As defined by US legislation, a conflict mineral is a metal derived from one of four minerals: tantalum, tin, tungsten, or gold.
Today, a small fraction of all tin, tantalum, tungsten, and gold metals are sourced from the Democratic Republic of Congo (DRC). Armed groups use these precious metals to finance the ongoing conflict in neighboring countries. Products in the electronics industry can contain some of these minerals in their supply chains.
No matter where a metal hails from or whether the mining has financed armed groups, tin, tantalum, tungsten, and gold are always conflict minerals.
How does the regulation affect people?
Tin, tantalum, tungsten, and gold importers operating within the European Union must comply with the Conflict Minerals Regulation so that their minerals are sourced responsibly and that their supply chains do not contribute to armed conflicts or other illegal activities.
These minerals must be imported into the EU following the following requirements:
- Build a robust management system for your company
- Assess the risk associated with their supply chains
- Prepare a strategy for responding to identified risks
- Conduct a due diligence audit of the supply chain by an independent third party
- The due diligence report on the supply chain needs to be submitted every year.
Approximately 500 smelters and refiners worldwide will also be impacted indirectly due to the requirement that EU-based importers identify and check these firms’ due diligence practices. In addition, EU importers will have to manage and report when the patterns of smelters and refiners are inadequate or associated with risks.
A company that uses these minerals in its product (i.e., one that is not an importer, such as a manufacturer) is not subject to the rules. Their due diligence activities, however, are encouraged to be published.
To what extent does the legislation seek to address risk?
Due to their frequent links to armed conflicts and human rights abuses, EU legislation focuses mainly on the four 3TG minerals. However, money flow can occur at different points in the supply chain – including extraction, refining, and transportation.
New regulations require importers to provide additional information about the mines and processing plants used and taxes, fees, and royalties paid when minerals are obtained from conflict-affected and high-risk areas.
With these obligations, the Commission hopes money won’t reach armed groups or criminals and that the local mining community will be able to prosper instead of being exploited and abused.
Are there any conflict-affected or high-risk countries?
The European Commission maintains an expert-developed list of conflict-affected and high-risk countries. These countries typically have highly demanded minerals, poor governance, and systematic violations of international law, including human rights and armed conflicts, such as civil wars.
Currently, this list features 27 countries, including Afghanistan, the Central African Republic, the Democratic Republic of Congo, Sudan, South Sudan, Libya, Somalia, and Yemen.
Several other countries on the list also indicate high risks for forced labor in the mining and quarrying industry.
Do companies outside the EU have similar regulations?
As part of the Dodd-Frank Act Section 15002 passed in 2010, the US passed legislation known as the Dodd-Frank Act. As a result, US stock markets require companies to conduct due diligence on minerals sourced from Congo and its neighbors.
Supply chain checks are now required in several African countries, including the Democratic Republic of Congo and Rwanda.
According to Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains released by the China Chamber of Commerce for Metals, Minerals & Chemicals Importers & Exporters in 2015, responsible mineral supply chains should include these guidelines.
Why is Conflict Minerals Compliance important?
The process of conflict minerals compliance involves performing mandatory due diligence on smelters and refiners in a supply chain to identify the source of conflict minerals. Companies, suppliers, importers, etc., must comply with their respective laws to sell conflict minerals in the United States or the European Union. Ensure conflict-free minerals are sourced globally through conflict minerals compliance.
Conflict minerals regulations require supply chain transparency. It will be easier for organizations to adapt to future regulatory requirements if they prepare for this regulation. By having a compliant supply chain, you can also improve your compliance program and process to effectively meet changing compliance requirements.
How Does A Supply Chain Assessment Benefit Your Organization?
Conflict minerals are commonly used in manufacturing telecom parts and components, as they are present in all electronic products and contain many different metals. However, the amounts and concentrations of each metal vary.
It should be an enterprise goal that the tantalum, tin, tungsten, and gold metals that feature in their products will never, directly or indirectly, contribute to or benefit armed groups in the Democratic Republic of Congo or neighboring countries as part of our commitment to responsible sourcing, human rights, and sustainability.
Dodd-Frank Act also regulates this in part. In 2010, Congress passed legislation requiring public companies to have a responsible raw material supply chain. In addition, a conflict mineral sourcing policy ensures that DRC conflict minerals are not sourced from the conflict zone. To adhere to this regulation, every company must file an annual disclosure of conflict minerals’ origin.
Conflict Minerals Compliance: 5 Key Steps
Managing conflict mineral compliance is challenging. However, the best-practices and the right tools can make the entire process simpler for you. To begin with, we are sharing the 5 key steps to conflict mineral compliance so you can align your processes better.
The five steps to conflict mineral compliance can be summarized as follows.
- Product Filter: Identify products that fall under the scope of the investigation.
- The Reasonable Country of Origin Investigation (RCOI): Identify sources of conflict minerals in a company’s products, such as the DRC or recycled materials.
- Due Diligence: After completing the RCOI, a company engages in due diligence to gather information about potential risks so they can be assessed and managed appropriately if it becomes aware or has reason to believe conflict minerals originating in the DRC do not come from recycled or scrap sources.
- Data Analysis: There must be a lot of caution when using information from the supply chain. A company must assess the completeness and accuracy of provided data.
- Report: Provide SEC with Conflict Minerals Reports and Special Disclosure forms as necessary.
Plan, schedule, and execute compliance assessments for various regulatory requirements in a more streamlined way
Several regulations, such as Conflict Minerals, Reach, and RoHS, require companies to evaluate their supply chains during due diligence. In addition, periodic reviews are necessary for response to changes in smelters and customer inquiries. In many cases, companies will remove the supply chain of high-risk smelters. The choice to remove or retain the smelter depends on the company’s policies and position regarding using conflict minerals.
The entire process, however, is labor-intensive and time-consuming. Therefore, the most innovative solution for enterprises is to use next-generation software like Qualityze to manage material compliance, periodic reviews of suppliers’ smelters, documents, and reporting.
Our next-generation Material Compliance Management software is designed to comply with Dodd-Frank Act Section 1502 and EU Conflict Minerals Regulation due diligence requirements. With the customizable and technology-driven platform, you can gather data about the origin of 3TG in your supply chain by configuring Conflict Minerals Reporting Templates (CMRTs) for your suppliers. A concise, visual report allows you to analyze supplier data and track supplier responses.
As regulations and standards change rapidly, companies need to establish a compliance management strategy that considers the nature and design of rules and their risks. Companies can respond more effectively to changing regulatory demands by adopting the user-friendly and efficient Qualityze Material Compliance Management solution. Moreover, the solution gives stakeholders real-time access to compliance across all supply chain tiers and an understanding of how risk impacts their objectives.
Is this relevant to you? An effortless way to comply. The supply chain transparency our solution provides can help make it simple for you to comply with conflict mineral regulations. Let us show you how our Conflict Minerals compliance software can make a difference in your business. Request a demo today.
Qualityze will make your conflict minerals compliance journey easier!
If you want to learn more about the product functionalities, please contact our customer success team at info@qualityze.com or call us at 1-877-207-8616, and we will be right there for you at the earliest.
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