Semiconductor Tariff Exclusions & New Section 232 Investigations

This article provides an overview of the most recent tariff updates affecting businesses operating within the semiconductor, pharmaceutical, and critical mineral industries. Below we outline recent tariff exclusions for semiconductor products and new investigations into certain semiconductors, pharmaceuticals, and critical minerals which can lead to higher tariffs for these product groups. Industries affected by the newly launched investigations should consider filing a public comment.

On April 11, 2025, President Trump issued a Presidential Memorandum (“the Memorandum”) excluding certain semiconductor products providing relief from reciprocal tariffs. The reciprocal tariffs, originally set forth in Executive Order 14257 of April 2, 2025, currently include a minimum 10% tariff on all imports of foreign-origin goods, subject to certain exclusions. One such exclusion referenced in E.O. 14257 and subsequent amendments is for the “semiconductor” product category. Semiconductor products originally excluded from the reciprocal tariffs were listed in Annex II of E.O. 14257 and included certain diodes, semiconductor-based transducers, and electronic integrated circuit parts and microassemblies.

The Memorandum issued on April 11, 2025, further clarifies the scope of the semiconductor exclusion by providing a list of additional semiconductor products subject to the exclusion from the reciprocal tariffs. The additional excluded products are classified under Chapters 84 and 85 of the Harmonized Tariff Schedule (“HTS”) and include certain automatic data processing systems and related accessories, machines for semiconductor manufacturing, smartphones, and flat panel display modules. The additional product exclusions are effective as of April 5, 2025. The Customs Cargo Systems Messaging Service (“CSMS”) notice issued the same day as the Memorandum also clarifies the list of new product exclusions, provides the appropriate HTS classification for reporting, and states that importers that paid the reciprocal tariffs on newly excluded products entered for consumption on or after April 5, 2025, may now file for a refund.

Semiconductors & Pharmaceuticals – Section 232 Investigation & Opportunity for Public Comment

Federal Register notices published on April 16, 2025, announced that the U.S. Department of Commerce initiated two separate investigations, both beginning on April 1, 2025, under Section 232 of the Trade Expansion Act of 1962. The investigations will focus on determining the national security impacts of imports of (1) “semiconductors and semiconductor manufacturing equipment (SME), and their derivative products,” and (2) “pharmaceuticals and pharmaceutical ingredients, including finished drug products, medical countermeasures, critical inputs such as active pharmaceutical ingredients, and key starting materials, and derivative products of those items.” Commerce is required to provide a report of its investigation findings and recommendations for action (or inaction) to the President within 270 days of the initiation of the investigations. Based on the April 1st initiation date, Commerce’s reports, which are expected to include some form of tariff recommendations, will be due by December 27, 2025. But given the expedient rate of tariff actions taken by the Trump Administration, it is likely that the reports, and subsequent tariff actions, may be announced well before December.

Importantly, a 21-day comment period will open on April 16, 2025 (closing May 7, 2025), for interested parties to submit comments, data, analyses, or other relevant information for review by Commerce during its investigations. Parties involved in the import of semiconductor and pharmaceutical products, or that may be impacted by any future tariffs imposed on these products, may utilize this opportunity to submit their unique perspectives and positions for consideration. Commerce is particularly interested in receiving public comments on the topics outlined below.

For Semiconductors:

• The current and projected demand for semiconductors (including as embedded in downstream products) and SME in the United States, differentiated by product type and node size;
• The extent to which domestic production of semiconductors can or is expected to be able to meet domestic demand at each node size for each product type, and similarly the extent to which domestic production of SME can or is expected to be able to meet domestic demand;
• The role of foreign fabrication and assembly, test and packaging facilities in meeting United States semiconductors demand, and similarly the role of foreign supply of SME in meeting domestic demand;
• The concentration of United States semiconductors imports (including as embedded in downstream products) from a small number of fabrication facilities and the associated risks, and similarly the concentration of United States SME imports from a small number of foreign sources;
• The impact of foreign government subsidies and predatory trade practices on United States semiconductor and SME industry competitiveness;
• The economic or financial impact of artificially suppressed semiconductor and SME prices due to foreign unfair trade practices and state-sponsored overcapacity;
• The potential for export restrictions by foreign nations, including the ability of foreign nations to weaponize their control over semiconductors and SME supply chains;
• The feasibility of increasing domestic semiconductors capacity (in different product types and node sizes) to reduce import reliance, and similarly the feasibility of increasing domestic SME capacity to reduce import reliance;
• The impact of current trade and other policies on domestic semiconductor and SME production and capacity, and whether additional measures, including tariffs or quotas, are necessary to protect national security;
• What product types and node sizes could be built only using SME from U.S. companies;
• What SME is manufactured abroad and faces limited competition from U.S.-made products;
• What SME parts or components are only available outside the United States;
• Where the U.S. workforce faces a talent gap in production of semiconductors, SME or SME components.

For Pharmaceuticals:

• The current and projected demand for pharmaceuticals and pharmaceutical ingredients in the United States;
• The extent to which domestic production of pharmaceuticals and pharmaceutical ingredients can meet domestic demand;
• The role of foreign supply chains, particularly of major exporters, in meeting United States demand for pharmaceuticals and pharmaceutical ingredients;
• The concentration of United States imports of pharmaceuticals and pharmaceutical ingredients from a small number of suppliers and the associated risks;
• The impact of foreign government subsidies and predatory trade practices on United States pharmaceuticals industry competitiveness;
• The economic impact of artificially suppressed prices of pharmaceuticals and pharmaceutical ingredients due to foreign unfair trade practices and state-sponsored overproduction;
• The potential for export restrictions by foreign nations, including the ability of foreign nations to weaponize their control over pharmaceuticals supplies;
• The feasibility of increasing domestic capacity for pharmaceuticals and pharmaceutical ingredients to reduce import reliance;
• The impact of current trade policies on domestic production of pharmaceuticals and pharmaceutical ingredients, and whether additional measures, including tariffs or quotas, are necessary to protect national security.

Critical Minerals – Commerce Directed to Launch Section 232 Investigation

On April 15, 2025, President Trump issued an Executive Order titled “Ensuring National Security and Economic Resilience Through Section 232 Actions on Processed Critical Minerals and Derivative Products” directing the Secretary of Commerce to initiate a Section 232 (like the semiconductor and pharmaceutical investigations) to assess national security impacts of imports of critical mineral products and their derivatives. The E.O. and accompanying White House Fact Sheet reference the risks posed by the U.S.’s reliance on a small group of foreign suppliers for the supply of critical minerals, and rare earth metals, that are critical to American infrastructure and development. In addition, recent restrictions implemented by China on exports of critical mineral products to the U.S. are a driving factor for this new investigation.

The E.O. directs the Secretary of Commerce to furnish a draft report of investigation findings and recommendations within 90 days. After the draft report is furnished, the Treasury and Defense Secretaries, the United States Trade Representative (“USTR”), the Assistant to the Preside for Economic Policy, and the Senior Counselor to the President for Trade and Manufacturing will have 15 days to provide comments on the draft report. Commerce’s final report and recommendations will ultimately be due within 180 days of the official initiation of the investigation, a notably shorter timeframe than the 270-day reporting period under prior-initiated Section 232 investigations. It is likely that a Federal Register notice will be published in the coming days announcing the official start date of the critical mineral investigation and requesting public comments. As with other Section 232 investigations, the critical mineral investigation is likely to result in the implementation of tariffs on specified products to address identified national security concerns related to imports of these products.

Looking Ahead

The semiconductor product exclusions from reciprocal tariffs offer some current relief to importers of these products. However, as the new Section 232 investigations demonstrate, U.S. trade policy, including the tariff environment, continue to be volatile and subject to frequent updates. Manufacturers, importers, and downstream buyers should remain alert to potential tariff shifts, and, where practicable, take advantage of opportunities to submit public comments for consideration in Section 232 investigations.