On Thursday 16 March, at its plenary meeting, the European Parliament (EP) voted on the proposed Conflict Minerals Regulation. The text was approved by 558 votes to 17 with 45 abstentions.
While OEMs will have until Jan. 1st, 2021 to comply with the new rules, any stocks of products or materials containing minerals affected by the regulation will be banned for sale in the European Union after that date.
This regulation, when enabled, will affect any metals or stocks created after Feb. 1, 2013, and covers both companies and individuals.
The new rule will affect the trade of four minerals — tin, tantalum, tungsten, and gold — which are sometimes used to finance armed conflicts, or are mined using forced or child labor. In all cases, the rule affects any area with widespread and systematic violations of international law, including human rights abuses.
The new EU regulation will affect smelters, refiners, and manufacturers who import minerals, components or products that contain any of the four above-mentioned metals.
The European Union insists that companies need to prepare for the regulation now in order to avoid potential problems in their supply chain or blockage of their products for trade in the EU, in addition to the possibility of substantial fines. For that reason, the European Commission is preparing guidelines to be released by the end of 2017, to help firms identify conflict-affected and high-risk areas.
In 2011, the Organization for Economic Co-operation and Development (OECD) published guidance on due diligence for responsible supply chains of minerals from conflict zones. The U.S. Dodd-Frank Act's conflict minerals provision was approved in 2012, and, in September 2013, a report by a coalition of 59 civil society organizations called on the European Union “to pass a strong law to prevent European businesses fueling conflict and human rights abuses through their purchases of natural resources, such as tin, gold, and diamonds.”
Since the introduction of the Dodd-Frank Act in 2010, public companies are required to disclose their use of conflict minerals. Section 1502 of the Act clearly states the requirement:
Section 1502 requires persons to disclose annually whether any conflict minerals that are necessary to the functionality or production of a product of the person, as defined in the provision, originated in the Democratic Republic of the Congo or an adjoining country and, if so, to provide a report describing, among other matters, the measures taken to exercise due diligence on the source and chain of custody of those minerals, which must include an independent private sector audit of the report that is certified by the person filing the report.
All companies using those minerals in their manufacturing process need to disclose their use and origin to the SEC by the end of May each year.
There have been some discussions and speculation about the intention of the new U.S. government administration to repeal some provisions of the Dodd-Frank Act, including section 1502, which deals with conflict minerals compliance. There has been, however, no action being taken, and several industry organizations have voiced their concern over the damaging implications of changing the rule.
While the US rule only affects minerals originated in the Democratic Republic of the Congo (DRC) or an adjoining country, the new EU regulation casts a wider net, targeting any minerals sourced in areas of conflict, and any other regions the European Commission determines that human rights are being violated for minerals smelters and traders.
OEMs are encouraged by the EU Commission to follow the OECD Due Diligence for Minerals, including identifying risks in their supply chain, carrying out an independent third-party audit, and report annually on supply chain due diligence.
The new U.S. administration might be determined to eliminate the restrictions of the Dodd-Frank Act. Europe, however, is not going to sit down and watch as human rights are being ignored in many parts of the world. The new EU Conflict Minerals Regulation, as other laws such as RoHS, are designed to protect workers and consumers worldwide.