Efficiently conducting 3TG due diligence for global conflict minerals regulation compliance
Conflict minerals compliance involves conducting due diligence to trace the origin of minerals like tin, tungsten, tantalum, and gold (3TG) within your supply chain, while accurately reporting on the smelters and refiners involved. Though the process is complex and resource-intensive, it’s a critical step in promoting ethical sourcing and reducing the risks of contributing to armed conflict, regional instability, and human rights abuses.
Both the United States and the European Union have established legal requirements for conflict minerals compliance, with similar regulations emerging worldwide. To support companies navigating this evolving landscape, this e-book explores the risks associated with conflict minerals, outlines key global laws, explains how to use the Conflict Minerals Reporting Template (CMRT) for reporting, and provides insights into the future of compliance.
You’ll also learn how Source Intelligence’s Minerals Reporting & Due Diligence solution helps streamline due diligence, supplier engagement, and reporting across your global supply chain.
Understanding Conflict Minerals
What are conflict minerals?
Conflict minerals are natural resources mined in countries with ongoing conflicts, human rights violations, and general instability – namely the Democratic Republic of the Congo (DRC) and surrounding countries. Four minerals are currently considered conflict minerals by both the United States (U.S.) and the European Union (EU), and are commonly referred to as 3TG: tantalum, tin, tungsten, and gold.[1] These minerals are essential in the production and functionality of everyday household items, but sourcing them comes at a high cost in many areas of the world.
Why are conflict minerals a problem?
The mining and trade of 3TG fuels conflict, regional instability, and human rights abuses (such as unsafe working conditions, child labor, and food insecurity), perpetuated by violent armed groups in high-risk areas across the globe. According to the Kivu Security Tracker, there were an estimated 113 armed groups in the DRC in 2020 alone. Ranging in size from small to large militias, they are well-organized and have their own international recruitment and finance networks. As such, these groups exploit profits from the conflict minerals trade to purchase weapons, pay combatants, and commit international law violations.
Global Conflict Minerals Laws
In an effort to oppose the unethical practices and dangerous conditions linked to the extraction and trade of 3TG, the U.S. enacted Section 1502 of the Dodd-Frank Act in 2010. Section 1502 established the standard framework for conflict minerals compliance, inspiring other countries to adopt a similar framework – most notably, Regulation (EU) 2017/821 (commonly referred to as the EU Conflict Minerals Regulation), which was enacted in January 2021.
While Section 1502 of the U.S. Dodd-Frank Act and the EU Conflict Minerals Regulation are the most developed, laws continue to expand worldwide as more governments realize the importance of sourcing conflict-free minerals.
Despite the shared purpose behind Section 1502 of the U.S. Dodd-Frank Act and the EU Conflict Minerals Regulation, the scope, due diligence processes, and reporting requirements vary. Often, companies must comply with both of these laws, which can complicate compliance procedures.
Section 1502 of the U.S. Dodd-Frank Act
What is Section 1502 of the Dodd-Frank Act?
Enacted in 2010, Section 1502 of the U.S. Dodd-Frank Act requires publicly traded companies to disclose their use of 3TG conflict minerals where any 3TG conflict minerals are considered “necessary to the functionality or production” of products manufactured by or contracted to be manufactured by the company. Companies must ensure that these minerals are sourced responsibly by tracking smelters of origin in their supply chain, conducting due diligence, and filing a Form SD with the U.S. Securities and Exchange Commission (SEC).
Defining a product contracted to be manufactured
For a product to be considered “contracted to be manufactured” by a company, the company must have influence over the manufacturing of that product. Influence is determined by various facts and circumstances relating to the specific case reviewed by the SEC.Companies are determined not to have influence over the manufacturing of a product in any of the following situations:
- A company adds its brand, logo, or label to a generic product manufactured by a 3rd party
- A company maintains, repairs, or services a product manufactured by a 3rd party
- A company specifies or negotiates terms with a manufacturer that does not directly relate to the product's manufacturing
Which countries are covered under Section 1502?
Section 1502 of the U.S. Dodd-Frank Act covers 3TG sourced from the DRC and surrounding countries, which includes Angola, Burundi, Central African Republic, Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia. These surrounding countries are often referred to as the “covered countries” under the law.
How do companies comply with Section 1502?
Publicly traded companies with products in the scope of Section 1502 of the Dodd-Frank Act must comply with the SEC's conflict minerals reporting process. This process involves contacting suppliers and collecting supplier data to trace the minerals back to their mine or smelter of origin. Companies are also required to verify the accuracy of the information provided to the best of their ability.
The SEC’s reporting process is as follows:
- Conduct a Reasonable Country of Origin Inquiry (RCOI) to determine whether any of the minerals used in products originated in the DRC or any other countries covered under Section 1502 of the Dodd-Frank Act
- Complete a Form SD and submit it to the SEC
- If the minerals did not originate from the DRC or any of the covered countries or are sourced from scrap or recycled materials, companies must:
- Complete the Form SD, including disclosing the RCOI results and providing a brief description of how the origin of the minerals was determined
- Make the description publicly available on the company website.
- If the minerals did originate, or may have originated, from the DRC or any of the covered countries, or if they are not sourced from scrap or recycled materials, companies must:
- Conduct due diligence on the source and chain of custody of its conflict minerals using a nationally or internationally recognized due diligence framework, such as the Organization for Economic Co-operation and Development (OECD) Due Diligence Guidance
- File a Conflict Minerals Report as an exhibit to the Form SD
- Make the Conflict Minerals Report publicly available on the company website.
Filing a Conflict Minerals Report requires companies to determine which of the following three categories their products fall into: DRC Conflict Free, Not Found To Be DRC Conflict Free, and DRC Conflict Undeterminable. Each category has additional reporting requirements, such as audits, certifications, and detailed plans to mitigate risk.
Strengthen your conflict minerals compliance strategy
You’ve just learned what conflict minerals are, why they pose global challenges, and how key laws like Section 1502 of the U.S. Dodd-Frank Act shape compliance efforts. Next, the e-book takes a deeper dive into the EU Conflict Minerals Regulation and explains how tools like the CMRT, EMRT, and AMRT support responsible sourcing and due diligence practices.
You’ll also see how Source Intelligence’s Minerals Reporting and Due Diligence solution empowers businesses to increase transparency, reduce risk, and stay ahead of evolving regulations.
Read the full e-book to learn how to best manage conflict minerals compliance and source minerals responsibly.