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Conflict Minerals - Developing Regulations Globally

Both China and the European Union are addressing the issue of Conflict Minerals in the supply chain and while the minerals currently covered parallel those covered in the US Conflict Minerals law, there are significant differences in other aspects that could expand the scope of companies required to report as well as the number of regions around the globe that could fall within the definition of conflict areas or regions.


The China Chamber of Commerce of Metals, Minerals and Chemicals Importers & Exporters (CCCMC), working closely with the Organisation for Economic Co-operation and Development (OECD) as well as industry organisations and select stakeholders, has prepared reporting guidance, Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains (the Guidelines) (English text).  This is currently a draft document.  It was posted for comment with comments being accepted through November 7, 2015.  Currently the Guidelines are voluntary and the final draft has not yet been issued.  The Guidelines are intended to assist with implementation of Clause 2.4.6 of the Chinese Guidelines for Social Responsibility in Outbound Mining Investments (“Chinese Responsible Mining Guidelines”).

Clause 2.4.6 requires companies to “conduct risk-based supply chain due diligence in order to prevent engagement with materials that may have funded or fueled conflict”. The sub-clauses further require companies to:

  1. conduct an assessment to define whether the mining project from which traded minerals originate or the mineral trading routes used are located in a conflict-affected and/or high-risk area;
  2. adapt existing due diligence measures to the specific needs of conflict-affected and high-risk areas;
  3. have their measures audited by a third party and
  4. when operating in a conflictaffected and/or high-risk area, publically report on steps taken to monitor the business relations, transactions, and flows of funds and resources and avoid the trade of conflict minerals.

The Guidelines are designed to align Chinese company due diligence with international standards and allow for mutual recognition with existing international initiatives and legislations. The Guidelines as currently drafted apply to all companies owned, partially owned, registered in, or operating in China, which are using or are engaged at any point in the supply chain of minerals and related products. All companies using or engaged in supply chains of natural resources other than conflict minerals are encouraged to use the Guidelines as a reference.

The Guidelines, which are based on the OECD guidelines, detail five steps: establish sound risk management systems, identify and assess risk in the supply chain, design and implement a strategy to respond to identified risks, carry out independent third-party audit at identified risk points in the supply chain, and report on process and results of supply chain risk management.

The Guidelines apply to all Chinese companies which are extracting and/or using mineral resources and their related products and are engaged at any point in the supply chain of minerals.  This includes companies which are engaged in

  • upstream activities (exploration, development, etc.);
  • midstream activities (trading, processing, including smelting and refining, storing, transporting, etc.); as well as
  • downstream companies which are using mineral resources and their related products (for example, electronics, electrical appliances, instruments, jewellery, communications equipment, etc.).

The CCCMC plans to release resource-specific audit protocols and supplementary materials providing detailed guidance for companies on how to carry out due diligence in specific sectors. 

European Union (EU)

In March, 2014 the European Commission (the Commission) proposed a draft Regulation setting up an EU system of self-certification for importers of tin, tantalum, tungsten and gold.  The self-certification required EU importers of these metals and their ores to exercise 'due diligence' in line with the OECD Due Diligence Guidance.  Under the proposed regulation approximately 400 European smelters and refiners of tin, tantalum, tungsten and gold would have been required to make regular disclosures about conflict minerals

In May, 2015 the European Parliament (the Parliament) adopted a much stricter regulation requiring companies to certify to the government that the minerals they source do not fuel violent conflict and human rights abuses and including provisions for mandatory reporting, and third-party independent certification of smelters and refiners.  The draft law adopted by the Parliament could affect more than 800,000 European manufactures using the metals in the automotive, electronics, packaging, lighting, aerospace, construction, jewelry and other industries.

The next step is negotiations between the Parliament, the Commission and EU member states on how to develop the new proposal into law.  Final approval from the European Council will be needed for the proposed regulation to become law.  The Council of the European Union (the Council) is currently considering the proposed legislation.  It is expected that a final regulation will not be agreed upon and passed into law until sometime in 2016.  Various interested parties are trying to influence the final regulation and it is unclear at this time what the final provisions will be.