New Tariff Relief Path for Pharmaceutical Companies That Negotiate Onshoring Agreements

The U.S. Department of Commerce's Bureau of Industry and Security (BIS) has issued procedures for pharmaceutical manufacturers to apply for company-specific onshoring agreements that may reduce new Section 232 tariffs on covered pharmaceuticals and pharmaceutical ingredients. The standard Section 232 tariff rate for pharmaceuticals is 100 percent, but companies with approved onshoring plans qualify for a 20 percent rate and, if they also enter into most favored nation (MFN) pricing agreements with the U.S. Department of Health and Human Services (HHS), won't pay a Section 232 tariff at all.

Background

In Proclamation 11020, issued on April 2, 2026, President Donald Trump determined that imports of certain pharmaceuticals and pharmaceutical ingredients threaten to impair U.S. national security and imposed tariffs under Section 232 of the Trade Expansion Act of 1962. The Proclamation sets a default 100 percent tariff rate for covered patented products and associated ingredients, effective July 31, 2026, for certain large companies and September 29, 2026, for small companies, while excluding generic pharmaceuticals and their associated ingredients. It also delegates authority to the Secretary of Commerce to enter into company-specific onshoring agreements that qualify approved companies for a 20 percent tariff rate, with a zero percent rate through January 20, 2029, for companies that also execute MFN pricing agreements with HHS.

BIS' May 13, 2026, Federal Register notice delineates the onshoring agreement process, requests applications by June 12, 2026, and sets out the application content, eligibility conditions, and monitoring and enforcement framework contemplated by Proclamation 11020.

Pharma 232 Tariff Relief Process and Eligibility

The BIS notice establishes the process through which companies marketing foreign-made patented pharmaceuticals and associated ingredients may seek to reduce their tariff exposure through onshoring agreements. If approved, a company may receive be subject to a 20 percent duty rate on covered patented pharmaceuticals and associated ingredients, and it may qualify for a zero percent rate through January 20, 2029, if it also enters into an MFN pricing agreement with HHS. Tariff rates otherwise could be as high as 100 percent. The process is highly company- and fact-specific, and BIS will evaluate each submission individually under the approval, monitoring and enforcement authorities reserved in Proclamation 11020 and elaborated in the notice.

To help applicants prepare filings, BIS outlined a set of required application sections, annexes, certifications and representations that must accompany a request for an onshoring agreement. The Commerce Department states that it will protect confidential, trade secret and proprietary information to the fullest extent allowed by law, including under the Trade Secrets Act and Freedom of Information Act Exemptions 3 and 4. Application details follow.

• Section 1 – Organization Information: Full legal name, address, ownership structure and beneficial ownership, along with headquarters country, authorized representative details, and information on products manufactured, locations and whether production occurs in owned facilities or through contract manufacturers or other arrangements
• Section 2 – Total Investment: Grand total of new U.S. investments from January 20, 2025, to January 20, 2029, with the portion attributable to brick-and-mortar manufacturing plants and buildings where research and development (R&D) will take place separately identified
• Section 3 – Onshoring Commitment: Comprehensive explanation of which parts of the existing patented product portfolio and associated pharmaceutical ingredients will be onshored, with supporting projections and milestones
• Section 4 – Projected U.S.-Made Share: Projections of the percentage of U.S. and global sales that will be U.S.-made by January 20, 2029
• Section 5 – Investment Commitment: Identification of products proposed not to be onshored by January 20, 2029, the value and percentage of the portfolio they represent, an explanation of why onshoring those products is not commercially feasible, an estimate of the hypothetical cost to establish U.S. production for those products and a commitment to additional U.S. brick-and-mortar spending beyond the baseline onshoring commitment
• Annex A – Planned Pharmaceutical Production Investments: A template setting out investment and production milestones through January 20, 2029, tied to the applicant's total investment and onshoring commitment
• Annex B – Tariff Adjustment: For each product for which preferential treatment is requested, BIS asks for the 10-digit harmonized tariff schedule of the U.S. classification, product or brand name and active ingredient, country of origin, importer of record names and numbers, exporter names and addresses, foreign manufacturing facility details, and the U.S. Customs and Border Protection (CBP) manufacturer identification code; the notice specifies that Annex B should list only patented products and associated pharmaceutical ingredients

Tariff relief approved under an onshoring agreement will be administered by CBP at the border and narrowly limited to specified products and importers. BIS indicates that it will transmit approved product and importer information to CBP, which will apply the adjusted tariff treatment at entry summary filing and may request additional documentation to validate entries. The notice also makes clear that, absent Commerce Department approval, reduced tariff treatment does not extend to products companies acquire or license from other companies after April 2, 2026, or products the applicant did not develop as a majority participant.

These limitations reflect the Commerce Department's intent to deter circumvention through portfolio acquisitions or licensing strategies divorced from new U.S. production. Applicants should also plan for the full enforcement spectrum, because the Proclamation contemplates not only prospective and retroactive tariff consequences for fraud or material misrepresentation, but also the possibility that Secretary Howard Lutnick may increase tariff rates if a company fails to fulfill its onshoring plan commitments.

Readiness Checklist and Submission Strategy

Given the 30-day application window, companies should assess quickly whether they would benefit from tariff relief under the Commerce Department's new program. This would require consideration of tariff exposure and planned or possible U.S. onshoring investments.

A credible submission to Commerce will need to match the program's specific goals and requirements, including a robust quantification of total U.S. investment through January 20, 2029, a clear mapping of which patented products and associated ingredients will be onshored, and concrete investment and production milestones that can be monitored and, if necessary, audited.

Companies should also examine whether they can present persuasive projections of the percentage of U.S. sales that will be U.S.-made over the plan period. Where exclusions from onshoring are proposed, applicants will need to substantiate commercial infeasibility with cost estimates and market dynamics, recognizing that near-term patent expirations or extremely small U.S. markets may be relevant considerations under the procedures.

Finally, companies should determine whether a parallel MFN pricing agreement with HHS is feasible, given the opportunity to secure a zero percent tariff rate when an MFN agreement is paired with a Commerce Department-approved onshoring agreement. The proposal makes clear that the Commerce Department will protect trade secret and confidential commercial information.

Applicants should note that all onshoring plans are subject to approval, monitoring, and enforcement by the Secretary of Commerce. Companies with qualifying onshoring plans must submit periodic reports to the Commerce Department regarding progress toward fulfilling onshoring milestones. The Commerce Department may require that such reports be audited by an external auditing firm.

Building a Compelling Case for Relief

The strongest applicants will likely be those that can connect tariff relief to concrete domestic production, supply chain resilience, investment, U.S. employment and national security objectives.

The Proclamation articulates a national security rationale that centers on reducing import dependence for patented pharmaceuticals and associated ingredients while strengthening the U.S. manufacturing base and supporting affordability and access. BIS' procedures operationalize that objective by requiring applicants to commit to specific onshoring actions, quantify capital investments in brick‑and‑mortar facilities and R&D sites, and demonstrate measurable increases in the share of U.S. sales that are made in the U.S.

In practical terms, that suggests the most competitive filings will feature site‑ready U.S. projects, financing and construction schedules, equipment procurement plans for active pharmaceutical ingredient and finished‑dose manufacturing, and concrete hiring and training roadmaps that demonstrate domestic capability expansion during the 2025 to 2029 period. Applicants should also articulate how their proposals support resilience across critical therapeutic and ingredient categories, which speaks directly to the national security and supply assurance aims underpinning the Section 232 investigation.

How Holland & Knight Can Help

A brief window is now open to secure company-specific tariff relief for patented pharmaceuticals and associated ingredients through a Commerce Department-approved U.S. onshoring plan. Holland & Knight is helping companies conduct rapid eligibility assessments, maintain compliance and develop submission strategies tailored to BIS' goals, data requirements and enforcement framework.

To discuss whether your company would be a candidate for Section 232 tariff relief under this new process, please contact the authors to evaluate your options.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.