Tag Archives: cassiterite

ALERT: EU “Political Understanding” Reached on Conflict Minerals Law

Yesterday, the European Commission announced that a “political understanding” was reached on the European conflict minerals law.  As we understand it, this means that the relevant political entities have agreed upon high level legal principles for the conflict minerals requirements for covered businesses in Europe.  The technical and implementation details are to be developed in the future.

Video announcements are available here and here.  The most substantive information in the first video is presented at 13:30 – 14:50 and 16:50 – 19:50.  In the second video, substantive information is presented at 10:22 – 11:20 and 13:30 – 19:22.  We distilled this down to the following points we were able to extract:

  • Due diligence and disclosure are mandatory, not voluntary, for the covered supply chain actors
  • Due diligence is based on OECD, but is limited to 3TG at this time
  • It is global in scope, covering conflict-affected areas, not just DRC and adjoining countries as is Dodd-Frank
  • Requires due diligence for upstream actors, including smelters/refiners
  • Due diligence is also mandatory for importers of ores and processed metals, but manufacturers are not covered
  • Covers 95% of relevant European importers of ores and processed metals
  • Specific guidelines are to be developed for companies with more than 500 employees
  • Requires public disclosure by covered downstream actors, which will include a registry/database
  • A clause exists for the EU/EC to review/renegotiate the law in the future relative to covered downstream actors
  • Includes some form of on-going monitoring, possibly audits
  • Several exemptions have been agreed upon, including recycled materials, existing stocks of materials and by-products from processing. The details are to be worked out in additional trialogue technical negotiations

As we know more, we will continue to post updates.  Feel free to contact us with any questions.


Latest DRC Group of Experts Report: Conflict Minerals Problems Continue

The United Nations Group of Experts (GoE) on the DRC released their latest mid term report covering the first half of CY2015.  The report can be downloaded below.  This report, much shorter than previous GoE reports, presents findings of continued conflict minerals problems in the DRC with gold smuggling, non-compliance with the Congolese Ministerial Decree, illegal taxation on transit routes of cassiterite, concerns about air cargo manifests and illegal sale of iTSCi tags along with irregularities with the associated logbooks.  See paragraphs 49 – 78.

In response to the GoE report, ITRI posted detailed comments on the report that “clarify certain points”.  ITRI provides commentary on specific facts cited by the Group, but also adds some context as well:

…the extent of gold mining in Shabunda and the extent of RM and FARDC interest in control of that sector, as well as the potential earnings from gold are significantly higher than for the 3T minerals as also described in the Groups report.

While all partners understand that the occurrence of risks impacting the supply chain need to be minimised, it is the identification and follow up of such issues that is key. iTSCi has developed many tools to mitigate and resolve risks in the supply chain in alignment with the concepts of due diligence described in the internationally accepted OECD guidance…

Mitigation and risk management continues to be the approach of iTSCi and we do not support expectations of perfection which lead to disengagement, embargo and a regressive spiral of events.

The GoE’s findings may or may not be a surprise, but it does raise questions and potential concerns for downstream companies – especially issuers filing Conflict Minerals Reports to SEC signed by an executive officer.

UN Group of Experts Midterm 2015 DRC report

Newsweek Calls for Improvements in Conflict Minerals Audits

Today, Newsweek magazine published an article calling out Apple, the Conflict Free Sourcing Initiative (CFSI) and iTSCi.

Fundamentally – although in a sensationalistic slant – the article points out potential gaps and concerns about the mechanisms, processes and supporting data relied upon by the conflict minerals audit programs.  It also illustrates the point Michael Littenberg makes: “Big consumer brands are the low-hanging fruit for nonprofits and investor advocates, and they’re increasingly focused on this issue.”  And should mass media outlets like Newsweek continue to cover the topic, that will only increase the momentum.

To an extent, we feel our quote is somewhat out of context in that there do appear to be pockets of success relative to maintaining adequate documentation by some upstream supply chain actors.  At the same time, we have long advocated strengthening audits along the conflict minerals supply chain, going back to our comments at the 2011 SEC Conflict Minerals Roundtable.

The article also contains factual errors such as the SEC disclosure “requires U.S. publicly traded companies to audit their supply chains…” and that the compliance process is limited to the Reasonable Country of Origin Inquiry (RCOI).

Latest UN Group of Experts Report on DRC and Conflict Minerals

The latest GoE report has been published (156 pages) and at first blush, is critical of conflict minerals traceability effectiveness in the region.  Although recent prior media reports of conflict minerals smuggling have focused on gold, the GoE reports smuggling of cassiterite and coltan from illegal sources to across borders to Rwanda, Tanzania and Uganda.

In another related action, the UN Security Council extended the mission of the Group of Experts until August 1, 2016, noting a possibility of additional extensions thereafter.

We will post further thought and commentary after we have reviewed the report in its entirety.

Video Introduction to Conflict Minerals tool SICMAP℠ Released

UPDATE:  The tool has been substantially updated, renamed CMCheckPoint℠ and is available from Elm Sustainability Partners, with a new video here.

As previously announced, The Elm Consulting Group International LLC today released its Self-Implemented Conflict Minerals Audit Preparation© (SICMAP℠) for commercial availability. As part of the product release, a short introductory video provides an overview of the tool, its features and functionality.

We are in the process of uploading a true HD version of the video on our website. Until that is completed, the version posted here has limited resolution even when viewed in HD mode (the “HD” icon in the upper right hand corner of the viewer window below.)

If you have access to YouTube, the video can be viewed in better quality here.

Elm Launches Groundbreaking Low Cost Conflict Minerals Audit Preparation Tool

Updated March 2012:  See our most recent announcement.

The Elm Consulting Group International LLC today announces a groundbreaking cost effective tool to support companies preparing for conflict minerals traceability audits or customer inquiries.

The delay in SEC’s final rule triggered many questions from companies about planning and pre-audit preparation.  This led us to a solution that is valuable in almost any foreseeable final regulation scope/content and companies planning responses to customer inquiries – yet significantly reduces costs during this period of uncertainty.

Elm’s Self-Implemented Conflict Minerals Audit Preparation© (SICMAP℠) is conceptually similar to a self-audit checklist.  SICMAP℠ is a spreadsheet tool that maximizes the use of internal company staff for cost reduction and implementation flexibility to develop and review conflict minerals programs in advance of third party auditing.

SICMAP℠ focuses on basic program elements equally relevant to companies responding to customer inquiries/procurement requirements and those working to comply with the upcoming SEC regulations on conflict minerals.   Successive and more complex tasks – for both program development and audit preparation – are identified based on initial SICMAP℠ findings, lessons learned from working through the SICMAP℠ process, and the final regulatory requirements once they are known.  The final rule, when published, will clarify the level of detail for some of the efforts.

Screenshots (which can be enlarged by clicking on them) show some of the features and functionality in SICMAP℠ include:

  • “At a glance” color-coding indicates progress/status of both program development and audit preparation
  • Live links to reference materials on the internet
  • Summaries of language from the U.S. legislation (which will not be changed by SEC’s final regulations)
  • Step-by-step pragmatic guidance on specific program elements
  • Highlights of emerging international initiatives in comparison/contrast to SEC audit standards
Sample Page Showing Detailed Guidance

Topics covered in an intuitive and pragmatic way include:

  • Initial scoping
  • Reasonable assurance and representative sampling concepts reflecting SEC auditor standards
  • Information management systems
  • Internal controls
  • Supply chain mapping
  • Communications planning and content
  • Scrap materials – special definitions and challenges in traceability efforts
  • Considerations in selecting an auditor and preparing for the site visit
Summary Tracking Page With Color Coding. This image shows covered topic tabs along the bottom.

The tool is based on Elm’s experience as one of four firms worldwide that have completed conflict minerals traceability independent audits. Elm’s tantalum traceability audits in 2010 resulted in the first ever “Conflict-Free Smelter” designation*, covering sites in the US and Japan.

We continue to recommend that companies move forward with planning activities, but defer third party audits until planning is substantially complete and the SEC regulations are final.  As with almost any new management program, a formal third party audit should be the last step of the implementation process – not the first.

SICMAP℠ will be commercially available beginning June 6, but feel free to contact us beforehand with questions.

* Issued by the industry association sponsoring the audits.  The Conflict Free Smelter (CFS) program is emerging as the leading conflict minerals third party certification program for smelters by the electronics industry.

Elm to Make Major Conflict Minerals Service Announcement May 31

On Tuesday May 31, The Elm Consulting Group International LLC will formally announce a major development in our conflict minerals traceability services.

Lawrence Heim, Elm Director and leader of the firm’s conflict minerals services:

SEC’s delay in promulgating their final conflict minerals rule has resulted in a significant amount of uncertainty within affected companies.  Many of these companies are challenged by cost constraints as they seek information, guidance and solutions to yet-unknown compliance standards.  Our announcement next week provides a highly cost-effective solution in balancing these challenges.

If you would like to receive the announcement and related information directly, send an email to Lheim@elmgroup.com.

SEC Provides Preview of April 15 Final Rules on Conflict Minerals Supply Chain Traceability



As veterans of regulatory research, we are accustomed to spending hours poring over a plethora of governmental regulations, background documents, guidance and other reports.  Our work with conflict minerals supply chain traceability and SEC’s regulations has been no different.  In addition to having completed such audits, we have read and re-read

  • the proposed SEC regulation and its preamble;
  • the OECD Due Diligence Guidance for Responsible Supply Chains of Materials from Conflict-Affected and High Risk Areas, and the Supplement on Tin, Tantalum and Tungsten;
  • the ISO 19011 standard;
  • comments submitted to the SEC on the proposed regulation (approximately 700 total comments were submitted, of which 433 were standard form letters.  Of the remaining 270, approximately 75% provide substantive content);
  • hundreds of relevant media reports, legal advisories and NGO documents;
  • various auditor standards under SEC, including Government Accounting Office Government Accounting Standards GAO-07-731G, AICPA Statements on Standards for Attestation Engagements (SSAEs); and
  • industry commentary and alerts on the topic.

Yesterday, we completed an analysis of the 263-page report from the Boston Consulting Group (BCG) titled US Securities and Exchange Commission Organizational Study and ReformMarch 10, 2011 to see what insight might be hidden therein on the upcoming final conflict minerals regulations.

BCG’s report establishes the ultimate context for the other documents which, in turn, essentially provides a preview of the final rule.  Our opinion is that SEC will meet the statutory deadline of April 15 with a rule that will:

  • clarify procedural aspects, such as applicable audit standards (i.e., GAO-07-731G, AICPA SSAE, etc), the need for annual audits and the question of “furnishing” versus “filing” the report;
  • establish a materiality threshold for conflict minerals content in products;
  • specifically exclude retailers and contract manufacturing arrangements under certain conditions;
  • defer most substantive compliance requirements to allow further study; and
  • defer the initial reporting compliance date.

By doing this, SEC can meet competing priorities with which it is currently struggling.  Such a rule would appease the regulated community and buy SEC time, while allowing SEC to claim victory in meeting the legal deadline.  During the deferral period, we expect SEC will implement its overarching organizational restructuring and internal risk assessment processes spelled out in the BCG report, then come to a final position on Section 1502(b).

What does this mean for companies impacted by the due diligence/audit requirements?

We have written and directly counseled clients and others on business risks associated with completing the audits in advance of the final SEC rules.  As we see it, the risks are somewhat different depending on your company:

  • Companies directly regulated by SEC. Audits conducted “pre-rule” risk being non-compliant with the final SEC requirements.  Early adopters may be faced with paying for audits a second time to achieve compliance.  Reputational damage is possible where companies publicize or market the results of audits that are non-conforming to the final rule.  At an extreme, companies could face lawsuits over nonconforming audits in a manner similar to lawsuits filed for non-GAAP financial reporting or certain corporate social responsibility reports.
  • Privately-held companies responding to customer demands. For these companies, the risk is not compliance oriented, but centers on unnecessary costs and reputational damage.  Where customers demand this information of suppliers, the demands must be met.  The question becomes is SEC compliance driving the customer’s request?  If so, (assuming our prediction is correct) the customer’s need may not be so urgent or burdensome as originally thought; and early adopter efforts on the supplier’s part may be overkill/overly expensive in light of a rule deferral period.  Legal action from customers who rely on the “pre-rule” audit information and reputational damage are both possible where companies publicize or market the results of audits that are non-conforming to the final rule.  Suppliers would be wise to work with customers to find an acceptable balance between the drivers, timing, scope and cost.

Companies want to be proactive and responsible corporate citizens.  But we live in a command-and-control legal setting – combined with third-party lawsuits and governmental performance metrics that incentivize fines, penalties/aggressive enforcement.  Early action in a time of regulatory uncertainty carries risk.  In US corporate sustainability activities, this is perhaps most vividly demonstrated by last year’s complete collapse of the voluntary US GHG emissions trading market – specifically established in advance of US legal requirements on GHGs to create “first mover advantage”.

Elm continues to recommend that companies move forward with implementation evaluation, scoping and planning activities, but wait for SEC’s rule to be finalized before conducting audits.

New Guide Published on Conflict Minerals

MetalMiner.com, one of the world’s foremost on-line publications on global procurement of metals and related products, including global pricing trends, capacity constraints, supply market M&A activity, today published its guide to planning compliance with the US Conflict Mineral Law and the (soon to be final) implementing regulations under the Securities and Exchange Commission (SEC).

This guide, titled What Your Company Should Know About Conflict Minerals, is a concise resource containing:

  • Elm’s insights from having conducted audits under a leading industry association program for conflict minerals supply chain traceability, and
  • MetalMiner’s expertise in metals trading/sourcing, with a unique perspective on how the scrap loophole may become exploited by operations in the conflict region.

The date is looming for SEC promulgation of the final regulation and over 160 comment letters were submitted to SEC on the proposal.  To help you prepare for these new program requirements, this report provides valuable substantive information based on first hand knowledge of conflict minerals programs and issues.

MetalMiner.com was founded more than four years ago and since then has become a recognized leader in providing unique insight, analysis, and tools for buyers, purchasing professionals, and everyone else for whom metals and their related markets matter.

Click here to obtain a copy of this report from MetalMiner.