“Conflict Metals” Buyers Beware – New EU Legislation

Attention all metals buyers! Last week, EU MEPs, ministers and the EU Commission reached agreement on mandatory measures to address issues around "conflict metals".  As the EU Commission press release says,

"All but the smallest EU firms importing tin, tungsten, tantalum, gold and their ores will have to do "due diligence" checks on their suppliers, to stop this trade being used to help fund conflicts and human rights abuses".

Due diligence will also be mandatory for smelters and refiners. The Commission will also press big manufacturers to disclose details of products that might contain conflict minerals.

"We need to finally break the vicious cycle between trade in minerals and the financing of conflicts - real difference for people on the ground. We need to end the suffering of people being forced to mine precious metals and do our utmost to prevent violent conflicts. We succeeded in pushing for mandatory measures instead of a voluntary system – a huge success achieved by the European Parliament", said Trade Committee Chair Bernd Lange.

The negotiations have been difficult, with some parties looking to avoid imposing onerous burdens on importing firms. But MEPs eventually persuaded Ministers that there was a need for mandatory rules, not merely guidance; the Commission and Council initially proposed only voluntary checks.

Due diligence checks should be conducted according to OECD due diligence guidelines.  EU member states’ "competent authorities" will be responsible for ensuring compliance by companies, and also for determining penalties for non-compliance, to be monitored by the EU Commission. So that means there is still a big onus on each country to take this seriously if real progress is to be made.

No burden on small firms

As the announcement explains, "MEPs and ministers ... agreed that the smallest importers (e.g. for dentistry) should not be obliged to comply with a due diligence scheme, so as to avoid encumbering their businesses with unreasonable bureaucratic burdens. Recycled metals, existing EU stocks and by-products are excluded from the regulation”.

Disclosure requirements for big EU manufacturers and sellers

Big EU firms i.e. those subject to EU law on "non-financial reporting" (above 500 employees) whose products contain tin, tungsten, tantalum or gold will be encouraged to report on their sourcing practices based on a new set of performance indicators to be developed by the EU Commission. Moreover, these businesses will be able to join a registry to be set up by the Commission and report voluntarily on their due diligence practices.

Review clause

The deal also requires the EU Commission to review and report to Parliament and the Council on the effectiveness of the new law – both its impact on the ground and the compliance by the EU firms, and, should it not suffice to induce the desired effect, consider additional mandatory measures.

Next steps

The technical details of the legislation agreed in principle last week still need to be worked out. The Dutch Presidency of the Council has pledged to conclude the informal legislative negotiations with the MEPs before its term ends on 1 July. Further political "trilogues" (three-way talks) under the Slovak presidency might be needed to seal the final text of the legislation before it is approved by Parliament in plenary session.

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