In our letter of May 12, 2006 (the “May 12^th letter”), we advised you that two bottlers in the region have been permitted to sell Coca-Cola and certain other of our finished products into Syria since July 2004. These bottlers began selling certain of our finished products to customers in Syria with our consent following a decision by the Syrian Ministry of Economy to allow the import of carbonated soft drinks from certain Arab countries. We are not required to obtain a license from either the United States Department of Treasury’s Office of Foreign Assets Control (“OFAC”) or the United States Department of Commerce’s Bureau of Industry and Security (“BIS”) in connection with sales by our regional bottlers of our finished products into Syria. The OFAC program on Syria (Executive Order 13338 of May 11, 2004 and April 26, 2006 and implementing regulations) is of limited scope, focusing primarily on the blocking of property of certain designated persons. It does not require a license for exports or re-exports to Syria. The Syria program administered by BIS under authority of the Syria Accountability Act (“SAA”) exempts the export or re-export of food and medicine to Syria. BIS guidelines state that food refers to “articles used for food or drink for man or other animals and articles used for components of any such article.” According to BIS, examples of “food” include, but are not limited to, “processed or unprocessed food items for human consumption, feed, livestock, vitamins, minerals, food additives, dietary supplements and bottled water.” Our finished beverage products are, therefore, considered food products for purposes of the SAA and its implementing regulations.

 

As we stated in the May 12^th letter, at that time we were anticipating that we would grant distribution rights for our finished products with respect to Syria to a new distribution company. We have since authorized a new distribution company that has been established in Syria to distribute finished beverages under the trademarks Coca-Cola, Fanta and Sprite in that country. This distribution company is not, however, authorized to manufacture finished beverages within Syria but sources finished beverages from designated bottlers operating in other countries in the region. Under current Syria sanctions programs administered by OFAC and BIS, we are not required to obtain a license from either agency in connection with this distribution arrangement. This distribution arrangement only involves the supply of finished beverages to Syria from bottlers operating in third countries which, as stated above, does not require an OFAC license; and our finished beverages are considered food products which are exempt from BIS licensing requirements.

 

In the May 12^th letter we also advised you that we had entered into an agreement to purchase the Cadbury Schweppes (“CS”) brands in Syria. We have now completed that transaction. As we advised you in the May 12^th letter, we secured an appropriate BIS license to export confidential informational materials and know-how necessary for the Syrian bottlers that manufacture CS finished beverages to do so in accordance with our required mixing instructions and to meet our quality assurance standards. We are not, however, required to obtain a BIS license to supply beverage concentrates to our CS bottlers in Syria because, as components of finished beverages, beverage concentrates are also considered food products and, therefore, are exempt from BIS licensing requirements under the SAA. In addition, we are

 

Ms. Cecilia D. Blye 

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James Lopez,

  Office of Global Security Risk

E. Neville Isdell,

  Chairman, Board of Directors and

  Chief Executive Officer

Gary P. Fayard,

  Executive Vice President and

  Chief Financial Officer

Connie D. McDaniel,

  Vice President and Controller

  Chairman of the Audit Committee

John F. Olson,

  Counsel to the Audit Committee