The European Union has come to an agreement on a conflict minerals rule stricter than the Dodd-Frank Act passed in the U.S. The EU agreement would apply to minerals mined anywhere in the world and intends to stem the use of gold, tin, tantalum and tungsten from sources associated with human rights abuses.
The U.S. Dodd-Frank conflict minerals rule requires publicly traded U.S. companies to disclose whether their products contain certain metals and whether these metals originate from rebel-held mines which are funding armed conflict in the Democratic Republic of Congo (DRC). The measure is intended to discourage companies from sourcing these materials from regions in which human rights are routinely violated.
The EU plan requires smelters and importers of raw materials to be able to trace the origin of the four minerals and is based on the Organization for Economic Cooperation and Development's due diligence guidance for responsible supply chains of minerals from conflict-affected and high-risk areas.
Smelters and importers of raw materials of a certain size are included, covering about 95 percent of imports, according to EU media outlets. Small and medium-sized companies are excluded. The EU regulation focuses on imports of the commodities used to make them but not with demands from the European Parliament to cover the "upstream" or finished products, according to Reuters.
The European Automobile Manufacturers' Association (ACEA), which represents firms such as Volkswagen, Peugeot and Ford, said it supported the Commission's aim to increase transparency in minerals trade, Reuters reported.
The Dodd-Frank Act has reverberated throughout the electronics supply chain as many companies have found the collection of data to comply with the rule complicated and burdensome. According to a 2014 PriceWaterhouseCoopers survey, organizations continue to find the process to be challenging at nearly every step: scoping, surveying suppliers, performing due diligence and drafting filings. As a result, 62 percent of survey respondents reported needing one to two full-time resources for their conflict minerals compliance efforts, and 21 percent needing three to five full-time resources, a substantial evolution over the last year. It ultimately comes down to performing reasonable due diligence, and according to PwC’s survey, companies in the technology, energy and metals industries appear to be the furthest along.
The rule has prompted many original equipment manufacturers (OEMs) to push data-collection requirements to their component vendors and distribution partners. It was challenged in court by a U.S. manufacturing association. A U.S. appeals court ruled last year that the government cannot compel companies to report whether or not their products contain conflict minerals.
There still appears to be confusion regarding the impact of the appeals court ruling.