Court of Justice Rules on Harley-Davidson Relocation Appeal

In a significant ruling delivered on 21 November 2024, in Case C‑297/23 P, Harley-Davidson Europe Ltd, Neovia Logistics Services International NV v. European Commission, the Court of Justice of the European Union (“CJEU”) has dismissed Harley-Davidson’s appeal against the General Court judgment that concerned its relocation of production and the application of EU customs rules. The decision sheds light on the interpretation of Article 33 of Delegated Regulation 2015/2446, which governs the economic justification for changes in the origin of goods in response to commercial policy measures, such as such as anti-dumping and countervailing duties, trade embargoes, retaliation measures, safeguard measures and quantitative restrictions or tariff quotas. 

1. Background

The case arose after Harley-Davidson moved part of its motorcycle production from the US to Thailand following the EU's imposition of additional customs duties of 25% on U.S.-origin motorcycles. The European Commission determined that this relocation aimed primarily to avoid these duties and deemed it economically unjustified under Article 33 of Delegated Regulation 2015/2446. The Commission adopted as a result a decision that denied non-preferential Thai origin to the Harley-Davidson motorcycles. Harley-Davidson challenged this decision before the General Court, arguing that its relocation was a legitimate business move driven by broader efficiency considerations.By means of a judgment T‑324/21 dated 1 March 2023, the General Court dismissed Harley-Davidson’s challenge which the latter appealed before the CJEU.

2. Key Findings by the Court

One of the key challenges in the appeal focused on the misinterpretation of Article 33 of Delegated Regulation 2015/2446. Harley-Davidson argued that the General Court improperly interpreted Article 33, asserting that it should apply only to relocations that are wholly unjustifiable absent the trade measures. They also contested the use of what they viewed as a subjective test, claiming it undermined business autonomy. 

The CJEU upheld the General Court’s reading of Article 33, affirming that relocations of production can be deemed economically unjustified if the primary or dominant purpose is to avoid EU commercial policy measures.

• The court clarified that the term "purpose" in Article 33 refers to the principal intent of the relocation, as determined objectively from available facts. It rejected Harley-Davidson’s assertion that relocations must be "wholly unjustifiable" absent trade measures to fall within the scope of Article 33.
• The court underscored that Article 33 does not impose a subjective assessment but relies on a fact-based analysis. Evidence such as Harley-Davidson’s Form 8-K, which explicitly linked the relocation to avoiding tariff burdens, was deemed sufficient to establish a presumption of non-economic justification.

An important aspect of the judgment was the court's validation of the rebuttable presumption created under Article 33. If evidence indicates that avoiding EU measures was a decisive factor in relocation, the burden shifts to the business to prove otherwise.

The court held that Harley-Davidson failed to provide sufficient evidence showing that its move was driven primarily by economic efficiency rather than regulatory avoidance. While businesses are free to make decisions optimizing their operations, relocations timed to align with EU measures face additional scrutiny. 

3. Implications for Businesses

The Harley-Davidson ruling reinforces the EU’s robust enforcement of trade policy measures, particularly where relocations appear timed to circumvent tariffs or other restrictions. Companies engaging in cross-border restructuring should note: 

• Economic Justification: Businesses must provide substantial evidence of economic rationale unrelated to EU trade measures to justify relocations. The ruling underscores that aligning relocations closely with trade measures invites enhanced scrutiny.
• Documentation Standards: Statements and records, such as public filings, will be critically examined. In this case, Harley-Davidson’s Form 8-K became pivotal in the Commission’s argument.

At the same time, since Article 33 applies to determination of non-preferential origin for the purposes of applying commercial policy measures upon importation of goods into the EU, it does not apply to re-location of production into the EU.

4. Conclusion

Court of Justice judgment affirms the EU’s stance on preventing circumvention of commercial policy measures. It provides clarity on how Article 33 should be applied and the evidentiary burden businesses must meet in order for their products to qualify as originating in the place of re-located production. Companies planning to respond to EU’s commercial policy measure, by re-locating production to third countries should consult with legal and trade experts to navigate these regulations effectively and ensure compliance with EU customs law.