Harley-Davidson ECJ case: key lessons in the current context.

Recapping the Facts

During Trump’s first presidency, the EU imposed retaliatory measures in response to U.S. tariffs on European steel and aluminum. In response, Harley-Davidson decided to relocate production from the U.S. to Thailand to secure a more favorable tariff position, as Thai-origin products were exempt from additional EU duties imposed on U.S.-origin goods.

To solidify this position, Harley-Davidson sought Binding Origin Information (BOI) from Belgian Customs Authorities to confirm the Thai non-preferential origin of its motorcycles, thereby not being subject to additional duties.

For context, a BOI is an official decision issued by EU customs authorities that provides legal certainty on the origin of goods, whether preferential or non-preferential.

And Harley-Davidson obtained not one but two BOI decisions confirming the Thai origin.

But the EU Commission had a different perspective.

The EU Institution requested and issued the revocation of the BOI decisions issued by Belgian Customs Authorities, arguing that Harley-Davidson’s production in Thailand lacked economic justification.

Harley-Davidson appealed the Commission's decision, but the General Court of the EU dismissed the case on 1 March 2023, ruling that the Commission's actions were justified.

On 21 November 2024, the ECJ, as the court of last resort, upheld the earlier decision, rejecting Harley-Davidson’s grounds for appeal.

Consequently, the origin of the motorcycles remained U.S., subjecting them to EU additional tariffs.

What went wrong for Harley-Davidson ?

To be more specific, the EU Commission relied on Article 33 of the UCC Delegated Act (Delegated Regulation No 2015/2446) to request the revocation of the BOI decisions issued by Belgian Customs Authorities. This article specifies that a processing or working operation in another country is not considered economically justified if it is established that the primary purpose of the operation was to avoid EU commercial policy measures.

As a reminder, the non-preferential origin of a product is determined in the country where it has undergone its last, substantial, and economically justified processing or working, in an undertaking equipped for that purpose, resulting in the manufacture of a new product or representing an important stage of manufacture.

Since the EU Commission determined that Harley-Davidson’s relocation was primarily aimed at avoiding EU tariffs, the processing in Thailand failed to meet the threshold of economic justification. As a result, the Thai non-preferential origin could not be recognised, leaving the motorcycles’ origin as U.S.

Why this Case matters now

As new U.S. tariffs and potential retaliatory measures loom, many companies are revisiting duty mitigation strategies, including relocating production. However, this case highlights the inherent risks and limitations of such moves, particularly for imports into the EU.

This case underscores the critical importance of ensuring that relocations are backed by genuine economic justification, not merely as a mechanism to circumvent trade measures. Post-decision, European authorities are likely to apply heightened scrutiny to relocations that coincide with the imposition of trade measures.

For corporate trade compliance and customs management leaders, this case must serve as a valuable tool to emphasise the risks and limitations of relocation strategies - especially when such ideas are driven by top management.

And there are other tools within customs regulations that can effectively help companies to reduce import duties. While they may not appear as aggressive as relocation, they come with a higher degree of legal certainty and compliance assurance.

And in the current context, certainty is invaluable.

The Judgment of the Court of 21 November 2024 can be found here.