On Wednesday, the European Parliament debated a bill on the adoption of a Union system for supply chain due diligence self-certification of responsible importers of tin, tantalum and tungsten, their ores, and gold originating in conflict-affected and high-risk areas.
The Parliament rejected several of the International Trade Committee’s (ITC) recommendations on the bill, including:
- That the system be voluntary, instead voting that it be mandatory for refiners and smelters of “conflict minerals”, which were agreed should be restricted to those already defined as such by the US Dodd-Frank Act and the OECD Due Diligence Guidance—namely, tin, tungsten, tantalum and gold (3TG); and
- That it be applicable to only smelters and refiners, instead voting that importers of 3TG and manufacturers of consumer products that contain these minerals should be also required to comply with this law.
While the bill is yet to be passed, the impacts it could have on the Democratic Republic of Congo (DRC) must be considered.
We suggest consideration of the following:
- The bill proposes that the conflict minerals Regulation should come together with accompanying measures aimed at incentivizing the responsible sourcing of minerals in high-risk areas. . In a worst-case scenario, some companies could react to the new EU rules by simply eschewing known conflict-affected countries regions, such the DRC. This is what happened when the US adopted its own conflict mineral rules in Section 1502 of the Dodd-Frank Act. Given that this bill will likely be mandatory means that such a knee-jerk reaction could be common within affected industries; as a consequence, known conflict-free mines in the DRC could be routinely ignored, devastating livelihoods in local mining industries. This is why the Parliament’s demand for accompanying measures is key: if companies are incentivized to remain engaged in these countries and source responsibility from known conflict-free mines, this would ensure that the legitimate trade of 3TG goes unabated and mining communities are not adversely affected.
- The main incentive of course is to make it financially attractive for operators to source their 3TG responsibly from high-risk areas. This could probably be achieved by a lowering of the tariff –customs duties – for consumer products (originating in China or elsewhere) demonstrated to contain 3TG sourced responsibly in the DRC and other high-risk areas. The EU routinely grants such tariff incentives, in the Free Trade Agreements (FTA) it negotiates with third countries (like the TTIP with the US), or in its autonomous concessions (the EU’s Generalised System of Preferences – GSP). And the Commission’s directorate general responsible for TTIP and the GSP is DG Trade, the very same DG that originates the conflict minerals proposal. If the EU is serious about ending the trade in conflict minerals, without ending the trade in responsible minerals from conflict and high-risk areas, it has a very powerful tool for making this happen: its tariff.
- Dialogue should also be initiated between the government of the DRC and the EU to determine both how EU companies could be incentivized to source from the DRC’s conflict-free mining regions, and how the business environment in the Congo could be realistically improved to ensure companies want to engage in the country.
- The development of a formal guideline for companies to use when assessing ‘conflict-affected’ or ‘at-risk’ countries could be very important for encouraging responsible sourcing from fragile states like the DRC. It would provide a distinct tool for companies to use to look ‘beyond the headlines’ and seek peaceful mines within conflict-affected countries. The existence of such a tool would also arguably lessen companies’ desire to have a knee-jerk reaction to the passing of the bill and simply eschew 3TG from countries like the DRC. Educating companies about their options must be key.
- The goal of this bill in the EU is to break the link between 3TG and conflict, and mineral tracing is how that outcome is envisaged being achieved. However, is this focus taking attention away from other important issues on the ground in mining communities, such as responsible mining practices? The potential for companies to go ‘beyond’ the conflict mineral issue and expand their influence to responsible mining practices should be promoted; how this could be incentivized by both the government of the DRC and the EU should also be discussed by these parties. Again, given that many more EU companies would be impacted by a mandatory bill means that the realisation of a ‘critical mass’ on this issue in the downstream sector could be possible, thus ensuring positive impacts are felt where they are needed most—on the ground in mining communities.
