On March 5, 2014, the European Commission announced its proposed strategy for transparency in the trading of conflict minerals (minerals from regions affected by conflict and instability, such as the Democratic Republic of Congo [DRC]) – its effort to address issues similar to those targeted by the United States’ Dodd-Frank Act section 1502. However, unlike the Dodd-Frank Act’s mandatory reporting requirements, the draft EU Regulation proposes a voluntary certification scheme for EU importers of conflict minerals, which would rely on reputational pressures from competitors and consumers to be effective.

The Proposed EU Scheme

The draft Regulation sets up a self-certification due diligence system for those who choose to sign up as “responsible importers” of tin, tantalum, tungsten, their ores, and gold. According to the scheme, EU importers of these metals would have to abide by the Organisation for Economic Cooperation and Development (OECD) Due Diligence Guidance.

The draft Regulation focuses on “conflict-affected and high risk areas” which are defined as “areas in a state of armed conflict, fragile post-conflict as well as areas witnessing weak or non-existent governance and security, such as failed states, and widespread and systematic violations of international law, including human rights abuses”.

Importers who sign on to the scheme would be required to adopt a supply chain policy for conflict minerals; establish management systems to support supply chain due diligence; incorporate supply chain policies into contracts with suppliers; establish grievance mechanisms as an early-warning risk-awareness system; operate a supply chain traceability system for the minerals and metals; and identify risks and implement a strategy to prevent or mitigate adverse impacts. Responsible importers must also carry out independent third-party audits.

Each year, responsible importers would be required to make a declaration of conformity with the obligations under the voluntary scheme and submit the proportion of minerals originating from conflict-affected and high-risk areas in relation to the total amount of minerals purchased, the names of each of the smelters or refiners in its supply chain, independent audits of the responsible importer and its smelters or refiners to the Member State. According to the draft Regulation, responsible importers must also make such information available to their immediate downstream purchasers and publish an annual report of its supply chain due diligence online.

Source: Fasken Martineau - See full article