As New Conflict Mineral Regulations Go Into Effect, Are Companies And Countries Ready?
Photo by John Whitworth Photography via Flickr Creative Commons
In 2009, feminist icon Eve Ensler called for "Rape-Free cell phones" -- or phones that do not contain minerals mined from conflict zones where rape is used as a weapon of war. The most notorious area where conflict minerals, such as coltan and cassiserite, are mined and sold to fund fighting is the Democratic Republic of Congo, or DRC. Because these and certain other minerals are essential to manufacturing electronics, the consumer electronics industry shoulders a significant burden in assuring the sources of their materials are legit. However, because many manufacturers say that such assurance is beyond their reasonable control, the US government has stepped up. Last year, a law was passed that companies have to verify the source of their minerals, and the law goes into effect this week. Who is ready? BBC News reports, "Coming into effect on 1 April, [the new law] forces any manufacturer subject to US regulation to report on how it sources its so-called conflict minerals - such as cassiserite, coltan and wolfranite, which are mined in the DRC and widely used in mobile phones and laptops. But how prepared are these countries to comply with the US ruling, and how easy will it be for US companies to trace the ultimate source of the minerals they buy?"
Verifying Mineral Sources Is Tough Work
Unfortunately, it isn't easy at all thanks to smuggling and convoluted supply chains. Large electronic companies like Nokia and Apple have been vocal about their concern over the sources of the minerals used in their devices, yet even Apple has noted how it is nearly impossible to know the exact source. Well, companies are going to have to make it their business to find out from now on -- but how accurate will the information they rely on be?
The BBC reports that Rick Goss, of the Information Technology Industry Council (ITIC), whose members include Apple, Dell, Hewlett Packard, Nokia, states that "it will be impossible to make sure that not one single illicit shipment entered the supply chain."
"'It is too complicated in terms of corruption - illegal taxation - to absolutely guarantee that an illegal shipment did not enter the supply chain, regardless of all private and public sector efforts,' he warns. The minerals could go elsewhere. Asian smelters are sourcing from any number of countries."
If it is impossible to track the source of all the minerals going into the stream, then the big question is what countries and companies will do to fix the systems.
How Will Mining Countries Deal With The Change?
Some countries where minerals are sourced, such as Rwanda, have admitted that they aren't ready for the new regulations since it borders the Congo where many minerals are sourced. The ministry worries about losing as much as 30% of the country's income from mining by not being able to verify the source of minerals they sell, according to BBC. In order to verify the source of their minerals, they need laser-induced breakdown spectroscopy (LIBS) technology that provides a chemical fingerprint of the material, yet they can't afford to purchase the equipment and likely won't be able to if they are losing income in their mining industry.
Photo by Flabber deGasky via Flickr Creative Commons
How Can Companies Be Sure They Aren't Using Conflict Minerals
Meanwhile, exactly how will companies verify the source of their minerals beyond any measures they're currently taking? Mainly, they will rely on the countries doing the mining. The DRC is working hard to come up to snuff with new regulations so that they don't lose business, which includes setting up a database for tracking statistics on production and exports, and setting up a whistle-blowing system to cut down on the rampant corruption. But companies may have to change their supply chains to ensure they are using only materials sourced from conflict-free zones.
How Does The New Law Check On Companies' Sources?
This is really the tricky part for making the new law matter. The Enough Project writes, "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 [such as Rwanda] then a company will have to file a report with the SEC [Securities and Exchange Commission] 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."
It is a long process, and it requires commitment from both companies and many countries to make it effective. Odds are that it will be full of holes and have a slow start at first, but the hope is it will gain momentum and become an effective way to track, and stop, the flow of conflict minerals. No matter what, everyone has until the end of the week before they feel the pinch of new regulations.
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