Initiatives of Internal Control
International Trade Initiatives
Epson is a multinational corporation with production centers, sales centers, customers, and business partners around the world. Smooth international trade operations are essential for delivering Epson products and services to customers in a timely manner.
Meanwhile, we must observe numerous conventions and frameworks governing international trade that have been put in place to maintain international peace and security.
To maintain compliance with these and to ensure smooth trade, Epson has established comprehensive systems and processes that have enabled Group companies to earn certification from the relevant authorities for compliance with international trade programs. (See the table below.)
|Seiko Epson Corporation||Special general bulk export license
(Ministry of Economy, Trade and Industry)
|The program grants a blanket license to export certain items (or provide certain information) to certain destinations without an individual application if an export control system is found to be in place.|
|Seiko Epson Corporation||Authorized exporter
(Ministry of Finance, Tokyo Customs)
|The program enables certified parties to get export permission even if goods are not brought into a bonded facility, etc., if an export security control and compliance system is found to be in place.|
|Seiko Epson Corporation||Authorized importer
(Ministry of Finance, Tokyo Customs)
|The program enables certified parties to separate import declarations from tax declarations and accept goods before filing a tax declaration if an import security control and compliance system is found to be in place.|
|Epson America Inc.||Customs-Trade Partnership Against Terrorism (C-TPAT)
|The program is designed to strengthen security of goods imported to the US and security of import channels to the US.|
|Epson Portland Inc.|
|Epson El Paso Inc.|
Epson has a comprehensive program for instilling compliance awareness.
In addition to a training course that presents employees with a broad overview of essential legal issues, we also provide compliance training that focuses on certain targeted subjects, such as copyright laws and antitrust laws. Compliance issues are also built into the training curriculums for new employees, persons recently promoted to senior staff positions, and managers.
For the executive management team we brought in an outside expert to give a seminar on antitrust issues. Overseas affiliates have their own local compliance rules and compliance training programs.
Topic: Mandatory Training at Epson (China) Co., Ltd.
Epson (China) Co., Ltd. (ECC), which serves both as the regional head office in China and as a sales company, has been conducting a different kind of compliance training since March 2015. ECC adopted a new policy of requiring all personnel, from the president on down, to take a compliance training course that aims to immediately supply them not just with knowledge, but with wisdom. The course is designed to be easy to understand (avoiding legal language wherever possible and using visual aids), kind (presenting solutions instead of only what is prohibited), and interesting. ECC created a booklet with illustrations to explain potential compliance risks in the company, and the number of people at each training session was limited to encourage active participation in debate. Approximately 800 ECC employees and managers participated in the 50 sessions held during the 2015 fiscal year.
Beginning in the 2016 fiscal year, the training curriculum will be modified and rolled out to Epson Group manufacturing companies in China.
October is Compliance Month throughout the Epson Group. We use this month as an opportunity to remind ourselves of the importance of compliance in achieving the Management Philosophy and to communicate Epson's compliance policies as an organization. FY2016 was the second year we held Compliance Month across the global Group to raise compliance awareness in the workplace to achieve the ideals espoused in the Epson Group's Management Philosophy.
A variety of actions were taken during the month. For example, Epson's Chief Compliance Officer and the heads of Epson divisions and subsidiary companies issued compliance messages. We also published a feature article on compliance in the company newsletter and provided compliance training to personnel. The feature article in the company newsletter and the training materials both presented concrete examples regarding compliance. Compliance awareness was further raised in Japan by discussing compliance risks in the workplace.
After Compliance Month activities are completed, we look to improve the activities for the following year by conducting a survey to find out what kind of actions were taken by each organization and about any compliance concerns people may have in Epson. We also ask for opinions and suggestions about activities. Survey responses are totaled and analyzed, and the results are made available to employees.
Business Continuity Management
Epson has a solid business continuity management program in place. For many years we have taken action to prevent and manage disasters, but the program really got started in 2006, when we formulated a business continuity plan (BCP) for what was then our liquid crystal displays business.
If a disaster or some other event impacts business at an Epson Group production site, our first priority is to ensure the safety of our employees. Next, we take steps to ensure continuity of the product supply so as not to inconvenience our customers. In order to provide a steady supply of products, particularly consumables and core components such as quartz and semiconductor devices, print heads, and small liquid crystal panels, we have preparations in place that allow us to limit damage, secure repair parts, switch to alternative producers, and restore operations in line with established procedures. We conduct exercises to check our procedures and ensure their effectiveness. Mission-critical IT systems and critical data that are essential for business continuity are consolidated in a robust data center, and backups are at the ready in the event of a disaster. We have secured multiple distribution routes to enable us to immediately switch to alternative routes in response to any disruption in international shipping and transport. In addition, our finance, accounting, public relations, and other key corporate functions have established BCPs so that business can continue in emergencies.
Meanwhile, we ask the companies that make up our supply chain to strengthen their BCPs, and we check to see how established those BCPs are. We analyze the items we purchase, and we develop multiple sources for those that are most important. When we cannot secure multiple sources, we keep an inventory of goods on hand or try other means to ensure continuous production in the event that something should happen to a supplier.
Every business and site in the Epson Group will continue to refine its BCP to ensure that it has the resilience to withstand threats to business continuity going forward.
Epson seeks to fulfill its corporate social responsibility by paying appropriate taxes in compliance with the tax laws in the countries and regions where it operates. In accordance with this basic policy on taxes, we are taking the actions below to maintain and improve tax compliance.
1) Tax governance
- Epson's Chief Financial Officer, a director of the company, has overall responsibility for Group tax affairs. The group that is in charge of tax affairs reports and manages taxes is under the supervision of the Chief Financial Officer.
- Epson considers tax risk to be an important risk, and regularly reports such risks to the board of directors and the Corporate Strategy Council, which is composed of directors of the company.
- Employees are trained in the tax-related regulations and business process standards that Epson has established to ensure that it properly fulfills its tax obligations. We conduct periodic internal tax audits and report the findings to top management and to the Audit & Supervisory Committee.
2) Monitoring tax affairs
- We appropriately respond in a timely manner to changes in local tax systems and taxation trends through regular reporting among the group that is in charge of tax affairs and Epson's local subsidiaries.
- We enlist the support of tax accounting firms and other external experts for advice on taxes and for tax support in each country.
3) Tax planning
- Around the globe, we strive to effectively use preferential taxation systems where possible in our normal business activities to ensure a suitable tax burden, but we do so within the spirit of the law and do not avoid taxes.
4) Dealing with uncertainty
- Tax risk uncertainty is expected to increase as countries around the globe strengthen their tax reporting obligations, tax audits, and tax enforcement. Epson controls tax risks by identifying situations that could potentially pose serious tax risks.
5) Transfer pricing taxation
- Epson complies with local tax laws and OECD guidelines to control transfer pricing tax risks. We have established transfer pricing guidelines for the Epson Group to help ensure appropriate transfer pricing transactions. In line with these transfer pricing guidelines, we control the profitability range of our global subsidiaries to ensure that transactions are made at arm's length.
- We use an advance pricing arrangement (APA) for transactions with subsidiaries in high-risk countries.
6) Anti-tax haven rules (also known as Japanese Controlled Foreign Company rules, or "CFC")
- Epson sets up foreign subsidiaries to carry out its ordinary business activities, but does not do so to avoid taxes. When anti-tax haven rules apply, Epson properly files and pays taxes.
7) Relationships with tax authorities
- Epson strives to work in good faith with tax authorities and to maintain and improve good tax corporate governance.