EC proposal for a regulation on responsible sourcing of minerals from conflict affected and high-risk areas

Responsible sourcing of minerals from conflict affected and high-risk areas

The European Commission (EC) published on the 5th of March 2014 a proposal for a regulation “setting up 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”.

This proposal aims at setting up:

  • an EU voluntary self-certification scheme based on OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas
  • for companies importing into the EU tin, tantalum, tungsten (3T) and gold (same minerals as the Dodd Frank Section 1502) whose precise CN code is listed in Annex I of the proposal
  • from conflict-affected and high risk areas widely defined as “areas in a state of armed conflict, fragile post-conflict as well as areas witnessing weak or non-existent governance and security, such as failed states, and widespread and systematic violations of international law, including human rights abuses;” (article 2, (e) of the proposal).

As written in the Commission’s memo, “the Draft Regulation is global in scope. (…) The EU does not intend to present a specific list of countries because the situation in such countries or areas is by definition fluid and unstable.”

The Commission has therefore chosen to use an existing instrument (OECD Due Diligence Guidance) to regulate conflict minerals, though it presumably goes “a step further than the OECD Guidance in terms of disclosure” as “the regulation introduces the obligation to pass on due diligence information to downstream purchasers”, as written in the Commission’s memo.

Though the scheme is voluntary, once importers opt in, they must comply with the supply chain due diligence obligations arising from the proposed regulation, in particular by

(i)             setting up a management system to inter alia track the origin of the minerals purchased (article 4 of the proposal),

(ii)            applying supply chain risk management procedures to address and mitigate adverse impact in related to the financing of armed groups (article 5)

(iii)           carry out independent third-part audit (article 6)

(iv)          and disclose relevant supply chain related information to downstream purchasers and the public (article 7).

Member States will be in charge of the designation of competent authorities responsible for enforcing the regulation (article 9) by carrying ex-post checks of responsible importers (article 10) and sanctioning infringements (article 14).

The EC proposes a number of measures/incentives to promote the uptake of supply chain due diligence and push EU importers to implement it through, for example, the publication of a “list of responsible smelters and refiners” (article 8). The accompanying Communication goes a step further by laying down additional incentives taking various forms:

  • Public procurement contracts. Products such as mobile phones, computers, printers containing tin, tantalum, tungsten or gold purchased through the Commission's public procurement will need to respect OECD Due Diligence Guidance or equivalent due diligence schemes in order to satisfy contractual obligations.
  • Funding to promote the uptake of the voluntary certification scheme among EU importers. Funding would be explored under the Competitiveness of Enterprises and SME’s Programme (COSME), adopted on 5 December 2013.
  • Financial assistance to the OECD or other bodies for programmes to promote transparency and due diligence practices among EU and non-EU smelters/refiners.
  • Political, development, trade and security dialogues and contacts with governments in mining, producing, processing and consuming countries to further develop a common understanding – at country and regional level – of the needs, challenges and opportunities of conflict-free and responsible mineral extraction.
  • Existing cooperation relations with governments in Africa, Asia, Latin America and the Caribbean to address conflict-free and responsible mineral extraction and trade.

The proposal will be adopted via the ordinary legislative procedure – i.e. codecision between the Council & European Parliament. There are currently little indications as to when the legislative process will start due to the May 2014 EU parliamentary elections.

lt is also important to bear in mind the instrument chosen is a regulation (not a directive) meaning that there is no need for implementation by Member States, and the legislation will be directly applicable following its entry into force (see article 16).

Emmanuel Katrakis
Environmental Manager Euromines