EU Due Diligence for Conflict Minerals Focuses Upstream — for Now

EU Due Diligence for Conflict Minerals Focuses Upstream for Now

By Rania Georgoutsakou, director, Public Policy, SEMI Europe

EU proposed legislation on responsible sourcing of ‘conflict minerals’, published on 5 March 2014, will create a voluntary scheme focusing on upstream suppliers that should help downstream users get the information they need to comply with the US Dodd Frank Act. The EU proposals largely address concerns raised by SEMI and other industry associations, but things could change as European legislators bite their teeth into the new proposals. And the EU is proposing additional ‘soft measures’ to encourage companies to source responsibly.

The EU plans to create a voluntary scheme for self-certification of smelters and refiners importing tin, tungsten, tantalum (3Ts), their ores, and gold into the EU market. The EU will create and annually review a “white list” of ‘responsible importers’ based on the audit assurances and due diligence information provided by smelters and refiners who decide to join the scheme and self-certify. Special reference will be made to those smelters/refiners who source from conflict-affected/high-risk areas, to encourage companies to source from them and encourage legitimate trade

Downstream users are not directly impacted by this scheme and in fact should benefit from it. ‘Responsible importers’ are required to give information derived from their due diligence to their direct downstream purchasers, so the EU scheme should help downstream users performing due diligence on conflict minerals under the US Dodd Frank Act (both US-listed companies and their wider supply chain) to get the information they need more easily. And the EU ‘white list’ should help companies identify and opt for responsible suppliers who can provide the information they need.

At a Glance – EU and U.S. Schemes Compared

Both the EU and the U.S. schemes focus on due diligence to encourage the responsible sourcing of 3Ts (tin, tantalum, tungsten and their ores) and gold.

The EU scheme, however, focuses on smelters and refiners importing the minerals and metals into the EU market, rather than the downstream users, who have no legal obligations under the EU scheme. On the contrary, the EU scheme should help encourage responsible sourcing and tracking the information needed for the US due diligence exercise.

The EU scheme is voluntary whereas the U.S. one is mandatory, although this could change. The EU plans to review its scheme within three years of implementation and may then introduce legislation to render it mandatory.

Whereas the U.S. scheme is limited to minerals and metals sourced from the Democratic Republic of Congo and adjoining countries, the EU scheme is global and will apply to all ‘conflict-affected and high-risk’ areas, to be defined based on the criteria set out in the OECD Due Diligence Guidance for responsible supply chains of minerals from conflict-affected/high-risk areas.

Additional EU Proposals Will Impact Downstream Industry

The EU is also considering additional actions to encourage the responsible sourcing of minerals from conflict-affected/high-risk areas.

The European Commission will include performance clauses in its own public procurement contracts. So products purchased through public procurement that contain the 3Ts and gold (i.e. including electronic products such as laptops or cellphones) will have to respect the OECD due diligence guidance or equivalent schemes.

Additionally, the European Commission is calling on national governments to develop their own complementary measures, and sites consumer information and labeling, as well as public procurement incentives, as an example.

What’s Next

The EU proposals published on 5 March 2014 are the first step in the process. The legislative procedure will begin in earnest once the new European Parliament has taken office in June 2014 and starts examining the proposals. A number of parties have already expressed their disappointment with the current proposals, so the negotiation process should be ‘interesting.’

SEMI will continue to monitor developments and will advocate for the current EU proposals. They largely address SEMI’s recommendations to limit the burden on downstream users, focus on the part of the supply chain where it is still technically possible to identify the origin of the mineral or metal and facilitate the flow of information across industries and throughout the downstream supply chain.

To find out more and to get involved, please contact Rania Georgoutsakou, director public policy for Europe, gourania@semi.org

To view the EU proposals, please visit the European Commission’s webpages.

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April 2, 2014