Commitment:

• British American Tobacco will seek to formalise further its relations at EU level by striving for a co-operation agreement with the European Commission and member states to support a high level of engagement across Europe and specifically to leverage awareness of issues in Russia and Ukraine.
   

Action resulting from the Commitment

British American Tobacco is currently in discussions with OLAF, the European Anti Fraud Office, to enter into a cooperation agreement to combat illicit trade across Europe. British American Tobacco is fully committed to the fight against illicit trade and is looking forward to working closer with the European Commission in the future.

Commitment:

• We will initiate a European Industry Anti-Illicit Trade Group to build co-operation/ collaboration amongst the manufacturers and also to provide a forum for non-industry stakeholders to participate. Within this forum we will seek the opportunities to contribute to efforts in building awareness of the risks associated with counterfeit products and help to engage the media to raise consumer awareness of the issue.
   

Action resulting from the Commitment

Firstly, an Industry Working Group (IWG) of major tobacco companies has been established to seek proactive solutions to potential measures that may be required by the FCTC Illicit Trade Protocol. British American Tobacco has chaired the group, which has discussed possible industry standards relating to Track & Trace and cross industry taggant readers for customs authorities. British American Tobacco continues to review opportunities for proactive implementation of future FCTC measures on anti-illicit trade.

Secondly, British American Tobacco has participated actively with other multinational corporations in supporting the British Chamber of Commerce in Belgium’s Task Force for Business Security. This industry initiative seeks to raise awareness of the serious negative impact of contraband and counterfeit on the viability and reputation of legitimate business and to provide a platform for business to engage with EU decision-makers in finding solutions. The Task Force began its activities with an expert seminar at the European Parliament in Strasbourg in November 2008, followed by a conference in Brussels in December 2008 involving the European Commission, EU Member State officials and consumer representatives. In January 2009, the Task Force worked closely with Members of the European Parliament to organise a hearing in the European Parliament on ‘Combating Counterfeit and Organised Crime’. Feedback has been very positive and further Task Force activities have continued during 2009.

Commitment:

• We will propose a schedule of future CEO-level engagement with key stakeholders and authorities.
   

Action resulting from the Commitment

Our top executives have continued to engage on the issue. In particular, Michael Prideaux, Director Corporate and Regulatory Affairs, spoke at the 4th Global Congress against Counterfeiting and Piracy in Dubai in February 2008. Jean-Marc Levy, Regional Director Western Europe, spoke in Hungary in April 2008 on the topic of fighting illicit trade in tobacco products. In addition, Pat Heneghan, Global Head of Anti-Illicit Trade (AIT), participated in the Global Leaders Group meeting of the International Chamber of Commerce Business Action to Stop Counterfeiting and Piracy (BASCAP) in March 2008 in New York, where an open and constructive dialogue took place between the business leaders and Susan Schwab, US Trade Representative, and Michel Danet, Secretary General of the World Customs Organisation. Pat Heneghan also presented at the Global Congress on Combating Counterfeiting and Piracy in 2008, at the Latin American Roundtable sponsored by the Trans-Atlantic Business Dialogue in Iguazu in September 2008, at the ‘International Conference on Combating Counterfeiting and Piracy’ in Greece in May 2008 and the European Parliament in January 2009. We have also participated in the Interpol Intellectual Property Crime Conference in Dublin in September 2009, the International Tax and Investment Center’s conference on Anti-illicit Trade of Tobacco Products in Brussels in November 2009 and the 5th Global Congress against Counterfeiting and Piracy in Cancun in December 2009. British American Tobacco will continue this high level engagement throughout 2010.

Commitment:

• British American Tobacco will seek to formalise agreements with custom authorities in all countries in Europe in which we will implement commitments to support customs with agreed levels of information, intelligence and training.
   

Action resulting from the Commitment

British American Tobacco consistently strives to sign formal Memoranda of Understanding (MOUs) with customs authorities in Europe and has progressed well to date. We have now signed 19 MOUs across Europe and we are in discussions in many other countries. Among these 19 MOUs, 11 have been signed with EU member states.

Regardless of whether governments sign MOUs with British American Tobacco, we are committed to supporting customs with information, intelligence and training (see also actions resulting from commitments 5 and 7).

Commitment:

• We will propose an annual schedule of training programs for customs authorities in priority European markets and in consultation with the World Customs Organisation (WCO).

Action resulting from the Commitment

We have developed an annual schedule of training programs for customs authorities in consultation with the World Customs Organisation (WCO) for 2008 following on from the very successful training programs run across Europe in 2007. In 2007 we conducted training for customs authorities in Belgium, Bulgaria, France, Latvia, Norway, Poland and Ukraine. We also provided intelligence information to authorities which resulted in 172 million cigarettes being seized in 2007. In 2008 we delivered training to 7 law enforcement authorities comprising 245 trainees from Albanian, Dutch, Estonian and Greek customs, Romanian customs and anti-fraud service and the UNMIK (United Nations Mission in Kosovo) Customs service.

In 2009, additional training and awareness programs were organised for national customs and/or law enforcement authorities in 9 countries (Bulgaria, Czech Republic, Denmark, Italy, Moldova, Serbia, Sweden, the Netherlands and Ukraine). So far in 2009 our programs have covered over 200 attendees from customs and law enforcement authorities. Additional training programs are planned.

Commitment:

• We will provide customs authorities with information on primary supply transportation partners for our products in Europe and establish the scope for further information required through dialogue with the WCO.

Action resulting from the Commitment

We have met with officials from the WCO and discussed our primary transportation supply partners and their operating procedures. No issues were raised and we have agreed to continue monitoring how we supply our products to the market. In 2009 we have also provided detailed information on our full supply chain to HM Revenue & Customs (UK Customs) and OLAF, the European Anti Fraud Office.

Commitment:

• We will allocate funds to support customs initiatives on a business case basis in targeted priority risk markets. We seek co-operation and dialogue with EU stakeholders to create a forum to agree priorities and allocation of investment (we see this as an effective partnership to propose and agree a schedule of implementation, in anticipation of an agreement with the European Commission).

Action resulting from the Commitment

We have set aside a specific budget to support customs authorities across Europe and have put emphasis on customs training and on product authentication. Extensive customs training sessions have been completed between 2007 and 2009, benefiting 23 enforcement authorities (for more detail, please refer to action resulting from Commitment 5). To facilitate product authentication, we have provided scanners and readers to the UK customs and following the results of this test we will be rolling these out to other markets. Moreover, we are currently discussing with EU officials how to allocate further expenditure on additional anti-illicit trade activities.

Commitment:

• British American Tobacco will establish a Product Authentification and Track & Trace working group to determine a suitable solution which meets stakeholders' expectations and will address the risks of diversion of our product from the legitimate supply chain in an appropriate manner. Proposal of the preferred solution and implementation plan will be shared by the end of 2007 with stakeholders to ensure the system meets potential future regulatory requirements.

Action resulting from the Commitment

British American Tobacco has established a Product Authentication and Track & Trace working group. We have evaluated third party and other industries' Track & Trace approaches and, following this, developed our own Track & Trace system, which was successfully piloted in Poland. We are ready to share information on our preferred solution with stakeholders and to discuss the way forward on potential future regulatory requirements.

Commitment:

• We will provide UK customs authorities, by the end of 2007, with reader capability and by the same time agree with the WCO an additional pilot market.

Action resulting from the Commitment

British American Tobacco cigarette products are already fully reader-compliant and we have provided UK Customs with reader capability for our products. We have also agreed that an additional pilot market will be identified with the assistance of WCO following the learnings from the UK project which will be presented in 2009.

Commitment:

• We will continue to monitor technology development via ongoing research and will report back to stakeholders on an annual basis.

Action resulting from the Commitment

British American Tobacco is party to an Industry Working Group to evaluate all technologies available to enhance the security of our products and to ensure that we are using the most effective systems for Track & Trace. These systems have been discussed with both HM Revenue & Customs (UK Customs) and OLAF and we have agreed to jointly monitor their testing and development, making any necessary changes or improvements.

Commitment:

• British American Tobacco will provide heightened visibility of internal Group Standards of Business Conduct and Trade policies to appropriate authorities (initial cascade to be agreed with external stakeholders).

Action resulting from the Commitment

Our Standards of Business Conduct are available on our Website. The Standards require all staff to act with high standards of business integrity, to comply with all laws and regulations wherever our companies operate and to ensure that our business standards are never compromised for the sake of results. They also set out the Group Policy, and provide guidance and support to staff in the following specific areas:

• Whistleblowing
• Conflicts of interest
• Bribery and corruption
• Entertainment and gifts
• Political contributions
• Charitable contributions
• Accurate accounting and record-keeping
• Protection of corporate assets
• Confidentiality and information security
• Insider dealing and market abuse
• Competition and anti-trust laws
• Money laundering and anti-terrorism
• Trade in the Group's products
• Sanctions.

At the end of each year the General Manager of each Group company and each Head of Function in our UK Head Office is required to formally confirm that the company or department for which he or she is responsible complies with the Standards. Continuous information on performance against the Standards throughout the year is gathered at a global level and reported quarterly to the Audit Committee.

Our Standards of Business Conduct and corporate policies are also included as part of the ‘Memorandum of Understanding’ (MoU) that we sign with governments across the globe. Across Europe 19 MOU’s have been signed, among which 11 have been concluded with national authorities of EU member states.

Commitment:

• We will provide appropriate authorities with on-going updates of machinery destruction aligned to rationalisation of our factories.

Action resulting from the Commitment

British American Tobacco has had a Group policy in place on machinery management for over 10 years. All of our machinery is managed through a central database, SAM (Strategic Asset Management). This database contains the make, model, location and type of all of our machinery used in tobacco manufacturing.

We do not sell any of our machinery second hand, except in the rare circumstances where we are forced to do so by law. For example, due to local legislation in Zimbabwe, after consolidation in the local tobacco industry, we were required to sell some machinery to a local manufacturer to establish a competitor in that market.

Our general policy is that if a factory is closed, the machinery is reviewed and either reused within the group or destroyed. Machinery that British American Tobacco no longer needs is destroyed and recorded in the SAM database. Before machinery is sent for destruction, British American Tobacco employees render the essential parts unusable to prevent diversion. If a factory manager were to sell a machine without authorisation this would lead to serious disciplinary consequences.

British American Tobacco has agreed to provide annual machinery destruction updates to the WCO and OLAF, the European Anti Fraud Office.