Tariff Pressure Takes Aim at Payment Equipment Once Again

While legislators and regulators focused much of their attention on the Facebook-backed Libra cryptocurrency this week, tariffs on Chinese-made goods re-emerged in Washington as a threat that could raise prices for merchants and merchant acquirers.

The Electronic Transactions Association payments trade group filed comments with the Office of the United States Trade Representative opposing the Trump Administration’s proposed 25% tariffs on Chinese-made cash registers, point-of-sale devices, and related equipment. ETA interim chief executive Amy Zirkle testified Wednesday before an inter-agency federal committee taking comments on the plan.

Much of the payment-processing POS hardware used by U.S. merchants is manufactured in China, but the software that runs the devices typically is American-made. “The value of the POS devices is in the software, and is injected into the terminal in the U.S.,” Zirkle tells Digital Transactions News. “That at least preserves some of the key issues where the concern lies, such as the intellectual property.”

The POS equipment is among the $300 billion worth of products that could be hit with tariffs in America’s latest trade skirmish with China. The administration is trying to get China to change its trade policies, including forced technology transfers and what it sees as lax protection of intellectual property.

“The proposed tariffs would increase the cost of cash registers and point-of-sale devices and have a negative effect on U.S. businesses and consumers, while having no impact on China,” Zirkle said in a statement from the Washington, D.C.-based ETA. “Protecting American intellectual property abroad is an important goal, and ETA supports the administration’s diplomatic efforts to curb harmful abuses. The proposed tariffs may not be the most effective way to achieve these goals.”

After industry protests, essentially the same payments stuff was removed from tariff lists during earlier go-arounds. “The [inter-agency] committee has agreed that an exemption was warranted twice before, and this was the right call,” Zirkle’s statement says. “ETA strongly believes that they should do so again, because point-of-sale products are critically important to the U.S. economy.”

The total value of the imported Chinese POS equipment was nearly $5 billion in 2018, though not all of it was for payment functions. The ETA’s formal written comments focus on two so-called tariff subheadings. One, “cash registers and point-of-sale terminals,” totaled $249.3 million in 2018, the filing says. The other, broader subheading, “machines for the reception, conversion and transmission or regeneration of voice, images or other data,” generated $4.72 billion in sales, according to the filing.

“The overall import value of POS products account for less than 2% of the proposed $300 billion of additional tariffs, i.e., they are de minimis,” the filing says.

The filing further says adding tariffs to the equipment poses little risk to China, where “manufacturers are already shifting their POS product sales to non-U.S. markets.”