Divisions emerge over US conflict minerals law

posted by Andrew Allen
in Law
30 March 2017

A call for feedback on whether to change a major US conflict minerals due diligence law has revealed stark differences of opinion between different stakeholders in the mineral supply chain.

The Securities and Exchange Commission’s (SEC) enquiry into the law, which requires publicly traded companies to conduct due diligence on the sourcing of tin, tungsten, tantalum and gold (3TG) was reported by SM in February and received thousands of submissions from interested parties.

The law, in section 1502 of Dodd-Frank, which requires publicly traded companies to report to the SEC on whether their 3TG sourcing is supporting conflict in the Democratic Republic of the Congo (DRC) or neighbouring countries.

But stakeholders were sharply divided as to whether the law should stay in place.

The Information Technology Industry (ITI) Council – whose members include Apple, Amazon, Dell, Google, HP, IBM, Intel, Samsung and Panasonic – said: “We are concerned by reports that the federal conflict minerals reporting and disclosure requirements may be repealed or otherwise set aside with nothing to take their place.

"The federal conflict minerals law – while not ideal – has advanced due diligence practices related to minerals sourcing in central Africa, and has brought desperately needed attention to the plight of civilians in the DRC and neighbouring countries.”

The ITI Council said section 1502 had shaped other global initiatives on due diligence for minerals sourcing and that several ITI members had already publicly committed to continuing to conduct due diligence on minerals supply chains.

However, Business Roundtable, the business advocacy association made up of the CEOs of many large companies, called for the law to be scrapped.

The group said the disclosures required by the conflict minerals rule help contribute to “information overload” and that compliance with the rule “comes with a high price tag”.

“Many of our members have found that compliance with this rule costs their companies hundreds of thousands (and in the case of larger companies millions) of dollars each year,” said the Business Roundtable.

This was “in addition to the hours that management and other employees have had to divert their attention from other matters and, at times, costly new IT systems that have been required”, it added.

Members had experienced difficulty collecting timely and complete information from suppliers, especially those further down the supply chain.

“Worse yet, since adoption, evidence has not clearly indicated that the rule has alleviated the atrocities in the DRC and surrounding areas,” it added, saying it may have increased conflict in areas containing unregulated gold.

However, Amnesty International said there were clear benefits to the law and that companies would not carry out due diligence unless forced to do so.

“The rule has led to an unprecedented number of companies doing their part to avoid fuelling conflict or human rights abuses by investigating and reporting on their supply chains,” the NGO said.

“Our own investigations on child labour and hazardous working conditions in the cobalt supply chain from the DRC, for example, have shown that even well-known brands will not address these types of risks unless they are legally obliged to do so.”

It said suspending the law would “be a huge step backwards”.

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