Section 232 Pharma Tariffs Go Fully Live: A 100% Base Rate, and a Zero-Rate Exemption List

On 29 September 2026 the Section 232 pharmaceutical tariffs exited their grace period and became payable by all importers: patented medicines, their APIs and key starting materials face a 100% base rate, and China sits outside the 19 favoured jurisdictions. The same schedule also hands out zeros — generics, biosimilars, ADCs, cell and gene therapies, plasma-derived therapies and orphan-only drugs are exempt; a committed US onshoring plan buys 20%, and adding an MFN pricing agreement takes it to zero through 20 January 2029. One tariff table splits the CDMO industry into two markets.

On 29 September 2026, the Section 232 pharmaceutical tariffs enacted under Proclamation 11020 — signed on 2 April 2026 — ended a two-month grace period and began to be paid by every importer. During the transition only 17 large pharmaceutical companies actually remitted duty; everyone else merely reported their entries. That buffer is gone.

For the CDMO industry this is a more direct structural event than either currency moves or the financing cycle, because the tariff boundary is not drawn around chemistry. It is drawn around a drug's patent status and its country of origin — and origin is precisely what a CDMO decides.

The schedule: 100% is the base rate, and every answer lives in the exceptions

Coverage has three moving parts. First, the target is any medicine listed in the FDA's Orange Book or Purple Book that still enjoys a valid, unexpired US patent. Second, it is not only the finished medicine: the API used to make it is captured whether or not that API carries its own patent, along with the key starting materials used to make that API. Third, excipients and inactive ingredients fall outside the definition, as does anything of US origin.

There is a definitional trap here that is easy to miss: coverage follows the medicine, not the molecule. An API that is off patent in every market on earth still lands inside the 100% bracket if it feeds a product that is patent-protected in the United States. For a CDMO that manages pricing by molecule rather than by product, that means rebuilding the customer ledger once.

The rates themselves tier as follows. The standard case is 100%, on top of ordinary duty. The European Union, Japan, South Korea, Switzerland and Liechtenstein sit at 15% combined; the United Kingdom at 10%, with scope to fall further under a UK–US pricing arrangement. Companies holding a Commerce Department (BIS)-approved onshoring plan pay 20%, reverting to 100% on 2 April 2030 if the plan is not delivered. Companies that pair an onshoring plan with a most-favoured-nation pricing agreement with HHS reach zero through 20 January 2029. Where more than one rate could apply, the lowest is used.

The zero list is longer than many expected. Qualifying generics — ANDA approvals, certain 505(b)(2) products rated therapeutically equivalent, authorised generics — and their APIs carry 0%. Biosimilars currently sit outside the tariff framework altogether. On 23 September the Commerce Department confirmed a 0% rate for a set of specialty categories when sourced from designated jurisdictions: medicines whose approved uses are all orphan-designated, plasma-derived therapies, cell and gene therapies, antibody–drug conjugates, nuclear medicines, fertility drugs and medical countermeasures. The designated list runs to 19 jurisdictions with reciprocal trade arrangements — including the EU, Japan, South Korea, Switzerland, the UK, India and Vietnam. Products from outside those jurisdictions can still qualify, but only by petitioning Commerce case by case to demonstrate an urgent US health need, supplying the HTS classification, the manufacturer and importer of record, the disease treated, an assessment of alternatives and the size of the reliant US patient population.

A second, underrated channel is the use-based exemption: articles imported solely for clinical trials, research and development or other non-commercial purposes carry 0% from 29 September under a newly added heading. For programmes between IND and Phase III this largely removes tariff noise from clinical shipments — provided the intended-use documentation is in place before entry and controls exist against diversion into commercial sale.

The last piece is drawback. The proclamation explicitly makes Section 232 pharma duties eligible for drawback, which is unusual among Section 232 actions. With a 100% base rate, even partial re-export can recover substantial sums — but it requires end-to-end traceability from imported material through production to export.

Land the table on China and the answer is blunt: China is not among the 19 favoured jurisdictions. A patented medicine, its API or its key starting materials made in China and imported into the US by a company without an exemption faces the full 100%.

Translating it into CDMO language: three dividing lines

The first line is patented small-molecule APIs and intermediates. This is the most traditional export category for Chinese CDMOs and the one hit head-on by 100%. For this business, origin stops being a cost line and becomes a tax line: the same shipment leaving China versus leaving Ireland differs by 85 percentage points in landed cost.

The second line is new modalities. ADCs, cell and gene therapies and plasma-derived therapies sit inside the exemption list, automatically at 0% when sourced from designated jurisdictions. That gives ADC and CGT CDMOs a structural advantage in the tariff dimension: whatever political pressure a customer faces, "this category is not tariffed" is a sentence that can go into a commercial term sheet.

The third line is generic and biosimilar APIs, at 0%. This is the most counter-intuitive outcome — the tariff standing of commodity API exports is actually safer than that of patented originator APIs. Which is exactly why the real pressure on Chinese API makers in 2026 is not the tariff but the price cycle: overcapacity in antibiotics and some veterinary APIs, channel destocking and historic lows in products such as florfenicol arrived earlier and hit harder.

Stack the three lines and the conclusion is uncomfortable in a useful way: inside a single Chinese CDMO's order book, different categories now face 0% and 100%. Business mix gets priced by a tariff schedule for the first time.

Orders are already moving: volumes up, values slow

Samsung Biologics' third quarter of 2026 offers an observable cut. Cumulative binding CMO contract value reached USD 21.9B at quarter-end, or USD 24.5B including non-binding agreements — against USD 21.7B and USD 24.3B at the end of Q2, a net add of roughly USD 200M in the quarter, and roughly USD 700M year-to-date from USD 21.2B at the end of 2025. Project counts, however, kept climbing: 117 cumulative CMO projects and 184 CDO projects, up 10 and 20 respectively since the end of 2025.

Sell-side attribution for that split is direct: the weak contract-value increment is tied to uncertainty over US tariffs and localisation policy, with customers reassessing manufacturing footprint and long-term supply arrangements, which slows the closing of large contracts. Projects are being signed; values are waiting. A site-of-origin diligence step has been inserted into the signing process.

This dovetails with the capacity map already on the record. Of Lonza's 793,000 litres globally, 484,000 sit in the United States — 61% — including 332,000 at Vacaville alone. Samsung acquired the Rockville, Maryland site from GSK in March 2026, adding 60,000 litres, and is converting it from a single-customer dedicated plant into a multi-client, multi-product CDMO site. US capacity has moved from customer preference to customer arithmetic.

A sell-side calibration, plus one new variable

On 25 October, Goldman Sachs published a China healthcare note arguing that CDMO results reflect the stability of the sector's cycle, and that visibility increasingly depends on exposure to late-stage and commercial projects rather than the early-stage financing environment. The bank also stated explicitly that AI has not caused structural damage to order volume, backlog quality or pricing. On stocks it stays positive on WuXi AppTec, BeiGene, MicroPort Robotics and Jiangsu Sanyou Medical under Buy ratings, while upgrading iKang Healthcare to Buy and MicroPort Medical to Neutral.

The framework is worth keeping — but Section 232 adds a variable to it. If visibility comes from late-stage and commercial exposure, then the larger and later a commercial contract is, the more it has to answer a single question: where is it made? Origin is no longer merely a cost and resilience question; it sits in the numerator of the customer's landed cost. Goldman is saying the cycle is stable. Section 232 is saying the cycle is stable but its distribution will be rearranged.

Editorial note: tariffs are being productised

First, category tiering will feed into how quotes are built. For ADCs, CGT, plasma and orphan drugs, CDMO pricing is shifting from "cost per kilogram or per litre" toward "compliant origin plus exemption status plus tariff certainty". The same capacity with and without a 0% tariff identity are two different products at two different prices.

Second, an onshoring commitment is effectively a five-to-ten-year capacity lease. The gap between 20% and 0% means Commerce has handed customers an explicit rate of return on capital expenditure, and the dates 2 April 2030 and 20 January 2029 are the two cliffs on that lease. US capacity planning now carries a policy-expiry axis it did not have before.

Third, contract terms will be rewritten. Rights to change manufacturing site, tariff allocation mechanisms, ownership of drawback proceeds and repricing triggers if a category is removed from the exemption list will all migrate into master service agreements. For cross-border licensing teams, supply chain, tariff exposure and deal terms now have to be negotiated together: a China-made patented product's landed cost in the US and its odds of an urgent-health-need petition are two pages of the same diligence file.

Finally, second-order uncertainty deserves respect. The 19-jurisdiction list, the specialty category list and the zero rate for generics are all administrative determinations that can move by notice. The President indicated on 21 July 2026 that generics would return to 100% after two zero-rate years and rise to 200% a year later, though no formal order has implemented that plan, and Commerce must advise within one year of the proclamation on whether to extend tariffs to generics. For CXDMO readers the actionable steps are only two: build a duty matrix for every commercial product across patent status, origin and category exemption, and put tariff clauses into the pricing formula of the next supply agreement rather than leaving them for the following negotiation.