EU Conflict Minerals Rule

Conflict Minerals: EU reaches political understanding on regulation

In June, the European Union finally reached an agreement on the broad framework of a conflict minerals regulation.

  • Who is affected: Only direct importers of minerals and metals into the EU will be required to conduct due diligence based on OECD Guidance framework. Private and public disclosure may be required.
  • Material: The regulation is limited to 3TG (tin, tantalum, tungsten, gold). Final regulation will include an annex with more detailed product description of the specific ores, concentrates and metals in scope, even products such as tin oxides and chlorides.
    Excluded mineral content:
    =>Recycled metals are likely to be excepted, although the specifics still need to be fleshed out. The definition is likely to mirror that in the OECD Guidance.
    =>Existing stocks of minerals will be grandfathered (31 January 2013) and mineral by-products will not come within the scope of the regulation.
  • Existing due diligence schemes: The EU regulation will recognize existing due diligence schemes and the recognition process is expected to be described in the final regulation.
  • Geographic scope: The regulation will apply to minerals sourced from conflict-affected and high-risk areas worldwide. In contrast, US Dodd-Frank Act is limited to the Democratic Republic of Congo.
  • Handbook for the operators: The regulation will contain a general principals-based definition of a conflict-affected and high-risk area. The EU will develop an indicative and non-exhaustive list of those areas.
  • Effective date: A two year transition period is expected before the regulation comes into full effect.
  • Reporting and disclosure: The EU Commission plans to set up a registry or transparency database that companies that are subject to the Non-Financial Reporting Directive can use to voluntarily report on their due diligence practices.

What is next

The agreement does not include further details as the final regulation still needs to be developed.
The preparation of a final regulation will involve technical meetings and one or more additional trilogue sessions (trilogue means discussions among the Commission, the Parliament and the Council) under the Slovak EU presidency
Once the text of the final regulation is completed, it will be submitted to the Parliament and the Council for adoption in the coming months.
As a regulation (in contrast to a directive), the EU's conflict minerals legislation will be directly and uniformly applicable in all member states from its effective date, without the need to adopt separate national legislation.

Eurométaux: Position paper by the EU non-ferrous metals industry

Eurométaux commented on the Draft EU Regulation and produced some recommendations to avoid existing "loopholes".
Recycling: As secondary raw materials from outside the EU could be conflict materials, the regulation should make a clear distinction between high-risk and low-risk material. Materials visually recognizable as post-consumer products or e-scrap are low risk materials whereas materials in basic form such as ingots, bars, flakes, are high risk material. The supplier from whom the recycled material (low risk material) originated from should be seen as the point in the supply chain where the material originated from in the first place. In that case, information about the location is not supposed to be open in the public.

Whitelist of EU smelters and refiners: broaden the definition of smelter and refiner in order to allow smelters and refiners of other raw materials to be whitelisted.
Area of conflict: delegate the definition of conflict area to one independent international entity with relevant expertise, e.g. UN
No threshold: introduction of whatever threshold creates a loophole as importers could form several small entities to stay below the threshold and to be excluded from the scope of the regulation.
Lack of commitment of the downstream industry: Eurométaux is concerned that the proposal for mandatory requirements only targets the upstream part of the value chain as this puts disproportional burden on the upstream.