The United States’ additional import tariffs on steel and aluminium products, which, as things currently stand, are due to apply from 12 March 2025 (see Article III on this), have a longer history behind them: already in his first term in office, President Trump imposed additional tariffs on certain steel and aluminium products, including those originating in Europe. The European Union responded with countermeasures in the form of additional tariffs on certain goods originating in the United States (Regulation (EU) 2018/886).
The case of a production relocation from the United States to Thailand, and the resulting question of the non-preferential origin of the goods manufactured there, is a direct consequence of the EU’s countermeasure. The CJEU addressed the related legal questions at the end of last year, in an interesting appellate decision (CJEU, 21 November 2024, Case C-297/23 P).
The goods list in Annex I to Regulation (EU) 2018/886 included, among other items, motorcycles with reciprocating internal combustion piston engines exceeding 800 cm³ in cylinder capacity, falling under CN code 8711 50 00.
For the American company Harley-Davidson Inc., which specialises in the manufacture of motorcycles, this measure meant a duty burden of 31% instead of 6% on motorcycles imported into the EU. The company thereupon decided to relocate the production of motorcycles destined for the EU from the United States to its factory in Thailand. It applied to the competent Belgian authority for Binding Origin Information (BOI). The authority confirmed, in a total of five BOI decisions covering various motorcycle families, that the goods originated in Thailand. In March 2021, the EU Commission adopted Decision (EU) 2021/563, requiring the Belgian authorities to revoke the first two BOI decisions (OJ EU L 119/117 of 7 April 2021). The Belgian authorities subsequently revoked all of the origin information decisions that had been issued.
Harley-Davidson Europe and a further company brought an action before the General Court (GC), seeking annulment of Implementing Decision (EU) 2021/563. The GC dismissed the action. By judgment of 21 November 2024, the Court of Justice of the European Union (CJEU) ruled on the appeal brought against the GC’s decision, by which Harley-Davidson sought to have the contested judgment set aside and Decision (EU) 2021/563 annulled. In the result, the CJEU dismissed the appeal.
The judgment is of general significance, since trade defence measures (including anti-dumping and anti-subsidy measures) are tied to the trade policy, that is, non-preferential, origin of a product. Under EU law, whether a product is to be regarded as originating in a particular country is governed by Article 60 UCC, in conjunction with the supplementing rules in the UCC Delegated Regulation, Articles 31 to 36 of Regulation (EU) 2015/2446 (UCC DA). That goods wholly obtained or produced in a single country are to be regarded as originating in that country, Article 60(1) UCC, is straightforward. Determining origin can become more difficult where more than one country is involved in manufacturing a product. In that case, origin is to be determined under Article 60(2) UCC, under which a product is regarded as originating in the country in which it underwent its last substantial, economically justified processing or working, carried out in an undertaking equipped for that purpose, and resulting in the manufacture of a new product, or representing an important stage of manufacture.
As a result of the relocation of production to Thailand, it was undisputed that the last processing took place in Thailand. This, however, can only be regarded as conferring origin if it is also economically justified. The court proceedings accordingly turned on the interpretation of Article 33 UCC DA, which defines this criterion in greater detail:
“Article 33
Processing or working operations which are not economically justified
(Article 60(2) of the Code)
Any processing or working operation carried out in another country or territory shall be deemed not to be economically justified if it is established on the basis of the available facts that the purpose of that operation was to avoid the application of the measures referred to in Article 59 of the Code.”
The CJEU examined the GC’s interpretation for any errors of law. The GC had found that, where it can be established, on the basis of the available facts, that the main or predominant purpose of a relocation was to circumvent the application of the Union’s trade policy measures, that relocation must, in principle, be regarded as not economically justified.
The CJEU considered this interpretation to be correct, and rejected the appellants’ argument that the purpose had to relate to the fact that the production relocation clearly made no sense without the trade policy measures in question. If the concept of purpose were reduced solely to that criterion, with the result that the provision would not apply where a production relocation is carried out for other reasons alongside the main purpose, the provision would, in the CJEU’s view, be rendered practically ineffective (para. 53). The decisive criterion for the application of Article 33 UCC DA is the main or predominant purpose of the measure in question (para. 61). Accordingly, where this main purpose consists in circumventing the application of trade policy measures, working or processing that is not economically justified is established.
The appellants had argued that, on the GC’s interpretation, the Commission conducts, or is entitled to presume, a subjective assessment of purpose. Indeed, Article 33 UCC DA requires that, in applying the provision, a subjective element be established, namely the intention to circumvent the application of a trade policy measure. The CJEU rejected this objection, noting that such an intention must be based on objective evidence, which it considered to be present in this case.
The CJEU likewise did not accept the argument that the Commission’s decision disproportionately restricted the companies’ property rights or freedom to conduct a business (para. 52).
In the result, the CJEU thus upheld the GC’s finding that, on the basis of the available facts, the main purpose of the relocation of production from the United States to Thailand had been to circumvent the trade policy measure represented by the additional tariffs. In such a case, it falls to the economic operator to prove that the main or predominant purpose of the relocation, at the time the relevant decision was taken, was not to circumvent the application of those measures. The Court found that no such proof, that is, evidence that the main purpose of the relocation was something else, had been provided in this case.
In connection with the appellants’ submissions, the CJEU also made a number of further, interesting findings on individual procedural issues of likewise general significance:
- The Commission had failed to hear the companies concerned before adopting the contested decision, which, in the appellants’ view, should render the Commission’s decision void. The courts confirmed, in principle, that the failure to conduct a hearing constituted a breach of duty and a procedural defect; however, the CJEU did not regard this as a ground requiring annulment. A breach of the right to be heard can only result in annulment where there is a possibility that the administrative procedure could have led to a different outcome had a hearing taken place. Referring to the evidence submitted, and the absence of corresponding proof, the CJEU rejected this argument in the present case.
- As regards the protection of legitimate expectations attaching to Binding Origin Information, the CJEU noted that a BOI decision cannot definitively guarantee that the origin of the goods to which such a decision relates will not subsequently be changed. Under Article 34(11) UCC, the possibility of revocation on the basis of Commission decisions exists as a matter of principle.
The subject matter of the CJEU and GC decisions is highly topical in light of current developments involving threatened punitive tariffs on steel and aluminium. It is to be expected that the EU will, once again, adopt countermeasures in the form of additional tariffs on goods originating in the United States. While the United States has, this time, decided to impose additional tariffs on steel and aluminium products from almost all countries, the EU is likely, once again, to tie its measures to trade policy origin in the United States. The CJEU’s decision has made clear that proving an economic justification for a production relocation in such cases is subject to a very high threshold.
