The US Conflict Mineral Law

In April 2009, Senator Sam Brownback (R-KS) introduced the Congo Conflict Minerals Act of 2009 (S. 819) to require electronics companies to verify and disclose their sources of cassiterite, wolframite, and tantalum. This legislation died in committee. However, Brownback added similar language as Section 1502 of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which passed Congress and was signed into law by President Barack Obama on July 21, 2010.

The U.S. Securities and Exchange Commission (SEC) issued its proposed, far-reaching draft regulations to implement the Conflict Mineral Law. The regulations were proposed on December 15, 2010 and published in the Federal Register of December 23, 2010 would require U.S. and certain foreign companies to report and make public the use of so-called "conflict minerals" from the Democratic Republic of the Congo or adjoining countries in their products. Comments on this proposal were originally due by January 31, 2011, but SEC extended the public comment period until March 2, 2011. The law itself requires the regulations to be finalized no later than April 15, 2011. According to the SEC website, section 1502 is one of the rules scheduled to be promulgated between January 2012 and June 30, 2012. The latest word from the SEC was a statement in March 2012 by SEC chairwoman Mary Schapiro that the agency hopes to complete the process in "the next couple of months", a statement that would be consistent with the website's target date,

One report concerning the proposal stated the following statistics for the submitted comments:
*Slightly more than 700 comment letters were submitted to SEC on the proposal;
*Approximately 65% of those were form letters or basic letters from the general public supporting the rule's intent;
*The remaining 35% (roughly 270) represent views of businesses, trade/industry associations, the investment/financial community, professional auditing firms, and other relevant governmental entities; and
*Of those 270 comments, an estimated 200 contained substantive and/or technical comments.

That report also contains what it calls a "preview of the final SEC regulations" synthesized from their detailed research and analysis of a large body of documents, reports and other information on the law, proposed regulation and the current budget/political setting facing the SEC in the current administration.

The comments on the proposal can be reviewed by the public.

Media reports published at the end of March/beginning of April 2011 appeared to indicate that the SEC rules were published and in place on April 1, However, these reports actually were referring to the Electronic Industry Citizenship Coalition (EICC) and their industry association program they developed for their membership. Those reports erroneously used the words "regulations" and "rules" to refer to the EICC program. 

The US law has not gone unnoticed by the international community, including entities seeking ways to undermine any required traceability efforts. A report published by a metals trading publication illustrated one DRC ore/mineral flow method that has apparently been devised to thwart detection. 

Applicability in general

Under the law, companies would be required to submit an annual conflict minerals report to the SEC if: (a) they are required to file reports with the SEC under the Exchange Act of 1934 and, (b) conflict minerals are necessary to the functionality or production of a product that they manufacture or contract to be manufactured. That statement contains two separate - but critical concepts: the purpose of the conflict mineral in the product/process, and the control that the company exerts over the manufacturing process/specifications.

A company would be deemed to contract an item to be manufactured if it: 
*Exerts any influence over the manufacturing process; or,
*Offers a generic product under its own brand name or a separate brand name (regardless of whether the company has any influence over the manufacturing process) and the company contracted to have the product manufactured specifically for itself.

The statute specifies that the audits be "conducted in accordance with standards established by the Comptroller General of the United States, in accordance with rules promulgated by the Commission." This means that the same auditing standards that apply to other SEC auditing requirements will also apply to conflict minerals audits Because of this statutory mandate, SEC will have little discretion to allow companies to issue self-generated statements or certifications to satisfy the law.

Third party audits for conflict minerals supply chain traceability began in summer 2010 under the Electronic Industry Citizenship Coalition (EICC), a US-based electronics manufacturing trade association. Under this program, EICC selected three audit firms to conduct the actual audits, with two of the three participating in the pilot audits in 2010. After concluding the pilot, one of the two firms involved in 2010 withdrew from the program specifically in response to the SEC's proposal and to reduce potential legal risks to the audited entities.[31] 

Criticism of the law 

The law has been criticised by many for not addressing the root causes of the conflict, leaving to the Congolese government the responsibility for providing an environment in which companies can practice due diligence and legitimately purchase the minerals they need, when the reality is that mechanisms for transparency do not exist.[39] The effect has been to halt legitimate mining ventures that provided livelihoods for people, reducing the Congo's legal mineral exports by 90%.