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SAT AND ITS INTERNATIONAL REPUTATION
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BAT Industries document for Province of British Columbia 22 April 1999

SAT AND ITS INTERNATIONAL REPUTATION
.The mergence of the UN's regulatory code of conduct for multinational
companies, currently at the drafting stage, will stimulate further
interest in arganisations such as SAT. In varying degrees, our associated
companies will be affected as host governments examine the local and
restrictive implications of the code.
The attached document aims to assist General Managers by identifying
key public affairs issues likely to receive emphasis in the UN code.
Equally, the document establishes the proposed BAT position to take pre-
emptive action to protect their business and to exploit the opportunities.
The papers have been reviewed in MI II bank with senior managers, and will
be added to, so that General Managers can be kept up to date with the issues
and SAT's views. The document is seen to be complementary to the Board
Strategies on Smoking Issues.
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BAT Industries document for Province of British Columbia 22 April 1999

INTRODUCTION
1. This document is intended to assist General Managers by identifying
the main issues likely to emerge in codes of conduct for multinational
companies. Currently, the United Nations Organisation is working on
its own draft. Although it was planned that the UK Centre on Transnational
Corporations would produce its own code which was due to come out next
year, it now looks as if there may be some delay. At the same time
the Centre is also planning a worldwide study into the international
tobacco industry which it is believed will begin in 1982.
2. 'the SAT Industries Group has already pledged its support far the voluntary
guidelines for multinational companies drawn up by the Mr; an
for Economic Co-operation and Development. Additionally, the Group
supports the code of the International Labour Organisati.-n and the European
Community's voluntary Guidelines on Employment Practices in South Africa.
7he United Nations code is likely to overlap considerac'y with provisions
of the OECD and EEC codes.
Although the UN Centre is consulting representatives of industry about
its code, obviously such views are not likely to prevail against Third
World and other government interests. The best chance of influencing
the Centre, even pernacs to the extent that its code may subsequently
:e seen to be superfluousis for companies like us to achere strictly
to the codes already in existence and to the philosophy which underlies
tnem
The UN code, if i-t does ccme into existence, will undoubtedly be recommended
to governments, particularly those in rapidly developing parts of the
world. The idea would be to give its provisions authority through local
legislation and thus the implications for SAT companies are significant.
3. General Managers should thus consider the SAT positions outlined in this
document and ensure that appropriate strategies are incorporated into
company plans. Too often in the past the tobacco industry has simply
reacted to events. Armed with foreknowledge of the issues, SAT companies
should be in a position to take initiatives with governments. In this
way companies can take steps to avoid legislation and h.elp towards
both their own long term viability and the economic ob.-ectives of
governments.
4. The circumstances which have led to demands frcm less z9vel cced countries
for a new ee.znomic ,rjer favourable to the Third Woric are well. understood.
The plight of many emergent nations and the wealth dis-zarity between
them and the wre industrialised nations has been underscored, particularly
since the 1970S by a continuing international debate and a ser es of
studies culminating in 1980 with the Report of the Brandt Commission.
Whi I St the debate has been conducted largely in the international fora,
the business world has become involved as the less developed nations
have noted the economic role of large international comoanies and their
potential as i rtsoume for national development. TM recognition
has promoted the drafting by international agencies of a series of codes
of conduct which have aimed to encouraSe international c:moanies to
acceot contr: I whicn, aim to at isn them more closely t., tne aims and
co'ectives of hcst -citrnmenti. A I I St companies have 7 4 ewe,. such c:des
,41
.h Su S.) I twc au of their restrictive character, 4: is recognised
to be in the interests of our bus develocment tha-. tne it ts rs';
of c:moanies should 2e c--mpat"zie with those of nations: ieveiopment.
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BAT Industries document for Province of British Columbia 22 April 1999

2
It Is inrecognition of such circumstances that the SAT Group has
expressed voluntary support for the principles enshrined in the OECD Code.
S. The interdependence of multinational companies and host economies provides
a climate-in which SAT can develop public affairs strategies to strengthen
relationships with governments.
At the same time companies can take further action to secure their profitable
future in the Third World.
6. Much of BATCo's success can be attributed to the company's identification
with the aims and aspirations of host countries. The company recognised
at an early phase in its history that it could continue to expand profitably
only if it successfully served the needs of the host community and
identified company plans with national aims. BAT will continue to
pursue these policies and play its par-, in Third World development.
The current debate on codes of practice for international companies
is therefore of special interest to SAT.
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BAT Industries document for Province of British Columbia 22 April 1999

-3
FOOD VS TOBACCO
The Issue
As is often stated, it is food shortage which poses the most serious threat to
populations in the rapidly developing parts of the world. This threat is said
to be even more serious than that posed by disease. A number of the Third World
countries currently experiencing shortages of food are also major producers of
tobacco. The World Health Organisation and anti-tobacco lobbyists claim in
consequence that large numbers of people are being kept short of food because
land and resources are being devoted to the cultivation of tobacco. Is it no:
time, say the opponents of the industry, that tobacco leaf growing should be
actively discouraged and replaced with food crops?
SATCo's Position
SAT's experience has shown that good food crop growing practice is a direct and
valuable spin-off from tobacco cultivation.
In the developing world there Is an abundance of land available for the
production of food crops. The problem is not one of tobacco preventing food
being grown and it is generally true that the plots allocated to tobacco
represent only a small proportion of the farmer's land. Comnentl ng on the
food/tobacco relationship, a recent economic study of leaf tobacco states:
'Within the agricultural sector generally. while actual or potential conmet@ t@ on
between tobacco and food crops can exist, the overall balance in each of the
case study areas is favourable. indeed, in certain circumstances, not only is
such a conflict avoided, but tobacco growing has also had a positive impact an
food production
The key problems facing many emergent nations are those of providing access to
other populaton Centre$ where the food is needed, and of ensuring an adequate
return to the farmer. As a parallel difficulty there are of-en few means by
which growers in r-i ra 1 areas can market their produce efficiently.
Nonetheless, in several parts of the world agricultural and related business
activity has risen faster in tobacco growing arias than in non-tobacco areas.
This has been-achieved through the application of new agricultural techniques.
Increased yields of food crops have been recorded since the early 1960's in t6e
tobacco growing areas.
Whilst SAT does not own land, it orovides tobacco farmers with expert
agricultural advice and assistance. It is the comoany's policy to encourage
crop rotation and as a result verv considerable increases in food crop
production have developed in tobacco areas.
Whilst it would be difficult to assign exact figures to these improvements,
there seems little doubt that the increase in food crops is directly associated
with the improved agricultural practices.
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BAT Industries document for Province of British Columbia 22 April 1999

4
Tobacco growing has proved beneficial to food production. A Nigerian newspaper
has expressed the point in the following way:
'Perhaps the most Impressive aspect of NTC's effort in recent times is the full
integration of high yielding food crops into its tobacco leaf growing
programme'. 2,
Far from inhibiting food production, therefore, BAT's presence in Third World
countries has meant that more food is now being grown in tobacco areas than was
the case In earlier years.
Considerable work has been dome by BAT companies to encourage t!@e production of
food by tobacco farmers. Rotation food crops should continue to be encouraged.
Such activity is valuable to many countries and enables the company to be seen
to identify its policies with national aspirations.
References
1. 'Leaf Tobacco Its Contribution to the Economic and Social Development of
Third World'.
2, Daily Times, Lagos. 12.5.81. Comment on Nigerian Tobacco Company.
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BAT Industries document for Province of British Columbia 22 April 1999

TRANSFER OF TECHNOLOGY
The Issue
New technology is seen as a key factor in the economic growth of developing
countries. On the one hand, it is sometimes claimed that the flow of technology
transfer is inhibited by ownership of patents by private corporations,
restrictive licensing agreements and expensive royalties. On the other,
technology transferred is often seen as inappropriate to the host country
because it is too soohisticated or capital intensive.
SATCo's Pcs":4on
SAT's contribution to technology transfer is significant. We are conscious of the
need to adapt technology to host environments.
Companies associatec wi th BATCo purchase leaf tobacco in some 41 coulli ri es
ano operate 63 factories manufacturing tobacco products in 38 countries.
This scale of activity has called for a massive growth in knowledge cl
agriculture, engineering, management, manufacturing and professional techniques,
marketing methoas and craft skill on the part of those BAT employees wno
live in the develoq4nq countries. This has been particularly true over
the past tmc decades with tne accelerating transfer of technological and
management skills t.- local staff.
BAT companies have given much assistance to peopleoutside their own orgamisation
in the deve'opment " agricultural knowledge and marketing techniques.
The tr a of the'r own staff by BAT companies has been of major imcortance
not only f1cr the ccrmanies themselves but also as a direct contributivi
to the ri level of skill in the host country. Most of this trai ri 'ng
is carried out locally, but it is supplemented by work done in other countries.
Large numbers of emoloyees from many Third World countries have been sent
to BAT esta@- I or to machinery manufacturers in the United Kingdom,
USA, Germany and elsewhere. They have been trained in operating techniques,
maintenance routines, accounting procedures and other aspects of tobacco
gr-)wi ng, manufacturing and selling. BAT's Southampton factory alone receives
about 50 v-.sitors each year from developing countries for suc!i trainin;
purposes.
At the management level, no less than 1100 nominees from Third World countries
have attended management development courses at SAT's Group Management
Centre in t-!e Uni tec Kingdom since 1962. Under a programme 'egun in '3575,
over 40 marace-s fr:T.- develooing countries have been secondec 'for per:
oas
frcm three months tc three years) to posts in the United Kingdom or c:ier
countries in order t: broaden their experience.
Since 1962, BAT has thus been able to transfer management resoonsibi"v
at senior levels to 'ocal staff in 542 posts in its overseas c-.mpariies.
Not all aA7 trained ,ersonnel have remained with the company. Many have
pursued their careers, as they were free to do, by moving tocther comeanies,
or by taking up government posts in their own countries. There are cznsequently
many ex amp' . o-' the way in which the local community has benefitted from
the active -articipa:ion of individuals who first developed their talents
in the BAT evi r-.nrret. This work should Continue.
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BAT Industries document for Province of British Columbia 22 April 1999

Sa
Each company should develop an inventory of the technology which it has
acquired from SAT and has put into use locally. Specific references should
be made to machinery and processes and not merely to the training of our
staff.
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BAT Industries document for Province of British Columbia 22 April 1999

6
DISCLOSURE OF IlIFORMATION
The Issue
Particularly since the end of World War 11, the sustained growth of international
business is such that there are now cor;crations whose total turnover exceeds
the G4P of some countries. An effect of this phenamnon has been that
the international activities of some companies have been viewed with suspicion
by certain governments. They have seen in some large organisations an
entity which is not fully accountable to any one government and the suspicion
engendered has led to international co=anies sometimes being accused of
deliberately shielding their activities from public scrutiny.
The UNCTAD Report on the Marketing and Distribution of Tobacco expresses
the issues in the following way:
"One of the salient features of transnar.4onal to0accocompaniesoperations
'... in both the developed market economy and in the developing countries
has been, and is, the absence of rigorous public accountability of their
cirporate practices, with the possible exception of the United States ...
This is particularly evident in the developing countries where knowledge
of the financial marketing and output, decisions ... is confined to
rudimentary data ...
Data concealment is assisted by the I ar;e accounting firms acting in alliance..."
, Position
Where SAT is concerned, allegations suc@l as these are groundless and we
0ould'never appear to be concealing our activities. We publish our annual
report which is circulated round the world and can be examined by all
.interested parties as well as the general public. This document complies
strictly with United Kingdom legal req-.;4rements. It is recognised that
different laws apply in different countries. It is also recognised that in
an Organisation as large as SAT Industries, it is impossible to inform all
employees worldwice of everything that is going on in each individual country
where we 'have investments. ' Within these Parameters, however, we should provide
reasonable information in each country.
The SAT company in any country is an integral part of the national economy of
that country. In many instances local shareholders own an interest in
the company and in some organisations the BAT interest is less than 50
per cent.
BAT has an excellent record in the provsion of information to governments,
its shareholders, employees anc the put! As regards disclosure and
accountability, BAT companies work with nighly reputable firms of accountants
and auditors who maintain strict professional standards of practice.
The disclosure requirements of company law are increasing throughout the
world and in every country; BAT and its auditors fully satisfy national
rtcuirements. In addition to what is recuired to be disclosed under company
law, much business information has to be disclosed for government statistical
purposes, for submissions under price central legislation, for licensing
and exchange control authorisations and in some cases under labour relations
law. We do not believe that the authori:ies in host countries find difficulty
in obtaining the information they need azout the operation of the local
SAT ccmoany.
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BAT Industries document for Province of British Columbia 22 April 1999

6a
It is a reflection of SAT's international reputation that leaders in
developing countries should be so encouraging to SAT, and as in Nigeria
and Kenya recently, for example, should give public acknowledgement to
the high national standing of the local SAT company.
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BAT Industries document for Province of British Columbia 22 April 1999

7
TRANSFER PRICING
The transfer pricing allegation as summarised in the UNCTAO report on
the Marke-ing and Distribution of Tobacco is that "the essential strategy
behind the accelerated dynamic for enhanced control resides in the move-
ment of c-iss-subsidisation allowing the mass deployment of resources
siphoned from one profit centre to another to acquire, ultimately,
unf control over other industries ....... the parent company can
shift pr-n-Fits through transfer pricing, 'profit loan swaps' and other
accountin; miracles on a wide scale. cross-subsidising its various opera-
ti on$.'
BATCo's -- -.si ti an
In re I at," :m to other SAT arganisations an associated company is an inde-
pendent `:rofit Centre" - Its dealings with other SAT companies are
governed :y national tax laws and strictly commercial considerations,
as is essential if it is to maintain its individual viability.
In business between BAT companies, purchases and sales of materials
and man products are priced according to normal commercial
practice, end royalties, commission ser4i ces and fees are charged as
in transactions between independent businesses.
SAT has :--olicly and unequivocally connitted itself to the OECD guide-
lines on transfer pricing, which state that enterprises should "refrain
from us I .!: facilities such as transfer pricing, which does not con`amn
to an a M. length standard for modifying in ways contrary to national
laws, t?,e tax base on which members of the group are assessed."
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BAT Industries document for Province of British Columbia 22 April 1999

COMPETITIVE ACTIV M,
The Issue
There are two principal elements to the competitive activity'
accusation. One is that BAT and the other large tobacco companies
achieve high profits through collusion to ensure that tobacco leaf
prices are kept low and cigarette prices high.
The second accusation is that large companies use their advertising
power to keep local companies and others out of the market.
These allegations of unscrupulous behaviour can have an effect upon the
reputation of a company and therefore upon trade. A further danger of
the collusion accusation is that industry cooperation on smoking
issues, through INFGTAS could be misunderstood or wilfully
misinterpreted by the industry's opponents.
SATCo Position
The first accusation is that of collusion to keev leaf prices low and
cigarette prices high. However. there is no such callusfon,
The method of determining leaf prices varies from country to country.
In Brazil, for example, prices are negotiated at the national level
between the farmers' association and that of the buyers. The prices
determined in this way are subject from time to 'line to the
government's price control machinery. In India, the principal interest
in the leaf market is represented by the National Tobacco Board which
.establishes recommended minimum prices. The farmer is not committed to
sell to any particular buyer and he can and does seek offers from
several sources. In some rapidly developing countries, prices art
determined at auction by supply and demand, as in Zimbabwe.
BAT's overriding interest is to ensure that there is a continuity of
leaf tobac:n supply. To achieve this end, it is self evident that
tobacco farmers must be paid what they see to be a fair price for their
croo. Indeed, tobacco is in competition with other crops and if it is
not seen to be profitable t!!4e farmer will rightly choose a more
rewarding IC -iv- "Y.
Whe-e cigarettes are concerned, in many countries price control Is
Imposed by governments particularly in the developing parts of the
wor'd, as a means of countering inflation. Where this happens there is
aere@ally cznsiderable discussion and negotiation over the extent of
ine increases, wr. have to be supported by evidence of cost
increases. It is a fact that in many countries tobacco companies are
not always successful in obtaining price increases in line with rises
in costs.
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BAT Industries document for Province of British Columbia 22 April 1999

Sa
The second major accusation that advertising is used to keep out
competitors, has never been substantiated. The accusation ignores the
fact that far from being a barrier to competitive activity, the
principal effect of tobacco advertl si-mg is to encourage the consumer to
switch from one brand to another.
Where the character of advertising is concerned, it is BAT policy that
promotional methods should always be acceptable to local communities.
INFOTA8 is not an Organisation for international collusion and price
fixing. It has been set up by the major tobacco companies to provide
an information exchange on the subjects which affect the tobacco
industry internationally. Commercial matters are specifically excluded
from the work of I
BAT Industries document for Province of British Columbia 22 April 1999

9
'DERV
rhe Issue
The flue-curing of tobacco requires artificial heat, although other
curing methods do not. In Canada, the United States, the Caribbean,
Central America, India and Indonesia, oil or coal or sometimes
natural gas are used for flue-curing. in some cther Third World
countries however, deforestation has occurred steadily due to
commercial forestry operations, the cueing of timber for domestic
firewood and building purposes and also for tobacco curing. In
some areas of particular countries, deforestation has led to severe
shortages of timber. 7his has led to tne tobacco industry being
accused of wilfully removing fcr flue-curing purposes, the pcor.
man's only source of rth ad fuel.
8ATCo's Position
Governments in a numaer of Third World countries, have generally
encouraged the development of tobacco as a cash crop and have acknow-
I ed its value to the national economy. However, with a few
notable exceptions such as Pakistan, forestry departments have
been slow :o see the need for re-afforestatiom prograrrines. SAT
has recognised the problem of wood shortage although tobacco curing
IS not a major cause. The company has taken a number of initiatives
and insists that the farmer Plants trees so that he has a crop of
timoer to meet flue-curing ana domestic Requirements. As an
example d the company's affores-cation work, SAT in Kenya maintains
tree nurseries where seedlings of fast-growing species are made
available to farmers at low cost. In ado it is SAT's policy
to encourage associated companies to develop further the ef-104ciency
of wood furnaces and to investigate research into alternative sour-
ces of energy. For example, in Sri LanKa, the conversion of waste
coir, rice-husk anc sawdust into Iriquettos is under investigation.
,n Kenya, trials are being conducted using solar energy as a
supplementary source of heat for flue-curing. In Brazil, the
company is changing to wood fuel even for factory purposes, thus
introducing a cheap and replaceable energy source as a substitute
for finite and expensive ones.The company in Brazil aims to be inde-
pendent of oil by the later MO's and already some 400 of its
vehicles are fuelled with alcohol.
In all cases BAT is particular'y ccnscizus of the need to renew the
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sources of wcod fuel so that tner! is no long term deforestation or erosion
of land.
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BAT Industries document for Province of British Columbia 22 April 1999

10
RELOCATION OF PRODUCTION
The Issue
There is a witely held view that multinational companies do not simply
switch production from one country to another or close.coerations to meet
changes in patterns of- demand, or to-mak-e economies, but to-do";o'y4thoutconcern
for the workforce involved. There ii-jeeh to be an underlying
threat that pr-:duction will be used as a bargaining tactic making
the multinat"nal immune to collective action by the workforce.
SATCa-s Pcs".':n
BAT recognises that its presence in a given host country
be
,gets a rtsoznsibili to examine all possible alterna-
t yes @efore Asking a%ocision to close an operation or move it
elsewn-are. C!reful assessment is made of tne options open on
possible modernisation, the availability of government subsidies,
possible reductions in labour to save the jobs of the majority and
so on. Only ahen all possible alternatives have been discount-ad
is a decision taken to close.
in such circumstances, every effort is made to provide employees
with adequate :notice, to ensure fair compensationto those made
redundant. tc re-deploy people if possible, and to help others
gain suitable iew employment.
It would be wr@ng for any international company to assert that it
would never SeeK to re-locate its production to meet changed circum-
stances, but SAT would contend that this is not exclusively a
multinational @nenomenan.
The factors wr'ch make the maintenance of production in aeVven coun-
try no longer -liable would apply equally to a multination or a
locally-owned Organisation.,
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BAT Industries document for Province of BritiSh COIUMbia 22 April 1999

MANAGEMENT POLICIES
The Issue
multinational companies are sometimes accused of operating with a
neo-co lo M. a I style of management which does not provide fair
opportunity for local national employeesWio are capable of taking
on senior management PCs Opportunities for cross-posting
between subsidiaries and head office are also seen as unreasonably
limited. Oisoarity between expatriate salaries and benefits, and
those of Deople locally employed, are seen as reason for discontent
OATCo I
SAT does not operate in a neo-colonialist manner and the allegation over-
looks 1@e dramatic changes which have taken-place in the ex-colonial
Countries in which wk operate. Tht establishment of countries as
independent sovereign-states carries with it an inevitable reaction
to colonialist attitudes in the business or personal conduct of our
overseas -managers, and we would be foolhardy not to recognise these
pressures.
SAT's training and development programmes for local staff are among
the best of their kind. Our Management Training Centre in the UK
provides courses for many overseas nationals annually. We employ
only 120 3ri tisn expatriate managers and 30 third country nationals
in our c-.erations outside t)e UK, and a very high proportion of the
management in cur subsidiaries is made up of local nationals.
In the jK, as ii other industrialised countries,attitudes towards
overseas oostings have changed radically and the potential 'stock'
of cara: I people who will undertake periods abroad has diminished.
Tt is in the interests of host countries as well as BAT tnat incen-
tives, In terms of salary and fringe benefits for expatriate staff,
should oe sufficiently attractive to persuade capable individuals
to acze:t overseas tours so they can-play both their business and
trai roles. Where opportunities exist, efforts are made to
effect cross-postings. Positions at Head Office are available and
there is invariably a number of senior mon-British managers to be
found wcrk there as part of their career development.
Oiffic-.ilt4es have been ex,,e- en ced in persuading outstanding mana-
gers arm other countries to take postings to London, for a variety
of reas:ns, among which are differences in life style, family cir-
cumstances and the cost of living. Where appointments are accepted in
Euroce, remuneration is based on the principles adopted for European
expatriates.
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BAT Industries document for Province of British Columbia 22 April 1999

POLITICAL AND COMMERC:Al-
CORRUPTION
The Issue
There have been some well-publicised instances of a few international
companies being accused of attempting to imorove their commercial
position through corrupt payments to Politicians and other indivi-
duals and groups. On other occasions companies have been accused
of making unlawful payments to political par-.i es so as to influence
national policies. Such examples have created increased public
concern in recent years.
SAM) I Position
B.A.T. Group companies are required to pursue policies which exclude
corrupt practices with regard to the giving or receiving of gifts
or benefits and to prohibit the use of funcs or assets of the Group
for unlawful or improper purposes. It is expected that the standard
set by a group company should be such that neither the Group's
overall integrity nor its local reputation wo be damagec if
full details of the business practice in question became a matter
of public disclosure.
Grouo companies are also required to abstain from improper involve-
ments in dome st political acti4ities. Mc -ontributl.ons should
be made to pot parties or other Po organisations,
unless such payments are legally permissible and in line with
local practice. Any such payments must be approved by the board
of the company concerned, must be of modest munt, and must be
properly recorded in the books of the ccmpary.
Commissions, consultants' fees, retainers and similar payments
may continue to be made in the normal course of business provided
the sums paid are understood by both parties to he related to and
are commensurate with the services per-, or-nec and the size of the
contract. In any case, where a proposed payment does not appear
to conform with these conditions, it shall be the responsibility
of the person proposing to authorise the payment to submit the
matter for the consideration of the board of the company concerned.
Compliance with prescribed accounting controls and rules is required
at all times. All assets, liabilities, inc:-ne and expenses must
be correctly recorded in the books of the parent company or its
subs;diaries as appropriate.
It shall be the duty of Operating Group a a a rt of Management to make
arrangements for such reviews as are necessary from time to time
to ensure tnat Group policy is being observea by the operating
companies for which they are responsible, and to report any breaches
to the Secretary of B.A.T. Industries togWer with an account of
what corrective action has been taken.
The Audit Committee of tie Board of B.A.1". es will be respon-
sible for monitoring the observance of Grou.- Pol icy by Divisions
and will include in their regular reports tz the Board details of
any Breeches and any action taken to be taker :y the CoeratIng
Gr-.t;o c3mce-ned to carrec: them.
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BAT Industries document for Province of British Columbia 22 April 1999

13
CONTRABAND
The Issue
Contraband is a major problem in some parts of the world, where
cigaret-.es are smuggled across borders to be sold at prices below those
of locally manufactured products.
It has teen alleged that BAT has a vested interest in the contraband
trade in some countries and-is unwilling to take action to prevent it.
As a result, governments say they lose revenue and that t@e home
industry is seriously prejudiced.
BATCo's Position
BAT companies manufacture cigarettes and other tobacco products in many
parts of the world and make a significant contribution to the progress
of the countries where they operate.
From BAT in the United Kirigdom cigarettes are exported to markets in
Europe, the Middle fast, the Far East and to a number of countries in
Afri c a. Other BAT companies also export cigarettes.
There have been instances where cigarettes exzarted by BAT to its bona
fide agents around 'he world have been smuggled from one country into
nothe@ where the domestic tobacco trade has been seriously affected.
:11 export transactions in which BAT is involved are perfectI4 legal.
As with other manufacturers, BAT has no means of controlling the
movement of goods it legitimately exports, once they have been shipped
in response to orders placed by authorised dealers.
It would be futile for BAT to restrict its exports to any region of the
world as any voluntary curtailment of its trade will be offset by
orders on competitive tobacco companies and local governments will not
derive any benefit from such restrictions. Nor can BAT refuse to sell
in markets where its agents have invested bot.@ time-and money in
promotion and advertising of its brands over -many years. That stocks
may be diverted from such markets by smugglers is a risk to take.
The contraband trade is a Comdex phenomenon. It is a problem that can
be solved only by concerned action on the part of local authorities,
the customs and other law-onforcement agencies. It should be
remembered that cigarettes are not the only commodity on which
smugglers thrive and that many other goods are likewise the subject of
illegal operations costing the Treasury in many countries enormous
amounts of money every year.
10th February, 1982
01%
01%
BAT Industries document for Province of British COlurnbla 22 April 1999

r",
N)
C)
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C71%
ON
L14
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BAT Industries document for Province of British Columbia 22 April 1999