EU Hikes Tariffs on Harley-Davidson, Establishes 'Intent' Rule on Origin Determinations
The European Union, via the Economic Ministry of Belgium, has revoked Milwaukee-based motorcycle manufacturer Harley-Davison's Binding Origin Information (BOI) credentials, hiking tariffs on the company's entire product portfolio from 56%, the company announced in an April 19 news release. In the release, Harley-Davidson claimed the move would “effectively prohibit the company from functioning competitively in Europe,” and “underscore the very real harm of an escalating trade war to our stakeholders on both sides of the Atlantic.” The EU originally placed tariffs on motorcycles in retaliation for U.S. Section 232 tariffs on European steel and aluminum.
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Issued to Harley via the Director General of Economic Analysis and International Economy, Federal Public Service Economy at the Economic Ministry of Belgium, the decision, dated March 31, results from an “intent” rule when determining the origin of goods when calculating retaliatory duties. Previously, Harley's motorcycles had been subject to a 6% tariff after the company moved production to Thailand.
The EU's Union Customs Code “stipulates that goods the production of which involves more than one country or territory shall be deemed to originate in the country or territory where they underwent their last, substantial, 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,” the decision said.
Another provision of the EU code says a production move is not “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 regular country of origin procedures, the decision said. As justification for revoking the binding origin information, the EC cited Harley's own Securities and Exchange Commission filing that said it had moved production to Thailand to avoid the EU's retaliatory tariffs.
The company pledged to launch an immediate legal challenge to the decision, which applies the revocation of the BOI to all Harley products regardless of their actual origins.
The move underscores how, in the EU, “it is not just about what the origin of the article being imported is (e.g., where was it last substantially transformed), but it is also about why the article is being produced where it is,” customs lawyer Ted Murphy of Sidley Austin said in a blog post. “If production shifted from one country to another in an effort to secure better tariff treatment, it may not work. This is different from the U.S. approach (which seems to accept that moving production from the country being targeted may be enough of a victory),” he said.
“What's more is that the decision to avoid tariffs does not need to be the only motivation behind moving production to another country for European regulators to still slap the product-in-question with retaliatory tariffs,” Murphy said. “Instead, the origin of the good produced in the third country would be based on the 'country or territory where the major portion of the materials originated,' by value.”