Are Conflict Minerals in Your Supply Chain?
The US government wants to know if there are conflict minerals in your supply chain. (And it’s not alone.)
Under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, publicly-held companies that make, or contract for the making of products containing tantalum, tin, tungsten, or gold (shorthand: 3T+G) must file a special disclosure (Form SD) with the Securities and Exchange Commission stating whether or not these minerals originated in the Democratic Republic of Congo or its neighbors (such as Rwanda and Uganda) – and if so, whether they were mined, processed or traded by armed groups to finance the conflict devastating Central Africa.
Companies using minerals that did not originate in the DRC can meet the basic requirement by conducting a reasonable ‘country of origin’ inquiry and reporting accordingly.
For companies whose minerals might have been sourced from the DRC, there is a further obligation to exercise due diligence in determining the source and chain of custody of these minerals. Their findings must be independently audited and certified. They must publicly disclose whether their minerals are ‘DRC Conflict Free’ or ‘Not Been Found to Be DRC Conflict Free.’
Minerals from recycled or scrap sources are considered DRC Conflict Free. For a temporary two-year period (or four years for small companies), the SEC will accept a ‘DRC Conflict Undeterminable’ finding.
The first filing deadline was last June. Amnesty International found the initial response underwhelming.
In its report, Digging for Transparency, the human rights NGO surveyed compliance across a dozen minimum requirements of Section 1502 and found that only 21% of the 1,000+ companies filing met all 12. While compliance with some criteria was high (99% made their reports available on the company website), it slipped as companies moved down their supply chains (only 61% described the country of origin of the minerals; 46%, the processing facilities, if known).
Amnesty was also critical of the relatively low share (62%) of companies that report actively working with their suppliers to develop responsible sourcing strategies.
The Amnesty report notes that 94% of companies relied on the Conflict Minerals Reporting Template (developed by the Conflict-Free Sourcing Initiative) to survey the vendors in their supply chains. Amnesty recommends that downstream companies (which may be privately-held, or off-shore, or otherwise not directly subject to the new law) tailor the survey to ask their sources to identify risks of conflict minerals entering the supply chain.
The Amnesty report seems timed to focus public attention on the next round of Conflict Minerals disclosure filings with the SEC, due May 31.
Datamyne has been tracking Conflict Minerals imports from Africa into the US, as well as 3T+G moving from Africa into China, and from Africa into Mexico. If you would like to see this, or other country of origin inquiry data, contact us.
Date posted: April 24, 2015