EU officials last week struck a political
compromise on a new framework geared towards preventing human rights abuses and
the financing of armed groups through trade in tin, tantalum, tungsten, and gold,
also known as “conflict minerals.”
The deal envisages obligations for direct
importers of these metals and minerals to source responsibly and undertake due diligence.
Voluntary reporting and transparency tools for companies further down the supply
chain that use such inputs will also be developed.
The EU represents one of the world’s largest
markets for the sensitive minerals set to be covered by the framework, importing
around 25 percent of global trade in tin, tantalum, and tungsten, and about 15 percent
of gold.
These four minerals and metals are commonly
used as components in a number of everyday products, ranging from mobile phones,
laptops, and jewellery, to cars and lightbulbs.
Heated debate
Ahead of the compromise, debate flared
among lawmakers and stakeholders alike on the appropriate assignment of sourcing
responsibility along supply chains, as well as around the binding nature of obligations.
The European Commission first proposed
a voluntary self-certification scheme focused on mineral importers in March 2014,
following a call by the European Parliament in 2010 for greater scrutiny of mineral
sourcing, along with the adoption in the US of a conflict mineral rule in association
with Section 1502 of the Dodd-Frank Act.
EU parliamentarians subsequently proposed
revisions that would make the scheme mandatory and later voted to extend due diligence
obligations all the way along the supply chain.
Many downstream companies using the relevant
minerals and metals said that heavy reporting obligations could prove difficult
to meet in the context of long and complex supply chains and also for smaller manufacturers,
while advocacy groups argued that placing the burden on raw materials importers
would be insufficient in addressing the challenge at hand.
Just ahead of the political compromise,
some 130 civil society organizations in mid-June delivered an open letter to the outgoing Dutch Presidency of the
Council of the EU, calling for a final ruling that would require all companies to
perform basic checks and due diligence on their supply chains.
In a press release following the deal, campaign organisation Global Witness said that while it represented a
step in the right direction, “the law ultimately risks falling well short of its
intended objectives.”
The European Automobile Manufacturers’
Association (ACEA), meanwhile, said it supported the overall outcome and efforts
to increase transparency in minerals trade.
Rules on due diligence and information
provision for the approximately 20 EU smelters and refiners affected by the rule
will be based on guidelines developed by the Organisation for Economic
Co-operation and Development (OECD). These are known formally as “Due Diligence
Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk
Areas.”
An additional 400 market participants
that directly import the concerned minerals and metals will also have some form
of reporting obligation and be required to use the OECD Due Diligence Guidance,
with small volume actors exempted, although this will represent not more than five
percent of total imports.
Experts suggest that further details for
these actors around information disclosure, third-party audits, and the possibility
of a “responsible importer” certification will be clarified in the final ruling.
Current and future industry due diligence schemes should also be recognised under certain conditions.
Recycled metals will not fall under the
new framework and existing stocks of minerals will be grandfathered in. EU manufacturers
and sellers of the minerals and metals will be encouraged to report on sourcing
practices based on guidelines to be developed by the Commission.