Companies in the United States are waiting for Security and Exchange Commission (SEC) clarification on their conflict minerals disclosure responsibilities. The SEC issued proposed rules in December and accepted public comments through March. The agency has stated it will evaluate the comments before finalizing the rules later this year.
What are conflict minerals? They are minerals being sourced from rebel-controlled mines in the Eastern region of the Democratic Republic of the Congo (DRC), where armed conflicts are resulting in thousands being killed. Horrific human rights violations are occurring, and profits from inhumanely-run mines are helping fuel these conflicts.
Conflict minerals include columbite-tantalite (coltan), cassiterite, wolframite, and gold. Four derivatives of these materials (tantalum, tin, tungsten, and gold) are used in the electronics industry. The US enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, and a provision in the act requires all US public companies that use any of four minerals -- tin, tantalum, tungsten, and gold -- to trace the supply back to their source. If they come from the DRC region, the company must file an audited report with the SEC declaring whether the minerals they used came from a mine that directly or indirectly financed or benefited armed groups in the region.
While this law is an historic attempt to address a serious problem, there is debate about whether it will help resolve the conflict in the DRC. Some believe the task is too daunting (only smelters know the source of their raw materials), and the reporting timetable too aggressive (companies must start reporting beginning January 2012), that it will cause companies to stop sourcing minerals from the Congo. This could lead to economic hardship for millions of innocent people who make their livings from the mining and minerals trade.
All of this is weighing on the SEC as it carefully reviews the comments it has received before issuing its final rules. In the meantime, the electronics industry is gearing up to comply. The Electronics Industry Citizenship Coalition and the Global e-Sustainability Initiative have rolled out encouraging programs to assist the electronics industry by certifying DRC smelters as conflict-free.
While we advise electronics companies to take action as soon as possible, some are waiting until final SEC clarification is provided. What is your company doing?
More details available on this and other legislation at element14.
Martin points out that mining areas of the Eastern DRC are difficult to access and the areas are often controlled or racketeered by armed groups. Illegal taxes are often levied during the transport of minerals to buyers in town, and minerals from various sources can easily be mixed during transport to consolidate loads and/or mask their provenance. Such actions could render materials no longer conflict free. "In such a context, it does not seem possible to provide an absolute guarantee as to the conflict-freeness of minerals." The Dodd-Frank Act requires due diligence and "documented representations" by suppliers will have to be relied upon. At least until a more reliable declaration "system" has been established.
I received an e-mail comment from Martin J. Bauwens, a consultant based in Johannesburg, South Africa. He provides expert consultancy services to African investors, with a focus on the mining industry. He recommends the following articles he prepared:
Based in South Africa (Johannesburg), MJB Consulting provides expert consultancy services to African investors, with a focus on the mining industry.
Based in South Africa (Johannesburg), MJB Consulting provides expert consultancy services to African investors, with a focus on the mining industry.
"While we advise electronics companies to take action as soon as possible, some are waiting until final SEC clarification is provided. What is your company doing?"
I am impressed by the interest in this topic! You ask if US regulators and the electronics industry is really concerned about what happens to the people in the DRC. I certainly hope so. I think the motivations are to help the region. I sincerely hope the SEC takes the potential impact on the DRC region and people into account before finalizing their rules.
You ask what companies are currently doing, and mine in particular as a distributor. Manufacturers will have to rely on smelters. Smelters will need to identify the mine(s) of origin of their raw materials, and provide evidence their source mines are conflict free. If they can’t do that US electronics manufacturers are not likely to buy from them. The real fear is that the SEC rules will not allow enough time for a system to be established for certifying mines and that will cause manufacturers to look for non-DRC region sources.
My company sells electronic components manufactured by others. We are currently unable to provide “conflict minerals” content information on our products. We tell our customers we are monitoring SEC actions and will react as soon as final rules are issued. I am monitoring an Electronics Industry Citizenship Coalition (EICC) and the Global e-Sustainability (GeSI) co-initiative to certify smelters as conflict free (http://www.eicc.info/). I hope an effort like this proves viable for DRC region smelters.
I agree with you that in most cases the industries as a whole are more focused on their sales and profits than what goes on in individual countries. As long as they get their product, many don't care about the after effects. And we are talking about the SEC. They only have governance over the U.S. What about all of these other global companies that still buy conflict minerals? In order to help stop the atrocities in the DRC, there would have to be significant global implications.
Do you really believe the industry is that concerned about what happens to the people of the DRC? This is a business and oftentime the profit motive can trump social responsibility.
How has the industry responded to your encouragement that they should comply immediately with the new law? You mentioned that your company has asked your suppliers to move towards compliance. Did they agree and what has been your experience? I am also curious how distributors can assist in ensuring compliance. Could you please explain further.
Ken--you make a great point that I haven't seen discussed that much--will the Dodd-Frank Act have any impact on the real problem in the DRC? The industry is doing the right thing by getting behind the act, at least in theory, but execution is going to be very difficult. It will be too bad if this is merely a symbloic action that has very little actual effect on human rights.
This new version will expand coverage to all electrical and electronic equipment, require special marking of finished goods and more compliance documentation, and increase penalties for non-compliance.
The US Senate Armed Services Committee uncovered approximately 1,800 cases of suspected counterfeiting over a two-year period. One Air Force supplier alone supplied 84,000 counterfeit devices.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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