The Facts Behind the Dodd-Frank Conflict Minerals Requirement
There has been a lot of chatter in the blogosphere recently about David Aronson’s op-ed “How Congress Devastated Congo,” in the New York Times on Monday concerning the impact that the Dodd-Frank legislation provision (Section 1502) on conflict minerals is having on the economy and workers of the Democratic Republic of the Congo (DRC).
Many activists claim that the Dodd-Frank requirement that companies disclose their use of conflict minerals (tin, tungsten, tantalum and gold) in their products is essential to ending the horrific violence taking place there, even though there is relatively little evidence that will be the case. What is of concern to many stakeholders across the spectrum is the potential for the provision creating an embargo on minerals from the DRC and surrounding countries, causing further economic devastation.
Paul Kavanaugh, writing for Bloomberg BusinessWeek, reported July 28, “The new rules left tens of thousands of people out of work, according Paul Yenga Mabolia, head of Promines, a World Bank program assisting Congo’s mining industry. ‘Nobody was prepared and there was no program to alleviate the impact of the law,’ he said by phone from Kinshasa, Congo’s capital, yesterday. ‘Almost everything came to a standstill.’”
Meanwhile, relatively little attention has been paid to the July 15 letter from the Congolese Minister of Mines Martin Kabwelulu to the Securities and Exchange Commission pleading with the SEC to craft a regulation implementing Dodd-Frank that does not result in a de facto embargo on minerals from the DRC. In that letter, the Minister states that companies “should not describe a product as ‘DRC with conflict” when [they] have taken reasonable steps and made good faith efforts to conduct due diligence on ores in accordance with the recommendations on due diligence of the Organization for Economic Cooperation and Development and United Nations resolutions.”
He further states that his proposal “will ensure that section 1502 of the Dodd Frank reform is implemented in accordance with its end, thus avoiding the consequences of a de facto embargo on minerals from the Democratic Republic of Congo.”
The National Association of Manufacturers has encouraged the SEC to take a pragmatic approach, and adopt an interim “indeterminate” category for companies’ reports on the origin of their conflict minerals while undertaking good faith efforts to conduct due diligence–much like Minister Kabwelulu proposes–while the necessary tracing infrastructure is developed. A phased in approach that builds off programs closest to the source of minerals, such as a smelter verification process, is the best way forward in achieving the law’s objectives without requiring pointless expensive reports from companies that can only say, “I don’t know”.
One can hope that the SEC will pay some attention to the views of the representatives of the DRC government who are responsible for their country’s welfare as least as much as self-appointed activists.
Stephen Jacobs is senior director international business policy.