 |
| Picture Credit: ILO |
The Dodd-Frank Wall Street Reform Act 2010 aimed to restrict the trade of conflict minerals sourced from the Democratic Republic of Congo. Trade in these minerals is crucial to the electronic and other industries. Since the early 2000s, The United Nations Group of Experts and many international NGOs have highlighted the link between the illegal exploitation of natural resources in the DRC and revenues from the illegal trade that finances rebel groups and fuels conflict in the region. The Dodd-Frank act however, does not ban or penalize the use of conflict minerals. If a company is sourcing minerals from the DRC, they merely have to make public their imports and report their source to the American Securities and Exchange Commission (SEC). The increased attention that conflict over minerals received is a welcome development. However, such initiatives will have little impact unless domestic governance issues are addressed.
The recent passage of provisions on conflict minerals from eastern Congo in the Dodd-Frank Wall Street Reform act has brought unprecedented attention to the linkages between trade in minerals crucial to electronics and other industries and the ongoing conflict in DRC. These provisions have been welcomed by the State Department, the Congolese government, a diverse coalition of NGOs, and by leading companies. But the passage of the legislation also raises important questions about how it will be implemented, potential unintended consequences from the law, its linkages with other initiatives to curb resource-fueled conflict, and how it fits with wider peacebuilding efforts in the DRC. Alongside these important issues, there are ripples of discontent and complaints from various industry representatives about burdensome reporting requirements, and warnings about de facto boycotts on minerals sourced in the region and massive job losses causing increased instability.
To help put these concerns in context and provide more information about Enough’s approach to conflict minerals and peace in Congo, we’ve put together this set of frequently asked questions:
What does the conflict minerals provision in the Dodd-Frank Reform bill require companies to do?
First, companies who report to the Securities and Exchanges Commission, or SEC, who manufacture products that require tin, tantalum, tungsten, or the 3Ts, and gold, must report whether these minerals originated in Congo or a neighboring country. Until now, companies have relied upon assurances from their suppliers that they do not purchase conflict minerals, without independent verification. With this law, the burden of proof shifts: now companies must find out where their suppliers do source from.
If a company finds that its minerals do originate in Congo or one of it neighbors, much more reporting is required. They then must report on the measures they have taken to exercise due diligence on the source and chain of custody of the minerals. Most importantly, companies need to provide independent verification of these steps through an independent private sector audit of their reporting. The Enough Project hopes to work with companies on the specific terms and actions to ensure they are able and willing to meet their commitments.
The truth of the matter is that inaction is unacceptable and for companies that would continue to move along the path of the status quo, tantamount to complicity. The new bill is intended to combine USG, private sector, activist, and consumer pressure to bolster the Government of the DRC and to reduce the presence of armed groups in the region known to have committed some of the worst human rights atrocities in history.
The instability in the eastern region of the DRC continues to cause immense suffering, including staggering mortality rates, mass displacement, as well as widespread sexual violence, often used as a weapon to terrorize and humiliate communities. The illicit exploitation of natural resources contributes to this instability. By creating a system that will eliminate funding mechanisms for the belligerents, the U.S. is paving the way for legitimate and sustainable resource management that will benefit the Government of the DRC, the Congolese people, private sector stakeholders, and concerned consumers here in the U.S.
How will this law be implemented?
Section 1502 of the Dodd-Frank act involves a range of government actors including the Securities and Exchange Commission, or SEC, the Secretary of State, Comptroller General and United States Agency for International Development, or USAID. The center piece of the new law is the disclosure requirement. The SEC has nine months from the date of enactment, July 21, to write regulations pertaining to the disclosure of conflict minerals from the DRC and its adjoining countries.
Beginning with the first full fiscal year after the promulgation of the regulations, April 2011, company’s will be responsible for disclosing whether conflict minerals are a necessary component of a company’s product. If they are and the conflict minerals originated in the DRC or an adjoining country then a company will have to file a report with the SEC that describes the measures taken by the company to exercise due diligence on the source and chain of custody of the minerals. Additionally, the Comptroller General, in consultation with the Secretary of State, is responsible for establishing the standards by which the independent audit of the disclosure report submitted to the SEC will be reviewed.
Finally, the Secretary of State, in consultation with USAID, has 180 days to develop a strategy to address the link between armed groups, conflict minerals, and human rights abuses. Both organizations are tasked to provide guidance to commercial entities seeking to exercise due diligence on the source and chain of custody of activities involving such minerals to ensure they did not directly or indirectly finance or benefit armed groups in the DRC. Lastly, the Secretary of State is responsible for developing a conflict minerals map that will show trade routes, mineral rich zones and areas under control of armed groups.
What are other governments and international organizations doing about this issue?
Many different governments and multilateral organizations have made statements or committed resources to breaking the link between conflict and natural resources in Congo. This includes the U.N. Security Council, which has recognized “the linkage between the illegal exploitation of natural resources, illicit trade in such resources and the proliferation and trafficking of arms as one of the major factors fuelling and exacerbating conflicts in the Great Lakes region of Africa.”
The 2010 G8 Communiqué also highlighted conflict minerals:
“The illicit exploitation of and trade in natural resources from the eastern Democratic Republic of the Congo has directly contributed to the instability and violence that is causing undue suffering among the people of the DRC. We urge the DRC to do more to end the conflict and to extend urgently the rule of law. We welcome the recent initiatives of the private sector and the international community to work with the Congolese authorities and to enhance their due diligence to ensure that supply chains do not support trade in conflict materials.”
The Organization for Economic Cooperation and Development, or OECD, is in the process of helping to develop due diligence guidelines for “managing the supply chain of key minerals from conflict-affected and high-risk areas, with particular regard to the Democratic Republic of Congo.”
Does the government in Congo support this law? Who else supports this law?
The Congolese government welcomed this law. In a statement, Minister of Information and Spokesperson Lambert Mende called it a “noble initiative.” In addition, the Catholic Church in Congo has issued a statement in support of the law, which they lobbied in support of through groups like Catholic Relief Services and the U.S. Conference of Catholic Bishops.
The bill has also been welcomed by international human rights groups, such as Amnesty International and Global Witness, as well as humanitarian groups like World Vision.
Congolese civil society organizations in North and South Kivu have expressed support for the legislation, but understandably also have questions about this legislation. Why has this happened now? How will it be implemented? How do we deal with potential unintended consequences? For these reasons it is imperative that the United States government, as well as groups supportive of the legislation, facilitate the full participation of Congolese groups in the process of implementation.
Is the new conflict minerals law intended to be a "silver bullet" solution to stop all armed violence in the Congo?
Not at all. As we’ve written: “While eastern Congo is a complex crisis—fueled by tensions over land, rights, identity, regional power struggles, and the fundamental weaknesses of Congo as a state—the trade in conflict minerals remains one of the key drivers of the conflict.” Efforts to curb the trade in conflict minerals are just one component of a comprehensive policy.
How will this legislation contribute to reducing violence in eastern Congo?
By complying with this law and ensuring that their products are conflict-free, companies will contribute to excluding armed groups and military units from their supply chains. This will not only reduce the resources available to these groups, who are among the worst human rights violators in the conflict, it will also create an incentive for minerals traders to reform their business practices and contribute to a more legitimate trade, one that would deliver more benefits to the Congolese people.
Besides compliance with the new law, what additional steps can tech companies begin to take?
This legislation is just one step toward conflict-free products and a minerals trade that benefits the Congolese people. Achieving this will require a combination of companies, governments, and consumers taking action to trace, audit, and certify their minerals supply chain:
Trace: Companies must determine the precise sources of their minerals. We should support efforts to develop rigorous means of ensuring that the origin and production volume of minerals are transparent.
Audit: Companies should have detailed examinations of their mineral supply chains conducted to ensure that a) minerals are not sourced from conflict mines; and b) no illegal taxes/bribes are paid to armed groups in Congo. Credible third parties should conduct or verify these audits.
Certify: For consumers to be able to purchase conflict-free electronics made with Congolese minerals, a certification scheme that builds upon the lessons of the Kimberley Process will be required. Donor governments and industry should provide financial and technical assistance to galvanize this process.
In addition to these steps, there are other important contributions that companies should make. Electronics, jewelry and minerals companies should partner with donors to set up a miners' livelihood fund to offer them real opportunities and help the Congolese economy through small business, microfinance and agriculture.
Can we buy conflict-free electronics products now? Which companies are leaders and which are laggards in taking steps to rid their supply chains of conflict minerals?
Unfortunately it is not yet possible to buy guaranteed conflict-free products. Enough is preparing a conflict minerals scorecard for electronics companies that will assess their responsiveness on this issue and concrete steps that they have taken toward becoming conflict-free.
Should companies stop buying Congolese minerals?
No. Enough is not calling for a boycott of minerals from Congo. We are demanding greater transparency in the supply chain and calling for companies to undertake the due diligence required to ensure they are not contributing to the conflict. The legislation does not ban Congolese minerals. International traders and refiners that have been purchasing minerals from eastern Congo may depend more on these sources than they admit and the interdependence between these multinational companies and their suppliers in Congo presents an opportunity to create greater due diligence down the supply chain.
What about Congolese miners? Will this impoverish them even further?
Ending the conflict in eastern Congo is the best way to help the Congolese people recover from more than a decade of suffering and violence. A critical aspect of this effort is severing the link between the minerals trade and the armed groups committing atrocities in Congo. But a comprehensive approach is required to improve the Congolese mining sector, one that improves livelihoods for miners and complements corporate responsibility.
Artisanal miners work in extremely difficult conditions in eastern Congo and earn an average of $1-5 per day, largely because the armed groups extract such enormous profits on the backs of their labor. The bill is meant to help industry differentiate between legal and illegal mining—which is built on brutality, extortion, and slave labor including the use of children. The State Department is producing a map that shows which mines in North and South Kivu are controlled by armed groups, and the legislation mandates that this map be updated every six months. However because of the fluid nature of the conflict, it will likely require even more frequent updates. The UN Group of Exports has stated that “nearly every mine in eastern DRC is militarized,” a signal that very few, if any, legitimate mining jobs exist at this point in the east.
Further, the new bill requires the Secretary of State and USAID, to develop a plan to address the link between human rights abuses, armed conflict in Congo. These measures would reinforce efforts by electronics companies to clean up their supply chains, and help to create a new market for conflict-free minerals. A legitimate supply chain would open up the private sector in Congo to responsible operators and improve the livelihoods of artisanal miners.
Will reporting on the source and chain of custody of conflict minerals be burdensome to companies?
No, only those few companies that source from DRC and adjoining countries have to report. Reporting will be defined in regulations, with feedback from industry groups, and won’t be required for several years to ensure that the regulations are reasonable and achievable.
Are independent audits too expensive?
No, industry has acknowledged that independent private sector audits are essential to insuring a level playing field for industry and transparency. Independent audits are required to verify that the representations in reports to the SEC are accurate.
Are conflict minerals too difficult for companies to identify?
No, industry is required to know what goes into its products, for quality control and health and safety reasons. Standards exist to eliminate lead paint, prison labor, and carcinogens in manufacturing. This is no different. Chains of custody are easy to understand and reporting is simple. There are a few dozen processors of conflict minerals worldwide and the vast majority of mines and mineral processors are legitimate.
Some companies already have policies that they do not buy conflict minerals from Congo. What is wrong with these policies?
Several electronics companies have issued statements that they ask suppliers not to source materials from conflict areas in Congo. However, these are merely written assurances that do not provide proof of where the minerals actually come from. They are not verified by any independent source. We currently have no way of knowing whether the minerals passed through the hands of armed groups in Congo or whether they came from another source. That is why we need more definitive proof, through tracing, auditing, and certifying.
Since the passage of the recent bill many industry leaders in the U.S. have shown support for the initiative and have also shown expressed concern about the unconscionable human rights abuses associated with conflict mineral extraction in DRC. The bill is not aiming to put unwarranted or undue burden on the private sector, rather asking leaders of industry to step-up to the plate and be involved in creating an effective and sustainable regulatory process in conjunction with the U.S. Government and NGOs.
Are electronics companies solely responsible for solving Congo's conflict minerals problem?
No. The Congo conflict minerals problem requires a comprehensive strategy, which must include serious policy action by the international community, the Obama Administration, the Congolese government, the UN, and NGOs - on issues of land tenure, security, governance, rule of law, and livelihoods. But electronics companies, as the main end user of minerals from Congo, bear a responsibility for cleaning up their supply chains. Our cell phones should not be fueling violent conflict. The companies have an important role to play in being part of the bigger solution.
Are there alternative sources of these minerals besides eastern Congo?
Yes. The percentages of the global supply of the 3Ts coming from Congo is relatively small, from one percent to 12 percent, depending on the specific mineral. Tantalum is temporarily much higher, at approximately 30 percent, because the largest supplier of tantalum, Australia, recently suspended production. Major alternative sources of these minerals include:
Tin: China, Indonesia, Peru, Bolivia, Brazil
Tantalum: Australia, Brazil, Canada
Tungsten: China, Russia, Canada
Gold: South Africa, Australia, the United States, China
It is important to note that the Enough Project is not calling for a ban or boycott of Congolese minerals, which would hurt miners. Instead, we encourage the development of legitimate, conflict-free mineral supplies from Congo through the development of tracing and auditing.
What are cassiterite, coltan, and wolframite? Why do some articles talk about metals and not minerals?
Before they are processed later down the supply chain into metals, the 3Ts minerals in Congo are often referred to in their mineral ore form.
- Tin ore = cassiterite
- Tanatalum ore = coltan or columbite-tantalite
- Tungsten ore = wolframite
The mineral ores are what make up the metals tin, tantalum, and tungsten. They change names once they are smelted and/or chemically processed by refining companies. To be consistent, we refer to "conflict minerals" because it is the mineral ores that fuel violence in eastern Congo.
