The US Department of Commerce has published the procedures for companies to apply for agreements with the US government to reduce tariffs levied under Section 232 of the Trade Expansion Act of 1962 (Section 232) on imported patented pharmaceutical products by onshoring manufacturing of qualifying products. Commerce requests applications by June 12 from companies wishing to enter into onshoring agreements. The establishment of requirements and criteria for such applications provides the opportunity for pharmaceutical companies facing the specter of 100% tariffs to seek tariff relief if business plans can align with the Trump Administration’s onshoring objectives.

Background

On April 2, 2026, President Donald Trump issued a proclamation invoking Section 232 to impose tariffs on certain pharmaceutical products imported into the United States. Section 232 authorizes the president to adjust imports to address national security threats, which can include the suppression of domestic manufacturing capacity caused by imports. President Trump’s proclamation imposing the tariffs stated that the United States is “heavily reliant on imports” of pharmaceuticals and foreign government intervention has fostered US “dependence on foreign production of patented pharmaceuticals that have fragile supply chains.”

President Trump imposed a 100% tariff on certain patented pharmaceuticals and their associated ingredients (i.e., active pharmaceutical ingredients (APIs) and key starting materials). The tariffs will take effect for certain large companies on July 31, 2026, and for small companies on September 29, 2026.

The Section 232 action has a complex set of carve-outs and differential tariff rates that include the following:

• Generic pharmaceuticals and associated ingredients are exempted.
• Products imported under the HTS subheadings in Annex IV to the proclamation would be subject to a 0% Section 232 tariff rate at this time.
• Pharmaceutical products of Japan, the European Union, Korea, Switzerland and Lichtenstein are subject to a 15% duty, unless a lower rate applies.
• Pharmaceutical products of the United Kingdom are subject to a 10% duty, potentially to be further reduced to 0%.
• A 0% tariff rate will apply for orphan drugs and associated ingredients; nuclear medicines; plasma-derived therapies; fertility treatments; cell and gene therapies; antibody drug conjugates; medical countermeasures related to chemical, biological, radiological and nuclear threats; and other specialty products to be identified by the Secretary of Commerce, as well as pharma products for animal health, if they are products of a jurisdiction that has a current or forthcoming trade and security framework agreement or they meet an urgent US health need.
• Duty drawback with respect to the duties subject to the proclamation is permitted.
• Imports of US-origin pharma products are exempted.

The President also granted certain company-specific duty reductions and exemptions:

• Companies that have entered into qualifying agreements with the US government and developed approved plans to onshore production of patented pharmaceuticals and associated ingredients in the United States (Onshoring Agreements) will be subject to only a 20% tariff from September 29, 2026, through April 2, 2030.
• Companies that have entered into both Onshoring Agreements and agreements to provide most-favored-nation pharmaceutical pricing (MFN Agreements) will be subject to a 0% tariff from July 31, 2026, through January 20, 2029.

The proclamation states that Commerce will continue to negotiate Onshoring and MFN Agreements to adjust imports of pharmaceutical products.

Onshoring Agreement Application Process

On May 11, 2026, Commerce announced procedures for companies to apply for Onshoring Agreements that would qualify them for the reduced 20% tariff on imports of their patented pharmaceuticals and associated ingredients. Applications and supporting documentation should be submitted to Commerce via email at [email protected] by June 12, 2026.¹

Applications must include detailed information, organized as follows:

1. Organization information: Details regarding the applicant’s corporate legal entity, beneficial ownership, and location of headquarters and manufacturing facilities.
2. Total investment: Total of new US investments planned between January 20, 2025, and January 20, 2029, including the amount of new capital expenditure (e.g., manufacturing plants and research and development locations).
3. Onshoring commitment: Scope of onshoring commitment, including a “comprehensive explanation” of the portion of the applicant’s existing patented product portfolio that will be onshored and the projected timeline (which may account for FDA approval timelines).
4. US production: Details regarding the applicant’s US and global sales of US-made patented pharmaceuticals (i.e., products whose APIs are produced in the United States) as of January 20, 2025, and expected US and global sales of such products as of January 20, 2029.
5. Investment commitment: Additional details regarding the applicant’s investment commitments, including:
   • a description of the products that will not be onshored, with explanations as to why onshoring is commercially unfeasible and hypothetical estimates of the cost to establish US production facilities for such products;
   • a statement of the amount the applicant commits to spend each calendar year on new facilities beyond its onshoring commitments and a commitment to submit audited reports regarding progress toward key investment milestones;
   • details on whether the applicant has or intends to enter into an MFN Agreement with the US government; and
   • a commitment to provide supporting information to Commerce upon request.

Annex A to the application provides a template for companies to submit the information in Sections 1–5 above. In Annex B, companies must provide detailed entry information regarding the patented pharmaceutical products and associated ingredients to be imported under the reduced tariff rate (i.e., tariff classification, brand name and API, country of origin, importer(s) of record, exporter(s), foreign manufacturing facilities, manufacturer identification code).

Applicants must include a certification from a senior officer of the company attesting that the submission is true, accurate and complete to the best of the company’s knowledge and that the company has conducted reasonable diligence to verify the information provided. Applicants must also acknowledge that preferential treatment granted pursuant to an approved Onshoring Agreement provides relief from the Section 232 pharmaceutical tariffs only and will not apply to certain excluded products (described in the next section).

Approval and Usage of Reduced Tariff Rate

The procedures state that Commerce will review each application on a case-by-case basis and may condition its approval on modifications to the proposed onshoring plan. There is no deadline for Commerce to issue its decisions. Commerce will notify approved applicants in writing and transmit relevant information to US Customs and Border Protection (CBP) to administer the reduced tariff rate.

If a company’s onshoring plan is approved, the company may designate approved importers for their products that may claim the 20% tariff. However, the reduced tariff may not be used to import any of the following products:

• products manufactured by a third-party company acquired after April 2, 2026;
• products acquired or licensed after April 2, 2026; and
• products that the company has not itself developed as a majority participant.

Key Considerations for Seeking Tariff Relief

Commerce’s procedures raise key considerations for companies that enter into approved Onshoring Agreements with the US government. For example:

• Accuracy of onshoring commitments: Commerce has stated that the executive branch will monitor Onshoring Agreements and determine whether a company engaged in fraud or deliberately misled the government regarding its onshoring commitments. In such an event, Commerce may subject the company’s products to the 100% tariff prospectively and retroactively, which could lead to significant tariff liability. Companies could also face penalties under other frameworks (e.g., 19 U.S.C. § 1592; False Claims Act). Companies must therefore carefully consider the commitments they make in applications for Onshoring Agreements.

• Increased scrutiny of imports: Commerce will monitor manufacturer and importer compliance with an approved Onshoring Agreement and will “communicate information regarding noncompliance to CBP.” This means that imports for which a company has claimed the 20% tariff under an Onshoring Agreement will likely receive additional scrutiny, potentially increasing the likelihood of penalties for errors in entry declarations and supporting documentation, even if unrelated to the company’s Onshoring Agreement.

• Uncertain impact of changes to Section 232 tariffs: Commerce’s procedures affirm that preferential tariff treatment applies only to the Section 232 tariffs imposed pursuant to the President’s April 2, 2026 proclamation and will expire as of April 2, 2030. To the extent that these Section 232 tariffs and the benefits available to companies that have entered into Onshoring Agreements may be modified prior to April 2, 2030, Commerce has not advised regarding the corresponding impact on companies’ commitments under Onshoring Agreements.

Next Steps

WilmerHale has extensive experience advising clients on a host of tariff mitigation measures. Please reach out to a member of our team if you would like to discuss how to assess your strategy for submitting applications to Commerce or how these latest developments may impact your business.