The European Court of Justice (ECJ) concluded that Harley-Davidson’s relocation of production from the US to Thailand was primarily intended to circumvent EU trade measures, thus considering the processing in Thailand as ‘non-economic’ under article 33 of the Delegated Act to the UCC, and upheld the European Commission’s decision to invalidate the Binding Origin Information (BOI) decisions granted by Belgian Customs.

In June 2018, the Trump Administration imposed additional import tariffs of 25% on steel and 10% on aluminum. In a countermeasure, the EU introduced additional duties on motorcycles of US origin. In response, Harley-Davidson filed a Form 8-K with the SEC, announcing the relocation of production for motorcycles destined for the EU from the US to Thailand. This move aimed to grant the motorcycles Thai origin, exempting them from the EU’s additional duties. This initial strategy was confirmed by Belgian customs authorities in a binding origin information (BOI).

However, the European Commission stepped in and ordered the revocation of the BOIs, arguing that the relocation did not justify Thai origin status under Article 33 of the Delegated Act of the Union Customs Code (DA UCC). This provision holds that any processing in another territory is not economically justified if it’s primarily to avoid additional import duties. Consequently, Harley-Davidson’s motorcycles remained subject to the EU’s additional duties.

Harley-Davidson challenged this decision at the General Court and later at the Court of Justice. Both courts dismissed the claim, upholding the European Commission’s stance that the relocation was intended to circumvent the additional tariffs.

This case is highly relevant considering the current trade landscape, where countries are increasingly implementing protective measures like additional import duties. This scenario is particularly pertinent when evaluating the relocation of production activities, as seen in disputes over electrical vehicles from China and potential additional duties following the US elections.

Companies naturally seek to mitigate these substantial duties, but the recent ruling underscores the need for careful consideration and thorough analysis of all relevant legislation before making decisions. Relocation should be driven by genuine economic reasons beyond avoiding trade measures, necessitating transparency and robust documentation to justify the economic viability of such strategies.

This case highlights that regulatory bodies will scrutinize relocations coinciding with the imposition of trade measures closely. Production strategy has to be economically justified and well-documented.