Tin, tungsten, tantalum, and gold are essential minerals used in several products, such as electronics, jewelry, tools, glass, and connecting wires. These four minerals are considered conflict minerals by the United States (U.S.) and European Union (EU) governments. Conflict minerals, otherwise known as 3TG, are typically sourced from areas experiencing governmental instability, armed violence, and human rights abuses. The profits from mining conflict minerals are primarily used to fund the groups responsible for these issues and perpetuate a cycle of destruction.
The U.S. and the EU passed their own respective conflict minerals compliance requirements—the U.S. Dodd-Frank Act and the EU Conflict Minerals Regulation—in efforts to:
- reduce the negative impacts associated with mining 3TG
- increase companies’ accountability for sourcing 3TG
- improve supply chain transparency
While the U.S. Dodd-Frank Act and the EU Conflict Minerals Regulation share similar goals, their compliance requirements and due diligence processes differ. Understanding the differences between the two is essential for companies that must comply with conflict minerals reporting requirements.
EU Conflict Minerals Regulation
The EU Conflict Minerals Regulation was enacted on January 1, 2021. The regulation applies to EU-based importers of 3TG sourced from conflict-affected and high-risk areas (CAHRAs). All imported 3TG is subject to regulation, including processed metals, mineral ores, or concentrates.
EU Conflict Minerals Regulation reporting requirements
The EU Conflict Minerals Regulation has different 3TG compliance and reporting guidelines for upstream and downstream companies. Upstream companies—operations involved with mines, smelters, and refiners—fall within the scope of the regulation. They must conduct due diligence and report on imported 3TG, as they are most at risk.
Downstream companies that import metal-stage products must also meet due diligence requirements. Downstream companies that deal with products beyond the metal stage do not fall under the regulation requirements. However, these exempt companies are expected to remain transparent with their due diligence reports.
Currently, the EU Conflict Minerals Regulation does not have a detailed process for 3TG reporting, but upstream companies are required to follow the Organization for Economic Cooperation and Development (OECD) Guidance. Additional requirements for upstream companies include the following:
- Sharing supply chain data with downstream purchasers
- Publicly reporting due diligence policies and practices
- Publishing summary reports of annual third-party supply chain audits
OECD Due Diligence Guidance for conflict minerals: five-step framework
The OECD Due Diligence Guidance established a five-step framework for upstream and downstream companies.
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U.S. Dodd-Frank Act Section 1502
The U.S. Dodd-Frank Act was enacted on July 21, 2010, with a specific section (Section 1502) focused on conflict minerals compliance. Section 1502 applies to publicly traded companies that manufacture products containing 3TG sourced from the Democratic Republic of the Congo (DRC) or any surrounding countries within the scope of the regulation.
Dodd-Frank Act Section 1502 Conflict Minerals Reporting Requirements
If 3TG is necessary for the functionality or production of a product, the product falls within the scope of Section 1502 of the Dodd-Frank Act. The act requires public companies to conduct due diligence by tracing the 3TG back to the utilized smelter to determine where the minerals originated.
Unlike the EU regulation, Section 1502 of the Dodd-Frank Act has an established 3TG reporting process. Once 3TG is determined to be essential to the functionality or production of a product, the following steps must be taken:
Step 1
File a Report with the U.S. Securities and Exchange Commission (SEC).
Step 2
Trace 3TG back to the smelter of origin via a Reasonable Country of Origin Inquiry (RCOI) to determine if the minerals originated from the DRC or surrounding countries.
Step 3
Complete the Form SD to verify how the origin of the 3TG was determined.
- If the 3TG did not originate from the DRC or surrounding countries, the results from the RCOI must be included in the Form SD.
- If the 3TG originated from the DRC or surrounding countries and was not sourced from scrap or recycled materials, due diligence must be conducted as a Conflict Minerals Report (CMR).
Public companies required to file a CMR must follow the due diligence process of a nationally or internationally recognized framework, such as the OECD Due Diligence Guidance. The due diligence process results in one of three determinations, each with its own set of requirements.
Key differences between the EU Conflict Minerals Regulation and Section 1502 of the U.S. Dodd-Frank Act
While the EU Conflict Minerals Regulation was inspired by Section 1502 of the U.S. Dodd-Frank Act, they differ in significant ways. The sourcing locations of 3TG, the companies that land in scope, and the reporting processes are all factors in these differences.
Despite the differences between the EU Conflict Minerals Regulation and Section 1502 of the U.S. Dodd-Frank Act, they share the same purpose: to ensure the sourcing of conflict-free minerals.
Source minerals responsibly with Source Intelligence's software
The effort to source minerals responsibly is an extensive process. Automating data collection, validation, and reporting helps drive efficiency and reduce business risk. Source Intelligence offers a software-based solution to conflict minerals compliance that covers 3TG, plus extended minerals and additional minerals of concern. Between our software and managed services options, we offer a flexible modular platform to help your company achieve its conflict minerals compliance goals.
