Section 232 Pharmaceutical Tariffs: What Importers Need to Know Before July 31

Informational only — not legal advice.

What happened on April 2, 2026

President Trump signed a Section 232 proclamation titled "Adjusting Imports of Pharmaceuticals and Pharmaceutical Ingredients into the United States." The authority is the Trade Expansion Act of 1962 (19 U.S.C. § 1862) — the same statute used for steel, aluminum, autos, copper, timber, and semiconductors.

The Commerce Department investigation found:

• Approximately 53% of patented pharmaceutical products distributed in the United States are manufactured outside the U.S.
• Only 15% of patented APIs by volume are domestically produced.

The proclamation adds U.S. Note 40 to subchapter III of Chapter 99 and establishes a new code family — 9903.04.60 through 9903.04.69 — with seven mutually exclusive rate tiers based on company agreements, country of origin, and product category. (White House proclamation, Apr. 2, 2026, Federal Register — 91 FR Doc. 2026-06956, Apr. 9, 2026)

Which products are covered

The proclamation targets three categories of covered goods:

1. Patented pharmaceuticals listed in the FDA Orange Book (Approved Drug Products with Therapeutic Equivalence Evaluations) or FDA Purple Book (Licensed Biological Products)
2. Their associated active pharmaceutical ingredients (APIs)
3. Their key starting materials used in API synthesis

Covered HTSUS subheadings are enumerated in Annex I and span two chapters:

The Chapter 99 code family: 9903.04.60–.69

The proclamation establishes seven mutually exclusive Chapter 99 headings:

How the 100% rate works in practice: The Section 232 duty is reduced as needed so the combined MFN Column 1 base rate plus the Section 232 tariff equals 100%. If the existing MFN rate already exceeds 100%, no additional Section 232 duty is added on top.

Effective dates: two tranches, not one

Tranche 1 — July 31, 2026 (120 days from signing)

Applies to the 17 large companies named in Annex III. These companies receive transitional treatment under 9903.04.61 (base HTSUS rate only) while they have the window to negotiate Commerce/HHS agreements before that date.

The Annex III companies are: AbbVie, Amgen, AstraZeneca, Bristol Myers Squibb, Boehringer Ingelheim, Eli Lilly, EMD Serono, Genentech, Gilead Sciences, GlaxoSmithKline/ViiV Healthcare, Johnson & Johnson, Merck Sharp & Dohme, Novartis, Novo Nordisk, Pfizer, Regeneron, and Sanofi.

Tranche 2 — September 29, 2026 (180 days from signing)

Applies to all other companies not in Annex II or Annex III.

Annex II (13 companies) had pre-existing agreements in place before April 2, 2026 and already qualify for the zero rate under 9903.04.65. They are not subject to either effective-date tranche.

Who is affected

Directly in scope (patented drugs, APIs, and key starting materials):

• U.S. importers of record for Annex I subheadings
• Distributors and wholesalers importing patented pharmaceutical products
• Pharmaceutical manufacturers importing patented APIs or key starting materials from abroad
• U.S. subsidiaries of foreign pharmaceutical companies sourcing from affiliated entities in Europe, Asia, or elsewhere

Not directly covered (as of April 2, 2026):

• Importers of generics and biosimilars (zero rate under 9903.04.67, subject to one-year Commerce review)
• Importers of orphan drugs, cell/gene therapies, and nuclear medicines (zero rate under 9903.04.66)
• Annex II companies with pre-existing onshoring/MFN agreements (zero rate through January 20, 2029)

Top source countries and the rates they face:

Canada and Mexico: No USMCA-specific carveout has been identified in available sources. Canada and Mexico do not appear on the ally list receiving the 15-percentage-point rate. Importers sourcing patented APIs or finished drugs from Canada or Mexico should confirm the applicable heading directly against the proclamation text and forthcoming CBP implementation guidance before assuming any preferential treatment.

Reducing or eliminating the tariff: two company-level pathways

Unlike steel and aluminum Section 232 — which allow importers to petition BIS for product-by-product exclusions — the pharmaceutical proclamation uses company-level agreements as the primary relief mechanism. There is no traditional product-exclusion petition process.

Pathway 1: Commerce onshoring plan → 20% rate

A company submits a domestic manufacturing plan to the Secretary of Commerce covering covered pharmaceuticals or APIs. If approved:

• The company pays the 20% rate under 9903.04.64.
• On April 2, 2030, the rate automatically steps up to 100% unless the company has also entered into an HHS MFN pricing agreement before that date.

The Commerce Department is required to publish qualifying criteria for onshoring plans in the Federal Register. As of April 11, 2026, those criteria have not yet been published.

Pathway 2: Onshoring plan + HHS MFN pricing agreement → zero rate

A company with both a Commerce-approved onshoring plan and an HHS Most Favored Nation drug pricing agreement receives:

• Zero Section 232 duty under 9903.04.65 (only the base Column 1 MFN rate applies).
• Effective through January 20, 2029.

The 13 Annex II companies have already secured this status. The July 31 and September 29 effective dates are, in part, pressure deadlines designed to move Annex III and other companies through this process.

Practical note: The negotiation window before July 31 and September 29 is short. Companies that want a reduced rate need to initiate the Commerce/HHS process now. Waiting until after the effective date means paying the applicable tier rate while negotiations proceed.

How this interacts with existing tariffs

Section 301 duties (China-origin APIs and ingredients)

Section 232 and Section 301 are independent tariff regimes that stack. The proclamation's rate-cap mechanic (combined MFN base rate + Section 232 duty = 100%) is based on the MFN Column 1 rate — it does not neutralize Section 301 duties, which are assessed on top of the MFN rate.

A Chinese-origin API with a 25% Section 301 duty faces:

1. The 25% Section 301 duty (unchanged)
2. A Section 232 duty calculated against the MFN base rate (not against the 25%-elevated effective rate)

The combined burden for some China-sourced patented ingredients could exceed 100%. The exact entry-level calculation depends on CBP implementation guidance not yet published. Confirm with trade counsel once that guidance is available.

Other Section 232 tariffs

Each Section 232 sector has its own Chapter 99 heading family assessed independently. If your imports are also subject to, for example, the steel Section 232 (e.g., for certain packaging or manufacturing equipment), the pharmaceutical 9903.04.* duty is an additional layer.

Section 122 temporary surcharge

The Section 122 temporary import surcharge (in effect since February 24, 2026, through at least July 24, 2026) continues to apply to pharmaceutical imports as a separate duty. The pharmaceutical Section 232 adds to it rather than replacing it.

What to do before July 31

For importers of patented pharmaceuticals, APIs, or key starting materials:

1. Map your 10-digit codes against Annex I. Products not in Annex I are not subject to the Section 232 duty. Products in Annex I are covered unless they fall into an excluded category (generics, biosimilars, orphan drugs). This classification work is the necessary first step.

2. Confirm your effective date. Annex III company: July 31, 2026. All others (without a qualifying agreement): September 29, 2026.

3. Evaluate the onshoring/MFN agreement pathways. If pursuing a reduced rate is commercially viable, begin the Commerce/HHS engagement now. The Commerce Federal Register notice on qualifying criteria is the next milestone to watch.

4. Assess sourcing and supply chain diversification. The rate differential between ally countries (15 pp) and default countries (100%) creates meaningful incentive to review country-of-origin sourcing. EU, Japanese, South Korean, Swiss, and UK sources face materially lower rates than India, China, or countries not on the ally list.

5. Monitor CBP CSMS for implementation guidance. CBP will publish CSMS notices implementing the 9903.04.* headings in ACE ahead of the July 31 effective date. These will confirm entry mechanics, duty-deposit procedures, and any special reporting requirements.

6. Model your China-origin Section 301 stacking exposure. If you source APIs or key starting materials from China, calculate how the pharmaceutical Section 232 stacks on your existing Section 301 burden before the effective date. The combined rate may trigger sourcing or tariff-engineering decisions.

7. Track the generics review. The one-year Commerce review on whether to extend tariffs to generics and biosimilars is a live risk for generic pharmaceutical importers who are not currently covered.

Open questions as of April 11, 2026

• USMCA interaction: No confirmed USMCA carveout. Canadian and Mexican pharma imports may default to the 100% rate. Verify against the proclamation text and CBP guidance once available.
• Commerce onshoring plan criteria: Not yet published. Required to appear in the Federal Register.
• CBP CSMS implementation notices: Not yet published. Expected before July 31, 2026.
• Annex II company names: The 13 Annex II companies are not widely reproduced in secondary sources. The proclamation's Annex II is the authoritative source.
• Section 301 stacking mechanic for China-origin goods: Exact CBP calculation methodology pending implementation guidance.
• Generics and biosimilars: The one-year review may produce scope expansion. Generic importers should monitor Federal Register notices.
• Legal challenges: No pharmaceutical Section 232 challenge had been filed as of April 11, 2026. Section 232 under the Trade Expansion Act of 1962 is on stronger statutory footing than IEEPA — Congress expressly granted tariff-adjustment authority in that statute — but challenges on the scope or methodology of the Commerce investigation remain possible, particularly once the tariffs take effect and injury materializes.