Conflict minerals compliance is the process of conducting mandatory due diligence to identify the source of conflict minerals in a supply chain and reporting on utilized smelters and refiners. The United States (U.S.) and the European Union (EU) require conflict minerals compliance from companies, suppliers, importers, etc., within the scope of their respective laws. Conflict minerals compliance ensures sourcing conflict-free minerals from regions around the world.
What are conflict minerals?
Conflict minerals are natural resources extracted from conflict-affected areas by armed groups. Tin, tantalum, tungsten, and gold (often called 3TG) are the four minerals currently considered conflict minerals by the U.S. and the EU. Extraction of these four minerals plays a primary role in supporting further conflict and human rights violations in high-risk areas across the globe.
Profits from the extraction of conflict minerals are used to purchase weapons and pay combatants who perform a wide range of human rights abuses. This cycle perpetuates:
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- War
- Regional instability
- International law violations
- Unsafe working conditions
- Child labor
- Food insecurity
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To combat unethical practices revolving around the extraction and trading of 3TG, the U.S. and the EU took action to regulate the sourcing of 3TG in supply chains in the form of the U.S. Dodd-Frank Act and the EU Conflict Minerals Regulation.
While the U.S. Dodd-Frank Act and the EU Conflict Minerals Regulation serve a shared purpose–to ensure that 3TG is ethically sourced from areas free of armed conflict and human rights abuses–they differ in scope, due diligence, and reporting requirements.
Dodd-Frank Act Section 1502 on Conflict Minerals
The U.S. Congress passed the Dodd-Frank Act in 2010. Section 1502 of the Dodd-Frank Act requires publicly traded companies to report on their use of conflict minerals. If 3TG is utilized at any point in a company's manufacturing process and the minerals are “necessary to the functionality or production” of a product manufactured or contracted to be manufactured by the company, the company must file a report with the U.S. Securities and Exchange Commission (SEC).
If a product falls under the scope of Dodd-Frank Section 1502, public companies must trace the 3TG minerals back to the smelter of origin via a Reasonable Country of Origin Inquiry (RCOI). Tracing the smelter of origin determines if the 3TG originated in the Democratic Republic of the Congo (DRC) or any surrounding countries. The surrounding countries covered under Section 1502 of the Dodd-Frank Act include Angola, Burundi, the Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia.
After conducting the RCOI, companies must complete the Form SD to verify its determination of the origin of the 3TG used in their products. If the 3TG did not originate from the DRC or any of the surrounding countries, the results of the RCOI must be disclosed on Form SD. However, if the 3TG originated from the covered countries and were not sourced from scrap or recycled materials, companies must conduct due diligence on the source of the 3TG and file a Conflict Minerals Report. They must also make the report publicly accessible on their website.
European Union Conflict Minerals Regulation
The EU Conflict Minerals Regulation was enacted in January 2021 and applies to EU-based importers of 3TG. Imported 3TG sourced from conflict-affected and high-risk areas (CAHRAs) fall within the EU regulation, which has a larger scope than the U.S. Dodd-Frank Act. The EU regulation addresses upstream and downstream companies and expects compliance at different levels with various requirements.
Downstream companies, including 3TG importers, must trace conflict minerals back to their smelter or mine of origin to ensure their supply chain is not connected to or supporting conflict in CAHRAs. Upstream companies that source finished components or distribute end-user products are currently not required to report on their use of 3TG but are encouraged to report voluntarily.
Currently, the EU Conflict Minerals Regulation does not have a specified reporting process for conflict minerals reporting. However, EU-based importers must conduct due diligence via the Organization for Economic Cooperation and Development (OECD) Guidance. Importers must also share the information gathered from their supply chain due diligence investigations with their downstream purchasers. Finally, importers must publicly report their conflict minerals due diligence policies and practices, along with a summary report of annual third-party audits of their supply chain.
Source Intelligence’s conflict minerals compliance software
Our conflict minerals compliance software enables your business to effortlessly comply with due diligence requirements for Section 1502 of the Dodd-Frank Act and the EU Conflict Minerals Regulation. Easily request and collect Conflict Minerals Reporting Templates (CMRTs), monitor supplier responses, and analyze data with visual reports. Our conflict minerals solution is also compatible with the Extended Minerals Reporting Template (EMRT) for cobalt and mica and the Additional Minerals Reporting Template (AMRT) for additional minerals of concern.
We’ve helped thousands of companies achieve comprehensive supply chain transparency. Request a demo today to discover how our conflict minerals compliance software can make a difference.
