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Union system for supply chain due diligence self-certification of responsible importers of tin, tantalum and tungsten, their ores, and gold originating in conflict-affected and high-risk areas

Jennifer GuestProject EngineerTetra TechP: (734) 213-5057E: [email protected]

1. What has happened to date2. EU legislative process3. Comparison of EU to US conflict

minerals requirements

Outline

2014/03/05 Legislative proposal published2014/03/13 Committee referral announced in Parliament, 1st

reading/single reading2014/10/20 Committee referral announced in Parliament, 1st

reading/single reading2015/04/14 Vote in committee, 1st reading/single reading2015/04/24 Committee report tabled for plenary, 1st

reading/single reading2015/05/19 Debate in Parliament2015/05/20 Decision by Parliament, 1st reading/single reading2015/07/14 interinstitutional negotiations with amendments from plenary

What has happened to date:

First Reading– Committee Stage– Plenary Stage– Follow-up Procedure

Second Reading– Committee Stage– Plenary Stage

Third Reading– Conciliation– Plenary Stage

EU Legislative Process

EU vs US: Scope

US• Tin, Tantalum, Tungsten and

Gold (3TG)• DRC and surrounding

countries (covered countries)• United States SEC filing

companies• Manufacturers (and

manufacturers that contract to manufacture) of products

• Products that contain 3TG• 3TG is necessary to the

production and functionality of the product

EU• Tin, Tantalum, Tungsten and

Gold (3TG)• Conflict-affected and high-

risk areas• Union importers of 3TG• Union smelters of 3TG

EU vs US: Labels

US• No labelling requirement

EU• Responsible importers who

self-declare can be certified by means of a label

• Responsible importers shall be granted a ‘European responsible importer’ label by Member States’ competent authorities

EU vs US: Exemptions

US• Recycled or scrap sources

EU• Recycled or scrap sources

EU vs US: Requirements

US• Conduct a reasonable country

of origin inquiry (RCOI) in good faith

• If results from the RCOI show that the 3TG is or may be coming from the covered countries then due diligence must be conducted on your supply chain in accordance to a nationally or internationally recognized frame work e.g. OECD Due Diligence Guidance

EU• Conduct supply chain due

diligence in accordance to Annex II of the OECD Due Diligence Guidance

• The regulation continues to cite requirements for due diligence that aligns with the OECD Due Diligence Guidance e.g. management system, risk assessment, grievance mechanism, supply chain policy etc.

EUAdditionally ….• Traceability system for minerals to include:

– Description of mineral including its trade name and type– Name and address of supplier to importer– Country of origin– Quantities and dates of extraction, expressed in volume or

weight– If from conflict region provide mine of origin, location

where minerals are consolidated, traded and processed, and taxes, fees, royalties paid


EUAdditionally ….• Traceability system for metals to include:

– Description of metal including trade name and type– Name and address of the supplier to the importer– Name and address of the smelter or refiner– Record of smelter or refiner third-party audit– Country of origin of the mineral – If from conflict region additional info according to the

OECD required


EUAdditionally ….• The Commission will make a list of responsible importers of minerals

and metals available on the internet.• Any smelter in the Union must meet all the requirements of this Reg. If

they do not then they will subject to fines• The Commission will make a list of responsible smelters or refiners and

make it available on the internet.• Member States shall carry out ex-post checks to ensure responsible

importers comply with Article 4, 5, 6 and 7. They will be conducted by taking a risk-based approach. The ex-posts will include: – Examination of the supply chain due diligence obligations including

management system, risk management, third-party audit and disclosure– Examination of documentation and records that demonstrate compliance

with due diligence obligations – Examination of audit obligations


EU vs US: Smelters

US• Must trace, identify and

report all smelters

EU• Must trace, identify and

report all smelters• The EU plans to maintain a

list of responsible smelters and refiners

EU vs US: Audits

US• Currently, after the court of

appeals decision, an independent private sector audit is required if a filing company claims they are conflict free or are not conflict free

EU• Certified responsible importers

shall be exempted from third-party audit provided they submit substantive evidence that all smelters or refiners in their supply chain conform to the provision of this Reg.

• Importers in scope of this Reg. shall carry out a third-party audit

• Audit scope to include:– Importer’s activities, processes and

systems for supply chain due diligence

– Importer’s compliance with Articles 4, 5 and 7 of this Reg.

EU vs US: Reporting

US• Reports are due by May 31st

of each calendar year for the previous year

• Submit to the SEC via EDGAR

EU• Reports are due by March

31st of each calendar year for the previous year

• Submit to the Member State competent authority

EU vs US: ReportingUS

• Form SD:– Commission File Number– IRS Employer Identification Number– Address and Contact Person– Brief description of the RCOI– Form to be filed on EDGAR

• CMR:– Detailed description of the due

diligence process implemented and the results of the assessment

– Provide a description of the products and the facilities used to process these products

– Disclose the location of the mine and the step took to determine this with the greatest possible specificity

– When applicable a copy of the independent third party audit and who conducted the audit and certification of independence

EU• Company contact details and description of

its commercial activities• Declaration of conformity to Article 4, 5, 6

and 7• Third-party audit• Total amount of minerals purchased as

confirmed by a third-party audit• Name and address of each responsible

smelter or refiner in its supply chain• Third-party audit of smelter or refiner• Proportion of minerals originating from

conflict-affected and high-risk areas to the total amount of the minerals purchased by each of those smelter or refiner, as confirmed by a third-party audit

• Report publicly on an annual basis on due diligence policies and practices and risk management and summary of third-party audit

Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains

1. Status2. Comparison of China to US conflict

minerals requirements

Outline

• In an unprecedented move the Chinese government opened up their Due Diligence Guidelines for Responsible Mineral Supply Chains for public comment.

• The commenting period closed on November 7, 2015• CFSI submitted and included anonymous comments

from member companies• Currently awaiting feedback on the comments from

China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters (CCCMC)

What has happened to date:

China vs US: Scope

US• Tin, Tantalum, Tungsten and

Gold (3TG)• DRC and surrounding

countries (covered countries)• United States SEC filing

companies• Manufacturers (and

manufacturers that contract to manufacture) of products

• Products that contain 3TG• 3TG is necessary to the

production and functionality of the product

China• Covers all minerals but the

CCCMC is prioritizing: Tin, Tantalum, Tungsten and Gold (3TG)

• Conflict-affected and high-risk areas

• Voluntary for “all Chinese companies which are extracting and/or using mineral resources and their related products and are engaged at any point in the supply chain of minerals”

China vs US: Requirements

US• Conduct a reasonable country

of origin inquiry (RCOI) in good faith

• If results from the RCOI show that the 3TG is or may be coming from the covered countries then due diligence must be conducted on your supply chain in accordance to a nationally or internationally recognized frame work e.g. OECD Due Diligence Guidance

China• Must determine origin• Risk based assessment• Apply OECD Due Diligence

Guidance

ChinaAdditionally ….• Risk is broken down into two categories.

– Type 1 are the risks contributing to conflict and serious human rights abuses, as they are defined in the OECD Due Diligence Guidance

– Type 2 go beyond the risks outlined in the OECD Due Diligence Guidance. They include those risks relating to serious misconduct, as defined in the Chinese Responsible Mining Guidelines.


ChinaAdditionally ….• Warning Signs have been defined to help determine when

enhanced due diligence is required:


China vs US: Audits

US• Currently, after the court of

appeals decision, an independent private sector audit is required if a filing company claims they are conflict free or are not conflict free

EU• Audit will assess whether

the company has fulfilled core requirements

• the auditor will check a) whether the company took

appropriate steps to actively collect information on risks and to evaluate the information received by third parties

b) whether the company has taken effective and adequate action to mitigate the risks identified

ChinaAdditionally ….• Companies can apply for certification

– Basic responsible sourcing certification– Basic responsible sourcing certification (making progress)– Extended responsible-sourcing certification

• Certified companies and those seeking certification will be made available via list on a website

China vs US: Audits

China vs US: Reporting

US• Reports are due by May 31st

of each calendar year for the previous year

• Submit to the SEC via EDGAR

China• Reporting publicly for the

step 5 report (OECD Due Diligence)

• A template and website will be made available

• Watch for feed back from the commenting period• CCCMC has promised further guidance on how to

implement due diligence requirements and audit protocols

What’s Next

Requirement U.S. E.U. ChinaMinerals in scope 3TG 3TG All (3TG priority)

Regions/Areas in scope

Democratic Republic of the Congo (DRC), Angola, Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia

All conflict-affected and high-risk areas

All conflict-affected and high-risk areas

Companies in scope All SEC filing companiesAll importers and smelters

All Chinese companies which are extracting and/or using mineral resources and their related products and are engaged at any point in the supply chain of minerals

OECD Due Diligence Guidance Yes Yes YesAudit Pending Court Decision Yes YesPublic Reporting Yes Yes Yes

Overall Comparison

Jennifer GuestProject EngineerTetra TechP: (734) 213-5057E: [email protected]

union system for supply chain due diligence self - certification ......union system for supply chain...

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