Section 232 Pharma Tariffs: The 29 September Deadline Indian API and CDMO Exporters Are Underestimating

On 2 April 2026 the United States issued a Presidential Proclamation under Section 232 of the Trade Expansion Act of 1962, the same national-security statute behind the 2018 steel and aluminium tariffs. The proclamation imposes tariffs on imports of patented pharmaceutical products and the active pharmaceutical ingredients associated with them.

The implementation runs in two waves. Seventeen manufacturers named in Annex III of the proclamation moved onto the new rates on 31 July 2026. Every other importer follows on 29 September 2026. That second date is the one that matters for most Indian exposure, because the typical US customer of an Indian API maker or CDMO is a mid-size buyer with no Annex III listing and, in many cases, no approved onshoring plan.

The sums at stake are large even before the generics question is settled. India's pharmaceutical exports to the US were valued at approximately US$10.5 billion in 2024-25, per India Briefing. Generics dominate that figure and are currently outside the tariff, but the exposed segment covers exactly the higher-margin work Indian firms have spent a decade building: APIs and intermediates feeding patented products, CDMO contracts for innovator pipelines, and licensed patented products sold into the US market.

The rate a shipment attracts depends on the importer's status and the product's origin. Per the Section 232 pharmaceutical tariff guide published by Carra Globe on 7 May 2026 and updated 28 July 2026, the tiers are:

1. 0% for companies with an approved onshoring plan and a most-favoured-nation pricing agreement with the US administration.
2. 10% for UK-origin product.
3. 15% for product originating in the EU, Japan, South Korea, Switzerland and Liechtenstein.
4. 20% for importers with an approved onshoring plan only.
5. 100% for everyone else, effective 29 September 2026.

India has no origin carve-out, so Indian-origin patented product and associated API cannot reach the 10% or 15% rates however the shipment is structured. What it does attract turns entirely on the importing customer: 0% where that customer holds both an approved onshoring plan and an MFN pricing agreement, 20% with an onshoring plan alone, and 100% with neither. The exporter cannot fix this from its own side: the tier turns on the importer's onshoring status, which the Indian supplier neither controls nor, in many trading relationships, can even verify.

Generic pharmaceuticals and biosimilars are currently excluded from the tariff, which is why much of the Indian industry read the proclamation as a near miss. Two details argue against relaxing.

First, the proclamation mandates a Commerce Department review within one year on extending tariffs to generics. Any credit decision, contract renewal or capacity commitment with a tenor running past mid-2027 is being made inside that review window. A limit that looks safe today because the buyer trades in generics can be sitting on the wrong side of a rate change before the receivable is collected.

Second, the exclusion is drawn around the finished product category. API and intermediates associated with patented products are already in scope, so an Indian plant that ships the same molecule to a generics customer and an innovator customer has one exposed revenue line today and possibly two next year.

For CDMOs the exposure concentrates further. Development and manufacturing contracts for innovator pipelines are, by definition, tied to patented or soon-to-be-patented products. Dedicated capacity, tooling and technology-transfer costs are recovered over multi-year supply commitments, and those commitments now depend on the customer's willingness to keep importing at post-tariff economics.

The tariff is levied on the US importer of record, so the first instinct is to treat it as the customer's problem. The credit history of every previous tariff shock says the cost migrates back up the supply chain through four channels:

• Order cuts and destocking. A buyer facing a doubled landed cost trims volumes first, often inside existing forecast flexibility, so the exporter sees demand fall before any contract is formally touched.
• Price renegotiation. Buyers push suppliers to share the duty. A supplier who refuses risks losing the account; one who accepts is financing the tariff out of margin while the receivable stays the same size.
• Stretched payment. Working capital absorbed by duty deposits shows up as slower payment on open-account terms. Days sales outstanding drift before any formal default event.
• Refusal and failure. At the sharp end, buyers refuse delivery of goods already shipped, invoke contract clauses to cancel, or become insolvent under the new cost base.

Each channel degrades the quality of a receivable that was underwritten on pre-tariff financials. Credit limits approved in 2025 on a US buyer's 2024 accounts say nothing about that buyer's viability with a 100% duty on its core input. The step change in buyer economics needs to be priced into limits now, before 29 September, because the deterioration will show in payment behaviour months before it shows in filed accounts. For the structural options, including whether ECGC or a commercial insurer handles this class of deterioration better, see our comparison of ECGC and commercial trade credit insurance.

Before repricing insurance, reread the contracts. Three clause families determine where the tariff cost legally lands.

Incoterms and importer of record

Under FOB or CIF terms the US customer is the importer of record and owes the duty. Under DDP the Indian seller clears customs and pays the tariff itself, converting a demand-side risk into a direct cost that can exceed the value of the goods at the 100% rate. Any DDP commitment running past 29 September needs immediate attention, and any customer now proposing a switch to DDP is proposing to hand you the duty.

Price adjustment and change-in-law

Contracts with tariff pass-through, price-adjustment or change-in-law clauses give a mechanical answer to who pays. Contracts without them leave the duty with whoever the Incoterm assigns, subject to renegotiation pressure. Long-term CDMO supply agreements signed before 2025 frequently fix prices for the committed term with no tariff trigger, which is precisely the situation in which a customer starts looking for an exit.

Force majeure and frustration

A tariff generally does not qualify as force majeure, because it makes performance more expensive without making it impossible, and most wordings require impossibility or something close to it. Expect customers to test the argument anyway. The related doctrine of contract frustration sets a similarly high bar in most governing laws. What matters commercially is that a buyer invoking either doctrine creates a dispute, and disputes have specific consequences under trade credit policies, covered in the next section. The exact policy wording on both sides, the sale contract and the insurance contract, decides the outcome.

This is the question to put to your insurer or broker in writing before the deadline, because the answer varies by wording and by fact pattern.

Standard trade credit policies respond to insolvency and protracted default. A buyer who goes under because the tariff destroyed its economics is a covered loss, subject to the limit in force at the time. The harder cases are the intermediate ones:

• Non-acceptance. The buyer refuses to take delivery of goods already shipped, citing the duty. Some policies cover non-acceptance as a named risk, often with a lower indemnity percentage; others exclude it or treat it as a dispute.
• Disputed debts. If the buyer asserts a contractual right to refuse or cancel, most wordings suspend cover until the dispute is resolved in the insured's favour, by judgment or award. That can put the claim years away, with the exporter funding the litigation.
• Repudiation of long-term contracts. For a CDMO, the loss from a cancelled multi-year supply agreement is mostly future volume and unamortised dedicated capacity, which sits outside a receivables policy entirely. Pre-shipment or work-in-progress cover, where it was bought, responds to costs incurred on goods not yet shipped.

There is also a boundary question between commercial and political risk. The tariff is a government measure, but the buyer's decision to refuse delivery is a commercial choice made in response to it. Wordings differ on which side of the line that falls, and the classification can change the applicable limit, waiting period and indemnity percentage. The same boundary issues arise across tariff-driven trade generally, which we examined in our note on trade disruption and political risk cover for Indian exporters.

Five weeks is enough time to reposition, provided the work starts from the book and follows the money.

1. Map the US book by tariff status. Split receivables and pipeline by product class: patented product, API associated with patented product, generic, biosimilar. Flag every buyer with no confirmed onshoring plan as 100%-tier exposure from 29 September.
2. Reconfirm credit limits with the insurer. Disclose the tariff exposure proactively and ask for limit confirmations that survive the deadline. Insurers reduce or withdraw limits on deteriorating buyers, and finding out at claim time that a limit was cut is the worst version of this discovery.
3. Reread contracts for Incoterms, price adjustment and force majeure. Prioritise DDP terms, fixed-price long-term agreements and any contract already receiving renegotiation signals from the customer.
4. Get the non-acceptance answer in writing. For each policy, establish whether refusal of delivery on duty grounds is a named risk, a dispute or an exclusion, and what pre-shipment cover exists for goods in production for US customers.
5. Scenario-test the generics review. Run the book against a 2027 extension of tariffs to generics and decide now which customers, tenors and capacity commitments survive that case.

For the wider insurance picture on Indian pharma exposure beyond credit risk, including liability and recall, see our profiles of the pharmaceutical industry risk and insurance position and product liability cover for Indian pharma selling globally. The exporters who come through tariff shocks with their balance sheets intact are the ones who repriced counterparty risk before the effective date. For this one, the date is 29 September 2026.