On the 1st of January 2021, new due diligence obligations within the Conflict Minerals Regulation are set to come into full force - bringing with them a raft of implications and obligations for importers across the European Union.
We've written previously on the development of the Conflict Minerals Regulation, and how it impacts on supply chain risk for UK electronics manufacturers.
In this post, we provide an overview of what the latest due diligence requirements will mean - and how they will need to be put into practice by the importers, suppliers or buyers of certain minerals and metals.
What are conflict minerals?
The term 'conflict minerals' is one that is used to describe any natural resource or commodity that is extracted, refined or transported within a politically unstable area - and the proceeds of which are used to finance the perpetuation of illegal acts, human rights abuses, forced labour or armed conflict.
The primary aim of the EU's Conflict Minerals Regulation is to stem the trade of four specific minerals - tantalum, tin, tungsten and gold (also referred to as the 3TGs) - that are regularly used in a wide variety of everyday electronics products.
What do the new due diligence regulations mean?
In order to comply with the newest Conflict Minerals regulations, from January 2021 all EU importers will be required to demonstrate the following:
- that they have strong company management systems in place
- that they are actively committed to identifying and assessing any potential risks to their supply chain
- that they have clear strategies to respond to any identified supply chain risks
- that they are carrying out independent third-party audits of their supply chain due diligence
- that they are providing annual reports on the due diligence of their supply chain
Who will be affected?
The new EU regulation aims to ensure that all suppliers, buyers and importers of 3TG minerals are taking steps to combat the trade of conflict minerals.
They will also need to demonstrate compliance with the international responsible sourcing standards set out by the Organisation for Economic Co-operation and Development (OECD).
A wide variety of activities take place at various points along the supply chain, so the Conflict Minerals Regulation makes a distinction between what it refers to as 'upstream' companies (miners, traders, smelters, refiners etc) and 'downstream' companies (traders, producers of components, contract manufacturers and end users).
Upstream companies operate at what is acknowledged as being the 'riskier' end of the supply chain, and as such will be required to comply with mandatory rules on due diligence.
What are your obligations?
The obligations for downstream companies, however, will differ depending on which category they fall within - with a distinction between made between those that are actively involved in the importing of metal-stage products and those that operate beyond the metal stage.
Any company that plays a part in the importing of metal-stage products will be required to adhere to the regulations' mandatory due diligence rules - while those operating beyond the metal-stage will not have obligations under the regulation but will still be expected to provide full transparency of their due diligence.
At present the EU regulation only applies directly to approximately 600 - 1000 EU-based importers, however it is also intended to promote the responsible sourcing of smelters and refiners of these minerals, wherever they may be based around the world.
For EU importers this will require identifying the smelters and refiners within their own supply chains and ensuring that each is following correct due diligence practices.
As an aid to compliance, the European Commission has plans in place to compile a "white-list" of approved smelters and refiners that have demonstrated that they source their metals and minerals in a responsible manner.
The continuous and proactive management of your supply chain relationships is vital to ensuring regulatory compliance and minimising any negative impacts on your business.
A reputable outsourcing partner will be actively dedicated to keeping themselves and their customers cognisant of the latest changes to industry regulations.
If you would like to know more about managing supply chain risk then you may also find the following resources helpful.