What are Conflict Minerals?

The US Congress passed the Wall Street Reform and Consumer Protection Act (the "Dodd Frank Act") in July 2010. Among other things it makes it binding for companies to document and publicise the presence of the so called conflict minerals when used in their products or in the manufacturing process. Coltan, gold, cassiterite (tin ore), wolframite and their derivates i.e. tin, tantalum or wolfram among others constitute conflict minerals.

As of 31st May 2014 all companies affected by this Regulation and listed in the US have to submit a report to the SEC (Securities and Exchange Commission) every year. This has to reveal whether the minerals used originate from the Democratic Republic of Congo (DRC) or its adjoining countries (DRC countries) and up to what extent they are actually "essential" for the products. Should this be the case the companies have to indicate the place of origin of the minerals precisely. This proposes to ensure a ban on the use of minerals that directly finance or back the armed conflict in the region.

If the minerals actually come from one of the DCR countries a Conflict Mineral Report has to be compiled. It must give a detailed account of the efforts undertaken to check the origin of the minerals and to make sure that the use of these minerals neither directly nor indirectly support armed groups. This report has also to be reviewed by an independent body. Affected companies have to independently account for the preceding year at the end of their financial year. Going by this the first report is due for 31st May 2014, which will be valid for the calendar year 2013 and thereafter on every 31st May for the preceding year.

The burden of proof will apply to all materials introduced into the recycling process from 1st January 2013 onwards. Materials that are "outside" the supply chain as of this date, i.e. holdings or ores already processed but not yet introduced into the value chain to end users, are exempt from this. A two-year transition period also permits minerals to be described as "Congo conflict not determinable" (instead of "Congo conflict-free"). For small-scale companies this transition period is valid for four years. Approximately 195,000 companies across the global supply chain are affected worldwide by this new burden of proof. For US companies the estimated costs incurred on account of this new Act are pegged at a minimum of three to four billion dollars annually. 

 

What does the new law imply for the supply chain?

Compliance of the statutory provisions does not merely mean verification of the elements of one's own parts and raw materials. In fact a report has to be drafted every year on whether the conflict minerals that are "essential" for the functioning or manufacture of a product originate from the DRC countries. Whether this is the case or not will depend, among other things, upon the following factors: whether or not the mineral forms an indispensable component of the end product and was knowingly used here, i.e. it is not a by-product generated from processing another product, for e.g. tin residue in the case of steel.

Some companies inform their supply chain about the new requirement and request suppliers to identify parts that contain conflict minerals or their derivatives. Subsequently the supply chains of such parts and the smelting works connected to them should be identified. Finally it has to be checked if the identified materials were extracted from scrap or recycled material or actually have their origins in conflict mines.

There are many systems available for such procedures that simplify research and reporting. On the one hand research and reporting can be done manually. There is an excel tool for this that can be downloaded from the www.conflictfreesmelter.org site. On the other hand, with an increasing length of the supply chain it is perhaps extremely confusing and time consuming to go this route. The IMDS and CDX systems can be used alternatively for research and declaration of conflict minerals.

This makes it possible to conduct analysis without having to pore over copious excel documents, and the data sheet and supplied goods can be quickly compiled. Instructions on the use of IMDS and CDX are given in the following sections.

Conflict Minerals in the IMDS System

The IMDS is a databank and archiving system for companies of the automotive industry. We will explain how to deal with Conflict Minerals in the IMDS system. You can follow the procedure easily with the help of the screenshots. However, the IMDS serves merely to establish whether or not conflict minerals are present in the raw materials. It is on the CDX system that Declarations can be compiled (refer to the next section).

Conflict minerals can only be displayed via a filter ("Conflict Minerals") in the IMDS. While doing so the blue triangles show the basic substances, i.e. the smallest chemical unit that a raw material can comprise of.

Since "Conflict Minerals" form a distinct group of basic substances in the IMDS you can also conduct a targeted search on them by selecting "Analysis" on the menu bar.

One can thus conduct a specific search in the IMDS on all conflict minerals in the basic substances list by selecting "Analysis"/ "Where-used list" on the menu bar: either "rule-based" i.e. under separate or received entries or "individual" i.e. under already published entries (see the selection below).

Conflict Minerals in the CDX-System

The CDX System by DXC Technology (formerly HPE) supports different industries in complying with national and international requirements. This not only includes REACH, RRR, RoHS, WEEE, ELV or HKC that relate to the recycling and processing of hazardous materials but also most recently to the law on Conflict Minerals.

To support declaration and reporting, for instance, a new module has been generated in the CDX for Conflict Minerals (Conflict Mineral Declaration, CMD), which helps in meeting the comprehensive requirements. As a supplement to the CMD module even a Conflict Mineral Group has been generated in the CDX, which helps you in the analysis of the Bill of Materials Structure (BOM Structure). However, the list of basic substances in this group is not an exhaustive one but concerns basic substances that are normally used in manufactured items. There are though many more compounds that are required for production of articles but are not present in the part.

The pull down menu can be used to analyse the structure of individual material data sheets (MDS). Conflict Minerals can thus be set apart like the REACH-SVHC or RoHS basic substances. Select "Analyse-Application-Basic Substances List" to detect the parts containing Conflict Minerals. This helps to identify those suppliers from whom further information is required.

Further Steps: What is to be done?

After identification of problematic parts and suppliers the steps that follow depend upon the requirements of one's own company or clients. For instance, some clients may perhaps request formal reports on the use of critical minerals. The suppliers can be informed about installing the CMD module in the CDX system.

Reporting to the SEC by a company may perhaps call for assistance to prepare the report. Even when CDX standard raw materials are used that contain potentially problematic substances the supplier should be asked for a CMD. The CDX can also be used for this regardless of the information on the product already existing in the system.

How we help

The new law has caused thousands of companies all over the world to be weighed down by the burden of proof. It is difficult for many companies to substantiate the origin of minerals since there are many complex steps between production of minerals and manufacture of the end product. Besides, the new regulations are complicated. The stream of countless queries on processed materials across the supply chain comes is added by another one in the wake of conflict minerals. Almost no company can cope with the responsibility of responding to these queries, managing them and of obligatory reporting manually.

imds professional with its expertise, contacts and solid knowhow in the field of material research and material compliance management is of great assistance here. We support companies in complying with statutory requirements relating to conflict minerals. Thus a company can prevent squandering valuable time and money or even committing blunders that may adversely affect its image. There are many companies that have already put faith in the long standing expertise of imds professional in the field of material compliance and seek consultation and support from us on Conflict Minerals.

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