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21 February 2017

The Conflict Minerals Regulation is here to stay.

A part of the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law in July, 2010 by then President Barack Obama, the conflict minerals regulation has become a global phenomenon. Despised by many industry associations but publicly embraced by all of the major players in the electronics supply chain, numerous versions of the law have been introduced globally making its abrogation by one regional economic body or country meaningless.

The new U.S. administration wants to gut the entire legislation, tossing a firecracker into an already fractious debate. My prediction is that the Conflict Minerals portion of the law will survive and, even if repealed in the U.S., the electronics supply chain will continue to honour its spirit for the foreseeable future.

That’s going out on a limb but I am certain that I am on safe grounds here. The legislation governs the mining and use of certain metals — tin, tantalum, tungsten and gold – mined in the Democratic Republic of Congo under conditions deemed unacceptable by labor activists and economic regulators. The proceeds of the rebel-held mines have allegedly been used to fund the civil war in the country.

Not all electronics companies were happy with the law but years after it first went into effect, few today will champion its repeal and even fewer enterprises will say it is okay to include the conflict minerals in their supply chains. In fact, as some electronics enterprises have hinted, compliance with the conflict minerals rule will continue until the war in the Congo is a distant memory. That’s not anytime soon.

Aside from the U.S., there’s a larger world out there that is supportive of regulations curbing the sale of conflict minerals. The rule was first established in the U.S. but international versions have proliferated. In China, Japan, Korea and in Europe, the U.S. Conflict Minerals rule has become a standard for companies in the electronics supply chain. The warm embrace of foreign regulatory bodies will keep the rule alive and assure compliance by electronics component suppliers and OEMs.

In November, the European Commission announced its version of the Conflict Minerals regulation. While “due diligence provisions” of the rule won’t take effect for years“ in the meantime, the Commission and Member States will work to make sure that the necessary structures are in place to ensure EU-wide implementation,” the EU said, in a statement. In effect, importers and exporters in the EU will continue to be subject to similar regulations even if the U.S. repealed Dodd-Frank.

“Accompanying measures to provide support for importers, especially small and medium-sized enterprises, will also be deployed,” the EU said in the statement referenced above. “This will be combined with a range of development aid and foreign policy actions to ensure the effectiveness of the regulation, and its positive impact on the ground.”

This blog is not justifying the Dodd-Frank legislation. This is a simple reality check. Companies in the electronics supply chain weren’t keen on the law because it places a heavy compliance burden on them. Yet, the few individuals who have criticized the nature and reach of the law have also made it clear they don’t support the existence of Conflict minerals in the supply chain. Their objection is more about the dubious process of assuring certification and proving their supply chains are squeaky clean of conflict minerals.

Also, industry bodies that have come out against the Conflict Minerals part of the Dodd-Frank legislation have been careful to advocate a modification of the law rather than its outright repeal. This is because there are limited upsides to taking on opponents who cite the extensive damages mining in the Congo has done to the local communities and individual workers. The Trump administration may find itself standing alone as far as the Conflict Minerals rule is concerned. Few companies and legislators will want to be associated with the funding of war and human rights abuses in the Congo as Global Witness, an activist group said.

“Any executive action suspending the US conflict minerals rule would be a gift to predatory armed groups seeking to profit from Congo’s minerals as well as a gift to companies wanting to do business with the criminal and the corrupt,” said Carly Oboth, Policy Adviser at Global Witness, in a statement. “Suspending it will benefit secretive and corrupt business practices. Responsible business practices are starting to spread in eastern Congo. This action could reverse that progress.”

he Conflict Minerals rule will eventually die but only once the rationale behind it had disappeared. Until then, electronics makers will keep structures in place to show they don’t have Conflict Minerals in the supply chain.

 Bolaji Ojo is editor-at-large at EPSNews. The views expressed in this blog are those of the author alone who promises to base his sometimes biased, possibly ignorant, occasionally irrelevant but absolutely stimulating thoughts on the subjective interpretation of verifiable facts alone. Any comments should be sent to the author at bolaji.ojo@epsnewsonline.com

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