Trump Administration Imposes Section 232 Tariffs on Patented Pharmaceutical Imports; Tiered Rate Structure Takes Effect Beginning July 31, 2026

Overview

On April 2, 2026, President Trump issued a Proclamation invoking Section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. § 1862), to impose tariffs on imports of patented pharmaceuticals, biologics, and associated ingredients into the United States.  The action affects pharmaceutical manufacturers, importers, and supply chain participants.   

Beginning July 31, 2026, a 100% tariff will apply to:

1. Pharmaceutical articles that are subject to a valid, unexpired U.S. patent and are:
   1. listed in the U.S. Food and Drug Administration’s (“FDA”) Approved Drug Products with Therapeutic Equivalence Evaluations (“Orange Book”); or
   2. listed in the FDA’s Lists of Licensed Biological Products (“Purple Book”); 
2. Active pharmaceutical ingredients (“APIs”) and key starting materials for such articles.

The 100% rate will replace the existing tariff rates for the product.  Exceptions and rate reductions will be available for certain products, countries, and manufacturers.

Exemption Categories

Certain categories of drug products are exempt from the additional tariff, including:

• Generic pharmaceuticals and biosimilars;
• U.S.-origin pharmaceutical products, APIs and key starting materials;
• Products classified in certain 10-digit tariff codes, listed in Annex IV of the Proclamation;
• Drugs and associated ingredients for all approved indications that are designated as orphan pursuant to the Orphan Drug Act;
• Drugs for certain specific uses, including nuclear medicines; plasma-derived therapies; fertility treatments; cell and gene therapies; antibody drug conjugates; medical countermeasures related to chemical, biological, radiological, and nuclear threats; animal health; and other specialty pharmaceutical products to be later identified by the Secretary of Commerce; and
• Goods that qualify as “prototypes to be used exclusively for development, testing, product evaluation, or quality control purposes,” under HTSUS code 9817.85.01, may be excluded from the additional tariffs.

Reduced Rate Categories

Other categories of drug products are subject to a reduced rate:

• Products of Japan, EU member states, the Republic of Korea, Switzerland, and Liechtenstein are subject to a 15% rate, instead of the general 100% rate; 
• Products of the UK are subject to a +10% percent rate, in addition to the general 100% rate, with the rate reducible to zero to the extent required by a future bilateral pharmaceutical pricing agreement;
• Products imported for the 17 companies identified in Annex IV will not be subject to the 100% duty until September 29, 2026; and
• Products imported for companies subject to an onshoring plan approved by the Secretary of Commerce (in accordance with a process yet to be established) will be subject to a +20% percent rate, in addition to the general applicable rate, until April 2, 2030.
  • Such companies which then also enter into an MFN pricing agreement with the U.S. Department of Health and Human Services (“HHS”) will not be subject to any additional tariff, until January 20, 2029, which includes the 13 companies listed in Annex II.

Key Takeaways

The Proclamation identifies the covered products in Annex I, which modifies the Harmonized Tariff Schedule of the United States (HTSUS) and established a tiered framework of mutually exclusive headings in order to calculate duties applicable to pharmaceutical products, API and key raw materials.  Tariffs take effect on July 31, 2026, for most companies.  Companies that entered into an MFN agreement prior to April 2, 2026 and listed in Annex II are exempt from duty. The tariffs for companies listed in Annex III begin on September 29, 2026.  The action affects pharmaceutical manufacturers, importers, and supply chain participants across therapeutic categories. Annex IV lists specific HTSUS codes for products exempt from the tariff framework.  Generic pharmaceuticals, biosimilars, and their associated ingredients are expressly excluded from Section 232 tariffs at this time. In addition, the administration published a fact sheet on the action.

Practical Implications and Key Reminders

Pharmaceutical manufacturers, importers, and supply chain participants should take the following steps promptly:

• Classify products (including API). Confirm whether imported patented pharmaceutical products, active pharmaceutical ingredients (APIs) and key raw materials are classifiable under the Annex I HTSUS provisions (subject to tariff) or the Annex IV HTSUS codes (zero-rate Section 232 coverage).
• Assess eligibility for Orphan Exclusivity and Special Category Exemptions. Companies with either drugs designated as orphan under the Orphan Drug Act (21 U.S.C. § 360aa et seq.); nuclear medicines; plasma-derived therapies; fertility treatments; cell and gene therapies; antibody drug conjugates (ADCs); medical countermeasures for chemical, biological, radiological, nuclear (CBRN) threats; pharmaceutical products for animal health; or other specialty products identified by the Secretary of Commerce, should assess eligibility for exemption, and monitor the Federal Register regarding such eligibility.
• Assess Eligibility for Drug Development Candidates.  Companies with developmental drug candidates not approved for use should assess eligibility for exemption under HTSUS code 9817.85.01.
• Assess eligibility for reduced rates. Companies pursuing onshoring plans (and the eligible 20% rate) must obtain Commerce approval; criteria for such approval will be published in the Federal Register. Commerce may increase tariff rates for companies that fail to fulfill onshoring or MFN pricing commitments, with notice to be published in the Federal Register.
• Monitor the 90-day negotiation update. Commerce has been instructed to report back to the President within 90 days of the Proclamation regarding the progress of any negotiations related to the Section 232 duties. Crowell will monitor any published updates.
• Review foreign trade zone admissibility. Products subject to the Proclamation's duties that are admitted into a U.S. foreign trade zone (FTZ) on or after the effective date must be admitted as "privileged foreign status" under 19 CFR § 146.41, unless eligible for "domestic status" under 19 CFR § 146.43.
• Note drawback availability. Drawback is available with respect to duties imposed under this Proclamation.
• Evaluate the generic/biosimilar exclusion's durability. Commerce is required, within one year of the Proclamation, to advise the President whether circumstances indicate a need to extend Section 232 tariffs to generic pharmaceuticals and associated ingredients.  Companies with generic or biosimilar portfolios should track these developments closely.
• Assessment of Supply Chain Arrangements – Life sciences companies that rely on supply of drug product, API and key raw materials from contract manufacturers should assess the impact of the Proclamation on its supply chain, and consider possible onshoring alternatives.  
• Assessment of Impact on Licenses and Collaborations – Life sciences companies that are party to licenses, collaborations, and co-commercialization agreements should assess any purchasing arrangements involving drug product, API and key raw materials imported into the US. 
• Not the end of potential tariffs – The new tariffs are based on the findings of an investigation by the U.S. Department of Commerce under Section 232 of the Trade Expansion Act of 1962 to determine the effects of imports on national security. Additional tariffs that impact pharmaceutical and biologic companies are still possible.  In a White House Fact Sheet explaining the new policy, the administration noted that Section 232 investigations are ongoing in sectors adjacent to pharmaceuticals: personal protective equipment, medical consumables, and medical equipment and devices, and robotics.

Crowell & Moring LLP will continue to monitor developments under the Proclamation, including Federal Register notices from Commerce and HHS regarding onshoring plan criteria, MFN pricing agreement pathways, FTZ guidance, and any modifications to the HTSUS, and will provide further updates as this framework evolves.