State Department Reviewing Conflict Minerals Sourcing

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By Andrea Vittorio

The State Department and other federal agencies are looking at efforts to break the link between armed groups and the minerals trade in and around the Democratic Republic of Congo.

Their newly launched review of how best to support responsible sourcing of conflict minerals could help determine the next step in a potential rethink of a Securities and Exchange Commission disclosure rule that requires listed companies to trace their use in products such as smartphones, cars and jewelry.

Verifying the source of the minerals has proven difficult for companies, according to Government Accountability Office research, and some, including the acting head of the SEC, have questioned what impact the disclosures are having. While armed groups are not absent from the mining sector, field research by the International Peace Information Service shows their presence has been reduced at mines in eastern DRC for three of the minerals—tin, tantalum and tungsten—but they remain common and have even reportedly increased in the gold sector.

The Trump administration seemed poised to suspend or rework the reporting rule—until Apple Inc., Tiffany & Co. and other major corporations said they would continue rooting out conflict minerals from their supply chains regardless. “That gave them pause,” Arvind Ganesan, who leads Human Rights Watch’s work on abuses linked to business and other economic activity, told Bloomberg BNA.

Repeal and Replace

Instead, the agencies’ month-long request for feedback could be an attempt to “repeal and replace” the SEC reporting requirement with other government policies or programs, said Sasha Lezhnev, associate director of policy at the nonprofit Enough Project.

Doing so would address one of the main criticisms leveled at the rule by groups like the U.S. Chamber of Commerce and the National Association of Manufacturers. “We think it’s a fundamentally flawed rule and the SEC is the wrong agency to try to solve this kind of problem,” the Chamber’s Brian O’Shea told Bloomberg BNA. “So involving the agencies that do have expertise is an important step,” he said.

The Chamber was among trade groups that sued the agency over the disclosure rule, mandated by the Dodd-Frank Act. That legal challenge is now effectively over after the parties agreed no further proceedings were necessary.

The commission, which just finished gathering feedback on the rule, declined to comment on whether it’s involved in the State Department’s public consultation, which runs until April 28. The State Department didn’t comment on which other agencies are involved.

Reporting Rollback?

Responses received could feed into rewriting the reporting requirement, as the SEC’s acting chairman Michael Piwowar has hinted at, or putting it on hold, as a leaked draft of an as-yet-unsigned executive order suggests. Or “it could feed into repealing the whole thing,” though that is less likely, said Jennifer Kraus, co-founder and chief scientific officer at supply chain data and analytics provider Source Intelligence.

Republican lawmakers tried and failed to repeal the law behind conflict minerals reporting in the last Congress and may try again this Congress. They have also tried to defund the commission’s work on the issue.

“Rolling back this law would reverse progress made in cutting the link between the area’s warlords and the mineral trade,” Sen. Richard Durbin (D-Ill.), one of the sponsors of the bipartisan conflict minerals legislation that eventually became part of Dodd-Frank, said in a March 24 email to Bloomberg BNA. Durbin said he hopes the State Department “reaches the conclusion that weakening this law would only lead to unnecessary bloodshed.”

Lawmakers were scheduled to get a progress report on conflict minerals in a March 22 Senate hearing that has been postponed to April 5.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

For More Information

The conflict minerals consultation announcement is available at http://src.bna.com/nk9

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