On September 29, 2026, the final phase of the Section 232 pharmaceutical tariffs established by Presidential Proclamation 11020 (the Proclamation), became effective, subjecting many imported patented pharmaceuticals and associated ingredients to an additional 100 percent ad valorem duty. Companies that were not identified in Annex III to the Proclamation are now generally subject to a 100 percent duty rate for their covered patented pharmaceutical imports unless the products qualify for the numerous exclusions, reduced-rate provisions and product-specific exceptions that have been refined through subsequent Federal Register notices, US Department of Commerce’s Bureau of Industry and Security (BIS) guidance, and US Customs and Border Protection (CBP) Cargo Systems Messaging Service messages.

Although the new duties may substantially increase import costs, importing companies should not assume that the resulting exposure is unavoidable. Depending on a company’s products, supply chain, manufacturing footprint, sourcing arrangements, and import and export profile, several customs and trade mechanisms may be available to reduce, eliminate or defer the tariffs. Set forth below are several customs strategies that companies can evaluate to help strategically mitigate the impact of the Section 232 pharmaceutical tariffs.

1. Review the Availability of Exemptions and Differential Duty Rates Under the Section 232 Pharmaceutical Action

The Section 232 pharmaceutical action includes a complex set of exceptions and preferential rates, outlined under headings 9903.04.61 through 9903.04.70 of the Harmonized Tariff Schedule (HTS) of the United States. These provisions may reduce or eliminate the applicable Section 232 duty based on entry timing, country of origin, importer-specific government agreements, product characteristics or intended use. The applicable Chapter 99 heading generally must be reported in addition to the product’s ordinary Chapter 1–97 classification. Importantly, US-origin pharmaceutical products are not subject to the Section 232 tariffs and require no Chapter 99 heading.

The principal provisions are:

• 9903.04.61, HTS: Transitional treatment. This heading provided a zero percent additional duty for covered patented pharmaceutical articles imported for specified companies between 12:01 a.m. Eastern time (ET) July 31, 2026, and 12:01 a.m. ET on September 29, 2026. Because the transition period has ended, this provision is relevant primarily when reviewing the treatment of entries made between July 31 and September 29 and may still be implemented in qualifying entries via post summary correction or protest.
• 9903.04.62, HTS: Products of specified trading partners. Covered patented pharmaceutical articles that are products of specified trading partners¹ are subject to a 15 percent total tariff rate, inclusive of the ordinary column 1 duty and the Section 232 duty, rather than the generally applicable 100 percent rate. 
• 9903.04.63, HTS: United Kingdom-origin products. Covered patented pharmaceutical articles that are products of the United Kingdom are subject to a zero percent additional Section 232 duty, so only the ordinary column 1 duty rate would apply. 
• 9903.04.64, HTS: Approved onshoring plans. Patented pharmaceutical articles imported for companies with an onshoring plan approved by the Secretary of Commerce are subject to the ordinary column 1 duty rate plus a reduced 20 percent additional duty through April 1, 2030, as discussed further below. Beginning April 2, 2030, the applicable rate becomes the 100 percent total rate unless the measure is modified by subsequent government action.
• 9903.04.65, HTS: Onshoring and most favored nation (MFN) agreements. Patented pharmaceutical articles imported for companies that both have an approved onshoring plan and have entered into a qualifying MFN pharmaceutical pricing agreement with the Secretary of Health and Human Services receive a zero percent additional duty through January 20, 2029.
• 9903.04.66, HTS: Designated specialty pharmaceuticals. A zero percent additional duty applies to specified pharmaceutical products and associated ingredients, including indications that are designated as orphan; nuclear medicines; plasma-derived therapies; fertility treatments; cell and gene therapies; antibody-drug conjugates; medical countermeasures related to chemical, biological, radiological and nuclear threats; pharmaceutical products for animal health; and other specialty pharmaceutical products identified by BIS. To qualify, a product must (1) be from a country that has a reciprocal trade agreement with the United States² or (2) "meet an urgent US health need." The former is self-executing. For all other countries, the latter requires importers to submit an application to BIS seeking duty-free treatment and obtain a decision from BIS prior to using the exemption.
• 9903.04.67, HTS: Generic pharmaceuticals. Qualifying generic pharmaceutical articles and associated ingredients are subject to a zero percent additional Section 232 duty. Companies should confirm that a product and its importer satisfy the precise tariff definition rather than relying solely on commercial descriptions such as “generic,” “biosimilar,” “authorized generic” or “off-patent.”
• 9903.04.69, HTS: Other articles within listed tariff classifications. Articles classified under a tariff provision identified in the Section 232 pharmaceutical action qualify for a zero percent additional duty if they fall outside the scope of certain key tariff-specific definitions, including “pharmaceutical products” or, although pharmaceutical articles, are neither “patented pharmaceutical articles” nor “generic pharmaceutical articles.” Because BIS has amended these definitions in the past, importers should routinely confirm that their products continue to qualify. 
• 9903.04.70, HTS: Clinical trials, R&D and other noncommercial uses. Pharmaceutical articles and associated ingredients covered by the identified tariff classifications qualify for a zero percent additional duty when they are solely for use in clinical trials, research and development, or another noncommercial application. This exception took effect on September 29, 2026, and in appropriate circumstances may eliminate the need to rely on the Chapter 98 prototype provision (as discussed further below). Because eligibility turns on the articles being “solely intended” for clinical trials, research and development, or other noncommercial applications, importers should establish documentation supporting the intended use before entry and maintain controls against diversion to commercial sale or routine commercial production.

Because these provisions turn on detailed facts, companies should map their imports by ordinary HTS classification, product status, patent and regulatory status, country of origin, active pharmaceutical ingredient (API) origin, and intended use. Importers should also retain records supporting the selected Chapter 99 treatment.

2. Onshoring Agreements With BIS

The Section 232 pharmaceutical action was intended to address the national security concerns identified by BIS and to encourage the expansion or establishment of pharmaceutical manufacturing capacity in the United States. Pursuant to a process established by BIS, pharmaceutical companies may enter into onshoring agreements committing to expand or establish US manufacturing capacity in exchange for preferential tariff treatment, including the reduced duty rate available under HTS 9903.04.64, HTS.

Although onshoring agreements require substantial commitments and often involve reporting obligations, they may provide a more predictable and durable solution than transactional customs planning strategies. For more information, please see our previous client alert, Onshoring Pharmaceutical Manufacturing: Procedures to Apply for Onshoring Agreements to Reduce Section 232 Tariffs. BIS requested that companies submit applications for onshoring agreements by June 12, 2026. However, a company that did not submit by that date but remains interested in an onshoring agreement may still be able to do so.

3. Customs Strategies

A. Duty Drawback

Duty drawback may provide a significant mechanism for recovering Section 232 pharmaceutical duties when imported merchandise, qualifying substitute merchandise or articles manufactured from such merchandise are subsequently exported from the United States or destroyed. The Proclamation expressly provides that drawback is available for duties imposed under the Section 232 pharmaceutical action, unlike certain other Section 232 and other tariff actions.

The economics of drawback become particularly significant when the underlying Section 232 duty rate is 100 percent. Even where only a portion of imported products are exported, the potential recovery can be substantial. Prior to implementing a drawback strategy, companies should review whether they maintain the records necessary to trace imported merchandise through production and export activities, whether they can satisfy CBP’s documentation and matching requirements, and whether their supply chains are structured to support drawback eligibility.

B. Temporary Importation Under Bond (TIB)

For certain qualifying imports, companies may be able to avoid the Section 232 pharmaceutical duties altogether through a TIB. A TIB permits qualifying merchandise to enter the United States without payment of duty, provided that the merchandise satisfies the applicable TIB requirements and is timely exported or destroyed rather than entered into US commerce for consumption. The activities permitted under a TIB depend on the particular Chapter 98 provision claimed and may include repair, alteration, processing or manufacturing activities before exportation. Because merchandise admitted under a TIB is not entered for consumption, the importer may avoid the Section 232 pharmaceutical duties entirely if program requirements are satisfied. However, TIB eligibility is highly fact-specific, and strict compliance with exportation requirements is essential. If the merchandise is not timely exported or otherwise fails to satisfy applicable program requirements, the importer may lose the benefits of TIB treatment and incur liquidated damages under the bond.

C. Leverage Chapter 98 Duty-Saving Provisions

Various provisions of Chapter 98 of the HTS may provide relief from Section 232 pharmaceutical tariffs in appropriate circumstances. Chapter 98 contains special tariff classifications that provide duty exemptions or reductions for certain qualifying imports. The availability of specific Chapter 98 provisions depends in part on the nature and the intended use of the imported product.

The prototype provision under subheading 9817.85.01, HTS may remain available for products imported in limited noncommercial quantities for development, testing, product evaluation or quality control purposes. As noted, BIS recently created a new HTS provision (9903.04.70, HTS) exempting certain pharmaceutical products and ingredients imported exclusively for clinical trials, research and development or other noncommercial applications. This provision may reduce the need to utilize certain Chapter 98 strategies in some situations, although Chapter 98 may still provide advantages in certain circumstances, including with respect to ordinary customs duties and tariff treatment more generally.

D. Foreign Trade Zones (FTZs)

FTZs continue to provide an important tariff management tool for pharmaceutical companies with US manufacturing and packaging operations. Merchandise admitted into an FTZ generally may be processed without immediate payment of US customs duties. Duties generally become payable only when merchandise is entered into US commerce. Merchandise exported directly from an FTZ generally may avoid US customs duties altogether.³

FTZs are particularly attractive for pharmaceutical companies that import APIs or pharmaceutical ingredients, perform manufacturing or packaging activities in the United States, and subsequently export a portion of their production. Companies already operating near an FTZ or considering expansion of US operations should evaluate whether FTZ participation could reduce their overall tariff exposure.

4. Evaluate Regulatory, Contracting, Pricing and Disclosure Implications Before Implementing Supply Chain Changes

A strategy that may reduce tariff exposure could create separate regulatory, contracting, pricing, disclosure or operational risks. Companies should therefore consider a cross-functional review process involving legal, regulatory, supply chain, government pricing, government contracts, finance, tax, compliance and investor relations personnel in evaluating significant tariff response measures. Some key concerns that may arise from supply chain changes include:

• Food and Drug Administration (FDA) Manufacturing Requirements. Adjusting supply chains to leverage tariff mitigation strategies may trigger FDA requirements—including validations or comparability activities, updated regulatory submissions, or FDA approval before implementation—that could take months or years to execute.
• Product Origin and Manufacturing Representations. Companies should assess whether existing representations—including those covering product origin, manufacturing responsibility or manufacturing location—remain accurate following implementation of a tariff mitigation strategy and whether updates are required.
• Federal Procurement Requirements. A change that improves customs treatment may not always align with federal procurement rules and therefore negatively impact country of origin analyses, domestic content calculations, procurement certifications or other contract-specific compliance requirements found in federal procurement requirements.
• Supply Continuity and Drug Shortage Risks. Production transfers, supplier changes, facility consolidations, inventory reductions or import restrictions can create transitional disruptions that outweigh projected tariff savings.
• Pricing and Government Program Considerations. Depending on the facts, changes in sourcing arrangements, transfer pricing structures, distribution pathways, rebates, discounts, chargebacks or product acquisition costs may have implications for Medicaid Drug Rebate Program calculations, Medicare Part B reimbursement metrics, 340B ceiling prices, Federal Supply Schedule pricing obligations, Inflation Reduction Act negotiations, or other government pricing and reimbursement programs. 
• Public Company Disclosure Considerations. Public companies should assess whether supply chain changes warrant updates to public disclosures. Companies should also ensure that public statements regarding expected cost savings, implementation timelines, manufacturing capacity or supply chain resilience remain consistent with internal plans and known operational constraints. 

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The strategies discussed above may provide significant opportunities for pharmaceutical companies to reduce, defer or eliminate Section 232 pharmaceutical duty exposure. Each strategy, however, is subject to distinct eligibility, documentation and compliance requirements. Depending on the strategy pursued, noncompliance with those requirements may result in denied tariff treatment or enforcement activity by CBP. Moreover, because tariff mitigation strategies often implicate FDA regulatory requirements, government pricing programs, federal procurement rules, commercial arrangements and public disclosure obligations, companies should evaluate potential alternatives through a coordinated legal, regulatory, operational and commercial framework. 

WilmerHale has extensive experience advising clients on a host of tariff mitigation measures and their cross-functional impact. Please reach out to a member of our team if you would like to discuss how to address how these latest developments may impact your business.