ITOCHU Group’s Compliance System

The ITOCHU Group has a system for compliance through the Compliance Department within the Legal Division. The Compliance Department suggests policies and measures to foster compliance throughout the entire Group and appoints compliance officers in each division within ITOCHU Corporation, overseas offices and major Group companies worldwide (including consolidated subsidiaries and some equity method associated companies; hereafter, the “companies subject to compliance management”).

The Compliance Committee is chaired by the CAO, and consists of two external members and the leaders of the relevant administrative divisions and sales divisions as internal members. The Compliance Committee’s meetings are held two times a year, in principle. It deliberates on matters related to compliance as a permanent executive committee. The most recent meeting was held on March 6, 2024.

The ITOCHU Group Compliance Program sets out policies to establish compliance systems to enable each division within ITOCHU Corporation, overseas offices and companies subject to compliance management to ensure compliance taking into consideration their business characteristics, operational formats and legal systems in the regions in which they are located. The status of the effectiveness and operation of the compliance system laid out in the Compliance Program is reviewed every year through the monitor and review process considering the recent trends in legislation and society. The results of this monitor and review process are reported to the Compliance Committee for deliberation, along with information about compliance incident trends and other compliance-related matters. The CAO, as the Chief Compliance Officer, reports matters reported to and deliberated by the Compliance Committee to the Board of Directors.

In addition, compliance-related incidents that are discovered within each division of ITOCHU Corporation, overseas offices and the companies subject to compliance management are reported to the CAO and the corporate auditors, and serious compliance-related incidents are reported to the Board of Directors, as appropriate. Directors of ITOCHU Corporation and its Group companies are obligated to report any compliance issues, such as significant violations of laws, regulations, or the Articles of Incorporation, to the Corporate Auditors of their respective companies.

Across the Group, as for key organizations such as overseas offices and companies subject to compliance management, we are implementing activities with a focus on constant improvement and enhancement of our compliance structure. For example, while we focus on in-person training, we have been proactively utilizing on-line training as well to provide training using compliance incidents that have actually occurred in our training materials.
Furthermore, based on our experience with former compliance incidents and the findings of the monitor and review process, we are formulating individual compliance reinforcement measures for each organization, and these measures are steadily being implemented.
In addition, to ensure compliance throughout the Group, ITOCHU Corporation confirms in writing that all employees have complied—and will continue to comply—with laws, regulations, and other rules, at individual performance evaluations each fiscal year.

The Audit Division of ITOCHU Corporation conducts compliance audits to verify whether the ITOCHU Group's compliance system is functioning properly as a part of its periodical audits of each ITOCHU organization (including the Group companies they are responsible for) and overseas blocs to check the status of the development and operation of the compliance system within the organizations and overseas blocs, as appropriate.

Implementation of Compliance Training

ITOCHU Corporation provides ongoing education and training on compliance to ensure that each and every officer and employee understands and complies with applicable laws, regulations, social norms, etc. based on a high ethical standard.

Bolstering Measures to Fight Corruption

The ITOCHU Group has established the ITOCHU Group Anti-Corruption Policy based on the Corporate Ethics Code of Conduct. It prohibits the provision of money and goods, entertainment, convenience and other profits to public officials and officers and employees of private entities, in Japan or overseas, for the purpose of gaining an illegal advantage.

The U.S. Foreign Corrupt Practices Act (U.S. FCPA) and the U.K. Bribery Act 2010 are evidence of the global trend towards the tightening of legislation against bribery. In line with this trend, ITOCHU Corporation has strengthened its determination to fight these corrupt practices and strictly operates within the framework of the Regulation Concerning the Prohibition of Giving Illicit Profit and its three related guidelines (i.e., guidelines regarding public officers, agents and consultants, and foreign public officers). Accordingly, our internal rules prohibit all employees from giving any improper advantage to Japanese or foreign civil servants or people in equivalent positions. In December 2015, we revised “The guideline regarding agents and consultants” which is now part of “The guideline regarding business partners”. In this revised guideline, we have expanded its scope of application, and intensified the measures to fight corruption by establishing an investment guideline, which is designed to carefully check investment projects from the perspective of risk of bribery.

“The Regulation Concerning the Prohibition of Giving Illicit Profit” specifically forbids any payment (regardless of the amount of money) aimed at facilitating ordinary administrative services and any other improper advantages; and commercial bribery, which covers any improper advantage given to business partners in the private sector. Our internal rules also prohibit officers and employees from receiving improper advantages from business partners in the private sector, deeming such acts to be a mix of business with personal affairs (e.g., conflicts of interest).
“The guidelines regarding public officers and foreign public officers” include guides for decisions and judgments on business entertainment and gift-giving to public officers and foreign public officers, under which we review cases on an individual basis.
“The guideline regarding business partners” clarifies the process for comprehensive checks and stipulates the process of entering into new contracts and renewals of existing contracts with business partners who will provide services to ITOCHU Corporation (including agents and consultants). Concerning overseas business partners, we use the Corruption Perceptions Index (CPI) published by Transparency International as one of our risk identification criteria.
In contracts where there is a possibility of a risk of bribery, including ones with business partners, we include an article prohibiting bribery, setting out the prohibition against improper payments (bribery or the provision of improper advantages) and clearly stating that such contracts may be terminated immediately if the anti-bribery and anti-corruption provisions are breached.
“The investment guideline” includes specific provisions on the implementation of due diligence and procedures to obtain the confirmation letter from the viewpoint of preventing corruption, which are to be used for deliberations on investment projects.

In the training provided to officers, employees and others, we strive to raise awareness and instill an understanding of the ITOCHU Group Anti-Corruption Policy, the Regulation Concerning the Prohibition of Giving Illicit Profit and four related guidelines. We make sure that the regulation and guidelines are reflected in our personnel’s daily work to prevent corruption, including the provision of improper advantages. We also provide specialized training on bribery for organizations for which there is a possibility of involvement in businesses or regions where the risk of bribery is particularly high. We also manage our political contributions, charitable activities, and sponsorship activities by referring to internal rules to ensure that they do not constitute corruption, and by following our internally specified routes of application for the approval of donations and sponsorship to ensure that such activities are socially just and meet ethical standards.

The annual monitor and review process—which is mentioned in the ITOCHU Group’s Compliance System above—includes checks on business-related entertainment and gift-giving to both domestic and foreign public officials; as well as on the appointment and renewal of contracts with agents and consultants by organizations within ITOCHU Corporation, overseas offices, and companies subject to compliance management.
In FYE2024 there were no cases in which ITOCHU Corporation was accused of acts of corruption, and no fine or administrative penalty charge was paid.

Measures to Fight Collusive Bidding and Cartels

In recent years, there have been many reports of suspected cartel activities in markets around the world. In response, to prevent involvement in any illicit transactions, ITOCHU Corporation has established the Basic Regulations in compliance with, among others, the Antimonopoly Act, and established subordinate regulations consisting of the Standard on Prevention of Cartels and Collusive Bidding, the Guidelines for Compliance with the Antimonopoly Act in Competition Between Multiple Organizations, and the Guidelines on Compliance with the Antimonopoly Act in Relation to Price Pass-Throughs. We have also established an Antimonopoly Act Compliance Manual, and the easy reference documents “A Must-Read! 51 Q&A about the Antimonopoly Act” (the last revision was published in August 2017) and “The 29 Frequent Misunderstandings about the Antimonopoly Act.” We also take further measures to ensure that all employees are made aware of the Antimonopoly Act compliance requirements, through the monitor and review process and various training programs as well as the Antimonopoly Act Desk in the Legal Division which was set up to cater to queries from our employees.

Following the four cease and desist orders received from the Japan Fair Trade Commission in FYE2018 and FYE2019, ITOCHU Corporation passed resolutions regarding the matters related to the orders at the Board of Directors meetings and published notifications and thoroughly publicized the contents of the resolutions of the Board of Directors.

TAX

Policy and Basic Concept

ITOCHU Corporation and its subsidiaries (“the ITOCHU Group”) have established the ITOCHU Group Tax Policy, which represents its basic attitude and code of conduct towards tax practice, and strive to maintain and improve tax compliance by complying with the Policy. It is committed to fully comply with and follow the significance and spirit of all applicable Tax Rules, not to engage in transactions that are intended to evade taxes such as shift of income from jurisdictions with economic activities and value creation to tax havens, and to make appropriate tax payments.

Structure and System

ITOCHU Corporation’s CFO supervises the General Accounting and Control Division of ITOCHU, which is responsible for overall tax management including tax risk management, and oversees the appropriate tax payments. ITOCHU CFO also reports to the Board of Directors on the status of the execution of duties related to tax matters.

Executive Officer in charge:
Tsuyoshi Hachimura, Member of the Board, Executive Vice President CFO

In accordance with the ITOCHU Group Tax Policy, the ITOCHU Group sets forth the basic action items to be performed and standards for business operations in the ITOCHU Group Tax Rules, and to appropriately implement the Rules, ITOCHU CFO has been appointed as the person ultimately responsible for Rules throughout the entire group, and General Manager of General Accounting Control Division of ITOCHU has been appointed as the person responsible for the management and the operation of the Rules throughout the entire group. In order for the ITOCHU Group to make appropriate tax payments, each department of the ITOCHU Group, in accordance with the Rules, acquires necessary tax knowledge, considers appropriate tax treatment of transactions, and makes appropriate tax filings.

Measures for Intellectual Property

To prevent infringements on intellectual property rights held by third parties in businesses directly affecting such rights, as well as in the ordinary course of business, ITOCHU implements measures to call attention to the issue by holding seminars for officers and employees and by establishing internal rules, regulations and manuals, that conform to applicable laws and regulations. We also define and apply internal rules to protect employees’ inventions and work, and rules for application, renewal, etc. of rights to properly manage and handle intellectual property rights that constitute property of the companies.

Basic Policy on Product Safety

ITOCHU Corporation has prepared a product safety manual for each internal company to assure safety. The manuals are based on its policy of observing obligations stipulated by laws related to the safety of the products it handles, and providing safe and secure products to its customers. We are going to continue with efforts to assure the provision of safe and secure products through in-house education, institution of ad-hoc units assigned to product safety, establishment of information relay routes, and response in the event of product accidents, while revising arrangements in these aspects as necessary.

Measures for Comprehensive Import and Export Control

To ensure appropriate and efficient trading, which is the main pillar of our activities as a general trading company, ITOCHU Corporation is continuously enhancing and improving its import and export controls. The Japanese government maintains strict trade-security under the Foreign Exchange and Foreign Trade Act in order to prevent the proliferation of weapons of mass destruction and conventional weapons. We have implemented a strict internal comprehensive trade-security control program so as to observe laws and regulations. Our internal program covers not only Japanese laws and regulations but also global security risks such as U.S. sanctions to ensure that we do not take part in business transactions that threaten international peace and security. Accordingly, ITOCHU recognizes that, as a responsible member of the global business community, we need to manage carefully potential risks associated with business operations in certain locations. In response to the growing importance of the corporate governance associated with global security risk, we have implemented corporate policies, procedures, and internal reporting structures to ensure that we perform rigorous, security-minded due diligence for global projects and transactions. The Compliance Program of ITOCHU is annually submitted to the Ministry of Economy, Trade and Industry of Japan as a company that has developed export control and an excellent management system. In addition, to properly conduct customs procedures for import and export, including import (payment of customs duty) declaration, we conduct internal customs examination (monitoring), provide training for clearing and customs valuation control, and take a host of other measures under the internal control/management provisions and regulations, thereby ensuring full compliance with customs procedures, etc. We have also been providing information needed for developing new businesses, by providing training on Economic Partnership Agreements (EPAs), which will be used more widely by sales sections in the future. These measures have led to the director-general of Yokohama Customs certifying ITOCHU as an Authorized Economic Operator (AEO) (both Authorized Exporter and Authorized Importer), a title given to operators with outstanding compliance systems and security control.

Basic Policy and Efforts against Antisocial Forces

ITOCHU Corporation makes it a basic policy to block any relationship or transaction with anti-social forces that threaten public order and safety. ITOCHU has established and strengthened the internal systems necessary to achieve this by providing education and awareness-raising activities to officers and employees on a regular basis and ensuring prior confirmation that counterparties of transactions do not fall under anti-social forces such as full investigation of new transactions.

Insider Trading Regulations

To prevent violations of insider trading regulations by its officers and employees, ITOCHU Corporation has established internal rules regarding the restriction of insider trading and conducts regular training, so as to ensure due compliance with these rules. In particular, we operate the Guidelines regarding the Reporting and Management of Insider Information, for handling important facts obtained from investment portfolio companies and transaction partners / suppliers (or other entities with which ITOCHU has a capital or contractual relationship).

Perspectives on Information Management

ITOCHU Corporation has formulated “Information Security Policy” to provide guidance for all officers and employees on how to handle information with high security level. In addition, the “Information Management Regulations” for all officers and employees have also been established to set high level of information security, thereby providing a code of conduct to ensure the appropriate management of the information that is necessary in our activities. Specifically, we have established rules and standards regarding personal information management, document management and IT security to protect personal information and other confidential information and prevent their leakage.

Response to Compliance Incidents (Violations)

If any violation of laws, regulations or internal rules, including anti-corruption measures, is discovered or there is a risk of a violation occurring within any of the divisions within ITOCHU Corporation, its overseas offices or the companies subject to compliance management, the compliance officer in that organization will take the lead in addressing the matter, including internal investigations and identification of cause and measures to prevent recurrence, in accordance with the prescribed standards and procedures. Compliance-related incidents are reported to the CAO through the Compliance Department from the time they are discovered until the end of the incident is reported.

In addition, for serious compliance incidents that require consideration from a company-wide perspective, necessary investigations will be conducted at the direction of the CAO or at the request of the Compliance Department to clarify the facts and take appropriate action in accordance with the company regulations.

For officers and employees involved in violations of laws and regulations, including bribery, ITOCHU Corporation will verify whether or not internal disciplinary action is necessary in light of the internal regulations of each company (work rules, etc.) and, if necessary, after consulting and deliberating with related departments and experts inside and outside the company, we will take appropriate disciplinary action in accordance with the standards and procedures set out in the internal regulations.

ITOCHU Corporation considers the need to respond to, report to, and disclose to external parties, and takes appropriate action as necessary.

ITOCHU Corporation did not have any serious compliance violations (including cases related to the handling of customer personal information) requiring external disclosure in FYE2024.