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The regulation explained

On 1 January 2021 a new law will come into full force across the EU – the Conflict Minerals Regulation.

It aims to help stem the trade in four minerals – tin, tantalum, tungsten and gold - which sometimes finance armed conflict or are mined using forced labour.

What are conflict minerals?

In politically unstable areas, armed groups often use forced labour to mine minerals which they then sell to fund their activities, for example to buy weapons.

These so-called 'conflict minerals' such as tin, tungsten and gold can be used in everyday products such as mobile phones and cars or in jewellery.

It is difficult for consumers to know if a product they have bought is funding violence, human rights abuses or other crimes overseas.

Which countries do conflict minerals come from?

The countries most affected by conflict minerals are those:

  • Whose natural resources include minerals which are in high demand

and

  • Are suffering from conflict, such as civil war.  Conflict within a country often weakens the capacity of authorities to govern effectively.

The most affected regions include:

  • West Africa
  • Central Africa
  • Some regions in:
    • South America
    • East Asia

Why does the EU want to stop conflict minerals from being sold in the EU?

When conflict minerals enter the supply chain – either as a raw material or a metal – the money from the sale goes to armed groups or criminals. 

This source of income helps perpetuate armed conflict, violence and human rights abuses, often in weak or unstable countries.

Stopping the flow of conflict minerals and cutting off a source of income to these armed groups and criminals is a way of:

  • making it more difficult for them to continue their activities
  • tackling human rights abuses

What does the new EU regulation do?

The EU regulation aims at stopping:

  • conflict minerals and metals from being exported to the EU
  • global and EU smelters and refiners using conflict minerals
  • the abuse of mine workers, and to support local development.

The regulation requires EU companies in the supply chain to ensure they import those minerals and metals which the regulation covers from responsible sources only.

The regulation covers:

  • gold
  • tin
  • tungsten
  • tantalum

When will the EU's new regulation come into force?

The new regulation will take effect on 1 January 2021. 

This will give companies plenty of time to adapt to the new rules.

The European Commission encourages all companies which the regulation covers to start carrying out due diligence before this date.

Why does the EU regulation only cover four products?

The EU regulation covers tin, tantalum, tungsten, and gold because these are the four metals that are most mined in areas affected by conflict or in mines that rely on forced labour. So it makes sense to focus on them.

The regulation also draws on well-established rules to help stem the trade in conflict minerals. These have been drawn up by experts at the Organisation for Economic Co-operation and Development (OECD), a group of 35 developed countries.

They are set out in a document called 'Due Diligence Guidance for Responsible Supply Chains from Conflict-Affected and High-Risk Areas.' The guidance has two sections dealing specifically with tin, tantalum and tungsten, and with gold.

The US also has legislation on conflict minerals: Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Act of 2010. And this covers the same four products.

Does the EU's regulation solve the problem of conflict minerals?

The regulation aims to stop conflict minerals and metals from entering the EU. 

As the world's largest trading bloc, the EU is a major market, so the regulation marks a big step in tackling the trade in conflict minerals.

Countries around the world buy minerals and products containing minerals, though, so it is important to encourage others to put in place similar measures as well.  And once laws are in place, they need to be properly implemented too.

The EU is working:

  • in international fora such as the Organisation for Economic Co-operation and Development (OECD) to promote the international guidelines on conflict minerals
  • to get countries that are the main suppliers and buyers of the minerals in question to take measures to combat conflict minerals.

Which countries does the EU regulation apply to?

The EU regulation will apply to minerals originating from all countries that export to the EU – whether they export raw materials or metals.

The European Commission will task a group of external experts to provide a list of conflict-affected and high-risk areas, which it will regularly update. The list will be:

  • indicative – it will give an indication of countries that are currently or could be affected by conflict
  • non-exhaustive – it won't necessarily  include every area in the world affected by conflict; however, companies will still have to comply with the regulation when operating in conflict-affected areas that aren't listed.

How many companies does the regulation affect?

The regulation applies directly to between 600 and 1,000 EU importers.

It will indirectly affect about 500 smelters and refiners of tin, tantalum, tungsten and gold, whether they are based inside the EU or not.

Will the regulation only apply to companies based in the EU?

Directly, yes. The regulation will only apply directly to EU-based importers of tin, tantalum, tungsten and gold, whether these are in the form of mineral ores, concentrates or processed metals.

Indirectly, the regulation will also promote the responsible sourcing of smelters and refiners of tin, tantalum, tungsten and gold, whether they are based inside the EU or not. This is because EU importers of metals need to make sure that they source from responsible smelters and refiners.

To help companies, the European Commission will create a so-called "white list" of global smelters and refiners which it knows source responsibly. 

What does 'due diligence' mean?

The term 'due diligence' means acting with reasonable care and investigating an issue before making a decision. 

For the minerals which the regulation covers it means companies must check that what they buy is sourced responsibly.

Companies that practise due diligence first check how risky it is to source raw materials from a certain region afflicted by conflict. They assess the likelihood that those raw materials could be financing conflict or mined using forced labour.

By checking the source, they can then make sure that they do not help fund that conflict.

How does the new EU system of due diligence work?

EU importers of tin, tantalum, tungsten and gold must check what they are buying, to ensure it has not been produced in a way that funds conflict.

The regulation requires importers to follow a five-step framework which the Organisation for Economic Co-operation and Development (OECD) has laid out in a document called 'Due Diligence Guidance for Responsible Supply Chains from Conflict-Affected and High-Risk Areas' (OECD Guidance).

These steps require an importer to:

  • establish strong company management systems
  • identify and assess risk in the supply chain
  • design and implement a strategy to respond to identified risks
  • carry out an independent third-party audit of supply chain due diligence
  • report annually on supply chain due diligence.

Why are there different requirements for different companies?

Production of goods often involves many different companies engaged in various types of activity along the supply chain. 

Firms that search for and extract raw materials are called 'upstream' companies.  The EU regulation identifies as upstream companies:

  • mining companies
  • raw material traders
  • smelters and
  • refiners.

Other firms process metals produced during the upstream stage into a finished product.  These are called 'downstream' companies.  The downstream stage includes the sale of the product to other businesses, governments or private individuals.

The EU regulation sets out different rules for upstream and for downstream companies:

  • Upstream companies have to comply with mandatory rules on due diligence when they import, as this is the most risky part of the supply chain.
  • Downstream companies fall into two categories:
    • those importing metal-stage products  also have to meet mandatory due diligence rules
    • those operating beyond the metal stage do not have obligations under the regulation;  but they are expected to use reporting and other tools to make their due diligence more transparent.

Do all companies in the EU carry out due diligence?

At the moment not all companies in the EU carry out due diligence – but not all companies get their raw materials from conflict areas either.

Who checks whether companies comply with the regulation?  And how?

Each EU Member State must check whether EU importers comply with the regulation.

Member States' authorities will examine documents and audit reports.  If needed, they can carry out on-the-spot inspections of an importer's premises.

How is it possible to know if a mineral has been responsibly sourced or not?

EU importers must:

  • list the minerals they're importing by trade name and type
  • provide the names and addresses of their suppliers
  • indicate which country the minerals come from
  • indicate the quantities imported and when they were mined.

They must do so as part of their internal management system, and provide supporting documents. 

When minerals come from conflict-affected and high-risk areas, importers must provide extra information on:

  • the mine the minerals came from
  • where the minerals were consolidated, traded and processed
  • the taxes, fees and royalties paid.

What happens if a company doesn't comply with the regulation?

If a Member State finds an EU importer has not complied with the regulation, it will:

  • order the firm to address the problem within a given deadline and
  • follow up to make sure it does so.

Who was involved in drafting and passing the new EU regulation?

As the EU's executive body, the European Commission was in charge of drafting the regulation. 

In doing so, it worked closely with the Council of the EU, where representatives of the governments of the EU's Member States sit, and the European Parliament. 

The Council and the European Parliament had the final say on approving the regulation.

The European Commission also consulted:

  • civil society, including non-governmental organisations and groups campaigning for action to tackle the trade in conflict minerals
  • mining companies
  • traders, i.e. exporters and importers
  • smelters, refiners and manufacturers
  • countries in which mining and smelting takes place
  • companies operating downstream
  • the Organisation for Economic Cooperation and Development (OECD).

What are others doing to tackle the trade in conflict minerals?

In 2011 United Nations members unanimously endorsed Guiding Principles for Business and Human Rights.  The Guiding Principles state that companies have a responsibility to make sure their activities do not fund harm and abuses.  The Guiding Principles recommend risk-based due diligence as a practical and effective way for companies to meet this responsibility.

Since 2011 the Organisation of Economic Co-operation and Development (OECD) – an intergovernmental economic body of 35 developed countries – has issued guidelines on conflict minerals for its members.  The guidelines are considered the international benchmark for supply chain due diligence.

In 2010 the US passed legislation, known as the Dodd Frank Act Section 1502.  It requires US-listed companies to carry out due diligence on minerals sourced from the Democratic Republic of Congo, and neighbouring countries.

Several African countries, including the Democratic Republic of Congo and Rwanda, have passed laws requiring companies to check their supply chains.

China has recently developed its own conflict minerals guidelines based on the OECD Guidance. 

What were the main milestones in making the regulation a reality?

2014

March

The European Commission and the EU's High Representative for Foreign Affairs proposed an integrated EU approach to tackle the trade in minerals being used to finance armed groups in areas affected by conflict or at high-risk of being affected.

The approach consisted of:

  • a draft Regulation
  • a joint Communication
  • accompanying measures, including:
    • a development aid package
    • outreach to and dialogue with all trading partners - suppliers and buyers
    • support for small businesses in the EU
2015

May 20

The European Parliament:

  • adopted amendments to the Commission's proposal
  • decided to enter into informal trilogue talks with the Council of the EU (comprising national governments) and the European Commission.

December 18

The Council adopted its mandate for trilogues.

2016

June

Agreement was reached on the main parts of the conflict minerals package between:

  • the European Commission
  • the European Parliament and
  • the Council of the EU

November 22

The three EU institutions agreed on the final package, comprising:

  • the text of the Regulation,
  • declarations by:
    • the Council of the EU
    • the European Commission.
2017

March 16

The European Parliament adopted the legal text of the regulation.

April

The Council of the EU (comprising EU governments) adopted the legal text on 3 April 2017.

Mid-May

The Presidency of the Council of the EU and the President of the European Parliament signed the legal text into law in Strasbourg.

End May

The text was published in the Official Journal of the EU and entered into force 20 days after publication.

2021

What will be the next steps in putting the regulation into practice?

January 1

EU importers will need to carry out due diligence from this date by law.

The Commission encourages all those companies which the regulation covers to start due diligence on their supply chains for tin, tantalum, tungsten and gold as soon as they are ready, preferably well before this date.