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PRIVILEGED & CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Barristers & Solicitors 25 Finsbury Square London EC2A 1DU United Kingdom

Tel: +44 (0)20 7438 6000

Fax: +44 (0)20 7438 6001

www.calderwoodharkness.com

December 12, 2022

Claims Department Oceanos Underwriters Société Anonyme 10 Kifissias Avenue 151 25 Marousi Athens, Greece

Via: Aether Insurance Brokers Limited

Attn: Fiona Hartwell, Senior Account Executive

30 St Mary Axe London EC3A 8BF United Kingdom

Re: Response to Reservation of Rights Letter dated November 22, 2022 Policy No.: OCU-FIN-2021-GR-0487 Insured: Thalassa Shipping & Logistics Société Anonyme (EORI: GR094827361000; AFM: 094827361) Calderwood & Harkness LLP Matter No.: C&H-2022-ITS-04781

Dear Sir or Madam:

I write on behalf of our client, Thalassa Shipping & Logistics Société Anonyme ("TSL"), in my capacity as Partner at Calderwood & Harkness LLP, in response to the Reservation of Rights letter dated November 22, 2022 (the "RoR Letter"), issued by Oceanos Underwriters Société Anonyme ("Oceanos") in connection with TSL's claim under Financial Lines Policy No. OCU-FIN-2021-GR-0487 (the "Policy"). TSL first notified the claim to Oceanos through its placing broker, Aether Insurance Brokers Limited ("Aether"), on October 15, 2022, following receipt of customs assessment notices from the Greek Independent Authority for Public Revenue (AADE). As Oceanos is aware, the RoR Letter purports to reserve Oceanos's rights to deny coverage on two grounds, specifically the "willful non-compliance" exclusion under Policy Section 4.3(a) and the "deliberate undervaluation" exclusion under Policy Section 4.3(b). TSL's position, for the reasons set out in detail below, is that neither exclusion has any application to the facts of this claim. TSL accordingly demands that Oceanos withdraw its reservation, confirm full coverage under the Policy, and begin advancing Defense Costs without further delay.

This letter sets forth the factual background and legal analysis supporting TSL's position. We address each of Oceanos's stated grounds in turn, demonstrating that the undisputed facts are wholly inconsistent with the exclusions upon which Oceanos purports to rely.

I. BACKGROUND AND SUMMARY OF THE CLAIM

A. The Underlying Dispute

TSL is a Greek transportation and logistics company organized as a Société Anonyme under the laws of the Hellenic Republic, registered with the Piraeus Commercial Registry under No. 78214/06/B/09/42, and headquartered at 47 Akti Miaouli, 185 35 Piraeus, Greece. Founded in 2009, TSL has grown to employ approximately 1,450 people across its Greek operations. For the fiscal year ended December 31, 2021, TSL reported consolidated revenue of approximately €387.2 million. TSL is a significant participant in the Greek maritime logistics sector, operating a fleet of 28 container vessels and managing terminal operations at three principal Greek ports: Piraeus, Thessaloniki, and Volos.

As part of a multi-year program to modernize and expand its port terminal infrastructure, TSL undertook between March 2019 and January 2022 to import 47 units of specialized marine cargo-handling equipment from Hailong Heavy Industries Co., Ltd. ("Hailong"), a major equipment manufacturer headquartered in Ningbo, Zhejiang Province, People's Republic of China (Unified Social Credit Code 91330211MA2GR8KT5X). The equipment was procured pursuant to four separate purchase contracts, the details of which are summarized below:

1. Contract HHI-TSL-2019-001, dated January 15, 2019: 12 ship-to-shore (STS) gantry cranes, model QC-65, with a declared CIF customs value of €38,400,000 (€3,200,000 per unit).

2. Contract HHI-TSL-2019-002, dated March 22, 2019: 18 rubber-tired gantry (RTG) cranes, with a declared CIF customs value of €25,200,000 (€1,400,000 per unit).

3. Contract HHI-TSL-2020-003, dated June 10, 2020: 8 automated stacking crane (ASC) systems, model ASC-40R, with a declared CIF customs value of €28,800,000 (€3,600,000 per unit).

4. Contract HHI-TSL-2021-004, dated February 28, 2021: a bundled package of spare parts, software licenses, and commissioning services, with a declared CIF customs value of €5,600,000.

The total declared CIF customs value across all four contracts was €98,000,000. All equipment was imported through the Port of Piraeus and cleared through Greek customs by TSL's licensed customs broker, Peloros Customs Agency S.A. (EORI: GR801234567000), under the supervision of Stavros Liapis, Licensed Customs Broker No. GR-CB-1287. Peloros prepared and filed all applicable Single Administrative Documents (SADs) and supporting customs documentation on TSL's behalf.

B. The AADE Assessment

On April 4, 2022, the Independent Authority for Public Revenue (AADE), acting through its Directorate of Customs Compliance and Audit at the Piraeus Regional Customs Office, initiated a post-clearance audit of TSL's customs declarations related to the Hailong equipment imports. The audit was assigned file reference AADE/DTE/2022/PIR-04518 and was conducted under the supervision of Chief Customs Auditor Aikaterini Vlachopoulou. The audit covered all 47 imported units and the four associated purchase contracts, as well as ancillary agreements related to the transaction.

The audit was completed on August 1, 2022. On August 12, 2022, AADE issued two Additional Duty Assessment Notices (the "Assessment Notices"), each of which asserted a separate basis for additional duties:

ADAN/2022/0073 (Classification). This Assessment Notice reclassifies 20 units — comprising the 12 STS gantry cranes and the 8 ASC systems — from Combined Nomenclature code 8426 41 00 (which carries a 0% Most Favoured Nation duty rate) to CN 8428 90 90 (which carries a 2.2% MFN duty rate). AADE's rationale is that these units constitute "other lifting, handling, loading or unloading machinery" within heading 8428 rather than "cranes" within heading 8426. The additional customs duties assessed on the basis of this reclassification amount to €1,478,400 (being 2.2% applied to the combined declared CIF value of the reclassified units: €67,200,000 × 2.2% = €1,478,400).

ADAN/2022/0074 (Valuation). This Assessment Notice adjusts the declared customs value of the imported equipment upward by a total of €9,940,000, based on AADE's determination that three categories of payments made by TSL should have been included in the transaction value of the goods under the Union Customs Code:

(i) €4,900,000 in technology license fees paid under a Technology License Agreement with Hailong, which AADE contends are royalties related to the imported goods and paid as a condition of sale, includable under Article 71(1)(c) of the UCC;

(ii) €2,940,000 paid to Nereus Maritime Advisory Limited under a Procurement Services Agreement, which AADE contends is not a deductible buying commission but rather an includable procurement coordination fee; and

(iii) €2,100,000 for commissioning services, which AADE contends should be included in customs value rather than treated as post-importation services excludable under Article 72(e) of the UCC.

The additional customs duties assessed on the basis of the valuation adjustment amount to €218,680 (being 2.2% applied to the upward valuation adjustment of €9,940,000, calculated at the reclassified duty rate).

In total, the Assessment Notices impose additional customs duties of €1,697,080 (€1,478,400 + €218,680). The total exposure arising from the Assessment Notices is substantially larger when ancillary charges are included:

Under a high-end exposure scenario, incorporating escalated penalties and compounding interest, TSL's total potential liability could reach approximately €14.7 million. This represents a material financial risk to the company.

C. Notice of Claim

TSL filed its notice of claim with Oceanos via Aether Insurance Brokers on October 15, 2022. TSL first became aware of the Assessment Notices upon receiving them on or about August 16, 2022. Notice was therefore provided within approximately 60 days of TSL's first awareness of the potential claim — well within the Policy's 60-day notification window prescribed by Section 5.1.

The claim is made under Section 2.4 of the Policy, which covers Tax and Regulatory Authority Disputes. The applicable sublimit for customs and excise duty disputes is €3,000,000, as specified in Policy Section 3.2(d). The Policy retention (deductible) applicable to such claims is €250,000 under Section 3.3. Accordingly, the maximum net coverage available to TSL under the Policy for this claim is €2,750,000 (€3,000,000 sublimit less €250,000 retention).

D. Current Status of the Dispute

Following receipt of the Assessment Notices, TSL moved promptly to assemble a qualified defense team and to protect its rights under Greek customs law. The following steps have been taken:

TSL retained Calderwood & Harkness LLP (this firm) under an engagement letter opened September 22, 2022, to serve as lead international insurance and regulatory counsel. TSL also retained Vournas & Theodorakis Dikigiriko Grafeio ("V&T"), an Athens-based law firm, as local Greek counsel. The V&T team is led by Managing Partner Alexandros Vournas (Athens Bar No. 18744) and Associate Maria-Christina Georgiou (Athens Bar No. 42917), both of whom are experienced customs litigation practitioners.

TSL has further retained two specialist advisory firms: Argonaut Trade Consulting GmbH (Berlin), led by Managing Director Dr. Lukas Brenner, as an independent customs classification expert; and Kestrel & Palladian LLP (Athens), led by Partner Spyros Makris, as customs valuation advisor. Both firms were retained to provide independent expert opinions on the technical merits of TSL's classification and valuation positions.

On the procedural front, administrative objections to both Assessment Notices were filed with AADE's Directorate of Resolution of Disputes (DED) on November 30, 2022, within the applicable statutory deadlines. In parallel, on November 15, 2022, TSL filed a Binding Tariff Information (BTI) application with AADE under reference BTI-GR-2022-003847, pursuant to Article 33 of Regulation (EU) No. 952/2013 (the Union Customs Code, or "UCC"). This application seeks a binding ruling from the Greek customs authority confirming the correct classification of the STS gantry cranes and ASC systems.

Notably, the BTI application was referred by AADE to the European Commission's Directorate-General for Taxation and Customs Union (DG TAXUD) on February 7, 2023, under Article 34(10) of the UCC. This referral procedure is triggered specifically when customs authorities in different EU member states have issued conflicting BTI rulings on substantially similar goods. In this case, the conflict arises between a Netherlands BTI ruling (NL-BTI-2021-01234), which classified substantially similar STS cranes and ASC systems under heading 8426, and a German BTI ruling (DE-BTI-2020-05678), which classified ASC systems under heading 8428. The significance of this referral is discussed in detail below.

To avoid enforcement action during the pendency of the administrative and BTI proceedings, a standstill agreement was executed on March 1, 2023, between TSL (acting through V&T) and AADE (acting through its external counsel, Meridian & Drakos Dikigiriko Grafeio, Panagiotis Drakos, Senior Partner, Athens Bar No. 29481). Under the standstill agreement, AADE has agreed to suspend enforcement of the Assessment Notices pending resolution of the BTI application and the DG TAXUD consultation. To support the standstill arrangement, TSL posted a bank guarantee in the amount of €5,000,000, issued by Compass Maritime Bank SA under Guarantee No. CMB-BG-2023-0291, dated March 10, 2023.

The matter is currently dormant pending the outcome of the DG TAXUD consultation. TSL continues to incur defense costs in monitoring the DG TAXUD process, maintaining the standstill arrangement, and preparing its administrative objections for substantive adjudication.

II. THE OCEANOS RESERVATION OF RIGHTS — SUMMARY

Oceanos's RoR Letter of November 22, 2022, acknowledges receipt of TSL's notice of claim but purports to reserve Oceanos's rights to deny coverage on two grounds:

First, Oceanos reserves the right to deny coverage under Policy Section 4.3(a), the "willful non-compliance" exclusion. Oceanos asserts that TSL's classification of the STS gantry cranes and ASC systems under CN 8426 41 00 may constitute "willful non-compliance" within the meaning of the Policy — that is, "a deliberate decision by the Insured to disregard a known legal obligation with respect to tax, duty, or customs classification, valuation, or reporting."

Second, Oceanos reserves the right to deny coverage under Policy Section 4.3(b), the "deliberate undervaluation" exclusion. Oceanos asserts that TSL's customs value declarations — specifically, TSL's exclusion of the technology license fees, procurement coordination fees, and commissioning services from the declared customs value — may constitute "deliberate undervaluation of imported goods for the purpose of reducing customs duties payable."

As set forth in the following sections, TSL submits that neither exclusion is applicable on the facts of this matter. The reservation is without factual or legal foundation and should be withdrawn.

III. THE "WILLFUL NON-COMPLIANCE" EXCLUSION (SECTION 4.3(a)) DOES NOT APPLY

A. Policy Language and Burden of Proof

Policy Section 4.3(a) provides that the Policy does not cover Loss arising from:

"Fraud, willful non-compliance, or deliberate evasion of any tax, duty, or customs obligation by the Insured or any officer or director of the Insured acting in such capacity."

The Policy defines "Fraud" as:

"any dishonest, fraudulent, or criminal act committed by the Insured with the intent to deceive or evade a legal obligation, as established by a final, non-appealable adjudication or admission."

Oceanos has not alleged that TSL committed "Fraud" as so defined — nor could it, since no final adjudication or admission exists. Rather, Oceanos relies on the concept of "willful non-compliance," which the Policy defines as requiring a "deliberate decision" by the Insured to "disregard" a "known legal obligation." Each of these elements carries significant weight. The term "deliberate" requires conscious, intentional action — not mere negligence or inadvertent error. The term "disregard" connotes knowledge of an obligation and a voluntary decision to ignore it. And the obligation must be "known" — not uncertain, unsettled, or subject to reasonable dispute.

Under well-established insurance law principles applicable in this jurisdiction, the burden of proving the applicability of a policy exclusion rests with the insurer. Oceanos must therefore demonstrate, on the balance of probabilities, that TSL deliberately disregarded a known legal obligation regarding tariff classification. As demonstrated below, the undisputed facts make it impossible for Oceanos to discharge this burden.

B. TSL Did Not Disregard Any "Known Legal Obligation"

The central predicate of the Section 4.3(a) exclusion is that the insured disregarded a "known legal obligation." For this element to be met, there must have existed, at the time TSL made its customs declarations, a clear, established, and binding legal obligation to classify the STS gantry cranes and ASC systems under a heading other than CN 8426 41 00. No such obligation existed. The evidence demonstrates exactly the opposite: the classification question was — and remains — genuinely ambiguous and unsettled at the EU level.

No prior AADE guidance or adverse ruling. Before the August 2022 Assessment Notices, no AADE guidance, ruling, circular, administrative decision, or published position indicated that STS gantry cranes or ASC systems of the type imported by TSL should be classified under CN 8428 90 90 rather than CN 8426 41 00. TSL had not previously been the subject of any AADE audit finding, penalty, or advisory notice relating to the classification of port cargo-handling equipment. There was simply no "known legal obligation" that TSL could have disregarded; the AADE's position was first articulated in the Assessment Notices themselves.

No binding EU-wide classification regulation. At the time of the relevant imports (2019–2022), the European Commission had not adopted any classification regulation under Article 57(4) of the UCC addressing the specific classification of STS gantry cranes, ASC systems, or functionally equivalent port cargo-handling equipment as between headings 8426 and 8428. The Combined Nomenclature Explanatory Notes and the Harmonized System Explanatory Notes published by the World Customs Organization provide guidance on the distinction between these headings, but that guidance is not determinative in cases involving complex, multi-functional equipment that exhibits characteristics relevant to both headings. The classification question was, in short, open and unsettled at the EU level.

Favorable BTI ruling from another EU member state. On June 14, 2021, the Netherlands customs authority (Douane Nederland, Belastingdienst) issued Binding Tariff Information ruling NL-BTI-2021-01234, classifying substantially similar STS cranes and ASC systems under heading 8426 (CN 8426 19 00). While a BTI ruling issued by one member state is not legally binding on the customs authorities of other member states, it is highly relevant to the question of whether TSL's classification constituted "willful non-compliance" with a "known" obligation. An insured that classifies goods in conformity with a published ruling issued by a competent customs authority of an EU member state — on substantially similar goods — cannot reasonably be characterized as having acted in "willful non-compliance." On the contrary, TSL's classification was consistent with the considered position of at least one national customs authority within the European Union.

Genuine classification ambiguity confirmed by AADE's own actions. Perhaps the most compelling evidence that no "known legal obligation" existed is found in AADE's own conduct following TSL's BTI application. AADE referred TSL's BTI application to DG TAXUD under Article 34(10) of the UCC. The Article 34(10) referral procedure is a mechanism triggered specifically because customs authorities in different EU member states have issued conflicting BTI rulings on substantially similar goods. The very existence of this referral mechanism presupposes that the classification question is one on which reasonable customs authorities can — and do — disagree. If the classification were clear and beyond reasonable dispute, there would be no conflicting BTI rulings and no need for a DG TAXUD consultation. AADE's own recognition that the classification question warrants resolution at the EU level through inter-institutional consultation is, we submit, dispositive evidence that TSL's classification was not "willful non-compliance" with a "known" legal obligation. It was, at most, a reasonable position on one side of a genuinely contested classification question.

Divergent BTI rulings among member states. The divergence between the Netherlands BTI ruling NL-BTI-2021-01234 (classifying STS cranes and ASC systems under heading 8426) and the German BTI ruling DE-BTI-2020-05678 (classifying ASC systems under heading 8428) further confirms the existence of genuine regulatory ambiguity. Experienced customs professionals employed by two different national customs authorities examined the same type of equipment and reached opposite conclusions. A classification position shared by at least one EU member state's customs authority is, by definition, not a "deliberate disregard" of a known obligation. It is a reasonable exercise of judgment in the face of genuine legal uncertainty — precisely the type of situation in which the "willful non-compliance" exclusion has no application.

C. TSL Relied on a Licensed Customs Broker

TSL's customs declarations were not prepared by TSL's own employees acting without professional guidance. Rather, all customs declarations for the Hailong equipment imports were prepared and filed by Peloros Customs Agency S.A. ("Peloros"), a professionally licensed Greek customs brokerage firm. Peloros holds Greek Customs Broker License No. GR-CB-1287, issued to Stavros Liapis, its principal licensed customs broker. Peloros was engaged under a Customs Brokerage Agreement dated February 1, 2019, which predates the first importation.

Under the terms of the Customs Brokerage Agreement, Peloros was responsible for the classification and declaration of the imported equipment on TSL's behalf. Peloros independently selected the Combined Nomenclature classification codes for all 47 units based on equipment specifications, technical documentation, and commercial invoices provided by TSL and Hailong. Peloros did not classify the equipment at TSL's direction or instruction; it exercised its own professional judgment, informed by its knowledge of the Combined Nomenclature, the Explanatory Notes, and applicable customs practice.

TSL's reliance on a licensed customs broker with regulatory expertise and a legal duty of care to apply correct tariff classifications is the antithesis of "willful non-compliance." It demonstrates that TSL took affirmative steps to ensure that its customs declarations complied with applicable law. An insured that engages a licensed professional to handle its customs compliance obligations and follows that professional's classification determinations cannot credibly be accused of having "deliberately disregarded" a known legal obligation.

D. TSL's Classification Was Based on the Equipment's Objective Characteristics

TSL's classification of the STS gantry cranes and ASC systems under heading 8426 was not arbitrary or contrived. It was a substantively reasonable application of the Combined Nomenclature to the physical and functional characteristics of the equipment. The STS gantry cranes and ASC systems are, by their objective physical characteristics, "cranes" within the ordinary and technical meaning of heading 8426. They lift loads vertically by means of wire ropes and a spreader mechanism suspended from a trolley that travels along a horizontal boom or crossbeam, which is in turn supported by a gantry structure. This is the defining physical mechanism of a crane.

The manufacturer, Hailong Heavy Industries, designates both products as "cranes" in its commercial literature, model designations, and technical documentation. The STS units are marketed as the "QC-65 Quayside Container Crane," and the ASC units are marketed as the "ASC-40R Automated Stacking Crane." The European Federation of Materials Handling (FEM) classifies both STS and ASC equipment types as cranes for purposes of its technical standards. The International Organization for Standardization (ISO), in ISO 4301-1 (Cranes — Classification — General), likewise classifies both types as cranes. TSL's classification was therefore consistent not only with the manufacturer's own designation but also with the prevailing industry and international standards classifications.

In sum, TSL's classification was a substantively reasonable application of the Combined Nomenclature to the equipment's observable characteristics, supported by the manufacturer's designation and international engineering standards. It cannot be characterized as a "deliberate decision to disregard a known legal obligation."

E. AADE's Own Penalty Characterization Confirms Good Faith

Further confirmation that TSL's conduct does not rise to the level of "willful non-compliance" is found in the penalty characterization applied by AADE itself. AADE has applied an administrative penalty rate of 30% of additional duties assessed, totaling €509,124. This 30% rate is consistent with a good-faith classification error under Article 42(1) of the UCC and Article 77 of Commission Delegated Regulation (EU) 2015/2446.

Critically, AADE has not escalated the penalty to the higher rates available under Greek law for more culpable conduct. Under Article 147 of the Greek Customs Code (Law 2960/2001), AADE has the authority to impose penalties at rates of 100% of additional duties (for negligence) or 300% of additional duties (for fraud or willful non-compliance). AADE's decision to apply only the 30% rate — the lowest level available — reflects its own assessment that TSL's classification error, if it is an error, was made in good faith and without fraudulent or willful intent.

Moreover, AADE has not alleged fraud, willful non-compliance, or deliberate misconduct by TSL in any of its assessment notices, correspondence, or audit documentation. AADE has not referred the matter for criminal investigation or prosecution. AADE has not sought to impose any sanctions beyond the standard administrative penalty and interest charges applicable to good-faith classification disputes.

If the customs authority that conducted the audit and issued the assessment does not characterize TSL's conduct as willful or fraudulent — and affirmatively applies the penalty level reserved for good-faith errors — there is simply no factual basis for Oceanos, an insurer with no direct knowledge of TSL's customs operations, to invoke the "willful non-compliance" exclusion. Oceanos cannot reasonably maintain that TSL's conduct was willful when the very authority that identified the alleged classification error has concluded otherwise.

F. Conclusion on Section 4.3(a)

Every element of the "willful non-compliance" definition is absent from this case. There was no "deliberate decision" — TSL's classification was made by a licensed customs broker exercising independent professional judgment, based on the equipment's objective characteristics and consistent with the manufacturer's own designation. There was no "known legal obligation" to disregard — the classification of these equipment types as between headings 8426 and 8428 was unsettled at the EU level, as confirmed by conflicting BTI rulings among member states and AADE's own referral to DG TAXUD. And TSL acted in good faith, as confirmed by AADE's own penalty characterization.

The Section 4.3(a) exclusion is, on these facts, wholly inapplicable. Oceanos has no basis to reserve rights under this provision, and the reservation should be withdrawn.

IV. THE "DELIBERATE UNDERVALUATION" EXCLUSION (SECTION 4.3(b)) DOES NOT APPLY

A. Policy Language

Policy Section 4.3(b) provides that the Policy does not cover Loss arising from:

"the Insured's deliberate undervaluation of imported goods for the purpose of reducing customs duties payable."

This exclusion has two distinct elements, both of which must be present for the exclusion to apply. First, the undervaluation must be "deliberate" — that is, a conscious, intentional act rather than an inadvertent error or a reasonable interpretive position subsequently rejected by the customs authority. Second, the undervaluation must have been undertaken "for the purpose of reducing customs duties payable" — that is, there must be a specific duty-reduction motive animating the insured's valuation decision. Both elements must be established by the insurer, as the party asserting the applicability of a policy exclusion. As demonstrated below, neither element is present in this case.

B. TSL Had No Motive to Undervalue

The absence of any duty-reduction motive is, standing alone, fatal to Oceanos's reliance on the Section 4.3(b) exclusion. The reason is straightforward and dispositive.

TSL classified all of the Hailong equipment under CN 8426 41 00, which carries a 0% MFN duty rate. Under a 0% duty rate, the declared customs value of the imported goods has zero impact on the amount of customs duties payable. Whether TSL declared the customs value as €98,000,000 or €108,000,000 or any other figure, the customs duty payable under heading 8426 41 00 would have been exactly the same: zero. There was therefore no financial incentive whatsoever for TSL to understate the customs value of the equipment. Understating the value would have achieved no duty savings — none at all.

The valuation adjustments identified in AADE's Assessment Notice ADAN/2022/0074 only become relevant to TSL's duty liability if and to the extent that the classification is changed from CN 8426 41 00 (0% duty) to CN 8428 90 90 (2.2% duty). This reclassification is the subject of AADE's other Assessment Notice (ADAN/2022/0073), which TSL is actively contesting. At the time TSL made its customs declarations, TSL classified the goods at 0% — and therefore had no reason to manipulate the declared customs value for duty-reduction purposes.

The Section 4.3(b) exclusion expressly requires that the undervaluation be undertaken "for the purpose of reducing customs duties payable." Where the applicable duty rate is 0%, this purpose cannot exist. No rational economic actor would engage in deliberate undervaluation — an activity carrying significant legal risk — when the undervaluation would yield precisely zero financial benefit. The absence of any duty-reduction motive is a complete answer to Oceanos's reliance on Section 4.3(b).

C. TSL's Valuation Declarations Were Based on Reasonable Interpretation of the UCC

Even setting aside the absence of motive — which is in itself dispositive — TSL's customs value declarations were based on reasonable and well-supported interpretations of the customs valuation rules set forth in the Union Customs Code. AADE's valuation adjustments involve three categories of payments, each of which TSL addressed through a legitimate application of the UCC's valuation framework.

1. Technology License Fees (€4,900,000). TSL paid €4,900,000 to Hailong under a Technology License Agreement ("TLA") dated January 10, 2019. The TLA grants TSL a non-exclusive license to use the HaiControl Suite v4.2 crane control software, together with associated predictive maintenance algorithms and technical documentation, for a term of 10 years.

TSL excluded the license fees from the declared customs value of the imported equipment based on the reasonable position that these fees are not "royalties and licence fees related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods being valued" within the meaning of Article 71(1)(c) of the UCC. TSL's position was grounded in the following considerations:

(a) The TLA is a contractually independent agreement. Article 3.2 of the TLA expressly provides that the TLA is independent of and not contingent upon the purchase contracts for the equipment. The TLA was negotiated and executed separately from the equipment purchase agreements, at a separately negotiated price, and contains its own termination provisions.

(b) The license fee covers predominantly post-importation services and deliverables over the 10-year license term. These include ongoing software updates and patches, remote technical support, periodic on-site technical visits by Hailong engineers, access to an updated documentation portal, and engineer training programs. These are services relating to the use of the software in Greece after importation, not services relating to the manufacture or sale of the physical equipment.

(c) The license fees relate to the post-importation use and reproduction of software within Greece, not to the sale of the goods for export to Greece. The software was pre-installed on the cranes at the time of manufacture, but the TLA fee covers the right to update, modify, and reproduce the software over the subsequent decade — rights that are exercised entirely after importation.

Whether technology license fees of this nature must be added to customs value under Article 71(1)(c) UCC is a genuinely complex question of customs valuation law. The determination turns on whether the fees are "related to the goods," whether they are paid "as a condition of sale," and whether the license constitutes a royalty for the use of intellectual property embodied in the goods. These are questions on which the WCO's Technical Committee on Customs Valuation, the European Commission's Customs Valuation Committee, and national customs authorities have reached varying conclusions in different factual contexts. TSL's position is a reasonable interpretation of these rules — not "deliberate undervaluation."

2. Procurement Coordination Fee (€2,940,000). TSL paid €2,940,000 to Nereus Maritime Advisory Limited ("Nereus") under a Procurement Services Agreement ("PSA") dated December 1, 2018. TSL characterized the Nereus fee as a buying commission, which is deductible from customs value under Article 72(a) of the UCC. That provision states that "[c]ommission and brokerage, except buying commissions" shall be included in customs value — implying that buying commissions are excluded.

The characterization of a procurement agent's fee as either a buying commission (deductible) or a selling commission (includable) is a fact-intensive determination governed by Article 127(1) of UCC Implementing Regulation (EU) 2015/2447 and by the WCO's Commentary 17.1 on the treatment of buying commissions. The critical question is whether the agent acted on behalf of the buyer or the seller in the transaction. Where the agent acted exclusively on behalf of the buyer — identifying potential suppliers, evaluating proposals, negotiating terms, and coordinating procurement logistics — the agent's fee is properly characterized as a buying commission.

TSL's characterization was based on the contractual terms of the PSA, which engaged Nereus to identify, evaluate, and recommend suitable manufacturers of port cargo-handling equipment, to coordinate the procurement process on TSL's behalf, and to supervise quality assurance inspections at the manufacturer's facilities. Nereus was compensated by TSL, not by Hailong. Nereus had no contractual or commercial relationship with Hailong. Nereus's obligations under the PSA ran exclusively to TSL.

Whether the Nereus fee ultimately qualifies as a deductible buying commission or an includable selling commission or intermediary markup is a question of fact and law. It is the type of valuation question that regularly arises in post-clearance audits and is resolved through administrative proceedings — not evidence of deliberate undervaluation. TSL adopted a reasonable position, supported by the contractual terms, and declared the Nereus fee transparently in its commercial documentation.

3. Commissioning Services (€2,100,000). TSL excluded €2,100,000 in commissioning services from the declared customs value of the imported equipment. TSL's position was based on Article 72(e) of the UCC, which expressly permits the exclusion from customs value of:

"charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation."

The commissioning services at issue were performed entirely in Greece, at TSL's terminal facilities, after the equipment had been physically imported into the customs territory of the European Union and cleared through customs. The commissioning work involved the on-site installation, testing, calibration, and functional verification of the cranes and ASC systems — activities that, by their nature, can only take place after the equipment has arrived at its final destination and been installed in its operational environment.

TSL's position has express textual support in Article 72(e) of the UCC. The commissioning services fall squarely within the statutory language excluding "assembly" and "technical assistance" charges "undertaken after importation." This is the stronger reading of the statute, and TSL submits that its position is correct as a matter of law, not merely reasonable. In any event, TSL's treatment of these charges is manifestly not "deliberate undervaluation" — it is a straightforward application of a statutory exclusion that is directly on point.

D. The Valuation Positions Were Adopted Openly, Not Covertly

It is important to emphasize that TSL's customs declarations accurately reflected the CIF purchase prices stated in the four Hailong purchase contracts. The technology license fees, procurement coordination fees, and commissioning costs were documented in separate, commercially genuine agreements with separate pricing structures. These agreements were available to AADE during the post-clearance audit and were, in fact, the basis for AADE's valuation adjustments.

There was no concealment of any payment. There was no falsification of commercial invoices. There were no secret side payments, under-the-table arrangements, or efforts to disguise the true consideration flowing between TSL and its counterparties. AADE's valuation dispute concerns the legal characterization of openly documented, arms-length payments — specifically, whether those payments must be included in the transaction value under the UCC's valuation rules. This is a question of law, not a question of honesty. The transparent manner in which TSL structured and documented its commercial arrangements is wholly inconsistent with "deliberate undervaluation."

E. AADE's Own Assessment Does Not Allege Deliberate Undervaluation

Consistent with the foregoing, AADE's own Assessment Notice ADAN/2022/0074 does not allege that TSL deliberately understated the customs value of the imported equipment or engaged in fraudulent valuation practices. The Assessment Notice is a post-clearance audit finding in which AADE applies the UCC valuation rules to documented payments and reaches a different legal conclusion than the one adopted by TSL and its customs broker. AADE has not characterized TSL's conduct as deliberate or fraudulent. AADE has applied the standard 30% administrative penalty rate — the rate applicable to good-faith errors — rather than the enhanced rates available for negligent or willful misconduct. As with the classification issue, the customs authority's own characterization of TSL's conduct is powerful evidence that the "deliberate undervaluation" exclusion has no application.

F. Conclusion on Section 4.3(b)

The "deliberate undervaluation" exclusion under Section 4.3(b) requires both deliberate conduct and a duty-reduction purpose. Neither element is present in this case. TSL had no motive to undervalue its imports, because the applicable duty rate under its declared classification was 0%. TSL's valuation positions were based on reasonable interpretations of the UCC valuation rules, supported by the statutory text and adopted on the advice of qualified professionals. TSL's customs declarations were transparent and consistent with the commercial documentation. And AADE itself has not alleged deliberate undervaluation or fraudulent conduct.

Section 4.3(b) is inapplicable to the facts of this claim, and Oceanos's reservation under this provision is without foundation and should be withdrawn.

V. THE POLICY PROVIDES CLEAR COVERAGE FOR THIS CLAIM

A. The Insuring Clause Is Satisfied

Having demonstrated that neither of the exclusions invoked by Oceanos applies, we turn to the affirmative case for coverage. The Policy's insuring clause is clearly satisfied.

Policy Section 2.4 provides coverage for:

"Loss, including Defense Costs and Assessed Amounts, incurred by the Insured arising from a Tax or Regulatory Authority Claim first made against the Insured during the Policy Period, provided that such Claim does not arise from Fraud, willful non-compliance, or deliberate evasion."

Each element of this insuring clause is met:

Tax or Regulatory Authority Claim. The AADE Assessment Notices are a "Tax or Regulatory Authority Claim" within the meaning of the Policy. They constitute a written demand from a customs authority of an EU member state alleging underpayment of customs duties and import VAT arising from the reclassification of imported goods and the adjustment of declared customs values. This is precisely the type of claim contemplated by Section 2.4.

First made during the Policy Period. The Policy Period runs from April 1, 2021, to March 31, 2023. The Assessment Notices were issued on August 12, 2022, and received by TSL on approximately August 16, 2022 — Squarely within the Policy Period. The claim was therefore "first made against the Insured during the Policy Period" as required by Section 2.4.

Not arising from Fraud, willful non-compliance, or deliberate evasion. As demonstrated at length in Sections III and IV above, the claim does not arise from Fraud, willful non-compliance, or deliberate evasion of any customs obligation. TSL acted in good faith, in reliance on professional advice, consistent with published EU precedent, and with no motive for evasion.

All elements of the insuring clause are satisfied, and TSL is entitled to coverage under the Policy.

B. Covered Losses

TSL's covered losses under the Policy include the following categories:

Defense Costs. TSL has incurred, and continues to incur, reasonable attorneys' fees and expenses in defending the AADE assessment. These include fees of Calderwood & Harkness LLP (international insurance and regulatory counsel), Vournas & Theodorakis Dikigiriko Grafeio (local Greek counsel — Alexandros Vournas and Maria-Christina Georgiou), Argonaut Trade Consulting GmbH (independent customs classification expert — Dr. Lukas Brenner), and Kestrel & Palladian LLP (customs valuation advisory — Spyros Makris). All of these fees and expenses constitute "Defense Costs" within the meaning of the Policy and are covered under Section 2.4.

Assessed Amounts. The additional customs duties assessed by AADE — totaling €1,697,080, comprising €1,478,400 in classification-related duties and €218,680 in valuation-related duties — constitute "Assessed Amounts" within the meaning of the Policy. To the extent that the import VAT adjustments of €2,740,416 (comprising €354,816 in VAT on the duty differential and €2,385,600 in VAT on the increased customs value) also constitute covered "Assessed Amounts" under the Policy, TSL claims coverage for those amounts as well.

Note regarding penalties and interest. TSL acknowledges that the administrative penalty of €509,124 and the estimated late payment interest of approximately €3,872,000 may not constitute covered "Loss" under the Policy, as such charges are typically distinguished from duties and assessed amounts in financial lines policies. TSL does not seek coverage for penalties or interest at this time but expressly reserves the right to do so in the future if a more detailed analysis of the Policy terms supports such coverage.

C. Policy Limits

The applicable sublimit for customs and excise duty disputes under Policy Section 3.2(d) is €3,000,000. The Policy retention (deductible) applicable to this claim under Section 3.3 is €250,000. The maximum net coverage recoverable by TSL under the Policy for this claim is therefore €2,750,000.

TSL's combined defense costs and assessed duties exposure significantly exceeds the sublimit. The additional customs duties alone total €1,697,080, and defense costs are substantial and ongoing. The full sublimit of €3,000,000 is at risk. TSL urges Oceanos to recognize the magnitude of the exposure and the clear applicability of coverage, and to begin fulfilling its obligations under the Policy without further delay.

VI. REQUESTS

In light of the foregoing, TSL respectfully requests that Oceanos take the following actions:

1. Withdraw the Reservation of Rights to the extent it relies on the willful non-compliance exclusion (Section 4.3(a)) and the deliberate undervaluation exclusion (Section 4.3(b)), as neither exclusion applies on the facts of this matter. The factual record demonstrates that TSL acted in good faith, in reliance on professional advice, consistent with published EU precedent, and without any motive for duty evasion.

2. Confirm coverage under Section 2.4 of the Policy for both Defense Costs and Assessed Amounts arising from the AADE customs classification and valuation dispute, subject to the Policy's sublimit of €3,000,000 (Section 3.2(d)) and retention of €250,000 (Section 3.3).

3. Commence advancement of Defense Costs as incurred, as required by Section 5.3 of the Policy. TSL has been incurring defense costs since September 2022, when it first retained legal counsel and expert advisors in connection with the AADE assessment. These costs are ongoing and will continue to accrue as TSL defends the administrative objections, the BTI application, and the DG TAXUD consultation process. TSL requests reimbursement of defense costs already incurred and advancement of future defense costs on an ongoing basis.

4. Provide a written coverage determination within thirty (30) days of the date of this letter — that is, by no later than January 11, 2023 — confirming the foregoing. TSL requires prompt certainty regarding its insurance coverage in order to manage its defense strategy effectively and to avoid unnecessary prejudice from Oceanos's continued reservation.

VII. RESERVATION OF RIGHTS

TSL reserves all rights under the Policy, at law, and in equity, including without limitation the following:

(a) The right to recover all Defense Costs and Assessed Amounts within the Policy sublimit and in accordance with the Policy's terms and conditions;

(b) The right to pursue a claim for breach of the insurance contract if Oceanos improperly denies or unreasonably delays coverage to which TSL is entitled under the Policy;

(c) The right to pursue a bad-faith denial of coverage claim if Oceanos unreasonably maintains its reservation of rights in the face of the facts set forth herein, which clearly demonstrate the inapplicability of the invoked exclusions;

(d) The right to seek consequential damages arising from any improper denial of coverage, including any additional costs, interest, penalties, or other prejudice suffered by TSL as a result of Oceanos's failure to advance defense costs in a timely manner; and

(e) All other rights, claims, and remedies available to TSL under the Policy, at law, in equity, or by statute.

Nothing in this letter, and no action or forbearance by TSL, shall constitute or be construed as a waiver of any right, claim, or remedy available to TSL, whether under the Policy, at common law, in equity, or under any applicable statute or regulation.

VIII. CONCLUSION

The facts of this matter overwhelmingly demonstrate that TSL acted in good faith at all times. TSL classified the imported equipment in a manner consistent with a published BTI ruling issued by the Netherlands customs authority (NL-BTI-2021-01234). TSL relied on a licensed and experienced Greek customs broker, Peloros Customs Agency S.A., to prepare and file its customs declarations. TSL declared a classification that carried a 0% duty rate, eliminating any conceivable motive for duty evasion or undervaluation. And TSL's valuation declarations were based on reasonable, well-supported interpretations of the UCC valuation rules, applied to openly documented and commercially genuine transactions.

The AADE dispute arises from a genuine classification ambiguity that AADE itself has acknowledged by referring TSL's BTI application to DG TAXUD under Article 34(10) of the UCC — a mechanism that exists precisely because different EU member states have reached conflicting conclusions on the same classification question. The valuation dispute concerns the legal characterization of transparently documented payments under complex customs valuation rules on which reasonable professionals can disagree.

This is precisely the type of regulatory risk — the risk that a good-faith customs position will be challenged by a regulatory authority in a post-clearance audit — that the Financial Lines Policy was designed to cover. The Policy's exclusions for fraud, willful non-compliance, and deliberate undervaluation are directed at dishonest and intentional misconduct, not at reasonable classification and valuation positions that happen to be disputed by a customs authority. Extending those exclusions to the facts of this case would render the Policy's customs coverage illusory.

TSL urges Oceanos in the strongest possible terms to confirm coverage promptly and to begin fulfilling its obligations under the Policy. TSL has been patient and cooperative in the weeks since the RoR Letter was issued, but the continued reservation of rights is causing real prejudice to TSL as it defends a substantial customs assessment without the benefit of the insurance coverage it purchased. TSL trusts that Oceanos will give this letter the careful consideration it warrants and will respond within the requested timeframe.

We remain available to discuss this matter further at Oceanos's convenience. Please do not hesitate to contact the undersigned directly.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

James Prentice Partner Direct Tel: +44 (0)20 7438 6127

Email: j.prentice@calderwoodharkness.com

(On behalf of Thalassa Shipping & Logistics SA)

cc:

Fiona Hartwell, Senior Account Executive, Aether Insurance Brokers Limited Nikolaos Andreadis, Chairman & CEO, Thalassa Shipping & Logistics SA Elena Papadimitriou, CFO, Thalassa Shipping & Logistics SA

Component	Amount (€)
Additional customs duties (classification)	1,478,400
Additional customs duties (valuation)	218,680
Total additional customs duties	1,697,080
Import VAT on duty differential (24%)	354,816
Import VAT on increased customs value (24% × €9,940,000)	2,385,600
Total import VAT adjustments	2,740,416
Administrative penalty (30% of additional duties)	509,124
Estimated late payment interest (0.73%/month)	~3,872,000
Total mid-case AADE claim	~8,818,620

PRIVILEGED & CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Barristers & Solicitors 25 Finsbury Square London EC2A 1DU United Kingdom
Tel: +44 (0)20 7438 6000
Fax: +44 (0)20 7438 6001
www.calderwoodharkness.com
December 12, 2022
Claims Department Oceanos Underwriters Société Anonyme 10 Kifissias Avenue 151 25 Marousi Athens, Greece
Via: Aether Insurance Brokers Limited
Attn: Fiona Hartwell, Senior Account Executive
30 St Mary Axe London EC3A 8BF United Kingdom
Re: Response to Reservation of Rights Letter dated November 22, 2022 Policy No.: OCU-FIN-2021-GR-0487 Insured: Thalassa Shipping & Logistics Société Anonyme (EORI: GR094827361000; AFM: 094827361) Calderwood & Harkness LLP Matter No.: C&H-2022-ITS-04781
Dear Sir or Madam:
I write on behalf of our client, Thalassa Shipping & Logistics Société Anonyme ("TSL"), in my capacity as Partner at Calderwood & Harkness LLP, in response to the Reservation of Rights letter dated November 22, 2022 (the "RoR Letter"), issued by Oceanos Underwriters Société Anonyme ("Oceanos") in connection with TSL's claim under Financial Lines Policy No. OCU-FIN-2021-GR-0487 (the "Policy"). TSL first notified the claim to Oceanos through its placing broker, Aether Insurance Brokers Limited ("Aether"), on October 15, 2022, following receipt of customs assessment notices from the Greek Independent Authority for Public Revenue (AADE). As Oceanos is aware, the RoR Letter purports to reserve Oceanos's rights to deny coverage on two grounds, specifically the "willful non-compliance" exclusion under Policy Section 4.3(a) and the "deliberate undervaluation" exclusion under Policy Section 4.3(b). TSL's position, for the reasons set out in detail below, is that neither exclusion has any application to the facts of this claim. TSL accordingly demands that Oceanos withdraw its reservation, confirm full coverage under the Policy, and begin advancing Defense Costs without further delay.
This letter sets forth the factual background and legal analysis supporting TSL's position. We address each of Oceanos's stated grounds in turn, demonstrating that the undisputed facts are wholly inconsistent with the exclusions upon which Oceanos purports to rely.
I. BACKGROUND AND SUMMARY OF THE CLAIM
A. The Underlying Dispute
TSL is a Greek transportation and logistics company organized as a Société Anonyme under the laws of the Hellenic Republic, registered with the Piraeus Commercial Registry under No. 78214/06/B/09/42, and headquartered at 47 Akti Miaouli, 185 35 Piraeus, Greece. Founded in 2009, TSL has grown to employ approximately 1,450 people across its Greek operations. For the fiscal year ended December 31, 2021, TSL reported consolidated revenue of approximately €387.2 million. TSL is a significant participant in the Greek maritime logistics sector, operating a fleet of 28 container vessels and managing terminal operations at three principal Greek ports: Piraeus, Thessaloniki, and Volos.
As part of a multi-year program to modernize and expand its port terminal infrastructure, TSL undertook between March 2019 and January 2022 to import 47 units of specialized marine cargo-handling equipment from Hailong Heavy Industries Co., Ltd. ("Hailong"), a major equipment manufacturer headquartered in Ningbo, Zhejiang Province, People's Republic of China (Unified Social Credit Code 91330211MA2GR8KT5X). The equipment was procured pursuant to four separate purchase contracts, the details of which are summarized below:
1. Contract HHI-TSL-2019-001, dated January 15, 2019: 12 ship-to-shore (STS) gantry cranes, model QC-65, with a declared CIF customs value of €38,400,000 (€3,200,000 per unit).
2. Contract HHI-TSL-2019-002, dated March 22, 2019: 18 rubber-tired gantry (RTG) cranes, with a declared CIF customs value of €25,200,000 (€1,400,000 per unit).
3. Contract HHI-TSL-2020-003, dated June 10, 2020: 8 automated stacking crane (ASC) systems, model ASC-40R, with a declared CIF customs value of €28,800,000 (€3,600,000 per unit).
4. Contract HHI-TSL-2021-004, dated February 28, 2021: a bundled package of spare parts, software licenses, and commissioning services, with a declared CIF customs value of €5,600,000.
The total declared CIF customs value across all four contracts was €98,000,000. All equipment was imported through the Port of Piraeus and cleared through Greek customs by TSL's licensed customs broker, Peloros Customs Agency S.A. (EORI: GR801234567000), under the supervision of Stavros Liapis, Licensed Customs Broker No. GR-CB-1287. Peloros prepared and filed all applicable Single Administrative Documents (SADs) and supporting customs documentation on TSL's behalf.
B. The AADE Assessment
On April 4, 2022, the Independent Authority for Public Revenue (AADE), acting through its Directorate of Customs Compliance and Audit at the Piraeus Regional Customs Office, initiated a post-clearance audit of TSL's customs declarations related to the Hailong equipment imports. The audit was assigned file reference AADE/DTE/2022/PIR-04518 and was conducted under the supervision of Chief Customs Auditor Aikaterini Vlachopoulou. The audit covered all 47 imported units and the four associated purchase contracts, as well as ancillary agreements related to the transaction.
The audit was completed on August 1, 2022. On August 12, 2022, AADE issued two Additional Duty Assessment Notices (the "Assessment Notices"), each of which asserted a separate basis for additional duties:
ADAN/2022/0073 (Classification). This Assessment Notice reclassifies 20 units — comprising the 12 STS gantry cranes and the 8 ASC systems — from Combined Nomenclature code 8426 41 00 (which carries a 0% Most Favoured Nation duty rate) to CN 8428 90 90 (which carries a 2.2% MFN duty rate). AADE's rationale is that these units constitute "other lifting, handling, loading or unloading machinery" within heading 8428 rather than "cranes" within heading 8426. The additional customs duties assessed on the basis of this reclassification amount to €1,478,400 (being 2.2% applied to the combined declared CIF value of the reclassified units: €67,200,000 × 2.2% = €1,478,400).
ADAN/2022/0074 (Valuation). This Assessment Notice adjusts the declared customs value of the imported equipment upward by a total of €9,940,000, based on AADE's determination that three categories of payments made by TSL should have been included in the transaction value of the goods under the Union Customs Code:
(i) €4,900,000 in technology license fees paid under a Technology License Agreement with Hailong, which AADE contends are royalties related to the imported goods and paid as a condition of sale, includable under Article 71(1)(c) of the UCC;
(ii) €2,940,000 paid to Nereus Maritime Advisory Limited under a Procurement Services Agreement, which AADE contends is not a deductible buying commission but rather an includable procurement coordination fee; and
(iii) €2,100,000 for commissioning services, which AADE contends should be included in customs value rather than treated as post-importation services excludable under Article 72(e) of the UCC.
The additional customs duties assessed on the basis of the valuation adjustment amount to €218,680 (being 2.2% applied to the upward valuation adjustment of €9,940,000, calculated at the reclassified duty rate).
In total, the Assessment Notices impose additional customs duties of €1,697,080 (€1,478,400 + €218,680). The total exposure arising from the Assessment Notices is substantially larger when ancillary charges are included:
Under a high-end exposure scenario, incorporating escalated penalties and compounding interest, TSL's total potential liability could reach approximately €14.7 million. This represents a material financial risk to the company.
C. Notice of Claim
TSL filed its notice of claim with Oceanos via Aether Insurance Brokers on October 15, 2022. TSL first became aware of the Assessment Notices upon receiving them on or about August 16, 2022. Notice was therefore provided within approximately 60 days of TSL's first awareness of the potential claim — well within the Policy's 60-day notification window prescribed by Section 5.1.
The claim is made under Section 2.4 of the Policy, which covers Tax and Regulatory Authority Disputes. The applicable sublimit for customs and excise duty disputes is €3,000,000, as specified in Policy Section 3.2(d). The Policy retention (deductible) applicable to such claims is €250,000 under Section 3.3. Accordingly, the maximum net coverage available to TSL under the Policy for this claim is €2,750,000 (€3,000,000 sublimit less €250,000 retention).
D. Current Status of the Dispute
Following receipt of the Assessment Notices, TSL moved promptly to assemble a qualified defense team and to protect its rights under Greek customs law. The following steps have been taken:
TSL retained Calderwood & Harkness LLP (this firm) under an engagement letter opened September 22, 2022, to serve as lead international insurance and regulatory counsel. TSL also retained Vournas & Theodorakis Dikigiriko Grafeio ("V&T"), an Athens-based law firm, as local Greek counsel. The V&T team is led by Managing Partner Alexandros Vournas (Athens Bar No. 18744) and Associate Maria-Christina Georgiou (Athens Bar No. 42917), both of whom are experienced customs litigation practitioners.
TSL has further retained two specialist advisory firms: Argonaut Trade Consulting GmbH (Berlin), led by Managing Director Dr. Lukas Brenner, as an independent customs classification expert; and Kestrel & Palladian LLP (Athens), led by Partner Spyros Makris, as customs valuation advisor. Both firms were retained to provide independent expert opinions on the technical merits of TSL's classification and valuation positions.
On the procedural front, administrative objections to both Assessment Notices were filed with AADE's Directorate of Resolution of Disputes (DED) on November 30, 2022, within the applicable statutory deadlines. In parallel, on November 15, 2022, TSL filed a Binding Tariff Information (BTI) application with AADE under reference BTI-GR-2022-003847, pursuant to Article 33 of Regulation (EU) No. 952/2013 (the Union Customs Code, or "UCC"). This application seeks a binding ruling from the Greek customs authority confirming the correct classification of the STS gantry cranes and ASC systems.
Notably, the BTI application was referred by AADE to the European Commission's Directorate-General for Taxation and Customs Union (DG TAXUD) on February 7, 2023, under Article 34(10) of the UCC. This referral procedure is triggered specifically when customs authorities in different EU member states have issued conflicting BTI rulings on substantially similar goods. In this case, the conflict arises between a Netherlands BTI ruling (NL-BTI-2021-01234), which classified substantially similar STS cranes and ASC systems under heading 8426, and a German BTI ruling (DE-BTI-2020-05678), which classified ASC systems under heading 8428. The significance of this referral is discussed in detail below.
To avoid enforcement action during the pendency of the administrative and BTI proceedings, a standstill agreement was executed on March 1, 2023, between TSL (acting through V&T) and AADE (acting through its external counsel, Meridian & Drakos Dikigiriko Grafeio, Panagiotis Drakos, Senior Partner, Athens Bar No. 29481). Under the standstill agreement, AADE has agreed to suspend enforcement of the Assessment Notices pending resolution of the BTI application and the DG TAXUD consultation. To support the standstill arrangement, TSL posted a bank guarantee in the amount of €5,000,000, issued by Compass Maritime Bank SA under Guarantee No. CMB-BG-2023-0291, dated March 10, 2023.
The matter is currently dormant pending the outcome of the DG TAXUD consultation. TSL continues to incur defense costs in monitoring the DG TAXUD process, maintaining the standstill arrangement, and preparing its administrative objections for substantive adjudication.
II. THE OCEANOS RESERVATION OF RIGHTS — SUMMARY
Oceanos's RoR Letter of November 22, 2022, acknowledges receipt of TSL's notice of claim but purports to reserve Oceanos's rights to deny coverage on two grounds:
First, Oceanos reserves the right to deny coverage under Policy Section 4.3(a), the "willful non-compliance" exclusion. Oceanos asserts that TSL's classification of the STS gantry cranes and ASC systems under CN 8426 41 00 may constitute "willful non-compliance" within the meaning of the Policy — that is, "a deliberate decision by the Insured to disregard a known legal obligation with respect to tax, duty, or customs classification, valuation, or reporting."
Second, Oceanos reserves the right to deny coverage under Policy Section 4.3(b), the "deliberate undervaluation" exclusion. Oceanos asserts that TSL's customs value declarations — specifically, TSL's exclusion of the technology license fees, procurement coordination fees, and commissioning services from the declared customs value — may constitute "deliberate undervaluation of imported goods for the purpose of reducing customs duties payable."
As set forth in the following sections, TSL submits that neither exclusion is applicable on the facts of this matter. The reservation is without factual or legal foundation and should be withdrawn.
III. THE "WILLFUL NON-COMPLIANCE" EXCLUSION (SECTION 4.3(a)) DOES NOT APPLY
A. Policy Language and Burden of Proof
Policy Section 4.3(a) provides that the Policy does not cover Loss arising from:
"Fraud, willful non-compliance, or deliberate evasion of any tax, duty, or customs obligation by the Insured or any officer or director of the Insured acting in such capacity."
The Policy defines "Fraud" as:
"any dishonest, fraudulent, or criminal act committed by the Insured with the intent to deceive or evade a legal obligation, as established by a final, non-appealable adjudication or admission."
Oceanos has not alleged that TSL committed "Fraud" as so defined — nor could it, since no final adjudication or admission exists. Rather, Oceanos relies on the concept of "willful non-compliance," which the Policy defines as requiring a "deliberate decision" by the Insured to "disregard" a "known legal obligation." Each of these elements carries significant weight. The term "deliberate" requires conscious, intentional action — not mere negligence or inadvertent error. The term "disregard" connotes knowledge of an obligation and a voluntary decision to ignore it. And the obligation must be "known" — not uncertain, unsettled, or subject to reasonable dispute.
Under well-established insurance law principles applicable in this jurisdiction, the burden of proving the applicability of a policy exclusion rests with the insurer. Oceanos must therefore demonstrate, on the balance of probabilities, that TSL deliberately disregarded a known legal obligation regarding tariff classification. As demonstrated below, the undisputed facts make it impossible for Oceanos to discharge this burden.
B. TSL Did Not Disregard Any "Known Legal Obligation"
The central predicate of the Section 4.3(a) exclusion is that the insured disregarded a "known legal obligation." For this element to be met, there must have existed, at the time TSL made its customs declarations, a clear, established, and binding legal obligation to classify the STS gantry cranes and ASC systems under a heading other than CN 8426 41 00. No such obligation existed. The evidence demonstrates exactly the opposite: the classification question was — and remains — genuinely ambiguous and unsettled at the EU level.
No prior AADE guidance or adverse ruling. Before the August 2022 Assessment Notices, no AADE guidance, ruling, circular, administrative decision, or published position indicated that STS gantry cranes or ASC systems of the type imported by TSL should be classified under CN 8428 90 90 rather than CN 8426 41 00. TSL had not previously been the subject of any AADE audit finding, penalty, or advisory notice relating to the classification of port cargo-handling equipment. There was simply no "known legal obligation" that TSL could have disregarded; the AADE's position was first articulated in the Assessment Notices themselves.
No binding EU-wide classification regulation. At the time of the relevant imports (2019–2022), the European Commission had not adopted any classification regulation under Article 57(4) of the UCC addressing the specific classification of STS gantry cranes, ASC systems, or functionally equivalent port cargo-handling equipment as between headings 8426 and 8428. The Combined Nomenclature Explanatory Notes and the Harmonized System Explanatory Notes published by the World Customs Organization provide guidance on the distinction between these headings, but that guidance is not determinative in cases involving complex, multi-functional equipment that exhibits characteristics relevant to both headings. The classification question was, in short, open and unsettled at the EU level.
Favorable BTI ruling from another EU member state. On June 14, 2021, the Netherlands customs authority (Douane Nederland, Belastingdienst) issued Binding Tariff Information ruling NL-BTI-2021-01234, classifying substantially similar STS cranes and ASC systems under heading 8426 (CN 8426 19 00). While a BTI ruling issued by one member state is not legally binding on the customs authorities of other member states, it is highly relevant to the question of whether TSL's classification constituted "willful non-compliance" with a "known" obligation. An insured that classifies goods in conformity with a published ruling issued by a competent customs authority of an EU member state — on substantially similar goods — cannot reasonably be characterized as having acted in "willful non-compliance." On the contrary, TSL's classification was consistent with the considered position of at least one national customs authority within the European Union.
Genuine classification ambiguity confirmed by AADE's own actions. Perhaps the most compelling evidence that no "known legal obligation" existed is found in AADE's own conduct following TSL's BTI application. AADE referred TSL's BTI application to DG TAXUD under Article 34(10) of the UCC. The Article 34(10) referral procedure is a mechanism triggered specifically because customs authorities in different EU member states have issued conflicting BTI rulings on substantially similar goods. The very existence of this referral mechanism presupposes that the classification question is one on which reasonable customs authorities can — and do — disagree. If the classification were clear and beyond reasonable dispute, there would be no conflicting BTI rulings and no need for a DG TAXUD consultation. AADE's own recognition that the classification question warrants resolution at the EU level through inter-institutional consultation is, we submit, dispositive evidence that TSL's classification was not "willful non-compliance" with a "known" legal obligation. It was, at most, a reasonable position on one side of a genuinely contested classification question.
Divergent BTI rulings among member states. The divergence between the Netherlands BTI ruling NL-BTI-2021-01234 (classifying STS cranes and ASC systems under heading 8426) and the German BTI ruling DE-BTI-2020-05678 (classifying ASC systems under heading 8428) further confirms the existence of genuine regulatory ambiguity. Experienced customs professionals employed by two different national customs authorities examined the same type of equipment and reached opposite conclusions. A classification position shared by at least one EU member state's customs authority is, by definition, not a "deliberate disregard" of a known obligation. It is a reasonable exercise of judgment in the face of genuine legal uncertainty — precisely the type of situation in which the "willful non-compliance" exclusion has no application.
C. TSL Relied on a Licensed Customs Broker
TSL's customs declarations were not prepared by TSL's own employees acting without professional guidance. Rather, all customs declarations for the Hailong equipment imports were prepared and filed by Peloros Customs Agency S.A. ("Peloros"), a professionally licensed Greek customs brokerage firm. Peloros holds Greek Customs Broker License No. GR-CB-1287, issued to Stavros Liapis, its principal licensed customs broker. Peloros was engaged under a Customs Brokerage Agreement dated February 1, 2019, which predates the first importation.
Under the terms of the Customs Brokerage Agreement, Peloros was responsible for the classification and declaration of the imported equipment on TSL's behalf. Peloros independently selected the Combined Nomenclature classification codes for all 47 units based on equipment specifications, technical documentation, and commercial invoices provided by TSL and Hailong. Peloros did not classify the equipment at TSL's direction or instruction; it exercised its own professional judgment, informed by its knowledge of the Combined Nomenclature, the Explanatory Notes, and applicable customs practice.
TSL's reliance on a licensed customs broker with regulatory expertise and a legal duty of care to apply correct tariff classifications is the antithesis of "willful non-compliance." It demonstrates that TSL took affirmative steps to ensure that its customs declarations complied with applicable law. An insured that engages a licensed professional to handle its customs compliance obligations and follows that professional's classification determinations cannot credibly be accused of having "deliberately disregarded" a known legal obligation.
D. TSL's Classification Was Based on the Equipment's Objective Characteristics
TSL's classification of the STS gantry cranes and ASC systems under heading 8426 was not arbitrary or contrived. It was a substantively reasonable application of the Combined Nomenclature to the physical and functional characteristics of the equipment. The STS gantry cranes and ASC systems are, by their objective physical characteristics, "cranes" within the ordinary and technical meaning of heading 8426. They lift loads vertically by means of wire ropes and a spreader mechanism suspended from a trolley that travels along a horizontal boom or crossbeam, which is in turn supported by a gantry structure. This is the defining physical mechanism of a crane.
The manufacturer, Hailong Heavy Industries, designates both products as "cranes" in its commercial literature, model designations, and technical documentation. The STS units are marketed as the "QC-65 Quayside Container Crane," and the ASC units are marketed as the "ASC-40R Automated Stacking Crane." The European Federation of Materials Handling (FEM) classifies both STS and ASC equipment types as cranes for purposes of its technical standards. The International Organization for Standardization (ISO), in ISO 4301-1 (Cranes — Classification — General), likewise classifies both types as cranes. TSL's classification was therefore consistent not only with the manufacturer's own designation but also with the prevailing industry and international standards classifications.
In sum, TSL's classification was a substantively reasonable application of the Combined Nomenclature to the equipment's observable characteristics, supported by the manufacturer's designation and international engineering standards. It cannot be characterized as a "deliberate decision to disregard a known legal obligation."
E. AADE's Own Penalty Characterization Confirms Good Faith
Further confirmation that TSL's conduct does not rise to the level of "willful non-compliance" is found in the penalty characterization applied by AADE itself. AADE has applied an administrative penalty rate of 30% of additional duties assessed, totaling €509,124. This 30% rate is consistent with a good-faith classification error under Article 42(1) of the UCC and Article 77 of Commission Delegated Regulation (EU) 2015/2446.
Critically, AADE has not escalated the penalty to the higher rates available under Greek law for more culpable conduct. Under Article 147 of the Greek Customs Code (Law 2960/2001), AADE has the authority to impose penalties at rates of 100% of additional duties (for negligence) or 300% of additional duties (for fraud or willful non-compliance). AADE's decision to apply only the 30% rate — the lowest level available — reflects its own assessment that TSL's classification error, if it is an error, was made in good faith and without fraudulent or willful intent.
Moreover, AADE has not alleged fraud, willful non-compliance, or deliberate misconduct by TSL in any of its assessment notices, correspondence, or audit documentation. AADE has not referred the matter for criminal investigation or prosecution. AADE has not sought to impose any sanctions beyond the standard administrative penalty and interest charges applicable to good-faith classification disputes.
If the customs authority that conducted the audit and issued the assessment does not characterize TSL's conduct as willful or fraudulent — and affirmatively applies the penalty level reserved for good-faith errors — there is simply no factual basis for Oceanos, an insurer with no direct knowledge of TSL's customs operations, to invoke the "willful non-compliance" exclusion. Oceanos cannot reasonably maintain that TSL's conduct was willful when the very authority that identified the alleged classification error has concluded otherwise.
F. Conclusion on Section 4.3(a)
Every element of the "willful non-compliance" definition is absent from this case. There was no "deliberate decision" — TSL's classification was made by a licensed customs broker exercising independent professional judgment, based on the equipment's objective characteristics and consistent with the manufacturer's own designation. There was no "known legal obligation" to disregard — the classification of these equipment types as between headings 8426 and 8428 was unsettled at the EU level, as confirmed by conflicting BTI rulings among member states and AADE's own referral to DG TAXUD. And TSL acted in good faith, as confirmed by AADE's own penalty characterization.
The Section 4.3(a) exclusion is, on these facts, wholly inapplicable. Oceanos has no basis to reserve rights under this provision, and the reservation should be withdrawn.
IV. THE "DELIBERATE UNDERVALUATION" EXCLUSION (SECTION 4.3(b)) DOES NOT APPLY
A. Policy Language
Policy Section 4.3(b) provides that the Policy does not cover Loss arising from:
"the Insured's deliberate undervaluation of imported goods for the purpose of reducing customs duties payable."
This exclusion has two distinct elements, both of which must be present for the exclusion to apply. First, the undervaluation must be "deliberate" — that is, a conscious, intentional act rather than an inadvertent error or a reasonable interpretive position subsequently rejected by the customs authority. Second, the undervaluation must have been undertaken "for the purpose of reducing customs duties payable" — that is, there must be a specific duty-reduction motive animating the insured's valuation decision. Both elements must be established by the insurer, as the party asserting the applicability of a policy exclusion. As demonstrated below, neither element is present in this case.
B. TSL Had No Motive to Undervalue
The absence of any duty-reduction motive is, standing alone, fatal to Oceanos's reliance on the Section 4.3(b) exclusion. The reason is straightforward and dispositive.
TSL classified all of the Hailong equipment under CN 8426 41 00, which carries a 0% MFN duty rate. Under a 0% duty rate, the declared customs value of the imported goods has zero impact on the amount of customs duties payable. Whether TSL declared the customs value as €98,000,000 or €108,000,000 or any other figure, the customs duty payable under heading 8426 41 00 would have been exactly the same: zero. There was therefore no financial incentive whatsoever for TSL to understate the customs value of the equipment. Understating the value would have achieved no duty savings — none at all.
The valuation adjustments identified in AADE's Assessment Notice ADAN/2022/0074 only become relevant to TSL's duty liability if and to the extent that the classification is changed from CN 8426 41 00 (0% duty) to CN 8428 90 90 (2.2% duty). This reclassification is the subject of AADE's other Assessment Notice (ADAN/2022/0073), which TSL is actively contesting. At the time TSL made its customs declarations, TSL classified the goods at 0% — and therefore had no reason to manipulate the declared customs value for duty-reduction purposes.
The Section 4.3(b) exclusion expressly requires that the undervaluation be undertaken "for the purpose of reducing customs duties payable." Where the applicable duty rate is 0%, this purpose cannot exist. No rational economic actor would engage in deliberate undervaluation — an activity carrying significant legal risk — when the undervaluation would yield precisely zero financial benefit. The absence of any duty-reduction motive is a complete answer to Oceanos's reliance on Section 4.3(b).
C. TSL's Valuation Declarations Were Based on Reasonable Interpretation of the UCC
Even setting aside the absence of motive — which is in itself dispositive — TSL's customs value declarations were based on reasonable and well-supported interpretations of the customs valuation rules set forth in the Union Customs Code. AADE's valuation adjustments involve three categories of payments, each of which TSL addressed through a legitimate application of the UCC's valuation framework.
1. Technology License Fees (€4,900,000). TSL paid €4,900,000 to Hailong under a Technology License Agreement ("TLA") dated January 10, 2019. The TLA grants TSL a non-exclusive license to use the HaiControl Suite v4.2 crane control software, together with associated predictive maintenance algorithms and technical documentation, for a term of 10 years.
TSL excluded the license fees from the declared customs value of the imported equipment based on the reasonable position that these fees are not "royalties and licence fees related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods being valued" within the meaning of Article 71(1)(c) of the UCC. TSL's position was grounded in the following considerations:
(a) The TLA is a contractually independent agreement. Article 3.2 of the TLA expressly provides that the TLA is independent of and not contingent upon the purchase contracts for the equipment. The TLA was negotiated and executed separately from the equipment purchase agreements, at a separately negotiated price, and contains its own termination provisions.
(b) The license fee covers predominantly post-importation services and deliverables over the 10-year license term. These include ongoing software updates and patches, remote technical support, periodic on-site technical visits by Hailong engineers, access to an updated documentation portal, and engineer training programs. These are services relating to the use of the software in Greece after importation, not services relating to the manufacture or sale of the physical equipment.
(c) The license fees relate to the post-importation use and reproduction of software within Greece, not to the sale of the goods for export to Greece. The software was pre-installed on the cranes at the time of manufacture, but the TLA fee covers the right to update, modify, and reproduce the software over the subsequent decade — rights that are exercised entirely after importation.
Whether technology license fees of this nature must be added to customs value under Article 71(1)(c) UCC is a genuinely complex question of customs valuation law. The determination turns on whether the fees are "related to the goods," whether they are paid "as a condition of sale," and whether the license constitutes a royalty for the use of intellectual property embodied in the goods. These are questions on which the WCO's Technical Committee on Customs Valuation, the European Commission's Customs Valuation Committee, and national customs authorities have reached varying conclusions in different factual contexts. TSL's position is a reasonable interpretation of these rules — not "deliberate undervaluation."
2. Procurement Coordination Fee (€2,940,000). TSL paid €2,940,000 to Nereus Maritime Advisory Limited ("Nereus") under a Procurement Services Agreement ("PSA") dated December 1, 2018. TSL characterized the Nereus fee as a buying commission, which is deductible from customs value under Article 72(a) of the UCC. That provision states that "[c]ommission and brokerage, except buying commissions" shall be included in customs value — implying that buying commissions are excluded.
The characterization of a procurement agent's fee as either a buying commission (deductible) or a selling commission (includable) is a fact-intensive determination governed by Article 127(1) of UCC Implementing Regulation (EU) 2015/2447 and by the WCO's Commentary 17.1 on the treatment of buying commissions. The critical question is whether the agent acted on behalf of the buyer or the seller in the transaction. Where the agent acted exclusively on behalf of the buyer — identifying potential suppliers, evaluating proposals, negotiating terms, and coordinating procurement logistics — the agent's fee is properly characterized as a buying commission.
TSL's characterization was based on the contractual terms of the PSA, which engaged Nereus to identify, evaluate, and recommend suitable manufacturers of port cargo-handling equipment, to coordinate the procurement process on TSL's behalf, and to supervise quality assurance inspections at the manufacturer's facilities. Nereus was compensated by TSL, not by Hailong. Nereus had no contractual or commercial relationship with Hailong. Nereus's obligations under the PSA ran exclusively to TSL.
Whether the Nereus fee ultimately qualifies as a deductible buying commission or an includable selling commission or intermediary markup is a question of fact and law. It is the type of valuation question that regularly arises in post-clearance audits and is resolved through administrative proceedings — not evidence of deliberate undervaluation. TSL adopted a reasonable position, supported by the contractual terms, and declared the Nereus fee transparently in its commercial documentation.
3. Commissioning Services (€2,100,000). TSL excluded €2,100,000 in commissioning services from the declared customs value of the imported equipment. TSL's position was based on Article 72(e) of the UCC, which expressly permits the exclusion from customs value of:
"charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation."
The commissioning services at issue were performed entirely in Greece, at TSL's terminal facilities, after the equipment had been physically imported into the customs territory of the European Union and cleared through customs. The commissioning work involved the on-site installation, testing, calibration, and functional verification of the cranes and ASC systems — activities that, by their nature, can only take place after the equipment has arrived at its final destination and been installed in its operational environment.
TSL's position has express textual support in Article 72(e) of the UCC. The commissioning services fall squarely within the statutory language excluding "assembly" and "technical assistance" charges "undertaken after importation." This is the stronger reading of the statute, and TSL submits that its position is correct as a matter of law, not merely reasonable. In any event, TSL's treatment of these charges is manifestly not "deliberate undervaluation" — it is a straightforward application of a statutory exclusion that is directly on point.
D. The Valuation Positions Were Adopted Openly, Not Covertly
It is important to emphasize that TSL's customs declarations accurately reflected the CIF purchase prices stated in the four Hailong purchase contracts. The technology license fees, procurement coordination fees, and commissioning costs were documented in separate, commercially genuine agreements with separate pricing structures. These agreements were available to AADE during the post-clearance audit and were, in fact, the basis for AADE's valuation adjustments.
There was no concealment of any payment. There was no falsification of commercial invoices. There were no secret side payments, under-the-table arrangements, or efforts to disguise the true consideration flowing between TSL and its counterparties. AADE's valuation dispute concerns the legal characterization of openly documented, arms-length payments — specifically, whether those payments must be included in the transaction value under the UCC's valuation rules. This is a question of law, not a question of honesty. The transparent manner in which TSL structured and documented its commercial arrangements is wholly inconsistent with "deliberate undervaluation."
E. AADE's Own Assessment Does Not Allege Deliberate Undervaluation
Consistent with the foregoing, AADE's own Assessment Notice ADAN/2022/0074 does not allege that TSL deliberately understated the customs value of the imported equipment or engaged in fraudulent valuation practices. The Assessment Notice is a post-clearance audit finding in which AADE applies the UCC valuation rules to documented payments and reaches a different legal conclusion than the one adopted by TSL and its customs broker. AADE has not characterized TSL's conduct as deliberate or fraudulent. AADE has applied the standard 30% administrative penalty rate — the rate applicable to good-faith errors — rather than the enhanced rates available for negligent or willful misconduct. As with the classification issue, the customs authority's own characterization of TSL's conduct is powerful evidence that the "deliberate undervaluation" exclusion has no application.
F. Conclusion on Section 4.3(b)
The "deliberate undervaluation" exclusion under Section 4.3(b) requires both deliberate conduct and a duty-reduction purpose. Neither element is present in this case. TSL had no motive to undervalue its imports, because the applicable duty rate under its declared classification was 0%. TSL's valuation positions were based on reasonable interpretations of the UCC valuation rules, supported by the statutory text and adopted on the advice of qualified professionals. TSL's customs declarations were transparent and consistent with the commercial documentation. And AADE itself has not alleged deliberate undervaluation or fraudulent conduct.
Section 4.3(b) is inapplicable to the facts of this claim, and Oceanos's reservation under this provision is without foundation and should be withdrawn.
V. THE POLICY PROVIDES CLEAR COVERAGE FOR THIS CLAIM
A. The Insuring Clause Is Satisfied
Having demonstrated that neither of the exclusions invoked by Oceanos applies, we turn to the affirmative case for coverage. The Policy's insuring clause is clearly satisfied.
Policy Section 2.4 provides coverage for:
"Loss, including Defense Costs and Assessed Amounts, incurred by the Insured arising from a Tax or Regulatory Authority Claim first made against the Insured during the Policy Period, provided that such Claim does not arise from Fraud, willful non-compliance, or deliberate evasion."
Each element of this insuring clause is met:
Tax or Regulatory Authority Claim. The AADE Assessment Notices are a "Tax or Regulatory Authority Claim" within the meaning of the Policy. They constitute a written demand from a customs authority of an EU member state alleging underpayment of customs duties and import VAT arising from the reclassification of imported goods and the adjustment of declared customs values. This is precisely the type of claim contemplated by Section 2.4.
First made during the Policy Period. The Policy Period runs from April 1, 2021, to March 31, 2023. The Assessment Notices were issued on August 12, 2022, and received by TSL on approximately August 16, 2022 — Squarely within the Policy Period. The claim was therefore "first made against the Insured during the Policy Period" as required by Section 2.4.
Not arising from Fraud, willful non-compliance, or deliberate evasion. As demonstrated at length in Sections III and IV above, the claim does not arise from Fraud, willful non-compliance, or deliberate evasion of any customs obligation. TSL acted in good faith, in reliance on professional advice, consistent with published EU precedent, and with no motive for evasion.
All elements of the insuring clause are satisfied, and TSL is entitled to coverage under the Policy.
B. Covered Losses
TSL's covered losses under the Policy include the following categories:
Defense Costs. TSL has incurred, and continues to incur, reasonable attorneys' fees and expenses in defending the AADE assessment. These include fees of Calderwood & Harkness LLP (international insurance and regulatory counsel), Vournas & Theodorakis Dikigiriko Grafeio (local Greek counsel — Alexandros Vournas and Maria-Christina Georgiou), Argonaut Trade Consulting GmbH (independent customs classification expert — Dr. Lukas Brenner), and Kestrel & Palladian LLP (customs valuation advisory — Spyros Makris). All of these fees and expenses constitute "Defense Costs" within the meaning of the Policy and are covered under Section 2.4.
Assessed Amounts. The additional customs duties assessed by AADE — totaling €1,697,080, comprising €1,478,400 in classification-related duties and €218,680 in valuation-related duties — constitute "Assessed Amounts" within the meaning of the Policy. To the extent that the import VAT adjustments of €2,740,416 (comprising €354,816 in VAT on the duty differential and €2,385,600 in VAT on the increased customs value) also constitute covered "Assessed Amounts" under the Policy, TSL claims coverage for those amounts as well.
Note regarding penalties and interest. TSL acknowledges that the administrative penalty of €509,124 and the estimated late payment interest of approximately €3,872,000 may not constitute covered "Loss" under the Policy, as such charges are typically distinguished from duties and assessed amounts in financial lines policies. TSL does not seek coverage for penalties or interest at this time but expressly reserves the right to do so in the future if a more detailed analysis of the Policy terms supports such coverage.
C. Policy Limits
The applicable sublimit for customs and excise duty disputes under Policy Section 3.2(d) is €3,000,000. The Policy retention (deductible) applicable to this claim under Section 3.3 is €250,000. The maximum net coverage recoverable by TSL under the Policy for this claim is therefore €2,750,000.
TSL's combined defense costs and assessed duties exposure significantly exceeds the sublimit. The additional customs duties alone total €1,697,080, and defense costs are substantial and ongoing. The full sublimit of €3,000,000 is at risk. TSL urges Oceanos to recognize the magnitude of the exposure and the clear applicability of coverage, and to begin fulfilling its obligations under the Policy without further delay.
VI. REQUESTS
In light of the foregoing, TSL respectfully requests that Oceanos take the following actions:
1. Withdraw the Reservation of Rights to the extent it relies on the willful non-compliance exclusion (Section 4.3(a)) and the deliberate undervaluation exclusion (Section 4.3(b)), as neither exclusion applies on the facts of this matter. The factual record demonstrates that TSL acted in good faith, in reliance on professional advice, consistent with published EU precedent, and without any motive for duty evasion.
2. Confirm coverage under Section 2.4 of the Policy for both Defense Costs and Assessed Amounts arising from the AADE customs classification and valuation dispute, subject to the Policy's sublimit of €3,000,000 (Section 3.2(d)) and retention of €250,000 (Section 3.3).
3. Commence advancement of Defense Costs as incurred, as required by Section 5.3 of the Policy. TSL has been incurring defense costs since September 2022, when it first retained legal counsel and expert advisors in connection with the AADE assessment. These costs are ongoing and will continue to accrue as TSL defends the administrative objections, the BTI application, and the DG TAXUD consultation process. TSL requests reimbursement of defense costs already incurred and advancement of future defense costs on an ongoing basis.
4. Provide a written coverage determination within thirty (30) days of the date of this letter — that is, by no later than January 11, 2023 — confirming the foregoing. TSL requires prompt certainty regarding its insurance coverage in order to manage its defense strategy effectively and to avoid unnecessary prejudice from Oceanos's continued reservation.
VII. RESERVATION OF RIGHTS
TSL reserves all rights under the Policy, at law, and in equity, including without limitation the following:
(a) The right to recover all Defense Costs and Assessed Amounts within the Policy sublimit and in accordance with the Policy's terms and conditions;
(b) The right to pursue a claim for breach of the insurance contract if Oceanos improperly denies or unreasonably delays coverage to which TSL is entitled under the Policy;
(c) The right to pursue a bad-faith denial of coverage claim if Oceanos unreasonably maintains its reservation of rights in the face of the facts set forth herein, which clearly demonstrate the inapplicability of the invoked exclusions;
(d) The right to seek consequential damages arising from any improper denial of coverage, including any additional costs, interest, penalties, or other prejudice suffered by TSL as a result of Oceanos's failure to advance defense costs in a timely manner; and
(e) All other rights, claims, and remedies available to TSL under the Policy, at law, in equity, or by statute.
Nothing in this letter, and no action or forbearance by TSL, shall constitute or be construed as a waiver of any right, claim, or remedy available to TSL, whether under the Policy, at common law, in equity, or under any applicable statute or regulation.
VIII. CONCLUSION
The facts of this matter overwhelmingly demonstrate that TSL acted in good faith at all times. TSL classified the imported equipment in a manner consistent with a published BTI ruling issued by the Netherlands customs authority (NL-BTI-2021-01234). TSL relied on a licensed and experienced Greek customs broker, Peloros Customs Agency S.A., to prepare and file its customs declarations. TSL declared a classification that carried a 0% duty rate, eliminating any conceivable motive for duty evasion or undervaluation. And TSL's valuation declarations were based on reasonable, well-supported interpretations of the UCC valuation rules, applied to openly documented and commercially genuine transactions.
The AADE dispute arises from a genuine classification ambiguity that AADE itself has acknowledged by referring TSL's BTI application to DG TAXUD under Article 34(10) of the UCC — a mechanism that exists precisely because different EU member states have reached conflicting conclusions on the same classification question. The valuation dispute concerns the legal characterization of transparently documented payments under complex customs valuation rules on which reasonable professionals can disagree.
This is precisely the type of regulatory risk — the risk that a good-faith customs position will be challenged by a regulatory authority in a post-clearance audit — that the Financial Lines Policy was designed to cover. The Policy's exclusions for fraud, willful non-compliance, and deliberate undervaluation are directed at dishonest and intentional misconduct, not at reasonable classification and valuation positions that happen to be disputed by a customs authority. Extending those exclusions to the facts of this case would render the Policy's customs coverage illusory.
TSL urges Oceanos in the strongest possible terms to confirm coverage promptly and to begin fulfilling its obligations under the Policy. TSL has been patient and cooperative in the weeks since the RoR Letter was issued, but the continued reservation of rights is causing real prejudice to TSL as it defends a substantial customs assessment without the benefit of the insurance coverage it purchased. TSL trusts that Oceanos will give this letter the careful consideration it warrants and will respond within the requested timeframe.
We remain available to discuss this matter further at Oceanos's convenience. Please do not hesitate to contact the undersigned directly.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
James Prentice Partner Direct Tel: +44 (0)20 7438 6127
Email: j.prentice@calderwoodharkness.com
(On behalf of Thalassa Shipping & Logistics SA)
cc:
Fiona Hartwell, Senior Account Executive, Aether Insurance Brokers Limited Nikolaos Andreadis, Chairman & CEO, Thalassa Shipping & Logistics SA Elena Papadimitriou, CFO, Thalassa Shipping & Logistics SA
Component | Amount (€)
Additional customs duties (classification) | 1,478,400
Additional customs duties (valuation) | 218,680
Total additional customs duties | 1,697,080
Import VAT on duty differential (24%) | 354,816
Import VAT on increased customs value (24% × €9,940,000) | 2,385,600
Total import VAT adjustments | 2,740,416
Administrative penalty (30% of additional duties) | 509,124
Estimated late payment interest (0.73%/month) | ~3,872,000
Total mid-case AADE claim | ~8,818,620

PRIVILEGED & CONFIDENTIAL

I. BACKGROUND AND SUMMARY OF THE CLAIM

V. THE POLICY PROVIDES CLEAR COVERAGE FOR THIS CLAIM

VI. REQUESTS

VII. RESERVATION OF RIGHTS

VIII. CONCLUSION

CALDERWOOD & HARKNESS LLP

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