JCPenney 2015 Annual Report Download - page 14

Table of Contents
legal, social and other factors that we cannot control. If the income or cash flow that the Company receives from our consumer credit card program agreement
with Synchrony decreases, our operating results and cash flows could be adversely affected.


We accept payments using a variety of methods, including cash, checks, credit and debit cards (including private label credit cards) and gift cards.
Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network
rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may
change over time or be reinterpreted, making compliance more difficult or costly. The payment card industry set October 1, 2015 as the date on which
liability shifted for certain debit and credit card transactions to retailers who are not able to accept EMV chip technology transactions. Implementation of the
EMV chip technology and receipt of final certification is subject to the time availability of third-party service providers. As a result, we bear the chargeback
risk for fraudulent transactions generated through EMV chip enabled cards before our implementation and certification of the EMV chip technology. Further,
we may experience a decrease in transaction volume if we cannot process transactions for cardholders whose issuer has migrated entirely from magnetic strip
to EMV chip enabled cards. Any prolonged inability to accept EMV chip technology transactions may subject us to increased risk of liability for fraudulent
transactions and may adversely affect our business and operating results.

A substantial portion of our merchandise is sourced by our vendors and by us outside of the United States. All of our vendors must comply with our supplier
legal compliance program and applicable laws, including consumer and product safety laws. Although we diversify our sourcing and production by country
and supplier, the failure of a supplier to produce and deliver our goods on time, to meet our quality standards and adhere to our product safety requirements
or to meet the requirements of our supplier compliance program or applicable laws, or our inability to flow merchandise to our stores or through the Internet
channel in the right quantities at the right time, could adversely affect our profitability and could result in damage to our reputation.
Although we have implemented policies and procedures designed to facilitate compliance with laws and regulations relating to doing business in foreign
markets and importing merchandise from abroad, there can be no assurance that suppliers and other third parties with whom we do business will not violate
such laws and regulations or our policies, which could subject us to liability and could adversely affect our results of operations.
We are subject to the various risks of importing merchandise from abroad and purchasing product made in foreign countries, such as:
• potential disruptions in manufacturing, logistics and supply;
• changes in duties, tariffs, quotas and voluntary export restrictions on imported merchandise;
• strikes and other events affecting delivery;
• consumer perceptions of the safety of imported merchandise;
• product compliance with laws and regulations of the destination country;
• product liability claims from customers or penalties from government agencies relating to products that are recalled, defective or otherwise
noncompliant or alleged to be harmful;
• concerns about human rights, working conditions and other labor rights and conditions and environmental impact in foreign countries where
merchandise is produced and raw materials or components are sourced, and changing labor, environmental and other laws in these countries;
• local business practice and political issues that may result in adverse publicity or threatened or actual adverse consumer actions, including boycotts;
14