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Conflict Metals Law: Good Intentions Gone Bad?

If anything proves how difficult it has become for businesses to extricate themselves from politically sensitive issues around them, it would be so-called “conflict minerals,” those raw materials that are sourced from some of the more dangerous parts of the globe, including the Democratic Republic of the Congo.

The issue has been off and on in the news recently, but its implications remain nevertheless complicated for electronics manufacturers and their suppliers. In recent months, even the US Congress has weighed in, and this has dramatically raised the stake for all parties involved. (See: Defense Bill Calls for Rare Earth Plan and Avoid Conflict: Comply With Dodd-Frank.) Many electronics components manufacturers and their raw material suppliers feel squeezed, pinned down between what they know is right and their limited ability to get accurate information about the extended supply chain, especially in areas of war.

Naturally, many OEMs and component manufacturers are calling on their lobby group for assistance, and this has pulled in the IPC (“Association Connecting Electronics Industries”), which, while agreeing that conflict metals need to be policed, believes this should not be used to tie down its members or make them complicit in activities they were not party to. In a statement sent to EBN, Tony Hilvers, vice president of industry programs at the IPC, said members of the association have gotten caught in a “no win” situation. He states the IPC's position as follows:

    It’s a script straight out of the movies. Just replace “blood diamonds” with “blood metals” and begin with a scene that demonstrates the tens of millions of dollars in profit flowing into rebel mines in the Democratic Republic of the Congo (DRC), funding criminal networks and perpetrating horrific war crimes. In the movie, the US government comes to the rescue by implementing a law that withholds resources from these groups, breaks the rebel mines and ends the atrocities.

    It seems logical: just don't buy minerals (metals) from the rebel “conflict” mines in the DRC and that will put them out of business. Initially I thought the same thing. Unfortunately, social responsibility issues are complex no matter how much we like to think or fervently wish there is a simple solution.

    IPC, an international trade association based in Bannockburn, Illinois has been working on this issue for the last two years. Yes, there is a significant financial toll to the electronics industry on this issue. But here's the dirty little secret — there’s a human toll to pay in “boycotting” the mines in the DRC.

    Consider the DRC's tin mines. The DRC's tin mines account for roughly four percent of the global market for tin; and it's estimated that about two percent of tin from the DRC has been identified as coming from conflict mines. Where does the other two percent of tin come from? The tin comes from many artisanal mines — mom and pop operations — whose wages support tens of thousands of people.

    It's tough, dirty work in these artisanal mines, but it does provide a wage. A boycott of all the mines in the DRC will shut down these artisanal mines as well. Consequently, tens of thousands of miners in the DRC will lose their jobs and most likely their only source of income. Starvation will probably follow. And make no mistake about it, the artisanal mines will be shut down. Moreover, there's a better than average chance that other countries surrounding the DRC will experience the flight from African minerals by the global business community. And then, these African countries, like Rwanda, will suffer greatly too.

    So whats causing these unintended consequences? The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires publicly traded companies to report to the U.S. Security and Exchange Commission (SEC) on their source of tantalum, tin, tungsten and gold. Though the SEC is still working on the rules, even now requirements are flowing down through the entire supply chain and across all US industry segments, from automotive manufacturers to construction equipment to electronics.

    SEC rules are attempting to immediately solve a long-standing social conflict that has resisted efforts by the International Conference on the Great Lakes Region (ICGLR), the US State Department, and the United Nations.

    Plus, the enormity of the supply chain review and audit is breathtaking, probably larger and more costly in scope than the lead-free requirements of the Restriction of Hazardous Substances (RoHS) Directive. While the SEC last year estimated the cost of implementation at $16.5 million, IPC, in a survey to its members, estimated the cost to the electronic interconnection industry alone to be $279 million, in the first year of implementation.

    What's the answer then? Well, the law has been passed and the SEC is writing the rules to address sourcing conflict metals. For artisanal miners, the damage has been done. No OEM in its right mind (or members of its supply chain) will willingly source metals from Africa, let alone the DRC.

    Quite candidly, no one will oppose the law. As you can see, this is a complex issue turned into sound bites by well-meaning, nongovernmental organizations using terms like “blood metals” and “bloodberry phones.” If you oppose the law, it will appear that you support rape and murder in the DRC by the rebel miners and criminal networks. It's a no-win position.

    There was, and maybe still is, a responsible solution to the issue of conflict metals. Over the last three years, electronics industry groups and global metals associations have been working to “bag and tag” minerals from artisanal mines in the DRC. The bag and tag program, initiated by the ITRI (formerly known as the International Tin Research Institute), is a comprehensive due diligence plan for tin minerals sourced from the DRC, and has been widely welcomed with input from the United Nations, the Organisation for Economic Co-operation and Development (OECD) and a number of nongovernmental organizations (NGOs).

    The bag and tag system starts at the mine where minerals are placed in a bag with a seal and security tagged so the mineral can be traced from the mine site to the smelter and then to the exporter. The DRC government also supports this action as does other countries in the Great Lakes Region of Africa.

    It's not a perfect system, but it can work, if it's given time to be implemented. The rush to source “conflict free” metals immediately can only serve to worsen the situation in the DRC. Right now, the only smelters that can be certified as “conflict free” are those that are not sourcing in the DRC or adjacent countries. We need to give certification systems time to work.

    Let's face it; it seems nothing in the DRC is perfect or easy, even though we keep trying to legislate to make it that way. It's real life however, and not a movie.

9 comments on “Conflict Metals Law: Good Intentions Gone Bad?

  1. mfbertozzi
    May 24, 2011

    It is interesting to link current info to general picture in the matter of raw materials / REEs elements: according to recent studies from World Economic Forum, GDP (Gross Domestic Product) in the future will be completely dominated by countries which as of today are leading the ownership of  raw materials resources including REEs (China, Russia, Brasil, India). The rest of resources are exactly in countries with limited stability in terms of political situation. Another analysis very interesting is above mentioned countries, leader in raw/REEs are leading also, since now, Internet penetration rate. Is a random picture or we are discussing about hide strategy (power and resources limited to a few leaders, the rest still owned by Govs with internal social conflits?)

  2. Dfpersico
    May 25, 2011

    When one filters through all the issues the social component rises to the top as the most critical. The pst activity centered around the Kivus (eastern DRC conflict region) has put a bad light on all the other legitimate activities well away from this region. Information is power and it seems that the good story has been suppressed because it is not sensational and therefore not newsworthy. This is not meant to minimize the atrocities of the past and the need to put a permanent solution in place, and quickly. However, when livelihoods of the many are impacted by the actions of the few, and the systems are developed to manage these few ( unfortunately necessary) we need to make certain we do not take our eye off the ball.

  3. Gerry Fay
    May 25, 2011

    Bolaji,

    Thank you for furthing the conversation I started on this important and challenging topic.

    For those of you that are interested in learning more about the topic and some of the actions being taken by companies and industry groups, I think this report would be of interest. I found it to be quite informative:

    http://www.scribd.com/doc/45270560/Getting-to-Conflict-Free-Assessing-Corporate-Action-on-Conflict-Minerals

    There are no easy answers but like I addressed in my blog, those companies who work to address it early will be in the best position to influence positive change while minimizing impacts to innocent parties.

    Regards,
    Gerry

  4. DataCrunch
    May 26, 2011

    Rare-earth minerals are actually not that rare at all as they are found in abundance in the earth’s crust.  However, mining for rare-earth minerals can be environmentally hazardous because they produce radioactive waste.  To mine rare-earth minerals in North America (US and Canada) would require companies to obtain many permits and to put in place costly mitigation efforts.  Mining operations in China are not monitored to the extent that North American mines would have to be.  This would apply to African miners as well in terms of no proper oversight.  Besides rare-earth mining profits in Africa going to rebel groups, there are many other concerns as well, like the side effects of the miners from being constantly around unmonitored radioactive waste resulting from rare-earth mining.  

  5. Jay_Bond
    May 26, 2011

    This is a very interesting article that brings some serious problems to light. Many people don't realize that these conflict mines produce more than just diamonds. There are some serious concerns about what would happen to the legitimate mines if a wide scale boycott was to begin. Like almost all other illegal businesses, the rebels operating the conflict mines would still find some other way to supply them with millions of dollars used in their bloody wars.

    The packaging and tracking of these minerals from destination to destination sounds like a good way to start getting this problem taken care of. Hopefully there will be enough cooperation and little to none corruption that will allow this new program to work.

     

  6. mfbertozzi
    May 26, 2011

    I trust you Dave, critical point is the ownership of materials, still concentraced in a few Govs. One point more: also in a recent past, Western Govs did strong action for saving freedom, I was wondering why not inside the core of Africa region which still lives with huge problems for people there at first and thenfor worldwide market as resumed by Bolaji's editorial.

  7. Kevin Jackson
    May 26, 2011

    Our corporate environmentalism is literally killing people.

    We reduce auto emissions by adding corn to our fuel, now the millions that once ate that corn at discounted prices or for free are going hungry.

    Reuse is the first tenant of environmentalism yet the company I work for recycles used computers only four or five years old. They send them to a US recycler that strictly follows our environmental laws so they don't go to one of those “bad” places where children get to eat because they have a computer to recycle.

    Now we are going to starve-out the employees of any legitimate mining operation that is in the “wrong” place in the world.

    Why can we not look for ways of improving these situations without literally sacrificing the lives of the poorest and most disenfranchised?

     

  8. stochastic excursion
    May 27, 2011

    This suggests that the source of such minerals can be identified by isotope analysis.  This or some similar approach would circumvent the need to take the word of a local middle-man on the source of his wares.

  9. GK
    June 2, 2011

    It's important to ensure that the Dodd Frank bill doesn't hurt artisanal miners outside of the conflict zones. However, the bill holds a lot of promise, both for cutting off funding for Congo's civil war and for encouraging accountable supply chains. Industry groups facing high compliance costs shouldn't be allowed to overstate the possible unintended consequences. Let's remember that Congo's civil war has been devastating for the people of Congo. More than 5 million people have lost their lives. The SEC ought to focus carefully on making the bill work as intended. – GK, Brilliant Earth, http://www.brilliantearth.com

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