ADMINISTRATIVE OBJECTION
Filed pursuant to Article 44 of Regulation (EU) No. 952/2013 (Union Customs Code) and Article 63 of Law 4174/2013 (Greek Tax Procedure Code)
Before the Directorate of Resolution of Disputes (DED) Independent Authority for Public Revenue (AADE) Hellenic Republic
Concerning Additional Duty Assessment Notice No. AADE/ADAN/2022/0074 (Customs Valuation — Marine Cargo-Handling Equipment)
OBJECTING PARTY:
CONTESTED ACT:
Date of Filing: November 30, 2022
Thalassa Shipping & Logistics Société Anonyme ("TSL"), by and through its legal representative, Alexandros Vournas, Managing Partner of Vournas & Theodorakis Dikigiriko Grafeio, duly authorized by resolution of TSL's Board of Directors dated November 18, 2022, hereby files this Administrative Objection ("Objection") against Additional Duty Assessment Notice No. AADE/ADAN/2022/0074 (the "Assessment Notice"), issued on August 12, 2022, by the Piraeus Regional Customs Office of the Independent Authority for Public Revenue ("AADE"). This Objection is filed in a timely manner, within the 120-day period prescribed under Article 44 of Regulation (EU) No. 952/2013 (the "Union Customs Code" or "UCC") and Article 63 of Law 4174/2013 (the "Greek Tax Procedure Code"), and in accordance with all applicable procedural requirements.
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SECTION I: SUBJECT OF THE OBJECTION
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, People's Republic of China. The imports at issue were effected between March 2019 and January 2022, spanning a period of approximately three years during which TSL undertook a major capital investment program to modernize and expand the cargo-handling capacity of its terminal operations in Greece.
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 to Hailong under a Technology License Agreement dated January 10, 2019;
(b) Procurement Coordination Fees: €2,940,000, calculated by AADE as 3% of the aggregate equipment purchase price of €98,000,000, representing fees paid by TSL to Nereus Maritime Advisory Limited ("Nereus"), a company incorporated in the Republic of Cyprus (Cyprus Company No. HE 387214), with offices at 12 Griva Digeni Avenue, Office 302, 3106 Limassol, Cyprus; and
(c) Commissioning Services: €2,100,000, representing the commissioning services component of Contract HHI-TSL-2021-004 dated February 28, 2021.
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 classification assessment in ADAN/2022/0073, which is the subject of a separate administrative objection filed contemporaneously herewith;
(b) Associated penalties: Calculated at a rate of 30% of additional duties under Article 77 of the UCC Delegated Regulation (EU) 2015/2446 and Article 42(1) UCC, constituting a portion of the total penalty of €509,124, which AADE has calculated jointly with the penalties arising under ADAN/2022/0073;
(c) Associated import VAT adjustments: €9,940,000 × 24% = €2,385,600, reflecting the standard Greek VAT rate applicable to the adjusted customs value; and
(d) Late payment interest: Accruing at the statutory rate of 0.73% per month from the respective original customs entry dates of each shipment to the date of payment.
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 the importation of the equipment and applied the customs valuations and tariff classifications that are now the subject of AADE's post-clearance audit and the contested Assessment Notice.
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. Technology License Fees (€4,900,000)
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 goods" being valued and that were paid by TSL "as a condition of sale" of the equipment by Hailong to TSL.
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 commercial package and that the TLA was a precondition to the equipment sale;
(b) The fee calculation methodology, which is expressed as a percentage of the aggregate equipment purchase price, rather than as a fixed sum or a fee based on usage or performance metrics, which AADE argues demonstrates that the license fee is economically linked to and dependent upon the sale of the goods;
(c) The functional dependence of the imported equipment on the licensed technology, specifically the HaiControl Suite v4.2 crane control software, which AADE contends is essential for the automated operation of the STS gantry cranes and ASC systems and without which the equipment cannot function as intended.
B. Procurement Coordination Fees (€2,940,000)
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. AFH is owned by Nikolaos Andreadis (70%), Eleni Andreadis (15%), and Georgios Andreadis (15%);
(b) Eleni Andreadis's direct stake: An additional 30% of Nereus is directly owned by Eleni Andreadis, the daughter of Nikolaos Andreadis. Eleni Andreadis serves as a non-executive director of Nereus;
(c) Konstantinos Melas's background: The remaining 30% of Nereus is held by Konstantinos Melas, the Managing Director of Nereus. AADE notes that Melas was formerly a sales agent for Hailong in the Southern European market, which AADE argues raises concerns about whether Nereus was in fact acting on behalf of the seller (Hailong) rather than the buyer (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 goods.
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 sale transaction.
SECTION III: GROUNDS OF OBJECTION
TSL submits the following grounds in support of the annulment, or in the alternative the reduction, of Assessment Notice AADE/ADAN/2022/0074.
A. Technology License Fees (€4,900,000) — Should Not Be Added to Customs Value
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)(c) UCC, and that, in the alternative, apportionment should apply to exclude the substantial post-importation component of the fees from the customs value.
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 separate approval by TSL's Board of Directors, which was granted by board resolution dated January 8, 2019 — a fact that underscores the independent commercial and legal significance of the TLA.
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 subject matter — ongoing technology licensing and support — from the purchase contracts, which address the sale and delivery of physical equipment.
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 purchase contracts, which were completed upon the final delivery of goods in approximately early 2022.
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 condition-based monitoring and predictive failure analysis for the licensed equipment; and
(c) Approximately 12,000 pages of technical documentation, including engineering drawings, maintenance manuals, operational procedures, and safety protocols.
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 during this period, as is commonplace in large-scale industrial procurement transactions. The near-contemporaneous execution of the agreements is entirely consistent with the conclusion that TSL negotiated two separate commercial arrangements with Hailong during the same negotiation window — one for the acquisition of physical equipment and one for the licensing of technology and provision of ongoing technical support.
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: Hailong is obligated to provide TSL with all updates, patches, upgrades, and new versions of the HaiControl Suite and HaiPredict algorithms released during the ten-year term. These updates are delivered remotely via secure electronic transmission and relate exclusively to the post-importation operational use of the equipment;
(b) Remote technical support: The TLA provides TSL with access to Hailong's 24/7 technical helpdesk for real-time troubleshooting, diagnostic support, and operational guidance. This is an ongoing service provided from Hailong's facilities in Ningbo, China, to TSL's operations in Greece;
(c) On-site technical support visits: Hailong is obligated to dispatch qualified engineers to TSL's terminal facilities in Greece for two on-site technical support visits per year, each consisting of four engineer-days. These visits are conducted at TSL's Greek terminals and address operational and maintenance issues that arise in the normal course of post-importation use;
(d) Technical documentation library access: TSL has ongoing access to Hailong's online technical documentation library, which is continuously updated and supplemented with new materials throughout the TLA term; and
(e) Training: Hailong is obligated to provide training to up to 20 TSL engineers per year, either at Hailong's Ningbo training facility or remotely via videoconference. This training covers the operation, maintenance, and optimization of the licensed technology and relates to the ongoing post-importation use of the equipment.
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 purchase contracts. Accordingly, the TLA fee does not compensate Hailong for the initial software component embedded in the equipment at the time of importation — that component is already included in the declared CIF customs value.
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 the UCC's transaction value methodology, which focuses on the price paid or payable for goods at the time of their sale for export.
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 conditions must be met; the failure to satisfy either one is sufficient to exclude the fees from the customs value.
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 ownership of the equipment. The purchase contracts stand alone as complete and enforceable agreements, without any reference to or dependence upon the TLA;
(b) No seller-imposed requirement: TSL was not contractually or commercially required by Hailong to execute the TLA as a precondition to purchasing the equipment. The TLA was an optional, supplementary arrangement that TSL elected to enter into for the purpose of securing ongoing technology support, and it was neither imposed nor mandated by the seller;
(c) Equipment operable without the TLA: The imported cranes and ASC systems are capable of manual and degraded-mode operation without the HaiControl Suite v4.2 software. While the automated operational capabilities provided by the HaiControl Suite enhance the efficiency and productivity of the equipment, the cranes can be and have been operated in manual mode during software update cycles and system maintenance windows. The equipment is not functionally dependent on the TLA for basic operation; and
(d) Fee calculation methodology is not determinative: AADE places significant weight on the fact that the TLA fee is calculated as a percentage of the aggregate equipment purchase price. While this pricing methodology creates a mathematical link between the TLA fee and the equipment purchase price, it does not, standing alone, establish a legal "condition of sale" nexus. Percentage-of-purchase-price or percentage-of-revenue fee structures are a common and widely accepted pricing mechanism in technology licensing arrangements across industries and are employed for commercial convenience — they provide a transparent and administratively simple basis for calculating the license fee. The use of such a pricing formula does not transform an independent technology license into a condition of sale for the underlying goods.
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 of the respective agreements. Temporal proximity reflects commercial efficiency; it does not demonstrate legal conditionality.
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 post-importation service components must be excluded.
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 engineering visits, documentation library access, and engineer training — are post-importation services that are performed in Greece (or remotely from China) after the goods have been imported and cleared through customs.
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 payment for post-sale services that are expressly excluded from the customs value under Article 72(e) UCC.
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 valuation report and any additional supporting analysis as these are completed.
5. Legal Authorities.
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 Article 71(1)(c), including the "condition of sale" test and the requirement that fees be "related to the goods being valued";
(c) WCO Technical Committee on Customs Valuation Advisory Opinion 4.9 — addressing the treatment of royalties and license fees in relation to the condition of sale requirement;
(d) WCO Technical Committee on Customs Valuation Advisory Opinion 4.17 — addressing the apportionment of royalties and license fees where only a portion of the payment relates to the imported goods; and
(e) WCO Commentary 25.1 — providing interpretive guidance on the treatment of payments for software and technology-related services in the context of customs valuation.
B. Procurement Coordination Fees (€2,940,000) — Deductible Buying Commission Under Article 72(a) UCC
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, TSL, and the Andreadis family do not alter this conclusion.
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, Konstantinos Melas.
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 clarifies that a buying commission is a fee paid to an agent who represents the buyer in the acquisition of the goods from the seller and who acts on the buyer's behalf in the transaction.
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:
(a) Market assessment: In November 2018, prior to the execution of the PSA and well before TSL entered into any purchase contracts with Hailong, Nereus prepared a comprehensive market assessment report evaluating the global market for marine cargo-handling equipment. This report identified and analyzed multiple potential equipment manufacturers across Asia, Europe, and North America, and provided TSL with comparative assessments of each manufacturer's product offerings, technical capabilities, production capacity, delivery timelines, pricing, and after-sales support. A copy of this report is submitted as Appendix 6;
(b) Supplier identification and evaluation: Building on the market assessment, Nereus identified and evaluated multiple potential equipment suppliers, including but not limited to Hailong. Nereus conducted preliminary due diligence on each shortlisted manufacturer and provided TSL with recommendations regarding preferred suppliers based on objective technical and commercial criteria;
(c) Quality inspection: Nereus conducted three quality inspection visits to Hailong's manufacturing facility in Ningbo, China, between February 2019 and September 2020, during the manufacturing period for the equipment ordered under Contracts HHI-TSL-2019-001 and HHI-TSL-2020-003. Each visit was documented through detailed inspection reports, which assessed manufacturing quality, progress against delivery schedules, compliance with agreed technical specifications, and adherence to international safety standards. Copies of these inspection reports are submitted as Appendix 7; and
(d) Coordination: Nereus served as the primary point of coordination between TSL's procurement team (led by VP Dimitrios Sarantopoulos) and Hailong's commercial and engineering departments throughout the procurement process. This coordination encompassed the negotiation and finalization of technical specifications, pricing terms, delivery schedules, insurance arrangements, and logistics planning.
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 and circumstances — not whether the agent is related to the buyer.
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 relevant equipment markets. The use of related-party procurement agents is common practice in the maritime and logistics industries and is not, in itself, indicative of any improper arrangement.
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 ended in 2017 — a full two years before the execution of the first TSL equipment purchase contract (HHI-TSL-2019-001, dated January 15, 2019). There is no overlap between Melas's prior role as a Hailong sales agent and his role as Managing Director of Nereus in connection with the TSL procurement;
(b) Industry expertise: Melas's prior experience in the Chinese heavy equipment market, including his established relationships with manufacturers and his familiarity with the commercial and regulatory landscape, is precisely the reason TSL engaged Nereus as its buying agent. Melas's expertise enabled Nereus to conduct informed market assessments, identify suitable suppliers, evaluate technical capabilities, and negotiate favorable terms on TSL's behalf;
(c) Exclusive loyalty to TSL: At the time of the TSL procurement, Melas was no longer acting on behalf of Hailong in any capacity. He was acting exclusively on behalf of TSL through Nereus, in accordance with the terms of the PSA, which imposed a duty of loyalty to TSL; and
(d) No transformation of commission character: A buying agent's prior industry experience — including experience working for suppliers — does not transform a buying commission into a selling commission. What matters is the agent's role in the specific transaction at issue, not the agent's career history. Melas's prior sales agency relationship with Hailong does not alter the fundamental nature of Nereus's engagement as TSL's buying agent.
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 equipment was sold directly by Hailong to TSL under the purchase contracts, and Nereus was not a party to any of the purchase contracts;
(b) Nereus did not bear the commercial risk of the transaction. Nereus's fee was a fixed percentage commission, payable regardless of the outcome of the procurement. Nereus had no inventory risk, credit risk, or price risk in relation to the equipment;
(c) Nereus's fee was paid exclusively by TSL (the buyer), not by Hailong (the seller). There is no evidence in the audit file, nor does AADE allege, that Nereus received any payment, commission, fee, discount, rebate, or other benefit from Hailong in connection with the TSL procurement; and
(d) Nereus's contractual duty of loyalty ran to TSL, not to Hailong. The PSA expressly required Nereus to act in TSL's best interests and to disclose any potential conflicts of interest.
6. Legal Authorities.
50. In support of its position regarding the procurement coordination fees, TSL relies on the following legal authorities:
(a) Article 72(a) of Regulation (EU) No. 952/2013 (Union Customs Code) — providing that buying commissions shall not be included in the customs value;
(b) Article 71(1)(a)(i) of Regulation (EU) No. 952/2013 (Union Customs Code) — defining selling commissions and brokerage fees as dutiable additions (cited by AADE; distinguished by TSL);
(c) Article 127(1) of the UCC Implementing Regulation (EU) 2015/2447 — defining "buying commission" and setting forth the criteria for its deductibility;
(d) WCO Technical Committee on Customs Valuation Commentary 17.1 — identifying the hallmarks of a genuine buying commission, including: (i) the agent performs services on behalf of the buyer; (ii) the agent does not take title to the goods; (iii) the agent does not bear the commercial risk of the transaction; (iv) the agent's fee is paid by the buyer; and (v) the agent does not receive any payment from the seller; and
(e) Court of Justice of the European Union, Case C-59/16, HAVI Logistics (2017) — holding that the classification of a fee as a buying commission or a selling commission depends on "the actual role played by the agent in the transaction, assessed on the basis of all the facts," and that the contractual label given by the parties, while relevant, is not determinative.
C. Commissioning Services (€2,100,000) — Post-Importation Costs Excludable from Customs Value
51. AADE's determination that the commissioning services component of Contract HHI-TSL-2021-004 should be added to the customs value of the base equipment is directly contrary to the express provisions of the Union Customs Code. Article 72(e) UCC unambiguously excludes post-importation construction, erection, assembly, maintenance, and technical assistance costs from the customs value. The commissioning services at issue fall squarely within this exclusion.
1. Article 72(e) UCC Express Exclusion.
52. Article 72(e) of the Union Customs Code expressly provides that the following charges shall not be included in the customs value of imported goods:
"charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation on imported goods such as industrial plant, machinery or equipment."
53. The commissioning services performed under Contract HHI-TSL-2021-004 consisted of the final assembly, testing, calibration, and system integration of the STS gantry cranes imported under Contract HHI-TSL-2019-001 and the ASC systems imported under Contract HHI-TSL-2020-003. These services were performed entirely in Greece, at TSL's terminal facilities in Piraeus, Thessaloniki, and Volos, by Hailong engineers dispatched to Greece specifically for the purpose of performing the commissioning work.
54. In each case, the commissioning work commenced only after the relevant equipment had been physically imported into Greece, cleared through customs, and delivered to the respective terminal sites. The commissioning activities took place over a period of several months at each terminal and included:
(a) Final mechanical and electrical assembly of crane components that were shipped in partially disassembled form for transport efficiency;
(b) Functional testing of all crane systems, including lifting mechanisms, trolley systems, electrical drives, and safety interlocks;
(c) Calibration of sensors, load cells, positioning systems, and control electronics to the specific operational parameters of each terminal;
(d) Integration of individual cranes with the terminal's wider operating systems, including the terminal operating system (TOS), vessel planning systems, and yard management systems; and
(e) Performance validation and acceptance testing, culminating in the issuance of commissioning completion certificates.
55. Commissioning completion certificates were issued for each terminal upon the successful conclusion of the commissioning process. These certificates confirm that all commissioning work was performed at the terminal sites in Greece, after the importation and customs clearance of the equipment. Copies of the completion certificates are submitted as Appendix 8.
56. The commissioning services described above fall squarely within the scope of Article 72(e) UCC as "erection, assembly, ... or technical assistance, undertaken after importation on imported goods such as ... machinery or equipment." There is no ambiguity in the application of this provision to the facts of this case.
2. Separate Contract and Pricing.
57. The commissioning services are contained in Contract HHI-TSL-2021-004, a separate and distinct contract from the base equipment purchase contracts. Contract HHI-TSL-2021-004 was executed on February 28, 2021, more than two years after the first equipment purchase contract (HHI-TSL-2019-001, dated January 15, 2019) and approximately eight months after the third equipment purchase contract (HHI-TSL-2020-003, dated June 10, 2020).
58. Within Contract HHI-TSL-2021-004, the commissioning services are assigned a separately identified price of €2,100,000, distinct from the spare parts component (€2,100,000) and the proprietary control software component (€1,400,000). The separate pricing of the commissioning services reflects the parties' recognition that these services constitute a discrete commercial deliverable with its own cost structure and delivery timeline, independent of the physical goods (spare parts and software) covered by the same contract.
59. The temporal separation between the execution of the base equipment purchase contracts and Contract HHI-TSL-2021-004, combined with the separate identification and pricing of the commissioning services within that contract, demonstrates that the commissioning services were a distinct commercial transaction. They were not an embedded or inseparable component of the equipment sale price and should not be treated as such for customs valuation purposes.
3. Customs Value Determined at Time of Importation.
60. Under the UCC's transaction value methodology, the customs value of imported goods is the transaction value — the price actually paid or payable for the goods when sold for export to the customs territory of the Union, as defined in Article 70(1) UCC. This transaction value is determined at the time of importation, when the Single Administrative Documents (SADs) are filed and the goods are presented for customs clearance.
61. In the present case, the customs value of the base equipment (STS gantry cranes, RTG cranes, and ASC systems) was declared at the time of importation, based on the CIF transaction values specified in the respective purchase contracts. These values were determined at the point of sale for export, reflecting the price paid by TSL for the goods as delivered CIF Piraeus. The commissioning services had not yet been performed at the time of importation and could not logically form part of the declared transaction value.
62. AADE's approach of retroactively adding post-importation commissioning costs to a pre-determined transaction value is methodologically inconsistent with the UCC's framework. The transaction value is fixed at the time of sale for export and cannot be retrospectively inflated by the addition of costs that relate to activities performed after the goods have been imported, cleared, and delivered.
4. Not a "Condition of Sale" Under Article 71(1)(b).
63. AADE characterizes the commissioning services as a "condition of sale" cost includable under Article 71(1)(b) UCC. TSL submits that this characterization is incorrect for the following reasons:
(a) Delivery obligations: The base equipment purchase contracts specify "delivery CIF Piraeus" as the delivery term. Under CIF Incoterms, delivery is complete upon the discharge of the goods at the named port of destination. The seller's delivery obligation — and correspondingly, the buyer's obligation to accept delivery and pay the purchase price — is fulfilled when the goods are delivered at the port. Commissioning is a post-delivery activity that occurs after the seller's delivery obligations have been satisfied;
(b) Commercial relationship, not legal conditionality: While the commissioning services are commercially related to the imported equipment — in the sense that the equipment requires commissioning before it can be placed into commercial operation — commercial relationship is not equivalent to legal conditionality. The "condition of sale" requirement under Article 71(1)(b) UCC requires that the cost be a contractual condition of the sale for export, not merely a commercially related expenditure; and
(c) Option to engage independent contractors: TSL had the commercial and contractual option to engage independent commissioning contractors to perform the commissioning work and was not contractually bound to use Hailong for this purpose. The decision to engage Hailong for commissioning was a separate commercial decision, made for reasons of technical expertise and efficiency, and does not convert the commissioning fee into a condition of sale for the equipment.
5. Legal Authorities.
64. In support of its position regarding the commissioning services, TSL relies on the following legal authorities:
(a) Article 72(e) of Regulation (EU) No. 952/2013 (Union Customs Code) — expressly excluding post-importation construction, erection, assembly, maintenance, and technical assistance from customs value;
(b) Article 70(1) of Regulation (EU) No. 952/2013 (Union Customs Code) — defining the transaction value as the price actually paid or payable for the goods when sold for export; and
(c) Article 71(1)(b) of Regulation (EU) No. 952/2013 (Union Customs Code) — cited by AADE as the basis for the valuation adjustment; rebutted by TSL on the grounds set forth above.
D. Interrelationship with Classification Objection — Duty Rate Dependency
65. TSL draws the DED's attention to a critical threshold issue that affects the entirety of the Assessment Notice: the additional duty assessment under ADAN/2022/0074 is calculated at a duty rate of 2.2%. This rate is not the duty rate that was originally applied at the time of importation; rather, it is the duty rate that results from AADE's concurrent reclassification of the imported equipment from CN 8426 41 00 (which carries an MFN duty rate of 0%) to CN 8428 90 90 (which carries an MFN duty rate of 2.2%), as set forth in the concurrent classification assessment in ADAN/2022/0073.
66. TSL has filed a separate administrative objection to ADAN/2022/0073 on the grounds that the classification under heading 8426 is correct and that AADE's reclassification under heading 8428 is legally erroneous. In connection with that classification dispute, TSL has also filed a Binding Tariff Information ("BTI") application with AADE (ref: BTI-GR-2022-003847), which was referred by AADE to the European Commission's Directorate-General for Taxation and Customs Union ("DG TAXUD") under Article 34(10) UCC on February 7, 2023.
67. The referral to DG TAXUD was prompted by the existence of divergent BTI rulings issued by other EU Member States with respect to substantially identical equipment:
(a) BTI Ruling NL-BTI-2021-01234 (Netherlands, issued June 14, 2021): STS cranes and ASC systems classified under heading 8426 (consistent with TSL's declared classification); and
(b) BTI Ruling DE-BTI-2020-05678 (Germany, issued September 3, 2020): ASC systems classified under heading 8428 (consistent with AADE's reclassification).
68. The resolution of the classification question has a direct and determinative impact on the financial consequences of the valuation dispute. If TSL's classification under heading 8426 is upheld — as TSL submits it should be — the MFN duty rate applicable to the imported equipment is 0%. In that case, even if the DED were to uphold AADE's valuation adjustments in their entirety, the resulting additional duty would be:
0% × €9,940,000 = €0
69. In other words, the valuation adjustments under ADAN/2022/0074 would have zero duty impact if the classification under heading 8426 is upheld. The entire additional duty assessment of €218,680 rests on the premise that the equipment has been correctly reclassified under heading 8428 at a 2.2% duty rate.
70. It bears noting that even AADE agrees that the 18 RTG Cranes imported under Contract HHI-TSL-2019-002 (declared CIF value: €25,200,000) are not subject to reclassification and remain properly classified under CN 8426 41 00 at a 0% duty rate. The reclassification dispute therefore affects only the STS gantry cranes and ASC systems.
71. Given this fundamental interrelationship between the classification and valuation disputes, TSL respectfully submits that the resolution of the classification question should precede, or at a minimum be contemporaneous with, the resolution of the valuation issues raised in this Objection. It would be procedurally inefficient and potentially unjust to adjudicate the valuation dispute in isolation from the classification dispute, when the financial consequences of the valuation adjustments are entirely dependent on the classification outcome.
E. Penalties and Interest
72. To the extent the DED considers the penalty exposure associated with the valuation assessment — either in connection with this Objection or in conjunction with the concurrent classification objection to ADAN/2022/0073 — TSL makes the following submissions:
73. Good faith. TSL's valuation positions were adopted in good faith, based on a reasonable and defensible interpretation of Articles 70, 71, and 72 of the Union Customs Code and the separate contractual structures of the TLA, the Nereus PSA, and Contract HHI-TSL-2021-004. TSL's treatment of each of the three payment categories reflected a commercially rational and legally supported reading of the applicable rules, and TSL acted consistently and transparently in its customs declarations.
74. Reliance on licensed customs broker. TSL retained the services of Peloros Customs Agency S.A. (EORI: GR801234567000), acting through its licensed customs broker Stavros Liapis (License No. GR-CB-1287), for the preparation and filing of all customs declarations related to the imported equipment. TSL relied on Peloros's professional judgment and expertise in determining the appropriate customs value declarations and was entitled to do so. Peloros is a licensed and regulated customs broker with extensive experience in the handling of major industrial imports through the Port of Piraeus.
75. Absence of prior adverse guidance. At the time TSL's customs declarations were filed, no prior adverse valuation ruling, AADE guidance, administrative interpretation, or published precedent existed that would have put TSL on notice that its treatment of the TLA license fees, the Nereus procurement fee, or the commissioning services was incorrect or inconsistent with AADE's interpretation of the applicable rules. The questions raised by AADE involve genuinely complex valuation issues on which reasonable minds may differ.
76. Penalty limitation. In light of the foregoing, TSL submits that any penalty imposed in connection with the valuation assessment should be limited to the minimum 30% rate applicable to good-faith errors under Article 42(1) UCC and Article 77 of the UCC Delegated Regulation (EU) 2015/2446. There is no basis for the application of the escalated penalty rates of 100% or 300% applicable to negligence or fraud under Article 147 of the Greek Customs Code (Law 2960/2001). TSL's conduct throughout the procurement and importation process was transparent, well-documented, and consistent with a good-faith understanding of the applicable legal rules.
77. Proportionality. The principle of proportionality, as enshrined in Article 42(1) UCC and as interpreted by the Court of Justice of the European Union, requires that penalties imposed by customs authorities be "effective, proportionate, and dissuasive." As the CJEU held in Case C-382/09, Stils Met, penalties must not exceed what is strictly necessary to achieve their legitimate objective and must bear a reasonable relationship to the gravity of the infringement. The imposition of penalties that are disproportionate to the nature and circumstances of the alleged infringement would be contrary to EU law.
78. Interest. TSL reserves the right to contest the methodology and rate applied by AADE in calculating late payment interest. TSL requests that the DED verify the accrual periods, the applicable statutory rate (currently 0.73% per month), and the accuracy of the interest calculations set forth in the Assessment Notice. TSL further reserves the right to submit detailed calculations demonstrating any errors in AADE's interest computation.
SECTION IV: PENDING BTI APPLICATION AND STANDSTILL AGREEMENT
79. As noted in Section III.D above, TSL filed BTI Application BTI-GR-2022-003847 with AADE on November 15, 2022, seeking a binding tariff classification ruling for the STS gantry cranes and ASC systems imported under Contracts HHI-TSL-2019-001 and HHI-TSL-2020-003. The BTI application was referred by AADE to DG TAXUD on February 7, 2023, under Article 34(10) UCC, in light of the divergent BTI rulings issued by the Netherlands (NL-BTI-2021-01234, classifying under heading 8426) and Germany (DE-BTI-2020-05678, classifying under heading 8428).
80. The DG TAXUD consultation is ongoing as of the date of this Objection. The outcome of the consultation will determine the correct tariff classification for the imported equipment and, by extension, the applicable duty rate. As demonstrated above, the duty rate is the critical variable that determines whether the valuation adjustments produce any additional duty liability.
81. In recognition of the interlinked nature of the classification and valuation disputes and the pendency of the DG TAXUD consultation, a standstill agreement was executed between TSL and AADE on March 1, 2023. The standstill agreement was negotiated between TSL's legal representatives, Vournas & Theodorakis Dikigiriko Grafeio (Alexandros Vournas, Managing Partner), and AADE's external legal advisors, Meridian & Drakos Dikigiriko Grafeio (Panagiotis Drakos, Senior Partner, Athens Bar No. 29481; and Irini Konstantinou, Associate).
82. The principal terms of the standstill agreement are as follows:
(a) Non-enforcement: AADE agrees not to enforce or take any collection action with respect to Assessment Notices ADAN/2022/0073 (classification) or ADAN/2022/0074 (valuation) during the standstill period;
(b) Bank guarantee: TSL has posted a bank guarantee in the amount of €5,000,000, issued by Compass Maritime Bank SA (Guarantee No. CMB-BG-2023-0291, dated March 10, 2023), to secure the potential liability under both Assessment Notices during the standstill period;
(c) Preservation of rights: Both parties expressly preserve all of their respective rights, claims, defenses, and procedural positions. Neither party's participation in the standstill arrangement shall be construed as an admission, waiver, or concession of any kind;
(d) DED proceedings in abeyance: The DED proceedings on both administrative objections are held in abeyance during the standstill period;
(e) Interest accrual: Statutory late payment interest continues to accrue at the applicable rate of 0.73% per month during the standstill period; and
(f) Termination: Either party may terminate the standstill agreement upon sixty (60) days' written notice to the other party.
83. A copy of the standstill agreement letter is submitted as Appendix 10.
84. TSL respectfully requests that the DED defer resolution of this Objection pending the outcome of the DG TAXUD consultation on BTI Application BTI-GR-2022-003847 and the resolution of the interlinked classification dispute under ADAN/2022/0073, consistent with the terms of the standstill agreement. The adjudication of the valuation dispute in advance of the classification determination would be premature and potentially inconsistent with the procedural economy and good administration objectives of the standstill arrangement to which AADE has agreed.
SECTION V: REQUESTS
85. In light of the foregoing, Thalassa Shipping & Logistics Société Anonyme respectfully requests that the Directorate of Resolution of Disputes of the Independent Authority for Public Revenue:
1. Annul Assessment Notice AADE/ADAN/2022/0074 in its entirety, on the grounds that:
(a) The technology license fees of €4,900,000 are not includable in the customs value of the imported equipment under Article 71(1)(c) of the Union Customs Code, because the TLA is a separate and independent contract, the license fees cover predominantly post-importation services, and the fees do not constitute a "condition of sale" within the meaning of the UCC;
(b) The Nereus procurement coordination fees of €2,940,000 constitute deductible buying commissions under Article 72(a) of the Union Customs Code, as Nereus acted as a genuine buying agent on behalf of TSL, performed substantive procurement services, and did not act on behalf of the seller; and
(c) The commissioning services of €2,100,000 are post-importation costs expressly excludable from the customs value under Article 72(e) of the Union Customs Code, as they consist of erection, assembly, and technical assistance undertaken after importation at TSL's terminal facilities in Greece.
2. In the alternative, reduce the valuation adjustment by excluding the following amounts from the customs value: