PMI comment submitted on Tuesday, June 14th 2018 regarding child labor and other labor abuses in U.S.
tobacco growing:“We’ve been making progress in tackling complex labor issues on farms supplying to PMI and ourstandards exceed U.S. law in many areas. Upon changing our leaf-buying model in the U.S., HumanRights Watch noted that this would mean higher child labor standards on thousands more U.S. farms.
Challenges remain, and PMI continues to work with Verité and the Farm Labor Practices Group on
systemic issues associated with child labor, grievance mechanisms to protect workers’ rights and toachieve meaningful improvements on the ground.”-Miguel Coleta, Director Sustainability, Philip Morris International
NOTE TO EDITOR:In 2015, PMI adopted a new leaf-buying model in the United States moving from purchasing tobacco throughdirect contracts with U.S. growers to purchasing through two international leaf tobacco suppliers, Universal Leaf
North America (ULNA) and Alliance One International, Inc. (AOI). Human Rights Watch noted that this change
would require both suppliers to implement PMI’s ALP Code standards on all farms where they source tobacco,regardless of whether the farm’s crop was ultimately bound for PMI: https://www.hrw.org/news/2014/11/05/ustobacco-giants-move-could-reduce-child-labor

Additional facts based on their inquiry:Our Agricultural Labor Practices (ALP) Code sets stricter standards than U.S. law, both interms of age limits and the type of work allowed by children. Our ALP Code, which is reflected in
the contracts of farmers supplying to PMI, prohibits under 18s from performing hazardous work,including the application of agrochemicals. A roll-back in U.S. legislation would not affect ourstandards nor our resolve to implement them.

In the U.S., monitoring of our ALP Code standards is conducted by our suppliers through trained
agronomists (field staff) who regularly visit farms (including unannounced visits) to guide their
ALP efforts, monitor, assess and address any issues. Farms who employ farm labor contractors(FLCs) are subject to more frequent visits, to mitigate the risks posed by unscrupulous FLCs.
Control Union, an external third-party monitoring organization, assesses progress and identifiespriority areas for attention. These reports are publicly available in full transparency. We also
welcome continued systematic scrutiny of our efforts.

In the U.S., PMI is focusing on three risk areas identified by suppliers’ farm monitoring andexternal assessment data: (i) use of farm labor contractors (crew leaders); (ii) child labor; and(iii) health and safety on farms. These are consistent concerns across U.S. agriculture.

Where child labor or other labor abuses are identified on U.S. farms contracted by our suppliers,
swift corrective actions are taken. In 2017, isolated cases of child labor were identified andcorrected immediately. When a violation is identified, our suppliers work with the grower toremediate the issue. If the farmer is unwilling to implement corrective action, their contract may
be terminated. In 2017, our suppliers terminated contracts with 2 farmers and in both cases, thereasons were wage-related.

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Our policy also requires, and we support, freedom of association including collective bargaining
rights. We have investigated and taken action on specific allegations of violations brought to ourattention by farm labor organizers.1

Among other initiatives to mitigate child labor risks, last year PMI began a program – Project
IMPACT (‘IMProving Achievement for Children in Tobacco’) that serves children and youth aged
10–17 whose families work in tobacco and other crops in Sampson County, North Carolina. The
program provides educational opportunity and economic support to keep children and youth on
track for successful school completion. The program supported 45 students in 2017 and thisyear there are plans to expand to a second county in North Carolina.

Structural challenges remain such as legal labor shortages in U.S. agriculture and alongside PMI’s
ALP implementation efforts, we continue working with the Farm Labor Practices multistakeholder Group (FLPG),2 which PMI helped found, to improve farm labor practices. The group
includes other tobacco manufacturers and suppliers, civil society, labor unions and the U.S.
Department of Labor and focuses primarily on issues related to farm labor contractors, childlabor and youth employment, and a grievance mechanism. This platform is used by all parties toraise concerns and work collectively to find long-term solutions. [See Annex: FLPG materials
approved at their Spring meeting].

H-2A workers rates are typically higher than the Federal minimum wage (7.25 USD/hour). In
2017, 48% of workers on farms contracted by our suppliers were covered under the H2-A labor
wage rate, which in North Carolina was 11.27 USD/hour.

The reliance on FLCs in U.S. agriculture is a reality in nearly all labor-intensive crops. In 2017, 8%of growers contracted by our suppliers employed farm labor contractors (FLCs) at some point
during the growing season. FLCs should be certified by the U.S. Department of Labor in accordancewith federal law and our ALP Code requires farmers to pay all workers directly, even if they havebeen recruited via an FLC.

The scarcity of legal labor in the U.S. leaves farmers vulnerable to unscrupulous FLCs. We support
enhanced monitoring, and enforcement by government so that FLCs are held accountable. We

PMI Annual Shareholder Meeting 2017: (Slide 35: “In the United States, we have consistently invited input from,and had dialogue with, interested stakeholders to reach shared goals. This has included our efforts in the Farm Labor
Practices Group (FLPG), which includes the Farm Labor Organizing Committee – present here today – whose efforts
we appreciate and recognize. Last month the Group met and agreed to move ahead, including exploring a grievancemechanism with worker representation free from intimidation. We have a robust approach with our suppliers
regarding the investigation of alleged violations of our policies. Moreover, we continue to invite independent
assessment and make such assessments public.”
2FLPG members include: Alliance One International Inc., Altria Client Services LLC, Japan Tobacco International
Leaf Services, Reynolds American Inc. Service Company, Universal Leaf Tobacco Company Inc. and Philip MorrisInternational Global Services Inc., Farm Labor Organizing Committee, Interfaith Center on Corporate Responsibility,Tobacco Growers Association of North Carolina, U.S. Department of Labor (Wage & Hour Division) as permanentmembers, and the North Carolina Agribusiness Council Inc., North Carolina Department of Labor Bureau ofAgricultural Safety & Health, North Carolina Farm Bureau, and Consulate General of Mexico in Raleigh as AdvisoryMembers.

also support training and education programs so that farmers and FLCs understand their legal
obligations, conducted in partnership with North Carolina State University with future crosssector initiatives planned for 2018.
Our suppliers also require their growers to attend annual GAP Connections Inc. training (whichincludes legal obligations related to FLCs). In 2017, 7,322 tobacco growers attended the annual
GAP Connections training held in 10 states.

(ANNEX to Response dated June 14th 2018: Working with Farm Labor Contractors: An
overview of guidance from the Farm Labor Practices Group – Spring 2018)-ENDS-