a non-exclusive license to use Hailong's proprietary crane control software ("HaiControl Suite v4.2"), predictive maintenance algorithms, and technical documentation for the op

2. Procurement Coordination Fee — Nereus Maritime Advisory Ltd. (€2,940,000) TSL paid a "procurement coordination fee" of €2,940,000 to Nereus Maritime Advisory Ltd. ("Nereus"), calculated at 3% of the aggregate equipment purchase price (3% × €98,000,000 = €2,940,000). Nereus is a company registered in Cyprus (Registration No. HE 387214) with the following ownership structure: • 40% — Andreadis Family Holdings LLC, w

3. Commissioning Services (€2,100,000) AADE contends that €2,100,000 in commissioning and installation services included in Contract HHI-TSL-2021-004 should be added to the customs value of the imported equipment under Article 71(1)(b) of the UCC as a "condition of sale" cost. AADE's reasoning is that the base purchase contracts (HHI-TSL-2019-001 and HHI-TSL-2020-003) specify that Hailong is responsible for "delivery

V. Analysis of TSL's Defenses A. Classification — STS Gantry Cranes and ASC Systems Overall Strength of Defense: Moderately Strong The classification dispute is the central issue in this case and has the greatest impact on TSL's overall financial exposure. We analyze TSL's classification defense below, addressing the arguments on both sides and providing our assessment of the likely outcome.

1. Arguments Supporting TSL's Classification Under CN 8426 TSL has several strong arguments in support of its original classification of both the STS gantry cranes and the ASC systems under heading 8426 of the Combined Nomenclature: (a) General Interpretive Rule 1 and the Heading Text. The starting point for any tariff classification analysis under the Combined Nomenclature is General Interpretive Rule ("GIR") 1, whi

2. Arguments Supporting AADE's Reclassification Under CN 8428 AADE's reclassification position, while we believe it to be incorrect on balance, is not without support. The following arguments could be advanced in favor of AADE's position: (a) German BTI Ruling DE-BTI-2020-05678. The German customs authority (Generalzolldirektion) issued a Binding Tariff Information ruling (DE-BTI-2020-05678) classifying a similar aut

3. Assessment. Based on our preliminary analysis, TSL has a credible and defensible classification position, with the strength of the defense varying between the two categories of equipment at issue: STS Gantry Cranes (12 units, €38,400,000). TSL's classification of the STS gantry cranes under heading 8426 is strong. These machines are unambiguously "cranes" by any definition — industry, engineering, or customs nomen

1. Arguments Supporting TSL's Position (Exclusion from Customs Value) (a) Contractual Independence. The TLA is a separate and independent contract from the equipment purchase agreements. Article 3.2 of the TLA expressly states that the TLA is "an independent agreement, not conditioned upon or connected to any other commercial agreement between the parties." The TLA has its own term, governing law provisions, dispute

2. Arguments Supporting AADE's Position (Inclusion in Customs Value) AADE's position draws on several factual and legal arguments that present significant challenges for TSL's defense: (a) Temporal Proximity. The TLA was executed on January 10, 2019, only five days before the first purchase contract (HHI-TSL-2019-001, January 15, 2019). The negotiations for the TLA and the purchase contracts were conducted in paralle

3. Assessment. The royalty / technology license fee question is fact-intensive, and the outcome will depend heavily on the weight given to the various factual indicators described above. TSL's defense is viable but faces significant headwinds from the temporal proximity of the TLA and the purchase contracts, the percentage-of-price fee methodology, the cross-default provision, and the practical necessity of the licen

1. Significant Obstacles to TSL's Defense TSL's buying commission defense faces several significant factual and legal obstacles: (a) Related-Party Ownership. Nereus is 40% owned by Andreadis Family Holdings LLC, which is TSL's controlling shareholder (holding approximately 62% of TSL's outstanding equity). In addition, Eleni Andreadis — daughter of TSL Chairman and CEO Nikolaos Andreadis — holds a 30% interest in Ner

2. Assessment. The buying commission defense is TSL's weakest valuation position. The combination of the Andreadis family's 70% economic interest in Nereus, Melas's prior role as a Hailong sales agent, and the apparent lack of robust documentation of independent buyer-side services creates a factual profile that is very difficult to defend. We estimate the risk of AADE prevailing on this issue at approximately 70–80%

1. Arguments Supporting TSL's Position (Exclusion from Customs Value) TSL has a solid defense on the commissioning services issue, supported by the express language of the UCC: (a) Article 72(e) UCC. Article 72(e) of the UCC expressly permits the exclusion from customs value of "charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation of the imported goods." The

2. Arguments Supporting AADE's Position (Inclusion in Customs Value) AADE's position rests on the following arguments: (a) Base Contract Delivery Obligations. The base purchase contracts (HHI-TSL-2019-001 and HHI-TSL-2020-003) specify that Hailong is responsible for "delivery, assembly, testing, and commissioning" at the destination port. AADE will argue that this contractual language demonstrates that commissioning

3. Assessment. TSL has a solid defense on this issue, anchored in the express language of Article 72(e) of the UCC, which was specifically drafted to exclude post-importation assembly and commissioning costs from customs value. We estimate the risk of AADE prevailing on this issue at approximately 35–45%. The defense would be further strengthened by evidence that: (i) TSL could have engaged a different commissioning

VI. Related Financial and Legal Considerations A. Financial Covenant Impact — Compass Maritime Bank Facility TSL's revolving credit facility with Compass Maritime Bank SA is a €75,000,000 facility dated September 1, 2020. The facility agreement contains a financial maintenance covenant requiring that TSL's Net Debt to EBITDA ratio not exceed 3.5× at any quarterly testing date. A breach of this covenant would constitu