What is the EU Conflict Mineral Policy and Regulation?

The European Union (EU) has implemented the "Conflict Minerals Regulation,” designed to address the issue of conflict minerals. The regulation was adopted in 2017 and came into effect on January 1, 2021.  

The Conflict Minerals Regulation aims to promote responsible sourcing practices and prevent companies from contributing to conflict and human rights abuses through their supply chains. It is part of a broader global effort to address the issue of conflict minerals and ensure that minerals are sourced responsibly and ethically. The regulation applies to all EU importers of tin, tantalum, tungsten, and gold sourced from conflict-affected and high-risk areas, regardless of their size or industry.

Companies in the EU that import tin, tantalum, tungsten, and gold (3TG) from conflict-affected and high-risk areas must comply with the EU Conflict Minerals Regulation.  

Importers are required to conduct due diligence to identify the risks in their supply chains and take steps to prevent the sourcing of minerals that finance armed groups or contribute to human rights abuses.  

The due diligence process includes several steps, such as establishing robust company management systems, identifying and assessing risks in the supply chain, and taking action to mitigate those risks. Companies must also report on their due diligence practices and provide information on their supply chains to the European Commission.

Companies must perform their due diligence in accordance with internationally recognized standards, such as the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. In addition, the due diligence process must be documented and available to the competent authorities upon request.

The OECD Guidance requires importers to:  

To comply with the regulation, companies must follow a due diligence process that involves the following steps:

• Establish robust company management systems: Companies must establish a policy on responsible sourcing of minerals and ensure that it is communicated to their suppliers and stakeholders. They must also assign responsibility for managing the due diligence process and allocate sufficient resources to it.
• Identify and assess risks in the supply chain: Companies must identify the smelters and refiners in their supply chain and assess their due diligence practices. They must also determine the risks of sourcing 3TG from conflict-affected and high-risk areas and evaluate the severity of these risks.
• Take action to mitigate risks: Companies must mitigate the identified risks, such as engaging with suppliers to improve their due diligence practices or discontinuing relationships with suppliers that do not meet the regulation's requirements.
• Report on due diligence practices: Companies must report on their due diligence practices, including the steps they have taken to identify and mitigate risks in their supply chain. They must also provide information on the countries of origin of the 3TG they have imported and the smelters and refiners in their supply chain.  

Requirements for Different Companies

Producing goods often involves many supplier and business engagements along the supply chain. Thus, the EU has divided these companies into two groups based on their function.  

Companies that extract, process, and refine raw materials are referred to as “upstream companies.”  

The EU classifies upstream firms as:

• Mining companies.
• Raw material traders.

• Smelters.
• Refiners.

The second classification is for companies that further process the metals produced during the upstream stage into a finished stage. These companies are referred to as “downstream companies.” Companies that sell products to other companies, governments, or individuals are also classified as downstream companies.

How to Ensure a Mineral has been Responsibly Sourced

Importers in the EU are required to set up internal systems and procedures that supply the information that indicates which country the minerals come from, the imported quantities, and when they were mined.

Furthermore, importers of minerals and metals must:

• List the minerals they're importing by trade name and type, and;
• Provide the names and addresses of their suppliers.

When minerals come from conflict-affected and high-risk areas, importers must also provide the following:

• The mine the minerals came from;
• Where the minerals were consolidated, traded, and processed, and;
• The taxes, fees, and royalties paid.

How to Comply with the Regulation

^Businesses that do due diligence first assess the risk associated with obtaining raw materials from unstable or conflict-affected regions. Each EU Member State has an established competent authority responsible for receiving and reviewing the conflict minerals reports submitted by companies. The competent authority may also conduct inspections and audits of companies to verify the accuracy and completeness of the information reported.

The European Commission also has a supervisory role in relation to the implementation of the Conflict Minerals Regulation. It is responsible for publishing a list of the responsible smelters and refiners that have been audited and verified as complying with the regulation's due diligence requirements. The list is updated annually and is available on the European Commission's website.

Companies that fail to comply with the Conflict Minerals Regulation may face penalties or other enforcement measures by the competent authorities. These measures may include fines, public reprimands, or even suspension or revocation of business licenses. Therefore, companies must comply with the regulation and submit accurate and complete conflict minerals reports to the competent authorities.