An aerial view of the Luwowo coltan mine, near Rubaya in the northeastern province of North Kivu, DRC. Credit: MONUSCO Photos/ CC-BY-SA-2.0

By Carey L. Biron
WASHINGTON, Jun 3 2014 (IPS)

For the first time, nearly 1,300 U.S. companies have filed reports on whether the products they manufacture or sell are made with minerals that have bankrolled conflict in the Great Lakes region of central Africa.

Monday was the deadline for the filings, the first concrete results of a provision passed in 2010 by the U.S. Congress aimed at helping to end the long-running civil war in the Democratic Republic of the Congo (DRC).

Yet the law’s regulatory details have since been the target of sustained legal attacks from companies and lobby groups that have warned that fulfilling the reporting requirements would be onerous and even unconstitutional.

“In general we’re very disappointed with how vague many of the reports are, lacking much description on processes.” -- Carly Oboth, policy advisor at Global Witness
By Tuesday, however, it appeared that most companies expected to file a report on the so-called conflict minerals in their supply chains had done so. Those reports are now publicly available through the Securities and Exchange Commission (SEC), the federal regulator tasked with implementing the rule, formally known as Section 1502.

“This is a historic day. Five years ago this issue wasn’t on anyone’s radar, and now consumers can look under the hood of what’s in a product,” Sasha Lezhnev, a senior policy analyst at the Enough Project, a Washington-based watchdog group, told IPS.

“I think many people knew what companies like Apple, Intel or HP had been doing, as they have been pretty proactive on this issue. But no one has known what companies like Walmart or GM [General Motors] have been doing.”

In 2009, the U.N. Security Council formally recognised that revenues from minerals extraction were strengthening multiple armed groups operating in eastern DRC. The electronics industry has been one of the most significant users of these minerals, which include tin, tantalum, tungsten and gold.

Since then, Lezhnev reports, 95 mines in the DRC have been validated as “conflict free”, while two-thirds of the tin, tantalum and tungsten mines in the country’s east have been demilitarised. Gold remains a significant problem, however, and the Enough Project and others are calling for more concerted action in tightening sourcing decisions, particularly from the jewellery industry.

Box-checking?

Under the SEC guidelines, companies listed on U.S. stock exchanges must now file annual reports describing their efforts to discern whether their products use conflict minerals and, if so, their plans for stopping this practice. Several thousand U.S. companies have been identified as potentially – and likely unwittingly – selling products containing conflict minerals.

The consulting firm Booz Allen Hamilton has stated that it has been involved in the manufacture of circuit boards, electrical assemblies and surveillance recorders containing conflict minerals. Many of these products, the company noted, were manufactured for the U.S. government.

Yet most companies have reported incomplete results. Microsoft, for instance, states that it “cannot exclude the possibility” that its products contain conflict minerals, but also that it hasn’t yet been able to obtain full sourcing information from its “extensive and complex” supply chain.

Advocacy groups are also concerned that most companies aren’t providing information on what follow-up actions they took after surveying their suppliers, if any.

“In general we’re very disappointed with how vague many of the reports are, lacking much description on processes,” Carly Oboth, a policy advisor at Global Witness, a watchdog group that has supported the conflict minerals regulations, told IPS.

“We’re concerned with how companies have come to their conflict minerals status decision, as many are claiming that they’re ‘conflict indeterminable’ or ‘conflict free’ but not showing how they arrived at that conclusion. This isn’t supposed to be a box-checking exercise, but rather about showing that you’re not sourcing from a conflict zone.”

Global Witness says the majority of the reports that have been filed thus far have been “inadequate”.

Conflict-free competition

For many companies faced with auditing their supply chains, a key chokepoint has been the metal smelters that turn raw resources into workable products. An industry-led initiative, the Conflict-Free Smelter Programme, has been particularly prominent, having so far certified around 40 percent of the world’s smelters, according to the Enough Project’s Lezhnev.

Yet Global Witness’s Oboth says many companies have simply ascertained whether their suppliers have this certification, and then gone no farther.

“Instead, what we want them to do – and what the [SEC] rule requires – is to follow up with the smelters,” she says. “Intel, for instance, has made site visits to smelters to check on their conflict minerals policy, to see how they’re actually identifying risk.”

Indeed, Intel, the microprocessor manufacturer, has in many regards been the most proactive company on the issue. In January, it unveiled the world’s first “conflict-free” product, and ahead of the recent filing deadline was the only company to offer a fully audited report on its supply chains.

Following an April court ruling that altered the original SEC rule, companies are no longer required to state whether or not a product is “conflict free” (though the court may rehear this case in coming months). Yet Intel, echoing advocacy groups and regulators, says such designations are important.

“One of our takeaways is around transparency. Although not required to disclose the status of our products, we believe this transparency shows our commitment on this issue to our customers and stakeholders,” Intel told IPS in a statement.

“We encourage other companies to also share their product conclusions as we all work towards validating our products as DRC conflict free. Product conclusions provide a useful and transparent method to communicate the progress of our due diligence efforts.”

Already the presence of a single conflict-free product on the market has spurred competition, and a similar dynamic is expected to result from Monday’s public filings.

“We’re already seeing other companies racing to make the next conflict-free product, and we’re encouraging consumers to urge the largest aerospace and automotive companies to take part,” Lezhnev stated.

“Intel’s step is a good one, but there are companies out there that are far bigger. For instance, when is Boeing or GE going to make the next conflict-free product?”

(END)

National police arrive on a boat at Goma's port in DRC as U.N. peacekeepers look on. Credit: William Lloyd-George/IPS

By Carey L. Biron
WASHINGTON, Apr 15 2014 (IPS)

The United States’ second-highest court has upheld most of a landmark U.S. law requiring companies to ascertain and publicly disclose whether proceeds from minerals used to manufacture their products may be funding conflict in central Africa.

The ruling, released Monday, means that U.S.-listed companies will need to file their first such reports with federal regulators by the end of May. The statute, known as Section 1502 and covering what are referred to as “conflict minerals”, became law in 2010, but the details of its actual implementation have remained up in the air ever since.The ruling is “a major step backward for atrocity prevention in the Great Lakes region of Africa and corporate accountability in the United States.” -- Holly Dranginis

“There are very encouraging aspects of this ruling, and the bottom line is that the rule hasn’t been overturned and now companies will need to move forward,” Corinna Gilfillan, head of the Washington office of Global Witness, a watchdog group that supports Section 1502, told IPS.

“The heart of this statute is companies carrying out due diligence on their supply chains so they can figure out whether their minerals are coming from conflict areas. Due diligence is a process – first knowing the supply chain and then taking action to address any problems. This ruling has upheld the due diligence and reporting aspects.”

The U.S. Congress hoped Section 1502 would help quell the violence that has wracked Africa’s Great Lakes region, particularly in parts of the Democratic Republic of Congo (DRC), for the past decade and a half. Findings by the United Nations, rights groups and others have warned that rebels in these areas have funded their operations in part by mining and selling any of five minerals that have become particularly sought after by the international electronics industry.

The rule has come under attack by U.S. business groups who say the requirements would be onerous and infringe on their constitutionally guaranteed right to free speech, by forcing them to label their products “conflict free”. But agreeing with previous rulings, a three-judge bench on Monday dismissed most of these concerns.

The dismissal included business concerns that the Securities and Exchange Commission (SEC) had not adequately analysed costs and benefits of the regulation.

“The rule’s benefits would occur half-a-world away in the midst of an opaque conflict about which little reliable information exists, and concern a subject about which the [SEC] has no particular expertise,” the court stated in its decision.

“Even if one could estimate how many lives are saved or rapes prevented as a direct result of the final rule, doing so would be pointless because the costs of the rule – measured in dollars – would create an apples-to-bricks comparison.”

Compelled speech

Yet the court also offered a split decision in favour of the manufacturers on the free speech concern, allowing both proponents and critics of Section 1502 to claim victory.

U.S. law allows for certain “compelled” public disclosures, but generally only if those are recitations of straight fact. However, the court found the issue of conflict minerals to be far more complex.

“[I]t is far from clear that the description at issue – whether a product is ‘conflict free’ – is factual and nonideological. Products and minerals do not fight conflicts,” the court stated.

“The label ‘conflict free’ is a metaphor that conveys moral responsibility for the Congo war. It requires an issuer to tell consumers that its products are ethically tainted, even if they only indirectly finance armed groups … By compelling an issuer to confess blood on its hands, the statute interferes with that exercise of the freedom of speech.”

It is unclear whether the SEC will appeal this part of the decision to the U.S. Supreme Court (the agency says it’s reviewing the ruling). For now, the decision undermines a key strategy for groups hoping to use a labelling requirement to shame companies into compliance, though related information will still be publicly available.

The ruling is “a major step backward for atrocity prevention in the Great Lakes region of Africa and corporate accountability in the United States,” Holly Dranginis, a policy associate with the Enough Project, an advocacy group here, said Monday.

“The court’s proposal that a conflict-free determination is ideological is unfounded and undercuts the power of society’s growing awareness that global markets and security in fragile states are in fact linked.”

Meanwhile, a separate case before the same court could soon undermine the free speech finding. A smaller bench has already ruled in favour of requiring meat producers to include “country of origin” information on their products, and the case is now slated to be heard by the full court in mid-May.

A dissenting opinion in the conflict minerals ruling noted that the meat-labelling decision could have a significant impact on Monday’s ruling.

6,000 reports

The complexities of implementing Section 1502 remain highly problematic in central Africa, and some are warning that the law could soon collapse under its own weight. Yet others say the regulation is already having a noticeable impact, with the Enough Project suggesting that “over two-thirds of tin, tantalum and tungsten mines [are] now free of armed groups.”

Monday’s ruling should now allow the U.S. side of the statute’s implementation to proceed. This means that around 6,000 U.S. companies will need to file reports with the SEC, and post them to company websites, by the end of May.

The lawsuit against Section 1502 was brought by three of the United States’ largest business lobbies, the National Association of Manufacturers (NAM), the U.S. Chamber of Commerce and the Business Roundtable. In a joint statement sent to IPS, the three lauded the decision.

“[W]e are pleased with the D.C. Circuit’s decision … finding the statute and regulation are unconstitutional,” the groups stated. “We understand the seriousness of the humanitarian situation in the Democratic Republic of Congo (DRC) and abhor the violence in that country, but this rule was not the appropriate way to address this problem.”

Yet other businesses are already complying with the spirit of Section 1502. Perhaps the most significant of these companies, Intel, is actually a member of NAM.

In January, the company pledged to remove all conflict minerals from its microprocessors. It says it now has no plans to change course.

“Regardless of this decision, we will continue to do our part to achieve conflict-free supply chains and to report publicly on these efforts,” Lisa Malloy, an Intel spokesperson, told IPS.

“The challenge of responsible minerals sourcing requires a comprehensive solution that involves government agencies in the U.S. and internationally, non-profit groups and industry. We urge all partners to continue the momentum towards a solution.”

Major manufacturing and business groups on Tuesday urged a court here to roll back a new U.S. regulation that would soon require major manufacturers to ensure that their global supply chains are free of minerals used to fund violence in the Great Lakes region of central Africa.

Former “blood diamonds” now provide employment in Sierra Leone. Credit: Tommy Trenchard/IPS

Yet the previous day, Intel, the major computer hardware manufacturer, announced the world’s first product formally dubbed free of such materials, stating that its microprocessors would no longer use “conflict minerals”. The announcement highlights trends that advocates of greater supply chain accountability say are already well underway, and which they suggest belie parts of the legal case against the rule.

“This provision has already catalysed reforms of the minerals trade in the Great Lakes region and has prompted both [U.S.] and Congolese companies to carry out supply chain due diligence and source minerals more responsibly,” Carly Oboth, an assistant policy advisor with Global Witness, a watchdog group, told IPS.

“According to consulting firm Claigan, in September 2013 2,946 companies were identified as having conflict minerals compliance programmes … Despite the appeal, many companies have already publically demonstrated the feasibility of the rule as they begin implementation to meet the May 31, 2014 reporting deadline.”

The U.S. Chamber of Commerce, the National Association of Manufacturers (NAM) and the Business Roundtable, all major lobby groups, say the new rules impose an undue financial burden on companies and infringe on constitutional guarantees of free speech. The groups say they are supportive of the aims of the regulation, known as Section 1502, but want significant tweaks and the inclusion of certain exemptions.

But supporters counter that the Securities and Exchange Committee (SEC), the country’s lead regulator of publicly listed companies, has already thoroughly weighed these issues.

“Generally we’ve been supportive of the SEC’s position and think they did extensive analysis before adopting the conflict minerals rule,” Julie Murray, an attorney currently acting as counsel for Amnesty International, a rights group that has joined the lawsuit in support of Section 1502, told IPS.

“The SEC received some 13,000 letters urging it to promptly adopt this rule, and we think the commission did an exhaustive job of looking at the issues – taking into account the concerns that were raised by these groups, and trying to make the rule cheaper and easier to comply with.”

The appeal follows a detailed and strongly worded legal decision in July that upheld Section 1502, which was mandated by Congress in 2010 but only finalised last year. As the regulation currently stands, by June large companies will need to certify the sourcing of a handful of minerals sourced from central Africa, while smaller companies will have a longer timetable.

In the appeal, a central issue in the court’s decision-making will be the estimates the SEC used to figure out the financial burden that Section 1502 would place on companies, upwards of four billion dollars in initial compliance costs followed by annual costs of 200-600 million dollars. Yet Murray suggests that companies will be able to bring these costs down as they learn how to comply with the new regulations.

“In general we think that it’s important that companies learn about the source of the materials they’re using – most consumers say they should know whether the materials they’re purchasing are responsible for rape, torture and murder in the DRC,” Murray says. “At the same time, this rule isn’t just about human rights, but also serves an important role in informing investors and consumers.”

On Tuesday, however, two of the three judges hearing the case appeared sceptical of several aspects of Section 1502. They raised concerns about the precedent that the regulation would set, the SEC’s capacity to create such a rule, and even the scope of the underlying law.

Conflict-free microprocessors

In 2009, the U.N. Security Council formally recognised that revenues from minerals extraction were strengthening multiple armed groups operating in eastern DRC. The electronics industry has been one of the most significant users of the minerals that have been singled out for scrutiny, which include tin, gold, tungsten and others.

Supporters of Section 1502 say that many businesses are showing strengthening interest in doing the work necessary to comply with the rule, both for brand and financial reasons. In this, Intel is widely seen as having made a uniquely serious effort to clean up its global supply chain.

“Two years ago, I told several colleagues that we needed a hard goal, a commitment to reasonably conclude that the metals used in our microprocessors are conflict-free,” Intel’s CEO, Brian Krzanich, said Monday. “We felt an obligation to implement changes in our supply chain to ensure that our business and our products were not inadvertently funding human atrocities in the Democratic Republic of the Congo.

(An Intel executive sits on the National Association of Manufacturers’ board and is thus technically a party to the current appeal. While a company spokesperson declined to comment on the case, on its website Intel notes that its “positions do not always align 100% with those of the industry and trade organizations to which we belong.”)

Intel called the achievement a “critical milestone”, while Krzanich said the it was “just a start. We will continue our audits and resolve issues that are found.” He also urged the rest of the electronics industry to follow suit.

Others say industry leadership from other sectors is equally important.

“Now that Intel has released the first conflict-free product, it’s time for other companies to do the same,” Sasha Lezhnev, a senior policy analyst with the Enough Project, an advocacy group here, told IPS. “Particularly for gold – it’s important for jewellers to take action, while aerospace companies also need to step up. This problem won’t be solved by just one company.”

Lezhnev recently returned from the DRC, and notes that Section 1502, despite having yet to come fully into force, has already played a “backbone” role in defunding armed groups in the eastern part of the country. Such groups, he says, are also far less present today in the mining areas.

“Smuggled minerals are now about a third of the price of the [certified] minerals, so the new price this rule helped to spur is offering a strong incentive to build up a conflict-free trade,” he says. “You’re seeing the disarmament of many armed groups … and while that is not only because of the new regulation, this rule is offering a strong incentive for them to not restart again.”

Artisanal diamond miners at work in the alluvial diamond mines around the eastern town of Koidu, Sierra Leone. So-called ‘blood diamonds’ helped fund civil wars in Sierra Leone and Liberia, but now provide much-needed jobs as well as revenue for the government. Credit: Tommy Trenchard/IPS

By Carey L. Biron
WASHINGTON, Nov 12 2013 (IPS)

Countries in Africa’s Great Lakes region are moving too slowly on an international plan to certify the sourcing of “conflict minerals”, researchers here are warning, a failure that could threaten the entire certification process.

Recent international efforts have made important gains in cutting off militants in Rwanda, Congo and neighbouring countries from mining profits, while bolstering focus on ensuring clean supply chains, particularly in the global electronics industry. Today, for instance, far fewer rebel groups are present in mines in eastern Congo, according to new analysis by the Enough Project, a Washington advocacy group."The heart of this process is asking companies operating in the region to take responsibility for their supply chains." -- Annie Dunnebacke of Global Witness

Yet several key components of an international initiative aimed at systematising the global traceability of these “conflict minerals” have yet to be fully set up by the region’s governments. In a new report, the Enough Project suggests the certification process is today at a “crossroads”.

“Minerals can be a boon for peace in Congo and the region, not a conflict curse,” Sasha Lezhnev, a senior policy analyst with the Enough Project, said Monday.

“But if Rwanda, Congo and regional states do not take urgent steps to complete the mineral certification process in the next few months, multinational companies may stop purchasing many minerals from the region that cannot credibly be certified as conflict-free.”

One key deadline in this regard is now just months away. In May 2014, a landmark U.S. regulation will start requiring all U.S.-listed corporations to publicly report on the provenance of a list of minerals coming from the Great Lakes region.

And even as this U.S. provision – known as Section 1502 of the Dodd-Frank Act, massive financial sector overhaul legislation passed in 2010 – has proven to be a major global impetus, the European Union is currently working on similar legislation.

“Over the past two years, we’ve certainly seen increased interest by companies to strengthen the level of minerals traceability. Our member companies have been putting a lot of resources into due diligence, carrying out a tremendous amount of tracing very far up the supply chain,” Julie Schindall, director of communications at the Electronic Industry Citizenship Coalition (EICC), an initiative that focuses on auditing smelters and refiners, told IPS.

“Yet it would be unfair to say that every company is doing this only due to action by regulators, though pressure from government, civil society and consumers is all vital. Companies also believe this matters, and some have been working on these issues far longer than they’ve been mandated.”

Safeguards lagging

The Enough Project’s warning comes just as a major conference is set to take place, later this week in Rwanda, among an international group of experts on responsible mineral supply chains.

Just ahead of the meeting, the certification process reached something of a milestone, with Rwanda last week issuing its first conflict-free certificate, known formally as an International Conference of the Great Lakes Region (ICGLR) Mineral Export Certificate. (Unlike the EICC, this certificate aims to audit operations at the level of extraction.)

The Congo government is reportedly preparing to do the same soon.

Yet there are concerns that these certificates have been prepared without mandated safeguards being in place. Enough Project researchers note that the process by which these initial certificates are being offered are “ad hoc”, with the governments focusing on mines that are particularly easy to certify.

“Interim steps will not work for all mines,” they write.

In the half-dozen years since the ICGLR Regional Initiative against the Exploitation of Natural Resources (RINR) was created, a rudimentary mine inspection system has been created and is partially functioning. Yet other important components of this framework – including a regional database to allow for the tracking of minerals from individual mines, disclosure requirements and critical auditing and monitoring systems – have yet to be finalised, in addition to more general deficiencies in capacity and public support.

While the governments of Rwanda and Congo have put in place interim measures to address some of these systemic gaps, these have been criticised for lacking transparency.

“Right now it’s a bit of a case of putting the cart before the horse – if you want a certification to be credible, then safeguards and monitoring have to be in place before you launch it,” Annie Dunnebacke, deputy campaigns director at Global Witness, a watchdog group that has been a key proponent of the ICGLR certification initiative, told IPS from Rwanda.

“At the same time, if this system launches before it’s ready, and at some point down the road is certifying actual conflict minerals, then we have a problem. The credibility of the system is the most important component.”

Yet Dunnebacke cautions advocates not to lose sight of the central priority: private sector due diligence. She says focus on this responsibility will ease concerns over the possibility of companies turning away from the region.

“The heart of this process is asking companies operating in the region to take responsibility for their supply chains, to identify and mitigate risks. Private sector players have to prove they’re carrying out due diligence,” she says.

“But companies can carry out due diligence, and can also source from the region, even if a fancy certification process is not up and running.”

Transformational development

Ahead of this week’s meetings in Rwanda, the Enough Project is now urging the United States, European Union, World Bank and electronics companies to strengthen technical assistance in several areas, in the hopes of expediting the formation of central components of the certification processes.

The World Bank has recently created a new project, the Africa Extractive Industry Trust Fund, through which it says it aims to work with African countries to provide advice on how to negotiate “fair and equitable contracts and deliver transformational development benefits.”

But the Washington-based development institution emphasises that certification remains a key requirement.

“Channelling revenues from Africa’s minerals into significantly improving people’s lives is an essential development investment in the continent’s future,” a bank spokesperson told IPS, “and so effective certification and traceability are vital steps in this process for countries, especially in the Great Lakes region.”

A U.S. federal judge has upheld a key regulatory provision aimed at ensuring that the profits from products mined in central Africa are not used to benefit armed groups, particularly in the Democratic Republic of Congo (DRC).

Artisanal diamond miners at work in the alluvial diamond mines around the eastern town of Koidu, Sierra Leone. So-called ‘blood diamonds’ helped fund civil wars in Sierra Leone and Liberia, but now provide much-needed jobs as well as revenue for the government. Credit: Tommy Trenchard/IPS

Rights groups are lauding the decision, stating that the so-called “conflict minerals” provision has already led to positive impacts on the ground, both in Congo and in U.S. boardrooms.

“This is a major victory, and shows how important this rule is for holding companies to account and ensuring that they take responsibility for the impacts of their purchases,” Corinna Gilfillan, head of the U.S. office of Global Witness, a watchdog group that filed a court brief in the case, told IPS.

“This provision has generated unprecedented levels of attention towards the eastern Congo, significantly increasing scrutiny around supply chains. After all, what company wants to be associated with funding human rights violations in Africa?”

The rule, known as Section 1502 or the “conflict minerals” provision, was originally signed into law in 2010 as part of a massive piece of financial industry legislation known as the Dodd-Frank Act. Two years later, in August last year, U.S. regulators finalised details on how companies listed in the United States would be required to implement the provision.

Under Section 1502, starting in early 2013 companies using any of four minerals – gold, tin, tungsten or tantalum, widely used in modern electronics – sourced from the DRC or neighbouring countries would need to provide proof that they had carried out due diligence to ensure that these products were not benefiting armed groups.

Yet the rule immediately faced a lawsuit by powerful trade associations representing U.S. businesses and manufacturers. They claimed that the conflict minerals provision would impose inordinate costs that U.S. regulators had not fully analysed, among several other complaints.

Another Dodd-Frank provision, requiring large extractives companies to disclose any payments made to foreign governments, was struck down by the U.S. courts earlier this month.

On Tuesday, however, Judge Robert Wilkins rejected each of these contentions, finding the Security & Exchange Commission (SEC)’s economic analysis to have been “eminently appropriate”.

“Taking all of these elements of the disclosure scheme together, the Court finds a ‘reasonable fit’ between the relevant provisions of Section 1502 and the Final Rule and Congress’s objectives in promoting peace and security in and around the DRC,” Judge Wilkins wrote in a detailed 63-page opinion.

The U.S. Chamber of Commerce, one of the main litigants in the case, told IPS in a statement that it is still “reviewing the court’s decision and our options going forward. We continue to believe this rule, while well intentioned, is unsupported by the Agency’s own record.”

‘Major opportunity’

For now, Tuesday’s fairly resounding decision clears the way for full implementation of Section 1502, with no other lawsuits on the issue currently pending.

Yet despite the legal uncertainty, this rule has already led to significant action from the Congolese government as well as several major U.S. companies – including those technically party to the lawsuit.

“There has actually been a rather strong disconnect between these big industry groups and their extreme positions and what we’ve been seeing individual companies doing to comply,” Global Witness’s Gilfillan notes. “Many have not been counting on lawsuits to get them out of this, but rather have been proactively working to comply.”

The utilities giant General Electric (GE), for instance, stated in May that it “shares … a commitment to take responsibility to alleviate suffering caused by the conflict in the DRC”, and noted that while it is a member of the U.S. Chamber of Commerce, “the views and positions expressed by the Chamber are its own, and not GE’s.”

Other major electronics companies to break with the Chamber on this issue in recent months have included Microsoft and Motorola. International industry initiatives – such as the Conflict Free Smelter Programme – have likewise been started or strengthened in the aftermath of Section 1502’s passage.

“So now we’re calling on all of these companies to do everything they can to ensure that the minerals they’re using aren’t fuelling human rights violations,” Gilfillan continues. “We have a very difficult situation in eastern Congo, so we can’t afford any more delays.”

In addition, the Congolese government has sought to build on the groundwork laid by Section 1502. In late 2011, the country’s mining minister reportedly stated that the legislation offered a “major opportunity” to delink minerals and violence in Congo, which has been at the centre of natural resources-driven conflict for more than a century.

Last year, the Congolese government introduced legislation requiring companies using these minerals to undertake supply chain due diligence to ensure that the products weren’t funding rights violations. Since then, the government has suspended at least two Chinese export companies for failing to adhere to this process.

Global principles

Dodd-Frank is also catalysing broader global action on conflict minerals, with the European Union in particular currently considering adopting policies similar to Section 1502. A public consultation process on this proposal just closed, and some are expecting draft legislation by the end of this year.

But while the United States may be leading global policy in this particular area, some groups are frustrated that Washington has yet to implement nascent international guidance on the human rights-related responsibilities borne by multinational corporations.

On Wednesday, a dozen rights, development and environment groups, under the umbrella of the International Corporate Accountability Roundtable (ICAR), sent a letter to President Barack Obama, calling on him to prioritise implementation of the United Nations Guiding Principles for Business and Human Rights, passed in 2011.

During a fact-finding mission to the United States, the letter notes, a U.N. working group found “significant gaps” in the U.S. efforts to implement the Guiding Principles, as well as “little appreciation of human rights being material to the conduct of business”.

Tuesday’s court decision on Section 1502 “recognises that business has a responsibility to respect human rights, and that the government, including agencies like the SEC, can and should ensure that business operations do not negatively impact human rights,” Amol Mehra, director of the Washington-based ICAR, told IPS.

“In this regard, we are calling for the development of a government-wide approach to business and human rights, and for President Obama to use appointments to critical positions in agencies and departments to effectuate the U.S. government’s duty to protect human rights. We look forward to further engagement to ensure that precedents like the conflict minerals provision are defended, promoted and extended.”

After a 16-month delay, a U.S. government regulator charged with investment oversight has voted on rules that will now govern U.S.-listed companies operating in the extractive industry as well as those that use minerals whose sale may fuel violence in other countries, particularly in central Africa.

On Wednesday, the Securities and Exchange Commission (SEC), charged with overseeing U.S. stock exchanges, approved rules on the implementation of two widely anticipated provisions of a broad financial reform package passed by the U.S. Congress in mid-2010, known in part as Dodd-Frank.

“We have received significant public input on this rulemaking through the written comment process, which generated more than 400 letters,” SEC Chair Mary Schapiro announced Wednesday morning.

“In response, we incorporated many changes from the proposal that are designed to address concerns about the costs…The rules we are considering use the same process as proposed, but many of the mechanisms within the process have been modified in response to comments.”

The first provision, section 1502, is aimed at cutting off financial support for so-called conflict minerals, whose extraction and sale has been blamed in part for financing rebel groups in several countries, particularly those at the centre of the violence raging in eastern Democratic Republic of Congo (DRC). Indeed, the legislative text of section 1502 specifically notes the situation in the DRC.

In addition, section 1504 will require petroleum companies listed in the United States to offer annual reporting on payments made to the governments of other countries, in the hope that this additional transparency measure will cut down on instances of corruption.

While proponents of the provisions suggest that the SEC has no mandate to actually reject laws enacted by Congress, there has been much anticipation during the course of the SEC deliberations. There has also been mounting frustration from across the ideological spectrum as the SEC has failed to act, in part citing massive public response on the issue.

In June, nearly five dozen members of the U.S. Congress wrote a letter to the SEC, urging the agency to either act on the matter or explain the delay.

During the lengthy period of deliberation, activist and watchdog groups suggest, the SEC was ferociously lobbied by industry groups, resulting in certain elements of the two provisions being watered down. In the final ruling, for instance, manufacturers using scrap or recycled materials will not be required to do due diligence on their supply chains.

“Strong industry lobbying created significant confusion around several key issues,” Jana Morgan, with Global Witness, a Washington-based group that focuses on natural-resources exploitation, told IPS immediately after Wednesday’s vote.

“We are particularly disappointed that companies will be able to describe the country of origin for their minerals as ‘undeterminable’ for several years. This disastrous decision will allow companies to avoid dealing substantively with this issue. The original draft had no such allowance, so now we feel that Congress needs to look at whether this rule accords with the legislative intent.”

Conflict-free products?

In general, however, watchdog groups applauded the SEC’s moves, particularly for refusing to include exemptions in either of the sections other than an extended phase-in period. Interestingly, the response from industry groups was also relatively muted.

“The [SEC] was clearly thoughtful and deliberative and made some constructive changes to the final rule,” Lisa K. Burgess, with the U.S. Chamber of Commerce, an industry lobbying group that had threatened to file a lawsuit to stop the SEC’s implementation of these provisions, told IPS. “However, clearly, challenges remain, and we will need to analyse the text of the rule to determine our next steps.”

Indeed, in the immediate aftermath of Wednesday’s vote, both industry and watchdog groups hastened to note that the full strength, or weakness, of the new Dodd-Frank provisions will be understood only after a careful examination of the final details.

“While we welcome the SEC’s rules that will finally bring these sections into effect, the devil is in the details,” Ian Gary, a senior policy manager with Oxfam America’s oil, gas and mining campaign, told IPS. “We’re in the process of thoroughly analysing the rules to determine whether they adhere to the statutory requirements and Congressional intent.”

Still, the knowledge of these looming provisions has already started to have an impact, even before they have been fully implemented. In part this could be attributed to the fact that Wednesday’s vote was narrow but fell along party lines. Hence the eventual outcome should not have surprised most close observers.

“The thing to remember about these industry groups is that they’re concerned with the bottom line,” Morgan said.

“The idea now is that this can become a brand issue, and there are already a number of investment groups that believe that this type of information is material to their decision-making.”

Already, for instance, several electronics companies have taken steps to ensure that raw materials for their products do not come from the DRC. Perhaps more importantly, the government of the DRC has also moved to integrate certain guidelines on due diligence into its own laws.

A recent report from the Enough Project, an anti-genocide group funded by the liberal Center for American Progress, a think tank here in Washington, found that Motorola, Apple, Intel and Hewlett Packard have each taken positive steps in this regard.

The report also castigated companies such as Sharp, Nikon, HTC, Canon and Nintendo for failing to do so.

“Going forward, it will be interesting to see whether companies come out with a ‘conflict-free product’ – Intel, for instance, has said that it will do so by 2013,” Darren Fenwick, an advocate on government affairs with the Enough Project, told IPS.

“Ultimately, this is an investor-protection issue. Would you want to invest in a company that could be supporting conflicts in other countries?”

In response to Wednesday’s vote, several U.S. investment groups applauded the decision.

At the same time, Fenwick cautioned, these new legal requirements are not meant to solve the DRC’s problems.

“This is about creating a window of opportunity,” he says. “Before [section] 1502, no one was talking about Congo. Now this discussion is widespread – and that’s good for the people of Congo.”

A U.S. government agency is being questioned on why it is dragging its feet on 2010 legislation that would increase transparency in extractive industries around the world, one aim of which would be to cut down on the global trade in “conflict minerals”.

A sack of cassiterite (tin ore) at a trader. Credit: Courtesy of Global Witness

Provisions in the bill would constitute the first major legislation enacted to deal with the issue of natural resources fuelling conflicts, but have run into significant attempts by industry to water them down.

On Friday, 58 members of the U.S. Congress sent a letter to Mary Schapiro, the head of the regulatory Securities and Exchange Commission, urging her to explain how her agency is moving towards operationalising two key provisions of the controversial 2010 bill.

Known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, the far-reaching bill was enacted in response to the 2008 financial crisis, vastly increasing the government’s ability to regulate the finance sector.

In focus are two provisions of that act, Sections 1502 and 1504. The former would require U.S. companies that use tin, gold or several other mined resources to publicly carry out due diligence to ensure that those resources are not fuelling conflict, as has been documented most recently in eastern Congo.

Section 1504, meanwhile, would require public disclosure of all payments made by U.S. companies made to any governments for minerals or oil extraction.

The SEC, which regulates all U.S. publicly traded companies, published draft rules for enacting the two provisions in December 2010, but since then these have languished pending a final vote within the Commission.

“There is no clear reason for the delay,” the 58 members of Congress, both Democrat and Republican, noted in their letter to Schapiro.

“This issue is too serious to allow further delay. Conflict minerals and non-transparent payments for natural resource extraction continue to be a weight on developing nations’ growth and are a risk to investors and the public.”

The letter specifically references the situation in Congo: “Worse, continued delay undermines efforts in (Congo) to make the mining industry more transparent and to diminish the link between minerals and the funding of the brutal violence carried out by warlords.”

The senators are urging Schapiro to schedule an SEC vote on these two provisions by Jul. 1 or to explain the inordinate delay.

According to the SEC’s website, votes on these sections were to have taken place between January and June of this year, a timeframe that had already struck many as unnecessarily lengthy.

Behind the scenes

While rights and advocacy groups widely lauded the letter, it was only the latest in a stream of attempts to prod the SEC into action.

“NGOs that work closely on the issue have met with the SEC and submitted comments 60 times,” Jana Morgan, with Global Witness, a Washington-based pressure group that previously gained accolades for its work on conflict diamonds, told IPS.

“It’s a question of leadership – Chairman Schapiro has not made this a priority. Is she going to take a stand on these issues, or is her legacy going to be sitting on the sidelines and letting opportunity slip past?”

It’s unclear what exactly is behind the holdup, but in fact the SEC is receiving complaints for its sluggish response to much of the Dodd-Frank provisions, with rulemaking pending of 60 percent of the bill.

Over the past 12 months, the SEC has reportedly finalised just nine new rules for Dodd-Frank, missing 48 related deadlines during that period.

“The argument that the SEC is overwhelmed is a red herring. Lobbying definitely has had a negative effect,” Morgan says. She points to strong stances taken on S 1502 and 1504 by the U.S. Chamber of Commerce and the American Petroleum Institute, a lobbying group, among others.

“The proposed rules on conflict mineral disclosures may affect nearly every manufacturing sector and facet of the supply chain,” the Chamber of Commerce noted in response to a query from IPS. In the past, the Chamber has engaged in legal battles against regulators and has suggested that it may be willing to do so again in this case.

On Wednesday, Global Witness called on major manufacturers, particularly electronics companies, to publicise their positions regarding the Chamber’s related statements. Already, high-profile companies in the sector – including Microsoft, General Electric and Motorola – have publicly rejected the Chamber’s position.

Meanwhile, groups supporting the conflict-minerals provisions have already engaged in legal action. In May, Oxfam America, a relief agency, sued the SEC for violating a legal deadline, which expired in April, on finalising S 1504.

Oxfam is requesting the court to order the SEC to move forward on the issue. A decision on the case is expected by mid-July.

“Oxfam America is simply asking the SEC to follow the law,” Ian Gary, with the organisation’s oil, gas and mining programme, said in a statement on Monday.

“New discoveries of oil and minerals, such as in East Africa, are being announced almost every week and quick implementation of this provision will help ensure that these countries build on a foundation of transparency.”

The U.S. decision is garnering significant international attention, as well, particularly with related legislation pending in the European Union.

“The world is watching what the U.S. does on this,” Global Witness’s Morgan says. “Other countries are waiting to follow suit.”