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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP 400 Lexington Avenue New York, NY 10170

25 Finsbury Square London EC2A 1DU, United Kingdom

Avenue Louise 480 1050 Brussels, Belgium

October 18, 2022

VIA ENCRYPTED EMAIL AND COURIER

Mr. Nikolaos Andreadis Chairman & Chief Executive Officer Thalassa Shipping & Logistics SA 47 Akti Miaouli 185 35 Piraeus, Greece

Ms. Elena Papadimitriou Chief Financial Officer Thalassa Shipping & Logistics SA 47 Akti Miaouli 185 35 Piraeus, Greece

Re: AADE Customs Dispute — Initial Assessment and Next Steps Matter No.: C&H-2022-ITS-04781

Dear Mr. Andreadis and Ms. Papadimitriou:

I. Introduction

We write in connection with our engagement pursuant to the engagement letter dated September 22, 2022, under which Calderwood & Harkness LLP was retained to advise and represent Thalassa Shipping & Logistics SA ("TSL" or the "Company") in connection with the customs classification and valuation dispute with the Independent Authority for Public Revenue of the Hellenic Republic (Ανεξάρτητη Αρχή Δημοσίων Εσόδων, "AADE").

We have now completed our preliminary review of the two AADE Additional Duty Assessment Notices issued against TSL: (i) Assessment Notice No. AADE/ADAN/2022/0073 (the "Classification Assessment"), relating to the tariff classification of certain imported container-handling equipment; and (ii) Assessment Notice No. AADE/ADAN/2022/0074 (the "Valuation Assessment"), relating to adjustments to the declared customs value of that equipment. Both Assessment Notices are dated August 12, 2022.

The purpose of this letter is to provide you with our initial assessment of the merits and exposure arising from the AADE Assessments and to outline the next steps we recommend to protect TSL's interests. This letter is intended as a high-level strategic overview. A more detailed Preliminary Case Assessment Memorandum, which includes a fuller analysis of the applicable legal framework, annotated references to the relevant provisions of the Union Customs Code, and a granular review of each documentary exhibit in the AADE audit file, has been transmitted to you under separate cover via secure document portal.

As with all communications between Calderwood & Harkness and TSL in connection with this matter, this letter is protected by the attorney-client privilege and is furnished on a strictly confidential basis. We request that its distribution be limited to those individuals within TSL who have a need to know, and that it not be shared with third parties without our prior written consent.

II. Summary of AADE Assessment and Exposure

A. Classification Assessment (ADAN/2022/0073)

The Classification Assessment relates to the tariff classification of container-handling equipment imported by TSL from Hailong Heavy Industries Co., Ltd. ("Hailong"), a manufacturer headquartered in Ningbo, People's Republic of China. The equipment was imported between March 2019 and January 2022 under four master purchase contracts:

• Contract HHI-TSL-2019-001 (STS Gantry Cranes), dated January 15, 2019;

• Contract HHI-TSL-2019-002 (RTG Cranes), dated March 22, 2019;

• Contract HHI-TSL-2020-003 (ASC Systems), dated June 10, 2020; and

• Contract HHI-TSL-2021-004 (Spare Parts, Software, and Commissioning Services), dated February 28, 2021.

The total declared CIF customs value across all four contracts was approximately €98,000,000.

TSL classified all 47 imported units of container-handling equipment under Combined Nomenclature subheading CN 8426 41 00, which carries a 0% Most Favoured Nation (MFN) duty rate. AADE does not dispute this classification with respect to the 18 rubber-tyred gantry ("RTG") cranes imported under Contract HHI-TSL-2019-002, which had a declared CIF value of €25,200,000 (18 units at €1,400,000 per unit). Those units remain classified under CN 8426 41 00 at 0% and are not the subject of any additional duty claim.

However, AADE contends that 20 of the 47 imported units should be reclassified from CN 8426 41 00 to CN 8428 90 90, which carries a 2.2% MFN duty rate. The 20 disputed units comprise:

1. Twelve (12) ship-to-shore ("STS") gantry cranes, imported under Contract HHI-TSL-2019-001, with a declared CIF value of €38,400,000 (12 units at €3,200,000 per unit); and

2. Eight (8) automated stacking crane ("ASC") systems, imported under Contract HHI-TSL-2020-003, with a declared CIF value of €28,800,000 (8 units at €3,600,000 per unit).

The combined reclassified equipment value base is therefore €67,200,000 (€38,400,000 + €28,800,000). At the 2.2% MFN rate applicable to CN 8428 90 90, the additional classification duty assessed by AADE amounts to:

€67,200,000 × 2.2% = €1,478,400

AADE's reclassification theory rests on the argument that STS gantry cranes and ASC systems do not fall within the scope of heading 8426 (which covers "ships' derricks; cranes, including cable cranes; mobile lifting frames, straddle carriers and works trucks fitted with a crane") because, according to AADE, the principal function of these machines is not "lifting" in the traditional sense but rather "automated container handling, transport, and storage," which AADE contends falls within the residual category of heading 8428 ("other lifting, handling, loading or unloading machinery"). We address the merits of this reclassification theory in Part III below.

B. Valuation Assessment (ADAN/2022/0074)

The Valuation Assessment asserts that TSL understated the customs value of the imported equipment by failing to include certain costs and payments that AADE contends should have been added to the transaction value under the provisions of Regulation (EU) No. 952/2013 (the "Union Customs Code" or "UCC"). AADE identifies three categories of valuation adjustments, totaling €9,940,000:

1. Technology License Fees — €4,900,000

AADE contends that technology license fees totaling €4,900,000, paid by TSL to Hailong under a Technology License Agreement ("TLA") dated January 10, 2019, should be included in the customs value of the imported equipment. The TLA license fee was calculated as 5% of the aggregate €98,000,000 equipment purchase price and was paid in three installments:

• €1,960,000 paid in March 2019;

• €1,470,000 paid in July 2020; and

• €1,470,000 paid in March 2022.

AADE characterizes these fees as royalties and license fees "related to the goods being valued" and paid as "a condition of sale" of those goods, within the meaning of Article 71(1)(c) UCC. AADE relies on the temporal proximity of the TLA (January 10, 2019) to the first purchase contract (January 15, 2019), the calculation of the fee as a percentage of the equipment purchase price, and the cross-default provisions linking the TLA to the purchase agreements.

2. Procurement Coordination Fee — €2,940,000

AADE contends that a procurement coordination fee of €2,940,000 paid by TSL to Nereus Maritime Advisory Limited ("Nereus"), a company incorporated in the Republic of Cyprus (company registration number HE 387214), should be included in the customs value. The fee was calculated as 3% of the aggregate €98,000,000 purchase price.

TSL characterized this payment as a "buying commission" — that is, a fee paid to an agent acting on behalf of the buyer — which is expressly excluded from customs value under Article 72(a) UCC. AADE disputes this characterization. AADE contends that the Nereus fee is not a genuine deductible buying commission but rather a selling commission or procurement markup that should be included in the customs value under Article 71(1)(a)(i) UCC.

AADE's position is based in significant part on the ownership and governance structure of Nereus and its relationship to both TSL and Hailong:

• Andreadis Family Holdings LLC ("AFH") holds 40% of Nereus. AFH is the controlling shareholder of TSL, holding 62% of TSL's equity. Mr. Nikolaos Andreadis holds 70% of AFH, Mr. Georgios Andreadis holds 15% of AFH, and Ms. Eleni Andreadis holds 15% of AFH.

• Mr. Konstantinos Melas holds 30% of Nereus and serves as its Managing Director. Mr. Melas is a former Hailong sales agent for the Southern European market, a position he held from approximately 2012 to 2017. His transition from serving as Hailong's sales representative to holding an ownership stake in and managing Nereus — which then received a 3% fee from TSL on the same equipment manufactured by Hailong — raises strong inferences of fee restructuring.

• Ms. Eleni Andreadis (daughter of Mr. Nikolaos Andreadis) holds 30% of Nereus and serves as a non-executive director. Through her direct 30% holding in Nereus, combined with her 15% indirect interest through AFH, the Andreadis family's combined economic interest in Nereus is approximately 70%.

3. Commissioning Services — €2,100,000

AADE contends that commissioning services valued at €2,100,000, performed by Hailong personnel in Greece after importation, should be added to the customs value under Article 71(1)(b) UCC as a condition-of-sale cost. These services were provided under Contract HHI-TSL-2021-004, which was a bundled contract that also included spare parts (€2,100,000) and software (€1,400,000). AADE's argument is that the base purchase contracts required Hailong to deliver, assemble, and commission the equipment as part of an integrated delivery obligation, and that the commissioning services therefore constitute a component of the transaction value even though they were separately invoiced.

At the 2.2% MFN rate that AADE contends applies to the reclassified equipment, the additional duty on the valuation adjustment amount is:

€9,940,000 × 2.2% = €218,680

C. Total Exposure Summary

The following table summarizes TSL's total potential financial exposure under both a mid-case and a high-end scenario. The mid-case scenario assumes that AADE prevails on all assessed amounts but applies standard administrative penalties. The high-end scenario assumes that AADE reclassifies the errors as intentional or fraudulent, triggering enhanced penalty provisions.

Two important notes regarding these figures:

First, the import VAT adjustments of approximately €2.74 million may ultimately be recoverable by TSL as input VAT credit under the Greek VAT framework, provided TSL's VAT registration remains in good standing and the adjustments are properly documented. However, AADE demands payment of the VAT liability pending verification and reconciliation of any input credit claims. Accordingly, the net cash impact of the VAT adjustment is expected to be a timing difference rather than a permanent cost, although the cash flow impact in the near term is real and should be planned for.

Second, the high-end penalty scenario assumes that AADE reclassifies the classification and valuation errors as intentional or fraudulent conduct, which would trigger the enhanced penalty regime under Article 147 of the Greek Customs Code (Law 2960/2001), permitting penalties of up to 300% of the unpaid duties. Based on our preliminary assessment, we consider this reclassification unlikely given the genuine ambiguity in the classification of automated container-handling equipment and the existence of divergent Binding Tariff Information rulings across EU Member States. Nonetheless, we cannot rule out such an escalation, particularly in light of the Nereus-related ownership issues, and we include it in the exposure range for completeness.

III. Initial Assessment of TSL's Defenses

We set forth below our initial assessment of the strength of TSL's defenses to each element of the AADE Assessments. These assessments are preliminary and may evolve as we develop the factual record and complete our expert analyses.

A. Classification Defense — Strength: Strongest

TSL's classification of the STS gantry cranes and ASC systems under heading 8426 of the Combined Nomenclature ("cranes") is, in our view, well-supported and represents TSL's strongest defense. We base this assessment on the following considerations:

General Interpretive Rule (GIR) 1 — Terms of the Headings. Under GIR 1, classification must be determined according to the terms of the headings and any relevant Section or Chapter Notes. Both STS gantry cranes and ASC systems are, in plain and ordinary usage, "cranes." They lift loads vertically using wire ropes and spreader mechanisms suspended from a trolley that traverses a horizontal boom, which is in turn supported by a gantry structure running on rails or wheels. The essential mechanical operation of these machines — the vertical lifting and horizontal traversing of loads — is the defining characteristic of a crane. Heading 8426 covers "ships' derricks; cranes, including cable cranes; mobile lifting frames, straddle carriers and works trucks fitted with a crane," and both the STS gantry cranes and the ASC systems fall squarely within this description.

General Interpretive Rule (GIR) 3(a) — Specificity. To the extent that the STS gantry cranes or ASC systems could be argued to fall within more than one heading, GIR 3(a) provides that the heading which provides the most specific description shall be preferred. Heading 8426 specifically describes "cranes," whereas heading 8428 is a residual heading covering "other lifting, handling, loading or unloading machinery" that is "not elsewhere specified or included." Because heading 8426 specifically describes cranes and both products are cranes, heading 8426 provides the more specific description and should prevail.

Favorable BTI Ruling. On June 14, 2021, the Netherlands customs authority issued Binding Tariff Information ruling NL-BTI-2021-01234, which classified substantially similar STS cranes and ASC-type systems under heading 8426. While a BTI ruling issued by one Member State is not formally binding on AADE, it is highly persuasive evidence of the correct classification, particularly where the goods at issue are substantially similar. We intend to rely on this ruling prominently in our BTI application and administrative objection.

Industry Practice and Nomenclature. Both STS gantry cranes and ASC systems are universally referred to as "cranes" throughout the maritime, port operations, and engineering sectors. Equipment manufacturers, port operators, industry associations (including the International Association of Ports and Harbors and the Terminal Operations Conference), and academic and engineering literature consistently use the term "crane" to describe both product categories. This industry-wide usage reinforces the conclusion that these machines are properly classified under heading 8426.

Notwithstanding these strong points, we must note one adverse authority. On September 3, 2020, the German customs authority issued Binding Tariff Information ruling DE-BTI-2020-05678, which classified automated stacking cranes similar to TSL's ASC systems under heading 8428. The German ruling was based on the reasoning that full automation transforms the machine's principal function from "lifting" (heading 8426) to "automated container handling and storage" (heading 8428). This ruling presents a complication, particularly for the ASC systems.

We draw the following distinction: the STS gantry cranes are the stronger case, because even the German ruling did not address STS cranes, and there is no adverse BTI ruling or other authority that would support reclassifying STS gantry cranes away from heading 8426. The ASC systems present a closer question due to their full automation, which AADE may argue aligns with the reasoning in the German ruling. Nonetheless, we believe the better view is that automation does not change the fundamental mechanical operation of the equipment, and that even fully automated cranes remain "cranes" for classification purposes.

We also note that TSL's declared subheading CN 8426 41 00 ("on tyres") is technically incorrect for the rail-mounted STS gantry cranes and ASC systems. The correct subheading for rail-mounted cranes within heading 8426 would be CN 8426 19 00. However, all subheadings within heading 8426 carry a 0% MFN duty rate, so this subheading-level error has no duty consequence whatsoever. We will proactively address the subheading correction in our BTI application to demonstrate good faith and transparency, and to eliminate any suggestion that the subheading-level error indicates a broader pattern of careless or incorrect classification.

B. Valuation — Commissioning Services (€2,100,000) — Strength: Solid

TSL's defense against the inclusion of the €2,100,000 commissioning services cost in the customs value is, in our view, solid. Article 72(e) UCC expressly provides that the customs value shall not include "charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation" of the goods. The commissioning services at issue were performed entirely in Greece by Hailong technical personnel after the equipment had been physically imported into the EU and cleared through Greek customs. The services consisted of on-site installation, calibration, testing, and commissioning activities that by their nature can only occur after the equipment has been delivered to the terminal site.

Furthermore, the commissioning services are separately priced under Contract HHI-TSL-2021-004, with a distinct line-item allocation of €2,100,000 for commissioning services, separate from the spare parts (€2,100,000) and software (€1,400,000) components of that contract. This separate pricing supports the treatment of the commissioning services as a post-importation cost excludable from customs value.

The principal risk to this defense is AADE's argument that the base purchase contracts (HHI-TSL-2019-001 and HHI-TSL-2020-003) required Hailong to deliver, assemble, and commission the equipment as part of an integrated delivery obligation, and that the subsequent Contract HHI-TSL-2021-004 merely separated out a cost that was always part of the overall transaction. If AADE can demonstrate that commissioning was a "condition of sale" embedded in the original purchase agreements — for example, through delivery term provisions specifying "DDP Delivered Duty Paid, commissioned and operational" or similar formulations — the Article 72(e) exclusion may not apply. We will need to review the precise delivery terms and acceptance clauses in Contracts HHI-TSL-2019-001 and HHI-TSL-2020-003 to assess this risk more fully.

C. Valuation — Technology License Fees (€4,900,000) — Strength: Moderate

TSL's position is that the TLA is a separate and independent agreement from the equipment purchase contracts, and that the technology license fees are not a "condition of sale" of the imported goods. TSL maintains that the TLA covers predominantly post-importation services, including software updates, ongoing technical support, operator training, and access to Hailong's HaiControl Suite v4.2 platform over a ten-year term, and that the fees relate to the ongoing use and support of the software rather than to the imported hardware.

We assess this defense as moderate in strength. While the argument has legal merit, TSL faces several factual challenges:

(i) Temporal proximity. The TLA was executed on January 10, 2019 — only five days before the first purchase contract (HHI-TSL-2019-001) was signed on January 15, 2019. This close temporal proximity strongly suggests that the TLA was negotiated as part of the same commercial transaction and was a practical prerequisite for the equipment purchase.

(ii) Price linkage. The license fee is calculated as 5% of the aggregate equipment purchase price (€98,000,000), rather than as a fixed fee or a fee based on the value of the licensed technology or services independently. This method of calculation demonstrates an economic linkage between the license fee and the price of the imported goods, which is a significant factor under the UCC valuation rules and relevant case law.

(iii) Functional dependence. The automated functions of the STS gantry cranes and ASC systems depend on the licensed HaiControl Suite v4.2 software. Without the software license, the equipment cannot perform its automated container-handling operations. This functional dependence supports AADE's argument that the license fees "relate to" the imported goods and are paid as a condition of their acquisition.

(iv) Cross-default provision. The TLA contains a cross-default provision linking it to the purchase agreements, such that a material breach of either the TLA or any purchase agreement constitutes a default under the other. This contractual linkage further undermines the argument that the TLA is an independent, standalone agreement.

We note that the World Customs Organization Commentary 25.1 and the Court of Justice of the European Union's decision in Dansk Transport og Logistik (Case C-230/08) support the inclusion of royalties and license fees in the customs value when the imported goods cannot function without the licensed technology and when the license fee is a condition of sale. These authorities present a headwind for TSL's position on this element.

We will work with Kestrel & Palladian to develop arguments that a substantial portion of the TLA fee relates to post-importation services and ongoing support that are properly excludable, and to explore whether the fee can be apportioned between an importation-related component (which would be includable) and a post-importation component (which would not). This apportionment approach would reduce, though not eliminate, the valuation adjustment.

D. Valuation — Nereus Procurement Fee (€2,940,000) — Strength: Challenging / Weakest Position

TSL's characterization of the €2,940,000 Nereus fee as a "buying commission" deductible under Article 72(a) UCC is, in our candid assessment, TSL's weakest position and the element of the AADE Assessments that presents the greatest legal and factual difficulty. We identify the following significant obstacles:

Related-party ownership. As set forth above, the combined Andreadis family economic interest in Nereus is approximately 70% (40% through AFH plus 30% held directly by Ms. Eleni Andreadis). AFH also controls TSL with a 62% equity stake, and Mr. Nikolaos Andreadis holds 70% of AFH. The degree of common ownership and control between TSL and Nereus is substantial and raises serious questions about whether Nereus can be characterized as an independent agent acting on behalf of TSL as buyer, or whether it is more properly characterized as an affiliate or instrumentality of the buyer (or even of the seller, given Mr. Melas's involvement).

Seller-side relationship. Mr. Konstantinos Melas, who holds 30% of Nereus and serves as its Managing Director, is a former Hailong sales agent for the Southern European market, a position he held for approximately five years (2012–2017). His transition from representing Hailong's commercial interests in selling equipment in the region to holding an ownership stake in and managing the entity that received a 3% procurement fee from TSL for the purchase of that same manufacturer's equipment raises strong inferences that the Nereus fee represents a restructured selling commission or sales-facilitation payment rather than a genuine buying commission.

Limited documentation. To date, we have reviewed limited documentation of the genuine buyer-side procurement services purportedly performed by Nereus on behalf of TSL. A credible buying commission defense requires evidence that the agent performed substantial services on behalf of the buyer — such as market research, identification and evaluation of alternative suppliers, quality inspections, price negotiations, and other procurement-related activities. The documentary record provided to us thus far is thin on these points. We will need to develop this record through our interview with Mr. Sarantopoulos and through document collection, but we must be candid that the existing evidentiary basis is not strong.

Under WCO Commentary 17.1 and the Court of Justice's decision in HAVI Logistics (Case C-59/16), the substance of the agent's role — not the label applied by the parties — determines whether a fee constitutes a deductible buying commission or an includable selling commission. The burden of proof rests on the importer to demonstrate that the agent acted genuinely and exclusively on the buyer's behalf. Given the ownership structure, the Melas background, and the current state of the documentary record, meeting this burden will be challenging.

We consider this element to be a likely concession point in any eventual settlement negotiation with AADE, and we recommend that our strategic planning account for this possibility. However, before reaching any definitive conclusion, we will first complete the Kestrel & Palladian functions-assets-risks ("FAR") analysis and the factual interviews described in Part VII below, which may reveal additional facts supporting (or further undermining) the buying commission characterization.

IV. Actions Taken to Date

The following table summarizes the actions taken to date in connection with this matter:

All advisors and local counsel have been briefed on the substance of the AADE Assessments and have commenced their respective workstreams. Coordination calls among the advisory team are being held weekly on Tuesdays at 10:00 AM CET.

V. Recommended Next Steps

We recommend the following actions over the coming weeks and months. Each is discussed in detail below.

A. BTI Application (Target Filing Date: November 15, 2022)

We recommend that TSL file a Binding Tariff Information ("BTI") application with AADE under Article 33 of the Union Customs Code, requesting a binding ruling that the STS gantry cranes and ASC systems are properly classified under CN 8426 19 00 (within heading 8426 — "cranes") at the 0% MFN duty rate.

The BTI application will be supported by:

• A comprehensive technical annex describing the design, engineering specifications, and mechanical operation of the STS gantry cranes and ASC systems, with diagrams and engineering drawings demonstrating that these machines are, in substance and function, cranes within the meaning of heading 8426;

• A legal argument brief applying the General Interpretive Rules (GIRs), the Explanatory Notes to the Combined Nomenclature, and relevant case law to demonstrate that heading 8426 is the correct classification;

• A formal expert opinion from Dr. Lukas Brenner of Argonaut Trade Consulting GmbH, addressing the technical classification of the equipment and responding to the reasoning in the adverse German BTI ruling DE-BTI-2020-05678; and

• The favorable Dutch BTI ruling NL-BTI-2021-01234, together with a comparative analysis demonstrating that TSL's equipment is substantially similar to the equipment classified under heading 8426 in that ruling.

Vournas & Theodorakis (Mr. Alexandros Vournas) will file the BTI application as TSL's authorized legal representative before AADE. We anticipate that, given the existence of divergent BTI rulings among EU Member States (the favorable Dutch ruling and the adverse German ruling), AADE may elect to refer the application to the European Commission's Directorate-General for Taxation and Customs Union (DG TAXUD) for consultation under Article 34(10) UCC. We are preparing for this contingency and will ensure that the application and supporting materials are of a quality suitable for DG TAXUD review.

B. Administrative Objections (Target Filing Date: November 30, 2022)

We recommend that TSL file administrative objections to both Assessment Notices before AADE's Directorate of Resolution of Disputes (Διεύθυνση Επίλυσης Διαφορών, "DED"), pursuant to Article 44 UCC and Article 63 of Law 4174/2013 (the Greek Tax Procedure Code).

• The objection to the Classification Assessment (ADAN/2022/0073) will incorporate the legal arguments developed for the BTI application and will challenge AADE's reclassification of the STS gantry cranes and ASC systems on all applicable grounds.

• The objection to the Valuation Assessment (ADAN/2022/0074) will address all three categories of valuation adjustments — the technology license fees, the Nereus procurement coordination fee, and the commissioning services — setting forth TSL's legal and factual defenses to each.

Both objections will be filed through Vournas & Theodorakis. The statutory deadline for filing administrative objections is 120 days from the date of notification of the Assessment Notices. Based on the August 12, 2022 date of the Notices and the notification date reflected in the AADE file, we believe the filing deadline is in early December 2022. We will confirm the precise deadline with V&T and ensure timely filing.

C. Expert Reports (Target Completion: January–February 2023)

We recommend commissioning the following formal expert reports:

• Argonaut Trade Consulting GmbH (Dr. Lukas Brenner): A formal expert report on the classification of the STS gantry cranes and ASC systems, prepared to a standard suitable for submission to AADE, DG TAXUD, or, if necessary, the Administrative Court of First Instance of Piraeus. The report will include a detailed technical analysis of the equipment, application of the GIRs and CN Explanatory Notes, a comparative analysis of the Dutch and German BTI rulings, and Dr. Brenner's expert conclusion. Estimated cost: €45,000–€65,000.

• Kestrel & Palladian LLP (Spyros Makris): A customs valuation report and economic analysis addressing all three valuation adjustment categories. Of particular importance, the report will include a functions-assets-risks ("FAR") analysis of Nereus's role in the procurement process, designed to assess whether Nereus's activities are consistent with those of a genuine buying agent or whether they more closely resemble those of a selling agent or intermediary. The report will also address the proper treatment of the TLA license fees and the commissioning services under the UCC valuation rules. Estimated cost: €60,000–€90,000.

D. Insurance Claim Follow-Up

We filed a timely claim notice with Oceanos Underwriters SA under Policy No. OCU-FIN-2021-GR-0487 on October 15, 2022. Under the terms of the policy, we expect an initial response from Oceanos within 30 days of the claim notice — that is, by approximately November 15, 2022.

The key parameters of the relevant insurance coverage are as follows:

• Sublimit for customs and excise duty disputes: €3,000,000

• Retention/deductible: €250,000

• Net potential recovery: up to €2,750,000

Coverage under the financial lines policy extends to defense costs and assessed duties, but we expect that the policy will likely exclude penalties and interest arising from fraud or willful non-compliance. We will review the policy wording carefully upon receiving any reservation of rights letter from Oceanos, and we will respond promptly to any coverage questions or requests for additional information. If coverage is confirmed even in part, it will provide a meaningful offset to TSL's total financial exposure.

E. Document Preservation

We will issue a formal document preservation notice (litigation hold) to TSL personnel promptly following this letter. It is critical that this notice be distributed and implemented without delay, as the failure to preserve relevant documents could give rise to adverse inferences and sanctions in any subsequent administrative or judicial proceedings.

The scope of the preservation notice will encompass all documents and communications — whether in paper or electronic form — relating to:

• The four Hailong purchase contracts and all amendments, annexes, and side letters;

• The Nereus engagement, including the procurement coordination agreement, all invoices, and all correspondence with Nereus;

• All customs entries (Single Administrative Documents) filed in connection with the importation of the equipment;

• The Technology License Agreement and all related correspondence, invoices, and payment records;

• The AADE audit file, including all correspondence with AADE and all documents provided to or received from AADE;

• Financial records relating to the imported equipment, including payment records, general ledger entries, and management accounts; and

• Insurance-related documents, including the Oceanos policy and all claim correspondence.

The preservation notice must be distributed to key personnel including, at a minimum: Mr. Nikolaos Andreadis, Ms. Elena Papadimitriou, Mr. Dimitrios Sarantopoulos (VP Procurement & Supply Chain), all relevant IT personnel, and personnel in the procurement, finance, and operations departments who were involved in the equipment acquisition, importation, or commissioning.

In addition, all automated email and data purging policies must be suspended immediately for all relevant custodians. We will coordinate with TSL's IT department to ensure that appropriate technical holds are implemented.

F. Peloros Customs Agency — Demand and Preservation Letter

We recommend sending a demand and document preservation letter to Peloros Customs Agency S.A., TSL's licensed customs broker, at the following address:

Mr. Stavros Liapis Licensed Customs Broker No. GR-CB-1287 Peloros Customs Agency S.A. 31 Akti Poseidonos 185 31 Piraeus, Greece EORI: GR801234567000

The letter will serve three purposes:

1. Assert TSL's indemnification rights under Article 9.1 of the Customs Brokerage Agreement between TSL and Peloros dated February 1, 2019, under which Peloros agreed to indemnify TSL against losses arising from Peloros's errors or omissions in the preparation and filing of customs declarations;

2. Request preservation by Peloros of all records relating to the 47 Single Administrative Document (SAD) filings made on TSL's behalf, including all classification worksheets, customs valuation calculations, correspondence with AADE, and internal working papers; and

3. Request disclosure of Peloros's professional indemnity insurance details, including the identity of the insurer, policy number, policy limits, and applicable retention.

We note that the Customs Brokerage Agreement contains a liability cap at Article 9.3, which limits Peloros's total aggregate liability to the greater of three times the annual brokerage fees paid by TSL or €500,000. Based on the annual fees reflected in TSL's records, we estimate the cap at approximately €561,000 — a small fraction of TSL's total exposure under the AADE Assessments. Nonetheless, Peloros's contribution represents a meaningful recovery source that should be preserved, and the demand letter will also serve to put Peloros and its insurers on notice of a potential claim.

VI. Financial Covenant and Lender Considerations

For Ms. Papadimitriou's reference, we provide a brief summary of the financial covenant considerations arising from the AADE Assessments in relation to TSL's Compass Maritime Bank SA €75 million revolving credit facility, dated September 1, 2020:

• The facility contains a Net Debt / EBITDA covenant with a maximum ratio of 3.5×.

• TSL's current projected ratio as of December 31, 2022 is approximately 2.9×.

• Even under the high-end exposure scenario of approximately €14.7 million, the ratio would increase to a projected ~3.2–3.35×, which would remain within the covenant threshold of 3.5×, though the headroom would be substantially reduced from the current ~0.6× cushion to approximately 0.15–0.3×.

• As noted in Part IV above, the material litigation disclosure required under the revolving credit agreement was provided to Compass Maritime Bank (Mr. Andreas Papathanasiou, Relationship Manager) on October 3, 2022. The disclosure threshold of €2,000,000 was exceeded based on even the most conservative assessment of TSL's potential exposure.

We are preparing a more detailed Financial Covenant Impact Memorandum analyzing the cash flow timing, potential VAT recovery offsets, and scenario-based impacts on TSL's covenant compliance under various outcomes. We will transmit this memorandum to Ms. Papadimitriou under separate cover within the next two weeks.

VII. Request for Client Meeting

We respectfully request a meeting with TSL management — either in person at TSL's offices in Piraeus or by secure videoconference — during the week of October 24, 2022. The purpose of this meeting will be to:

• Discuss the assessment and strategic options set forth in this letter in greater detail;

• Finalize the defense strategy and prioritize among the recommended next steps;

• Begin the factual development process, which is essential to building the evidentiary record for TSL's administrative objections, BTI application, and expert reports.

In particular, we have a specific and urgent need to interview Mr. Dimitrios Sarantopoulos, Vice President of Procurement & Supply Chain, regarding the following topics:

1. The Hailong procurement process from inception through contract execution, including how Hailong was identified as a supplier, whether alternative suppliers were considered, and the key commercial terms negotiated;

2. Nereus's actual role in the procurement process, the specific services Nereus performed, and the commercial rationale for engaging Nereus as a procurement intermediary rather than contracting directly with Hailong;

3. The decision-making process for entering into the Technology License Agreement, including whether the TLA was negotiated independently of the equipment purchase contracts or as part of a single integrated transaction; and

4. The existence of any contemporaneous documents demonstrating Nereus's genuine procurement activities on behalf of TSL — such as market research reports, supplier evaluation memoranda, records of quality inspections conducted at Hailong's Ningbo facility, price comparison analyses, or records of price negotiations with Hailong or other potential suppliers.

The information and documents gathered through this interview will be critically important, particularly in developing the factual record relating to the Nereus buying commission defense, which, as noted above, is currently the weakest element of TSL's position.

In advance of the meeting, we would also request that TSL assemble and provide to us the following documents, to the extent not already provided:

• All four Hailong purchase contracts (HHI-TSL-2019-001, HHI-TSL-2019-002, HHI-TSL-2020-003, and HHI-TSL-2021-004) and all amendments, annexes, and side letters thereto;

• The Technology License Agreement dated January 10, 2019, and all related correspondence;

• The Nereus engagement agreement, all Nereus invoices, and all correspondence between TSL and Nereus relating to the procurement;

• All 47 Single Administrative Documents (SADs) filed in connection with the importation of the equipment;

• The Peloros Customs Brokerage Agreement dated February 1, 2019;

• All correspondence between TSL and AADE relating to the audit and the Assessment Notices;

• The Compass Maritime Bank revolving credit agreement dated September 1, 2020, including all amendments and compliance certificates; and

• The Oceanos Underwriters Financial Lines Policy (Policy No. OCU-FIN-2021-GR-0487), including all policy schedules, endorsements, and correspondence with Aether Insurance Brokers.

VIII. Closing

We appreciate TSL's confidence in Calderwood & Harkness to handle this important matter. As the foregoing assessment indicates, TSL has strong defenses on the classification issue and a solid position on the commissioning services valuation element, while the technology license fee and Nereus procurement fee issues will require careful development and strategic handling. We are confident that a well-prepared and proactive defense strategy — commencing with the BTI application and administrative objections — will position TSL to achieve the best possible outcome.

We are available to discuss any aspect of this letter at your convenience. Please let us know your availability during the week of October 24, 2022 so that we may schedule the strategy meeting and Mr. Sarantopoulos interview described above.

Our engagement team for this matter is as follows:

• James Prentice, Partner (Responsible Partner) — jprentice@calderwoodharkness.com — +1 (212) 555-4800

• Sandra Tung, Partner (Billing Partner) — stung@calderwoodharkness.com — +1 (212) 555-4812

• Christy Bauer, Associate (Lead Associate — Classification) — cbauer@calderwoodharkness.com — +1 (212) 555-4837

• Garrett Simmons, Associate (Working Associate — Valuation) — gsimmons@calderwoodharkness.com — +1 (212) 555-4851

Please do not hesitate to contact James Prentice or any member of the team at any time.

Sincerely,

CALDERWOOD & HARKNESS LLP

By: ________

James Prentice Partner

Calderwood & Harkness LLP 400 Lexington Avenue New York, NY 10170 Tel: +1 (212) 555-4800

Email: jprentice@calderwoodharkness.com

cc (via encrypted email): Alexandros Vournas, Esq., Vournas & Theodorakis Dikigiriko Grafeio Dr. Lukas Brenner, Argonaut Trade Consulting GmbH Spyros Makris, Kestrel & Palladian LLP

Enclosures:

1. Preliminary Case Assessment Memorandum (transmitted under separate cover)

2. Draft Document Preservation Notice

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION This letter and any attachments are privileged and confidential, intended solely for the use of the addressees. Unauthorized disclosure, copying, or distribution is strictly prohibited. If you have received this communication in error, please notify the sender immediately.

Component	Mid-Case Estimate (€)	High-End Estimate (€)
Additional customs duty (classification)	1,478,400	1,478,400
Additional customs duty (valuation)	218,680	218,680
Total additional duties	1,697,080	1,697,080
Import VAT adjustments (24% rate) — on duty differential (€1,478,400 × 24% = €354,816) plus on increased customs value (€9,940,000 × 24% = €2,385,600)	2,740,416	2,740,416
Administrative penalties — 30% of additional duties under Article 77 UCC Delegated Act (mid-case); up to 300% under fraud provisions of Article 147, Greek Customs Code, Law 2960/2001 (high-end)	509,124	~5,091,240
Late payment interest (0.73%/month from original entry dates)	3,872,000	~5,171,264 (compounded)
Total	~€8,818,620	~€14,700,000
Action	Date	Status
Calderwood & Harkness engagement opened pursuant to engagement letter	September 22, 2022	Completed
Conflict check cleared (Rachel M. Fleischer, Deputy General Counsel — Conflicts, Calderwood & Harkness)	September 20, 2022	Completed
Material litigation disclosure provided to Compass Maritime Bank SA (Andreas Papathanasiou, Relationship Manager; €75M revolving credit facility dated September 1, 2020; disclosure threshold under the credit agreement: €2,000,000)	October 3, 2022	Completed
Argonaut Trade Consulting GmbH retained as customs classification expert (Dr. Lukas Brenner, Managing Director; former member, WCO Harmonized System Committee)	October 10, 2022	Completed
Kestrel & Palladian LLP retained as customs valuation advisor (Spyros Makris, Partner — Indirect Tax & Customs Valuation; also TSL's statutory auditor; appropriate independence safeguards have been implemented and documented)	October 11, 2022	Completed
Insurance claim notice filed with Oceanos Underwriters SA (Policy No. OCU-FIN-2021-GR-0487) via Aether Insurance Brokers Ltd. (Fiona Hartwell, Senior Account Executive)	October 15, 2022	Completed
Local Greek counsel Vournas & Theodorakis Dikigiriko Grafeio retained (Alexandros Vournas, Managing Partner, Athens Bar Registration No. 18744; Maria-Christina Georgiou, Associate, Athens Bar Registration No. 42917)	October 2, 2022 (countersigned)	Completed

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP 400 Lexington Avenue New York, NY 10170
25 Finsbury Square London EC2A 1DU, United Kingdom
Avenue Louise 480 1050 Brussels, Belgium
October 18, 2022
VIA ENCRYPTED EMAIL AND COURIER
Mr. Nikolaos Andreadis Chairman & Chief Executive Officer Thalassa Shipping & Logistics SA 47 Akti Miaouli 185 35 Piraeus, Greece
Ms. Elena Papadimitriou Chief Financial Officer Thalassa Shipping & Logistics SA 47 Akti Miaouli 185 35 Piraeus, Greece
Re: AADE Customs Dispute — Initial Assessment and Next Steps Matter No.: C&H-2022-ITS-04781
Dear Mr. Andreadis and Ms. Papadimitriou:
I. Introduction
We write in connection with our engagement pursuant to the engagement letter dated September 22, 2022, under which Calderwood & Harkness LLP was retained to advise and represent Thalassa Shipping & Logistics SA ("TSL" or the "Company") in connection with the customs classification and valuation dispute with the Independent Authority for Public Revenue of the Hellenic Republic (Ανεξάρτητη Αρχή Δημοσίων Εσόδων, "AADE").
We have now completed our preliminary review of the two AADE Additional Duty Assessment Notices issued against TSL: (i) Assessment Notice No. AADE/ADAN/2022/0073 (the "Classification Assessment"), relating to the tariff classification of certain imported container-handling equipment; and (ii) Assessment Notice No. AADE/ADAN/2022/0074 (the "Valuation Assessment"), relating to adjustments to the declared customs value of that equipment. Both Assessment Notices are dated August 12, 2022.
The purpose of this letter is to provide you with our initial assessment of the merits and exposure arising from the AADE Assessments and to outline the next steps we recommend to protect TSL's interests. This letter is intended as a high-level strategic overview. A more detailed Preliminary Case Assessment Memorandum, which includes a fuller analysis of the applicable legal framework, annotated references to the relevant provisions of the Union Customs Code, and a granular review of each documentary exhibit in the AADE audit file, has been transmitted to you under separate cover via secure document portal.
As with all communications between Calderwood & Harkness and TSL in connection with this matter, this letter is protected by the attorney-client privilege and is furnished on a strictly confidential basis. We request that its distribution be limited to those individuals within TSL who have a need to know, and that it not be shared with third parties without our prior written consent.
II. Summary of AADE Assessment and Exposure
A. Classification Assessment (ADAN/2022/0073)
The Classification Assessment relates to the tariff classification of container-handling equipment imported by TSL from Hailong Heavy Industries Co., Ltd. ("Hailong"), a manufacturer headquartered in Ningbo, People's Republic of China. The equipment was imported between March 2019 and January 2022 under four master purchase contracts:
• Contract HHI-TSL-2019-001 (STS Gantry Cranes), dated January 15, 2019;
• Contract HHI-TSL-2019-002 (RTG Cranes), dated March 22, 2019;
• Contract HHI-TSL-2020-003 (ASC Systems), dated June 10, 2020; and
• Contract HHI-TSL-2021-004 (Spare Parts, Software, and Commissioning Services), dated February 28, 2021.
The total declared CIF customs value across all four contracts was approximately €98,000,000.
TSL classified all 47 imported units of container-handling equipment under Combined Nomenclature subheading CN 8426 41 00, which carries a 0% Most Favoured Nation (MFN) duty rate. AADE does not dispute this classification with respect to the 18 rubber-tyred gantry ("RTG") cranes imported under Contract HHI-TSL-2019-002, which had a declared CIF value of €25,200,000 (18 units at €1,400,000 per unit). Those units remain classified under CN 8426 41 00 at 0% and are not the subject of any additional duty claim.
However, AADE contends that 20 of the 47 imported units should be reclassified from CN 8426 41 00 to CN 8428 90 90, which carries a 2.2% MFN duty rate. The 20 disputed units comprise:
1. Twelve (12) ship-to-shore ("STS") gantry cranes, imported under Contract HHI-TSL-2019-001, with a declared CIF value of €38,400,000 (12 units at €3,200,000 per unit); and
2. Eight (8) automated stacking crane ("ASC") systems, imported under Contract HHI-TSL-2020-003, with a declared CIF value of €28,800,000 (8 units at €3,600,000 per unit).
The combined reclassified equipment value base is therefore €67,200,000 (€38,400,000 + €28,800,000). At the 2.2% MFN rate applicable to CN 8428 90 90, the additional classification duty assessed by AADE amounts to:
€67,200,000 × 2.2% = €1,478,400
AADE's reclassification theory rests on the argument that STS gantry cranes and ASC systems do not fall within the scope of heading 8426 (which covers "ships' derricks; cranes, including cable cranes; mobile lifting frames, straddle carriers and works trucks fitted with a crane") because, according to AADE, the principal function of these machines is not "lifting" in the traditional sense but rather "automated container handling, transport, and storage," which AADE contends falls within the residual category of heading 8428 ("other lifting, handling, loading or unloading machinery"). We address the merits of this reclassification theory in Part III below.
B. Valuation Assessment (ADAN/2022/0074)
The Valuation Assessment asserts that TSL understated the customs value of the imported equipment by failing to include certain costs and payments that AADE contends should have been added to the transaction value under the provisions of Regulation (EU) No. 952/2013 (the "Union Customs Code" or "UCC"). AADE identifies three categories of valuation adjustments, totaling €9,940,000:
1. Technology License Fees — €4,900,000
AADE contends that technology license fees totaling €4,900,000, paid by TSL to Hailong under a Technology License Agreement ("TLA") dated January 10, 2019, should be included in the customs value of the imported equipment. The TLA license fee was calculated as 5% of the aggregate €98,000,000 equipment purchase price and was paid in three installments:
• €1,960,000 paid in March 2019;
• €1,470,000 paid in July 2020; and
• €1,470,000 paid in March 2022.
AADE characterizes these fees as royalties and license fees "related to the goods being valued" and paid as "a condition of sale" of those goods, within the meaning of Article 71(1)(c) UCC. AADE relies on the temporal proximity of the TLA (January 10, 2019) to the first purchase contract (January 15, 2019), the calculation of the fee as a percentage of the equipment purchase price, and the cross-default provisions linking the TLA to the purchase agreements.
2. Procurement Coordination Fee — €2,940,000
AADE contends that a procurement coordination fee of €2,940,000 paid by TSL to Nereus Maritime Advisory Limited ("Nereus"), a company incorporated in the Republic of Cyprus (company registration number HE 387214), should be included in the customs value. The fee was calculated as 3% of the aggregate €98,000,000 purchase price.
TSL characterized this payment as a "buying commission" — that is, a fee paid to an agent acting on behalf of the buyer — which is expressly excluded from customs value under Article 72(a) UCC. AADE disputes this characterization. AADE contends that the Nereus fee is not a genuine deductible buying commission but rather a selling commission or procurement markup that should be included in the customs value under Article 71(1)(a)(i) UCC.
AADE's position is based in significant part on the ownership and governance structure of Nereus and its relationship to both TSL and Hailong:
• Andreadis Family Holdings LLC ("AFH") holds 40% of Nereus. AFH is the controlling shareholder of TSL, holding 62% of TSL's equity. Mr. Nikolaos Andreadis holds 70% of AFH, Mr. Georgios Andreadis holds 15% of AFH, and Ms. Eleni Andreadis holds 15% of AFH.
• Mr. Konstantinos Melas holds 30% of Nereus and serves as its Managing Director. Mr. Melas is a former Hailong sales agent for the Southern European market, a position he held from approximately 2012 to 2017. His transition from serving as Hailong's sales representative to holding an ownership stake in and managing Nereus — which then received a 3% fee from TSL on the same equipment manufactured by Hailong — raises strong inferences of fee restructuring.
• Ms. Eleni Andreadis (daughter of Mr. Nikolaos Andreadis) holds 30% of Nereus and serves as a non-executive director. Through her direct 30% holding in Nereus, combined with her 15% indirect interest through AFH, the Andreadis family's combined economic interest in Nereus is approximately 70%.
3. Commissioning Services — €2,100,000
AADE contends that commissioning services valued at €2,100,000, performed by Hailong personnel in Greece after importation, should be added to the customs value under Article 71(1)(b) UCC as a condition-of-sale cost. These services were provided under Contract HHI-TSL-2021-004, which was a bundled contract that also included spare parts (€2,100,000) and software (€1,400,000). AADE's argument is that the base purchase contracts required Hailong to deliver, assemble, and commission the equipment as part of an integrated delivery obligation, and that the commissioning services therefore constitute a component of the transaction value even though they were separately invoiced.
At the 2.2% MFN rate that AADE contends applies to the reclassified equipment, the additional duty on the valuation adjustment amount is:
€9,940,000 × 2.2% = €218,680
C. Total Exposure Summary
The following table summarizes TSL's total potential financial exposure under both a mid-case and a high-end scenario. The mid-case scenario assumes that AADE prevails on all assessed amounts but applies standard administrative penalties. The high-end scenario assumes that AADE reclassifies the errors as intentional or fraudulent, triggering enhanced penalty provisions.
Two important notes regarding these figures:
First, the import VAT adjustments of approximately €2.74 million may ultimately be recoverable by TSL as input VAT credit under the Greek VAT framework, provided TSL's VAT registration remains in good standing and the adjustments are properly documented. However, AADE demands payment of the VAT liability pending verification and reconciliation of any input credit claims. Accordingly, the net cash impact of the VAT adjustment is expected to be a timing difference rather than a permanent cost, although the cash flow impact in the near term is real and should be planned for.
Second, the high-end penalty scenario assumes that AADE reclassifies the classification and valuation errors as intentional or fraudulent conduct, which would trigger the enhanced penalty regime under Article 147 of the Greek Customs Code (Law 2960/2001), permitting penalties of up to 300% of the unpaid duties. Based on our preliminary assessment, we consider this reclassification unlikely given the genuine ambiguity in the classification of automated container-handling equipment and the existence of divergent Binding Tariff Information rulings across EU Member States. Nonetheless, we cannot rule out such an escalation, particularly in light of the Nereus-related ownership issues, and we include it in the exposure range for completeness.
III. Initial Assessment of TSL's Defenses
We set forth below our initial assessment of the strength of TSL's defenses to each element of the AADE Assessments. These assessments are preliminary and may evolve as we develop the factual record and complete our expert analyses.
A. Classification Defense — Strength: Strongest
TSL's classification of the STS gantry cranes and ASC systems under heading 8426 of the Combined Nomenclature ("cranes") is, in our view, well-supported and represents TSL's strongest defense. We base this assessment on the following considerations:
General Interpretive Rule (GIR) 1 — Terms of the Headings. Under GIR 1, classification must be determined according to the terms of the headings and any relevant Section or Chapter Notes. Both STS gantry cranes and ASC systems are, in plain and ordinary usage, "cranes." They lift loads vertically using wire ropes and spreader mechanisms suspended from a trolley that traverses a horizontal boom, which is in turn supported by a gantry structure running on rails or wheels. The essential mechanical operation of these machines — the vertical lifting and horizontal traversing of loads — is the defining characteristic of a crane. Heading 8426 covers "ships' derricks; cranes, including cable cranes; mobile lifting frames, straddle carriers and works trucks fitted with a crane," and both the STS gantry cranes and the ASC systems fall squarely within this description.
General Interpretive Rule (GIR) 3(a) — Specificity. To the extent that the STS gantry cranes or ASC systems could be argued to fall within more than one heading, GIR 3(a) provides that the heading which provides the most specific description shall be preferred. Heading 8426 specifically describes "cranes," whereas heading 8428 is a residual heading covering "other lifting, handling, loading or unloading machinery" that is "not elsewhere specified or included." Because heading 8426 specifically describes cranes and both products are cranes, heading 8426 provides the more specific description and should prevail.
Favorable BTI Ruling. On June 14, 2021, the Netherlands customs authority issued Binding Tariff Information ruling NL-BTI-2021-01234, which classified substantially similar STS cranes and ASC-type systems under heading 8426. While a BTI ruling issued by one Member State is not formally binding on AADE, it is highly persuasive evidence of the correct classification, particularly where the goods at issue are substantially similar. We intend to rely on this ruling prominently in our BTI application and administrative objection.
Industry Practice and Nomenclature. Both STS gantry cranes and ASC systems are universally referred to as "cranes" throughout the maritime, port operations, and engineering sectors. Equipment manufacturers, port operators, industry associations (including the International Association of Ports and Harbors and the Terminal Operations Conference), and academic and engineering literature consistently use the term "crane" to describe both product categories. This industry-wide usage reinforces the conclusion that these machines are properly classified under heading 8426.
Notwithstanding these strong points, we must note one adverse authority. On September 3, 2020, the German customs authority issued Binding Tariff Information ruling DE-BTI-2020-05678, which classified automated stacking cranes similar to TSL's ASC systems under heading 8428. The German ruling was based on the reasoning that full automation transforms the machine's principal function from "lifting" (heading 8426) to "automated container handling and storage" (heading 8428). This ruling presents a complication, particularly for the ASC systems.
We draw the following distinction: the STS gantry cranes are the stronger case, because even the German ruling did not address STS cranes, and there is no adverse BTI ruling or other authority that would support reclassifying STS gantry cranes away from heading 8426. The ASC systems present a closer question due to their full automation, which AADE may argue aligns with the reasoning in the German ruling. Nonetheless, we believe the better view is that automation does not change the fundamental mechanical operation of the equipment, and that even fully automated cranes remain "cranes" for classification purposes.
We also note that TSL's declared subheading CN 8426 41 00 ("on tyres") is technically incorrect for the rail-mounted STS gantry cranes and ASC systems. The correct subheading for rail-mounted cranes within heading 8426 would be CN 8426 19 00. However, all subheadings within heading 8426 carry a 0% MFN duty rate, so this subheading-level error has no duty consequence whatsoever. We will proactively address the subheading correction in our BTI application to demonstrate good faith and transparency, and to eliminate any suggestion that the subheading-level error indicates a broader pattern of careless or incorrect classification.
B. Valuation — Commissioning Services (€2,100,000) — Strength: Solid
TSL's defense against the inclusion of the €2,100,000 commissioning services cost in the customs value is, in our view, solid. Article 72(e) UCC expressly provides that the customs value shall not include "charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation" of the goods. The commissioning services at issue were performed entirely in Greece by Hailong technical personnel after the equipment had been physically imported into the EU and cleared through Greek customs. The services consisted of on-site installation, calibration, testing, and commissioning activities that by their nature can only occur after the equipment has been delivered to the terminal site.
Furthermore, the commissioning services are separately priced under Contract HHI-TSL-2021-004, with a distinct line-item allocation of €2,100,000 for commissioning services, separate from the spare parts (€2,100,000) and software (€1,400,000) components of that contract. This separate pricing supports the treatment of the commissioning services as a post-importation cost excludable from customs value.
The principal risk to this defense is AADE's argument that the base purchase contracts (HHI-TSL-2019-001 and HHI-TSL-2020-003) required Hailong to deliver, assemble, and commission the equipment as part of an integrated delivery obligation, and that the subsequent Contract HHI-TSL-2021-004 merely separated out a cost that was always part of the overall transaction. If AADE can demonstrate that commissioning was a "condition of sale" embedded in the original purchase agreements — for example, through delivery term provisions specifying "DDP Delivered Duty Paid, commissioned and operational" or similar formulations — the Article 72(e) exclusion may not apply. We will need to review the precise delivery terms and acceptance clauses in Contracts HHI-TSL-2019-001 and HHI-TSL-2020-003 to assess this risk more fully.
C. Valuation — Technology License Fees (€4,900,000) — Strength: Moderate
TSL's position is that the TLA is a separate and independent agreement from the equipment purchase contracts, and that the technology license fees are not a "condition of sale" of the imported goods. TSL maintains that the TLA covers predominantly post-importation services, including software updates, ongoing technical support, operator training, and access to Hailong's HaiControl Suite v4.2 platform over a ten-year term, and that the fees relate to the ongoing use and support of the software rather than to the imported hardware.
We assess this defense as moderate in strength. While the argument has legal merit, TSL faces several factual challenges:
(i) Temporal proximity. The TLA was executed on January 10, 2019 — only five days before the first purchase contract (HHI-TSL-2019-001) was signed on January 15, 2019. This close temporal proximity strongly suggests that the TLA was negotiated as part of the same commercial transaction and was a practical prerequisite for the equipment purchase.
(ii) Price linkage. The license fee is calculated as 5% of the aggregate equipment purchase price (€98,000,000), rather than as a fixed fee or a fee based on the value of the licensed technology or services independently. This method of calculation demonstrates an economic linkage between the license fee and the price of the imported goods, which is a significant factor under the UCC valuation rules and relevant case law.
(iii) Functional dependence. The automated functions of the STS gantry cranes and ASC systems depend on the licensed HaiControl Suite v4.2 software. Without the software license, the equipment cannot perform its automated container-handling operations. This functional dependence supports AADE's argument that the license fees "relate to" the imported goods and are paid as a condition of their acquisition.
(iv) Cross-default provision. The TLA contains a cross-default provision linking it to the purchase agreements, such that a material breach of either the TLA or any purchase agreement constitutes a default under the other. This contractual linkage further undermines the argument that the TLA is an independent, standalone agreement.
We note that the World Customs Organization Commentary 25.1 and the Court of Justice of the European Union's decision in Dansk Transport og Logistik (Case C-230/08) support the inclusion of royalties and license fees in the customs value when the imported goods cannot function without the licensed technology and when the license fee is a condition of sale. These authorities present a headwind for TSL's position on this element.
We will work with Kestrel & Palladian to develop arguments that a substantial portion of the TLA fee relates to post-importation services and ongoing support that are properly excludable, and to explore whether the fee can be apportioned between an importation-related component (which would be includable) and a post-importation component (which would not). This apportionment approach would reduce, though not eliminate, the valuation adjustment.
D. Valuation — Nereus Procurement Fee (€2,940,000) — Strength: Challenging / Weakest Position
TSL's characterization of the €2,940,000 Nereus fee as a "buying commission" deductible under Article 72(a) UCC is, in our candid assessment, TSL's weakest position and the element of the AADE Assessments that presents the greatest legal and factual difficulty. We identify the following significant obstacles:
Related-party ownership. As set forth above, the combined Andreadis family economic interest in Nereus is approximately 70% (40% through AFH plus 30% held directly by Ms. Eleni Andreadis). AFH also controls TSL with a 62% equity stake, and Mr. Nikolaos Andreadis holds 70% of AFH. The degree of common ownership and control between TSL and Nereus is substantial and raises serious questions about whether Nereus can be characterized as an independent agent acting on behalf of TSL as buyer, or whether it is more properly characterized as an affiliate or instrumentality of the buyer (or even of the seller, given Mr. Melas's involvement).
Seller-side relationship. Mr. Konstantinos Melas, who holds 30% of Nereus and serves as its Managing Director, is a former Hailong sales agent for the Southern European market, a position he held for approximately five years (2012–2017). His transition from representing Hailong's commercial interests in selling equipment in the region to holding an ownership stake in and managing the entity that received a 3% procurement fee from TSL for the purchase of that same manufacturer's equipment raises strong inferences that the Nereus fee represents a restructured selling commission or sales-facilitation payment rather than a genuine buying commission.
Limited documentation. To date, we have reviewed limited documentation of the genuine buyer-side procurement services purportedly performed by Nereus on behalf of TSL. A credible buying commission defense requires evidence that the agent performed substantial services on behalf of the buyer — such as market research, identification and evaluation of alternative suppliers, quality inspections, price negotiations, and other procurement-related activities. The documentary record provided to us thus far is thin on these points. We will need to develop this record through our interview with Mr. Sarantopoulos and through document collection, but we must be candid that the existing evidentiary basis is not strong.
Under WCO Commentary 17.1 and the Court of Justice's decision in HAVI Logistics (Case C-59/16), the substance of the agent's role — not the label applied by the parties — determines whether a fee constitutes a deductible buying commission or an includable selling commission. The burden of proof rests on the importer to demonstrate that the agent acted genuinely and exclusively on the buyer's behalf. Given the ownership structure, the Melas background, and the current state of the documentary record, meeting this burden will be challenging.
We consider this element to be a likely concession point in any eventual settlement negotiation with AADE, and we recommend that our strategic planning account for this possibility. However, before reaching any definitive conclusion, we will first complete the Kestrel & Palladian functions-assets-risks ("FAR") analysis and the factual interviews described in Part VII below, which may reveal additional facts supporting (or further undermining) the buying commission characterization.
IV. Actions Taken to Date
The following table summarizes the actions taken to date in connection with this matter:
All advisors and local counsel have been briefed on the substance of the AADE Assessments and have commenced their respective workstreams. Coordination calls among the advisory team are being held weekly on Tuesdays at 10:00 AM CET.
V. Recommended Next Steps
We recommend the following actions over the coming weeks and months. Each is discussed in detail below.
A. BTI Application (Target Filing Date: November 15, 2022)
We recommend that TSL file a Binding Tariff Information ("BTI") application with AADE under Article 33 of the Union Customs Code, requesting a binding ruling that the STS gantry cranes and ASC systems are properly classified under CN 8426 19 00 (within heading 8426 — "cranes") at the 0% MFN duty rate.
The BTI application will be supported by:
• A comprehensive technical annex describing the design, engineering specifications, and mechanical operation of the STS gantry cranes and ASC systems, with diagrams and engineering drawings demonstrating that these machines are, in substance and function, cranes within the meaning of heading 8426;
• A legal argument brief applying the General Interpretive Rules (GIRs), the Explanatory Notes to the Combined Nomenclature, and relevant case law to demonstrate that heading 8426 is the correct classification;
• A formal expert opinion from Dr. Lukas Brenner of Argonaut Trade Consulting GmbH, addressing the technical classification of the equipment and responding to the reasoning in the adverse German BTI ruling DE-BTI-2020-05678; and
• The favorable Dutch BTI ruling NL-BTI-2021-01234, together with a comparative analysis demonstrating that TSL's equipment is substantially similar to the equipment classified under heading 8426 in that ruling.
Vournas & Theodorakis (Mr. Alexandros Vournas) will file the BTI application as TSL's authorized legal representative before AADE. We anticipate that, given the existence of divergent BTI rulings among EU Member States (the favorable Dutch ruling and the adverse German ruling), AADE may elect to refer the application to the European Commission's Directorate-General for Taxation and Customs Union (DG TAXUD) for consultation under Article 34(10) UCC. We are preparing for this contingency and will ensure that the application and supporting materials are of a quality suitable for DG TAXUD review.
B. Administrative Objections (Target Filing Date: November 30, 2022)
We recommend that TSL file administrative objections to both Assessment Notices before AADE's Directorate of Resolution of Disputes (Διεύθυνση Επίλυσης Διαφορών, "DED"), pursuant to Article 44 UCC and Article 63 of Law 4174/2013 (the Greek Tax Procedure Code).
• The objection to the Classification Assessment (ADAN/2022/0073) will incorporate the legal arguments developed for the BTI application and will challenge AADE's reclassification of the STS gantry cranes and ASC systems on all applicable grounds.
• The objection to the Valuation Assessment (ADAN/2022/0074) will address all three categories of valuation adjustments — the technology license fees, the Nereus procurement coordination fee, and the commissioning services — setting forth TSL's legal and factual defenses to each.
Both objections will be filed through Vournas & Theodorakis. The statutory deadline for filing administrative objections is 120 days from the date of notification of the Assessment Notices. Based on the August 12, 2022 date of the Notices and the notification date reflected in the AADE file, we believe the filing deadline is in early December 2022. We will confirm the precise deadline with V&T and ensure timely filing.
C. Expert Reports (Target Completion: January–February 2023)
We recommend commissioning the following formal expert reports:
• Argonaut Trade Consulting GmbH (Dr. Lukas Brenner): A formal expert report on the classification of the STS gantry cranes and ASC systems, prepared to a standard suitable for submission to AADE, DG TAXUD, or, if necessary, the Administrative Court of First Instance of Piraeus. The report will include a detailed technical analysis of the equipment, application of the GIRs and CN Explanatory Notes, a comparative analysis of the Dutch and German BTI rulings, and Dr. Brenner's expert conclusion. Estimated cost: €45,000–€65,000.
• Kestrel & Palladian LLP (Spyros Makris): A customs valuation report and economic analysis addressing all three valuation adjustment categories. Of particular importance, the report will include a functions-assets-risks ("FAR") analysis of Nereus's role in the procurement process, designed to assess whether Nereus's activities are consistent with those of a genuine buying agent or whether they more closely resemble those of a selling agent or intermediary. The report will also address the proper treatment of the TLA license fees and the commissioning services under the UCC valuation rules. Estimated cost: €60,000–€90,000.
D. Insurance Claim Follow-Up
We filed a timely claim notice with Oceanos Underwriters SA under Policy No. OCU-FIN-2021-GR-0487 on October 15, 2022. Under the terms of the policy, we expect an initial response from Oceanos within 30 days of the claim notice — that is, by approximately November 15, 2022.
The key parameters of the relevant insurance coverage are as follows:
• Sublimit for customs and excise duty disputes: €3,000,000
• Retention/deductible: €250,000
• Net potential recovery: up to €2,750,000
Coverage under the financial lines policy extends to defense costs and assessed duties, but we expect that the policy will likely exclude penalties and interest arising from fraud or willful non-compliance. We will review the policy wording carefully upon receiving any reservation of rights letter from Oceanos, and we will respond promptly to any coverage questions or requests for additional information. If coverage is confirmed even in part, it will provide a meaningful offset to TSL's total financial exposure.
E. Document Preservation
We will issue a formal document preservation notice (litigation hold) to TSL personnel promptly following this letter. It is critical that this notice be distributed and implemented without delay, as the failure to preserve relevant documents could give rise to adverse inferences and sanctions in any subsequent administrative or judicial proceedings.
The scope of the preservation notice will encompass all documents and communications — whether in paper or electronic form — relating to:
• The four Hailong purchase contracts and all amendments, annexes, and side letters;
• The Nereus engagement, including the procurement coordination agreement, all invoices, and all correspondence with Nereus;
• All customs entries (Single Administrative Documents) filed in connection with the importation of the equipment;
• The Technology License Agreement and all related correspondence, invoices, and payment records;
• The AADE audit file, including all correspondence with AADE and all documents provided to or received from AADE;
• Financial records relating to the imported equipment, including payment records, general ledger entries, and management accounts; and
• Insurance-related documents, including the Oceanos policy and all claim correspondence.
The preservation notice must be distributed to key personnel including, at a minimum: Mr. Nikolaos Andreadis, Ms. Elena Papadimitriou, Mr. Dimitrios Sarantopoulos (VP Procurement & Supply Chain), all relevant IT personnel, and personnel in the procurement, finance, and operations departments who were involved in the equipment acquisition, importation, or commissioning.
In addition, all automated email and data purging policies must be suspended immediately for all relevant custodians. We will coordinate with TSL's IT department to ensure that appropriate technical holds are implemented.
F. Peloros Customs Agency — Demand and Preservation Letter
We recommend sending a demand and document preservation letter to Peloros Customs Agency S.A., TSL's licensed customs broker, at the following address:
Mr. Stavros Liapis Licensed Customs Broker No. GR-CB-1287 Peloros Customs Agency S.A. 31 Akti Poseidonos 185 31 Piraeus, Greece EORI: GR801234567000
The letter will serve three purposes:
1. Assert TSL's indemnification rights under Article 9.1 of the Customs Brokerage Agreement between TSL and Peloros dated February 1, 2019, under which Peloros agreed to indemnify TSL against losses arising from Peloros's errors or omissions in the preparation and filing of customs declarations;
2. Request preservation by Peloros of all records relating to the 47 Single Administrative Document (SAD) filings made on TSL's behalf, including all classification worksheets, customs valuation calculations, correspondence with AADE, and internal working papers; and
3. Request disclosure of Peloros's professional indemnity insurance details, including the identity of the insurer, policy number, policy limits, and applicable retention.
We note that the Customs Brokerage Agreement contains a liability cap at Article 9.3, which limits Peloros's total aggregate liability to the greater of three times the annual brokerage fees paid by TSL or €500,000. Based on the annual fees reflected in TSL's records, we estimate the cap at approximately €561,000 — a small fraction of TSL's total exposure under the AADE Assessments. Nonetheless, Peloros's contribution represents a meaningful recovery source that should be preserved, and the demand letter will also serve to put Peloros and its insurers on notice of a potential claim.
VI. Financial Covenant and Lender Considerations
For Ms. Papadimitriou's reference, we provide a brief summary of the financial covenant considerations arising from the AADE Assessments in relation to TSL's Compass Maritime Bank SA €75 million revolving credit facility, dated September 1, 2020:
• The facility contains a Net Debt / EBITDA covenant with a maximum ratio of 3.5×.
• TSL's current projected ratio as of December 31, 2022 is approximately 2.9×.
• Even under the high-end exposure scenario of approximately €14.7 million, the ratio would increase to a projected ~3.2–3.35×, which would remain within the covenant threshold of 3.5×, though the headroom would be substantially reduced from the current ~0.6× cushion to approximately 0.15–0.3×.
• As noted in Part IV above, the material litigation disclosure required under the revolving credit agreement was provided to Compass Maritime Bank (Mr. Andreas Papathanasiou, Relationship Manager) on October 3, 2022. The disclosure threshold of €2,000,000 was exceeded based on even the most conservative assessment of TSL's potential exposure.
We are preparing a more detailed Financial Covenant Impact Memorandum analyzing the cash flow timing, potential VAT recovery offsets, and scenario-based impacts on TSL's covenant compliance under various outcomes. We will transmit this memorandum to Ms. Papadimitriou under separate cover within the next two weeks.
VII. Request for Client Meeting
We respectfully request a meeting with TSL management — either in person at TSL's offices in Piraeus or by secure videoconference — during the week of October 24, 2022. The purpose of this meeting will be to:
• Discuss the assessment and strategic options set forth in this letter in greater detail;
• Finalize the defense strategy and prioritize among the recommended next steps;
• Begin the factual development process, which is essential to building the evidentiary record for TSL's administrative objections, BTI application, and expert reports.
In particular, we have a specific and urgent need to interview Mr. Dimitrios Sarantopoulos, Vice President of Procurement & Supply Chain, regarding the following topics:
1. The Hailong procurement process from inception through contract execution, including how Hailong was identified as a supplier, whether alternative suppliers were considered, and the key commercial terms negotiated;
2. Nereus's actual role in the procurement process, the specific services Nereus performed, and the commercial rationale for engaging Nereus as a procurement intermediary rather than contracting directly with Hailong;
3. The decision-making process for entering into the Technology License Agreement, including whether the TLA was negotiated independently of the equipment purchase contracts or as part of a single integrated transaction; and
4. The existence of any contemporaneous documents demonstrating Nereus's genuine procurement activities on behalf of TSL — such as market research reports, supplier evaluation memoranda, records of quality inspections conducted at Hailong's Ningbo facility, price comparison analyses, or records of price negotiations with Hailong or other potential suppliers.
The information and documents gathered through this interview will be critically important, particularly in developing the factual record relating to the Nereus buying commission defense, which, as noted above, is currently the weakest element of TSL's position.
In advance of the meeting, we would also request that TSL assemble and provide to us the following documents, to the extent not already provided:
• All four Hailong purchase contracts (HHI-TSL-2019-001, HHI-TSL-2019-002, HHI-TSL-2020-003, and HHI-TSL-2021-004) and all amendments, annexes, and side letters thereto;
• The Technology License Agreement dated January 10, 2019, and all related correspondence;
• The Nereus engagement agreement, all Nereus invoices, and all correspondence between TSL and Nereus relating to the procurement;
• All 47 Single Administrative Documents (SADs) filed in connection with the importation of the equipment;
• The Peloros Customs Brokerage Agreement dated February 1, 2019;
• All correspondence between TSL and AADE relating to the audit and the Assessment Notices;
• The Compass Maritime Bank revolving credit agreement dated September 1, 2020, including all amendments and compliance certificates; and
• The Oceanos Underwriters Financial Lines Policy (Policy No. OCU-FIN-2021-GR-0487), including all policy schedules, endorsements, and correspondence with Aether Insurance Brokers.
VIII. Closing
We appreciate TSL's confidence in Calderwood & Harkness to handle this important matter. As the foregoing assessment indicates, TSL has strong defenses on the classification issue and a solid position on the commissioning services valuation element, while the technology license fee and Nereus procurement fee issues will require careful development and strategic handling. We are confident that a well-prepared and proactive defense strategy — commencing with the BTI application and administrative objections — will position TSL to achieve the best possible outcome.
We are available to discuss any aspect of this letter at your convenience. Please let us know your availability during the week of October 24, 2022 so that we may schedule the strategy meeting and Mr. Sarantopoulos interview described above.
Our engagement team for this matter is as follows:
• James Prentice, Partner (Responsible Partner) — jprentice@calderwoodharkness.com — +1 (212) 555-4800
• Sandra Tung, Partner (Billing Partner) — stung@calderwoodharkness.com — +1 (212) 555-4812
• Christy Bauer, Associate (Lead Associate — Classification) — cbauer@calderwoodharkness.com — +1 (212) 555-4837
• Garrett Simmons, Associate (Working Associate — Valuation) — gsimmons@calderwoodharkness.com — +1 (212) 555-4851
Please do not hesitate to contact James Prentice or any member of the team at any time.
Sincerely,
CALDERWOOD & HARKNESS LLP
By: ________
James Prentice Partner
Calderwood & Harkness LLP 400 Lexington Avenue New York, NY 10170 Tel: +1 (212) 555-4800
Email: jprentice@calderwoodharkness.com
cc (via encrypted email): Alexandros Vournas, Esq., Vournas & Theodorakis Dikigiriko Grafeio Dr. Lukas Brenner, Argonaut Trade Consulting GmbH Spyros Makris, Kestrel & Palladian LLP
Enclosures:
1. Preliminary Case Assessment Memorandum (transmitted under separate cover)
2. Draft Document Preservation Notice
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION This letter and any attachments are privileged and confidential, intended solely for the use of the addressees. Unauthorized disclosure, copying, or distribution is strictly prohibited. If you have received this communication in error, please notify the sender immediately.
Component | Mid-Case Estimate (€) | High-End Estimate (€)
Additional customs duty (classification) | 1,478,400 | 1,478,400
Additional customs duty (valuation) | 218,680 | 218,680
Total additional duties | 1,697,080 | 1,697,080
Import VAT adjustments (24% rate) — on duty differential (€1,478,400 × 24% = €354,816) plus on increased customs value (€9,940,000 × 24% = €2,385,600) | 2,740,416 | 2,740,416
Administrative penalties — 30% of additional duties under Article 77 UCC Delegated Act (mid-case); up to 300% under fraud provisions of Article 147, Greek Customs Code, Law 2960/2001 (high-end) | 509,124 | ~5,091,240
Late payment interest (0.73%/month from original entry dates) | 3,872,000 | ~5,171,264 (compounded)
Total | ~€8,818,620 | ~€14,700,000
Action | Date | Status
Calderwood & Harkness engagement opened pursuant to engagement letter | September 22, 2022 | Completed
Conflict check cleared (Rachel M. Fleischer, Deputy General Counsel — Conflicts, Calderwood & Harkness) | September 20, 2022 | Completed
Material litigation disclosure provided to Compass Maritime Bank SA (Andreas Papathanasiou, Relationship Manager; €75M revolving credit facility dated September 1, 2020; disclosure threshold under the credit agreement: €2,000,000) | October 3, 2022 | Completed
Argonaut Trade Consulting GmbH retained as customs classification expert (Dr. Lukas Brenner, Managing Director; former member, WCO Harmonized System Committee) | October 10, 2022 | Completed
Kestrel & Palladian LLP retained as customs valuation advisor (Spyros Makris, Partner — Indirect Tax & Customs Valuation; also TSL's statutory auditor; appropriate independence safeguards have been implemented and documented) | October 11, 2022 | Completed
Insurance claim notice filed with Oceanos Underwriters SA (Policy No. OCU-FIN-2021-GR-0487) via Aether Insurance Brokers Ltd. (Fiona Hartwell, Senior Account Executive) | October 15, 2022 | Completed
Local Greek counsel Vournas & Theodorakis Dikigiriko Grafeio retained (Alexandros Vournas, Managing Partner, Athens Bar Registration No. 18744; Maria-Christina Georgiou, Associate, Athens Bar Registration No. 42917) | October 2, 2022 (countersigned) | Completed

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