As the May 2014 deadline approaches for the first conflict minerals filings in the United States, manufacturers are establishing best practices for dealing with the new rules. There’s a laundry list of observers watching the process closely, expecting that there will be many lessons learned.
The European Union (EU) and Canada may be among the more interested observers, as each has taken up the issue of conflict minerals as a matter for potential regulation. In both cases, the U.S. legislation can be used as a point of comparison. However, there will be key differences and it’s unlikely that manufacturers will be able to simply re-purpose their SEC filings for use in the EU and Canada, or vice-versa.
Although the topic of conflict minerals is one of great concern in the EU, the regulatory process is in its earliest stages. It won’t be until December 2013 that the European Commission is ready to issue a detailed proposal.
Although new legislation for the EU is several months away, some discussion indicates that it could be significantly more far-reaching than the U.S. laws, targeting more minerals from more regions classified as high-risk.
The legislation may target perpetual crisis zones like Afghanistan—where zinc, copper, and lithium are among the huge veins of minerals that were identified in recent years—with an eye toward responsible sourcing and sustainability. And the potential mandate could be broad enough to include Argentina, where the right of mining firms to extract lithium is contested by indigenous communities.
Compliance in Canada
In Canada, the Conflict Minerals Act (Bill C-486) was introduced March 26, 2013. Although this legislative proposal is much more fully formed than its EU counterpart, at present, there are no clear signs as to when the bill will become law. But, there are a number of key differences between the Canadian proposal and the current U.S. law:
- Jurisdiction is not limited to public companies. Privately held companies and the Canadian subsidiaries of foreign companies are also subject to due diligence and disclosure requirements related to conflict minerals.
- The list of African countries for mineral sourcing scrutiny includes Kenya and Sudan, but excludes the Republic of Congo (located to the west of the Democratic Republic of Congo) and South Sudan.
- The act covers any derivatives of the ores cassiterite, wolframite, and coltan – not just the “3T’s” of tin, tungsten, and tantalum.
- The act applies to extraction, processing, purchasing, trading in or use, not just manufacturing with these materials.
- Scrap and recycled metals are not exempt.
- There’s no phase-in period for the audit requirement, and no loophole for labeling materials as “undeterminable,” unlike the US, which allows for this exemption until 2016.
- Companies are required to make their disclosures within 60 days of their fiscal year end.
Conflict minerals legislation has at least some support at the grass roots level among Canadians. The Just Minerals Campaign in Ontario is striving to create consumer awareness and demand for a fair trade cellphone, while STAND Canada’s Conflict Free Canada Initiative aims to raise public awareness as part of a broader platform of anti-genocide advocacy and activism.
The key take-away for manufacturers affected by the Conflict Minerals Rule in the U.S. and/or those that may be impacted by the EU and Canadian regulations: establish an airtight supply chain strategy now – one that includes a thorough method and the appropriate tools for collecting and reporting the material information for your products.
The current conflict minerals regulation is just one of many compliance hurdles that you will encounter as world governments act to address a broad spectrum of concerns, ranging from the environment to social injustice.
Visit our Resource Center to learn more about the conflict minerals regulation, compliance solutions, and emerging best practices from leading organizations.