JT International and the European Commission Sign a 15-year Agreement to Combat Contraband and Counterfeit Cigarettes

Geneva (Switzerland) 14 December (PROTEXT/PRNewswire) - Japan TobaccoInternational (JTI) today announced the signing of a 15-year agreement withthe European Commission and 26 Member States of the EU defining theircooperation to combat the illegal trade of cigarettes in the Europeanterritory.

"The fight against cigarette smuggling and counterfeiting is an importantbusiness priority for JTI," said Pierre de Labouchere, President and CEO ofJT International. "Combining the resources and coordinating the efforts ofboth government and business is the only solution," he explained.

In 2006, nearly 5 billion contraband cigarettes were seized in the EuropeanUnion and this represents only what has been reported. The figure forseizures of counterfeit cigarettes is estimated to be about 65 percent ofthat total. The World Customs Organization (WCO) estimates that Europe as awhole accounts for 75 percent of total cigarettes seized in the world.While a precise figure for counterfeit cigarettes is difficult toestablish, it is clear that the production of fake cigarettes has increaseddramatically over the last three years.

"This massive, sophisticated global business penalizes our legitimatecustomers and our consumers - who sometimes don't get what they pay for -while depriving governments of legitimate revenues," continued Mr. deLabouchere.

The forward-looking agreement announced today builds upon and confirms anumber of JTI initiatives that have been implemented over the years. Underits terms, the company will maintain and expand its current internalcompliance programs that address the manufacture, sale, distribution andstorage of cigarettes; it will facilitate investigations of reportedbreaches and suspicious transactions; continue JTI's certification ofcontractors and customers while ensuring transparent payment procedures forall transactions.

The agreement provides for clear processes around seizures and closecooperation with the European Commission, the European anti-fraud office(OLAF) and the law enforcement authorities of Member States.

In the field of tracking & tracing (T&T), where tools & solutions arerapidly emerging, JTI has taken a very methodical approach in identifyingan optimal solution that is beneficial to all concerned parties.

The company's initial goals are to be in a position to label master casesof cigarettes in a manner which will allow government officials to easilyobtain key information relating to the manufacture, storage and sales ofits products. In a second phase, JTI will extend markings to cartons - andif appropriate to packs. In the event products are diverted into theillegal market, a viable T&T solution will enable JTI and governments tocooperate more closely in getting to the source of such diversions and takeimmediate corrective actions.

The agreement calls for JT International to pay USD 400 million over 15years to the EC and participating Member States, which can be used inadditional support for anti-contraband and anti-counterfeit initiatives tohelp address these problems over the European territory.

In keeping with this spirit of cooperation, any future lawsuits against JTIfor civil claims arising out of alleged past conduct related to illicittrade activity are excluded by the agreement. All parties believe that thisis the best way to tackle a problem that none of them can solve on its own.

On 18 April 2007, the JT Group acquired Gallaher Plc. A stated objective ofJTI is to operate as one single company, and therefore a framework andtimetable have been agreed upon to include the former Gallaher entities inthe agreement. General compliance obligations will apply immediately.Others like Tracking and Tracing (T&T) or Know Your Customer (KYC) are tobe introduced on realistic yet aggressive time scales.

"Our joint objective was to establish an ongoing relationship of meaningfulcooperation to combat the illicit trade of cigarettes into or through theEuropean Union," commented Mr. de Labouchere." I am pleased that in doingso, we have not limited ourselves to past or present problems but moreimportantly we have established a solid forward-looking partnership," heconcluded.

JT International is a subsidiary of Japan Tobacco, Inc. (JT), the world'sthird largest international manufacturer of tobacco products. JT'sportfolio includes top cigarette brands such as Winston, Camel and MildSeven; as well as Benson & Hedges, Silk Cut, LD, Sobranie and Glamour. TheJT Group's total tobacco net sales (excluding taxes) amount to USD 14.4billion (US $1 = Yen 118.05) in the fiscal year ended March 31, 2007. Withheadquarters in Geneva, Switzerland, JTI has 23'000 employees andoperations in 120 countries.

Documents pertaining to the Agreement and other related materials areavailable on http://www.jti.com.

For information, please contact:

JTI Press Office

Joelle Jost

E-mail: Jti.press.office@jti.com

Tel.: +41(0)22-703-02-91

Source: JT International S.A.

For information, please contact: JTI Press Office, Joelle Jost, e-mail:Jti.press.office@jti.com, tel.: +41(0)22-703-02-91

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