The current trade policy landscape, shaped by President Trump’s recent tariff announcements, is creating significant uncertainty and potential cost pressures for businesses operating in globalized supply chains. With tariffs imposed by the US on aluminum and steel and the corresponding retaliation measures announced by the EU on 12 March, many EU-based multinationals are facing serious challenges, since navigating the global trade tensions between USA, Mexico, China and Canada is becoming increasingly complex, especially in industries with long and manifold supply chains.

For companies invested in and based within the customs territory of the EU, this means rethinking supply chains and production strategies as well as other cost-reduction strategies to mitigate potential tariff impacts. However, caution is essential in this regard. The recent Harley Davidson judgement by the Court of Justice of the EU (C-297/23 P as of 11 November 2024) highlights the EU’s firm stance on anti-circumvention rules under Article 33 of the Delegated Regulation 2015/2446¹. The CJEU clarified that a coincidence in timing between the adoption of a commercial policy measure and the relocation of production is sufficient to establish a presumption that that relocation is not economically justified, placing the burden of proof of the contrary on the economic operator.

In the present case, Harley-Davidson issued a report to the United States Securities and Exchange Commission (SEC), intended to inform its shareholders of the application of the additional customs duties adopted by the European Union. To address the substantial cost of this tariff burden long-term, Harley-Davidson stated that it would be implementing a plan to shift production of motorcycles for EU destinations from the U.S. to its Thailand facilities to avoid the tariff cost. However, the motorcycles manufactured in Thailand were denied the application of preferential origin for importation into the EU.

With this judgement, the CJEU confirms that if, on the basis of the available facts, it appears that the principal or dominant purpose of a relocation was to avoid the application of EU commercial policy measures, then that relocation must be considered incapable of being economically justified. Hence, the relocation of production to another country, despite the substantial efforts it causes, fails to result in the obtaining of an origin that would entitle the motorcycles to the preferential treatment upon their importation in the EU.

Therefore, in this complex, uncertain and challenging environment, businesses must navigate a fine line between economic efficiency and trade compliance. Strategic decisions on locations, production, and supply chains must not only address cost pressures but also align with EU trade, customs, and regulatory frameworks.

At Alvarez & Marsal, we combine deep expertise in specific industries, restructuring, strategy, and tax advisory to help businesses develop holistic strategies that align operational and regulatory priorities. Our Global Trade Team and Operating Model Design Team combined with our respective Industry Teams are here to support companies in navigating these complexities and ensuring compliance with trade and customs regulations in the EU.

For tailored advice and solutions, please reach out to the contacts listed in the authors section.

¹(Commission Delegated Regulation (EU) 2015/2446 of 28 July 2015 supplementing Regulation (EU) No 952/2013 of the European Parliament and of the Council as regards detailed rules concerning certain provisions of the Union Customs Code)