WASHINGTON – ITI today said it urged the Securities and Exchange Commission (SEC) to continue to support rules requiring due diligence on so-called conflict minerals rules under the Dodd-Frank Act’s section 1502.

The SEC promulgated the rules under a provision of the 2010 financial reform law that requires publicly traded companies to disclose to the SEC their efforts to determine if they source specific minerals from the Democratic Republic of the Congo or adjoining countries. The rule was intended to ensure publicly traded companies were not inadvertently financing ongoing civil wars in the DRC and elsewhere in Africa.

Local mines often used poorly paid and teenage or preteen children to work the mines for precious minerals such as tungsten.

A portion of the text to SEC Acting Chairman Michael Piwowar follows:

The federal conflict minerals law – while not ideal – has advanced due diligence practices related to minerals sourcing in Central Africa, and has brought desperately needed attention to the plight of civilians in the Democratic Republic of Congo (DRC) and neighboring countries.  Collective pressure on the supply chain from numerous sectors – including apparel, automotive, aerospace, ICT, jewelry, retail, and others – can be credited in part with the overall improvement in transparency in the region.

High-tech companies have led the charge to drive continuous improvement on minerals sourcing practices, while directly engaging in development activities in Central Africa. We are concerned by reports that the federal conflict minerals reporting and disclosure requirements may be repealed or otherwise set aside with nothing to take their place.  Absent collective action, and the unremitting pressure it brings to bear on global supply chains to institute necessary reforms, we may lose the fragile progress on clean minerals sourcing that we have collectively achieved.

Today, about 80% of the known smelters of covered minerals are validated to be conflict-free.  Moreover, dozens of these smelters are sourcing from the covered countries in Central Africa, thus helping bring proper economic investment and development to the region.  As responsible corporate citizens that have driven much of this progress, we do not want to see these gains eroded.

Importantly, section 1502 has also shaped other global initiatives on due diligence for minerals sourcing.  The European Union conflict minerals regulation, which is due to gain final approval on March 15 of this year, was developed to complement the US approach.  Should section 1502 be repealed without any replacement, Brussels may elect to take a different approach when it conducts its first mandated review of the effectiveness of its regulation.  This uncertainty does not serve the interests of an American business community that has committed significant time and resources to comply with existing federal requirements.

In fact, several ITI members have already publicly committed to continuing to conduct due diligence on minerals supply chains and to report on their findings, regardless of the outcome of the current debate on the future of section 1502. These companies have determined that their ongoing commitment is needed to satisfy their customers, their stakeholders, their investors and their corporate principles. The ICT sector will continue to drive these practices throughout our own supply chain, but we will find it harder to generate ongoing improvement without the involvement of other industries.

While section 1502 is not the perfect solution to a humanitarian challenge deeply rooted in complex sociopolitical origins, it does establish the principle that the private sector can play a role in helping to address the terrible and persistent conditions in Central Africa.

Governments undoubtedly need to take the lead to bring peace, security, and stability to the DRC and its neighbors, and civil society also has an indispensable role to play in directing aid and development assistance. The private sector can and should stand shoulder-to-shoulder and use its economic demand to drive progress and help advance stability.  Ultimately, though, we know our sector’s commitment to sustainability and corporate social responsibility alone cannot bring peace and security to the DRC, and in the absence of concerted government and civil society engagement, the tragic status quo will reign in Central Africa.  

In closing, we do not support efforts to repeal or suspend section 1502 without some replacement regime to maintain demand for conflict-free minerals.  We would urge the Commission and other policymakers to look closely at the OECD Due Diligence Guidance for Responsible Supply Chains as a framework for a replacement approach that advances transparency efforts, emphasizes continuous improvement in an efficient and effective manner, and provides for strong reporting requirements.

We stand ready to engage in any dialogue to institute practical reforms that improve conditions on the ground and ameliorate the lives of civilians in the DRC and throughout Central Africa.

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