Revving Through International Trade: Tariffs & Harley-Davidson’s Battle Over Origin of Motorcycles

Harley-Davidson Europe Ltd (referred to collectively with its group as ‘Harley-Davidson’) and Neovia Logistics Services International (‘Neovia’), are seeking the annulment, under Article 263 TFEU, of Commission Implementing Decision (EU) 2021/563, dated 31 March 2021. This decision, published in the Official Journal (OJ 2021 L 119, p. 117) and addressed to the Kingdom of Belgium, concerns the validity of certain binding origin information (BOI) decisions. The contested decision called for the revocation of two BOI decisions related to Neovia, acting on behalf of Harley-Davidson, which pertained to the importation into the European Union, via Belgium, of specific categories of motorcycles manufactured by Harley-Davidson in Thailand.

You may read the full decision here: CURIA – Documents

The Customs Code establishes three rules for determining the origin of goods: rules for non-preferential origin, rules for preferential origin, and rules for determining the origin of specific goods.

Specifically, Article 59 of the Customs Code states that Articles 60 and 61 set out the rules for determining the non-preferential origin of goods. These rules apply to: (1) the Common Customs Tariff, excluding measures under Article 56(2)(d) and (e); (2) non-tariff measures established by EU legislation governing specific areas of trade in goods; and (3) other EU measures related to the origin of goods.

 

Article 60 of the Customs Code, which deals with the acquisition of non-preferential origin, provides the following:

 

Goods entirely produced in a single country or territory are considered to originate from that country or territory.

 

Goods whose production involves more than one country or territory are deemed to originate from the country or territory where they underwent their last substantial, economically justified processing or working. This processing must occur in a facility equipped for such purposes and must result in the creation of a new product or represent a significant stage in the manufacturing process.

 

Under Article 62 of the Customs Code, the Commission is authorized to adopt delegated acts, in line with Article 284, to establish detailed rules for determining non-preferential origin. These rules specify when goods are considered wholly obtained in a single country or territory or when they have undergone substantial, economically justified processing or working, as outlined in Article 60.

 

Based on this authority, the Commission enacted Commission Delegated Regulation (EU) 2015/2446 on 28 July 2015. This regulation supplements Regulation No 952/2013 by providing detailed rules for certain provisions of the Union Customs Code (UCC-DA) (OJ 2015 L 343, p. 1).

 

Article 33 of the UCC-DA clarifies which processing or working operations are not considered economically justified. It states:

 

“Any processing or working operation carried out in another country or territory shall be deemed not economically justified if it is demonstrated, based on available evidence, that the purpose of the operation was to circumvent the measures referred to in Article 59 of the Customs Code. These measures pertain to the application of the Common Customs Tariff and other EU tariff or non-tariff measures related to the origin of goods imported into the European Union.”

Background to the Dispute

In June 2018, the U.S. government imposed additional tariffs of 25% on steel and 10% on aluminum imports from the EU under Section 232 of the Trade Expansion Act of 1962, aiming to boost domestic production. In response, the EU Commission adopted Regulation 2018/886 on 20 June 2018, introducing additional customs duties on U.S. products, including motorcycles with engines over 800 cm³ (classified under code 8711 50 00). These duties were set at 25% from 22 June 2018, rising to a total of 56% (including the standard 6% duty) by 1 June 2021.

 

Harley-Davidson, an American motorcycle manufacturer, announced in a 25 June 2018 SEC filing (Form 8-K) that it would shift production of EU-bound motorcycles from the U.S. to international facilities to avoid these tariffs, estimating an additional cost of $2,200 per motorcycle. The company chose its Thailand factory for this purpose.

 

To confirm the origin of motorcycles produced in Thailand, Harley-Davidson and its logistics partner, Neovia, applied for Binding Origin Information (BOI) decisions from Belgian customs authorities in January 2019.

 

The Belgian authorities, after consulting with the EU Commission and Member States, issued BOI decisions on 24 June 2019, certifying the motorcycles as originating in Thailand. However, the Commission, citing Article 33 of the UCC-DA, argued that the production shift was economically unjustified and aimed at avoiding EU tariffs. Despite objections from Belgium and some Member States, the Commission adopted a decision on 31 March 2021, requesting the revocation of the BOI decisions. The Belgian authorities complied, revoking the decisions on 16 April 2021.

 

The applicants claim that the Court should:

• annul the contested decision;
• give guidance to the customs authorities of the European Union as to the useful consequences of the judgment;
• order procedural or inquiry measures as appropriate;
• order the Commission to pay the costs.

 

The Commission contends that the Court should dismiss the action and order the applicants to pay the costs.

 

The Commission argued that the applicants’ second claim was inadmissible. The Court confirmed that under Article 263 TFEU, it does not have authority to issue directives to EU institutions on how to implement judgments. Therefore, the Court dismissed the second claim for lack of jurisdiction.

 

The Court rejected all pleas, finding that:

• • Third Plea (Misuse of Power): The Commission correctly interpreted Article 33 UCC-DA, which deems operations not economically justified if their primary purpose is avoiding EU commercial measures. The Court agreed that Harley-Davidson’s relocation to Thailand primarily aimed to avoid tariffs.

 

• • Fourth Plea (Invalidity of Article 33): The Court upheld Article 33 as valid, finding no breach of proportionality or legal certainty and confirming the Commission acted within its delegated powers under Article 290 TFEU.

 

• • First Plea (Procedural Errors): The Court found no procedural flaws. The Commission was not bound by dissent from Member States and provided adequate reasoning.

 

• • Second Plea (Manifest Error of Assessment): The Court ruled that the Commission reasonably concluded that the relocation’s primary objective was to avoid tariffs and was not required to consider alternative explanations.

 

• • Fifth Plea (Breach of Fundamental Rights): The Court rejected claims of disproportionate measures and breach of legitimate expectations. Any procedural delay was not deemed excessive.

 

• Sixth Plea (Abuse of Power): No evidence supported allegations of political motivation. The Commission acted to ensure correct origin determination.

 

The Court also rejected requests for additional measures of inquiry, holding that the evidence already provided was sufficient. The claim was dismissed in full and the applicants were ordered to pay the costs.

 

Key Points:

• The Commission’s interpretation of Article 33 UCC-DA was upheld.
• Operations primarily aimed at avoiding tariffs are not economically justified.
• No procedural or fundamental rights breaches were found.
• The applicants failed to prove alternative motives for the relocation.
• The Commission’s decision was lawful and not politically motivated.