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STATEMENT OF ROBERT J. CARBONELL SENIOR EXECUTIVE VICE PRESIDENT OF RJR NABISCO, INC. BEFORE THE HOUSE SUBCOMMITTEE ON-TOBACCO & PEANUTS JUNE 11, 1987

MR. CHAIRMAN, DISTINGUISHED MEMBERS OF THE SUB-COMMITTEE, I AM ROBERT J. CARBONELL, SENIOR EXECUTIVE VICE PRESIDENT OF RJR NABISCO, INC. I AM HERE TODAY ON BEHALF OF OUR SUBSIDIARY, THE R. J. REYNOLDS TOBACCO COMPANY. I APPEAR BEFORE YOU AS THE SENIOR EXECUTIVE OFFICER OF RJR NABISCO, INC. WITH OVERSIGHT RESPONSIBILITY FOR RESEARCH & DEVELOPMENT AND QUALITY ASSURANCE. I HOLD A DOCTORATE DEGREE IN PHARMACEUTICAL CHEMISTRY AND HAVE DONE POST-GRADUATE WORK IN AGRICULTURAL AND FOOD BIOCHEMISTRY. IN MY 35 YEARS OF PROFESSIONAL EXPERIENCE I HAVE ALWAYS BEEN CLOSE TO AGRICULTURE AND HAVE PARTICIPATED IN MANY PUBLIC ISSUES RELATING TO FOOD SAFETY, SUCH AS THE CONTROL OF AFLATOXIN ON PEANUTS AND ETHYLENE DIBROMIDE RESIDUES IN GRAINS. I AM FIRST VICE PRESIDENT OF THE FOOD INDUSTRY SAFETY COUNCIL, AN INDUSTRY ORGANIZATION SPECIFICALLY CONCERNED WITH THE SAFETY OF OUR FOOD SUPPLY. FINALLY, I AM CHAIRMAN OF THE DEL MONTE CORPORATION, WHICH IS ONE OF THE LARGEST GROWERS AND PROCESSORS OF FRESH FRUITS AND VEGETABLES IN THE UNITED STATES. OUR COMPANY APPRECIATES THE OPPORTUNITY TO APPEAR BEFORE YOU BECAUSE WE BELIEVE THESE HEARINGS CAN DO A GREAT DEAL TO HELP RESOLVE AN ISSUE FACING THE ENTIRE U. S. TOBACCO INDUSTRY. - 1 -

CONTRARY TO WHAT YOU MIGHT HAVE READ OR HEARD IN THE MEDIA REGARDING ONE OF OUR CIGARETTE PRODUCTS IN JAPAN, THIS INCIDENT DID NOT INVOLVE ANY HAZARD TO HUMAN HEALTH, ANY PAKISTANI TOBACCO, OR ANY ILLEGAL OR UNETHICAL BUSINESS PRACTICES BY OUR COMPANY. BANVEL, OR ITS ACTIVE INGREDIENT, DICAMBA, SIMPLY ARE NOT A PUBLIC HEALTH ISSUE. DICAMBA'S MISUSE ON U.S. TOBACCO AS A SO-CALLED "RIPENING AGENT" IS, HOWEVER, AN ISSUE THAT NEEDS TO BE PROMPTLY ADDRESSED IF WE ARE TO PRESERVE THE REPUTATION AND INTEGRITY OF U.S GROWN TOBACCO MARKET. WE ARE CONFIDENT THAT OUR GROWERS RECOGNIZE THAT'PROBLEM AND ARE TAKING POSITIVE STEPS TO ADDRESS IT. AS BACKGROUND, OUR ORIGINAL PLAN WITH RESPECT TO THE JAPANESE CIGARETTE WAS TO MANUFACTURE THIS PRODUCT IN EUROPE FOR EXPORT TO JAPAN. HOWEVER, AS A RESULT OF SUCCESSFUL TRADE NEGOTIATIONS WITH THE JAPANESE GOVERNMENT, THANKS TO YOUR SUPPORT AND THAT OF OTHERS, IN OCTOBER OF 1986 TARIFF RESTRICTIONS WERE RELAXED FOR U.S. MANUFACTURED CIGARETTES EXPORTED TO JAPAN. - 2-

THIS DEVELOPMENT, WHEN COUPLED WITH MANUFACTURING AND CURRENCY EXCHANGE CONSIDERATIONS, LED TO THE DECISION TO PRODUCE THIS NEW PRODUCT IN THE U. S. -- AS AN ASIDE, IF THIS PRODUCT HAD BEEN MANUFACTURED IN EUROPE AND EXPORTED TO JAPAN, THERE WOULD HAVE BEEN NO ISSUE BECAUSE JAPAN AND GERMANY DO NOT HAVE ANY RESTRICTIONS ON THE IMPORTATION OF TOBACCO PRODUCTS CONTAINING DICAMBA. IN LATE 1986, OUR GERMAN SUBSIDIARY BEGAN SHIPPING BLENDED TOBACCO TO R. J. REYNOLDS TOBACCOUSA, OUR DOMESTIC COMPANY, FOR MANUFACTURE OF A NEW PRODUCT TO BE INTRODUCED IN JAPAN IN APRIL. EIGHT SUCH SHIPMENTS WERE MADE. THE BLEND HAD BEEN DEVELOPED AND SELECTED SPECIALLY FOR THIS PRODUCT BY OUR GERMAN SUBSIDIARY, AND CONTAINED TOBACCOS PURCHASED BY OUR GERMAN SUBSIDIARY FROM SEVERAL DIFFERENT COUNTRIES INCLUDING THE UNITED STATES. AS A MATTER OF FACT, OVER A THIRD OF THIS BLEND WAS MADE UP OF U. S. GROWN TOBACCOS. THE FIRST FOUR SHIPMENTS OF THIS TOBACCO BLEND ARRIVED IN THIS COUNTRY AND WERE SPOT-TESTED BY THE USDA FOR PESTICIDE CONTENT. WE WERE ADVISED BY THE U.S. DEPARTMENT OF AGRICULTURE THAT THESE SHIPMENTS MET THE PESTICIDE TOLERANCES ESTABLISHED IN AUGUST, 1986, FOR FLUE-CURED AND BURLEY TOBACCOS IMPORTED INTO THE UNITED STATES. 3

SUBSEQUENTLY, THE USDA NOTII'IED OUR COMPANY THAT THEIR TESTS ON ADDITIONAL SHIPMENTS WE HAD RECEIVED OF THIS'BLEND INDICATED THE PRESENCE OF DICAMBA IN THEIR SAMPLES ABOVE PERMISSIBLE LIMITS. FURTHER MANUFACTURING OF THE PRODUCT WAS HALTED, AND WE CONDUCTED OUR OWN TESTS ON SAMPLES OF THIS TOBACCO, WHICH ALSO SHOWED DICAMBA RESIDUES ABOVE THE PERMISSIBLE LIMIT. ALTHOUGH WE KNEW THAT DICAMBA WAS NOT'A PUBLIC HEALTH ISSUE, ITS' PRESENCE IN OUR JAPANESE CIGARETTES IN EXCESS OF PERMISSIBLE LEVELS ESTABLISHED FOR LEAF IMPORTED INTO THE U. S., AND OUR OWN COMPANY STANDARDS THAT ENSURE THAT THERE SHOULD BE NO QUESTION AS TO THE QUALITY OF OUR PRODUCTS, CAUSED US TO ORDER OUR JAPANESE SUBSIDIARY TO DETAIN AND SEGREGATE IN BONDED WAREHOUSES ABOUT 16,000 CASES OF THE PRODUCT THAT HAD ALREADY BEEN SHIPPED TO JAPAN. PRODUCT THAT HAD ALREADY BEEN MANUFACTURED, BUT NOT SHIPPED, WAS ORDERED HELD IN OUR U. S.. FACILITIES, AS WAS THE UNUSED PORTION OF THE TOBACCO FROM THESE SHIPMENTS. WE THEN MANUFACTURED TOTALLY NEW BATCHES OF CIGARETTES IN OUR U.S. PLANT, USING A DIFFERENT BLEND, AND SHIPPED THEM TO JAPAN TO REPLACE THE EMBARGOED INVENTORIES IN TIME FOR THE APRIL INTRODUCTION INTO THE JAPANESE MARKET. 4

REGRETFULLY, WE LEARNED LATER ON THAT BEFORE OUR ORDERS TO HOLD THE PRODUCT WERE RECEIVED IN JAPAN, APPROXIMATELY 100 CASES OF CIGARETTES HAD BEEN PULLED FROM THE INITIAL SHIPMENTS FOR INTERNAL QUALITY CONTROL USE AND FOR PROMOTIONAL FREE SAMPLES TO JAPANESE RETAILERS. IN THIS PROMOTION, JAPANESE RETAILERS WERE GIVEN ONE OR TWO PACKS EACH AS AN INTRODUCTION TO THE NEW BRAND IN ADVANCE OF MARKET LAUNCH. IT IS IMPORTANT TO NOTE THAT THERE WERE, AND THERE ARE, NO HEALTH CONCERNS ASSdCIATED WITH THE PRESENCE OF DICAMBA IN THESE CIGARETTES. APPROXIMATELY 30 OF THESE CIGARETTE CASES HAVE SINCE BEEN RETRIEVED. AT THE PRESENT TIME, THE U. S. ATTORNEY'S OFFICE, MHE USDA AND CUSTOMS OFFICIALS ARE INVESTIGATING TO DETERMINE IF THERE WAS ANY VIOLATION OF FEDERAL REGULATIONS WHEN THE BLENDED TOBACCO FROM OUR GERMAN SUBSIDIARY WAS RECEIVED IN THE UNITED STATES. WE ARE COOPERATING IN THAT INVESTIGATION. TO FURTHER PUT THIS MATTER IN PROPER PERSPECTIVE, IT IS NECESSARY TO REVIEW THE FACTS ABOUT DICAMBA AND THE WAY IT APPARENTLY BECAME PART OF THE REGULATIONS REGARDING IMPORTED AND DOMESTIC TOBACCO. 5

DICAMBA HAS BEEN REGISTEREI) AS A PRE- AND POST-EMERGENCE HERBICIDE TO CONTROL WOODY PLANTS AND BROAD-LEAF WEEDS. IT HAS BEEN USED IN THE UNITED STATES SINCE 1967 WITH A NUMBER OF FOOD CROPS. NO APPLICATION HAS BEEN MADE IN THE UNITED STATES FOR THE USE OF DICAMBA AS A HERBICIDE FOR USE WITH TOBACCO BECAUSE DICAMBA KILLS BROAD LEAF PLANTS INCLUDING TOBACCO. AS I INDICATED EARLIER, OTHER COUNTRIES SUCH AS JAPAN AND WEST GERMANY DO NOT PROHIBIT THE IMPORTATION OF TOBACCO CONTAINING DICAMBA. DICAMBA DOES NOT CAUSE ANY ADVERSE HEALTH EFFECTSAT LEVELS OF INTENDED USE, OR AT LEVELS CONSIDERABLY ABOVE THE USDA RESIDUE LIMIT OF 0.5 PPM. RESULTS OBTAINED IN LABORATORY ANIMALS HAVE DEMONSTRATED THAT DICAMBA IS NOT ACUTELY TOXIC AND DOES NOT CAUSE CANCER, BIRTH DEFECTS, OR ADVERSE EFFECTS ON REPRODUCTIVE CAPACITY. SUCH'CONCLUSION IS WELL DOCUMENTED IN THE TECHNICAL LITERATURE AND HAS BEEN REAFFIRMED IN RECENT TIMES, SUCH AS THE FOLLOWING: IN THE JUNE 3, 1987 WALL STREET JOURNAL, DR. WILLIAM BURNHAM, AN ENVIRONMENTAL PROTECTION AGENCY TOXICOLOGIST WAS QUOTED AS SAYING "THERE ISN'T ANY EVIDENCE THAT DICAMBA CAUSES CANCER OR BIRTH DEFECTS". 6

DR. JOHN MCCARTHY, DIRECTOR OF SCIENTIFIC AFFAIRS OF THE NATIONAL AGRICULTURAL CHEMICALS ASSOCIATION, WAS QUOTED AS SAYING "DICAMBA IS NOT A CONTROVERSIAL CHEMICAL" IN THE GREENSBORO NEWS & RECORD ON JUNE 2, 1987. DR. T. J. (JACK) SHEETS, PROFESSOR AND DIRECTOR OF THE PESTICIDE RESIDUE LABORATORY AT NORTH CAROLINA STATE UNIVERSITY ALSO HAS CONFIRMED TO US THE LACK OF TOXICITY ASSOCIATED WITH DICAMBA. AS I HAVE ALREADY STATED, IN AUGUST 1986 THE USDA ADOPTED REGULATIONS SETTING RESIDUE LEVELS FOR DICAMBA AND OTHER PESTICIDES. THESE REGULATIONS LIMIT THE PERMISSIBLE LEVELS OF DICAMBA ON IMPORTED AND DOMESTIC FLDE-CURED AND BURLEY TOBACCOS TO 0.5 PARTS PER MILLION. GOVERNMENI' RECORDS RELATING TO THE INCLUSION OF DICAMBA IN THIS REGULATION MARE SPECIFIC REFERENCE TO THE USE OF DICAMBA AS A "RIPENING AGENT". WE CAN ONLY ASSUME THAT DICAMBA'S PRESENCE IN THIS REGULATION AND THE APPLICABILITY OF THE REGULATION ONLY TO FLUE-CURED AND BURLEY TOBACCO WAS TO PROTECT DOMESTICALLY GROWN LEAF FROM COMPETITIVE FOREIGN TOBACCOS, WHICH MIGHT APPEAR TO BE OF A HIGHER QUALITY THAN THEY ACTUALLY WERE, BECAUSE OF DICAMBA'S "YELLOWING" EFFECT WHEN APPLIED TO IMMATURE TOBACCO LEAVES. 7

THIS WOULD SEEM TO BE THE LOGICAL EXPLANATION IN VIEW OF THE FACT THAT THERE IS NO SIMILAR RESTRICTION ON DICAMBA RESIDUES IN ORIENTAL TOBACCOS WHICH ARE COMMONLY USED IN AMERICAN CIGARETTES, BUT NOT GROWN IN THE UNITED STATES. IT WOULD ALSO EXPLAIN WHY MARYLAND AND PENNSYLVANIA TOBACCOS, NOT GROWN OVERSEAS, ARE NOT SUBJECT TO THE 0.5 PARTS PER MILLION LIMITATION. IN FEBRUARY OF THIS YEAR, THE USDA ISSUED A NEWS RELEASE AND OTHER PUBLIC STATEMENTS INDICATING THE DEPARTMENT WAS AWARE THAT , SOME U. S. GROWERS HAD ON OCCASION USED DICAMBA. THIS RELEASE STATED THEY HAD FOUND DICAMBA RESIDUES ON FIVE , PERCENT OF THE SAMPLES THEY HAD TAKEN FROM 1986 U: S. FLUE-CURED TOBACCO AUCTION MARKETS. WE ALSO UNDERSTAND THAT VIOLATIVE DICAMBA RESIDUE LEVELS IN THESE SAMPLES RANGED FROM SIX TENTHS TO 207 PARTS PER MILLION. FURTHER, WE UNDERSTAND THERE HAVE BEEN CASES IN WHICH U. S. GROWERS HAVE HAD TO RETURN CROP SUPPORT ADVANCES BECAUSE THEY WERE FOUND TO HAVE USED DICAMBA IN VIOLATION OF THESE REGULATIONS. 8

SINCE"WE BECAME AWARE OF THE DICAMBA SITUATION REGARDING THE BLENDED TOBACCOS SENT HERE BY OUR GERMAN SUBSIDIARY FOR THE JAPANESE BLEND, WE HAVE BEEN CONDUCTING TESTS TO DETERMINE THE ORIGIN OF THE TOBACCO IN THE BLEND THAT CONTAINED THE IMPERMISSIBLE LEVELS OF DICAMBA. RESULTS OF THOSE TESTS SHOW THAT THE SOURCE OF DICAMBA IN THE BLEND IS U.S.-GROWN FLUE-CURED TOBACCOS PREVIOUSLY PURCHASED BY ' OUR GERMAN SUBSIDIARY FROM INDEPENDENT LEAF DEALERS IN THE UNITED STATES. IN CONCLUSION, MR. CHAIRMAN, WE FEEL WE HAVE ACTED RESPONSIBLY UNDER CIRCUMSTANCES THAT HAVE BEEN GREATLY EXAGGERATED. EQUALLY IMPORTANT, WE BELIEVE IT ESSENTIAL FOR ALL INVOLVED TO RECOGNIZE THAT DICAMBA AS USED ON TOBACCO DOES NOT REPRESENT A HEALTH CONCERN -- IN FACT, WE ESTIMATE THAT EVEN IF CIGARETTES WERE MADE FROM LEAF CONTAINING 280 PARTS PER MILLION, THE PRODUCT WOULD STILL FALL WITHIN SAFE LIMITS OF USE -- AND, TO THE EXTENT THAT DICAMBA IS BEING MISUSED IN THE U. S. AS A YELLOWING AGENT, APPROPRIATE STEPS MUST BE TAKEN TO LEGITIMIZE ITS USE IN THE PAST AND PREVENT THIS PRACTICE IN THE FUTURE. MR. CHAIRMAN, JOINING WITH ME THIS MORNING ARE: DR. A. WALLACE HAYES, OUR SENIOR CORPORATE TOXICOLOGIST, PAUL C. BERGSON, SENIOR VICE PRESIDENT GOVERNMENT RELATIONS FOR RJR NABISCO, AND WAYNE W. JUCHATZ, SENIOR VICE PRESIDENT AND GENERAL COUNSEL OF R. J. REYNOLDS TOBACCO COMPANY. 9