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CALDERWOOD & HARKNESS LLP

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It is intended solely for internal use by Calderwood & Harkness LLP and authorized personnel of Thalassa Shipping & Logistics SA. Any distribution, reproduction, or disclosure to third parties without the prior written consent of Calderwood & Harkness LLP is strictly prohibited.

MEMORANDUM

TO: File (C&H-2022-ITS-04781)

FROM: Garrett Simmons, Associate, Tax Group

DATE: November 10, 2022

RE: Customs Valuation Analysis — AADE Valuation Adjustments Under UCC Articles 70–74; Additional Duty Assessment Notice AADE/ADAN/2022/0074

I. Issues Presented

This memorandum analyzes three discrete categories of valuation adjustments proposed by the Independent Authority for Public Revenue (Ανεξάρτητη Αρχή Δημοσίων Εσόδων, "AADE") in Additional Duty Assessment Notice AADE/ADAN/2022/0074, dated August 12, 2022. AADE contends that each of the following amounts should be added to the customs value of marine cargo-handling equipment imported by Thalassa Shipping & Logistics SA ("TSL") from Hailong Heavy Industries Co., Ltd. ("Hailong" or "HHI"), a Chinese manufacturer based in Ningbo, Zhejiang Province, under the provisions of the Union Customs Code (Regulation (EU) No. 952/2013, "UCC"):

1. Technology license fees of €4,900,000 paid by TSL to Hailong under a Technology License Agreement ("TLA") dated January 10, 2019, calculated at 5% of the aggregate equipment purchase price of €98,000,000. AADE contends these fees constitute royalties and license fees related to the imported goods and paid as a condition of sale, includable in customs value under Article 71(1)(c) UCC.

2. Procurement coordination fees of €2,940,000 paid by TSL to Nereus Maritime Advisory Limited ("Nereus"), a Cyprus-registered company, under a Procurement Services Agreement dated December 1, 2018, calculated at 3% of the aggregate contract value of €98,000,000. AADE contends that this fee is not a deductible buying commission under Article 72(a) UCC but rather a selling commission or procurement markup includable under Article 71(1)(a)(i) UCC.

3. Commissioning services costs of €2,100,000 invoiced by Hailong under Contract HHI-TSL-2021-004, dated February 28, 2021. AADE contends these costs constitute a "condition of sale" cost properly added to the customs value of the imported equipment under Article 71(1)(b) UCC.

The total valuation adjustment contended by AADE across all three categories is €9,940,000 (€4,900,000 + €2,940,000 + €2,100,000). These adjustments are the subject of AADE's Additional Duty Assessment Notice AADE/ADAN/2022/0074, dated August 12, 2022. Assuming that the reclassification of the imported equipment under the companion Additional Duty Assessment Notice AADE/ADAN/2022/0073 is upheld — resulting in a 2.2% conventional duty rate rather than the 0% rate originally declared — the additional duty liability attributable solely to the valuation adjustment would be €9,940,000 × 2.2% = €218,680. This figure does not include downstream exposure from VAT implications, penalties, or interest, which are addressed in Section V below.

This memorandum should be read in conjunction with the companion Classification Analysis Memorandum (C&H-2022-ITS-04782), dated November 8, 2022, which addresses the underlying tariff classification dispute under ADAN/2022/0073.

II. Short Answers

Technology license fees (€4,900,000): AADE's position that the technology license fees should be added to customs value under Article 71(1)(c) UCC has substantial merit but is not clearly correct. TSL's defense — that the TLA relates primarily to post-importation services and constitutes a separate, independent contract — is viable but faces significant factual headwinds. The five-day gap between execution of the TLA and the first purchase contract, the fee calculation methodology (5% of equipment purchase price), the cross-default provision in TLA Article 8.1, and the essential nature of the HaiControl Suite software to the equipment's operation all weigh in favor of AADE's position. However, the TLA's ten-year term, which covers substantial post-importation services (software updates, technical support, training, documentation access), and the separate contractual structure provide TSL with colorable arguments. An apportionment approach — allocating only the portion of the fee attributable to the imported goods to customs value — may offer a viable compromise. Risk of inclusion assessed at approximately 55–65%.

Procurement coordination fees (€2,940,000): AADE's position that the Nereus fee is not a genuine buying commission is strong. TSL's defense that the Nereus fee qualifies as a deductible buying commission under Article 72(a) UCC is challenging given Nereus's related-party status. The Andreadis family holds a combined 70% economic interest in Nereus (40% through Andreadis Family Holdings LLC, which also controls TSL at 62%, and 30% through Eleni Andreadis). Compounding this structural concern, Nereus's Managing Director, Konstantinos Melas, is a former Hailong sales agent for the Southern European market (approximately 2012–2017) and was personally responsible for introducing Hailong to TSL. The temporal proximity of Nereus's incorporation in 2018 to the commencement of TSL's procurement process, combined with the limited contemporaneous documentation of genuine buyer-side procurement services, creates a fact pattern that is deeply problematic for TSL's position. Under WCO Commentary 17.1 and CJEU case law, customs authorities are entitled to look beyond the label given by the parties and examine the substance of the agent's role. Risk of inclusion assessed at approximately 70–80%.

Commissioning services (€2,100,000): TSL has a reasonable defense that commissioning services are post-importation costs excludable from customs value under Article 72(e) UCC. The express language of Article 72(e) permits exclusion of "charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation." The commissioning services at issue — final assembly, testing, calibration, and commissioning of STS gantry cranes and ASC systems — were performed entirely at TSL's terminal facilities in Greece, after the equipment was imported and cleared through customs at the Port of Piraeus. The services were separately priced under a distinct contract (HHI-TSL-2021-004), executed after the base equipment purchase contracts. TSL's defense is strengthened if it can document that it had the option to engage an independent commissioning contractor and that the commissioning price was negotiated at arm's length. AADE's counter-argument — that commissioning was part of Hailong's delivery obligations under the base purchase contracts and that contractual separation is form over substance — has some force but faces the express statutory text of Article 72(e). Risk of inclusion assessed at approximately 35–45%.

III. Legal Framework

A. Transaction Value Method (Article 70 UCC)

The primary method of customs valuation under Regulation (EU) No. 952/2013 (the Union Customs Code) is the transaction value method set forth in Article 70. This method reflects the longstanding principle — adopted from Article VII of the General Agreement on Tariffs and Trade (GATT) and codified in the WTO Agreement on Implementation of Article VII of GATT 1994 (the "WTO Valuation Agreement") — that customs value should be based, to the greatest extent possible, on the actual price of the imported goods.

Article 70(1) UCC provides that the customs value of imported goods shall be their "transaction value, that is the price actually paid or payable for the goods when sold for export to the customs territory of the Union, adjusted, where appropriate, in accordance with Articles 71 and 72." The price actually paid or payable is defined as the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods, encompassing all payments made or to be made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller.

The transaction value method is the preferred and most frequently applied method of customs valuation across the European Union. Alternative valuation methods under Articles 73 and 74 UCC — including the transaction value of identical goods, the transaction value of similar goods, the deductive method, and the computed method — are applied sequentially only when the transaction value cannot be determined or accepted under Article 70.

Critically for the present analysis, the transaction value is not simply the invoiced price as stated in the commercial documentation. Article 70(2) UCC specifies that the price actually paid or payable shall include all payments made or to be made as a condition of sale by the buyer, whether to the seller or to a third party. This principle is central to AADE's contention that payments made by TSL to entities other than Hailong — specifically, the technology license fees and the Nereus procurement fee — should nonetheless be included in customs value because they were made as a condition of the sale of the imported equipment.

For related-party transactions, Article 70(3)(d) UCC provides an additional safeguard: the transaction value may be accepted only where the customs authorities are satisfied, on the basis of an examination of the circumstances of the sale, that the relationship between the buyer and seller did not influence the price. While TSL and Hailong are not themselves related parties within the meaning of Article 127 of Implementing Regulation (EU) 2015/2447, the related-party dimension arises in the context of Nereus, which is related to TSL through the Andreadis family's controlling interests in both entities.

B. Additions to Transaction Value (Article 71 UCC)

Article 71 UCC mandates that certain costs be added to the price actually paid or payable in order to arrive at the customs value, provided those costs are not already included in the declared price. The additions relevant to this analysis are as follows:

Article 71(1)(a)(i) — Commissions and brokerage, except buying commissions. All commissions and brokerage fees, other than buying commissions, incurred by the buyer in connection with the importation of goods must be added to the transaction value. This provision captures selling commissions (fees paid to agents acting on behalf of the seller) and procurement intermediary fees where the intermediary does not qualify as a genuine buying agent. The distinction between a buying commission (deductible) and a selling commission or general intermediary fee (includable) is a central issue in the Nereus analysis below.

Article 71(1)(b) — Assists and "condition of sale" costs. The value of goods and services supplied by the buyer free of charge or at reduced cost for use in connection with the production or sale for export of the imported goods must be added to the transaction value. This category encompasses "assists" — including materials, tools, engineering, development work, artwork, design work, and plans and sketches undertaken elsewhere than in the customs territory of the Union — as well as costs that are required as a condition of the sale of the imported goods. AADE invokes this provision in connection with the commissioning services costs, arguing that commissioning was a condition of the sale of the base equipment.

Article 71(1)(c) — Royalties and license fees. Royalties and license 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, must be added to the transaction value to the extent that such royalties and license fees are not already included in the price actually paid or payable. This provision is central to AADE's challenge to TSL's treatment of the technology license fees. Two cumulative conditions must be satisfied for inclusion: (i) the royalties or license fees must be "related to the goods being valued," and (ii) the payment must be a "condition of sale" of those goods.

C. Deductions from Transaction Value (Article 72 UCC)

Article 72 UCC identifies certain costs that shall not be included in the customs value, provided they are distinguishable from the price actually paid or payable for the imported goods. The deductions relevant to this analysis include:

Article 72(a) — Buying commissions. The cost of buying commissions — defined as fees paid by an importer to its agent for the service of representing the importer in the purchase of the goods being valued — may be deducted from or excluded from the customs value. This exclusion is the basis for TSL's characterization of the Nereus procurement fee as a buying commission. The burden of establishing that a payment constitutes a buying commission rests with the importer, and customs authorities are entitled to examine the substance of the agent's role rather than relying on the contractual label.

Article 72(e) — Post-importation charges. Charges for construction, erection, assembly, maintenance, or technical assistance, undertaken after importation of the goods into the customs territory of the Union, may be excluded from customs value. This provision is the foundation of TSL's defense regarding the commissioning services costs. The rationale is straightforward: costs incurred after the goods have entered the customs territory and cleared customs should not inflate the dutiable value, because customs duty is assessed on the value of the goods as they are at the point of importation, not as they are after post-importation work has been performed.

D. Implementing Regulation (EU) 2015/2447

Commission Implementing Regulation (EU) 2015/2447 of November 24, 2015, laying down detailed rules for implementing certain provisions of Regulation (EU) No. 952/2013, provides further guidance on the application of the customs valuation provisions of the UCC. Articles 127 through 144 of the Implementing Regulation address customs valuation in detail and are essential to the analysis of the issues presented in this memorandum.

Article 127(1) — Definition of buying commission. Article 127(1) defines a "buying commission" as a fee paid by an importer to its agent for the service of representing the importer in the purchase of the goods being valued. For a commission to qualify as a buying commission excludable under Article 72(a) UCC, the agent must act exclusively on behalf of the buyer. The agent must not simultaneously represent the seller's interests or act in a dual capacity. This definition is critical to the Nereus analysis: AADE contends that Nereus did not act exclusively on behalf of TSL and therefore the fee cannot be characterized as a buying commission.

Articles 136–137 — Royalties and license fees. These provisions elaborate on the criteria for including royalties and license fees in customs value under Article 71(1)(c) UCC. Two requirements must be met cumulatively: the royalty or license fee must be "related to the goods being valued" (Article 136), and the payment must be made "as a condition of sale" (Article 137). A royalty or license fee is "related to the goods" when it is paid for the right to use intellectual property that is incorporated in or embodied by the imported goods, or when the goods cannot be used, resold, or otherwise disposed of without the licensed intellectual property. A payment constitutes a "condition of sale" when the seller or a person related to the seller requires the buyer to make the payment as a prerequisite to the sale of the goods for export.

Treatment of related-party transactions. The Implementing Regulation addresses transactions between related parties and provides that the relationship between buyer and seller does not, in itself, constitute grounds for regarding the transaction value as unacceptable. However, where the circumstances surrounding the sale indicate that the relationship influenced the price, the customs authorities are entitled to examine the matter further and, if necessary, reject the declared transaction value.

E. WCO Technical Committee on Customs Valuation

The Technical Committee on Customs Valuation, established under the WTO Valuation Agreement and administered by the World Customs Organization ("WCO"), has issued numerous commentaries, advisory opinions, case studies, and studies that provide interpretive guidance on customs valuation issues. While WCO instruments are not legally binding on EU Member States or the CJEU, they carry significant persuasive authority and are regularly cited by customs authorities and courts in the European Union.

The following WCO instruments are relevant to this analysis:

• Commentary 17.1 — Buying Commissions. This commentary examines the criteria for distinguishing a genuine buying commission (excludable under Article 72(a) UCC) from a selling commission or other intermediary fee (includable under Article 71(1)(a)(i) UCC). Commentary 17.1 identifies several "red flags" that may indicate a purported buying commission is not genuine, including where the agent has a relationship with the seller, where the agent is related to the buyer, where there is limited evidence of genuine procurement services performed on behalf of the buyer, and where the fee is calculated as a percentage of the purchase price. As discussed in Section IV.B below, several of these red flags are present in the Nereus fact pattern.

• Commentary 25.1 — Royalties and License Fees. This commentary provides guidance on the "related to the goods" and "condition of sale" requirements for inclusion of royalties and license fees in customs value. Commentary 25.1 addresses, among other scenarios, the treatment of software licenses where the licensed software is integral to the operation of the imported goods. The commentary supports the inclusion of license fees in customs value where the software is pre-installed on the goods at the time of importation and is necessary for the goods to function as intended.

• Advisory Opinion 4.9 — Condition of Sale. This advisory opinion examines circumstances in which a payment may be considered a "condition of sale" for purposes of Article 71(1)(c) UCC. It addresses both express contractual conditions (where the seller explicitly requires the buyer to make the payment as a prerequisite to the sale) and implied conditions (where the circumstances of the transaction indicate that the payment was, in substance, a prerequisite, even if not expressly stated in the sales contract).

• Advisory Opinion 4.17 — Apportionment of Royalties. This advisory opinion recognizes that where a royalty payment covers both elements related to the imported goods and elements not related to the imported goods (e.g., post-importation services), apportionment is appropriate. Only the portion of the royalty that is related to the imported goods and paid as a condition of sale need be included in customs value.

The case law of the Court of Justice of the European Union ("CJEU") provides binding interpretive guidance on the UCC's valuation provisions. Two CJEU decisions are particularly relevant:

• Case C-230/08, *Dansk Transport og Logistik* (2010). The CJEU held that royalties related to the imported goods and paid as a condition of sale must be included in the customs value. The Court confirmed that both the "related to the goods" and "condition of sale" requirements must be satisfied cumulatively, and that the analysis must be conducted on the basis of all the relevant circumstances of the transaction.

• Case C-59/16, *HAVI Logistics* (2017). The CJEU addressed the classification of payments to intermediaries in customs valuation. The Court held that the classification of a payment as a buying commission, selling commission, or other intermediary fee depends on the "actual role played by the agent in the transaction, assessed on the basis of all the facts." The label assigned by the parties is not determinative; customs authorities must examine the substance of the agent's functions, the nature of the services provided, and the relationship between the agent and the buyer and seller.

IV. Analysis

A. Technology License Fees (€4,900,000)

1. Factual Background. TSL and Hailong entered into a Technology License Agreement ("TLA") on January 10, 2019. Under the TLA, Hailong grants TSL a non-exclusive license to use Hailong's proprietary crane control software, known as the "HaiControl Suite v4.2," together with Hailong's predictive maintenance algorithms (the "HaiPredict module") and access to Hailong's technical documentation library, comprising approximately 12,000 pages of engineering manuals, schematics, maintenance protocols, and operational guidelines.

The HaiControl Suite v4.2 is the integrated software platform that operates the automated functions of the imported equipment, including the anti-sway system for ship-to-shore ("STS") gantry cranes, automated container positioning, and the automated stacking control system for automated stacking cranes ("ASCs"). Without the HaiControl Suite, the cranes can be operated only in manual mode, with significantly reduced throughput capacity and without the precision-positioning capabilities that are central to the operational requirements of TSL's terminal operations. The HaiPredict module provides predictive maintenance analytics, using sensor data from the equipment to forecast component failures and optimize maintenance scheduling.

The license fee under the TLA is calculated at 5% of the aggregate equipment purchase price. The aggregate equipment purchase price across all Hailong purchase contracts is €98,000,000, yielding a total license fee of €4,900,000. This fee is payable in three installments:

• €1,960,000 — paid in March 2019

• €1,470,000 — paid in July 2020

• €1,470,000 — paid in March 2022

The TLA was executed on January 10, 2019 — five days before the first purchase contract, Contract HHI-TSL-2019-001, dated January 15, 2019 (covering STS gantry cranes). The recitals of the TLA expressly reference TSL's intention to purchase marine cargo-handling equipment from Hailong, stating that "the Licensee intends to acquire certain marine cargo-handling equipment manufactured by the Licensor and wishes to secure a license for the proprietary technology required for the optimal operation of such equipment." This language in the TLA's recitals is significant because it establishes an express factual link between the TLA and the contemplated equipment purchases.

Article 3.2 of the TLA provides that the agreement is "independent of and supplemental to any equipment purchase agreement that may be entered into between the parties." TSL relies on this provision to support its position that the TLA is a standalone contract, separate from the purchase agreements. However, this independence clause is substantially undermined by Article 8.1 of the TLA, which contains a cross-default provision: Hailong may terminate the TLA if TSL fails to execute an equipment purchase agreement within 90 calendar days of the TLA's effective date. This cross-default provision creates a direct contractual linkage between the TLA and the purchase agreements, notwithstanding the independence language in Article 3.2.

The term of the TLA is ten years from the date of first commercial operation of the last piece of equipment installed under the purchase contracts. Given the phased delivery schedule, the TLA term is expected to extend through at least 2033. The TLA covers the following services over this ten-year period:

• Initial installation of the HaiControl Suite v4.2 on the imported equipment (included in the CIF equipment price under the purchase contracts)

• Software updates and upgrades to the HaiControl Suite throughout the license term

• Remote 24/7 technical support via Hailong's Operations Center in Ningbo

• Two on-site technical visits per year by Hailong engineers to TSL's terminal facilities in Greece

• Access to the complete HaiControl Suite technical documentation library (approximately 12,000 pages, updated periodically)

• Training of up to 20 TSL engineers per year at Hailong's training facility in Ningbo or on-site at TSL's terminal

It is important to note that the initial software installation — the component most directly related to the imported goods at the time of importation — is included in the declared CIF price of the equipment under the purchase contracts. TSL's position is that the TLA fee covers the ongoing post-importation services described above, not the initial software installation.

2. AADE's Position. AADE relies on Article 71(1)(c) UCC, which requires that royalties and license fees related to the goods being valued, paid as a condition of sale, be added to the transaction value. AADE's analysis proceeds along two axes.

First, AADE contends that the license fees are "related to the goods" because the HaiControl Suite v4.2 is essential to the operation of the imported equipment. Without the software, the cranes' automated functions — anti-sway, container positioning, and automated stacking — cannot operate. The equipment was designed, manufactured, and marketed by Hailong as an integrated system in which the hardware and software function as inseparable components. AADE argues that the HaiControl Suite is not a generic, interchangeable software product but a proprietary system specifically engineered for Hailong's equipment, which cannot practically be replaced by third-party software or manual operation without rendering the equipment significantly less functional and commercially uncompetitive. This argument is supported by WCO Commentary 25.1, which recognizes that where software is integral to the function of the imported goods, license fees for that software are "related to the goods" for purposes of customs valuation.

Second, AADE contends that the license fees were paid "as a condition of sale" of the imported equipment. AADE advances several factors in support of this conclusion:

• Temporal proximity: The TLA was executed on January 10, 2019, just five days before the first purchase contract (HHI-TSL-2019-001, dated January 15, 2019). This near-simultaneous execution demonstrates that the TLA and the purchase contract were components of a single commercial transaction rather than independent agreements.

• Fee calculation methodology: The license fee is calculated as a percentage (5%) of the aggregate equipment purchase price (€98,000,000). This methodology directly ties the license fee to the price of the imported goods, suggesting that the license fee is effectively an extension of the purchase price rather than an independent charge for separately-valued services.

• Practical precondition to purchase: AADE contends that Hailong would not have sold the equipment to TSL without TSL's commitment to the TLA. The cross-default provision in TLA Article 8.1, which permits Hailong to terminate the TLA if TSL fails to execute a purchase agreement within 90 days, is read by AADE as evidence that the TLA and the purchase agreements were, in commercial substance, interdependent: Hailong would not grant a software license without an equipment sale, and — AADE contends — Hailong would not sell equipment without a companion software license.

• Equipment functionality depends on licensed software: Operating the equipment without the HaiControl Suite would be commercially impractical. TSL would not have purchased the equipment without the assurance of a software license, and Hailong would not have expected TSL to operate the equipment without its proprietary software.

• Cross-default provision (TLA Article 8.1): This provision directly links the TLA to the purchase agreements, creating a contractual mechanism that makes the TLA contingent on, and a condition of, the equipment sale.

• Hailong market practice: AADE's preliminary investigation indicates that Hailong does not sell its marine cargo-handling equipment without a companion technology license. This is consistent with the integrated nature of the hardware-software system and further supports the conclusion that the license is, in practice, a condition of the sale.

AADE cites CJEU Case C-230/08, Dansk Transport og Logistik, for the proposition that royalties related to the imported goods and paid as a condition of sale must be included in customs value. AADE also references WCO Commentary 25.1 for the principle that software integral to the functioning of the imported goods is "related to the goods" for valuation purposes.

3. TSL's Defense. TSL's defense proceeds along several lines, each designed to challenge one or both of the cumulative requirements for inclusion under Article 71(1)(c) UCC.

First, TSL argues that the license fees relate primarily to post-importation services rather than to the imported goods themselves. The TLA has a ten-year term and covers an extensive suite of ongoing services — software updates and upgrades, remote 24/7 technical support, on-site technical visits, documentation access, and engineer training — all of which are provided after importation. TSL characterizes the TLA as a long-term technology support agreement, not a payment for the right to use software embedded in the imported goods at the time of importation. The initial installation of the HaiControl Suite on the equipment, which is the element most directly connected to the goods as imported, is already included in the declared CIF price. The TLA fee, TSL contends, covers the subsequent stream of services and does not constitute a royalty or license fee "related to the goods being valued."

Second, TSL points to the separate and independent contractual structure of the TLA. Article 3.2 of the TLA expressly states that the agreement is "independent of and supplemental to" any equipment purchase agreement. TSL contends that the TLA was separately negotiated, with its own terms, conditions, pricing structure, and internal board approval process. TSL's board minutes from December 2018 reflect a separate discussion and approval of the TLA, distinct from the approval of the equipment purchase contracts.

Third, TSL argues that the fee calculation methodology — 5% of the aggregate equipment purchase price — is simply a convenient pricing mechanism and does not evidence a "condition of sale" relationship. Technology licensing agreements frequently use percentage-of-related-sales or percentage-of-related-purchase-price formulas as pricing conventions, without those formulas converting the license fee into an element of the purchase price. The use of the equipment purchase price as a reference point for calculating the license fee reflects the commercial reality that the value of the technology support services is proportional to the scale of the installed equipment base, not that the license fee is a disguised component of the purchase price.

Fourth, TSL contends that it could theoretically have operated the cranes using third-party control software or in manual operating mode. While TSL acknowledges that this option was not explored in practice and that retrofitting the equipment with alternative software would be costly and complex, TSL maintains that the theoretical availability of alternatives undermines AADE's argument that the license was an absolute prerequisite to the purchase. TSL argues that the decision to license the HaiControl Suite was a separate commercial decision motivated by operational efficiency and convenience, not a condition imposed by Hailong as a prerequisite to the sale.

Finally, TSL emphasizes the separate pricing, negotiation, and internal approval of the TLA. TSL's negotiating team for the TLA was led by its Chief Technology Officer, whereas the equipment purchase contracts were negotiated by the VP Procurement & Supply Chain. The fee structures, payment terms, and performance obligations are distinct across the two categories of agreements.

4. Assessment — Factor-by-Factor Analysis. The following table summarizes the factor-by-factor assessment of the technology license fee issue:

On balance, the factors favoring AADE's position outnumber and outweigh the factors favoring TSL. The cross-default provision, the temporal proximity, the fee calculation methodology, and the essential nature of the licensed software to the equipment's operation collectively create a strong inference that the TLA payments are, in substance, royalties related to the imported goods and paid as a condition of their sale. TSL's defenses — separate contract structure, post-importation service component, and theoretical availability of alternatives — have some force but are unlikely to be determinative in the face of these countervailing factors.

Risk assessment: 55–65% probability that AADE prevails on this issue. The range reflects uncertainty about how the Greek customs adjudicator or, ultimately, the Greek administrative courts and CJEU will weigh the post-importation services component of the TLA against the strong indicia of economic linkage to the imported goods.

5. Possible Mitigation — Apportionment Argument. Even if AADE establishes that the technology license fees are, in principle, includable in customs value under Article 71(1)(c) UCC, TSL may argue that only a portion of the fee — the component attributable to the pre-installed software at the time of importation — should be added to customs value. The remainder of the fee, attributable to post-importation services (software updates, technical support, training, documentation access, and on-site visits), would be excludable.

This apportionment approach finds support in WCO Advisory Opinion 4.17, which recognizes that where a royalty payment covers both elements related to the imported goods (e.g., the right to use embedded software) and elements not related to the imported goods (e.g., post-importation support services), apportionment is appropriate. Only the portion of the royalty that is related to the imported goods and paid as a condition of sale need be included in customs value.

The viability of this argument depends critically on TSL's ability to establish a credible allocation methodology. Two illustrative scenarios demonstrate the potential exposure reduction:

• Scenario 1 — 60% post-importation / 40% import-related: If 60% of the license fee is attributable to post-importation services and 40% to the import-related software component, the includable amount would be €4,900,000 × 40% = €1,960,000, reducing the valuation adjustment by €2,940,000 and the corresponding additional duty (at 2.2%) by €64,680.

• Scenario 2 — 80% post-importation / 20% import-related: If 80% of the license fee is attributable to post-importation services, the includable amount would be €4,900,000 × 20% = €980,000, reducing the valuation adjustment by €3,920,000 and the corresponding additional duty by €86,240.

To support an apportionment argument, TSL would need to obtain:

• An economic analysis by Kestrel & Palladian LLP (contact: Spyros Makris, Partner, Athens office) establishing the fair market value of each post-importation service component covered by the TLA, benchmarked against comparable arm's-length transactions for similar services in the marine equipment sector.

• A cost breakdown from Hailong (via Wei Junhao, Export Sales Director) showing Hailong's internal allocation of the TLA fee across service components, including the incremental cost of providing software updates, 24/7 remote support, on-site visits, documentation maintenance, and training.

• TSL's own internal records, including board minutes for TLA approval, internal cost-benefit analyses, and procurement memoranda, to confirm that TSL's management understood and intended the TLA to cover a distinct bundle of post-importation services.

Without robust evidentiary support, AADE will challenge any proposed apportionment as arbitrary and self-serving. TSL bears the burden of establishing a reasonable basis for the allocation, and AADE is entitled to reject an apportionment that lacks objective support.

B. Procurement Coordination Fees — Nereus Maritime Advisory Limited (€2,940,000)

1. Factual Background. Nereus Maritime Advisory Limited ("Nereus") is a Cyprus private limited company, registered under Company No. HE 387214, with its registered office at 12 Griva Digeni Avenue, Office 302, 3106 Limassol, Cyprus. Nereus was incorporated in 2018, shortly before the commencement of TSL's procurement process for marine cargo-handling equipment.

The ownership structure of Nereus is as follows:

• 40% — Andreadis Family Holdings LLC ("AFH"), a Delaware limited liability company (File No. 5847291). AFH also holds a 62% controlling interest in TSL. AFH is the principal investment vehicle of the Andreadis family, controlled by Nikolaos Andreadis, Chairman and CEO of TSL.

• 30% — Konstantinos Melas, Managing Director of Nereus. Melas is a former sales agent of Hailong Heavy Industries for the Southern European market, having served in that capacity from approximately 2012 to 2017. In that role, Melas was personally responsible for introducing Hailong's products to TSL and facilitating the initial commercial discussions between Hailong and TSL. Melas departed from Hailong in 2017 and subsequently co-founded Nereus in 2018.

• 30% — Eleni Andreadis, daughter of Nikolaos Andreadis (TSL Chairman & CEO). Eleni Andreadis, age 29, serves as a non-executive director of Nereus.

The combined Andreadis family economic interest in Nereus is 70% (40% through AFH + 30% through Eleni Andreadis). This creates a clear related-party relationship between Nereus and TSL, as both entities are ultimately controlled by the Andreadis family through AFH.

TSL and Nereus entered into a Procurement Services Agreement ("PSA") on December 1, 2018. Under the PSA, TSL engaged Nereus to "identify, evaluate, and recommend suitable manufacturers of marine cargo-handling equipment and to coordinate the procurement process on behalf of TSL." The agreed fee is 3% of the aggregate equipment purchase price, calculated as 3% × €98,000,000 = €2,940,000.

Several facts regarding Nereus's formation and the PSA's execution timeline are noteworthy. Nereus was incorporated in Cyprus in 2018, shortly before TSL's procurement process commenced. Melas's departure from Hailong in 2017 and the formation of Nereus in 2018 coincided directly with the TSL procurement timeline. The PSA was executed on December 1, 2018 — approximately six weeks before the TLA (January 10, 2019) and approximately seven weeks before the first purchase contract (January 15, 2019). In its customs declarations, TSL characterized the Nereus fee as a "buying commission" and excluded it from the declared customs value, relying on Article 72(a) UCC.

2. AADE's Position. AADE rejects TSL's characterization of the Nereus fee as a buying commission and contends that the fee is properly classified as either a selling commission or an intermediary procurement markup, includable in customs value under Article 71(1)(a)(i) UCC.

AADE's position rests on the following grounds:

• Nereus did not act exclusively on behalf of the buyer. Under Article 127(1) of Implementing Regulation (EU) 2015/2447, a buying commission is deductible only if the agent acts exclusively on behalf of the buyer in the purchase of the goods. AADE contends that Nereus's related-party status and Melas's former Hailong connection undermine any claim that Nereus acted exclusively in TSL's interest.

• Melas's transition from seller-side agent to buyer-side agent. AADE characterizes Melas's career trajectory — from Hailong sales agent for Southern Europe (2012–2017) to Managing Director of Nereus (2018–present) — as a restructuring of commission flows. What Melas would have earned as a Hailong selling commission (includable in customs value) is now routed through Nereus as a "procurement fee" labeled as a buying commission (excluded from customs value). The economic substance, AADE contends, has not changed: Melas continues to facilitate the sale of Hailong equipment to TSL, but the commission is now styled as a buyer-side fee.

• Nereus's 70% Andreadis family ownership blurs the line between agent and principal. When the buyer's controlling family also controls 70% of the purported buying agent, the agent cannot be said to exercise independent judgment in the buyer's interest. The agent's economic interests are aligned with the buyer's controlling shareholders, creating a circular arrangement in which the "buying commission" is essentially a payment from TSL to its own controlling family through an intermediary entity.

• Absence of genuine buyer-side procurement services. AADE's preliminary investigation suggests that Nereus's actual contributions to the procurement process were limited and that TSL's own procurement team, led by VP Procurement & Supply Chain Dimitrios Sarantopoulos, performed the substantive procurement functions — including technical specification development, supplier evaluation, price negotiation, and quality assurance oversight.

AADE cites WCO Commentary 17.1 and CJEU Case C-59/16, HAVI Logistics, for the proposition that the classification of a payment as a buying commission depends on the actual role played by the agent, assessed on the basis of all the relevant facts, and that the contractual label assigned by the parties is not determinative.

3. TSL's Defense. TSL defends the characterization of the Nereus fee as a deductible buying commission under Article 72(a) UCC, advancing the following arguments:

• Nereus acted as TSL's buying agent. The PSA expressly provides that Nereus shall act as TSL's agent for the purpose of identifying, evaluating, and recommending suitable manufacturers and coordinating the procurement process on behalf of TSL. The language of the PSA places Nereus squarely in the role of a buying agent.

• Temporal sequence supports buyer-side characterization. The PSA predates the first Hailong purchase contract by approximately seven weeks (December 1, 2018 vs. January 15, 2019). TSL contends that it engaged Nereus before selecting Hailong as its equipment supplier, which is consistent with Nereus performing genuine buyer-side procurement services (including market assessment and supplier identification).

• Nereus performed genuine procurement services. TSL asserts that Nereus provided valuable services, including market assessment of available equipment manufacturers, identification and evaluation of potential suppliers, support in price negotiation with Hailong, quality coordination with Hailong's manufacturing operations, and logistics support for the transportation and delivery of equipment.

• Related-party status does not automatically disqualify. TSL argues that Article 127(1) of the Implementing Regulation does not contain an express prohibition on related-party buying agents. The test is whether the agent acted genuinely on behalf of the buyer, not whether the agent is related to the buyer. TSL contends that Nereus met this standard.

• Melas's expertise justifies engagement. Melas's extensive knowledge of the Chinese heavy equipment market, developed during his years as a Hailong sales agent, is precisely the reason TSL engaged Nereus. TSL hired Melas (through Nereus) because his market expertise and supplier relationships were valuable buyer-side assets, not because he was continuing to act on Hailong's behalf.

• Structural indicia of buying agent status. TSL notes that Nereus did not take title to the goods, did not bear commercial risk of loss or damage, and did not maintain inventory. The fee was separately identified and distinguishable from the purchase price paid to Hailong.

4. Critical Weaknesses in TSL's Defense. Notwithstanding TSL's arguments, the Nereus buying commission defense is subject to several critical weaknesses that significantly undermine its viability:

Related-party ownership. The Andreadis family's combined 70% economic interest in Nereus creates a strong inference that Nereus is not a genuine independent agent but a related-party vehicle. The fact that the same family that controls the buyer (TSL, 62% held by AFH) also controls the purported buying agent (Nereus, 70% held by AFH and Eleni Andreadis) raises fundamental questions about whether Nereus exercised independent judgment in TSL's interest or simply served as a conduit for payments from the buyer to its controlling shareholders. In the CJEU's HAVI Logistics framework, the substance of the relationship must be assessed on the basis of all the facts — and the ownership structure here is a fact that weighs heavily against TSL.

Melas's prior Hailong role. The fact that Nereus's Managing Director was a former Hailong sales agent — who personally introduced Hailong to TSL and facilitated the initial commercial relationship — is a highly suspicious fact pattern. The transition from seller-side agent to buyer-side commission recipient on the same product category, with the same buyer and seller, creates an inference that the Nereus arrangement is a restructuring of commission flows rather than a genuine change in economic function. AADE will argue — with considerable force — that Melas's departure from Hailong and the creation of Nereus were designed to reclassify what would have been a Hailong selling commission (includable in customs value) as a TSL buying commission (excluded from customs value).

Limited documentation of genuine procurement services. Our preliminary document review reveals limited contemporaneous records of substantive buyer-side activities by Nereus. We have not yet identified comprehensive market research reports, competitive supplier evaluations, independent quality inspection reports, or detailed records of price negotiation support provided by Nereus. While further factual development may reveal such documentation, the current evidentiary record does not strongly support Nereus's claim to have performed genuine procurement services. If Nereus's actual contributions were limited to facilitating the introduction between TSL and Hailong (a relationship that Melas had already established during his Hailong tenure) and providing general coordination, this would not be sufficient to establish a genuine buying agent role.

WCO Commentary 17.1 red flags. Multiple red flags identified in WCO Commentary 17.1 are present in the Nereus fact pattern:

• Agent has a relationship with the seller — (Melas's prior Hailong role, approximately 2012–2017)

• Agent is related to the buyer — (AFH and Andreadis family control 70% of Nereus; AFH controls 62% of TSL)

• Limited evidence of genuine procurement services performed on behalf of the buyer — to be determined following factual development, but preliminary review is not encouraging

• Fee calculated as a percentage of the purchase price — (3% of €98,000,000)

The cumulative presence of these red flags substantially undermines TSL's buying commission defense.

CJEU *HAVI Logistics* (C-59/16, 2017). The CJEU's holding in HAVI Logistics is directly applicable: the classification of a payment depends on the "actual role played by the agent in the transaction, assessed on the basis of all the facts." The label given by the parties — "buying commission" in the PSA — is not determinative. Customs authorities must examine the substance, including the agent's functions, relationships, and economic interests. On the facts as currently understood, the substance of Nereus's role is far more consistent with a seller-side or dual-capacity intermediary than with a genuine exclusive buying agent.

5. Risk Assessment. Risk of inclusion: 70–80% probability that AADE prevails on this issue. This is TSL's weakest valuation position among the three issues analyzed in this memorandum.

The combination of related-party ownership, Melas's prior seller-side role, the temporal coincidence of Nereus's incorporation with the procurement timeline, and the limited contemporaneous documentation of genuine buyer-side services creates a fact pattern that is very difficult to defend. While TSL's arguments are not frivolous, and related-party status does not per se disqualify a buying commission claim, the totality of the circumstances strongly favors AADE's position.

This issue is the subject of a separate, more detailed analysis in the Nereus Related-Party Analysis Memorandum (C&H-2022-ITS-04783), which examines the corporate structure, beneficial ownership, and related-party dynamics in greater depth. We recommend that the final position on this issue not be determined until Kestrel & Palladian LLP (Spyros Makris) has completed a comprehensive functions-performed, assets-used, and risks-assumed ("FAR") analysis of Nereus's actual role in the procurement transaction.

6. Mitigation Strategies (Summary). Given the strength of AADE's position, TSL's mitigation strategy should focus on both factual development (to strengthen the buying commission defense to the extent possible) and alternative positioning (to minimize exposure if the buying commission defense fails).

Factual development (highest priority). Request from TSL all documents showing Nereus's actual activities in connection with the procurement, including:

• Market research reports and supplier evaluations prepared by Nereus

• Correspondence between Nereus and TSL's procurement team

• Records of price negotiations in which Nereus participated

• Reports of site visits to Hailong's manufacturing facility in Ningbo

• Quality inspection reports or coordination with independent quality inspectors

• Logistics coordination records

• Nereus's internal work product demonstrating substantive buyer-side activities

FAR analysis by Kestrel & Palladian LLP. Commission a formal functions-assets-risks analysis to establish Nereus's economic substance and to determine whether Nereus performed genuine procurement functions distinct from those performed by TSL's own procurement team.

Interview Konstantinos Melas. Develop a clear and defensible narrative regarding Melas's departure from Hailong, his motivations for establishing Nereus, and the specific services he personally provided to TSL during the procurement process. Melas must be prepared to explain, in detail, how his role at Nereus differed from his former role as a Hailong sales agent.

Interview Dimitrios Sarantopoulos (VP Procurement & Supply Chain). Establish what procurement functions TSL's own internal team performed versus what functions were delegated to Nereus. This is critical to assessing whether Nereus's contributions were substantive and additive or duplicative and nominal.

Alternative argument — "assists" treatment. If the buying commission defense fails, consider arguing that the Nereus fee should be treated as an "assist" under Article 71(1)(b) UCC rather than as a selling commission under Article 71(1)(a)(i) UCC. While both categories result in inclusion in customs value, the "assists" classification may offer a more favorable allocation methodology, potentially permitting a portion of the fee to be apportioned across multiple importation entries rather than being allocated in full to a single transaction.

Settlement leverage. Recognize that the Nereus fee may be an appropriate concession point in the context of a global settlement of all outstanding customs disputes. If TSL prevails on the classification dispute (maintaining heading 8426 at 0% duty), the Nereus fee addition has no duty impact regardless of outcome — 0% × €2,940,000 = €0. Even if the classification changes to 2.2%, conceding the Nereus fee would result in only €2,940,000 × 2.2% = €64,680 in additional duties, which may be an acceptable trade-off in a broader settlement that resolves more significant exposure on other issues.

C. Commissioning Services (€2,100,000)

1. Factual Background. Contract HHI-TSL-2021-004, dated February 28, 2021, is a bundled contract between Hailong and TSL covering three categories of goods and services:

• Spare parts: €2,100,000

• Proprietary control software (additional modules): €1,400,000

• Commissioning and installation services: €2,100,000

• Total contract value: €5,600,000

AADE proposes to unbundle Contract HHI-TSL-2021-004 and treat each component separately for customs valuation and classification purposes. Under AADE's proposed approach:

• The spare parts (€2,100,000) are reclassified under CN 8431 49 80 (parts of machinery of heading 8426/8428) at a 0% duty rate.

• The software (€1,400,000) is reclassified under CN 8471 49 00 (other digital processing units) at a 0% duty rate.

• The commissioning services (€2,100,000) are treated not as an independent post-importation service but as a cost that should be added to the customs value of the underlying base equipment under Article 71(1)(b) UCC, on the ground that commissioning constituted a "condition of sale" of the equipment.

The commissioning services at issue include the dispatch of Hailong engineers to TSL's terminal facilities in Greece for final assembly, testing, calibration, and commissioning of the STS gantry cranes and ASC systems. These services were performed entirely in Greece, after the equipment had been imported and cleared through customs at the Port of Piraeus. The commissioning process involved final mechanical assembly of crane components that were shipped in knock-down or semi-assembled configuration, electrical and control system integration, load testing and calibration, safety system verification, and formal acceptance testing.

Contract HHI-TSL-2021-004 was executed on February 28, 2021, which is after both the first base equipment purchase contract (HHI-TSL-2019-001, dated January 15, 2019, covering STS gantry cranes) and the second base equipment purchase contract (HHI-TSL-2020-003, covering ASC systems). A significant portion of the base equipment had already been imported and cleared through customs before Contract HHI-TSL-2021-004 was executed.

2. AADE's Position. AADE contends that the commissioning services costs of €2,100,000 should be added to the customs value of the base equipment under Article 71(1)(b) UCC as a "condition of sale" cost. AADE's reasoning proceeds as follows:

• The base equipment purchase contracts (HHI-TSL-2019-001 for STS cranes and HHI-TSL-2020-003 for ASC systems) specify that Hailong is responsible for "delivery, assembly, testing, and commissioning" at the destination port. Under these contracts, Hailong's delivery obligations are not satisfied until the equipment has been assembled, tested, and commissioned at TSL's terminal. AADE argues that the commissioning services under Contract HHI-TSL-2021-004 are therefore a continuation of Hailong's contractual delivery obligations under the base purchase contracts, not a separate post-importation service.

• The equipment was not fully operational until commissioning was finalized. The cranes, as imported, required final assembly, calibration, and testing before they could be placed into commercial service. Until commissioning was completed, the equipment could not perform its intended function, and Hailong's delivery obligations under the base contracts were not discharged.

• The contractual separation — executing a separate contract (HHI-TSL-2021-004) for commissioning services — is form over substance. AADE contends that the parties artificially split commissioning from the base purchase contracts to exclude commissioning costs from customs value.

3. TSL's Defense. TSL defends the exclusion of commissioning services costs from customs value on the basis of Article 72(e) UCC, which expressly permits the exclusion from customs value of "charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation."

TSL's defense rests on the following grounds:

• Express statutory text. Article 72(e) UCC provides clear textual authority for excluding post-importation assembly and technical assistance costs from customs value. The commissioning services at issue — final assembly, testing, calibration, and commissioning — fall squarely within the categories enumerated in Article 72(e): "construction, erection, assembly, maintenance or technical assistance." The statutory language is unambiguous and directly applicable.

• Services performed entirely in Greece after importation. The commissioning services were performed at TSL's terminal facilities in Greece, after the equipment was imported into the customs territory of the Union and cleared through customs at the Port of Piraeus. The location and timing of the services are fully consistent with the post-importation characterization required by Article 72(e).

• Separate contract and pricing. The commissioning services are separately priced under Contract HHI-TSL-2021-004, which was contracted separately from the base equipment purchase contracts. The separate contract has its own terms, payment schedule, and performance milestones. This contractual separation, combined with the temporal gap between the base contracts and Contract HHI-TSL-2021-004, supports the characterization of commissioning as a distinct, post-importation service.

• Customs value determined at point of sale for export. The customs value of the base equipment was declared at the time of importation, when the Single Administrative Documents ("SADs") were filed. The transaction value is determined at the point of sale for export to the customs territory of the Union, not at the point of final commissioning. Commissioning costs incurred after importation and customs clearance should not retroactively increase the declared customs value.

• Contract HHI-TSL-2021-004 executed after base contracts. The commissioning contract was executed on February 28, 2021, after the base equipment purchase contracts and after a significant portion of the equipment had already been imported. This temporal separation reinforces the characterization of commissioning as a distinct, subsequent transaction rather than an integral component of the original sale for export.

• TSL had alternative commissioning options. TSL considered, and had the option to engage, a different commissioning contractor — including its own in-house engineering team or a third-party commissioning specialist. While TSL ultimately selected Hailong for commissioning (given Hailong's superior familiarity with its own equipment), the availability of alternatives demonstrates that commissioning was not an inevitable component of the sale but a separate service for which TSL made an independent procurement decision.

4. Assessment — Factor-by-Factor Analysis.

On balance, TSL's position on the commissioning services issue is its strongest of the three valuation positions analyzed in this memorandum. The express language of Article 72(e) UCC directly supports the exclusion of post-importation assembly and technical assistance costs from customs value. The services were indisputably performed in Greece after the equipment was imported and cleared through customs. The separate contractual structure and temporal gap between the base contracts and Contract HHI-TSL-2021-004 further support TSL's position.

AADE's strongest counter-argument is that the base purchase contracts specify Hailong's responsibility for commissioning as part of its delivery obligations, suggesting that the separate commissioning contract is an artificial device to separate a cost that is, in substance, part of the purchase price. This argument has some force, particularly given that the equipment was not fully operational until commissioning was completed. However, it faces the significant hurdle of Article 72(e)'s express text, which draws the line at "aft

CALDERWOOD & HARKNESS LLP
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It is intended solely for internal use by Calderwood & Harkness LLP and authorized personnel of Thalassa Shipping & Logistics SA. Any distribution, reproduction, or disclosure to third parties without the prior written consent of Calderwood & Harkness LLP is strictly prohibited.
MEMORANDUM
TO: File (C&H-2022-ITS-04781)
FROM: Garrett Simmons, Associate, Tax Group
DATE: November 10, 2022
RE: Customs Valuation Analysis — AADE Valuation Adjustments Under UCC Articles 70–74; Additional Duty Assessment Notice AADE/ADAN/2022/0074
I. Issues Presented
This memorandum analyzes three discrete categories of valuation adjustments proposed by the Independent Authority for Public Revenue (Ανεξάρτητη Αρχή Δημοσίων Εσόδων, "AADE") in Additional Duty Assessment Notice AADE/ADAN/2022/0074, dated August 12, 2022. AADE contends that each of the following amounts should be added to the customs value of marine cargo-handling equipment imported by Thalassa Shipping & Logistics SA ("TSL") from Hailong Heavy Industries Co., Ltd. ("Hailong" or "HHI"), a Chinese manufacturer based in Ningbo, Zhejiang Province, under the provisions of the Union Customs Code (Regulation (EU) No. 952/2013, "UCC"):
1. Technology license fees of €4,900,000 paid by TSL to Hailong under a Technology License Agreement ("TLA") dated January 10, 2019, calculated at 5% of the aggregate equipment purchase price of €98,000,000. AADE contends these fees constitute royalties and license fees related to the imported goods and paid as a condition of sale, includable in customs value under Article 71(1)(c) UCC.
2. Procurement coordination fees of €2,940,000 paid by TSL to Nereus Maritime Advisory Limited ("Nereus"), a Cyprus-registered company, under a Procurement Services Agreement dated December 1, 2018, calculated at 3% of the aggregate contract value of €98,000,000. AADE contends that this fee is not a deductible buying commission under Article 72(a) UCC but rather a selling commission or procurement markup includable under Article 71(1)(a)(i) UCC.
3. Commissioning services costs of €2,100,000 invoiced by Hailong under Contract HHI-TSL-2021-004, dated February 28, 2021. AADE contends these costs constitute a "condition of sale" cost properly added to the customs value of the imported equipment under Article 71(1)(b) UCC.
The total valuation adjustment contended by AADE across all three categories is €9,940,000 (€4,900,000 + €2,940,000 + €2,100,000). These adjustments are the subject of AADE's Additional Duty Assessment Notice AADE/ADAN/2022/0074, dated August 12, 2022. Assuming that the reclassification of the imported equipment under the companion Additional Duty Assessment Notice AADE/ADAN/2022/0073 is upheld — resulting in a 2.2% conventional duty rate rather than the 0% rate originally declared — the additional duty liability attributable solely to the valuation adjustment would be €9,940,000 × 2.2% = €218,680. This figure does not include downstream exposure from VAT implications, penalties, or interest, which are addressed in Section V below.
This memorandum should be read in conjunction with the companion Classification Analysis Memorandum (C&H-2022-ITS-04782), dated November 8, 2022, which addresses the underlying tariff classification dispute under ADAN/2022/0073.
II. Short Answers
Technology license fees (€4,900,000): AADE's position that the technology license fees should be added to customs value under Article 71(1)(c) UCC has substantial merit but is not clearly correct. TSL's defense — that the TLA relates primarily to post-importation services and constitutes a separate, independent contract — is viable but faces significant factual headwinds. The five-day gap between execution of the TLA and the first purchase contract, the fee calculation methodology (5% of equipment purchase price), the cross-default provision in TLA Article 8.1, and the essential nature of the HaiControl Suite software to the equipment's operation all weigh in favor of AADE's position. However, the TLA's ten-year term, which covers substantial post-importation services (software updates, technical support, training, documentation access), and the separate contractual structure provide TSL with colorable arguments. An apportionment approach — allocating only the portion of the fee attributable to the imported goods to customs value — may offer a viable compromise. Risk of inclusion assessed at approximately 55–65%.
Procurement coordination fees (€2,940,000): AADE's position that the Nereus fee is not a genuine buying commission is strong. TSL's defense that the Nereus fee qualifies as a deductible buying commission under Article 72(a) UCC is challenging given Nereus's related-party status. The Andreadis family holds a combined 70% economic interest in Nereus (40% through Andreadis Family Holdings LLC, which also controls TSL at 62%, and 30% through Eleni Andreadis). Compounding this structural concern, Nereus's Managing Director, Konstantinos Melas, is a former Hailong sales agent for the Southern European market (approximately 2012–2017) and was personally responsible for introducing Hailong to TSL. The temporal proximity of Nereus's incorporation in 2018 to the commencement of TSL's procurement process, combined with the limited contemporaneous documentation of genuine buyer-side procurement services, creates a fact pattern that is deeply problematic for TSL's position. Under WCO Commentary 17.1 and CJEU case law, customs authorities are entitled to look beyond the label given by the parties and examine the substance of the agent's role. Risk of inclusion assessed at approximately 70–80%.
Commissioning services (€2,100,000): TSL has a reasonable defense that commissioning services are post-importation costs excludable from customs value under Article 72(e) UCC. The express language of Article 72(e) permits exclusion of "charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation." The commissioning services at issue — final assembly, testing, calibration, and commissioning of STS gantry cranes and ASC systems — were performed entirely at TSL's terminal facilities in Greece, after the equipment was imported and cleared through customs at the Port of Piraeus. The services were separately priced under a distinct contract (HHI-TSL-2021-004), executed after the base equipment purchase contracts. TSL's defense is strengthened if it can document that it had the option to engage an independent commissioning contractor and that the commissioning price was negotiated at arm's length. AADE's counter-argument — that commissioning was part of Hailong's delivery obligations under the base purchase contracts and that contractual separation is form over substance — has some force but faces the express statutory text of Article 72(e). Risk of inclusion assessed at approximately 35–45%.
III. Legal Framework
A. Transaction Value Method (Article 70 UCC)
The primary method of customs valuation under Regulation (EU) No. 952/2013 (the Union Customs Code) is the transaction value method set forth in Article 70. This method reflects the longstanding principle — adopted from Article VII of the General Agreement on Tariffs and Trade (GATT) and codified in the WTO Agreement on Implementation of Article VII of GATT 1994 (the "WTO Valuation Agreement") — that customs value should be based, to the greatest extent possible, on the actual price of the imported goods.
Article 70(1) UCC provides that the customs value of imported goods shall be their "transaction value, that is the price actually paid or payable for the goods when sold for export to the customs territory of the Union, adjusted, where appropriate, in accordance with Articles 71 and 72." The price actually paid or payable is defined as the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods, encompassing all payments made or to be made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller.
The transaction value method is the preferred and most frequently applied method of customs valuation across the European Union. Alternative valuation methods under Articles 73 and 74 UCC — including the transaction value of identical goods, the transaction value of similar goods, the deductive method, and the computed method — are applied sequentially only when the transaction value cannot be determined or accepted under Article 70.
Critically for the present analysis, the transaction value is not simply the invoiced price as stated in the commercial documentation. Article 70(2) UCC specifies that the price actually paid or payable shall include all payments made or to be made as a condition of sale by the buyer, whether to the seller or to a third party. This principle is central to AADE's contention that payments made by TSL to entities other than Hailong — specifically, the technology license fees and the Nereus procurement fee — should nonetheless be included in customs value because they were made as a condition of the sale of the imported equipment.
For related-party transactions, Article 70(3)(d) UCC provides an additional safeguard: the transaction value may be accepted only where the customs authorities are satisfied, on the basis of an examination of the circumstances of the sale, that the relationship between the buyer and seller did not influence the price. While TSL and Hailong are not themselves related parties within the meaning of Article 127 of Implementing Regulation (EU) 2015/2447, the related-party dimension arises in the context of Nereus, which is related to TSL through the Andreadis family's controlling interests in both entities.
B. Additions to Transaction Value (Article 71 UCC)
Article 71 UCC mandates that certain costs be added to the price actually paid or payable in order to arrive at the customs value, provided those costs are not already included in the declared price. The additions relevant to this analysis are as follows:
Article 71(1)(a)(i) — Commissions and brokerage, except buying commissions. All commissions and brokerage fees, other than buying commissions, incurred by the buyer in connection with the importation of goods must be added to the transaction value. This provision captures selling commissions (fees paid to agents acting on behalf of the seller) and procurement intermediary fees where the intermediary does not qualify as a genuine buying agent. The distinction between a buying commission (deductible) and a selling commission or general intermediary fee (includable) is a central issue in the Nereus analysis below.
Article 71(1)(b) — Assists and "condition of sale" costs. The value of goods and services supplied by the buyer free of charge or at reduced cost for use in connection with the production or sale for export of the imported goods must be added to the transaction value. This category encompasses "assists" — including materials, tools, engineering, development work, artwork, design work, and plans and sketches undertaken elsewhere than in the customs territory of the Union — as well as costs that are required as a condition of the sale of the imported goods. AADE invokes this provision in connection with the commissioning services costs, arguing that commissioning was a condition of the sale of the base equipment.
Article 71(1)(c) — Royalties and license fees. Royalties and license 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, must be added to the transaction value to the extent that such royalties and license fees are not already included in the price actually paid or payable. This provision is central to AADE's challenge to TSL's treatment of the technology license fees. Two cumulative conditions must be satisfied for inclusion: (i) the royalties or license fees must be "related to the goods being valued," and (ii) the payment must be a "condition of sale" of those goods.
C. Deductions from Transaction Value (Article 72 UCC)
Article 72 UCC identifies certain costs that shall not be included in the customs value, provided they are distinguishable from the price actually paid or payable for the imported goods. The deductions relevant to this analysis include:
Article 72(a) — Buying commissions. The cost of buying commissions — defined as fees paid by an importer to its agent for the service of representing the importer in the purchase of the goods being valued — may be deducted from or excluded from the customs value. This exclusion is the basis for TSL's characterization of the Nereus procurement fee as a buying commission. The burden of establishing that a payment constitutes a buying commission rests with the importer, and customs authorities are entitled to examine the substance of the agent's role rather than relying on the contractual label.
Article 72(e) — Post-importation charges. Charges for construction, erection, assembly, maintenance, or technical assistance, undertaken after importation of the goods into the customs territory of the Union, may be excluded from customs value. This provision is the foundation of TSL's defense regarding the commissioning services costs. The rationale is straightforward: costs incurred after the goods have entered the customs territory and cleared customs should not inflate the dutiable value, because customs duty is assessed on the value of the goods as they are at the point of importation, not as they are after post-importation work has been performed.
D. Implementing Regulation (EU) 2015/2447
Commission Implementing Regulation (EU) 2015/2447 of November 24, 2015, laying down detailed rules for implementing certain provisions of Regulation (EU) No. 952/2013, provides further guidance on the application of the customs valuation provisions of the UCC. Articles 127 through 144 of the Implementing Regulation address customs valuation in detail and are essential to the analysis of the issues presented in this memorandum.
Article 127(1) — Definition of buying commission. Article 127(1) defines a "buying commission" as a fee paid by an importer to its agent for the service of representing the importer in the purchase of the goods being valued. For a commission to qualify as a buying commission excludable under Article 72(a) UCC, the agent must act exclusively on behalf of the buyer. The agent must not simultaneously represent the seller's interests or act in a dual capacity. This definition is critical to the Nereus analysis: AADE contends that Nereus did not act exclusively on behalf of TSL and therefore the fee cannot be characterized as a buying commission.
Articles 136–137 — Royalties and license fees. These provisions elaborate on the criteria for including royalties and license fees in customs value under Article 71(1)(c) UCC. Two requirements must be met cumulatively: the royalty or license fee must be "related to the goods being valued" (Article 136), and the payment must be made "as a condition of sale" (Article 137). A royalty or license fee is "related to the goods" when it is paid for the right to use intellectual property that is incorporated in or embodied by the imported goods, or when the goods cannot be used, resold, or otherwise disposed of without the licensed intellectual property. A payment constitutes a "condition of sale" when the seller or a person related to the seller requires the buyer to make the payment as a prerequisite to the sale of the goods for export.
Treatment of related-party transactions. The Implementing Regulation addresses transactions between related parties and provides that the relationship between buyer and seller does not, in itself, constitute grounds for regarding the transaction value as unacceptable. However, where the circumstances surrounding the sale indicate that the relationship influenced the price, the customs authorities are entitled to examine the matter further and, if necessary, reject the declared transaction value.
E. WCO Technical Committee on Customs Valuation
The Technical Committee on Customs Valuation, established under the WTO Valuation Agreement and administered by the World Customs Organization ("WCO"), has issued numerous commentaries, advisory opinions, case studies, and studies that provide interpretive guidance on customs valuation issues. While WCO instruments are not legally binding on EU Member States or the CJEU, they carry significant persuasive authority and are regularly cited by customs authorities and courts in the European Union.
The following WCO instruments are relevant to this analysis:
• Commentary 17.1 — Buying Commissions. This commentary examines the criteria for distinguishing a genuine buying commission (excludable under Article 72(a) UCC) from a selling commission or other intermediary fee (includable under Article 71(1)(a)(i) UCC). Commentary 17.1 identifies several "red flags" that may indicate a purported buying commission is not genuine, including where the agent has a relationship with the seller, where the agent is related to the buyer, where there is limited evidence of genuine procurement services performed on behalf of the buyer, and where the fee is calculated as a percentage of the purchase price. As discussed in Section IV.B below, several of these red flags are present in the Nereus fact pattern.
• Commentary 25.1 — Royalties and License Fees. This commentary provides guidance on the "related to the goods" and "condition of sale" requirements for inclusion of royalties and license fees in customs value. Commentary 25.1 addresses, among other scenarios, the treatment of software licenses where the licensed software is integral to the operation of the imported goods. The commentary supports the inclusion of license fees in customs value where the software is pre-installed on the goods at the time of importation and is necessary for the goods to function as intended.
• Advisory Opinion 4.9 — Condition of Sale. This advisory opinion examines circumstances in which a payment may be considered a "condition of sale" for purposes of Article 71(1)(c) UCC. It addresses both express contractual conditions (where the seller explicitly requires the buyer to make the payment as a prerequisite to the sale) and implied conditions (where the circumstances of the transaction indicate that the payment was, in substance, a prerequisite, even if not expressly stated in the sales contract).
• Advisory Opinion 4.17 — Apportionment of Royalties. This advisory opinion recognizes that where a royalty payment covers both elements related to the imported goods and elements not related to the imported goods (e.g., post-importation services), apportionment is appropriate. Only the portion of the royalty that is related to the imported goods and paid as a condition of sale need be included in customs value.
The case law of the Court of Justice of the European Union ("CJEU") provides binding interpretive guidance on the UCC's valuation provisions. Two CJEU decisions are particularly relevant:
• Case C-230/08, *Dansk Transport og Logistik* (2010). The CJEU held that royalties related to the imported goods and paid as a condition of sale must be included in the customs value. The Court confirmed that both the "related to the goods" and "condition of sale" requirements must be satisfied cumulatively, and that the analysis must be conducted on the basis of all the relevant circumstances of the transaction.
• Case C-59/16, *HAVI Logistics* (2017). The CJEU addressed the classification of payments to intermediaries in customs valuation. The Court held that the classification of a payment as a buying commission, selling commission, or other intermediary fee depends on the "actual role played by the agent in the transaction, assessed on the basis of all the facts." The label assigned by the parties is not determinative; customs authorities must examine the substance of the agent's functions, the nature of the services provided, and the relationship between the agent and the buyer and seller.
IV. Analysis
A. Technology License Fees (€4,900,000)
1. Factual Background. TSL and Hailong entered into a Technology License Agreement ("TLA") on January 10, 2019. Under the TLA, Hailong grants TSL a non-exclusive license to use Hailong's proprietary crane control software, known as the "HaiControl Suite v4.2," together with Hailong's predictive maintenance algorithms (the "HaiPredict module") and access to Hailong's technical documentation library, comprising approximately 12,000 pages of engineering manuals, schematics, maintenance protocols, and operational guidelines.
The HaiControl Suite v4.2 is the integrated software platform that operates the automated functions of the imported equipment, including the anti-sway system for ship-to-shore ("STS") gantry cranes, automated container positioning, and the automated stacking control system for automated stacking cranes ("ASCs"). Without the HaiControl Suite, the cranes can be operated only in manual mode, with significantly reduced throughput capacity and without the precision-positioning capabilities that are central to the operational requirements of TSL's terminal operations. The HaiPredict module provides predictive maintenance analytics, using sensor data from the equipment to forecast component failures and optimize maintenance scheduling.
The license fee under the TLA is calculated at 5% of the aggregate equipment purchase price. The aggregate equipment purchase price across all Hailong purchase contracts is €98,000,000, yielding a total license fee of €4,900,000. This fee is payable in three installments:
• €1,960,000 — paid in March 2019
• €1,470,000 — paid in July 2020
• €1,470,000 — paid in March 2022
The TLA was executed on January 10, 2019 — five days before the first purchase contract, Contract HHI-TSL-2019-001, dated January 15, 2019 (covering STS gantry cranes). The recitals of the TLA expressly reference TSL's intention to purchase marine cargo-handling equipment from Hailong, stating that "the Licensee intends to acquire certain marine cargo-handling equipment manufactured by the Licensor and wishes to secure a license for the proprietary technology required for the optimal operation of such equipment." This language in the TLA's recitals is significant because it establishes an express factual link between the TLA and the contemplated equipment purchases.
Article 3.2 of the TLA provides that the agreement is "independent of and supplemental to any equipment purchase agreement that may be entered into between the parties." TSL relies on this provision to support its position that the TLA is a standalone contract, separate from the purchase agreements. However, this independence clause is substantially undermined by Article 8.1 of the TLA, which contains a cross-default provision: Hailong may terminate the TLA if TSL fails to execute an equipment purchase agreement within 90 calendar days of the TLA's effective date. This cross-default provision creates a direct contractual linkage between the TLA and the purchase agreements, notwithstanding the independence language in Article 3.2.
The term of the TLA is ten years from the date of first commercial operation of the last piece of equipment installed under the purchase contracts. Given the phased delivery schedule, the TLA term is expected to extend through at least 2033. The TLA covers the following services over this ten-year period:
• Initial installation of the HaiControl Suite v4.2 on the imported equipment (included in the CIF equipment price under the purchase contracts)
• Software updates and upgrades to the HaiControl Suite throughout the license term
• Remote 24/7 technical support via Hailong's Operations Center in Ningbo
• Two on-site technical visits per year by Hailong engineers to TSL's terminal facilities in Greece
• Access to the complete HaiControl Suite technical documentation library (approximately 12,000 pages, updated periodically)
• Training of up to 20 TSL engineers per year at Hailong's training facility in Ningbo or on-site at TSL's terminal
It is important to note that the initial software installation — the component most directly related to the imported goods at the time of importation — is included in the declared CIF price of the equipment under the purchase contracts. TSL's position is that the TLA fee covers the ongoing post-importation services described above, not the initial software installation.
2. AADE's Position. AADE relies on Article 71(1)(c) UCC, which requires that royalties and license fees related to the goods being valued, paid as a condition of sale, be added to the transaction value. AADE's analysis proceeds along two axes.
First, AADE contends that the license fees are "related to the goods" because the HaiControl Suite v4.2 is essential to the operation of the imported equipment. Without the software, the cranes' automated functions — anti-sway, container positioning, and automated stacking — cannot operate. The equipment was designed, manufactured, and marketed by Hailong as an integrated system in which the hardware and software function as inseparable components. AADE argues that the HaiControl Suite is not a generic, interchangeable software product but a proprietary system specifically engineered for Hailong's equipment, which cannot practically be replaced by third-party software or manual operation without rendering the equipment significantly less functional and commercially uncompetitive. This argument is supported by WCO Commentary 25.1, which recognizes that where software is integral to the function of the imported goods, license fees for that software are "related to the goods" for purposes of customs valuation.
Second, AADE contends that the license fees were paid "as a condition of sale" of the imported equipment. AADE advances several factors in support of this conclusion:
• Temporal proximity: The TLA was executed on January 10, 2019, just five days before the first purchase contract (HHI-TSL-2019-001, dated January 15, 2019). This near-simultaneous execution demonstrates that the TLA and the purchase contract were components of a single commercial transaction rather than independent agreements.
• Fee calculation methodology: The license fee is calculated as a percentage (5%) of the aggregate equipment purchase price (€98,000,000). This methodology directly ties the license fee to the price of the imported goods, suggesting that the license fee is effectively an extension of the purchase price rather than an independent charge for separately-valued services.
• Practical precondition to purchase: AADE contends that Hailong would not have sold the equipment to TSL without TSL's commitment to the TLA. The cross-default provision in TLA Article 8.1, which permits Hailong to terminate the TLA if TSL fails to execute a purchase agreement within 90 days, is read by AADE as evidence that the TLA and the purchase agreements were, in commercial substance, interdependent: Hailong would not grant a software license without an equipment sale, and — AADE contends — Hailong would not sell equipment without a companion software license.
• Equipment functionality depends on licensed software: Operating the equipment without the HaiControl Suite would be commercially impractical. TSL would not have purchased the equipment without the assurance of a software license, and Hailong would not have expected TSL to operate the equipment without its proprietary software.
• Cross-default provision (TLA Article 8.1): This provision directly links the TLA to the purchase agreements, creating a contractual mechanism that makes the TLA contingent on, and a condition of, the equipment sale.
• Hailong market practice: AADE's preliminary investigation indicates that Hailong does not sell its marine cargo-handling equipment without a companion technology license. This is consistent with the integrated nature of the hardware-software system and further supports the conclusion that the license is, in practice, a condition of the sale.
AADE cites CJEU Case C-230/08, Dansk Transport og Logistik, for the proposition that royalties related to the imported goods and paid as a condition of sale must be included in customs value. AADE also references WCO Commentary 25.1 for the principle that software integral to the functioning of the imported goods is "related to the goods" for valuation purposes.
3. TSL's Defense. TSL's defense proceeds along several lines, each designed to challenge one or both of the cumulative requirements for inclusion under Article 71(1)(c) UCC.
First, TSL argues that the license fees relate primarily to post-importation services rather than to the imported goods themselves. The TLA has a ten-year term and covers an extensive suite of ongoing services — software updates and upgrades, remote 24/7 technical support, on-site technical visits, documentation access, and engineer training — all of which are provided after importation. TSL characterizes the TLA as a long-term technology support agreement, not a payment for the right to use software embedded in the imported goods at the time of importation. The initial installation of the HaiControl Suite on the equipment, which is the element most directly connected to the goods as imported, is already included in the declared CIF price. The TLA fee, TSL contends, covers the subsequent stream of services and does not constitute a royalty or license fee "related to the goods being valued."
Second, TSL points to the separate and independent contractual structure of the TLA. Article 3.2 of the TLA expressly states that the agreement is "independent of and supplemental to" any equipment purchase agreement. TSL contends that the TLA was separately negotiated, with its own terms, conditions, pricing structure, and internal board approval process. TSL's board minutes from December 2018 reflect a separate discussion and approval of the TLA, distinct from the approval of the equipment purchase contracts.
Third, TSL argues that the fee calculation methodology — 5% of the aggregate equipment purchase price — is simply a convenient pricing mechanism and does not evidence a "condition of sale" relationship. Technology licensing agreements frequently use percentage-of-related-sales or percentage-of-related-purchase-price formulas as pricing conventions, without those formulas converting the license fee into an element of the purchase price. The use of the equipment purchase price as a reference point for calculating the license fee reflects the commercial reality that the value of the technology support services is proportional to the scale of the installed equipment base, not that the license fee is a disguised component of the purchase price.
Fourth, TSL contends that it could theoretically have operated the cranes using third-party control software or in manual operating mode. While TSL acknowledges that this option was not explored in practice and that retrofitting the equipment with alternative software would be costly and complex, TSL maintains that the theoretical availability of alternatives undermines AADE's argument that the license was an absolute prerequisite to the purchase. TSL argues that the decision to license the HaiControl Suite was a separate commercial decision motivated by operational efficiency and convenience, not a condition imposed by Hailong as a prerequisite to the sale.
Finally, TSL emphasizes the separate pricing, negotiation, and internal approval of the TLA. TSL's negotiating team for the TLA was led by its Chief Technology Officer, whereas the equipment purchase contracts were negotiated by the VP Procurement & Supply Chain. The fee structures, payment terms, and performance obligations are distinct across the two categories of agreements.
4. Assessment — Factor-by-Factor Analysis. The following table summarizes the factor-by-factor assessment of the technology license fee issue:
On balance, the factors favoring AADE's position outnumber and outweigh the factors favoring TSL. The cross-default provision, the temporal proximity, the fee calculation methodology, and the essential nature of the licensed software to the equipment's operation collectively create a strong inference that the TLA payments are, in substance, royalties related to the imported goods and paid as a condition of their sale. TSL's defenses — separate contract structure, post-importation service component, and theoretical availability of alternatives — have some force but are unlikely to be determinative in the face of these countervailing factors.
Risk assessment: 55–65% probability that AADE prevails on this issue. The range reflects uncertainty about how the Greek customs adjudicator or, ultimately, the Greek administrative courts and CJEU will weigh the post-importation services component of the TLA against the strong indicia of economic linkage to the imported goods.
5. Possible Mitigation — Apportionment Argument. Even if AADE establishes that the technology license fees are, in principle, includable in customs value under Article 71(1)(c) UCC, TSL may argue that only a portion of the fee — the component attributable to the pre-installed software at the time of importation — should be added to customs value. The remainder of the fee, attributable to post-importation services (software updates, technical support, training, documentation access, and on-site visits), would be excludable.
This apportionment approach finds support in WCO Advisory Opinion 4.17, which recognizes that where a royalty payment covers both elements related to the imported goods (e.g., the right to use embedded software) and elements not related to the imported goods (e.g., post-importation support services), apportionment is appropriate. Only the portion of the royalty that is related to the imported goods and paid as a condition of sale need be included in customs value.
The viability of this argument depends critically on TSL's ability to establish a credible allocation methodology. Two illustrative scenarios demonstrate the potential exposure reduction:
• Scenario 1 — 60% post-importation / 40% import-related: If 60% of the license fee is attributable to post-importation services and 40% to the import-related software component, the includable amount would be €4,900,000 × 40% = €1,960,000, reducing the valuation adjustment by €2,940,000 and the corresponding additional duty (at 2.2%) by €64,680.
• Scenario 2 — 80% post-importation / 20% import-related: If 80% of the license fee is attributable to post-importation services, the includable amount would be €4,900,000 × 20% = €980,000, reducing the valuation adjustment by €3,920,000 and the corresponding additional duty by €86,240.
To support an apportionment argument, TSL would need to obtain:
• An economic analysis by Kestrel & Palladian LLP (contact: Spyros Makris, Partner, Athens office) establishing the fair market value of each post-importation service component covered by the TLA, benchmarked against comparable arm's-length transactions for similar services in the marine equipment sector.
• A cost breakdown from Hailong (via Wei Junhao, Export Sales Director) showing Hailong's internal allocation of the TLA fee across service components, including the incremental cost of providing software updates, 24/7 remote support, on-site visits, documentation maintenance, and training.
• TSL's own internal records, including board minutes for TLA approval, internal cost-benefit analyses, and procurement memoranda, to confirm that TSL's management understood and intended the TLA to cover a distinct bundle of post-importation services.
Without robust evidentiary support, AADE will challenge any proposed apportionment as arbitrary and self-serving. TSL bears the burden of establishing a reasonable basis for the allocation, and AADE is entitled to reject an apportionment that lacks objective support.
B. Procurement Coordination Fees — Nereus Maritime Advisory Limited (€2,940,000)
1. Factual Background. Nereus Maritime Advisory Limited ("Nereus") is a Cyprus private limited company, registered under Company No. HE 387214, with its registered office at 12 Griva Digeni Avenue, Office 302, 3106 Limassol, Cyprus. Nereus was incorporated in 2018, shortly before the commencement of TSL's procurement process for marine cargo-handling equipment.
The ownership structure of Nereus is as follows:
• 40% — Andreadis Family Holdings LLC ("AFH"), a Delaware limited liability company (File No. 5847291). AFH also holds a 62% controlling interest in TSL. AFH is the principal investment vehicle of the Andreadis family, controlled by Nikolaos Andreadis, Chairman and CEO of TSL.
• 30% — Konstantinos Melas, Managing Director of Nereus. Melas is a former sales agent of Hailong Heavy Industries for the Southern European market, having served in that capacity from approximately 2012 to 2017. In that role, Melas was personally responsible for introducing Hailong's products to TSL and facilitating the initial commercial discussions between Hailong and TSL. Melas departed from Hailong in 2017 and subsequently co-founded Nereus in 2018.
• 30% — Eleni Andreadis, daughter of Nikolaos Andreadis (TSL Chairman & CEO). Eleni Andreadis, age 29, serves as a non-executive director of Nereus.
The combined Andreadis family economic interest in Nereus is 70% (40% through AFH + 30% through Eleni Andreadis). This creates a clear related-party relationship between Nereus and TSL, as both entities are ultimately controlled by the Andreadis family through AFH.
TSL and Nereus entered into a Procurement Services Agreement ("PSA") on December 1, 2018. Under the PSA, TSL engaged Nereus to "identify, evaluate, and recommend suitable manufacturers of marine cargo-handling equipment and to coordinate the procurement process on behalf of TSL." The agreed fee is 3% of the aggregate equipment purchase price, calculated as 3% × €98,000,000 = €2,940,000.
Several facts regarding Nereus's formation and the PSA's execution timeline are noteworthy. Nereus was incorporated in Cyprus in 2018, shortly before TSL's procurement process commenced. Melas's departure from Hailong in 2017 and the formation of Nereus in 2018 coincided directly with the TSL procurement timeline. The PSA was executed on December 1, 2018 — approximately six weeks before the TLA (January 10, 2019) and approximately seven weeks before the first purchase contract (January 15, 2019). In its customs declarations, TSL characterized the Nereus fee as a "buying commission" and excluded it from the declared customs value, relying on Article 72(a) UCC.
2. AADE's Position. AADE rejects TSL's characterization of the Nereus fee as a buying commission and contends that the fee is properly classified as either a selling commission or an intermediary procurement markup, includable in customs value under Article 71(1)(a)(i) UCC.
AADE's position rests on the following grounds:
• Nereus did not act exclusively on behalf of the buyer. Under Article 127(1) of Implementing Regulation (EU) 2015/2447, a buying commission is deductible only if the agent acts exclusively on behalf of the buyer in the purchase of the goods. AADE contends that Nereus's related-party status and Melas's former Hailong connection undermine any claim that Nereus acted exclusively in TSL's interest.
• Melas's transition from seller-side agent to buyer-side agent. AADE characterizes Melas's career trajectory — from Hailong sales agent for Southern Europe (2012–2017) to Managing Director of Nereus (2018–present) — as a restructuring of commission flows. What Melas would have earned as a Hailong selling commission (includable in customs value) is now routed through Nereus as a "procurement fee" labeled as a buying commission (excluded from customs value). The economic substance, AADE contends, has not changed: Melas continues to facilitate the sale of Hailong equipment to TSL, but the commission is now styled as a buyer-side fee.
• Nereus's 70% Andreadis family ownership blurs the line between agent and principal. When the buyer's controlling family also controls 70% of the purported buying agent, the agent cannot be said to exercise independent judgment in the buyer's interest. The agent's economic interests are aligned with the buyer's controlling shareholders, creating a circular arrangement in which the "buying commission" is essentially a payment from TSL to its own controlling family through an intermediary entity.
• Absence of genuine buyer-side procurement services. AADE's preliminary investigation suggests that Nereus's actual contributions to the procurement process were limited and that TSL's own procurement team, led by VP Procurement & Supply Chain Dimitrios Sarantopoulos, performed the substantive procurement functions — including technical specification development, supplier evaluation, price negotiation, and quality assurance oversight.
AADE cites WCO Commentary 17.1 and CJEU Case C-59/16, HAVI Logistics, for the proposition that the classification of a payment as a buying commission depends on the actual role played by the agent, assessed on the basis of all the relevant facts, and that the contractual label assigned by the parties is not determinative.
3. TSL's Defense. TSL defends the characterization of the Nereus fee as a deductible buying commission under Article 72(a) UCC, advancing the following arguments:
• Nereus acted as TSL's buying agent. The PSA expressly provides that Nereus shall act as TSL's agent for the purpose of identifying, evaluating, and recommending suitable manufacturers and coordinating the procurement process on behalf of TSL. The language of the PSA places Nereus squarely in the role of a buying agent.
• Temporal sequence supports buyer-side characterization. The PSA predates the first Hailong purchase contract by approximately seven weeks (December 1, 2018 vs. January 15, 2019). TSL contends that it engaged Nereus before selecting Hailong as its equipment supplier, which is consistent with Nereus performing genuine buyer-side procurement services (including market assessment and supplier identification).
• Nereus performed genuine procurement services. TSL asserts that Nereus provided valuable services, including market assessment of available equipment manufacturers, identification and evaluation of potential suppliers, support in price negotiation with Hailong, quality coordination with Hailong's manufacturing operations, and logistics support for the transportation and delivery of equipment.
• Related-party status does not automatically disqualify. TSL argues that Article 127(1) of the Implementing Regulation does not contain an express prohibition on related-party buying agents. The test is whether the agent acted genuinely on behalf of the buyer, not whether the agent is related to the buyer. TSL contends that Nereus met this standard.
• Melas's expertise justifies engagement. Melas's extensive knowledge of the Chinese heavy equipment market, developed during his years as a Hailong sales agent, is precisely the reason TSL engaged Nereus. TSL hired Melas (through Nereus) because his market expertise and supplier relationships were valuable buyer-side assets, not because he was continuing to act on Hailong's behalf.
• Structural indicia of buying agent status. TSL notes that Nereus did not take title to the goods, did not bear commercial risk of loss or damage, and did not maintain inventory. The fee was separately identified and distinguishable from the purchase price paid to Hailong.
4. Critical Weaknesses in TSL's Defense. Notwithstanding TSL's arguments, the Nereus buying commission defense is subject to several critical weaknesses that significantly undermine its viability:
Related-party ownership. The Andreadis family's combined 70% economic interest in Nereus creates a strong inference that Nereus is not a genuine independent agent but a related-party vehicle. The fact that the same family that controls the buyer (TSL, 62% held by AFH) also controls the purported buying agent (Nereus, 70% held by AFH and Eleni Andreadis) raises fundamental questions about whether Nereus exercised independent judgment in TSL's interest or simply served as a conduit for payments from the buyer to its controlling shareholders. In the CJEU's HAVI Logistics framework, the substance of the relationship must be assessed on the basis of all the facts — and the ownership structure here is a fact that weighs heavily against TSL.
Melas's prior Hailong role. The fact that Nereus's Managing Director was a former Hailong sales agent — who personally introduced Hailong to TSL and facilitated the initial commercial relationship — is a highly suspicious fact pattern. The transition from seller-side agent to buyer-side commission recipient on the same product category, with the same buyer and seller, creates an inference that the Nereus arrangement is a restructuring of commission flows rather than a genuine change in economic function. AADE will argue — with considerable force — that Melas's departure from Hailong and the creation of Nereus were designed to reclassify what would have been a Hailong selling commission (includable in customs value) as a TSL buying commission (excluded from customs value).
Limited documentation of genuine procurement services. Our preliminary document review reveals limited contemporaneous records of substantive buyer-side activities by Nereus. We have not yet identified comprehensive market research reports, competitive supplier evaluations, independent quality inspection reports, or detailed records of price negotiation support provided by Nereus. While further factual development may reveal such documentation, the current evidentiary record does not strongly support Nereus's claim to have performed genuine procurement services. If Nereus's actual contributions were limited to facilitating the introduction between TSL and Hailong (a relationship that Melas had already established during his Hailong tenure) and providing general coordination, this would not be sufficient to establish a genuine buying agent role.
WCO Commentary 17.1 red flags. Multiple red flags identified in WCO Commentary 17.1 are present in the Nereus fact pattern:
• Agent has a relationship with the seller — (Melas's prior Hailong role, approximately 2012–2017)
• Agent is related to the buyer — (AFH and Andreadis family control 70% of Nereus; AFH controls 62% of TSL)
• Limited evidence of genuine procurement services performed on behalf of the buyer — to be determined following factual development, but preliminary review is not encouraging
• Fee calculated as a percentage of the purchase price — (3% of €98,000,000)
The cumulative presence of these red flags substantially undermines TSL's buying commission defense.
CJEU *HAVI Logistics* (C-59/16, 2017). The CJEU's holding in HAVI Logistics is directly applicable: the classification of a payment depends on the "actual role played by the agent in the transaction, assessed on the basis of all the facts." The label given by the parties — "buying commission" in the PSA — is not determinative. Customs authorities must examine the substance, including the agent's functions, relationships, and economic interests. On the facts as currently understood, the substance of Nereus's role is far more consistent with a seller-side or dual-capacity intermediary than with a genuine exclusive buying agent.
5. Risk Assessment. Risk of inclusion: 70–80% probability that AADE prevails on this issue. This is TSL's weakest valuation position among the three issues analyzed in this memorandum.
The combination of related-party ownership, Melas's prior seller-side role, the temporal coincidence of Nereus's incorporation with the procurement timeline, and the limited contemporaneous documentation of genuine buyer-side services creates a fact pattern that is very difficult to defend. While TSL's arguments are not frivolous, and related-party status does not per se disqualify a buying commission claim, the totality of the circumstances strongly favors AADE's position.
This issue is the subject of a separate, more detailed analysis in the Nereus Related-Party Analysis Memorandum (C&H-2022-ITS-04783), which examines the corporate structure, beneficial ownership, and related-party dynamics in greater depth. We recommend that the final position on this issue not be determined until Kestrel & Palladian LLP (Spyros Makris) has completed a comprehensive functions-performed, assets-used, and risks-assumed ("FAR") analysis of Nereus's actual role in the procurement transaction.
6. Mitigation Strategies (Summary). Given the strength of AADE's position, TSL's mitigation strategy should focus on both factual development (to strengthen the buying commission defense to the extent possible) and alternative positioning (to minimize exposure if the buying commission defense fails).
Factual development (highest priority). Request from TSL all documents showing Nereus's actual activities in connection with the procurement, including:
• Market research reports and supplier evaluations prepared by Nereus
• Correspondence between Nereus and TSL's procurement team
• Records of price negotiations in which Nereus participated
• Reports of site visits to Hailong's manufacturing facility in Ningbo
• Quality inspection reports or coordination with independent quality inspectors
• Logistics coordination records
• Nereus's internal work product demonstrating substantive buyer-side activities
FAR analysis by Kestrel & Palladian LLP. Commission a formal functions-assets-risks analysis to establish Nereus's economic substance and to determine whether Nereus performed genuine procurement functions distinct from those performed by TSL's own procurement team.
Interview Konstantinos Melas. Develop a clear and defensible narrative regarding Melas's departure from Hailong, his motivations for establishing Nereus, and the specific services he personally provided to TSL during the procurement process. Melas must be prepared to explain, in detail, how his role at Nereus differed from his former role as a Hailong sales agent.
Interview Dimitrios Sarantopoulos (VP Procurement & Supply Chain). Establish what procurement functions TSL's own internal team performed versus what functions were delegated to Nereus. This is critical to assessing whether Nereus's contributions were substantive and additive or duplicative and nominal.
Alternative argument — "assists" treatment. If the buying commission defense fails, consider arguing that the Nereus fee should be treated as an "assist" under Article 71(1)(b) UCC rather than as a selling commission under Article 71(1)(a)(i) UCC. While both categories result in inclusion in customs value, the "assists" classification may offer a more favorable allocation methodology, potentially permitting a portion of the fee to be apportioned across multiple importation entries rather than being allocated in full to a single transaction.
Settlement leverage. Recognize that the Nereus fee may be an appropriate concession point in the context of a global settlement of all outstanding customs disputes. If TSL prevails on the classification dispute (maintaining heading 8426 at 0% duty), the Nereus fee addition has no duty impact regardless of outcome — 0% × €2,940,000 = €0. Even if the classification changes to 2.2%, conceding the Nereus fee would result in only €2,940,000 × 2.2% = €64,680 in additional duties, which may be an acceptable trade-off in a broader settlement that resolves more significant exposure on other issues.
C. Commissioning Services (€2,100,000)
1. Factual Background. Contract HHI-TSL-2021-004, dated February 28, 2021, is a bundled contract between Hailong and TSL covering three categories of goods and services:
• Spare parts: €2,100,000
• Proprietary control software (additional modules): €1,400,000
• Commissioning and installation services: €2,100,000
• Total contract value: €5,600,000
AADE proposes to unbundle Contract HHI-TSL-2021-004 and treat each component separately for customs valuation and classification purposes. Under AADE's proposed approach:
• The spare parts (€2,100,000) are reclassified under CN 8431 49 80 (parts of machinery of heading 8426/8428) at a 0% duty rate.
• The software (€1,400,000) is reclassified under CN 8471 49 00 (other digital processing units) at a 0% duty rate.
• The commissioning services (€2,100,000) are treated not as an independent post-importation service but as a cost that should be added to the customs value of the underlying base equipment under Article 71(1)(b) UCC, on the ground that commissioning constituted a "condition of sale" of the equipment.
The commissioning services at issue include the dispatch of Hailong engineers to TSL's terminal facilities in Greece for final assembly, testing, calibration, and commissioning of the STS gantry cranes and ASC systems. These services were performed entirely in Greece, after the equipment had been imported and cleared through customs at the Port of Piraeus. The commissioning process involved final mechanical assembly of crane components that were shipped in knock-down or semi-assembled configuration, electrical and control system integration, load testing and calibration, safety system verification, and formal acceptance testing.
Contract HHI-TSL-2021-004 was executed on February 28, 2021, which is after both the first base equipment purchase contract (HHI-TSL-2019-001, dated January 15, 2019, covering STS gantry cranes) and the second base equipment purchase contract (HHI-TSL-2020-003, covering ASC systems). A significant portion of the base equipment had already been imported and cleared through customs before Contract HHI-TSL-2021-004 was executed.
2. AADE's Position. AADE contends that the commissioning services costs of €2,100,000 should be added to the customs value of the base equipment under Article 71(1)(b) UCC as a "condition of sale" cost. AADE's reasoning proceeds as follows:
• The base equipment purchase contracts (HHI-TSL-2019-001 for STS cranes and HHI-TSL-2020-003 for ASC systems) specify that Hailong is responsible for "delivery, assembly, testing, and commissioning" at the destination port. Under these contracts, Hailong's delivery obligations are not satisfied until the equipment has been assembled, tested, and commissioned at TSL's terminal. AADE argues that the commissioning services under Contract HHI-TSL-2021-004 are therefore a continuation of Hailong's contractual delivery obligations under the base purchase contracts, not a separate post-importation service.
• The equipment was not fully operational until commissioning was finalized. The cranes, as imported, required final assembly, calibration, and testing before they could be placed into commercial service. Until commissioning was completed, the equipment could not perform its intended function, and Hailong's delivery obligations under the base contracts were not discharged.
• The contractual separation — executing a separate contract (HHI-TSL-2021-004) for commissioning services — is form over substance. AADE contends that the parties artificially split commissioning from the base purchase contracts to exclude commissioning costs from customs value.
3. TSL's Defense. TSL defends the exclusion of commissioning services costs from customs value on the basis of Article 72(e) UCC, which expressly permits the exclusion from customs value of "charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation."
TSL's defense rests on the following grounds:
• Express statutory text. Article 72(e) UCC provides clear textual authority for excluding post-importation assembly and technical assistance costs from customs value. The commissioning services at issue — final assembly, testing, calibration, and commissioning — fall squarely within the categories enumerated in Article 72(e): "construction, erection, assembly, maintenance or technical assistance." The statutory language is unambiguous and directly applicable.
• Services performed entirely in Greece after importation. The commissioning services were performed at TSL's terminal facilities in Greece, after the equipment was imported into the customs territory of the Union and cleared through customs at the Port of Piraeus. The location and timing of the services are fully consistent with the post-importation characterization required by Article 72(e).
• Separate contract and pricing. The commissioning services are separately priced under Contract HHI-TSL-2021-004, which was contracted separately from the base equipment purchase contracts. The separate contract has its own terms, payment schedule, and performance milestones. This contractual separation, combined with the temporal gap between the base contracts and Contract HHI-TSL-2021-004, supports the characterization of commissioning as a distinct, post-importation service.
• Customs value determined at point of sale for export. The customs value of the base equipment was declared at the time of importation, when the Single Administrative Documents ("SADs") were filed. The transaction value is determined at the point of sale for export to the customs territory of the Union, not at the point of final commissioning. Commissioning costs incurred after importation and customs clearance should not retroactively increase the declared customs value.
• Contract HHI-TSL-2021-004 executed after base contracts. The commissioning contract was executed on February 28, 2021, after the base equipment purchase contracts and after a significant portion of the equipment had already been imported. This temporal separation reinforces the characterization of commissioning as a distinct, subsequent transaction rather than an integral component of the original sale for export.
• TSL had alternative commissioning options. TSL considered, and had the option to engage, a different commissioning contractor — including its own in-house engineering team or a third-party commissioning specialist. While TSL ultimately selected Hailong for commissioning (given Hailong's superior familiarity with its own equipment), the availability of alternatives demonstrates that commissioning was not an inevitable component of the sale but a separate service for which TSL made an independent procurement decision.
4. Assessment — Factor-by-Factor Analysis.
On balance, TSL's position on the commissioning services issue is its strongest of the three valuation positions analyzed in this memorandum. The express language of Article 72(e) UCC directly supports the exclusion of post-importation assembly and technical assistance costs from customs value. The services were indisputably performed in Greece after the equipment was imported and cleared through customs. The separate contractual structure and temporal gap between the base contracts and Contract HHI-TSL-2021-004 further support TSL's position.
AADE's strongest counter-argument is that the base purchase contracts specify Hailong's responsibility for commissioning as part of its delivery obligations, suggesting that the separate commissioning contract is an artificial device to separate a cost that is, in substance, part of the purchase price. This argument has some force, particularly given that the equipment was not fully operational until commissioning was completed. However, it faces the significant hurdle of Article 72(e)'s express text, which draws the line at "aft

CALDERWOOD & HARKNESS LLP

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