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DODD-FRANK FIVE YEARS LATER: 

WHAT HAVE WE LEARNED FROM 

CONFLICT MINERALS REPORTING? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON MONETARY 

POLICY AND TRADE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

NOVEMBER 17, 2015 

Printed for the use of the Committee on Financial Services 

Serial No. 114–61 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON MONETARY POLICY AND TRADE

BILL HUIZENGA, Michigan, Chairman 

MICK MULVANEY, South Carolina, Vice 

Chairman 

FRANK D. LUCAS, Oklahoma 

STEVAN PEARCE, New Mexico 

LYNN A. WESTMORELAND, Georgia 

MARLIN A. STUTZMAN, Indiana 

ROBERT PITTENGER, North Carolina 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

MIA LOVE, Utah 

TOM EMMER, Minnesota 

GWEN MOORE, Wisconsin, Ranking Member 

BILL FOSTER, Illinois 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

PATRICK MURPHY, Florida 

DANIEL T. KILDEE, Michigan 

DENNY HECK, Washington 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

November 17, 2015 ........................................................................................... 1 

Appendix: 

November 17, 2015 ........................................................................................... 33 

WITNESSES 

TUESDAY, NOVEMBER 17, 2015 

Gianopoulos, Kimberly, Director, International Affairs and Trade, U.S. Government Accountability Office (GAO) ................................................................. 6 

Imena, Hon. Evode, Minister of State, in charge of Mining, Ministry of Natural Resources, Government of the Republic of Rwanda .................................. 8 

Loof, Hon. Per-Olof, Chief Executive Officer, KEMET Electronics Corporation 11 

Schwartz, Jeff, Professor of Law, S.J. Quinney College of Law, University 

of Utah .................................................................................................................. 4 

Woody, Karen E., Assistant Professor, Business Law and Ethics, Kelley 

School of Business, Indiana University .............................................................. 9 

APPENDIX 

Prepared statements: 

Gianopoulos, Kimberly ..................................................................................... 34 

Imena, Hon. Evode ........................................................................................... 58 

Loof, Hon. Per-Olof ........................................................................................... 68 

Schwartz, Jeff ................................................................................................... 72 

Woody, Karen E. ............................................................................................... 137 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Huizenga, Hon. Bill: 

Written statement of the National Association of Manufacturers ............... 141 

Moore, Hon. Gwen: 

Public Declaration from the Association for the Development of the Initiatives of the People, dated November 15, 2015 ............................................ 145 

Written statement of the Conflict-Free Campus Initiative ........................... 146 

Written statement of the Electronic Industry Citizenship Coalition ........... 148 

Written statement of Claigan Environmental ............................................... 151 

Written statement of the Enough Project ....................................................... 158 

Written statement of Georges Nzabanita Iyamuremye ................................. 162 

Written statement of Global Witness ............................................................. 164 

Written statement of the International Corporate Accountability Roundtable ............................................................................................................... 168 

Written statement of Jewish World Watch .................................................... 170 

Written statement of Hon. Jim McDermott, a Representative in Congress 

from the State of Washington ...................................................................... 171 

Written statement of the National Association of Evangelicals ................... 173 

Written statement of Panzi Hospital & Foundations .................................... 175 

Written statement of the Responsible Sourcing Network ............................. 176 

Imena, Hon. Evode: 

Chapter 3, ‘‘Specialty Metals,’’ of a report entitled, ‘‘Remaking American 

Security, Supply Chain Vulnerabilities & National Security Risks 

Across the U.S. Defense Industrial Base,’’ by Brigadier General John 

Adams, U.S. Army (Retired), dated May 2013 ........................................... 180 

Page

VI 

Imena, Hon. Evode—Continued 

Marketplace article entitled, ‘‘The long arms of a U.S. law reach Congo,’’ 

dated December 11, 2014 ............................................................................. 221 

Article entitled, ‘‘How Dodd-Frank Is Failing Congo,’’ dated February 

2, 2015 ............................................................................................................ 227 

New York Times article entitled, ‘‘How Congress Devastated Congo,’’ 

dated August 7, 2011 .................................................................................... 236 

An open letter from various undersigned parties .......................................... 240 

PR Newswire article entitled, ‘‘Rwanda Has Become World’s Largest 

Coltan Exporter, Reports KT Press,’’ dated December 16, 2014 ............... 245 

Article from The Wall Street Journal entitled, ‘‘‘Conflict Minerals’ Too 

Hard To Track, Commerce Department Says,’’ dated September 5, 

2014 ................................................................................................................ 250 

A report from the Tulane University Law School’s Payson Center for 

International Development entitled, ‘‘A Critical Analysis of the SEC 

and NAM Economic Impact Models and the Proposal of a 3rd Model 

in view of the Implementation of Section 1502 of the 2010 DoddFrank Wall Street Reform and Consumer Protection Act,’’ dated October 17, 2011 ................................................................................................... 252 

Report entitled, ‘‘Unconflicted, Making conflict-free mining a reality in 

the DRC, Rwanda and Burundi,’’ dated July 2015 .................................... 288 

USGS report entitled, ‘‘An Exploration in Mineral Supply Chain Mapping 

Using Tantalum as an Example,’’ dated 2013 ............................................ 315 

Washington Post article entitled, ‘‘How a well-intentioned U.S. law left 

Congolese miners jobless,’’ dated November 30, 2014 ............................... 370 

Washington Post article entitled, ‘‘Eastern Congo, economic colonialism 

in the guise of ethical consumption?’’ dated September 10, 2014 ............. 375 

Center for Global Development Working Paper entitled, ‘‘What’s Wrong 

with Dodd-Frank 1502?’’ dated January 2012 ............................................ 378 

(1) 

DODD-FRANK FIVE YEARS LATER: 

WHAT HAVE WE LEARNED FROM 

CONFLICT MINERALS REPORTING? 

Tuesday, November 17, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON MONETARY

POLICY AND TRADE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:07 a.m., in room 

2128, Rayburn House Office Building, Hon. Bill Huizenga [chairman of the subcommittee] presiding. 

Members present: Representatives Huizenga, Mulvaney, Lucas, 

Pearce, Westmoreland, Pittenger, Messer, Schweikert, Guinta, 

Love, Emmer; Moore, Foster, Himes, Murphy, Kildee, and Heck. 

Ex officio present: Representatives Hensarling and Waters. 

Also present: Representative Sherman. 

Chairman HUIZENGA. The Subcommittee on Monetary Policy and 

Trade will come to order. And without objection, the Chair is authorized to declare a recess of the subcommittee at any time. 

Today’s hearing is entitled, ‘‘Dodd-Frank Five Years Later: What 

Have we Learned from Conflict Minerals Reporting?’’ 

I now recognize myself for 5 minutes to give an opening statement. 

Five years ago, the passage of the Dodd-Frank Act created Section 1502, requiring public companies to disclose whether they 

source ‘‘conflict minerals’’—tin, tungsten, tantalum, and gold—from 

the Democratic Republic of the Congo (DRC) and its nine neighboring countries. These minerals have been used in a variety of 

products, including cell phones, cosmetics, footwear, apparel, and 

even auto supplies. Many auto suppliers are located in my area in 

western Michigan. Needless to say, every single one of us has 

someone impacted by this very provision in our various congressional districts. 

I would also like to note that was a provision that was put into 

Dodd-Frank which had no hearings in the House or in the Senate; 

it was a provision that was inserted at conference and never had 

a full airing. And that is something that I am determined to do 

now. 

Well, 5 years later, I am very concerned that this well-intentioned conflict minerals rule is actually harming the very people it 

was intended to help. In a November 2014 article, the Washington 

Post reported that the conflict minerals rule, while well-intenVerDate Nov 24 2008 19:19 Nov 03, 2016 Jkt 099780 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\99780.TXT TERI
2 

tioned, ‘‘set off a chain of events that has propelled millions of Congolese miners and their families deeper into poverty,’’ with many 

miners ‘‘forced to find other ways to survive, including by joining 

armed groups.’’ 

Writing in Foreign Policy magazine, Lauren Wolfe observed that, 

‘‘Perhaps it is time to face the fact that the regulatory law now in 

place has done little to improve the lives of some of the poorest people on Earth, and for many it may have made an already dismal 

reality grimmer.’’ 

Now, we see that the Securities and Exchange Commission has 

promulgated rules for public companies to disclose their use of 

these minerals and issued its disclosure rule in August of 2012. 

Under the rule, companies that use conflict minerals must undertake a reasonable country-of-origin inquiry (RCOI) to assess whether these minerals have originated from the 10 covered countries in 

Africa. Companies filed disclosures for the first time in response to 

the rule in 2014 on minerals used in the calendar year of 2013. 

Additionally, in April of 2014 a panel of the U.S. Court of Appeals for the D.C. Circuit ruled that requiring companies to describe the conflict-free status of their products violated their First 

Amendment rights. This decision was upheld by the same threejudge panel in August of this year, of 2015. 

As we all know, the SEC has little or no experience in crafting 

trade sanctions or articulating and enforcing human rights policy, 

two areas which have not traditionally been within the purview of 

securities regulation. SEC Chair Mary Jo White has also questioned the SEC’s ability to promulgate rules governing the African 

minerals trade and whether SEC disclosure powers are best used 

to meet and address societal ills. 

In fact, in an October of 2013 speech, Chair White stated that, 

‘‘Other mandates which invoke the Commission’s mandatory disclosure powers seem more directed at exerting society pressure on 

companies to change behavior rather than to disclose financial information that primarily informs investment decisions. That is not 

to say that the goals of such mandates are not laudable. Indeed, 

most are. 

‘‘Seeking to improve safety in mines for workers or to end horrible human rights atrocities in the DRC are compelling objectives, 

which, as a citizen, I wholeheartedly share. But as Chair of the 

SEC, I must question as a policy matter using the Federal securities laws and the SEC’s power of mandatory disclosure to accomplish these goals.’’ 

And I can’t emphasize enough that I personally agree with Chair 

White. We have laudable goals. Unfortunately, this is the wrong 

vehicle. 

In light of the President’s 2016 budget request of $1.722 billion 

for the SEC, I, along with Chairman Hensarling, Chairman Royce 

of the Foreign Affairs Committee, and Subcommittee Chairman 

Garrett, sent Chair White a letter asking for a detailed description 

of the funds and hours expanded to the date on the SEC’s conflict 

mineral disclosure rule. 

In the SEC response letter from July of 2010—in the letter they 

tracked it from July of 2010 to March 16th of 2015. The SEC spent 

over 21,000 man and woman hours and approximately $2.7 million 

3 

on this particular provision, with which the SEC has little to no experience. 

From my perspective, I don’t believe that the SEC and the Federal securities laws should be used to help counter human rights 

abuses or further altruistic causes, no matter how important that 

they may be. 

Dodd-Frank is full of unintended consequences. Today, we have 

the opportunity to hear from expert witnesses, including Minister 

Imena from Rwanda, regarding how the conflict minerals provision 

within Dodd-Frank is limiting opportunities to create jobs in the 

African mining sector, failing to improve the living standards for 

local miners, and failing to ensure source minerals from African 

nations that are totally free from bloodshed. 

And with that, I yield back the balance of my time. 

The Chair now recognizes the ranking member of the subcommittee, Ms. Moore, for 5 minutes for an opening statement. 

Ms. MOORE. It is really great to be here with you today, Chairman Huizenga. 

And I want to welcome all of our witnesses to discuss Section 

1502, the so-called conflict mineral provisions of Dodd-Frank. 

I have previously met with several of our witnesses and I look 

forward to hearing your testimony here today. 

We have just had our second reporting period, and we have seen 

some improvements in the disclosure regimes of companies. Although still far from perfect, we anticipate that it will improve as 

time goes on. 

What we have also seen is a clear overestimation of the cost of 

compliance. Let me say at the onset that I support this provision 

because the human rights violations that occur and that are being 

fueled by illicit trade in these materials is not something that we 

can or should ignore. And Section 1502, I believe, is a measured 

response. 

Compliance will improve with time. The cost of compliance will 

decline, and the world will improve. 

It is easy to think that this is happening in a far-off place, but 

we know in a global world that the problems and instability of faroff places frequently find their way to our shores. For example, in 

the first reporting period in 2014, 68 companies looking at their 

supply chain realized that they were buying gold refined by North 

Korea. Now, I assume that even the most ardent opponents of Section 1502 do not support North Korean products in the supply 

chain of U.S. businesses. 

The United States is a leader in this area, and Europe and China 

are following. 

We will hear some good news and some bad news from our witnesses, but we will still see improvement from year to year—from 

year one to year two. And I believe Section 1502 can work. 

I am open to improving Section 1502, but now is not the time to 

discuss repeal of Section 1502, especially in this past weekend, as 

we have witnessed rogue organizations and rogue states seeking 

revenue streams for terrorist activities. 

I am going to ask unanimous consent to place in the record the 

entire testimony of Representative McDermott of Washington, and 

I will read a little bit of it. 

4 

Chairman HUIZENGA. Without objection, it is so ordered. 

Ms. MOORE. He says, ‘‘It was almost 6 years ago to the day that 

I introduced the Conflict Minerals Trade Act, which was designed 

to help stop trade in conflict minerals that were sustaining the brutal civil war in the Democratic Republic of the Congo. It is important to remember why we enacted Section 1502 in the first place: 

to take a real step forward in monitoring in mining and trade minerals that contributes to violence in the DRC. What my colleagues 

and I originally envisioned was a vehicle by which the links between the mineral trade and conflict could be broken.’’ 

Measured against that objective, Section 1502 has already 

achieved substantive progress. This was designed to be a thorough 

and comprehensive process, and I applaud those companies who 

from the start showed that compliance was possible by undertaking 

a complete and detailed account of their mineral supplies. 

I am further encouraged by the conflict minerals disclosures that 

were released in June, which saw a marked improvement from the 

initial 2014 reports as more companies shed greater light on their 

supply chain. This law is changing the way supply chains are understood and ultimately how they function. 

And with that, I yield back the balance of my time. 

Chairman HUIZENGA. The gentlelady yields back. 

Today, we have a great panel of experts, and we are very pleased 

that you are all here. 

First, we are going to be welcoming the testimony of Jeff 

Schwartz, a professor of law at S.J. Quinney College of Law, at the 

University of Utah. 

We also are joined by Kimberly Gianopoulos, Director of International Affairs and Trade for the GAO. 

Next, I am very pleased to welcome the Honorable Evode Imena, 

Minister of State, in charge of Mining, for the Ministry of Natural 

Resources, for the Republic of Rwanda. 

And I would also like to point out that we are joined by Ambassador Mathilde Mukantabana, who is also here with us in the audience. Welcome, Ambassador. 

Karen Woody is an assistant professor of business law and ethics 

at the Kelley School of Business at Indiana University. 

And finally, Per-Olof Loof is the chief executive officer of KEMET 

Electronics Corporation. 

Thank you all for being here, and you will now be recognized for 

5 minutes to give an oral presentation of your testimony. And without objection, each of your written statements will be made a part 

of the record. 

With that, Professor Schwartz, you are recognized for 5 minutes. 

STATEMENT OF JEFF SCHWARTZ, PROFESSOR OF LAW, S.J. 

QUINNEY COLLEGE OF LAW, UNIVERSITY OF UTAH 

Mr. SCHWARTZ. Thank you. 

Chairman Huizenga, Ranking Member Moore, and members of 

the subcommittee, thank you very much for having me here today. 

It is an honor. 

In my testimony, I would like to make two points. The first is 

that Section 1502, the conflict minerals rule, isn’t working. The second is that there is still hope for it. Relatively minor changes to 

5 

the legislation, to the implementing regulations, or to how the SEC 

interprets the current rules could render the initiative far more effective. 

First, why do I say that Section 1502 isn’t working? This assertion is based on my empirical study of the disclosures filed by companies in response to the legislation in 2014. 

For this study, I read each filing submitted by a company in the 

S&P 500 Index—over 200 in total. In doing so, I measured compliance with each aspect of the conflict minerals rule and looked at 

the extent to which the disclosures served the purpose that Congress intended. 

The purpose of the legislation is transparency—specifically, 

transparency with respect to corporate supply chains in conflict 

minerals: tin; tungsten; tantalum; and gold. The idea of the legislation was to force companies to make disclosures that would allow 

concerned shareholders and consumers to identify which companies 

should be praised and which companies should be condemned for 

their conflict mineral sourcing practices and their efforts to identify 

and understand any shortcomings. 

Unfortunately, the legislation fails in this regard. The disclosures 

do not contain enough specifics for concerned stakeholders to make 

such determinations. 

One cannot simply sit down and read the disclosures and tell 

which companies are committed to conflict-free sourcing and which 

are not. And if stakeholders can’t sort companies in accordance 

with their sourcing practices, there is no incentive for companies 

to change them in accord with the humanitarian goals underlying 

Section 1502. 

In short, the goal of Section 1502 was transparency with respect 

to conflict mineral supply chains, but we don’t have it. 

Why, then, do I think there is still hope for Section 1502? My 

empirical study revealed what went wrong with conflict minerals 

reporting, and thus provides insight into what we can do to fix it. 

My big-picture takeaway with regard to what went wrong is that 

there is a mismatch between how the SEC thought companies 

would comply with the regulations and how they actually did. The 

rules seemed to anticipate that each company on its own would endeavor to trace its conflict minerals back to the mine of origin. 

That is not what happened, however. 

Instead, companies centralized and coordinated their efforts 

through the Conflict-Free Sourcing Initiative (CFSI). Most importantly, CFSI audits smelters to determine whether the minerals 

they process come solely from conflict-free mines and then shares 

the results of its audits publicly on its website. 

CFSI’s efforts are enormously helpful to companies that are subject to Section 1502. Thanks to CFSI’s efforts, all companies need 

to do is trace the conflict minerals in their products back to the 

smelters, which they should be able to do, and then look to see 

whether the smelters they have identified show up on CFSI’s conflict-free list. If so, then the products for that company are conflictfree. 

This method of compliance is far easier and far more effective 

than individual efforts. But the legislation and the regulations 

didn’t foresee this method of compliance, so the regulations don’t 

6 

ask the right questions to illuminate it. And therefore, the soughtafter transparency has proven elusive. 

If the rules were changed to reflect the centrality of the CFSI 

audit process, then we would get disclosures that were much more 

useful. 

Finally, I would like to briefly mention one small change that 

would have a large impact. In the disclosures that I studied, only 

31 percent of companies listed the identities of the smelters in their 

supply chain despite the rule’s instruction that they do so. 

Many companies explained that they failed to list this because 

while they could identify which smelters processed minerals for 

their suppliers, they could not identify which smelters processed 

minerals for their particular products. And because of this gap, the 

inability to match specific smelters to their products, companies 

left out the identity of their smelters from their conflict mineral 

disclosures. 

Doing so, leaving this information out, is based on a narrow interpretation of the regulations. If the wording of the regulations 

were changed or if the SEC issued interpretive guidance telling 

companies that they need to include the identity of the smelters in 

their conflict mineral disclosures that are in their supply chain, regardless of whether they can link specific smelters to specific products, then we would get the identity of far more smelters into the 

disclosures, which would make them far more useful. 

Thank you very much for having me here today. 

[The prepared statement of Mr. Schwartz can be found on page 

72 of the appendix.] 

Chairman HUIZENGA. Thank you. 

With that, I recognize Kimberly Gianopoulos for 5 minutes. 

Thank you. 

STATEMENT OF KIMBERLY GIANOPOULOS, DIRECTOR, INTERNATIONAL AFFAIRS AND TRADE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE (GAO) 

Ms. GIANOPOULOS. Thank you, Mr. Chairman. 

Chairman Huizenga, Ranking Member Moore, and members of 

the subcommittee, thank you for inviting me here today to talk 

about our work on conflict minerals. As you know, Section 1502 of 

the 2010 Dodd-Frank Act contained a provision for us to report annually on the effectiveness of the SEC rule in promoting peace and 

security in the DRC and adjoining countries. My statement today 

will focus on the findings from our August 2015 report, our sixth 

on this topic. 

We focused on: first, a review of the SEC filings; and second, 

State and USAID’s actions to implement the U.S. conflict minerals 

strategy. 

First, I will discuss our review of the company filings. In 2014, 

for the first time, companies were required to file disclosures related to their use of conflict minerals from the DRC and adjoining 

countries. While the SEC estimated that about 6,000 companies 

could be affected by the rule, only 1,321 filed disclosures. 

We drew a generalizable sample of those disclosures and found 

several things. 

7 

First, almost all of the companies reported performing countryof-origin inquiries for the conflict minerals that they used. Second, 

94 percent of the companies reported exercising due diligence on 

the source and chain of custody of conflict minerals used. 

Third, about two-thirds of the companies were unable to determine whether the conflict minerals came from the DRC or the adjoining countries. And finally, none of the companies could determine whether or not the minerals financed or benefited armed 

groups in these countries. 

Through discussions with companies’ representatives and our review of the filings, we learned that the companies encountered difficulties in getting the necessary information from suppliers because of delays and other challenges in communication. For example, some companies told us that they received incomplete information from their suppliers. 

The Dodd-Frank Act also required State and USAID to prepare 

a conflict minerals strategy to address the linkages between human 

rights abuses, armed groups, mining of conflict minerals, and commercial products. This strategy was submitted to the Congress in 

2011. 

As part of the strategy, agencies supported a range of initiatives 

such as validation of conflict-free mine sites in the DRC, and 

strengthening traceability mechanisms that minimize the risk that 

minerals which have been exploited by illegal armed groups will 

enter the supply chain. 

The first photograph from our November 2014 trip to the region, 

as you can see on the screen, shows a bag of tantalum at a DRC 

mine being prepared for tagging and export. USAID officials told 

us that local miners can earn double the price for certified conflictfree minerals compared to non-certified, illegal minerals, which is 

more than they would earn from smuggling. 

Additionally, State reported funding a program for anti-human 

trafficking initiatives as well as to promote alternative livelihoods 

and improve workers’ rights in the artisanal mining sector. For example, State gave us an example of a woman who used to transport 

minerals, which is a physically demanding and low-paying job. She 

received a kit to sell fish at an alternative livelihood training session, and she now makes a better living from selling fish and can 

pay her children’s school fees without having to work in the mining 

sector. 

However, there are significant challenges that agencies face in 

implementing these efforts, many of which are outside the control 

of the U.S. Government. The eastern DRC is insecure due to a 

number of factors including poor infrastructure, weak governance, 

and the presence of illegal armed groups and some corrupt members of the Congolese military. 

Infrastructure challenges, such as the one you can see in our 

fifth photograph from our November 2014 trip to the DRC, make 

it difficult for police and other authorities to travel in the region 

and monitor mines for illegal activity. U.N. Security Force officials 

told us that armed groups continue to threaten and perpetrate violence against miners. 

8 

Finally, a member of the U.N. group of experts noted that smuggling remains prolific, and that instances of fraud call into question 

the integrity of some traceability mechanisms. 

Thank you for the opportunity to testify today, and I am more 

than happy to answer any questions you may have. 

[The prepared statement of Ms. Gianopoulos can be found on 

page 34 of the appendix.] 

Chairman HUIZENGA. Thank you. 

Mr. Imena, you now have 5 minutes for your oral presentation. 

STATEMENT OF THE HONORABLE EVODE IMENA, MINISTER 

OF STATE, IN CHARGE OF MINING, MINISTRY OF NATURAL 

RESOURCES, GOVERNMENT OF THE REPUBLIC OF RWANDA 

Mr. IMENA. Thank you, Chairman Huizenga, Ranking Member 

Moore, and members of the subcommittee, for inviting me today 

and holding this important hearing. I am honored to testify on behalf of the United States’ ally and friend, the Republic of Rwanda. 

Rwanda has enjoyed significant political stability since emerging 

from the 1994 genocide against the Tutsi. Gaining recognition for 

an efficient and uncorrupt government, the country is currently experiencing unprecedented economic development. 

Rwanda has rich deposits of 3T minerals: tin; tungsten; and tantalum. 3T minerals account for more than 90 percent of Rwanda’s 

mineral production. 

Mineral resources are very important to our economy. They represent 28 percent of national exports. The industry employs more 

than 37,000 people and supports livelihoods of about 1.5 percent of 

the population of Rwanda. 

In Rwanda, we recognize the threats posed by the potential link 

between mineral resources and conflicts. That is why 4 years before 

the passage of Dodd-Frank, the government initiated a project to 

collect fingerprints of deposits, and later on we initiated the certified trading chains, a system based upon guidance from the 

Organisation for Economic Co-operation and Development (OECD). 

When Section 1502 on conflict minerals was passed in 2010, the 

Government of Rwanda, in cooperation with the International Tin 

Research Institute, initiated a scheme to improve due diligence and 

traceability in order to reassure metal buyers of the provenance of 

their minerals. 

Since then, a lot has been achieved: 100 percent of 3T minerals 

mined in Rwanda are traceable from the mine sites up to the point 

of exports; a modern database exists with information on mining 

operations, production records, and mineral trading transactions, 

and to ensure third-party verification, our government works with 

PACT, the Washington D.C.-based NGO, to implement the 

traceability mechanism. 

Despite all of these efforts, we still face serious challenges. To 

name a few, the 10 countries covered by Section 1502 are at different levels of achievement and have different interests. Putting 

them in one box and applying a one-size-fits-all regulation is an impediment to implementation and fails to recognize efforts made by 

individual countries. 

Today, the Rwandan mining industry bears the direct costs resulting from the conflict minerals due diligence framework. Those 

9 

costs are a burden to mine workers and mining companies, for 

which revenues have decreased by 3 to 6 percent. Currently, more 

money is spent in complying with conflict minerals regulations 

than money paid for government taxes. 

I must, however, note a number of positive developments triggered by Dodd-Frank, including better record-keeping and reporting, increased monitoring and alignment of national regulations to 

best practices. These gains are among the reasons the ministry decided that regardless of what might happen to Section 1502, Rwanda will continue to have a robust traceability and be a reliable 

partner. 

In an ideal world, everyone is innocent until proven guilty. But 

with Section 1502, all of our sources have been labeled ‘‘conflict 

minerals’’ and our job is to prove that they are innocent. 

In conclusion, moving forward, we welcome a discussion about 

ways that we could partner with U.S. industry and the U.S. Government to identify strategies and improve the implementation of 

Dodd-Frank. 

Let me take this opportunity to invite all of you to Rwanda to 

witness for yourselves the achievement made in the mining sector 

and discuss opportunities for development with Rwandan miners. 

I welcome your questions, and thank you again for inviting me 

to participate today. Thank you. 

[The prepared statement of Minister Imena can be found on page 

58 of the appendix.] 

Chairman HUIZENGA. Thank you, Minister. 

With that, we have Professor Karen Woody, from Indiana University. 

And, you have 5 minutes. Thank you. 

STATEMENT OF KAREN E. WOODY, ASSISTANT PROFESSOR OF 

BUSINESS LAW AND ETHICS, KELLEY SCHOOL OF BUSINESS, 

INDIANA UNIVERSITY 

Ms. WOODY. Thank you. Chairman Huizenga, Ranking Member 

Moore, and members of the subcommittee, thank you for the invitation to appear before you today. 

My name is Karen Woody, and I am an assistant professor of 

business law and ethics at the Kelley School of Business at Indiana 

University. I have researched and written about the mandate and 

role of the Securities and Exchange Commission, particularly in enforcing Section 1502 of Dodd-Frank. 

I will begin with some background information. 

The Securities and Exchange Commission was founded in 1934 

and bestowed by Congress with its three-pronged mission: first, to 

protect investors; second, to maintain fair, orderly, and efficient 

markets; and third, to facilitate capital formation. 

The focus of the mandate is the creation and preservation of 

market integrity. In other words, the SEC was created to help assure investors that their investments are safe. 

Markedly absent from this congressional mandate is any administrative authority or charge to effect international, diplomatic, or 

human rights-oriented goals. 

Now, companies are required to make certain statutorily-mandated disclosures, triggered by events such as issuing new securiVerDate Nov 24 2008 19:19 Nov 03, 2016 Jkt 099780 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\99780.TXT TERI
10 

ties or electing new management. In addition to these disclosures, 

publicly traded companies must disclose any information considered material. 

The SEC, through its regulation, has implicitly defined ‘‘material 

information’’ as information that bears on the economic value of an 

investment. The SEC’s understanding of the materiality standard 

is that a reasonable investor generally focuses on matters that 

have affected or will affect a company’s profitability and financial 

outlook. This understanding is in keeping with Supreme Court 

precedent, as well. 

Section 1502 of Dodd-Frank, however, is not a financial regulation, but rather a provision aimed at ending the atrocities of a war 

occurring 7,000 miles from Wall Street. Assigning the SEC with 

oversight of conflict minerals disclosure is well beyond the SEC 

mandate and overextends the agency in ways that could prove 

harmful to its sole mission: investor and market protection, and 

capital formation. 

When tasking an agency to work towards a goal outside of its 

mandate and outside of its expertise, the agency and the population it is designed to protect are losing out in two ways: first, by 

losing the opportunity that the proper agency and its experts would 

achieve the goal in a more efficient and more successful manner; 

and second, by reducing the ability of the mis-tasked agency to do 

its best with the proper tasks it should be accomplishing. 

In other words, by tasking the SEC with regulation such as that 

of conflict minerals, one is foregoing the opportunity that another 

agency, such as the Department of State or the Office of Foreign 

Asset Control, can implement a better solution to achieve the humanitarian goals of the provision. 

Moreover, there is an increased risk that the SEC will not have 

sufficient resources to accomplish the goals for which it was created. In practicality, this means the risk of another Enron or 

Madoff scandal increases because the agency is overextended. 

This leads me to my second point, which is this: Absent the statutory requirement in Section 1502, information about conflict minerals likely would not meet the threshold for materiality. Conflict 

minerals disclosure is not a financial disclosure, and disclosure of 

social and environmental information is not typically required because that information to date has not been regarded as relevant 

or material to the financial condition of a company. 

Proponents of Section 1502 and other measures enhancing these 

disclosure requirements point out that the general public’s increased awareness of conflict minerals has rendered it material information. The general public, however, is not the constituency of 

the SEC: the investors are. That is, the SEC was created to protect 

those who own Apple stock, not everyone who owns an iPhone. 

If the SEC administered its regulations with an eye toward protecting all citizens rather than shareholders, it would be difficult 

to maintain capital formation and to balance the requirements of 

the agency’s mandate. For this reason, the SEC has never waded 

very far into regulation of human rights or foreign policy. 

Furthermore, requiring the SEC to enforce these disclosure requirements stretches thin an already overburdened agency and demands that it oversee diplomatic and humanitarian regulations for 

11 

which it lacks the subject matter expertise and the enforcement resources. 

Thank you again for the invitation to testify today, and I welcome any question you may have. 

[The prepared statement of Ms. Woody can be found on page 137 

of the appendix.] 

Chairman HUIZENGA. Thank you. We appreciate that. 

And last, but certainly not least, we have Per-Olof Loof, chief executive of KEMET. 

And you have 5 minutes. 

STATEMENT OF THE HONORABLE PER-OLOF LOOF, CHIEF 

EXECUTIVE OFFICER, KEMET ELECTRONICS CORPORATION 

Mr. LOOF. Thank you, Chairman Huizenga, Ranking Member 

Moore, and members of the subcommittee, for holding this hearing 

and inviting me to tell my story. 

My name is Per Loof, and I am the chief executive officer of 

KEMET Corporation, and chairman of the board of NEC TOKIN, 

a joint venture with NEC, headquartered in Tokyo. 

KEMET is a leading supplier of electronic components. Founded 

in 1919, we manufacture the broadest range of capacitor technologies in the world. 

We serve the military, automotive, industrial, telecommunications, computer, and medical markets. Including our joint venture, we have 17,000 people employed and a total of 28 manufacturing facilities globally, and we are listed on the New York Stock 

Exchange. 

Tantalum capacitors have been the key product for us since 1958. 

Today, about 46 percent of our revenue comes from tantalum capacitors. 

Tantalum ore is one area where the DRC actually can be a world 

leader. Simply put, it is easier to get to, and once you get it the 

density of tantalum in the material is significantly higher. 

Tantalum is our single largest cost item. Acquiring tantalum at 

competitive prices and stable prices is paramount to our company. 

This has always been a bit of a struggle, but during the global 

recession in 2008 and 2009, it became a real issue. Powder suppliers kept raising prices, seemingly unaware of what was going on 

around them. We had to figure something out, and the DRC was 

not, at the time, an option. 

Already in the 1990s, as things became increasingly difficult in 

the DRC due to the conflicts, customers didn’t want products with 

raw materials originating from the DRC. Some even said they 

didn’t want blood tantalum capacitors. 

We did procure from other locations, China mainly. But we all 

knew that DRC had the most cost-competitive source. 

When the Dodd-Frank Act passed, I actually sensed a real business opportunity. Section 1502 could be the impetus for us to develop in the DRC a socially sustainable source for conflict-free tantalum ore. 

We got going in 2011, after my first visit to Katanga and the village of Kisengo in northern Katanga. The objective was a vertically 

integrated, closed-pipe, sustainable sourcing model. 

12 

First, we helped create an industrial mine in the DRC. The mine 

is operated according to an agreement between us and the mining 

partner, MMR, and the people of the mining village of Kisengo, 

through their union. 

Second, we had to get really serious about logistics. Kisengo in 

northern Katanga, to get to Kalemie on the shores of Lake 

Tanganyika is a real trip. 

Third, we built an ore processing facility. 

And finally, we bought a tantalum powder manufacturer in Carson City, Nevada. 

All of our facilities have been audited and validated with the 

Conflict-Free Smelter Program. And globally, we have today invested over $110 million in this venture. 

Our investment has reduced some extreme fluctuation in ore and 

powder pricing in our former supply model. Being one of the largest 

tantalum users in the world, I believe our initiative has stabilized 

the pricing of this material not just for us but for the industry at 

large. 

While some may argue that miners in the DRC have been negatively impacted by Dodd-Frank, I can say with certainty that this 

is not the case with our initiative and in our little village. 

Our investment resulted in: an industrial mine, making it safer 

for the workers; a new hospital for the people of Kisengo, treating 

over 14,000 patients over the last year-and-a-half; a new school 

with 1,500 students; access to clean water; eradicating cholera from 

the village; the creation of a bunch of businesses to support the 

mine, the school, and the hospital; the installation of solar powered 

street lights; and refurbishing basic infrastructure. 

The economic benefit to KEMET is multiples of what we have invested in the village. The annual run rate benefit to us is now at 

$56 million. We were able to secure 86 jobs in Nevada and 200 jobs 

in South Carolina. 

It is possible to succeed in business while being economically and 

socially responsible. 

Section 1502 has been very good for the tantalum industry. 

There is little question on provenance and there is a clear road 

map how to ethically source DRC tantalum. 

The Dodd-Frank Act has helped companies like KEMET to again, 

after decades of absence, be able to embrace the DRC and develop 

a competitive and secure supply chain, while also, of course, improving the lives of the people in the village. 

I know we at KEMET cannot solve all of the problems in the 

DRC, but I do believe that we have had and will continue to make 

a positive impact on this little village—a village that you can hardly find on a map, but with 15,000 people living there 4 years ago, 

and now 30,000 people living there. 

So I thank you all for allowing me to testify and tell our story. 

I will be happy to answer any of your questions. 

[The prepared statement of Mr. Loof can be found on page 68 of 

the appendix.] 

Chairman HUIZENGA. The Chair now recognizes himself for 5 

minutes for questioning. 

Mr. Loof, you just testified that what has happened in this was 

‘‘very good for the tantalum market.’’ What I am concerned about— 

13 

you have the minister of mines sitting two down from you—is that 

it hasn’t necessarily been so good for Rwanda and for the countries 

affected. 

We have seen the average price per month of tantalum ore fall from $116 in January to about $92. I understand that is very good 

for business, but aren’t you kind of invested in making sure DoddFrank stays exactly as it is, the status quo, and isn’t that a bit of 

a conflict of interest? 

Mr. LOOF. Thank you, Mr. Chairman, but for KEMET it is very 

important that the prices are stable and that the sources are secure. And it is important not just for us but mainly for our customers. 

Our customers are determined to ensure that whatever they buy 

from us is conflict-free and that the prices are stable. And what has 

happened through the investment that we have made and others 

have been able to benefit from, is we have been able to ensure a 

stable, cost-competitive source that allows the tantalum industry to 

continue to flourish. 

Chairman HUIZENGA. All right. I need to turn to the minister of 

mines, but I will note that in your written testimony you said, 

‘‘When the Dodd-Frank Act passed, I sensed a business opportunity.’’ So I understand this may be very good for your business; 

what I am concerned about is this might be misplaced for the folks 

in the countries that are affected by that. 

So, Minister Imena, obviously, I think especially in the people in 

the West, we have talked about this and have had in previous 

hearings, we kind of lump in all of Africa together way too often, 

those 10 different countries within the Great Lakes Region. Rwanda had, as you have pointed out, its challenges and horrors 20 

years ago, but it is a very different place now, and very different 

than the DRC and very different than some of the others. 

In your testimony, you argue that Dodd-Frank’s one-size-fits-all 

approach is a mistake, and I would just like you to maybe elaborate a little bit more on that, if you would. 

Mr. IMENA. Thank you very much, Mr. Chairman. 

Geologically, we are in what is called the Kibaran Belt. That is 

a belt very rich in tin, tungsten, and tantalum. And that belt covers entirely Rwanda, and some parts of the eastern side of the Republic of Congo, and some parts of Burundi, Tanzania, and Uganda. 

But in this Section 1502, 10 countries with different geological 

backgrounds and different economic, social, and cultural situations 

have been put together in a box and are required to do the same 

thing. And we don’t look at what is above ground, where are we, 

and where these countries are going. So that is the real challenge 

for Rwanda. 

Chairman HUIZENGA. You had said in your testimony, you write 

we don’t have ‘‘conflict-free’’ minerals under Dodd-Frank, but you 

have Africa-free minerals with Dodd-Frank. Do you believe that 

economic instability is likely for Central Africa if this de facto boycott of material continues? 

Mr. IMENA. Thank you very much, Mr. Chairman. The customer 

of these has reduced dramatically because companies are fearing to 

come and source directly from us. 

14 

We have a very limited number of companies working or buying 

from our producers, due to these regulations. Thank you. 

Chairman HUIZENGA. And you have also testified that Rwanda 

pays more to comply with Section 1502 than it collects in mining 

taxes. This may go to Mr. Loof’s questions about price stability and 

all of those things. You and I have had a little bit of a conversation 

about that. 

But please tell the panel what Rwanda and what the Government of Rwanda would do if compliance costs weren’t so burdensome, and what kinds of investments do you think could be made 

in your country and in your people? 

Mr. IMENA. You are right, Mr. Chairman. It is today more costly 

to comply with these requirements than what we collect as taxes 

to develop the mining industry and to do some surveys and educate 

our people so that we can grow the industry. 

It seems like it is really a burden from the small-scale miner up 

to the mineral exporter, and they don’t really understand why. It 

is too costly, it is too difficult, and despite whatever they are trying 

to do, they don’t see people coming and investing in the business. 

Chairman HUIZENGA. And you said to me yesterday that you 

have been witnessing an 8 percent growth in the economy of Rwanda, but there has been some stagnation, correct, in mining? 

Mr. IMENA. You are right, Mr. Chairman. We expect a reduction 

of around 50 percent, compared to what we are expecting from the 

mining sector. And this is also impacting the growth of the country. 

Chairman HUIZENGA. Okay. 

With that, my time has expired. 

I now recognize the distinguished ranking member of the subcommittee, Ms. Moore, for 5 minutes. 

Ms. MOORE. Thank you so much, Mr. Chairman. And I can tell 

you that I was not disappointed to hear such good information from 

this distinguished panel. 

I guess—and someone can correct me if I am wrong—what I hear 

from you all is that—especially from you, the Honorable Imena— 

you really at a gut level believe that this is a good, socially responsible thing to do but for the problems in implementation, but for 

the speed bumps. 

I heard Professor Schwartz say that there was hope, although it 

is not working because there are some things that need to be 

tweaked. I heard our GAO witness talk about the difficulties in 

doing it. I heard Professor Woody say that the SEC doesn’t have 

the expertise necessarily to do that, nor the authority. 

And I heard you, Honorable Imena, say that no matter what happens, you are committed to providing conflict-free minerals for the 

industry. 

So I think that I am hearing that we are not at a point where 

people are suggesting that we throw the baby out with the bath 

water. Now, having said that, let me ask a couple of questions. 

Let me start with you, Honorable Imena. I guess what I need to 

get a clearer picture of is the costs relating to compliance. 

Has the government or the private industry done any sort of assessments to determine why there are $6.1 million to comply? We 

have heard testimony here that people will pay a premium price 

to make sure that they are conflict-free. I know I want a diamond 

15 

badly, but I want a conflict-free diamond. But they will pay for 

that. 

So do you think—I want to know, Honorable Imena, if you think 

that the private sector, that—using, for example, the tagging and 

bagging scheme run by the International Tin Research Institute, is 

a much more costly approach and that could be done at a lesser 

cost. 

Do you think that if the private sector owns these mines—I guess 

I don’t understand why—and if they are getting a premium price, 

I don’t understand exactly why it is costing more. Can you dive a 

little deeper into that? 

Mr. IMENA. Thank you very much, Congresswoman Moore, for 

that question. 

I will address that by giving you some figures. Our region produces around 2 percent of the global tungsten. And when any company willing to source from Africa sees that they will be filling out 

different reports, and undergoing different audits, they just say, 

‘‘Let’s avoid Africa because it is just 2 percent of the tungsten.’’ 

When it comes to tin, we have a quite considerable share. But 

the number of companies interested in coming and continuing to do 

their business directly from our countries has reduced because of 

that— 

Ms. MOORE. Okay, Honorable Imena, I don’t have much time so 

I am interrupting you. So just with the tungsten, can they source 

it from non-conflict areas? 

Mr. IMENA. Thank you— 

Ms. MOORE. The other 98 percent? 

Mr. IMENA. They can source it from Canada, from China, from 

many parts of the world. 

Ms. MOORE. Is there anyone else on the panel who wants to address this particular issue? 

Mr. Loof? 

Mr. LOOF. Yes. I will be happy to. I can talk about the costs of 

implementing this system for our country, and we are the largest 

tantalum users in the world probably. 

The bag and tag system is very simple. It needs a bit of discipline, but we all need discipline in whatever we do. 

The cost of implementing this for us has been—last year we paid $45,000 for the audits. We have two full-time equivalents working 

on this ongoing for the— 

Ms. MOORE. So the $6 million doesn’t make any sense— 

Mr. LOOF. This does not make any sense to us. We haven’t seen 

that. For us, this has been an important business reason to go back 

into the Congo. And due to the fact that we now can tell our customers—because that is where this all originates; it is about people 

not willing to buy iPhones if they can’t ensure that the tantalum 

used in those iPhones is conflict-free. That is where it starts. 

And our ability to serve these customers are absolute—it is paramount that we can source it— 

Ms. MOORE. Thank you. My time has expired. 

Thank you, Mr. Chairman. 

Chairman HUIZENGA. With that, we recognize— 

Ms. MOORE. Mr. Chairman? 

Chairman HUIZENGA. Yes— 

16 

Ms. MOORE. I ask unanimous consent request to place in the 

record letters—from the Responsible Sourcing Network, Panzi Hospital & Foundations, the Conflict-Free Initiative, the Enough 

Project, the National Association of Evangelicals, the Association 

for the Development of the Initiatives of the People, Congolese 

human rights NGO, the International Corporate Accountability 

Roundtable, and other documents, including George Inez Bonita y 

Amarne statement, Campus Initiative, Jewish World Watch, and 

Global Witness—supporting Section 1502. 

Chairman HUIZENGA. Without objection, it is so ordered. All 

right. We will make sure that a forklift is provided— 

[laughter] 

With that, I would like to recognize the vice chairman of our 

Monetary Policy and Trade Subcommittee, Mr. Mulvaney from 

South Carolina, for 5 minutes. 

Mr. MULVANEY. Thank you, Mr. Chairman. 

Mr. Imena, I want to go back to something you had started talking about with the chairman and follow up a little bit. You mentioned that Section 1502 treats these 10 countries in the region 

similarly, or the same, that they are all in this same box together. 

You mentioned that, as well, in your opening statement. 

So I am curious as to why you think that is inefficient or wrong, 

and how you would propose to change that? What is it about Rwanda that is different than the Congo and why they should be treated 

differently and not all painted with this same brush? And if you 

could be specific, that would be helpful. 

Mr. IMENA. Thank you very much, Congressman. 

The difference is that in Rwanda there is no single mine occupied 

by any armed group or any illegal group. There is no single route 

controlled by any illegal group. So the situation is totally different 

from what you have in some of the parts of these countries. 

Mr. MULVANEY. Then how would you— 

Chairman HUIZENGA. If the gentleman will yield just a moment— 

Mr. MULVANEY. Absolutely. 

Chairman HUIZENGA. —we do actually have a map, if you are interested, and we can put that map up. And without objection, I 

would love to share that map for the testimony. 

Mr. MULVANEY. And while they are doing that, I will ask the 

question. So I understand that is one of the differences. If we sit 

here, and Ms. Moore and I get together afterwards and say, ‘‘Well, 

look, we are not going to get rid of Section 1502 for various political 

reasons in our country,’’ how could we improve it in order to reflect 

what you just said? 

Mr. IMENA. Thank you very much, Congressman. 

Normally when a country complies with some requirements or 

does what it is supposed to do, it graduates. But in our case, we 

are just stuck. 

I think we need to work with U.S. companies, the U.S. Government, and get something that works for Rwanda but also for the 

United States, and to ensure that we are responsible, we are transparent, and we are cost-effective. This is what is lacking, being efficient and cost-effective. 

17 

Mr. MULVANEY. So I guess if I am trying to summarize that to 

my friends across the aisle, it would be that since Rwanda does not 

have the same challenges as the Democrat Republic of Congo, does 

that mean maybe we shouldn’t treat it exactly the same as the 

DRC? Is that fair? 

Mr. IMENA. Thank you, Congressman. 

I will speak for Rwanda. We would like, really, Rwanda to be 

considered as conflict-free because there is no conflict in Rwanda. 

Mr. MULVANEY. That is about as good a summary as I can think 

of. Thank you very much, Mr. Imena. 

Professor Woody, you said something that has come up a couple 

of different times in these hearings over the last couple of years, 

which is that as well-intentioned and as admirable as the desired 

results of this rule are, there seems to be a fairly valid conversation as to whether or not the SEC is the right entity to enforce it. 

And you said something that caught my attention during your 

opening statement. You said that the SEC has neither the experience nor the personnel or the expertise to do this. 

Could you flesh that out a little bit and tell us what you have 

seen in your research and why you think that is noteworthy? 

Ms. WOODY. Yes. Thank you. 

It is a valid question and now, as the chairman’s opening remarks mentioned, there has been a significant amount of manpower and personnel put to this. But my point, simply, in my testimony is that is at the expense of using that staff and that personnel for other well-situated tasks within the agency. 

And so for—if that answers your question? 

Mr. MULVANEY. I think it does, and that is what I was expecting 

you to say. So I say again to—I see that the ranking member of 

the full Financial Services Committee, Ms. Waters, has come in, 

and to the ranking member of the subcommittee, as well, is that 

this comes back to a conversation we have had many times, which 

is that as well-intentioned as this is, there are things that the SEC 

has not been able to do because it has been spending time on this. 

We are now coming up on many, many months after I asked 

Chair White where the rules were on parts of the JOBS Act, as 

many of you voted for—most specifically, some of the rules on 

crowd funding, which are now several years late, in large part, I 

think, because the time has been spent on issues like this. 

So with that, I am not going to have a chance to ask another full 

question, so I will yield back the balance of my time. 

I thank you all. 

Chairman HUIZENGA. The gentleman yields back. I will make a 

note that Chair White will actually be here tomorrow for testimony 

in front of the full Financial Services Committee, and I intend to 

pursue that line of questioning with her. 

I now recognize the ranking member of the full committee, Ms. 

Waters, for her 5 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. I’m sorry 

that I could not be here at the beginning of the hearing, but I want 

to thank you for having it. I think this is very important, and I am 

glad that you decided to take the time, because this is an important issue. 

18 

I served on the conference committee of Dodd-Frank, and I 

worked with Barney Frank on this issue. Some of us who have 

spent years dealing with different parts of Africa and trying to do 

everything that we could to not only support the peoples of the continent in different ways, whether we are talking about Northern 

Africa, South Africa, Central, or what have you, we believe that the 

continent is so rich in minerals and they have the kind of resources 

that could conceivably guarantee a good quality of life for all Africans. 

And we believe that, of course, the entire continent has been exploited for far too long and that the people have not benefited from 

the rich resources in many of the parts of the continent. And so 

Section 1502 is important because we, in Dodd-Frank, took the opportunity to not only look after investors so that they would know 

where these minerals are coming from and not do anything, or try 

to do everything that we could to avoid the conflict and the different organized paramilitary efforts that were engaged in this conflict. 

And so I am very pleased that the SEC is charged with oversight. I am very pleased that the SEC does not see this as something that they don’t have time to pay attention to. 

I just heard one of the gentlemen talk about how the SEC is so 

involved with the JOBS Act and all of that perhaps—I guess he 

was suggesting that maybe they should be spending time on this 

issue, or too much time is spent on this issue. I am just pleased 

to learn from my staff that our companies are doing a better job 

of reporting, that—and it is working, and that from the first report 

to the second report, we see a marked improvement. And I think 

that is very helpful. 

Let me ask any of the members of the panel today, do you think 

Section 1502 in Dodd-Frank is helpful and should be supported and 

maintained? 

Mr. LOOF. If I may answer that, Congresswoman, for us it is 

paramount. We could not be back in the DRC if we didn’t have a 

sure, secure way of ensuring our customers, because that is where 

it all starts, that the tantalum that we—tantalum capacitors that 

we make actually are made from ore that sourced conflict-free. 

Ms. WATERS. Anyone else? 

Yes, sir? 

Mr. IMENA. Thank you, Congresswoman. 

I think one of the best way to solve conflicts is to create opportunities to grow economies. Section 1502, as it is written, is not allowing us to build the mining industry, to create jobs, to allow our 

people to develop. We need to do something because it is not working. 

Ms. WATERS. Let me interrupt you a minute because I want to 

understand you. Would you repeat the statement about the SEC 

when they are not doing what? Would you repeat that? 

Mr. IMENA. Section 1502 is not helping us grow our mining industry, employ people, create opportunities. 

Ms. WATERS. How is it stopping you from doing that? 

Mr. IMENA. Minerals have been labeled as conflicts—themselves. 

Even not being extracted, they are already conflict minerals. So 

19 

this is taking away a lot of companies which would be willing to 

invest and do business in Africa. 

Ms. WATERS. And so you think perhaps if we could eliminate Section 1502 that you could develop your economy a lot better? 

Mr. IMENA. Thank you, Congresswoman. 

If we work on how we implement this regulation, we can do a 

lot. 

Ms. WATERS. If you do what? I’m sorry, repeat that. 

Mr. IMENA. If we change how we implement these regulations, 

we can do a lot. 

Ms. WATERS. How would you suggest that we could be helpful? 

Mr. IMENA. We need to work on how it can get cost-effective and 

how the de facto boycott on African minerals can be taken away. 

Ms. WATERS. Would you describe to me the cost-effective problem 

that you are alluding to? 

Chairman HUIZENGA. Unfortunately, we are going to have to 

have another—the gentlelady’s time has expired. But this is a line 

of questioning we are hoping to continue to pursue. 

I encourage my fellow Members to do that. And if possible, I am 

hoping that we are going to be able to get to a second round of 

questioning. 

So with that, we recognize Mr. Pittenger of North Carolina for 

5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman, for this important 

hearing. 

I would like to continue on that line of questioning. 

Please continue on the cost-effectiveness that you can employ inside your own country and what you can do to make this more efficient. 

Mr. IMENA. Thank you very much, Congressman. 

In Rwanda we have two type of levies. There is one we call the 

iTSCi and the other one we call the JIMBI. Both levies are taken 

or collected at the export points to finance the traceability mechanism. 

For a ton of tin, for instance, we collect almost $400. And that 

money is spent to pay auditors, to pay employees, and to make sure 

that the system works. 

Four-hundred dollars is almost the same amount that the government collects as taxes, and those taxes would in turn be used 

to develop the industry, harmonize it, and build a responsible business in the country. But because we are spending a lot of money, 

and a lot of effort in complying with these regulations, we are not 

given enough resources to develop the industry in the country. 

And our wish is to look at how can we efficiently work with the 

U.S. Government, with the U.S. private companies, to ensure that 

whatever product comes from Rwanda is clean; but for ourselves, 

that it is not very costly. And, most importantly, people are feared 

to come and work with us because we have tagged all our minerals 

that they are already conflict, which is not the case. 

Thank you, sir. 

Mr. PITTENGER. Thank you. 

Professor Schwartz, would you like to weigh in on that? 

20 

Mr. SCHWARTZ. Sure. I think what the Honorable Mr. Imena says 

is troubling, that this is imposing costs on Rwanda, and that he 

makes a good point in that regard. 

I guess the only thing I would say is that we have to always keep 

in mind when we are talking about the costs that we need to consider the benefits, and that while this might be costly for the government and it might be costly for companies, we also have to look 

at, is this decreasing the funding available to military groups in 

the Congo? And we need to weigh those against each other. And 

they are both abstract and this is difficult to do, but we just need 

to keep both sides of the equation in mind. 

Mr. PITTENGER. Professor Woody? 

Ms. WOODY. I would echo both the Honorable Imena’s comments 

and Professor Schwartz’s. 

It is something that seems different with Rwanda, and it almost 

seems like we would have to have a representative from each of the 

neighboring countries here because each neighboring country of the 

Congo likely would have very different regulations and different— 

even as you pointed out—geographical characteristics, such that 

that would make—Section 1502 needs to be written in such a way 

that you would have to have discrete provisions for each of the 

countries that it affects. 

Mr. PITTENGER. Ms. Gianopoulos, do you have anything else to 

add? 

Ms. GIANOPOULOS. As part of our work, we really didn’t look at 

the cost of putting this rules into effect. We have gotten a very 

mixed bag as far as the effectiveness of the rule in achieving the 

goals that it has been set out to do. 

Part of that is because of the way the rule has been promulgated, 

in that larger companies have 2 years and smaller companies have 

4 years before they have to actually determine whether or not the 

conflict minerals that they are employing are supporting armed 

groups. So that is part of the reason why we haven’t addressed this 

issue. 

Mr. PITTENGER. Thank you. 

Many people have stated that Section 1502 has been a de facto 

embargo on the continent, as—on the country, and it is leaving the 

militias more in charge. Would you concur with that, Mr. Imena? 

Mr. IMENA. Thank you very much, Congressman. 

I will give an example. Before Dodd-Frank, we had a company 

from Germany which owned a mine, and they were extracting the 

minerals and shipping them immediately to Germany. But since 

the promulgation of this law, that company just ceased its operation and they were fearing about the auditing, about all the burden which will come with Section 1502 and they just stopped operations. Now the clients we have only for those minerals are coming 

from Asia. 

So when you have a reduced number of people coming to source 

from you, immediately they put the price down, which also impacts 

your economy. 

Mr. PITTENGER. Thank you. 

Would anybody else like to weigh in on that? 

I yield back. 

21 

Mr. LOOF. If I may jump in, Congressman, our experience is different. We couldn’t actually be there unless there was a clear way 

of sourcing this thing in an ethical manner because we couldn’t sell 

our products to our customers. 

Chairman HUIZENGA. The gentleman’s time has expired, and I 

am going to have a follow-up question on that personally, if it is 

not gotten to. 

But with that, I recognize the gentleman from New Mexico, Mr. 

Pearce, for 5 minutes. 

Mr. PEARCE. Yes, sir. Mr. Chairman, thank you very much. 

Minister Imena, I will continue the discussion that Ms. Waters 

and Mr. Pittenger started. 

But first I want to go to the Honorable Loof and ask if you have 

your own security forces to protect your mines to keep them from 

being taken over? 

Mr. LOOF. No, we don’t have. There are police—Federal police 

and mining police—in the mine site. The number of times I have 

been in the village there have been—there are always police 

present. I have never felt really threatened, and I have been able 

to walk around in the village quite openly and quite freely. 

But clearly, I am no expert on the DRC, and I am no expert on 

the mining business. But for our experience in our little village, we 

have been able to create work and create safer work, and also been 

able to fund medical care at a whole different situation than before. 

As I said, we have eradicated cholera, and we are working on malaria right now. 

Mr. PEARCE. I appreciate that. Having traveled to Uganda, 

Rwanda, Burundi, South Sudan, and Tanzania in the last 2 years 

multiple times, I suspected I would be concerned about people like 

Joseph Kony, who ranges freely. We stopped and talked with the 

U.S. forces who are trying to catch him, and he does—I am not asking a question; I am just making an observation that I would be 

concerned that your operation, if it is profitable, would be a target 

for somebody who has been able to pretty well do what he wants. 

Mr. Imena, we have been to Rwanda, and I will tell you that as 

an outsider, I appreciate when I go in and see the cleanliness of 

your country and the kind of industriousness. And I have met with 

Paul Kagame personally and know that he is in the process of 

maybe getting an exception to move into another term and I would 

support him. 

But I have found our State Department to be exactly on the opposite side of that; they seem to be trying to undermine him during 

our visits there and it is—again, the politics are very difficult to 

understand completely. And maybe I was mistaken, but I don’t 

think so. 

Do you think that Rwanda maybe has been singled out because 

of our disagreement between the State Department and Mr. 

Kagame and their resistance to him being there? Do you think that 

it is something as directed as that? 

Mr. IMENA. Thank you very much, Congressman, and thank you 

for your good comments on the cleanliness of Kigali City. 

For these other aspects beyond the mining sector, I will be 

pleased to refer them to our embassy here, and we can follow up 

with you. Thank you. 

22 

Mr. PEARCE. Thank you. Those are very carefully chosen, wellchosen comments. 

[laughter] 

Chairman HUIZENGA. The Chair will note, he is a professional 

diplomat. 

Mr. PEARCE. He gets a special award for that particular answer. 

I think Ms. Waters is really driving at something that is very 

critical: If there are ways that Section 1502 can be changed to accommodate what we all want, I think that the aspirations of the 

provision are noble. 

I, like you, am concerned that it is penalizing a country that really is trying to move itself forward. And again, I see the industriousness of the people; I appreciate the quality of the society there. And 

anything that we can do to facilitate that would be, I think, good 

for both sides. 

Mr. Loof, have you considered going into Rwanda as a country 

and maybe establishing a second mine there, a second operation? 

Mr. LOOF. We have not considered starting another mine in 

Rwanda, but we are sourcing material from Rwanda as well. 

Mr. PEARCE. Okay. 

Mr. LOOF. And that works in the same manner that it does in 

the DRC. I do recognize the situation in Rwanda is much different 

from the Congo. Luckily for us, the southern part of Congo, southeastern part, the Katanga province, has always been a little less 

violent than the other parts for the— 

Mr. PEARCE. And the final question—thank you, sir. 

The final question is to Ms. Gianopoulos: Do you have an observation about Professor Woody’s comments about the SEC being 

overextended? I tend to believe it. I have watched as they have 

tried to get into the fracking question and the oil and gas industry, 

and so I wonder how in the world they have the resources. Do you 

note any of that extension of resources? 

Ms. GIANOPOULOS. We have spoken with the SEC across the last 

several years that we have been under this mandate to report to 

you annually. When we talked with the SEC about how they were 

going to promulgate the rule, they did admit that they needed to 

come up to speed on a number of issues that they did not have expertise on, but that they reached out to the State Department as 

well as to other stakeholders, and when they promulgated the rule 

and asked for public comments, they received a number of written 

comments from both the private and the public sector in order to 

put it together in a meaningful way. 

Mr. PEARCE. Thank you. 

I yield back, Mr. Chairman. 

Chairman HUIZENGA. The gentleman yields back. 

I recognize the gentleman from Washington State, Mr. Heck, for 

5 minutes. 

Mr. HECK. Thank you, Mr. Chairman. 

I am not entirely sure to whom I should address this question, 

but I think probably starting with Ms. Gianopoulos, and maybe 

Professor Schwartz. If anyone else wants to chime in, that would 

be fine. 

I am a little bit old-school insofar as I believe that you can, in 

fact, catch more flies with honey than you can with vinegar. And 

23 

as a consequence, I think there is great value in pointing out and 

putting the spotlight on the success that some of this program has 

brought about. 

I read with some considerable interest the report by Global Witness and Amnesty International on the first round of reports and 

took some personal pride in the fact that the Boeing Company, 

which, of course, I believe makes the finest airplanes on the face 

of the planet and does so mostly in the State of Washington, which 

I have the privilege to represent, was individually cited for the precision and depth of their disclosures. But for all my parochial pride, 

it prompted in me the question, well, after Boeing, maybe who else 

should be given a little honey, as it were, to spotlight their successes? 

So I am wondering, in addition to the Boeing Company, Ms. 

Gianopoulos, if there are any—I wouldn’t want you to just say one, 

but are there two or three companies that you thought had pretty 

good reporting and earnestly attempted to fulfill the spirit of the 

law among those that did report? 

Ms. GIANOPOULOS. We took a generalizable sample of all different sizes of companies. I know Professor Schwartz was focused 

on a particular sector or a particular size of companies. 

But across the various companies we tried to make it—to bring 

it up to a higher level. So I wouldn’t be able to give you the names 

of individual companies of particular disclosure reports. 

But this coming year, with the current cycle of our annual mandate, we are looking at the second round of disclosures and comparing them back to the first round to see how those have 

changed—positive, negative, or whatever. So I would probably have 

more to tell you in the next round of reporting. 

Mr. HECK. Can you do it by sector? Is there any particular sector 

that you think overall did a little better job than— 

Ms. GIANOPOULOS. Unfortunately, the generalizable sample that 

we took did not break it down by individual sector. We would have 

had to do a much larger sample for that. I’m sorry, sir. 

Mr. HECK. Professor Schwartz, throw me a lifeline here. 

Mr. SCHWARTZ. Thank you, Congressman. 

I would single out Intel as having the best disclosures, and then 

I would also throw some honey towards Apple. Although Apple’s 

disclosures didn’t necessarily stand out to me in reviewing the reports, you can tell by looking at the website that they have internalized the idea of conflict-free sourcing and that they are endeavoring to illustrate to the public the extent to which they are actually trying to do so. And they have a diagram where they actually 

separate out their phone and show where everything came from on 

their website. 

And then if I were to single out—I don’t know if I could do it by 

industry, but I would single out as generally doing better those 

companies that are consumer-facing, so companies that actually— 

they sell their products directly to a customer, like Apple, rather 

than companies that are deeper in the supply chain. So those companies that are more worried about what the person buying their 

product on the street is going to think, they are tending to be more 

responsive to these rules. 

24 

And I would also say that there has been some improvement in 

the reporting year over year, but there is still a long way to go. 

Mr. HECK. Professor Woody, do you have anything to add? 

Ms. WOODY. I also couldn’t speak necessarily to any individual 

company, but I agree that for the most part, the press that I have 

read has singled out Intel as being one of the forerunners of doing 

very comprehensive due diligence on their supply chain. 

Mr. HECK. That would be, of course, in addition to the Boeing 

Company. 

Ms. WOODY. Yes. I’m sorry. Of course, Boeing, as well. 

Mr. HECK. That is really all I have, Mr. Chairman. Thank you 

for holding this hearing. With that, I yield back the balance of my 

time. 

Chairman HUIZENGA. The gentleman from Boeing, I mean Washington, yields back. 

[laughter] 

Okay. It was meant purely as a jest, so with that, the Chair recognizes the gentleman from Minnesota, Mr. Emmer. 

Mr. EMMER. Thank you, Mr. Chairman. 

And thanks to the witnesses, again, for taking the time to be 

here today. 

Mr. Imena, it is my understanding that a U.S. Federal court— 

at least one, perhaps more—has struck down a large and important 

requirement from Section 1502, and I am referring specifically to 

the requirement that companies file with the SEC to indicate that 

the minerals they use are ‘‘conflict-free.’’ How do you think this will 

affect any United States and Western companies and their suppliers in terms of doing future business in Rwanda? 

Mr. IMENA. Thank you very much, Congressman, for the question. 

We are following that case closely, but obviously it is beyond any 

control of the Government of Rwanda. But the concern to us is the 

uncertainty it is creating, because as long as the case is still before 

the courts, it creates uncertainty, and we are not able to predict 

whatever will happen in the future. Thank you. 

Mr. EMMER. It hasn’t relieved the filing; it just—you are waiting 

to see if ultimately—let’s just say the case is affirmed. I assume it 

is on appeal. Let’s say the case is affirmed. How will that affect the 

U.S. and Western companies and their suppliers in terms of doing 

future business with Rwanda? 

Mr. IMENA. Still there will be a problem to us because Section 

1502 will be there and the region will continue to be struggling because of that de facto boycott. So, the concern would remain. 

Mr. EMMER. Thank you. 

What other traceability systems for 3T minerals are currently 

being used by Rwanda’s neighbors, Mr. Imena? 

Mr. IMENA. Today, we have the iTSCi. That is the ITRI Tin Supply Chain Initiative. 

We tested the METRUCK. It is another electronic system. And 

we also have the regional certification mechanism, called the International Conference on the Great Lakes Region. 

So both schemes that we are having on the ground, but the most 

efficient one is the iTSCi. 

Mr. EMMER. All right. 

25 

Mr. IMENA. Thank you. 

Mr. EMMER. And what are some of the development and investment challenges in terms of scaling up your mining sector in Rwanda? Where do you see the best opportunities for growth? 

Mr. IMENA. Thank you, Congressman. 

The best opportunities are at value addition. We have very good 

opportunities to create refineries and processing facilities in Rwanda. We also have very good opportunities in other minerals rather 

than 3Ts, like the gemstone. 

We also have very good opportunities in transforming and modernizing the mining industry from a small-scale, artisanal industry 

to an industrial operations. 

Mr. EMMER. Thank you, Mr. Imena. 

Changing gears just a little bit, Professor Schwartz, I appreciate 

all of your research, the empirical evidence you presented. But as 

I was reading through it and then listening to you again today, on 

the one hand, when I read it it sounded as though you—or I took 

from it that you are not impressed with Section 1502, it is not 

doing what it was intended to do, and that we should get rid of it. 

But then I get to another portion of your testimony and you start 

to offer a potential better way of doing it. And I have heard you 

talk about this here this morning. 

So the question I have is—to you, Professor Schwartz—should we 

get rid of Section 1502 or should we fix it, and why? 

Mr. SCHWARTZ. Thank you very much, Congressman. 

And you are definitely right that I have a lot of criticism for Section 1502, but the way I ultimately come down is that it is worth 

trying to salvage. And when I was writing that paper and thinking 

about what we should do next, it was—I was weighing, is this section fundamentally flawed so it should just be repealed, or is there 

a way to fix it? 

And I ultimately come down in thinking that there are ways to 

fix it and that primarily, if we ask some different questions, so ask 

companies—so the way companies complied was commonly through 

surveying their suppliers, so if we ask companies what their survey 

response rate was with respect to their suppliers, and if they followed up with their suppliers; and if we ask companies to identify 

the actual mine of origin and who controls the mine of origin. 

So if we ask some different questions, we might get better answers to what is going on in these companies’ supply chains. And 

much of the rule, I think, is written with an eye towards process— 

but do these companies have the right process in place—and not 

enough with an eye towards substance. 

So I think when we ask more substantive questions like, ‘‘Okay, 

who are your suppliers,’’ make it more clear that the companies 

need to identify their smelters in their supply chain, and make it 

so that we really can unfold the supply chain and get that onto the 

reports, I think it could be better. 

Mr. EMMER. But you weren’t actually making a determination as 

to whether Section 1502 would be better, for instance, than the 

traceability systems that are currently being tested in the region? 

Mr. SCHWARTZ. That is a good point. They are all actually connected, so I can’t— 

26 

Mr. EMMER. It is a yes-or-no question. You weren’t actually doing 

that, trying to compare Section 1502 and whether its benefits outweigh the cost, as opposed to the traceability systems that are currently being tested? 

Mr. SCHWARTZ. They are connected. So iTSCi is a way to trace 

conflict minerals in order to comply with Section 1502, so that is 

why I said they are related together, that they are tied together. 

Mr. EMMER. But you wouldn’t need it— 

Mr. SCHWARTZ. I’m sorry? 

Mr. EMMER. My time has expired. Thank you. 

Chairman HUIZENGA. I will allow you to answer that last question. 

Mr. EMMER. My last one was, but you don’t need Section 1502. 

I understand you are saying they are related, Professor, but you 

don’t need it. If the traceability systems that are currently being 

tested in the region work, then it would solve the problem, allegedly, that the purportedly Section 1502 is supposed to address, correct? 

Mr. SCHWARTZ. Correct. I see what you are saying. So if the tracing schemes are already in place, then perhaps the legislation is 

unnecessary. I understand— 

Mr. EMMER. Thank you very much. 

I yield back. 

Chairman HUIZENGA. The gentleman’s time has expired. 

And the Chair is sitting here with a bit of embarrassment and 

egg on his face. I offered a private apology to Mr. Heck up here, 

and I now want to publicly apologize, as well. My misdirected and 

misguided Irish sense of humor got out in front of my thinking 

process and I in no way intended to suggest or impugn his character or independence, and I hope he will allow me to chalk that 

up as a lesson learned. He has assured me that he will, but I wanted to make that public, as well. 

So with that, I would like to recognize the gentleman from California, Mr. Sherman, for 5 minutes. 

Mr. SHERMAN. I thank the chairman for allowing me to participate. 

I will point out that the tracing schemes and other ways to deal 

with this issue, I think get their impetus from Section 1502 and 

the effort that led to Section 1502. 

I will ask our witness from the GAO, is there a difference in the 

market price, because these are traded goods, in these 3T minerals 

where they are coming from outside this region versus coming from 

inside the relevant region? Is there a difference in price? 

Ms. GIANOPOULOS. We haven’t— 

Mr. SHERMAN. A pound of tin is a pound of tin. 

Ms. GIANOPOULOS. Right. We haven’t done an analysis of the 

price of minerals that are coming from outside the Great Lakes Region and those from inside the Great Lakes Region. What we 

looked at and what we spoke with folks in the region about was, 

what difference does it make if a particular mine is certified as conflict-free when it comes to the price of those minerals? 

Mr. SHERMAN. And what is that price differential, a conflict-free 

versus an uncertified mine? What is the difference in price? 

27 

Ms. GIANOPOULOS. What we heard was if minerals are coming 

from a certified conflict-free mine, the miners are receiving about 

double the price for those minerals than they would from an 

uncertified, potentially illegal mine. 

Mr. SHERMAN. Mr. Loof, is that your experience, that you will 

pay twice as much for a certified rather than an uncertified pound 

of tin? 

Mr. LOOF. We wouldn’t buy from an uncertified smelter, period. 

Mr. SHERMAN. How much more are you paying to get certified tin 

as opposed to your competitors who are using uncertified tin? 

Mr. LOOF. It is actually a little different. It doesn’t actually work 

that way for us. 

What has happened is due to, I believe, the efforts we have taken 

to ensure that we can do this in a conflict-free and ethical manner, 

we have been able to stabilize the price. And because we actually 

have our own source of material, we have been able to extract the 

same price from anywhere in the world when we buy from somebody else today, so our business— 

Mr. SHERMAN. So you are able to take a stand against the evils 

that we have seen in some of the mining operations at no 

discernable higher price for the minerals involved? 

Mr. LOOF. I don’t want to say that what we are doing is, in a 

major way, changing the lives of the Congo, but I can certainly say 

that for us the pricing has been more stable, the sourcing of this 

mineral has been more secure, and in our little village, which has 

grown twice as big as it was 4 years ago when we got in there, life 

has improved significantly. 

Mr. SHERMAN. Doing well by doing good. 

Professor Schwartz, you have—you are looking for tweaks in Section 1502. Are you looking for tweaks in the statute or—‘‘tweaks’’ 

may be understating it. You are looking for changed regulations or 

changed statute? 

Mr. SCHWARTZ. I think there is a range of options. I think there 

could be some changes to the statute. 

If you are fully on board with my proposal, I think that might 

implicate some changes to the statute. But I think a lot could be 

done just by changing the regulations, or even through interpretive 

guidance. 

There is some vague language in the statute and the regulations, 

and some companies very narrowly interpreted that language. So 

if it was clarified what companies needed to report in terms of the 

identity of their smelter, I think that would improve things and 

that would be a small tweak that the SEC could do. 

Mr. SHERMAN. Does the SEC have the advisory committees and 

the channels to listen to you and others to improve their regulations and guidance? 

Mr. SCHWARTZ. I think they do. The SEC is actually fairly reachable. Oftentimes, when I send my work to them, I will get a response. But they don’t have a formalized process in place. 

Mr. SHERMAN. Okay. 

Obviously, there are those pushing in the business community 

just to eliminate Section 1502. Have any of them come up with a 

solution, or do they just say, ‘‘Don’t worry about the problem?’’ 

Professor? 

28 

Mr. SCHWARTZ. I think the general response in the business community from those who are opposed to this rule is to just repeal. 

You don’t generally see middle-of-the-road options like I am proposing. 

Mr. SHERMAN. I would just say that the effect of these conflict 

minerals on people’s lives in the Great Lakes Region is significant. 

The fact that Mr. Loof and others are able to help people build 

lives through conflict-free and certified minerals is substantial, and 

for the business community to just say, ‘‘Oh, that is just a goal not 

worth trying to achieve,’’ is not as good a stance as those whom you 

have mentioned positively, or other witnesses have mentioned positively, such as Intel and Apple, who seem to take seriously the effect that their sourcing minerals have on the lives of people in the 

Great Lakes Region. 

And I will yield back. 

Chairman HUIZENGA. The gentleman’s time has expired. 

And without objection, I would like to do a brief second round, 

since it looks like it may be just the vice— 

Ms. WATERS. Thank you very much. I think there is an awful lot 

to be learned about— 

Chairman HUIZENGA. I will recognize the gentlelady first, if she 

would like to go first. Ladies first. And feel free to go ahead. 

Ms. WATERS. Mr. Chairman— 

Chairman HUIZENGA. I would be happy to follow up and wrap up. 

Ms. WATERS. I thought you were looking this way. But please, 

take your rightful time. Thank you. 

Chairman HUIZENGA. I am happy to do so. 

But, all right, I want to still continue to unpack this a little bit. 

And we have heard from the ends here, Mr. Loof, we have heard 

from Professor Schwartz. 

We have not heard from Minister Imena, as well, and I know 

that Mr. Loof here had said that you couldn’t be there without 

Dodd-Frank, is what I heard. And I guess what struck me and a 

question that I had written down at that time was, even with a 

non-Dodd-Frank system in place, you couldn’t be there? 

So in other words, Minister Imena had talked about how Rwanda, well before Dodd-Frank ever put in Section 1502, was working 

on a system that guaranteed that conflict-free mineral. And what 

I am concerned about again, and I think what we have heard from 

the minister—I don’t want to put words in his mouth—but when 

it is 2 percent, I believe, of the tantalum on the world market and 

4 percent of tungsten, or I might have those reversed, there is still 

96 and 98 percent of the world market that is not subject to this, 

and doesn’t that put a place like Rwanda at a distinct disadvantage 

if they have the types of cost structure? 

So I guess my specific question to you, Mr. Loof, is could you be 

there if there was a non-Dodd-Frank system that would fulfill your 

internal mandate to your customers that you wanted to have conflict-free minerals? 

Mr. LOOF. Thank you for your question. And I do recognize the 

situation in Rwanda is quite different from the part of the world 

where we have our operation. 

But the issue for us was to have a clear playbook that we and 

our customers can agree on, so that if you fulfill this playbook, you 

29 

are actually by definition legally conflict-free. Otherwise, if there 

wasn’t this playbook we would be in a constant conversation as to 

whether the bag and tag system we use and the way we transport 

the material through the bush in Katanga down to Kalemie and 

across the lake is, indeed, conflict-free. 

If that wasn’t clear to our customers, we couldn’t actually operate 

the way we are. And that is really where I am coming from. 

Chairman HUIZENGA. Okay. 

Mr. LOOF. But I do recognize that the minister has a different 

situation in Rwanda. 

Chairman HUIZENGA. And, Minister, do you care to address that 

briefly? 

Mr. IMENA. Thank you very much, Mr. Chairman. 

You are right, before Dodd-Frank had this system, we tested the 

analytical fingerprint; we tested the CTC, certified trading chains. 

Both systems were voluntary. But when Section 1502 came and it 

was mandatory, we immediately shifted to it and we lost the attention for both other systems. 

It means that if there is no Dodd-Frank, Rwanda is committed 

to continue to ensure to be a source of clean, transparent, and reliable minerals. 

Chairman HUIZENGA. Okay. 

Professor Schwartz, I was gathering from your conversation with 

Mr. Emmer—and, Professor Woody, I would like to have you comment, as well, on this—about the SEC’s capability and broad—their 

bandwidth as they are dealing with this. We heard a couple of examples: We have not seen JOBS Act regulations be put in place; 

we have seen a number of other delays that have been put in place. 

We do know from the GAO reports that 21,000 hours have been 

put into this at a substantial cost—I don’t have that right in front 

of me right now. 

Ms. Gianopoulos, I don’t know if you recall exactly what that 

number is. It is significant. 

Ms. GIANOPOULOS. ‘‘Significant’’ is fair. 

Chairman HUIZENGA. Okay. 

So in the last remaining minute here or so, Professor Schwartz, 

Professor Woody, talk to me a little bit about the SEC and whether 

they could be doing additional things if they weren’t putting an 

outsized amount of effort into this. 

Mr. SCHWARTZ. Yes. And thank you for the question, Mr. Chairman. 

Yes, I agree with what has been said, that the SEC is overstretched here, and just in general, and that this additionally 

stretches their expertise. So I think it is less than ideal that the 

legislation has fallen to the SEC to oversee and to implement and 

to enforce. 

I guess if I were to defend it, I would say that we could have a 

more dynamic conception of the SEC that agencies aren’t static 

over time and that if we take a more dynamic perspective, maybe 

it needs to evolve to embrace these social disclosures. But I agree 

that this stretches them both in terms of manpower and expertise. 

Chairman HUIZENGA. And Professor Woody, quickly? 

30 

Ms. WOODY. Yes. I would agree. The SEC certainly, just in sheer 

economic principle here, people who are working on this are not 

working on something else. 

And that said, I think the import of my testimony here today is 

really the broader picture, that there are a couple of problems with 

this regulation as written, in that the SEC has no real effective 

measurement of progress or a way to really quantify a reduction 

in violence in the Congo via the disclosures. Again, there is no penalty even for the use of conflict minerals under the law, so mere 

disclosure is really the only charge that is required here, so that 

alone seems to render the SEC fairly toothless in this. 

Chairman HUIZENGA. And I think that is fair to point out, that 

there is no penalty. So if you don’t particularly care what your 

interface is with the public or with that customer, you could go 

right ahead and continue to use conflict minerals, correct? 

Ms. WOODY. That is correct. 

Chairman HUIZENGA. All right. Which other countries may be 

doing. 

So with that, my time has expired, and I would like to recognize 

the ranking member of the full committee for 5 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

This may have been described, but I would like Mr. Imena to describe to me what was happening prior to Section 1502 in the region. 

Mr. IMENA. Thank you, Congresswoman. 

It depends on which country, but in Rwanda before Section 1502, 

and today after Section 1502, we were mining tin, tungsten, and 

tantalum. And there was no conflict mineral before, and there is 

no conflict mineral today. 

The only change is the introduction of that regulation, which 

sometimes was taken as a burden to many of the operators in the 

region and essentially in Rwanda. Thank you. 

Ms. WATERS. So can you describe to me what the smuggling 

problem was or is—smuggling conflict minerals from the Democratic Republic of Congo to Rwanda? What is that all about? 

Mr. IMENA. Thank you, Congresswoman. 

That has existed in the past. And today, with all the illegal exploitation of metal resources in the country and in the region, our 

heads of state in 2006 signed a pact of the International Conference on the Great Lakes Region. 

And one of the areas covered by that pact is the Regional Initiative on the Illegal Exploitation of Natural Resources. We have 

teams and committees following up closely any claim of any illegal 

transportation, and illegal sale, or any illegal cross-border activity 

where minerals are concerned. 

Ms. WATERS. All of the smuggling has been basically gotten rid 

of? You don’t have any smuggling from the DRC to Rwanda, is that 

right? 

Mr. IMENA. Thank you, Congresswoman. 

Smuggling is criminal in Rwandan law. Whenever there is any 

issue relating to smuggling, we have enforcement capacity and we 

immediately take actions. As is mentioned in my statement, where 

even giving an example of a company which was mentioned in the 

last U.N. group of experts report, which was immediately sancVerDate Nov 24 2008 19:19 Nov 03, 2016 Jkt 099780 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 K:\DOCS\99780.TXT TERI
31 

tioned and its license was cancelled because we found that they 

were doing some illegal and illicit activities. 

Ms. WATERS. So you are saying Section 1502 may be needed for 

DRC but not for Rwanda. Is that right? 

Mr. IMENA. You are right. 

Ms. WATERS. And you are saying that because of the conflict 

mineral problem in DRC, you are perceived somehow by the international community or by America as having the same problem 

and that is what bothers you? 

Mr. IMENA. You are right, Congresswoman. 

Ms. WATERS. And you believe that even though the DRC needs 

Section 1502 and you don’t, that Section 1502 should be modified 

or gotten rid of in some way? 

Mr. IMENA. I will not speak for the DRC, but for the Rwandan 

case, Section 1502 is not helping at all. 

Ms. WATERS. But you are not for—you won’t speak for the DRC, 

but DRC has no negative impact on Rwanda at all now because you 

have smuggling covered. Is that right? 

Mr. IMENA. There are many areas, as long as Rwanda and DRC 

relations are concerned. But for minerals and for Section 1502, we 

need to do something. 

Ms. WATERS. Let me just say, I think that is Mr. Schwartz down 

on the end, you agreed with the Chair about the SEC and you 

think that the SEC is oversubscribed and they don’t have the personnel to deal with some of the other mandates that they have. Are 

you aware of the opposition to funding the SEC so that it can cover 

its missions by Members of Congress? 

Mr. SCHWARTZ. So yes, I have followed that debate, and I am not 

going to claim to be an expert on it, but I have followed that debate, yes. 

Ms. WATERS. So you know they are underfunded? 

Mr. SCHWARTZ. I’m sorry. Say that again? 

Ms. WATERS. You know the SEC is underfunded? 

Mr. SCHWARTZ. Yes, I would agree that the SEC is underfunded. 

Ms. WATERS. And if we are desirous of the SEC carrying out its 

missions, we probably should try and see that it is funded properly 

so we wouldn’t be in a position of saying they can’t do their job 

properly because they are oversubscribed. I guess that could be the 

conclusion. 

Mr. SCHWARTZ. I would agree. If the worry is the opportunity 

cost for the SEC’s time, then the answer would be if we hired more 

people at the SEC, they could attend to all of the tasks that are 

assigned to them. 

You could even envision hiring—you could even envision a department of the SEC for social disclosures that would internalize 

the values of regulations like the conflict minerals rule, and they 

could enforce provisions like this and implement the rules. 

Ms. WATERS. Thank you, Mr. Chairman. 

Chairman HUIZENGA. The gentlelady’s time has expired. 

So I would like to thank our witnesses for their testimony today. 

And without objection, I would like to submit a statement for the 

record from the National Association of Manufacturers. 

Without objection, it is so ordered. 

32 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

And again, I just would like to say thank you to our distinguished panel. I thought this was illuminating. I am hoping that 

we will do additional hearings on this. That is my intent, as well. 

And with that, our hearing is adjourned. 

[Whereupon, at 11:48 a.m., the hearing was adjourned.] 

(33) 

A P P E N D I X 

November 17, 2015 

34 


99780.001

For Release on Delivery 

Expected at 10:00 a.m. ET 

Tuesday, November 17, 

2015 

GA0-16-200T 

United States Government Accountability Office 

Testimony before the Subcommittee on 

Monetary Policy and Trade, Committee 

on Financial Services, House of 

Representatives 

SEC CONFLICT 

MINERALS RULE 

Insights from 

Companies' Initial 

Disclosures and State 

and USAID Actions in 

the Democratic 

Republic of the Congo 

Region 

Statement of Kimberly Gianopoulos, Director, 

International Affairs and Trade 
35 


99780.002

Why 9AO'Dld This Study 

Ar..;ed~rRupsineaswm DRC 

conilrl~ii>l()<:omml! 'S.eliere human rtg~ta '!bUS!>S and profit from the 

exP,Ioi!ali1>n of l)'lnerata~ according !0 the Unfted ~'!"lions. Congress included 

a provi$ioil in !~. 2010 QOdd;frank 

Wall. :>tree! Reform an.d .Consumer 

Prolec!ion Act that, among gther 

thing,., directed SEC to promulgate 

discloSure, and )'eporting regu(:at,ions 

Jegarcting the, use of con~ict mineral~ 

rrorn t~e ORC and adjoining countries. 

The act•also'ctirected State and USAID 

to develope shetegy to. address the 

linkages 'lmOnl!human rights abuses, 

armed groups, )he mining of conflict 

rrlineials, and commercial products. 

-fhi~> t!'stilllonY sumll)'lfizes .the 

findings fr<irn GAO's AU)!Ust2015 

r,.porf. whlch revie~~~ed { 1} rompany 

disclosures lil~d with SEC for the first 

time in2014 in response to the sec 09hfl~ Qlf~etals di~~loSur~ ruf~~ and (2) State·aild lJSAID actions relat~d to 

the lJ$. oo)lfliCt minerals slrai!'QY in 

llJe DRC region, ~mohg other things. 

GAO teview!Od aM analyzed "'levant 

document~. and data and interviewed 

officials from relevant U.S. agencles 

and h~ngo~ernme~l,, industry, ~md 

intern~ti?~at organizati?l:l$; ,and 

analy~~d a random sample, of 

company disclosures from tl]!> SEC 

dajabase that. was suffiCiently large to prodUc~ ~stlmates for an companies 

that filed. GAO also traveled to the 

DRC, Rwanda, and Burinidi to conduct liefdWorl<. 

What GAQ Recomm~nds 

GAO is not making recommendations 

in thiSJestimony. 

Vre"Y GAP:.1,6-200T. rOr,mpre i~fQrmation, ~ta~t ,Kim~-Oianopol)!os at {2:02) 512~ 

S612,Qr Giarwpou!OsK@gao.gov. 

SEC CONFLICT MINERALS RULE 

Insights from Companies' Initial Disclosures and 

State and USAID Actions in the Democratic Republic 

of the Congo Region 

What GAO Found 

According to a generalizable sample GAO reviewed, company disclosures filed 

with the Securities and Exchange Commission (SEC) for the first time in 2014 in 

response to the SEC conflict minerals disclosure rule indicated that most 

companies were unable to determine the source of conflict minerals used in their 

products. Companies that filed disclosures used one or more of the four "conflict 

minerals" -tantalum, tin, tungsten, and gold--detennined by the Secretary of 

State to be financing conflict in the Democratic Republic of the Congo (ORC) or 

adjoining countries. Eighty-seven percent of those companies were based in the 

United States. Almost all of the companies (99 percent) reported performing 

country-of-origin inquiries for conflict minerals used. Companies GAO spoke to 

cited difficulty obtaining necessary information from suppliers because of delays 

and other challenges in communication. Most of the companies (94 percent) 

reported exercising due diligence on the source and chain of custody of conflict 

minerals used. However, 67 percent were unable to determine whether those 

minerals came from the DRC or adjoining countries (Covered Countries), and 

none could determine whether the minerals financed or benefited armed groups 

in those countries. 

Sou'ce GAO ! GA0.16·200T 

a covered Countries: Angola, Burundi, Central African Republic, the Democratic RepubHc of the 

Congo, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia. 

Department of State (State) and U.S. Agency for International Development 

(USAID) officials reported taking actions to implement the U.S. conflict minerals 

strategy, but a difficult operating environment complicates this implementation. 

The agencies reported supporting a range of initiatives including validation of 

conflict-free mine sites in the DRC and strengthening traceabi!fty mechanisms 

that minimize the risk that minerals that have been exploited by illegal armed 

groups will enter the supply chain. Implementation of the U.S conflict minerals 

strategy faces multiple obstacles outside the control of the U.S. government For 

example, eastern DRC is plagued by insecurity because of the presence of illegal 

armed groups and some corrupt members of the national military, weak 

governance, and poor infrastructure. 

-------------United States Government Accountability Office 
36 


99780.003

GAO u.s. GOVERNMENT ACCOUNTABILITY OFFICE 

441 GSt.N.W. 

Washington, DC 20548 

November 17, 2015 

Chairman Huizenga, Ranking Member Moore, and Members of the 

Subcommittee: 

Thank you for the opportunity to discuss our work on conflict minerals. 

Over the past decade, the United States and the international community 

have sought to improve security in the Democratic Republic of the Congo 

(DRC), the site of one of the world's worst humanitarian crises. The 

International Rescue Committee estimates that between 1998 and 2010, 

more than 5.4 million people died there as a result of this crisis, which has 

also destabilized and created insecurity in the minerals-rich eastern part 

of the country. As we previously reported, illegal armed groups and some 

units of the Congolese national military have committed severe human 

rights abuses and mass killings and profited from the illegal exploitation of 

minerals originating in eastern DRC.' 

Expressing a sense that the exploitation and trade of conflict minerals 

originating in the DRC is contributing to an emergency humanitarian 

situation therein, Congress included a provision in the 2010 Dodd-Frank 

Wall Street Reform and Consumer Protection Act (the act) pertaining to 

the trade in "conflict minerals"-tantalum, tin, tungsten, and gold2 Section 

1502 of the act directed several U.S. agencies to take certain actions to 

implement the act's conflict minerals provisions. For example, Section 

1502(b) required the Securities Exchange Commission (SEC), in 

consultation with the Department of State (State), to promulgate 

disclosure and reporting regulations regarding the use of conflict minerals 

from the DRC and adjoining countries. Accordingly, SEC adopted its 

conflict minerals disclosure rule in August 2012, and companies filed 

disclosures for the first time in response to the rule in 2014, on conflict 

'GAO, The Democratic Republic of the Congo: U.S. Agencies Should Take 

Further Action to Contribute to the Effective Regulation and Control of the 

Minerals Trade in Eastern Democratic Republic ofthe Congo, GA0-10-1030 

(Washington, D.C.: Sept 30, 2010). 

2

The Dodd-Frank Act defines conflict minerals as columbite-tantalite (eolian), cassiterite, gold, wotframite, or their derivatives, or any other mineral or its 

derivatives that are determined by the Secretary of State to be financing conflict in the DRC or an adjoining country. See Pub. L No. 111-203, § 1502, 124 Stat 

1376,2213-18. Columbite-tantalite, cassiterite, and wolframite are the ores from which tantalum, tin, and tungsten, respectively, are processed. 

Page 1 GA0·16-200T 
37 


99780.004

minerals used in calendar year 2013. 3 The act also required State, in 

consultation with the U.S. Agency for International Development (USAID), 

to submit to appropriate congressional committees a conflict minerals 

strategy to address the linkages between human rights abuses, armed 

groups, mining of conflict minerals, and commercial products. 4 The act 

contained a provision for GAO to, among other things, report annually, 

beginning in July 2012, on the effectiveness of the SEC rule in promoting 

peace and security in the DRC and adjoining countries. 5 

This statement summarizes key findings from our August 2015 report, in 

which we examined, among other things, (1) company disclosures filed 

with SEC for the first time in 2014 in response to the SEC conflict 

minerals rule, and (2) State and USAID actions related to the U.S. conflict 

minerals strategy in the DRC region. 6 In brief, we found that company 

disclosures filed in 2014 indicate that companies performed country-oforigin inquiry and due diligence but provide limited insights regarding 

country of origin of conflict minerals used, citing difficulty obtaining 

information from suppliers. We also found that State and USAID actions 

to implement the U.S. conflict minerals strategy have yielded some 

results, but conditions remain difficult. 

To conduct our review, we analyzed documents and data and interviewed 

officials from State, USAID, SEC, the Department of Commerce, 

nongovernmental organizations (NGO), industry, and international 

organizations, including offices within the United Nations (UN). We 

analyzed a random sample of 147 reports from a population of 1,324 to 

Reg. 56,274 (Sept. 12, 2012) {codified at 17 C.F.R. § 

4

See Pub. L. No. 111-203, § 1502(c). Section 1502 of the act defines 

qappropriate congressional committees" to mean the Committee on 

Appropriations, the Committee on Foreign Affairs, the Committee on Ways and Means, and the Committee on Financial Services of the House of 

Representatives, and the Committee on Appropriations; the Committee on 

Foreign Relations; the Committee on Finance; and the Committee on Banking, Housing, and Urban Affairs of the Senate. 

5

Pub. L. No. 111-203, § 1502(d). 

6

GAO, SEC Conflict Minerals Rule: Initial Disclosures Indicate Most Companies 

Were Unable to Determine the Source of ?heir Conflict Minerals, GA0-15-561 

{Washmgton, D.C.: Aug. 18, 2015). This report is one of six that we have issued since 2010 examining issues related to the minerals sector and violence in the DRC and adjoining countries. For a list of related GAO products, see appendix I. 

Page2 GA0~16-200T 
38 


99780.005

Background 

create estimates generalizable to the population of all companies that 

filed Specialized Disclosure reports and Conflict Minerals Reports with the 

SEC. We spoke with company representatives to obtain additional 

perspectives. We traveled to the DRC, Burundi, and Rwanda for field 

work and visited and observed artisanal mining activities at three different 

mines. We met with a range of stakeholders, including NGOs, 

contractors, international organizations, and private sector 

representatives. 7 We conducted the work on which this testimony is 

based in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

The DRC is a vast, mineral-rich nation with an estimated population of 

about 75 million people and an area that is roughly one-quarter the size of 

the United States. Since its independence in 1960, the DRC has 

undergone political upheavals, including a civil war. Eastern DRC, in 

particular, has continued to be plagued by violence, including sexual 

violence against women and children, perpetrated by armed groups and 

some members of the Congolese national military. Some of the adjoining 

countries in the region have also experienced recent turmoil, which has 

led to flows of large numbers of refugees and internally displaced persons 

into the DRC. 8 For example, the United Nations High Commissioner for 

Refugees (UNHCR) estimated that as of mid-2013 there were around 2.6 

million internally displaced persons living in camps or with host families in 

the DRC. 

Various industries, particularly manufacturing industries, use the four 

conflict minerals in a wide variety of products. For example, tin is used to 

solder metal pieces and is also found in food packaging, in steel coatings 

on automobile parts, and in some plastics. Most tantalum is used to 

manufacture tantalum capacitors, which enable energy storage in 

electronic products such as cell phones and computers, and to produce 

7 Artisanal mining is a form of mining that is characterized by a lack of 

mechanization or capital investment. 

'According to the UN, internally displaced persons are people who have not crossed an inter~at~ona! ~order but have moved to a different region than the one they call home w1th1n thetr own country to escape war, persecution, or terror. 

Page 3 
39 


99780.006

alloy additives, which can be found in turbines in jet engines. Tungsten is 

used in automobile manufacturing, drill bits and cutting tools, and other 

industrial manufacturing tools and is the primary component of filaments 

in light bulbs. Gold is used as a reserve and in jewelry and is used by the 

electronics industry. As we have previously reported, conflict minerals are 

mined in various locations around the world. 

Over the past decade, Congress has focused on issues related to the 

DRC. In 2006, Congress passed the Democratic Republic of the Congo 

Relief, Security, and Democracy Promotion Act of 2006, stating that U.S. 

policy is to engage with governments working for peace and security 

throughout the DRC and holding accountable any individuals, entities, 

and countries working to destabilize the country. 9 In 2011, State and 

USAID developed the U.S. Strategy to Address the Linkages between 

Human Rights Abuses, Armed Groups, Mining of Conflict Minerals and 

Commercial Products (the strategy). 

9

Pub. L No. 109-456, § 102(14), 120 Stat 3384. 

Page4 GA0-16-200T 
40 


99780.007

Company Filings in 

2014 Indicate That 

Company Inquiries 

and Due Diligence 

Provided Limited 

Insights Regarding 

Country of Origin of 

Conflict Minerals 

Used, Citing Difficulty 

Obtaining Information 

from Suppliers 

The SEC conflict minerals disclosure rule outlines a three-step process 

for companies to follow, as applicable, to comply with the rule. Broadly, 

the process falls into three steps requiring a company to ( 1) determine 

whether the rule applies to it; (2) conduct a reasonable country of origin 

inquiry (RCOI) concerning the origin of conflict minerals used; and (3) 

exercise due diligence, if appropriate, to determine the source and chain 

of custody of conflict minerals used. (App. II depicts SEC's flowchart 

summary of the rule). Of the 1,321 companies that filed conflict minerals 

disclosures in 2014, the sample of filings that we reviewed indicates that 

almost all of the companies conducted an RCOI and a majority of them 

exercised due diligence, but most reported that they were unable to 

determine the country of origin of conflict minerals they had used in 

2013. 1

° Company representatives we interviewed cited difficulties in 

obtaining information from suppliers. According to our analysis, an 

estimated 

67 percent reported that they were unable to determine the 

country of origin, 

4 percent reported that conflict minerals came from Covered 

Countries, 11 

24 percent reported that conflict minerals did not originate in 

Covered Countries, 

2 percent reported that conflict minerals came from scrap or 

recycled sources, and 

3 percent did not provide a clear determination. 

According to our estimate, just about all of the companies that filed 

conflict minerals disclosures reported that they conducted an RCOI, with 

10The number of companies that filed conflict minerals disclosures in 2014-

1,321-was substantially lower than SEC's estimate of 6,000 companies that 

could possibly be affected by the rule. In its rule proposal, SEC had estimated 

that approximately 6,000 companies could possibly be affected by the rule by 

estimating the number and types of businesses that SEC staff believed may 

manufacture or contract to manufacture products with conflict minerals necessary 

to the functionality or production of those products. According to an SEC official, 

this estimate was intentionally overly inclusive, was not an expectation, and was provided to satisfy the requirements of the Paperwork Reduction Act. Pub. L. No. 104-13, 109 Stat. 163 (codified at 44 U.S.C. §§ 3501-3520). 

"Covered Countries are the DRC and countries that share an internationally 

recognized border with the DRC, which included Angola, Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia at the time that SEC issued its conflict minerals rule. 

Page 5 GA0-16-200T 
41 


99780.008

96 percent of them reporting that they conducted a survey of their 

suppliers to try to obtain information about whether they used conflict 

minerals, the country of origin of those conflict minerals, and the 

processor of the conflict minerals. Based on some of the filings that we 

reviewed and interviews with company representatives, in general, 

companies used a supplier survey and industry template to conduct their 

RCOis. A challenge noted by representatives of some companies we 

spoke with was that they received incomplete information from suppliers, 

limiting their ability to determine the source and chain of custody of the 

conflict minerals they used in 2013. We should note that in a July 2013 

report, we found that a company's supply chain can involve multiple tiers 

of suppliers. 12 As a result, a request for information from a company could 

go through many suppliers, as figure 1 illustrates, delaying the 

communication of information to the company. 

"GAO, SEC Conflict Minerals Rule: Information on Responsible Sourcing and CompamesAffected, GA0-13-689 (Washington, D.C .. July 18, 2013). 

PageS GA0-16-200T 
42 


99780.009

Source: GAO analysis. 1 GA0~16~200T 

Supply chain inquiries 

For example, as we noted in our 2013 report, companies required to 

report under the rule could submit the inquiries to their first-tier 

suppliers.'' Those suppliers could either provide the reporting company 

with sufficient information or initiate the inquiry process up the supply 

chain, such as by distributing the inquiries to suppliers at the next tiertier 2 suppliers. The tier 2 suppliers could inquire up the supply chain to 

additional suppliers, until the inquiries arrived at the smelter. Smelters 

could then provide the suppliers with information about the origin of the 

conflict minerals. Representatives of some companies that we spoke with 

told us that they were making efforts to address concerns about the lack 

of information on the country of origin of conflict minerals they had used. 

Our analysis shows that the exercise of due diligence on the source and 

chain of custody of conflict minerals yielded little or no additional 

Page 7 GA0-16-200T 
43 


99780.010

State and USAID 

Actions to Implement 

the U.S. Conflict 

Minerals Strategy 

Have Yielded Some 

Results, but 

Conditions Remain 

Difficult 

State and USAID Are 

Taking Action to 

Implement Strategy 

Objectives 

information, beyond the RCOI, regarding the country of origin of conflict 

minerals or whether the conflict minerals that companies used in 2013 in 

their products benefited or financed armed groups in the Covered 

Countries. The estimated 4 percent of the companies who determined 

that the necessary conflict minerals used in their products originated from 

Covered Countries could not determine whether such conflict minerals 

financed or benefitted armed groups during the reporting period, even 

though they disclosed that they conducted due diligence on the source 

and chain of custody of conflict minerals they used. 

State and USAID officials reported that they are implementing the U.S. 

conflict minerals strategy they submitted to Congress in 2011 through 

specific actions that address the strategy's five key objectives. Both State 

and USAID officials in Washington and the region reiterated that the 

strategy and its five key objectives remain relevant The following 

summarizes our findings about each objective: 

• Promote an Appropriate Role for Security Forces (Objective 1). 

Page8 

Some of the reported actions being undertaken by the 

International Organization for Migration (10M), a USAID 

implementing partner, are helping to lessen the involvement of the 

military and increasing the role of legitimate DRC government 

stakeholders in mining areas. For example, USAID reported that 

10M has assisted with the planning and demilitarization of mine 

sites in eastern DRC through leading a multi-sector stakeholder 

process of mine validation to ensure that armed groups and 

criminal elements of the Congolese military are not active in 

eastern DRC mines. As we previously reported, according to UN, 

GA0·16·200T 
44 


99780.011

Tr~u:e~bility Mechanisms 

Tra~i3bilJty, m~cha:nisms may: minimize 

the. risk that minerals that have been 

exploited by illegal armed groups will 

enter the suppWchain and may alSo 

su~port companies' efforts to identify the 

Sou(Ce of,the conflict minerals' across the 

suppiX i::hain arqund the world. Such 

m~a~isms hy the Oemocriltic RepUblic 

of the, CongO a riO adjoining countries 

fOcUs,, on, traCing n1inerals tram the 'mine 

,to '~h~ mi~~~af, smelter or refiner by 

supPorting a bagging and tagging 

Prog'ram'Of some type of traceability 

, 'schefne:' 

Source: GAO.! GA0-16-200T 

Page 9 

U.S., and foreign officials and NGO representatives, some 

members of the Congolese national military units are consistently 

and directly involved in human rights abuses against the civilian 

population in eastern DRC and are involved in the exploitation of 

conflict minerals and other trades. 

Enhance Civilian Regulation of the DRC Minerals Trade 

(Objective 2). USAID reported that it is undertaking a number of 

actions, through implementing partners, to enhance civilian 

regulation and traceability of the DRC minerals trade. For 

example, USAID reported funding Tetra Tech, a technical services 

company, to (1) build the capacity for responsible minerals trade 

in the DRC, (2) strengthen the capacity of key actors in the conflict 

minerals supply chain, and (3) advance artisanal and mining 

rights. In addition, USAID indicated that it is funding 10M to 

support DRC infrastructure and regulatory reform. According to an 

10M official we spoke with in the region, 10M also provides the 

DRC government with information on which mines should be 

suspended from the conflict-free supply chain based on safety and 

human rights violations. During our visit to the region, we met with 

a USAID official and representatives of local human rights 

organizations who told us that the implementation of traceability 

schemes is contributing to positive outcomes. For example, in 

some cases, according to USAID, local miners earn double the 

price for certified conflict-free minerals compared to non-certified 

illegal minerals, which is more than they would earn from 

smuggling (see app. Ill, figs. 1 and 2). 

Protect Artisanal Miners and Local Communities (Objective 3). 

State and USAID reported several programs through their 

implementing partners, aimed at protecting artisanal miners and 

local communities and providing alternative livelihoods. For 

example, State reported that it funded an implementing partner for 

anti-human-trafficking initiatives as well as to promote alternative 

livelihoods and improve workers' rights in the artisanal mining 

sector. According to State, these efforts aimed to reduce the 

vulnerability of men and women in local communities. In addition, 

USAID has funded an implementing partner to promote 

community conflict mitigation and conflict minerals monitoring 

structures at local levels. According to USAID, artisanal mining 

provides survival incomes to Congolese throughout the country 

but it is particularly significant in eastern DRC, where roughly 

500,000 people directly depend on artisanal mining for their 

income. These miners work under very difficult safety, health, and 

GA0-16-200T 
45 


99780.012

security conditions and almost always within an illicit environment. 

Moreover, as we observed during our visits to the mines in the 

region, artisanal mining is a physically demanding activity 

requiring the use of rudimentary techniques and little or no 

industrial capacity (see app. Ill, figs. 3 and 4). 

Strengthening Regional and International Efforts (Objective 4). 

U.S. diplomatic and capacity building initiatives have reportedly 

helped strengthen international efforts. For example, USAID said it 

is working with Tetra Tech to build the capacity of the International 

Conference on the Great Lakes Region (ICLGR), an 

intergovernmental organization. According to USAID, this effort 

supports the implementation and coordination of regional 

countries' efforts to promote monitoring, certification, and 

traceability of mine sites. A Tetra Tech representative we mel with 

in the region told us that Tetra Tech is also organizing workshops 

for educating and raising awareness about regional certification in 

ICGLR countries. 14 According to officials we interviewed from the 

United Nations Organization Stabilization Mission in the 

Democratic Republic of the Congo (MONUSCO) and the ICGLR, 

as well as local officials, U.S. diplomacy has increased awareness 

about conflict minerals and improved coordination in the region. 

Some of these officials described Stale and USAID actions to 

strengthen regional and international efforts as the most effective 

in the region. 

• Promote Due Diligence and Responsible Trade through Public 

Outreach (Objective 5). State and USAID reported engaging in 

various efforts to reach out to industry associations, NGOs, 

international organizations, and regional entities to help promote 

due diligence and responsible trade in conflict minerals. For 

example, State and USAID reported that they leveraged private 

sector interest to establish the Public-Private Alliance for 

Responsible Minerals Trade to support supply chain solutions to 

conflict minerals challenges in the region. The alliance includes 

State, USAID, and representatives from U.S. end-user companies, 

industry associations, NGOs, and ICGLR, among others. In 

is composed of twelve member states: Angola, Burundi, Central African 

Republic, the Republic of the Congo, the DRC, Kenya, Uganda, Rwanda, South Sudan, Sudan, Tanzania, and Zambia 

Page 10 GA0-16-200T 
46 


99780.013

State and USAID Face 

Difficult Conditions in 

Implementing the U.S. 

Conflict Minerals Strategy 

addition, State is engaged with the Conflict-Free Sourcing 

Initiative (CFSI) and State and USAID both participate in the 

biannual Organization for Economic Co-operation and 

Development, UN Group of Experts (UNGOE), and ICGLR 

forums. According to State and USAID officials, these efforts 

promote continued engagement with industry officials and civil 

society groups and encourage due diligence and strengthening of 

conflict-free supply chains. A USAID official in the region told us 

that teams of private sector executives, hosted by State and 

USAID officials, have visited eastern DRC and Rwanda mining 

sites on several occasions, reinforcing the executives' 

commitment to source minerals responsibly. In addition, a State 

official noted that some private companies have been active in 

providing feedback on certification and traceability mechanisms. 

Although State and USAID officials provided some examples of results 

associated with their actions, the agencies face difficult operating 

conditions that complicate efforts to address the connection between 

human rights abuses, armed groups, and the mining of conflict minerals. 

We have described some of these challenges in our previous reports but, 

as we observed during our fall 2014 visit to the region, numerous 

challenges continue to exist. First, the mining areas in eastern DRC 

continue to be plagued by insecurity because of the presence and 

activities of illegal armed groups and some corrupt members of the 

national military. In 2010, we reported extensively on the presence of 

illegal armed groups, such as the Democratic Forces for the liberation of 

Rwanda or Forces Democratiques de Liberation du Ruwanda, and some 

members of the Congolese military and the various ways in which they 

were involved in the exploitation of the conflict minerals sector in eastern 

DRC. 15 In 2013, the Peace and Security Cooperation Framework signed 

by 11 regional countries noted that eastern DRC has continued to suffer 

from recurring cycles of conflict and persistent violence. 16 Although U.S. 

agency and Congolese officials informed us during our recent fieldwork in 

the region that a large number of mines had become free of armed 

16Peace, Security and Cooperation Framework for the Democratic Republic of 

the Congo and the Region, signed in Addis Ababa (Feb. 24, 2013). 

Page 11 GAC>-16-200T 
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99780.014

groups (referred to as green mines), 17 MONUSCO officials we met with in 

the DRC also told us that armed groups and some members of the 

Congolese military were still active in other mining areas. Specifically, 

MONUSCO officials described two fundamental ways in which armed 

groups continued to be involved in conflict minerals activities: directly, by 

threatening and perpetrating violence against miners to confiscate 

minerals from them; and indirectly, by setting up checkpoints on trade 

routes to illegally tax miners and traders. As we noted in our 2010 report, 

U.S. agency and UN officials and others believe that the minerals trade in 

the DRC cannot be effectively monitored, regulated, or controlled as long 

as armed groups and some members of the Congolese national military 

continue to commit human rights violations and exploit the local 

population at will. 18 

As we reported in 2010, U.S. government officials and others indicated 

that weak governance and lack of state authority in eastern DRC 

constitute a significant challenge. As we noted then, according to UN 

officials, if Congolese military units are withdrawn from mine sites, civilian 

DRC officials will need to monitor, regulate, and control the minerals 

trade. We also noted that effective oversight of the minerals sector would 

not occur if civilian officials in eastern DRC continued to be underpaid or 

not paid at all, as such conditions easily lead to corruption and lack of 

necessary skills to perform their duties. Evidence shows that this situation 

has not changed much. U.S. agencies and an implementing partner, as 

well as some Congolese officials, told us that there are not enough 

trained civilians to effectively monitor and take control of the mining 

sector. ICGLR officials we met with highlighted the importance of a 

regional approach to addressing conflict minerals and indicated that 

governments' capacity for and interest in participating in regional 

certification schemes varies substantially, making it difficult to implement 

credible, common standards. Corruption continues to be a challenge in 

the mining sector. For example, a member of the UN Group of Experts 

told us that smuggling remains prolific and that instances of fraud call into 

question the integrity of traceability mechanisms. This official stated that 

tags used to certify minerals as conflict-free are easily obtained and 

sometimes sold illegally in the black market. According to USAID officials, 

17For our August 2015 report, we traveled to a tantalum mine in eastern DRC, 

which would have been impossible in 2010 during our last visit to the region, because of security concerns at that time. 

18See GA0-10-1030. 

Page 12 
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99780.015

GAO Contact and 

Staff 

Acknowledgments 

USAID is working to introduce a pilot traceability system to increase 

transparency, accountability, and competition in the legal artisanal mining 

sector. According to U.S. government officials and officials from local and 

civil society in the region that we met with, lack of state authority bolsters 

armed group activity and precludes public trust in the government. 

Poor infrastructure, including poorly maintained or nonexistent roads, 

makes it difficult for mining police and other authorities to travel in the 

region and monitor mines for illegal armed group activity. In our 2010 

report, we reported that the minerals trade cannot be effectively 

monitored, regulated, and controlled unless civilian DRC officials, 

representatives from international organizations, and others can readily 

access mining sites to check on the enforcement of laws and regulations 

and to ensure visibility and transparency at the sites. 19 As shown by the 

photograph in app. Ill, fig. 5, during our recent visit to the region, poor 

road conditions made travel to the mines very challenging. 

Chairman Huizenga, Ranking Member Moore, and Members of the 

Subcommittee, this completes my prepared statement. I would be 

pleased to respond to any questions that you may have at this time. 

If you or your staff have any questions about this testimony, please 

contact Kimberly Gianopoulos, Director, International Affairs and Trade, 

at (202) 512-8612 or GianopoulosK@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this statement. GAO staff who made key contributions to 

this testimony are Godwin Agbara (Assistant Director), Marc Castellano 

(Analyst-in-Charge). Jeffrey Baldwin-Bot!, Debbie Chung, Stephanie 

Heiken. Andrew Kurtzman, Grace Lui, and Jasmine Senior. 

Page 13 GA0-16-200T 
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99780.016

Appendix 1: Related GAO Products 

SEC Conflict Minerals Rule: Initial Disclosures Indicate Most Companies 

Were Unable to Determine the Source of Their Conflict Minerals. 

GA0-15-561. Washington, D.C.: August 18,2015. 

Conflict Minerals: Stakeholder Options for Responsible Sourcing Are 

Expanding, but More Information on Smelters Is Needed. GA0-14-575. 

Washington, D.C.: June 26, 2014. 

SEC Conflict Minerals Rule: Information on Responsible Sourcing and 

Companies Affected, GA0-13-689. Washington D.C.: July 18,2013. 

Conflict Minerals Disclosure Rule: SEC's Actions and StakeholderDeveloped Initiatives. GA0-12-763. Washington, D.C.: July 16,2012. 

The Democratic Republic of Congo: Information on the Rate of Sexual 

Violence in War-Torn Eastern DRC and Adjoining Countries. 

GA0-11-702. Washington, D.C.: July 13,2011. 

The Democratic Republic of the Congo: U.S. Agencies Should Take 

Further Action to Contribute to the Effective Regulation and Control of the 

Minerals Trade in Eastern Democratic Republic of the Congo. 

GA0-10-1030. Washington, D.C.: September 30,2010. 

Page 14 GA0~16~200T 
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99780.017

Appendix II: SEC Flowchart Summary of the 

Conflict Minerals Disclosure Rule 

" Does the issuer 

----+-:~:~:au::::~:~(·~ limctiooa1~1"'Pmduct~oof1hep<oouct. 

SQurcer S(:lcuritle&c and Exchange Commiss1011 (SEC). 1 GA0·16-200T 

Page 15 
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99780.018

Appendix Ill: Photographs from GAO 

Fieldwork 

We took the following photographs in the Democratic Republic of the 

Congo, Burundi, and Rwanda during fieldwork for our August 2015 report 

Figure 1: A Bag of Tantalum Ore Being Prepared for Tagging (a Method to Trace 

Origin) and Export at a Mine in the Democratic Republic of the Congo 

Source GAO l GA0-16-2\JOT 

Page 16 GA0-16-200T 
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99780.019

Appendix Ill: Photographs from GAO Fieldwork 

Figure 2: A Bag of Tin Ore Tagged for Export at a Mine in Rwanda 

Sourw· GAO j GA0-16->200T 

Page 17 GA0.1G-200T 
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99780.020

Appendix Ill: Photographs from GAO Fieldwork 

Figure 3: Artisanal Miners at a Tantalum Mine in the Democratic Republic of the 

Congo 

Source- GAO. j GA0.16·200T 

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99780.021

Appendix Ill: Photographs from GAO Fieldwork 

Figure 4: Artisanal Miners at a Gold Mine in Burundi 

Source. GAO, j GA0-18-ZOOT 

Page 19 GA0·16·200T 
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99780.022

{100384) 

Appendix Ill: Photographs from GAO Fieldwork 

Figure 5: Stuck Vehicle during a Visit by GAO Team to a Mine Site in the Eastern 

Part of the Democratic Republic of the Congo, November 2014 

Soorce· GAO, I GA0-1&-200T 

Page 20 GA0-16-200T 
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99780.023

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57 


99780.024

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58 


99780.025

TESTIMONY OF 

Evode Imena, Minister of State 

In charge of Mining, Ministry of Natural Resources 

Government ofthe Republic of Rwanda 

Before the U.S. House Financial Services Committee, Monetary Policy and 

Trade Subcommittee 

"Dodd-Frank Five Years Later: What Have We Learned from Conflict 

Minerals Reporting?" 

November 17, 2015 

Page I oflO 
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INTRODUCTION 

Thank you, Chairman Huizenga, Ranking Member Moore, and Members of the Subcommittee 

for inviting me here today. Thank you for holding this important hearing to discuss what we 

have learned from implementing Section 1502 of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act. I am honored to testifY on behalf of the United States' friend and ally, 

the Republic of Rwanda. 

CURRENT STATE OF AFFAIRS IN RWANDA 

I want to first set the stage and talk a little bit about my country today. Rwanda has enjoyed 

significant political stability since emerging from the 1994 genocide. According to the World 

Economic Forum's Global Competitiveness Report released in July 2015 1

, Rwanda is the most 

efficiently governed country in Africa and seventh globally. Rwanda is also among the five least 

corrupt nations in Africa according to Transparency International. 2 

Additionally, Rwanda has one of the fastest growing economies in the world, registering an 

average growth rate of eight percent3 for the last 13 years. The World Bank has stated that 

Government reforms have directly resulted in Rwanda's having the most improved economy 

worldwide since 2005, and the country is the second easiest place to do business in Africa.4 The 

factors used to determine these rankings are: cutting wasteful government spending; relaxing or 

removing regulatory burdens; and increasing transparency of policy-making. 

Rwanda has come a long way, and we are strategically planning for the future to ensure we 

continue on the path of progress. 

Rwanda's long-term development goals are defined in a strategy entitled Vision 2020. 5 This 

framework's goal is to transform the country from a low-income agriculture-based economy to a 

knowledge-based, service-oriented, manufacturing economy with a middle-income country 

status by 2020. The mining sector has been identified as a key priority as we work to achieve 

this next step in our economic evolution. 

RWANDA'S MINERAL RESOURCES & IMPACT ON ECONOMY 

To understand how critical Rwanda's mineral resources could be in Rwanda's continued 

transfonnation, it is important to understand a little bit about the resources within our borders 

and the significant role mining plays in our economy. 

1 2014-2015 World Economic Forum's annual Global Competitiveness Report, 

https:/ I agenda. weforum.org/2015/07 I efficient -government/ 2 Transparency International's 2014 Corruption Perception Index (CPI), 

https://www.transparency.org/cpi2014/results#myAnchor1 

3 Figures from the Ministry of Finance and Economic Planning & National Institute of Statistics of Rwanda 

•world Bank Doing Business 2014 report, https://openknowledge.worldbank.org/handle/10986/16204 5 http://edprs.rw/content/vision-2020 

Page 2 of!O 
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Rwanda is located in the geological area known as the Kibaran belt, which has rich deposits of 

tin, tungsten, and tantalum, also known as the "3T minerals." The Kibaran belt entirely covers 

Rwanda, as well as large parts of the Kivu region of the Democratic Republic of Congo (DR C), 

which borders Rwanda to the west. Parts of Burundi, Tanzania, and Uganda are also overlaid by 

sections of the Kibaran belt. 

While tin is abundant around the world, tungsten and tantalum are significantly more rare. 

Tungsten has a high melting point and is one of the strongest substances known to mankind. It is 

often alloyed with other metals to strengthen them, and has a wide variety of applications critical 

to modem economies from circular saws to electrodes. 

Rwanda produces an annual average of 1,500 tons of tungsten ore6

, and the African Great Lakes 

region, of which we are a part, has been responsible for about two percene of the world's 

tungsten supply in recent years. Nearly 80 percent8 of the world's tungsten supply is generated 

by China, followed by Russia and then Canada. 

In 2014, the US Geological Survey credited Rwanda, DRC, and Burundi with producing more 

than 50 percent9 of the world's tantalum raw ore. Tantalum derivatives are used in a wide variety 

of products, including medical equipment and prosthetics, global positioning systems, 

computers, hard drives, cell phones, and most other sophisticated electronics. 

Mining accounts for two percent of Rwanda's GOP, 28 percent of national exports, and is the 

second greatest source of foreign exchange just after tourism. 10 The mining industry employs 

more than 37,000 people. 

A 2014 survey II indicates that on average, each miner has another four dependents, meaning that 

the work of the approximately 37,000 miners in the country supports the livelihood of 170,000 

individuals - about 1.5 percent of the population of Rwanda. The monthly income for a miner 

varies significantly, and can be as high as $600 per month with median incomes of about $85 per 

month, putting them in what the US would call middle class. For comparison, the average salary 

for a primary school teacher in public school in Rwanda is about $90 per month, and the salary 

for a junior staff member in a government agency is about $400 per month. 

6 Statistics from the National Bank of Rwanda and the Ministry of Natural Resources 7 US Geological Survey- Mineral Commodity Summaries 201S 8 1bid. 

9 1bid. 

10 Annual report of National Institute of Statistics of Rwanda 11 Statistics from the Ministry of Natural Resources 

Page 3 of 10 
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Currently, the 3Ts still account for more than 90 percent 12 of Rwanda's mineral production. 

However, we have started to diversify our extraction efforts to other resources, including 

gemstones like sapphire, tourmaline, and amethyst, as well as gold and iron ore. We are also 

exploring for additional minerals including copper, cobalt, silver, rare earth elements, lead, and 

zinc. 

Our mining industry is currently led by the Ministry of Natural Resources and the Geology and 

Mines Department (GMD). The Ministry has responsibility for setting policy and preparing 

legislation, overseeing the whole industry, and monitoring and evaluation. GMD has 

responsibility for policy implementation; promoting, regulating, and supervising the industry; 

and compiling and disseminating data. 

Mines are operated by private companies and cooperatives licensed by the Ministry. All the 

mining operators are grouped under an umbrella organization known as the Rwanda Mining 

Association. 

IMPLEMENTATION OF BEST PRACTICES 

Now I would like to discuss the steps Rwanda has taken to implement best practices in our 

mining industry, which illustrate our leadership domestically and internationally. 

Recognizing the growing problems posed by trafficking and smuggling minerals, nearly a decade 

ago, Rwanda proactively developed the regulatory and physical infrastructure needed to continue 

to develop and legitimize our mining industry. 

In 2006, four years before the passage of Dodd-Frank, the Government initiated a project to 

collect an analytical fingerprint of deposits containing 3T minerals. In 2008, two years prior to 

the enactment of Dodd-Frank, the Ministry of Natural Resources initiated the Certified Trading 

Chains (CTC) system in collaboration with the German Mineral Resources Agency (BGR). 

The CTC system was based on international integrity instruments such as guidance from the 

Organisation for Economic Cooperation and Development (OECD), and focused on two aspects: 

supply chain due diligence (origin of minerals and traceability, taxation and transparency), and 

mining conditions (workers' rights, communities and environment). The CTC was piloted at six 

mines in Rwanda, but when Dodd-Frank was enacted in 2010, the Government and industry 

shifted their focus to compliance with Section 1502 of the law, implementing mandatory 

regulations rather than a voluntary system. 

In 2010, the Government signed a memorandum of understanding with the International Tin 

Resource Institute (ITRI). ITRI is a London-based industry organization funded by tin producers 

12 Statistics from the Ministry of Natural Resources 

Page 4 of 10 
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to represent the interests of the tin industry globally. The agreement was signed with the 

objective to address issues relating to 3T mining in Rwanda in relation to "conflict minerals" 

regulations. The aim of the project was to improve due diligence, governance and traceability of 

3T in order to reassure metal buyers of the provenance of their minerals by using the ITRJ 

Supply Chain Initiative (iTSCi), the system devised by ITRI. 

The iTSCi program was officially started in Rwanda in 2011. The Government works with 

PACT, a Washington DC based NGO, as an independent verifier to implement the iTSCi 

traceability mechanism. 

PACT plays an important role in building capacity and training small-scale miners, performing 

field investigations, auditing, and reporting on all due diligence aspects of iTSCi. A national 

steering committee composed of the Government, PACT, and civil society organizations 

oversees the program and recommends actions to the Ministry. 

In March 2012, Rwanda was the first country in the African Great Lakes region to promulgate 

regulations on the International Conference for the Great Lakes Region (ICGLR) Mineral 

Certification Mechanism (RCM). ICGLR Certification is based on the OECD due diligence 

guidelines. In November 2013, Rwanda was the first country in the region to issue an ICGLR 

mineral certificate to a shipment of 3Ts destined for export. 

In May 2014, the Rwanda Parliament passed a new mining code, codifying revised mining 

policy aimed at professionalizing and modernizing the Rwandan mining industry. One of the 

pillars of the policy is the transformation of the sector from artisanal and small-scale operations 

to semi-industrial and industrial mining operations. 

This transformation requires technical knowledge and skills, financial capacity, proper planning, 

and an enabling environment. In this framework, the Ministry organized small mining 

cooperatives into a Federation (FECOMIRWA) and developed a revolving fund to enable 

artisanal miners to access loans. Other entrepreneurs and relatively larger companies were 

grouped into the Rwanda Mining Association, which serves as a forum for advocacy, building 

capacity, and sharing experience. 

We recognize that there have been past cases of illegal transportation and trade of minerals from 

neighboring countries to Rwanda. With the above noted policies and practices in place, Rwanda 

has the capacity for robust enforcement against smuggling and trafficking of minerals, and takes 

enforcement very seriously. The Government has implemented the Regional Initiative against 

Illegal exploitation of Natural Resources (RINR), a strong mechanism to curb mineral 

smuggling. 

Page 5 of 10 
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In April 2015, a regional team was formed to assist in formulating and receiving requests for 

cooperation and mutual assistance in the fight against mineral fraud and smuggling. Member 

states of the ICGLR are represented in the team. 

Whenever there is evidence of misconduct by any mineral license holder in Rwanda, immediate 

actions are taken by the Government. For example, in September 2015, a cooperative named 

Kamico allegedly misused tags dedicated for traceability, and its license was suspended. Upon 

determining that the allegations could be substantiated, the license was cancelled. 

In October 2015, 54 companies that were not complying with legal requirements were excluded 

from the mineral traceability scheme. Three companies - namely RF & GM, Africa Multibusiness Line, and SOMIKA named in the UN Group of Experts on the DRC report of October 

16, 2015, are also among companies excluded from the traceability scheme, and are thus 

prohibited from participating in extraction, processing, transportation, or selling 3T minerals. 13 

Because of the actions the Government has taken, today there is really a de minimis financial 

benefit in cross-border smuggling in Rwanda. Anyone tempted to smuggle minerals into 

Rwanda for the purpose of selling them would need to pay 15 percent of the value of minerals as 

withholding tax, four percent as royalty tax, and transportation costs. If the minerals are illegally 

introduced in the traceability scheme, they would also need to pay the iTCSi levy and 

Government fees. 

In total, anyone attempting to illegally sell minerals by introducing them into the Rwanda supply 

chain would be subject to fees and payments ranging between 20 to 24 percent of the value of the 

smuggled minerals. In a business where profit margins are generally tight, we do not see much 

incentive for smuggling products through Rwanda at a cost of up to 24 percent. 

IMPACT OF SECTION 1502 

As you can see, Rwanda has taken extensive steps and made great strides in improving 

accountability and transparency in the mineral supply chain. Today, Rwanda is the country with 

the best mineral traceability system in the region. Currently, 100 percent of 3T minerals mined 

in Rwanda are traceable from the mine site to the export point, and a modem database exists with 

information on mining operations, production records, and mineral trading transactions. Despite 

all that has been accomplished, our efforts to improve are hampered by the fact that Rwanda was 

lumped together with nine other countries in Section 1502 of Dodd-Frank. 

The ten countries covered by this law certainly have some things in common, but they are 

dissimilar in many significant ways. From economic development to border control, these 

13 

United Nations Midterm Report of the Group of Experts on the Democratic Republic of the Congo, October 16, 

2015 

Page 6 of!O 
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99780.031

countries are at all different levels of achievement. Putting them in one group and applying a 

"one size fits all" regulation is not only an impediment to efficient implementation of the 

regulations, but further, such an approach fails to recognize efforts made and challenges faced by 

individual countries. 

Today, the Rwandan mining sector bears the direct costs resulting from the conflict mineral due 

diligence framework. Due diligence costs include an ITRI levy and fees paid to the Government. 

All levies are collected at the export stage based on export volumes and essentially serve to 

finance the mineral traceability scheme in Rwanda. There are additional due diligence costs, 

including the iTSCi joining and membership fees, as well as internal due diligence costs, such as 

record keeping and internal audits. 

Due diligence fees are directly paid either by large-scale mining companies or by Rwandan 

mineral exporters, and they in turn pass on the levies to small-scale and artisanal miners who 

supply the minerals. 

The cost of due diligence for the three years prior to 2015 were between two and four percene4 

of the export value of 3T minerals. However, because due diligence costs are not contingent 

upon mineral prices, but depend on produced volumes, the decline in mineral prices has 

increased due diligence costs to 5.7 percent 15 of the tungsten ore value, 3.7 percent of the tin ore 

value, and 3.5 percent of the tantalum ore value. 

Currently, more money is spent complying with the conflict mineral requirements than money 

paid for Government taxes. In October 2015, Rwanda tungsten miners paid $12,000 for each 

container in due diligence costs in comparison to $8,330 paid for royalty tax. 16 Between January 

and August 2015, $3.2 million 17 was spent on due diligence- four percent of the value of 

minerals produced. 

Despite all these efforts and the costly investments in due diligence, we have noted since 2013 a 

negative international market bias against Rwandan minerals, and in particular against tungsten, 

as Dodd-Frank has been fully implemented. This situation worsened in 2014, when companies 

that process tungsten ore stopped buying from all Central African countries despite the fact 

that Rwanda was fully implementing both OECD due diligence recommendations related to 

conflict minerals and the lTRl minerals traceability mechanism. 

The region is now suffering from an "Africa-free" and not a "conflict-free" minerals situation. 

Section 1502 has caused a de-facto boycott by companies in the US and much of Europe on our 

14 Statistics from the Ministry of Natural Resources 15 1bid. 16 1bid. 17 Statistics from Rwandan mining companies and the Ministry of Natural Resources 

Page 7 of 10 
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most valuable resources. The result is a very limited customer base, which further drives down 

mineral prices because these customers know they have no competition for our resources. 

The situation has largely impacted the livelihood of thousands of miners and their families, as the 

costs for due diligence are passed down from mineral exporters to mining companies, and then 

on to mine workers. Based on our calculation, the revenues for mining companies and wages for 

mine workers have decreased by 3 to 6 percent in the last year. Coupled with price fluctuation, 

the situation has become very difficult to miners and to an industry with tight profit margins. 

During the fiscal year 2014/2015, the Ministry of Natural Resources which has several 

departments beyond mining- had a budget of $19.8 million. Approximately $3.7 million was 

dedicated to mining sector development, including mineral exploration. Approximately $6.1 

million was spent to comply with due diligence requirements, 46 percent more than was used to 

discover more mineral resources for the people of Rwanda and for modernization of existing 

mines. And still, because of Section 1502, our minerals are effectively excluded from the world 

market. 

In 2010, when Dodd-Frank was introduced, Rwandan 3Ts mineral production was estimated at 

$68 million. lt grew by 208 percent to reach $210 million in 2014. While this growth is very 

impressive, it is dwarfed by the I ,260 percent growth registered between 1998 and 20 I 0, before 

the enactment ofDodd-Frank. 18 While the difference between growth rates cannot be explained 

solely by the negative impact of the conflict mineral regulations, these regulations have clearly 

had a significant negative impact. 

I must note that a number of positive developments were triggered by the introduction of DoddFrank, including: better record-keeping and reporting from mining companies, improvements in 

mine site inspections, increased monitoring of mining activities by government agents, capacity 

building of small-scale and artisanal miners, and alignment of national regulations to regional 

and global best practices. 

These positive gains are among the reasons the Ministry in charge of mines decided that 

regardless of what might happen with Section 1502, Rwanda will continue to encourage robust 

traceability for tax and regulatory purposes. Moreover, sustainability, certification, and 

traceability are here to stay, and Rwanda will continue to be a reliable partner because we know 

that only "well-sourced" materials will attract the highest yield on the world market. 

CHALLENGES AND OPPORTUNITIES 

As illustrated above, many of the main challenges to our industry revolve around the limitations 

the de facto Dodd-Frank boycott has put on our potential for growth and increased revenue. 

18 Figures from annual report of the National Institute of Statistics of Rwanda 

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A major structural challenge is caused by the fact that 3T minerals arc only mined in four of the 

I 0 countries covered by Section 1502, so the engagement and contribution to efforts for a 

regional solution through the lCGLR on 3Ts would not attract the attention of all members. 

With less than half of the ICGLR countries affected, why should they expend political capital 

and professional time and talent in seeking a solution? 

A continuing challenge is the cost of the iTSCi system, and the opacity around the use of levies 

from local miners. While the system has improved the mining sector by ensuring traceability, the 

system is costly and it is unclear what the levies are used for within ITRI or why they are so 

high. 

Another issue is based on the fact that I 0 countries with divergent interests and different needs 

are all put in the same box under the current enforcement regime. African Great Lakes countries 

have initiated the JCGLR regional certification mechanism to deal with various issues related to 

mining development. However, the mechanism faces several challenges, which has resulted in 

limited achievements compared to expected outcomes. 

Some of the challenges are linked to the limited capacity of the ICGLR and its unit in charge of 

mineral resources, which depends on donations. That being the case, prioritization of projects 

does not solely depend on the needs of member states, but on wishes of donors. 

Plans for auto-financing of the ICGLR have not yet been successful, so the system lacks the 

financial stability to be effective in the long term. Issues related to mineral resources in the 

Great Lakes region are most of the time reduced only to "conflict minerals," which has created 

confusion among various stakeholders and takes away countries that are not concerned about 3T 

minerals, further hampering efforts to develop an effective funding mechanism. 

We do sec many opportunities for growth, and the Ministry in charge of mining will continue to 

take proactive steps. We are currently missing out on investment from a whole host of socially 

responsible private US companies. We are not asking for any US government handout, but we 

would like to create an environment that encourages public-private partnerships with US 

companies to help us with extraction, surveying and mapping, refining and processing, logistics 

and transportation, and worker training and professional development. 

We feel that encouraging US investment will help us fill gaps in our supply chain, increase enduser consumer confidence in our raw materials, improve our economy, and get the most out of 

our existing infrastructure. For example, Rwanda has a tin smelter that needs modernization. 

The smelter has undertaken steps to be certified as conflict-free smelter, and additional foreign 

Page 9 of!O 
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investment could greatly improve the smelter's capacity. The Ministry has also received 

proposals for projects from mining companies to set up tantalum and tungsten refineries. 

Today, systems exist that can produce what I will call a geologic finger print of a particular 

mining site, essentially identifying minerals by their mine of origin. Foreign investment could 

help us deploy these systems in Rwanda, further adding to the integrity of our traceability 

systems and increasing confidence in the world market. 

CONCLUSION 

Moving forward we welcome a discussion about ways that we could partner with US industry, 

academic institutions, and the US Government to identify future growth strategies and improve 

implementation of Dodd-Frank. 

Our Government is open to programs and systems that will encourage US manufacturers to 

source materials from Rwanda and our neighbors. 

I welcome your questions and thank you again for inviting me to participate today. 

Page 10 of 10 
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The Hon. Per-Olof Loof 

Chief Executive Officer 

KEMET Electronics Corporation 

Before the House Financial Services Monetary Policy and Trade 

Subcommittee 

United States House of Representatives 

Dodd-Frank Five Years Later: What Have We Learned from Conflict 

Minerals Reporting 

November 17,2015 

2128 Rayburn House Office Building 

A Silver lining to the Dodd-Frank Act 

Thank you, Chairman Huizenga, Ranking Member Moore, and Members of 

the subcommittee for holding this hearing on the impact of Dodd-Frank's 

Conflict Minerals Provision. My name is Per Loof, I am the CEO of 

KEMET Corporation and Chairman ofNEC TOKIN, our joint venture with 

NEC. 

KEMET is a leading global supplier of electronic components. Founded in 

1919, we manufacture the broadest selection of capacitor techno logics in the 

industry. Through our Joint venture we also offer electromechanical and 

electromagnetic devices as well as supercapacitors. 

Capacitors store, filter and regulate electrical energy in just about anything 

that plugs in, has an on-off switch or uses a battery. According to our 

estimates each of you own more than 15000 capacitors. 

We serve the military, automotive, industrial, telecommunication, computer, 

medical, and consumer markets. 

Including our joint venture we employ 17000 people have a total of28 

manufacturing facilities. We are listed on the NYSE. 

Tantalum capacitors have been a key product for us since 1958, after Bell 

labs invented the solid state capacitor in the mid-fifties. Today about 46% of 

KEMET's revenue originates from Tantalum capacitors. Tantalum ore is one 

area where the Democratic Republic of Congo (DRC) can be a world leader. 
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99780.036

This is due to the fundamental chemical nature of the tantalum molecule, 

and the form in which it typically exists in the DRC. Simply put, it is easier 

to get to and the tantalum density is significantly higher. 

Tantalum powder is our single largest material cost item. Acquiring tantalum 

at stable and competitive prices is paramount. This has always been a bit of a 

struggle but during the global recession in 2008 and 2009 it became a real 

issue. Powder suppliers kept raising prices seemingly unaware of the world 

around them. We had to figure something out. The DRC was not, at the 

time, an option. 

Already in the 90ies, as things became difficult in the DRC due to conflicts, 

customers did not want products with raw materials originating from the 

DRC- some even said that they did not want "blood tantalum" capacitors. 

The industry can procure ore from other locations and we did of course, 

mainly from China. But we all knew that the DRC enjoys the most cost 

competitive source. 

When the Dodd-Frank Act passed, I sensed a business opportunity. Section 

1502 could be the impetus for developing, in the DRC, an innovative and 

socially sustainable source for conflict-free tantalum ore. 

We got going in 2011, after my first visit to the village in February that year. 

To realize this vision, we formed "The Partnership for Social and Economic 

Sustainability". The objective was a vertically integrated, closed-pipe, 

sustainable sourcing model. 

First we helped create an industrial conflict free mine in the DRC. The mine 

is operated according to a special agreement between KEMET, our mining 

partner MMR and the people of the mining town ofKisengo. 

Second we had to get really serious about logistics. Kisengo in northern 

Katanga to Kalemie on the shores of Lake Tanganyika is a real trip. 

Third we built an ore processing facility in Matamoros, Mexico 

Fourth we bought a tantalum powder production Company in Carson City, 

Nevada. 
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All of our facilities have been audited and validated as compliant with the 

Conflict-Free Smelter Program of the Electronic Industry Citizenship 

Coalition and the Global e-Sustainability Initiative. The total KEMET 

investment to date is in excess of$110 million. 

Our closed pipe process ensures that there is no tantalum from non-conflictfree sources. In addition, we believe, our investment has reduced the 

extreme fluctuation in ore and powder pricing in our former supply model. 

Being one of the largest tantalum users in the world, I believe our initiative 

has stabilized the pricing of this material benefitting not just KEMET but the 

industry at large. 

While some argue that miners in the DRC have been negatively impacted by 

Dodd-Frank, I can say with certainty that this is not the case with our 

initiative, and in our little village. 

Our investments have resulted in: 

• An industrial mine, also making it safer for the workers; 

• A new hospital for the people ofKisengo- treated over 14,000 cases 

in the last 16 months; 

• A new school - 1,500 students 

• Access to clean water and according to the folks in the village, have 

eradicated cholera; 

• Helped start a few local businesses supporting the mine, the school 

and the hospital; 

• Installed solar powered street lights; and 

• Refurbished basic infrastructure. 

The business value is clear. And the economic benefit to KEMET is 

multiples of what we have invested in the village to improve the life of the 

miners and their families. The annual run rate benefit to KEMET is now at 

$56 million. We were able to secure 86 jobs in NV and over 200 jobs in SC. 

We have shown that it is possible to succeed in business while being 

economically and socially responsible. 

As strange as it may sound Section 1502 has been very good for the 

tantalum industry. There is now little question on provenance and there is a 
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clear road map how to ethically source DRC tantalum. Section 1502 may not 

be perfect, but The Dodd-Frank Act has certainly helped companies like 

KEMET to again, after decades of absence, be able embrace the DRC 

allowing us to develop a competitive and secure supply chain, improving 

both our competitiveness and the life of the people in the village. 

I know we at KEMET cannot solve all the problems in the DRC, but I do 

believe that we have had and will continue to have a positive impact on this 

little village. A village that you can't even find on a map. 

Thank you for allowing me to testify. I will be happy to answer any of your 

questions. 
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99780.039

Written Statement of Jeff Schwartz, Professor of Law, 

University of Utah S.J. Quinney College of Law 

Before the Subcommittee on Monetary Policy and Trade 

of the Committee on Financial Services 

of the United States House of Representatives 

Hearing Titled 

"Dodd-Frank Five Years Later: 

What Have We Learned from Conflict Minerals Reporting?" 

November 17, 2015 

Chairman Huizenga, Ranking Member Moore, and members of the Subcommittee, thank 

you for the opportunity to appear before you today. It is an honor and a privilege to be here. I am 

a Professor of Law at the University of Utah S.J. Quinney College of Law, and have written 

extensively about securities regulation and related topics. 

Recently, I conducted an empirical study of compliance with Section 1502 of Dodd-Frank 

and the SEC regulations adopted thereunder (the "Conflict Minerals Rule" or the "Rule"). 1 Today, 

I would like to share with the Subcommittee the primary findings of that study and several policy 

recommendations that stem therefrom (the full study is attached as Appendix A). Overall, I 

conclude that the Conflict Minerals Rule is a failure in its current form, because the filings that 

companies have submitted to the SEC in response do not provide sufficient insight into conflict 

mineral supply chains, or company due diligence efforts related thereto, for consumers and 

shareholders to discern which companies are committed to conflict-free sourcing.2 I suggest, 

however, that amendments to the Rule (some ofthcm relatively minor), or even SEC guidance on 

how the current regulations should be interpreted, could greatly increase transparency without 

1 Jeff Schwartz, The Conflict Minerals Experiment, 6 HARVARD BUSINESS LAW REVIEw (forthcoming 2015), 

available at http://papers.ssrn.com/sol3/papcrs.cfm?abstract_id~2548267. 2 For purposes of the Rule, the "conflict minerals" are tin, tungsten, tantalum, and gold. See id. at 7 & n.21. 
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increasing compliance costs. First, I will briefly describe the methodology of the study, then I will 

describe my findings and policy recommendations. 

I. Empirical Methodology 

The SEC regulations under Section 1502 required that public companies begin reporting 

on their conflict mineral supply chains, and the due diligence efforts undertaken to understand 

them, in 2014.3 To explore the effects of this new disclosure mandate, I collected quantitative and 

qualitative data on the nature and scope of the first-year corporate compliance effort. This involved 

compiling summary statistics on how many companies filed conflict mineral disclosures in that 

year, in which industries filers did business, and whether companies only filed the basic disclosure 

document, Form SD, or filed the supplemental and more probing Conflict Minerals Report 

("CMR") as well. I also compared how my findings in these regards matched with the estimates 

the SEC put forward when adopting the final regulations. 

In addition, I read each Form SD and CMR submitted by a company included in the S&P 

500 Index (over 200 of these firms made such submissions). In doing so, I measured compliance 

with each aspect of the Conflict Minerals Rule, and assessed the extent to which the filings served 

the purpose Congress intended-that is, whether they shed sufficient light on conflict mineral 

supply chains and corporate due diligence for concerned parties to identifY which companies 

should be praised and which condenmed for their sourcing practices and their efforts to understand 

and address any shortcomings. 

II. Empirical Findings 

My most important quantitative finding was that far fewer companies filed reports than the 

SEC had estimated. The afency predicted that nearly 6,000 companies would file Form SDs, but 

only about 1,300 did so. The SEC, therefore, overestimated by about 350%.5 The agency's 

methodology in reaching this estimate was reasonable-it based its calculation on the number of 

firms in industries most likely to be impacted.6 That this approach yielded such a grossly inflated 

figure suggests that there has been significant noncompliance.7 

Though the reason so few companies filed is worthy of further research, the qualitative 

aspect of my study focused on the actions of those firms that did submit the mandated reports. In 

the sections that follow, I discuss my findings with respect to the content of the required 

3 See Conflict Minerals, 77 Fed. Reg. 56,274, 56,274 (Sept. 12, 2012). 4 See id. at 56,338 n.748_ 5 The SEC estimated that about 4,500 companies would supplement their Form SD with the more in-depth CMR, 

but only approximately 1,000 did so-----a 341% overestimate. See id at 56,356. 6 See Conflict Minerals, 75 Fed. Reg. 80,948, 80,966 & n.l76 (proposed Dec. 23, 2010). 7 As this estimate was used as the basis of the SEC's cost calculations, the low number of filers also suggests 

that the agency's much-discussed projection that compliance would cost companies $3-$4 billion in the first year was 

far too high. Conflict Minerals, 77 Fed. Reg. at 56,334. My qualitative findings reinforce this conclusion: filers 

frequently complied in a way that suggests they did not incur substantial expenses. For a more extensive analysis of 

the costs associated with the Rule and the SEC's analysis thereof, see Jeff Schwartz & Alexandrea Nelson, CostBenefit Analysis and The Conflict Minerals Rule, 68 ADMINISTRATIVE LAw REVIEW (forthcoming 20 !6) (on file with 

authors). 

2 
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99780.041

disclosures, as well as the policy implications that stem from what I found. My study reveals 

noncompliance with specific legal requirements, superfluous aspects of the regulatory scheme, the 

importance of fledging institutional initiatives to the compliance effort, and the ultimate failure of 

the Rule to illicit meaningful information about corporate sourcing practices. 

a. Noncompliance with Legal Requirements 

The Conflict Minerals Rule contains numerous due diligence and reporting obligations. 

The following table shows where compliance therewith appeared particularly poor. 

Table 1: Due Diligence and Reporting Rules with Low Compliance Rates 

Legal Requirement 

Amend Supplier Agreements 

Institute Grievance Procedure 

Report Due Diligence Findings to Senior Management 

Adopt a Risk Management Plan 

Describe Products Not Found to be Conflict Free 

List Processing Facilities 

List Countries of Origin of Conflict Minerals 

Describe Mineral-Origin Inquiry with Specificity 

Percent of 

Companies 

Taking Step 

Listed 

51% 

47% 

55% 

29% 

71% 

31% 

20% 

40% 

Several of the legal requirements listed above, and the company responses thereto, merit 

further discussion. As noted in the table, only 31% of companies listed the processing facilities 

(i.e., the smelters and refiners) used to process their conflict minerals despite the Rule's 

requirement that they do so8 Many did not list them even though they had identified at least a 

portion of those in their supply chain. Some gave no reason for omitting the names, but many 

claimed that even though they could identify such facilities, they could not link particular facilities 

to their products. According to these companies, when they polled their suppliers, they would get 

a response at the "company level," meaning that they were told all of the smelters and refiners that 

the supplier used. In many cases, however, suppliers apparently did not take the additional step of 

informing companies which of these facilities processed the minerals that made it into the 

company's specific products. Companies, therefore, could not match conflict minerals from a 

particular smelter or refiner with their particular goods, and, based on this, claimed not to have 

enough information to include facilities in their filings. 

8 See Form SD, OMB No.: 3235-0697, at Item I.OI(c)(2), available ar http://www.scc.gov/ 

about/fonns/formsd.pdf[hereinafter Form SD]. 

3 
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99780.042

Country-of-origin disclosure was even scarcer. Only 20% of companies provided this 

information. As with facilities, some companies gave no explanation for the omission. Others 

claimed that they could not determine the country of origin for the conflict minerals in their 

products. While some left it at that, others provided details as to why. When smelters and refiners 

process conflict minerals, ores from different regions arc combined and the location of origin 

becomes impossible to track. Thus, the only way to trace the source of a conflict mineral in a 

product is to identifY the smelter or refiner from which it carne. If, for example, a particular smelter 

only processed minerals from Asia, then a company downstream from the smelter could know that 

is where its raw materials came from. Since "company level" reporting from suppliers meant that 

downstream reporting companies could not match specific smelters or refiners to their products, it 

also meant that they were unable to match products to countries. The information gap at the 

supplier level thus formed the grounds for noncompliance with two key aspects of the Rule. 

More specifically, the requirement to describe processing facilities and countries of origin 

appears to have largely been undermined by a combination of (i) a narrow interpretation of what 

the law requires, necessitating inclusion of such information only when particular smelters or 

refiners could be matched to a company's produets,9 and (ii) an inability or unwillingness on the 

part of suppliers to provide information on such a granular level. 

Further still, this disconnect likely played a large role in derailing the Rule's sorting 

ambitions. The hope was that companies would disclose whether their products contain (or may 

contain) conflict minerals from militarized mines in the Congo, whether their products do not, or 

whether, despite their due diligence, they were unable to tell. 10 But these distinctions never 

materialized. Almost every company said they were unable to determine the conflict status of their 

products or gave no specific conclusion. Although they frequently did not explain their rationale, 

their inconclusiveness makes sense given the lack of specifics provided to companies by their 

suppliers. Once a company has taken the position that, because it cannot link specific processing 

facilities to its products, both the processing facilities and the countries of origin of its products' 

conflict minerals arc unknown, it follows that the conflict status of its products is unknown for the 

same reason. 

Policy Recommendation-Require that companies list all smelters and refiners in their 

products' supply chains, along with the countries of origin of the minerals processed at those 

facilities, regardless of whether they can determine if minerals from particular processing facilities 

are found in their products. This could be accomplished through SEC interpretive guidance or an 

amendment to the current regulations. 

9 This is a reasonable interpretation of the regulatory language, which simply requires that companies list '"the 

facilities used to process the necessary conflict minerals" and "the country of origin of the necessary conflict minerals" 

in products that have "not been found to be 'DRC conflict free."' !d. at Item I.Ol(c)(2). Nevertheless, this 

interpretation certainly runs counter to the spirit of transparency behind the legislation. 10 While this intent can be gleaned from the regulations, the wording of the relevant requirements is imprecise. 

See Schwartz. supra note 1, at II n.60. Moreover, while the SEC wanted companies to label products in their 

disclosures as "having not been found to be 'DRC conflict free"" where this was the case, the agency's attempt to 

mandate this specific wording has been struck down as unconstitutional. See Nat'! Ass'n ofMnfrs v. SEC, 748 F.3d 

359 (D.C. Cir. 2014), overruled by Am. Meat lnst. v. U.S. Dept. of Agric., 760 F.3d 18, 22-23 (D.C. Cir. 2014), 

reaffirmed by Nat' I Ass'n ofMnfrs v. SEC, 800 F.3d 518 (DC. Cir. 2015). 

4 
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99780.043

Another central aspect ofthe Rule is the requirement that companies list their products that 

have not been found to be conflict free. 11 As noted above, 71% of companies did so. While this is 

much higher than the other figures in the table, the more impressive percentage is misleading. Most 

companies listed their products at a high level of generality, describing them as "apparel" or 

"household products," for example, rather than including something like brand names. This 

technical compliance frustrates the Rule's intent. Ostensibly, Congress wanted companies to list 

product information so that consumers could ascertain which of them contain conflict mineralsand change their purchasing habits accordingly. But individuals have a limited ability to do so if 

they arc only informed of broad product categories. 

Policy Recommendation-Require companies to provide a more specific listing of 

products that have not been found to be conflict free. This could be accomplished through SEC 

interpretive guidance. 

b. Ephemeral Distinctions: RCOI, Due Diligence, and Mineral-Origin Inquiry 

The SEC set up a complex multi-tiered diligence structure. The regulations require a 

company to conduct a so-called "reasonable countfl of origin inquiry" (an "RCOI") if it 

determines that it has conflict minerals in its products.' If the RCOI does not reveal the presence 

of conflict minerals from the Congo region, the company need only file a Form SD, which must 

"briefly" describe the company's RCOI process and its conclusion. 13 

If, on the other hand, the RCOI reveals that the company is sourcing conflict minerals from 

the region or gives the company reason to believe that this is the case, then the company is required 

to conduct due diligence "on the source and chain of custody" of such minerals. 14 After conducting 

due diligence, if companies are unable to rule out the possibility that their conflict minerals are 

from the Congo, they must file a CMR. 15 In the CMR, companies must not only describe their due 

diligencc, 16 but also their "efforts to determine the mine or location of origin with the greatest 

possible specificity." 17 

There arc abstract distinctions between the three concepts just described. Based on the 

regulations, a company's due diligence should theoretically be more in depth than its RCOI, and a 

company's description of its mineral-origin inquiry should theoretically be more detailed than its 

description of its due diligence. None of these fine gradations, however, showed up in the reports. 

And this is not the companies' fault. It would be inefficient for them to conduct two rounds of 

inquiry-an RCOI and then due diligence; it makes sense for companies to ask for all of the 

information at once, which is what they did. Similarly, it is difficult to figure out what information 

companies were expected to include when describing their mineral-origin inquiry, but omit when 

describing their due diligence. 

:: Fonn SD, supra note 8, at Item l.Ol(c)(2). 

-!d. at Item l.Ol(a). 13 !d. at Item l.Ol(b). 14 !d. at Item I.OI(c). 

I

5 See id. 16 !d. at Item I.Ol(c)(l). 17 !d. at Item l.Ol(c)(2). 

5 
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99780.044

The overly complex framework had a deleterious effect on the filings. Companies ended 

up repeating themselves in their RCOI and due diligence sections. Filings were also inconsistent 

with each other: some companies listed an activity as part of its RCOI while others listed the same 

thing as part of its due diligence. Such redundancies and inconsistencies made the reports difficult 

to compare and tedious to read. 

The distinction in the level of detail required of companies in describing their mineralorigin inquiry was also lost in practice. As noted above, only 40% of companies included this 

section. Those that did address this requirement frequently provided no additional information, 

instead referencing their due diligence and RCOI descriptions as their efforts to determine the mine 

or location of origin. 

Policy Recommendation-Abandon the multi-tiered diligence and reporting structure. 

Since RCOI and due diligence collapse into one in practice, and the ephemeral distinction between 

the two is the central distinction between the Form SD and the CMR, one form with one due 

diligence requirement is all that is necessary. The redundant requirement that companies describe 

their mineral-origin inquiry with specificity should likewise be eliminated. 

c. The Nature of Compliance and the Importance of Institutional Initiatives 

Two overarching observations about the nature of compliance stand out from reading the 

reports: almost all companies conducted due diligence into their supply chains in a similar fashion, 

and the way in which companies conducted due diligence depended heavily on nascent 

institutional initiatives. 

The Conflict Free Sourcing Initiative ("CFSI"), an organization of industry members 

concerned about conflict minerals, put together a survey that companies could use to poll their 

suppliers about, among other things, whether the supplier's goods contain conflict minerals, from 

where such minerals originate, and in what facilities they are processed. CFSI also administers the 

Conflict-Free Smelter Program ("CFSP"), which coordinates third-party audits of smelters and 

refiners and publicly shares its results on its website. Smelters and refiners successfully completing 

an audit receive a conflict-free designation from CFSP, which signifies an auditor determination 

that none of the minerals the facility processes originate from militarized mines in the Congo. So 

far, CFSP has designated 205 smelters and refiners as conflict free. 

The core of almost every company's due diligence was sending out the CFSI survey to its 

suppliers and, if those suppliers identified smelters and refiners in their supply chain, reporting on 

whether tbosc facilities were listed as conflict free by CFSP. Ninety-two percent of companies 

reported using the CFSI survey and about 70% reported checking to sec if processing facilities in 

their supply chain showed up on the CFSP's conflict-free list. 18 

The emergence of CFSI shows the efficiency gains from centralization and coordination. 

It makes much more sense for CFSI, an organization with expertise in conflict mineral supply 

18 

While 134 companies reported checking the conflict status of their processing facilities against the CFSP list 

of conflict-free smelters and refiners, only 50 actually disclosed the names of their facilities-less than 40%. 

6 
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chains, to prepare supplier surveys and coordinate audits, which trace minerals back to their source, 

than to have individual companies attempt to do so. 

CFSI's central role also illuminates the importance of processing facilities as the node 

where top-down and bottom-up diligence converge. All companies need to do is trace their 

minerals back to the smelters and refiners, which they can do with the CFSI survey (and perhaps 

additional follow-up measures). They can then consult the CFSP website to see whether the 

facilities they have identified are conflict free. Since conflict minerals cannot enter the supply 

chain after processing, once companies identify that their products are only incorporating materials 

from conflict-free smelters or refiners, they can declare their goods to be conflict free as well. 

Policy Recommendation-A core problem with the current state of affairs is that the 

diligence practices the regulations envisioned map poorly onto the practices that companies 

actually adopted. This is part ofthe reason why, as discussed below, corporate reliance on CFSI's 

efforts failed to result in the sought-after transparency. Since the compliance process that has 

organically evolved is better than the one the SEC intended, it should be embraced-that is, the 

Conflict Minerals Rule should be changed to better fit the diligence methodology that centers 

around CFSI supplier surveys and CFSP audits. Reliance on these mechanisms should be explicitly 

endorsed as satisfactory. Moreover, to generate greater transparency through this process, the Rule 

should be changed to require disclosure of (i) a company's survey response rate (and whether 

follow-up measures were taken), (ii) whether a company's smelters and refiners arc listed as 

conflict free by CFSP, and (iii) the mine of origin of a company's conflict minerals and the group 

that controls it (this information should be available for CFSP-approvcd processing facilities). 

Finally, if company obligations were confined to the relatively simple tasks of conducting a 

supplier survey and checking CFSP's conflict-free list, a third-party audit of a company's 

diligence-a requirement for large companies starting next year-would be unnecessary. 19 These 

are not the sort of complex endeavors for which an auditor's involvement is necessary. A diligence 

process that explicitly leans on institutional rather than independent efforts would increase 

transparency but not costs. 

d. The Big Picture from the Empirical Findings 

Section 1502 adopts disclosure as the tool to combat humanitarian atrocities in the Congo. 20 

The path from transparency to decreased violence, however, has many steps in between. The 

legislation and the implementing rules arc designed to elicit supply-chain revelations that inspire 

shareholder and consumer blowback against companies sourcing from militarized mines; those 

experiencing (or anticipating) such reprisal are expected to change their practices. The hope is that 

as companies stop sourcing from militarized mines, the military groups controlling them weaken 

and lose the funding that fuels their humanitarian abuses. 

The entire chain of events depends on the ability of concerned individuals to discern which 

companies are "conflict free" and which are indirectly supporting human-rights violations through 

19 See Fonn SD, supra note 8, at Item l.Ol(c)(l)(ii) (containing the audit requirement); id. at Instruction 2 to 

Item I (inserting a two-year delay in implementation). 20 See Dodd-Frank Wall Street Refonn and Consumer Protection Act, Pub. L. No. lll-203, § !502(a), 124 Stat. 

1376, 2213 (2010) (expressing Congress's concern about human-rights violations in the Congo). 

7 
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99780.046

their activities. But this cannot be done through inspection of the conflict mineral filings. The 

submissions lack the type of specifics regarding conflict mineral supply chains and the extent to 

which companies are scrutinizing and adjusting them that arc necessary for the market forces that 

the Rule envisions to take hold. 

III. Conclusion 

My empirical findings are, for the most part, dispiriting, but they also reveal that the effort 

to drive change in the Congo through transparency is not hopeless. Surgical changes to wording 

or interpretive guidance on the nature of the regulatory obligations could vastly improve the 

content of company reports, and the rules could be streamlined to render company disclosures 

more readable and comparable. Even more promising, in their filings companies leveraged 

institutional efforts to create a diligence process that has the potential to deliver supply-chain 

transparency without raising compliance costs. If the regulations were reoriented around this 

approach, then the disclosures might prove revealing enough to set in motion the chain of events 

on which Section 1502 depends for its success. 

I am happy to answer any questions about my findings and my policy prescriptions. Both 

arc also described in greater detail in my article, The Conflict Minerals Experiment, attached 

hereto. 

Thank you again for giving me the opportunity to present here today. 

8 
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Appendix A 

Jeff Schwartz 

The Conflict Minerals Experiment 

6 HARVARD BUSINESS LAW REVIEW (forthcoming 2015) 

(Draft as of June 30, 2015) 

(This Article may not be copied without the written permission of the Journal.) 
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THE CONFLICT MINERALS EXPERIMENT 

Jeff Schwartz • 

In Section 1502 of Dodd-Frank, Congress instructed the SEC to draft rules 

that would require public companies to report annually on whether their products 

contain certain Congolese minerals. This unprecedented legislation and the SEC 

rulemaking that followed have inspired an impassioned and ongoing debate 

between those who view these efforts as a costly misstep and those who view them 

as a measured response to human-rights abuses committed by the armed groups 

that control many mines in the Democratic Republic of the Congo. 

This Article for the first time brings empirical evidence to bear on this 

controversy. I present data on the inaugural disclosures that companies submitted 

to the SEC Based on a quantitative and qualitative analysis of these submissions, I 

argue that Congress's hope of supply-chain transparency goes unfolfilled, but 

amendments to the rules could yield useful information without increasing 

compliance costs. The SEC filings expose key loopholes in the regulatory structure 

and illustrate the importance of fledgling institutional initiatives that trace and 

verifY corporate supply chains. This Article's proposal would eliminate the 

loopholes and refocus the transparency mandate on disclosure of the supply-chain 

information that has come to exist thanks to these institutional efforts. 

TABLE OF CONTENTS 

INTRODUCTION .......................................................................................................... 2 

I. LAWMAKING, LITIGATION, AND CONTROVERSY ................................................... 6 

A. The Conflict-Minerals Legislation and Implementing Regulations ................ 6 

B. The Conflict-Minerals Rules in Court ........................................................... 12 

C. The Conflict-Minerals Rules and Policy Controversy ................................... l4 

II. EMPIRICAL ANALYSIS OF THE SEC FILINGS ...................................................... 17 

A. The Scope of the Compliance Effort.. ........................................................... 17 

B. The Content of the Compliance Effort .......................................................... 21 

l. The Content of Form SDs ........................................................................... 21 

2. The Content of the Conflict Minerals Reports ............................................ 22 

C. What the SEC Filings Reveal About the Conflict-Minerals Rules ................ 31 

* Professor of Law, University of Utah, S.J. Quinney College of Law. I wish to thank 

Shima Baradaran, Tencille Brown, John Cioffi, Eric Chaffee, Jorge Contreras, Lincoln 

Davies, Benjamin Graham, Andy Hessick, Carissa Hessick, Amelia Rinehart, Clifford 

Rosky, and Cynthia Williams for their valuable comments. I also received helpful 

comments at the Southern California Law and Social Science Conference at the University 

of Southern California, and the National Business Law Scholars Conference at Seton Hall. 

Claymore Hardman provided excellent research assistance. 

1:56 
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III. WHY THE CONFLICT -MINERALS FILINGS PROVED UNILLUMINATING ............. 34 

A. The Difficulty ofNaming and Shaming Conflict-Mineral Users .................. 35 

B. Shortcomings in the Implementation of Naming and Shaming ..................... 36 

C. Reluctant Compliance .................................................................................... 39 

IV. SUPPLY -CHAIN TRANSPARENCY THROUGH REFORM ..................................... .41 

A. Maintain the Status Quo? .............................................................................. 41 

B. Repeal the Conflict-Minerals Rules? ............................................................ .44 

C. Reforming the Conflict-Minerals Rules ....................................................... .46 

1. Getting the Incentives Right ...................................................................... .46 

2. Disclose or Explain ..................................................................................... 46 

3. Concerns with the Disclose-or-Explain Template ...................................... 52 

D. Implications for other Supply Chain Transparency Efforts ........................... 55 

CONCLUSION ........................................................................................................... 56 

INTRODUCTION 

The Dodd-Frank Wall Street Reform and Consumer Protection Act 

("Dodd-Frank") was a response to the 2008 financial crisis, but one of its most 

controversial provisions had nothing to do with the economic collapse. 1 In Section 

1502, Congress instructed the Securities and Exchange Commission (the "SEC") 

to draft regulations requiring companies to disclose annually whether certain 

minerals for their products were originally obtained from mines controlled by 

armed groups in the Congo region of Africa.2 This effort to bring supply-chain 

transparency to so-called conflict minerals (i.e., tin, tungsten, tantalum, and gold) 

has been ferociously criticized by business groups and staunchly defended by 

human-rights advocates. 3 

Much of the debate, though, has been based on conjecture. The heated 

back-and-forth that has filled op-ed pages and scholarly journals largely took place 

before the statute had been given any time to operate.4 Both those who argued that 

the legislation was a costly mistake and those who defended it as a judicious 

counterweight to humanitarian atrocities linked to armed groups in the Congo 

region implicitly or explicitly staked their claims on conceptions of what would be 

contained in the SEC-mandated filings. 5 Neither side, however, had the benefit of 

actual compliance data to support its position. 

1 Pub. L. No. 111-203, 124 Stat. 1376 (2010) (codified as amended in scattered 

sections of the U.S. Code). 2 Jd. § 1502,124 Stat. at2213 (codified at 15 U.S.C. § 78m(p) (2012)). 3 See infra Part I. C. 4 See, e.g .. Karen E. Woody, C011flict Minerals Legislation: The SEC's New Role as 

Diplomatic and Humanitarian Watchdog, 81 FORDHAM L. REV. 1315 (2012); David 

Aronson, How Congress Devastated Congo, N.Y. TIMES (Aug. 7, 20!1), http://www. 

nytimes.com/20 11/08/08/opinionlhow-congress-devastated-congo.html. 5 One thing that is not controversial is the direness of the situation in the Democratic 

Republic of the Congo. For an overview of the humanitarian crisis, see Alexandrea Nelson, 
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Now, more than four years after the bill was signed into law, the SEC 

rulemaking is complete and companies have submitted their first regulatory filings: 

those pertaining to their use of conflict minerals during the 2013 calendar year. 

This Article closely analyzes these disclosures, and, in so doing, brings empirical 

evidence to bear on the conflict-minerals controversy. I present data on the scope 

and nature of compliance based on a quantitative review of the over 1,300 conflictminerals filings and a qualitative review of each filing submitted by a company 

included in the S&P 500 Index (over 200 of these companies, which arc among the 

largest in the U.S., submitted filings). 6 

The overall picture is not pretty. I argue that the filings do not contain 

sufficient information about conflict-mineral supply chains for the legislation to 

work as intended, and that this is the result of shortcomings in the original law, in 

the SEC rules that followed, and in the corporate compliance effort. While the 

evidence largely supports the critics, I contend that the filings also contain flickers 

of hope and suggest a set of reforms that would lead to more transparency without 

additional expense. 

The data suggests that both the costs and benefits of the rules were grossly 

exaggerated by those debating their merits. Costs were likely much lower than 

estimated because far fewer companies actually filed reports than estimated and 

many filers complied in a largely superficial manner suggestive of minimal effort.7 

Benefits likewise appear muted. The conflict-minerals rules borrow from 

the human-rights world the regulatory strategy of "naming and shaming," which, 

like the securities law trope, "sunlight is the best disinfectant," is the concept that 

exposure of reprehensible conduct eliminates it. 8 In this case, the rules are 

Note, The Materiality of Morality: Conflict Minerals, 2014 UTAH L. REV. 219,221-223. 6 For a description of the S&P 500, see S&P 500, S&P Dow JONES INDICES, 

http://us.spindices.com/indices/equity/sp-500 (last visited Dec. 16, 2014). The data on the 

scope of compliance includes, among other things, information on how many companies 

made filings pursuant to the rule and the size and type of companies that filed reports. See 

infra Part II.A. The data on the nature of compliance includes information on the steps 

companies took to meet their obligations. See infra Part II. B. 7 See infra Part II.B. 8 See Woody, supra note 4, at 1344. This is not the first time corporations have been 

the subject of naming-and-shaming efforts. See generally David A. Skeel, Jr., Shaming in 

Corporate Law, 149 U. PA. L. REV. 1811 (2001). For a more general discussion of naming 

and shaming in the human-rights context, see Oona Hathaway & Scott J. Shapiro, 

Outcasting: Enforcement in Domestic and International Law, 121 YALE L. J. 252, 309 & n. 

178 (2011); Suzanne Katzenstein, Reverse-Rhetorical Entrapment: Naming and Shaming 

as a Two-Way Street, 46 VAND. J. TRANSNAT'L L. 1079, 1082-86 (2013). The idea of using 

the securities laws to address social goals was given its most comprehensive and elegant 

defense in Cynthia A. Williams, The Securities and Exchange Commission and Corporate 

Social Transparency, 112 HARV. L. REV. 1197 (1999). The conflict-minerals provision is 

one of several social disclosure laws in Dodd-Frank. The statute also called for disclosures 

regarding mine safety, extractive industry practices, and pay disparities. See Jeff Schwartz, 

The Twilight of Equity Liquidity, 34 CARDOZO L. REV. 531, 584-85 & n. 319 (2012). 
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designed to inspire shareholder and consumer blowback against companies 

sourcing from militarized mines; those experiencing this reprisal are then expected 

to change their practices.9 This logic, while appealing on its face, depends on the 

ability of concerned individuals to discern which companies are "conflict free" and 

which are indirectly supporting human-rights violations through their activities. 

But this cannot be done through inspection of the first-year filings. The vast 

majority of companies reached the same conclusion (that they have not been able 

to determine the source of their minerals) and conducted their diligence in nearly 

the same way (the centerpiece of nearly every effort was a simple supplier survey). 

This is not the stuff of sell orders and picket signs. 

The conflict-minerals rules resemble an elaborate firework that falls 

quietly to the ground rather than yielding an eye-catching display. This is 

problematic in and of itself, but also serves as a broader caution. Supply-chain 

transparency is a global concern. Other countries are looking into similar rules for 

conflict minerals and "name and shame" is seen as a way to address other ills in 

the su~ply chain, including deplorable working conditions, slavery, and child 

Jabor. 1 The failure of the conflict-minerals rules suggests that in their current form 

they should not serve as the template for future efforts. 

An analysis of the filings provides insight into what and where things went 

wrong. Although it is tempting to lay blame for the underwhelming reports solely 

on botched rulemaking or perfunctory compliance, culpability appears to extend to 

all involved. The overarching problem with the reports is that reading them does 

not provide insight into which companies ought to be praised and which 

condemned. One probable explanation is that naming and shaming conflict-mineral 

users is inherently difficult. This form of regulation works best when there are 

clear wrongdoers; not when, as is the case here, singling out the offenders is tricky 

and dependent on cooperation of multiple parties, including the targets of the rules. 

The latter invites opacity. 

There were also problems with how this regulatory approach was 

implemented. Rather than recognize and respond to the challenges of applying 

naming and shaming in this space, regulators created a prolix rule structure that 

maps poorly onto the name-and-shame goal. For example, information about 

where a company's conflict minerals are processed into commercially usable forms 

9 See Dodd-Frank, Pub. L. No. I 11-203, § 1502(a), 124 Stat. 1376, 2213 (2010) 

(expressing Congress's concern about human-rights violations in the Congo); Woody, 

supra note 4, at 1344. 10 See DALE NEEF, THE SUPPLY CHAIN IMPERATIVE: HOW TO ENSURE ETHICAL 

BEHAVIOR IN YOUR GLOBAL SUPPLIERS 26-27 (2004); Jamie D. Prenkert & Scott J. 

Shackelford, Business, Human Rights, and the Promise of Polycentricity, 47 VAND. J. 

TRANSNAT'L L. 451, 483-84 (2014); Steven Nakasone, Name and Shame is New Supply 

Chain Game, RETAILING TODAY (Jan. 5, 2012), http://www.retailingtoday.eornlartiele/ 

name-and-shame-new-supply-ehain-game. Several states are also considering, or have 

already approved, conflict-minerals regulation. See Prenkert & Shackelford, supra note 10, 

at 482-83; Nakasone, supra note 10. 
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is central to discerning whether it is sourcing from militarized mines. But many 

companies reasonably interpreted SEC language to require that they report such 

data only when they could precisely identity the processing facilities linked to their 

individual products; companies plausibly claimed that they could not do so and 

chose not to reveal this information. Drafting oversights like this greatly 

contributed to the flimsy reports. 

Finally, companies forced to comply with the rnles showed little sympathy 

for their goals. Instead of responding in a manner responsive to the rules' intent of 

bringing supply-chain transparency to conflict minerals, they usually chose to read 

the rules literally and narrowly, seizing on opportunities-like the one just 

mentioned regarding processing facilities-to provide as little information as 

possible. Worse still, many corporate filers simply ignored clear requirements. The 

reports ultimately reveal shallow, almost cynical, compliance with poorly crafted 

rules built on a regulatory paradigm better suited to simpler contexts. 

While all of this provides fodder for those who have sought the rules' 

repeal, 11 I argue that it is too early to abandon the experiment. Though companies 

claimed ignorance as to many things, a large number also claimed to have 

identified-·even if they chose not to reveal-the facilities used to process the 

conflict minerals in their supply chainY In addition, third-party audits coordinated 

through a nongovernmental institutional framework have certified a number of 

processing facilities as conflict-free, and these audits and certifications are 

ongoing. 13 

That these facilities can be identified and then sorted based on their 

conflict status makes them a bright spot in otherwise murky supply chains. Based 

on this information, companies can be named and shamed according to whether 

they use conflict-free processing facilities. I argue, therefore, that the conflictminerals rules should be reoriented around such information. Companies should be 

clearly required to identity and provide the conflict status of the processing 

ll See, e.g., CHRIS N. BAYER, DODD-FRANK SECTION 1502: POST-FILING SURVEY 

2014, at 40 (2014), available at http://www.payson.tulane.edu/sites/defau1tlfiles/content 

/fi!es/TulanePaysonS 1502PostFilingSurvey.pdf (describing results of a survey of affected 

companies in which the most frequent recommendation by those surveyed was repeal); Ben 

Dipietro, investor Groups Back Conflict Minerals Law, WALL ST. J. (May 31, 2013, 3:58 

PM), http:/ !blogs. wsj.com/riskandcompliance/20 13/05/31 /investor-groups-back-conflictminerals-law (describing business groups seeking repeal); Benjamin Goad, Wall Street 

Reform Rule Said to Increase Violence in Congo, THE HILL (May 21, 2013, 7:58 PM), 

http:/ /theh ill. com/regulation/business/3 0 I 07 5 -wall-street-ref onn-rule-said-to-haveincreased-congolese-violence (quoting Congressman Mick Mulvaney calling the rules 

"absurd" and arguing for repeal); John Kester, SEC Should Not Handle Conflict Minerals 

Reports: Commissioner, WALL ST. J. (Oct. 17, 2014, 4:15 PM), http://blogs.wsj.com/cfo/ 

2014/1 Oil 7 /sec-should-not-handle-conflict-minerals-reports-commissioner (quoting SEC 

Commissioner Daniel Gallagher Jr. as arguing for repeal). 12 See infra text accompanying notes 156, 169-173. 13 See infra text accompanying notes 48-52. 
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facilities in their supply chains. If they reveal facilities that are not conflict free, 

they should be free to explain why. The marketplace can then judge whether such 

justifications are reasonable or consist of hollow generalities. I also propose a set 

of supplemental changes that would eliminate redundancies and loopholes in the 

current rules and render the entire framework more cohesive. This proposal 

maintains Dodd-Frank's disclosure-based reform model, but re-engineers it to 

more effectively further the statute's humanitarian goals without increasing 

compliance costs. 

Part I of this Article describes the conflict-minerals legislation, the SEC 

rules implementing it, and the controversy surrounding these congressional and 

regulatory efforts. Part II then provides data on the nature and scope of corporate 

compliance with the newly formed regulatory regime. In this Part, I also analyze 

the data and argue it suggests that the conflict-minerals rules have so far turned out 

to be far less costly than critics feared, but also far less illuminating than 

supporters hoped. Next, Part III examines potential explanations for why the rules 

have proven unremarkable. I argue that the lackluster results stem from poorly 

conceived legislation and regulation and from halfhearted compliance therewith. 

Finally, in Part IV, I suggest a set of reform proposals based on the idea that 

greater transparency surrounding the processing facilities in corporate supply 

chains would make the filings under the conflict-minerals rules much more useful. 

I. LAWMAKING, LITIGATION, AND CONTROVERSY 

A. The Conflict-Minerals Legislation and Implementing Regulations 

Section 1502 of Dodd-Frank, which sets forth the legislative framework 

for the conflict-minerals rules, is a dense provision with an awkward structure. The 

core of the legislation consists of three parts: an introduction followed by two 

subsections. 14 The introduction instructs the SEC to write regulations mandating 

that companies annually disclose whether conflict minerals that are necessary to 

their products originate from the Democratic Republic of the Congo (the "DRC") 

or an adjoining country. Where this is the case, the SEC is to require that 

companies submit a report pertaining to their use of such minerals. 15 

The subsections focus on the contents of this report. The first tells the SEC 

to require that companies include a description of the due-diligence measures they 

have undertaken to determine "the source and chain of custody" of the conflict 

minerals in their supply chain. 16 The SEC is also to mandate that these reports be 

independently audited. 17 The second subsection then goes on to list other things 

14 See 15 U.S.C. § 78m(p)(l)(A)(i)-(ii) (2012). 15 See id. § 78m(p)(l)(A). A company's products includes both things it manufactures 

itself and things that it contracts to manufacture. /d. § 78m (p )(1 )(A)(ii). 16 Id. § 78m(p)(l)(A)(i). 17 /d. 
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Congress wants to see. The SEC is instructed to call on companies to name their 

report's auditor and to describe (i) all of their products that are not conflict free, 18 

(ii) "the facilities used to process the conflict minerals" in their products, (iii) "the 

country of origin" of such conflict minerals, and (iv) "the efforts to determine the 

mine or location of origin" of such conflict minerals "with the greatest possible 

specificity." 19 In addition to SEC reporting, the legislation also requires that this 

information be made available on the disclosing corporation's website.20 

The key phrase, "conflict minerals," includes tantalum, tin, tungsten, and 

gold.21 These materials are ubiquitous in our everyday lives. They are key 

components in electronics, including smartphones and computers, but can also be 

found in everything from household tools to jet engines.22 

Though the law's drafting is somewhat muddled, Congress's ambition 

with respect to these commercial building blocks is clear. Basically, it wants 

companies, first, to figure out if their products contain conflict minerals and, 

second, to determine where those minerals come from. It also wants companies to 

report how they go about this exercise, and for those companies potentially 

sourcing conflict minerals from militarized mines to list the products in which such 

minerals are contained. The goal here seems to be a "bad actors" list of companies 

and their products that would provide the impetus for socially minded shareholders 

and customers to put pressure on companies to change their sourcing practices. 

The hope would be that this pressure, in tum, inspires companies to stop doing 

business with militia-controlled mines, which would lessen the funding available 

18 A product is not conflict free if it contains or may contain minerals sourced from 

mines controlled by armed groups in the Congo region. See id. § 78m(p)(I)(A)(ii). 19 15 U.S.C. § 78m(p)(I)(A)(ii). 20 15 U.S.C. § 78m(p)(l)(E). 21 Dodd-Frank, Pub. L. No. 111-203, § 1502(e)(4)(A)-(B), 124 Stat. 2218 (2010). 

Tantalum, tin, and tungsten are not specifically listed in the legislation. Rather it refers to 

the mineral ores from which they are extracted (coltan, cassiterite, and wolframite, 

respectively), as well as derivatives thereof. See id.; Conflict Minerals, 75 Fed. Reg. 

80,948, 80,950 (proposed Dec. 23, 2010) (to be codified at 17 C.F.R. pts. 229, 249b). 

Though tantalum, tin, tungsten, and gold are commonly referred to as "conflict minerals" in 

commerce and in the debate, they are technically metals. See DEP'T OF COMMERCE, 

DEPARTMENT OF COMMERCE REPORTING REQUIREMENTS UNDER§ 1502(DX3)(C) OF THE 

DODD FRANK ACT WORLD-WIDE CONFLICT MINERAL PROCESSING FACILITIES 2 (2013), 

http://www.ita.doc.gov/td/forestprod/DOC-ConflictMineralReport.pdf [hereinafter 

COMMERCE REPORT); ENOUGH PROJECT & GRASSROOTS RECONCILIATION GRP., A 

COMPREHENSIVE APPROACH TO CONGO'S CONFLICT MINERALS 3 (2009), available at 

http://www.enoughproject.org/files/Comprehcnsive-Approach.pdf [hereinafter A 

COMPREHENSIVE APPROACH]. Despite the "conflict" label attached to these materials, 

relatively small percentages come from the Congo: l 5 to 20 percent of tantalum, 6 to 8 

percent of tin, 2 to 4 percent of tungsten, and less than I percent of gold come from the 

region. A COMPREHENSIVE APPROACH, supra note 21, at I 5. 22 See Conflict Minerals, 75 Fed. Reg. at 80,950. 
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to armed groups and thereby temper the violence in the region. 23 Such an approach 

is commonly referred to in the human-rights arena as "naming and shaming"-bad 

actors are brought to light in the hopes that they will change their behavior to avoid 

public condcmnation. 24 

This congressional intent is reflected in the SEC's regulations, which the 

agency finalized on August 22, 2012.25 These rules add a great deal of nuance to 

the legislation's somewhat underdeveloped foundation. In fact, while Congress 

looks to have sacrificed clarity for brevity, the SEC made the opposite mistake and 

created a Byzantine and, at times, circular rule structure. 

Just as the legislation instructs, under the SEC rules the first step is for 

companies to determine whether conflict minerals are necessary to their products.26 

If not, companies need not file anything?7 If a company does make use of conflict 

minerals, however, it is required to conduct a so-called "reasonable country of 

origin inquiry" (an "RCOI'') with regard to the conflict minerals in its products.28 

If the RCOI does not reveal the presence of conflict minerals from the Congo 

region, the company need only file a Form SD, which must "briefly" describe the 

company's RCOI process and its conclusion. 29 The company also needs to post this 

information on its website. 30 

If the RCOI reveals that the company is sourcing conflict minerals from 

the Congo region or gives the company reason to believe that this is the case, then 

the company is required to conduct due diligence "on the source and chain of 

custody" of such minerals. 31 If, based on its due diligence, the company determines 

that its minerals are not actually from the Congo region, then it must briefly 

23 Much in the same vein, one of the legislation's authors, Dick Durbin, has argued 

that the "transparency" elicited through the rules "will allow consumers and investors to 

know which companies source materials more responsibly in DRC and will hopefully 

persuade the industry to finally create clean supply chains out of Congo." Press Release, 

Senator Dick Durbin, Statement on US District Court Decision Regarding Conflict 

Minerals (July 7, 2013), available at http://www.durbin.senate.gov/newsroom/pressreleases/durbin-statement-on-us-district-court-decision-regarding-conflict-minerals. 24 See Katzenstein, supra note 8, at 1082-86. 25 Conflict Minerals, 77 Fed. Reg. 56,274, 56,276 (Sept. 12, 2012) (codified at 17 

C.F.R. pts. 204.13p-1 & 249b.400). 26 See Form SD, OMB No.: 3235-0697, at Item l.Ol(a), available at http://www.sec. 

gov/about/forms/formsd.pdf [hereinafter Form SD]. 27 Id at Item l.OI(a)-(b). 28 Id at Item I.OI(a). 29 Id. at Item I.Ol(b). The SEC also set up a parallel process for companies that are 

using conflict minerals derived from recycled or scrap sources. It is not necessary to fully 

describe this added layer of complexity. Most importantly, products that solely contain 

minerals from recycled or scrap sources are considered conflict free. Id. at Item l.Ol(c)(4). 30 Id. at Item I.Ol(b). 31 Form SD, supra note 26, at Item l.OI(c). 
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describe its due-diligence efforts, its RCOI, and its conclusion both on a Form SD 

and its website. 32 

The SEC declined to give guidance on what specifically constitutes an 

RCOI. 33 It said only that such an inquiry need be in good faith. 34 The agency did 

say, however, with respect to due diligence, that such efforts must be audited35 and 

conform to "a nationally or internationally recognized due-diligence framework. "36 

Currently, the only such framework in existence is the OECD's Due 

Diligence Guidance for Responsible Supply Chains of Minerals from ConflictAffected and High Risk Areas (the "OECD Guidance"). 37 Though the document is 

wordy and lengthy (over 100 pages including appendices), the guidance it offers 

boils down to a five-step due-diligence process. 38 The first is the most important, 

and has a number of subparts, while the remainder are more straightforward. 

Step one instructs companies to "establish strong company management 

systems."39 According to the OECD Guidance, this includes adopting a conflictminerals policy and making it available to suppliers and the general public, setting 

up an internal conflict-minerals diligence team, establishing a system for mapping 

the conflict-minerals supply chain, incorporating a supply-chain policy in 

agreements with suppliers, and establishing a grievance mechanism for those 

wishing to report sourcing violations.40 

The second step is to "identify and assess risk in the supply chain."41 This 

means "assessing the due diligence practices" of the smelters and refiners of 

conflict minerals in the corporate supply chain by comparing their practices against 

32 See id. at Item 1.01 (c). 33 Conflict Minerals, 77 Fed. Reg. 56,274, 56,311-12 (Sept. 12, 2012) (codified at 17 

C.F .R. pts. 204.13p-l & 249b.400). 34 Form SD, supra note 26, at Item l.Ol(a). 35 Jd. at Item l.Ol(c)(l)(ii). 36 Id. at Item l.Ol(c). 37 Conflict Minerals, 77 Fed. Reg. at 56,281 n.55; 0RG. FOR ECON. COOPERATION & 

DEV., OECD DUE DILIGENCE GUIDANCE FOR RESPONSIBLE SUPPLY CHAINS OF MINERALS 

FROM CONFLICT-AFFECTED AND HIGH-RISK AREAS (2nd ed. 2013), available at http:// 

www.oecd.org/eorporate/mne/GuidanceEdition2.pdf [hereinafter OECD GUIDANCE]. The 

OECD drafted this document over several years in collaboration with eleven African 

nations with the goal of"help[ingJ companies respect human rights and avoid contributing 

to conflict through their mineral sourcing practices." I d. at 3. States are not legally bound to 

comply. !d. at 4. For additional background, see LEVIN ET AL., MINERAL SUPPLY CHAIN 

DUE DILIGENCE AUDITS AND RISK ASSESSMENTS IN THE GREAT LAKES REGION 8-9 (20 13 ), 

available at http://www.srz.com/files/upload/Conflict Minerals Resource Center/OECD 

Mineral_Supply_Chain-Due_Diligence Audits and Risk Asse~ments in-the Great - Lakes_Region.pdf. - - - - - - - --

38 OECD GUIDANCE, supra note 37, at 17-19. 39 Jd. at 17. 

4o Id. 41 Jd. at 18. 
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those specified for such entities in the OECD Guidance.42 Smelters and refiners are 

the key processing facilities for conflict minerals. It is at these locations where the 

mineral ores are transformed into commercially valuable forms. 43 

Third, companies are to "design and implement a strategy to respond to 

identified risks."44 This includes reporting the findings of the risk assessment in 

step two to senior management, as well as implementing a plan to mitigate supplychain risks.45 A risk-mitigation plan would outline a procedure for dealing with 

suppliers or others in their supply chain that have shoddy supply-chain diligence or 

are suspected of sourcing from militarized mines.46 Companies can respond to 

these supply-chain risks by, for example, temporarily suspending trade until the 

issues are resolved or ending their relationship with the implicated party.47 

Fourth, companies must "carry out an independent third-party audit" of the 

smelters and refiners in their supply chain. 48 While this seems like a lot to ask of 

individual companies, the OECD also advises that the audits can be centralized and 

coordinated through an institutional mechanism.49 The key institutional mechanism 

for doing so is the Conflict-Free Smelter Program ("CFSP"), which is an industryled effort that coordinates third-party audits of smelters and refiners and publicly 

shares its results on its website. 50 It is the key contribution of the Conflict-Free 

Sourcing Initiative ("CFSI"), an organization of industry members concerned 

about conflict minerals, which through this and other efforts described below has 

had a major impact on the nature of conflict-mineral compliance. 5

1 The OECD has 

blessed CFSI audits as an alternative to individual efforts.52 Fifth and finally, as 

called for by the rules themselves, the OECD Guidance instructs companies to 

publicly report on their supply-chain due diligence. 5

3 

42 !d. at 42. 43 GOV'T ACCOUNTABILITY OFFICE, SEC CONFLICT MINERALS RULE: INFORMATION 

ON RESPONSIBLE SOURCING AND COMPANIES AFFECTED I (20 13), available at http://www. 

gao.gov/assets/660/655972.pdf [hereinafter GAO REPORT]. 44 OECD GUIDANCE, supra note 3 7, at 18. 45 Id. at 18. 46 See id. 47 Id. 48 !d. at 19,47. 49 See id. at 50-51. 50 See Conjlict-P'ree Smelter Program, CONFLICT-FREE SOURCING INITIATIVE, 

http://www.conflictfreesourcing.org/conflict-free-smelter-program/ (last visited Nov. II, 

2014); 0RG. FOR ECON. COOPERATION & DEY., DOWNSTREAM IMPLEMENTATION OF THE 

OECD DUE DILIGENCE GUIDANCE FOR RESPONSIBLE SUPPLY CHAINS OF MINERALS FROM 

CONFLICT-AFFECTED AND HIGH-RISK AREAS 46 (2013), available at http://www.oecd.org/ 

corporate/mne/DDguidanceTTTpilotJan2013.pdf [hereinafter OECD STUDY]. For an 

overview ofCFSI audits, see LEVIN ET AL., supra note 37, at 43-48 tbl.5. 51 See About the Conflict-Free Sourcing Initiative, CONFLICT-FREE SOURCING 

INITIATIVE, http://www.conflictfreesourcing.org/about/ (last visited Nov. 23, 2014). 52 See OECD STUDY, supra note 50, at 47. 53 OECD GUIDANCE, supra note 37, at 19. 
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After compliance with all of the OECD steps, if companies are unable to 

rule out the possibility that their conflict minerals arc from the Congo region, they 

must file a "Conflict Minerals Report" that includes a laundry list of itcms. 54 A 

company's report must describe its due diligence and include an independent 

auditor's certification thereof. 55 The auditor is to confirm (i) that the company 

inquiry conformed in all material respects to a "recognized due diligence 

framework" (meaning the OECD Guidance as it is the only one), and (ii) that the 

diligence that the company actually conducted matches what it described in its 

Conflict Minerals Report. 56 

Aside from a description of audited due diligence, the rules require, in 

language quite close to that of Section 1502 itself, that companies include a list of 

products "that have not been found to be 'DRC conflict free. "'57 A product would 

fall into this category if a company could not determine that it did not contain 

conflict minerals from militarized mines. 58 This awkward double negative means 

that products must be listed, unless a company affirmatively determines that they 

are conflict free. The SEC did not prescribe that companies note the brand names 

or model numbers of their products; rather, it gave companies the flexibility to 

describe their goods however they deem appropriate. 5

9 

The overall list, however, must be labeled as that of products "having not 

been found to be 'DRC conflict free. "'60 In addition, companies arc required to 

note "the facilities used to process the necessary conflict minerals in those 

products, the country of origin of the necessary conflict minerals in those products, 

54 See Form SD, supra note 26, at Item l.Ol(c). 55 Jd. at l.Ol(c)(l). 56 !d. at Item l.Ol(c)(l)(ii)(A). 57 Id. at Item l.Ol(c)(2). 58 See id. at Item l.Ol(c)(2), (d)(4). 59 See Conflict Minerals, 77 Fed. Reg. 56,274, 56,317-18, 56,323 (Sept. 12, 

2012) (codified at 17 C.F.R. pts. 204.13p-l & 249b.400). 60 Even though the labeling of company products as conflict free or not would 

seemingly be the centerpiece of the rules, it is only explicitly included in the instructions to 

Form SD. Rather than specifY any particular label, the body of the rules only requires a 

description of products "that have not been found to be 'DRC conflict free."' Fonn SD, 

supra note 26, at Item l.Ol(c)(2). The instructions pertaining to a temporary safe-harbor 

discussed infra text accompanying notes 62-64, however, explain that, after a grace period 

during which the rules allow companies to claim "conflict undeterminable" status, "a 

registrant with products manufactured or contracted to be manufactured that are 'DRC 

conflict undetenninable,' must provide a description of those products as having not been 

found to be 'DRC conflict free[.]'" Form SD, supra note 26, at Instruction 2 to Item 1. That 

the requirement is only included with a discussion of the safe harbor implies that it relies 

on a more direct statement elsewhere, but one does not exist. It is also only by implication 

that companies with products that are not conflict free are required to label them in the 

above manner even during the grace period. 
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and the efforts to detennine the mine or location of origin with the greatest 

possible specificity."61 

Finally, the rules include a ramp-up period. For the first four years for 

smaller companies, and the first two years for others, those companies that cannot 

reach a firm conclusion as to the source of their conflict minerals need not list their 

products as "having not been found to be 'DRC conflict free. "'62 Rather they can 

list them as "DRC conflict undeterminable," and specify the efforts they are 

currently undertaking or plan to undertake to "mitigate the risk that its necessary 

conflict minerals benefit armed groups."63 In addition, during the ramp-up period, 

those companies taking advantage of this category need not have their duediligence efforts audited. 64 

Working through these rules gives one the feeling of a character in an 

M.C. Escher drawing. 65 There are numerous orthogonal paths through the multilayered structure, each with its own unique feature. Despite the complexity, 

however, the SEC remained true to Congress's instructions. At their core, the rules 

basically require that companies conduct diligence into their conflict-mineral 

supply chain and report not only on the nature of their diligence but on their 

findings, including the extent to which conflict minerals from militarized mines 

make it into their products. 

B. The Conflict-Minerals Rules in Court 

The ink was barely dry on the final rules when the National Association of 

Manufacturers, the U.S. Chamber of Commerce, and the Business Roundtable 

challenged them in federal court.66 They raised three primary arguments: that the 

SEC abused its discretion in failing to include a de minimus exception for those 

companies that make scant use of conflict minerals,67 that the agency failed to 

61 Form SD, supra note 26, at Item l.Ol(c)(2). 62 The rules never explicitly state that "conflict undeterminable" is a required label 

during the two-year grace period, though the SEC clearly interprets them as saying as 

much. In the adopting release, the SEC says that the "final rule permits ... issuers [unable 

to determine the source of their conflict minerals] to describe their products containing 

those conflict minerals as "DRC conflict undctcm1inable." Conflict Minerals, 77 Fed. Reg. 

at 56,321. 63 See Form SD, supra note 26, at Item l.Ol(c)(l)(iii). 64 !d. at Instruction 2 to Item 1. Also, for products that are deemed "conflict 

undeterminable," companies only need to provide facility and country of origin information 

"if known." !d. at Item 10l(c)(2)(i). It is hard to see what this adds, though, because 

companies would never be able to provide information they did not know. 65 See, e.g., Relativity (M C. Escher), WIKJPEDIA.ORG, http://cn.wikipedia.org/wiki/ 

Relativity_(M._C._Escher) (last visited Nov. 27, 2014). 66 Christopher M. Matthews, Business Groups Sue to Block "Conflict Minerals'" 

Rules, WALL ST. J. CORRUPTION CURRENTS (Oct. 22, 2012, 4:38 PM), http://blogs.wsj. 

com/ corruption-currents/2 0 12/1 0/22/business-groups-sue-to-b lock -conflict-minerals-rules/. 67 See Nat'l Ass'n of Manufacturers v. SEC, 956 F. Supp. 2d 43, 61 (D.D.C. 2013), 
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conduct an appropriate cost-benefits analysis,68 and finally, that the requirement to 

describe products as "having not been found to be 'DRC conflict free"' was a freespeech violation. 69 

The D.C. District Court found none of these arguments compelling. 70 But 

on appeal, the Circuit Court held that the requirement to label products as specified 

violates corporate free-speech rigbts.71 The court imposed a heightened standard of 

review on this mandate because, unlike traditional securities regulation, the 

labeling provision at issue here was not aimed at preventing consumer deception.71 

According to the court, the rule failed the elevated review because the SEC did not 

provide evidence that it could have accomplished its goal of connecting company 

products with conflict minerals through less restrictive means. 73 The court noted 

that companies could have been permitted, for example, to use their own language 

to describe products that contain conflict minerals rather than words specifically 

dictated to them. 74 

The Circuit Court is rehearing the case, 75 but this is bow the law currently 

stands. In addition, to be consistent with this ruling while it remains good law, the 

SEC has stayed the requirement that companies, when appropriate during the phase 

in period, describe their products as "conflict undeterminable."76 Despite 

overbroad headlines,77 the court's determination and the SEC's conforming 

redaction have little practical significance. Firms must still list all products that 

contain conflict minerals that may have originated from militarized mines-that 

portion of the rule remains in place-but they need not usc any particular label to 

rev'd in part, Nat'! Ass'n of Manufacturers v. SEC, 748 F.3d 359 (D.C. Cir. 2014), 

overruled by American Meat Institute v. U.S. Dept. of Agriculture, 760 F.3d 18, 22-23 

(D.C. Cir. 2014). 68 Id. at 55. 69 See id. at 73. 70 See id. at 82. 71 Nat'! Ass'n of Manufacturers v. SEC, 748 F.3d at 373 (D.C. Cir. 2014), overruled 

by, American Meat Institute v. U.S. Dept. of Agriculture, 760 F.3d 18, 22-23 (D.C. Cir. 

2014). 72 See id. at 371-72. 73 !d. at 3 72. 74 !d. at 372-73. 75 Jenna Greene, D.C. Circuit to Give Second Look At SEC's Conflict-Minerals Rule, 

NAT'L L. J. (Nov. 24, 2014), http://www.nationallawjournal.com/id=1202677128135/DCCircuit-to-Give-Second-Look-At-SECs-ConflictMinerals-Rule-#ixzz3KZIBnHVk. 76 Daniel M. Gallagher & Michael S. Piwowar, Commissioners, U.S. Sec. & Exch. 

Comm'n, Joint Statement on the Conflict Minerals Decision (Apr. 28, 2014), available at 

http://www.sec.gov/News!PublicStmt/Detail!PublicStmt/13 70541681994#. VBYPV k7tc Y. 77 See, e.g., Jonathan H. Adler, D.C Circuit Finds SEC's Conflict Mineral Di-;closure 

Rule Violates First Amendment, WASH. POST VOLOKH CONSPIRACY (April 14, 2014), 

http://www. washingtonpost.com/news/volokh-conspiracy/wp/20 14/04/ 15/d-c-circuit-findssees-conflict-mineral-disclosure-rule-violates-first-amendment/. 
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describe them. Rather, companies are free to take the court up on its suggestion 

and use their own language to describe their list of products. 

C. The Conflict-Minerals Rules and Policy Controversy 

As is often the case when rules are challenged, this litigation was policydriven. While the conflict-minerals rules have been subject to numerous critiques, 

the primary point of contention has involved their potential compliance costs. In its 

final rules, the SEC estimated initial costs to be $3 to $4 billion with yearly costs 

thereafter ranging between approximately $200 and $600 million per year. 78 And 

others had estimated that costs would be even higher. 79 The National Association 

of Manufacturers, for instance, estimated initial costs ranging from $8 to $16 

billion.80 The sheer number of companies required to comply was one driver of 

these estimates. The SEC thought that approximately 6,000 companies would file 

Form SDs and that 75% of those companies would file Conflict Minerals 

Reports. 81 Supply-chain complexity was the other source of cost concerns. Many 

companies are numerous steps removed from the actual mining of the conflict 

minerals in their products. 82 The SEC and others predicted that for these companies 

to ascertain the source of such minerals, they would have to undertake a great deal 

of costly sleuthing.83 Some also argued that despite companies' best efforts, 

accurate and comprehensive tracking might prove elusive. 84 

78 See Conflict Minerals, 77 Fed. Reg. 56,274, 56,354 (Sept. 12, 2012) (codified at 17 

C.F.R. pts. 204.l3p-l & 249b.400). 79 See, e.g., CHRIS N. BAYER, A CRITICAL ANALYSIS 01' THE SEC AND NAM 

ECONOMIC IMPACT MODELS AND THE PROPOSAL OF A 3"" MODEL IN VIEW OF THE 

IMPLEMENTATION OF SECTION 1502 OF THE 2010 DODD-FRANK WALL STREET REFORM 

AND CONSUMER PROTECTION ACT 35 (2011), available at http://www.payson.tulane.edu/ 

sites/defaultlfiles/3rd _Economic_ Impact_ Model-Conflict_ Minerals. pdf; Letter from Nat'! 

Ass'n of Manufacturers to the SEC, Initiatives under the Dodd-Frank Act, Special 

Disclosures Section 1502 (Conflict Minerals), File No. S7-40-102, 24-27 (Mar. 2, 2011), 

available at http://www.sec.gov/comments/s7-40-10/s74010-183.pdf [hereinafter NAM 

Letterk 8 See NAM Letter, supra note 79, at 24-27. 81 See Conflict Minerals, 77 Fed. Reg. at 56,338 n.748. 82 See general~v JOHN PRENDERGAST & SASHA LEZHNEV, FROM MINE TO MOBILE 

PHONE: THE CONFLICT MINERALS SUPPLY CHAIN (2009), available at http://www.enough 

project.org/files/minetomobilc.pdf (outlining the conflict-mineral supply chain). 83 Conflict Minerals, 77 Fed. Reg. at 56,350-54 (analyzing the potential cost of the 

rules). 84 See, e.g., RESOLVE, TRACING A PATH FORWARD: A STUDY OF THE CHALLENGES OF 

THE SUPPLY CHAIN FOR TARGET METALS USED IN ELECTRONICS I, 3, 5 (20 I 0), available at 

http://www.resolv.org/site-ciscm/files/20 11/02/Tracing_a _path _Forward-A_ Study_ of_ the_ 

Challenges_ of_ the_ Supply_ Chain _for_ Target_ Metals_ Uscd_in_ Electronics. pdf; OECD 

STUDY, supra note 50, at 59--60; IPC---Ass'n Connecting Elee. Indus., Comments on SEC 

Proposed Rule on Conflict Minerals, 3, 10 (March 2, 2011), available at 
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2015] THE CONFLICT MINERALS EXPERIMENT 15:56 

Another prominent concern had to do with unintended consequences. The 

New York Times and Wall Street Journal both ran op-eds expressing the worry that 

the legislation was causing a de facto embargo of the Congo region. 85 This 

possibility was even the subject of a congressional hearing in 2013.86 The editorials 

argued that companies had stopped sourcing from the region because that was 

easier than figuring out whether minerals mined from there came from lawful or 

militarized operations.87 According to these critics, legitimate local miners, who 

are often poor individuals and families, have thus been unintended victims of 

Section 1502.88 

A final critique focused on the administrative and procedural side of the 

legislative mandate rather than its substance. Much has been written about the 

propriety of delegating human-rights rulemaking to the SEC for inclusion in 

securities-law filings, which typically include solely information related to the 

finances and financial prospects of reporting firms. 89 The SEC Chairwoman herself 

criticized the legislation for assigning to the SEC, an expert in financial regulation, 

the task of drafting rules aimed to shame companies into acting in conformity with 

a social goal. 90 

Supporters of the rules counter all of these concerns. They argue that while 

the SEC may not be perfectly suited for this task, it can, nevertheless, do much to 

https://www.sec.gov/comments/s7-40-l O/s740 l O-l3l.pdf. 85 See Aronson, supra note 4; Africa and 'Obama 's Embargo': A Provision of DoddFrank Boomerangs on the Continent's Poor, WALL ST. J. (July 18, 2011 ), http://online.wsj. 

com/news/articles/SB l 0001424052748703956604576109773538681918 [hereinafter 

Obama 's Embargo]. See also Marcia Narine, From Kansas to the Congo: Why Naming and 

Shaming Corporations Through the Dodd-Frank Act's Corporate Governance Disclosure 

Won't Solve a Human Rights Crisis, 25 REGENTU. L. REV. 351, 351 (2012-13) (describing 

a potential boycott of the Congo region); Laura E. Seay, What's Wrong with Dodd-Frank 

1502? 14 (Ctr. for Global Dev., Working Paper No. 284, 2012), available at http://www.cg 

dev.org/sites/defaultlfiles/1425843 _file_ Seay _Dodd _Frank_ FINAL. pdf (outlining de-facto 

embargo argument). 86 Kevin J. Kelley, US Congress: Conflict Minerals Law Fuels War in DR Congo, 

EAST AFRJCAN (May 25, 2013, 3:04 PM), http://www.theeastafrican.eo.ke/news/USCongrcss--Conflict-minerals-law-fuels-war--in-DR -Congo-/-/25 58/ l862724/-/12iws3sz/-

/index.html; Memorandum from the FSC Majority Committee Staff to the Members of the 

Committee on Financial Services, (May J 6, 2013), available at http://www.srz.com/files/ 

upload/Conflict_ Minerals_Resouree _ Center/052113 _Monetary _Policy 

_and_ Trade __ Subcommittee_ Hearing.pdf. 87 See Aronson, supra note 4; Obama 's Embargo, supra note 85. 88 See Aronson, supra note 4; Obama 's Embargo, supra note 85. 89 See, e.g.. Woody, supra note 4, at 1342, 1345; Goad, supra note 11. 90 See Mary J. White, Chairwoman, U.S. Sec. & Exch. Comm'n, 14th Annual A.A. 

Sommer, Jr. Corporate Securities and Financial Law Lecture, Fordham Law School: The 

Importance of Independence (Oct. 3, 20 13), available at http://www.sec.gov/News/Speech/ 

Detaii/Speech/13705398640 16#. VBY ovvk7tc Y. 
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further human-rights goals.91 They also contend that concerns about costs, 

feasibility, and unintended consequences are overstated.92 Rather, they see the 

conflict-minerals rules as a reasonable response to rampant human-rights abuses.93 

With equal passion on both sides, it is easy to get caught up in the 

wrangling and forget that the debate has taken place without the most important 

piece of information-the corporate filings themselves. The cost and feasibility of 

compliance, whether companies are abandoning the region, what the consequences 

are of relying on a securities regulator to enact human-rights legislation-the 

companies' first-year disclosures shed tremendous light on all of these issues. 

Insights from company filings also have wider implications. U.S. states, 

including California, Maryland, and Massachusetts, have adopted or are 

considering adopting conflict-minerals regulations94 and both the E.U. 95 and 

Canada have issued proposed rules on the matter.96 Moreover, conflict minerals are 

not the only thing potentially buried in corporate supply chains-sweatshops may 

be there too. One of the reasons for the rancor over conflict minerals may be that 

the rules could serve as precedent for the use of securities laws to forcefully bring 

transparency to corners of the supply chain that companies might wish to keep 

shadowy.97 The content of the corporate filings tells a great deal about whether 

Section 1502 and the SEC rules animating them should serve as the model for a 

raft of new measures or be dismissed as folly. 

91 See, e.g., Galit A. Sarfaty, Human Rights Meets Securities Regulation, 54 VA. J. 

INT'L L. 97, 115-18 (2013). 92 See, e.g., John Bradshaw, Conflict Mineral Law is Helping Congolese, WALL ST. J. 

(July 23, 2011), http://online.wsj.com/articles/SB10001424053111903461104576458751 

122272110; Dipietro, supra note 11; Myth Buster: The Conflict Minerals Provision, 

GLOBAL WITNESS (June 2, 2014) http://www.globalwitness.org/library/myth-busterconflict-minerals-provision. 93 See, e.g., Goad, supra note 11; Blood Money and Conflict Minerals, BLOOMBERG 

VIEW (Jul. 2, 2014, 1:00PM EDT), http://www.bloombergview.com/articles/2014-07-02/ 

blood-money-and-conflict-minerals. 94 Prenkert & Shackelford, supra note 10, at 482-84. 95 Proposal for a Regulation of the European Parliament and of the Council Setting 

Up a Union System for Supply Chain Due Diligence Self-Certification of Responsible 

Importers of Tin, Tantalum and Tungsten, Their Ores, and Gold Originating in ConflictAffected and High-Risk Areas, COM (2014) 111 final (May 3, 2014); Ian Weekes, Conflict 

Minerals: New EU Rules Simpler Alternative to US Regulation, THE GUARDIAN (Mar. 26, 

2 0 14), http://www. theguardian. com/ sustainab I e-bus i ness/b I og/ eu-regu I ati ons-confl i ctminerals-trade (describing the EU proposal). 96 The Conflict Minerals Act, Bill C-486, 2013-62, H. C. Bill C-486 (Can.). 97 See generally INT'L CORPORATE ACCOUNTABILITY ROUNDTABLE, "KNOWfNG AND 

SHOWING": USING U.S. SECURITIES LAWS TO COMPEL HUMAN RIGHTS DISCLOSURE (2013), 

available at http://accountabilityroundtable.org/wp-contentluploads/20 13/1 0/ICARKnowing-and-Showing-Report4.pdf (setting forth a proposal for human-rights disclosures 

in securities filings). 
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II. EMPIRICAL ANALYSIS OF THE SEC FILINGS 

This section illuminates the first-year compliance effort. The first part 

discusses the scope of compliance. It provides statistics on such things as how 

many companies filed Form SDs, how many filed Conflict Minerals Reports, and 

which industries were represented. The second drills down on the content of the 

filings themselves. I present a narrative description and summary statistics 

detailing how S&P 500 companies went about meeting their compliance 

obligations.98 

A. The Scope of the Compliance Effort 

As mentioned above, the SEC predicted that nearly 6,000 companies 

would file conflict-minerals disclosures on Form SD.99 It turns out, however, that 

only 1,319 companies did so. 100 The SEC, therefore, overestimated by about 350%. 

The agency also predicted that 75% of those companies (about 4,500) would file 

Conflict Minerals Reports in addition to their Form SDs. 101 This time the SEC was 

close-77% of filers included this report as an exhibit (1 ,020/1 ,319). Its initial 

error, however, means that the SEC still missed the mark on the total number of 

Conflict Minerals Reports actually filed by well over 300%. The table below 

summarizes this information. 

Table 1: Actual Filings Compared to SEC Estimates 

Number of Form SDs Number of CMRs 

SEC Estimate 5,994 4,496 

Actual Number 1,319 1,020 

Percent Overestimate 354% 341% 

Most agreed on the industries that would fall within the rules' scope. Ernst 

& Young issued a representative prediction that the most heavily impacted would 

be "electronics and communications, aerospace, automotive, jewelry, and 

industrial products." 102 Unlike the SEC's numerical estimates, Ernst & Young's 

98 Supporting data for the statistics presented in this Part are on file with the author. 99 See supra text accompanying note 81. 100 The filing deadline was June 2, 2014. See Form SD, supra note 26, at General 

Instructions B.l-2. All filing statistics are as of August 8, 2014. 101 Conflict Minerals, 77 Fed. Reg. 56,274, 56,356 (Sept. 12, 20l2)(codificd at 17 

C.F.R. pts. 204.13p-l & 249b.400). 102 

ERNST & YOUNG, CONFLICT MINERALS: WHAT YOU NEED TO KNOW ABOUT THE 
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projection is consistent with the data. There are two ways a review of the filings 

can help to assess which industries were most affected. The first is to look at the 

raw numbers. The table below sorts companies by SIC code (a commonly used 

system of categorizing companies by industry) and shows which codes generated 

the most filings. 103 It reveals that semiconductor manufacturers bore the brunt of 

the conflict-minerals rules (turning in 118 filings) and that some other top 

categories were also related to electronics. The automotive industry shows up on 

the table too, as do communications and industrial products. 104 

Table 2: Top Industries by SIC Code 

SIC Code & Definition Number Percent 

---105 

of Filers FiliQZ 

3674 (Semiconductors & Related Devices) 118 93% 

3845 (Eiectromedical & Electrotherapeutic Apparatus) 48 76% 

3714 (Motor Vehicle Parts & Accessories) 31 83% 

3663 (Radio & TV Broadcasting & Communications Equipment) 29 69% 

3841 (Surgical & Medical Instruments & Apparatus) 26 56% 

7372 (Services- Prepackaged Software) 24 14% 

2834 (Pharmaceutical Preparations) 23 13% 

3576 (Computer Communications Equipment) 23 77% 

3690 (Miscellaneous Electrical Machinery, Equipment & Supplies) 22 83% 

NEW DISCLOSURE AND REPORTING REQUIREMENTS AND HOW ERNST & YOUNG CAN HELP 

1 (2012), http://www.ey.com/Publication/vwLUAsscts/EY Cn11ictMinerals/$FILE/EY 

ConflictMinerals.pdf. See also 77 Fed. Reg. at 56,284-85. - - 103 See Division ofCorpora/e Finance: Standard Industrial Class{fication (SIC) Code 

List, U.S. SEC. & EXCH. COMM'N, http://www.sec.gov/info/edgar/siccodes.htm (last visited 

Dec. 12, 2014). 104 Other notable SIC codes related to these categories include: (i) for electronic, 3672 

(printed circuit boards) with 13 filers; (ii) for automotive, 3711 (motor-vehicle and 

passenger-car bodies) with 13 filers; (iii) for communications, 3661 (telephone and 

telegraph apparatus) with 16 filers; (iv) for industrial products, 3533 (oil and gas field 

machinery) with 12 filers and 3560 (general industrial machinery and equipment) with 9 

filers. 105 This column shows, by SIC code, the percentage of public companies traded on 

major exchanges that filed conflict-minerals disclosures. 
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Counter to Ernst & Young's prediction, jewelers and aerospace companies 

are absent. The conflict-minerals rules' bearing on them becomes evident, 

however, when the data is parsed in another way. The sheer number of filings is 

revelatory, but so too is the percentage of companies within each SIC code that 

filed. If a high percentage of companies in an industry make conflict-minerals 

disclosures, it is safe to say that the industry is heavily impacted. There were only 

seven filings with jewelry-related SIC codes, but every public company with such 

a code filed. 106 Similarly, 24 out of 25 public companies in the four aerospacerelated SIC-codes filed. 107 

Percentages also indicate that not all of the industries in table two were 

truly the most impacted. As shown in the table, some had a high percentage of 

filers, while others were simply large industries with a small group of affected 

firms. For example, 93% of semiconductor makers and 83% of automobile-part 

makers submitted filings, but only a small percentage of software service providers 

and phannaceutical-related companies did so. For these industries, therefore, the 

rule was not a widespread concern. 

On the other hand, surveying the data more broadly reveals a couple of 

other industries that the rules' greatly affected. There are a variety of SIC codes 

related to measurement and control instruments. While such devices are used in a 

wide range of industries-including some of those that Ernst & Young mentions 

(namely, electronics, industrial products, and aerospace)--the number of filings 

produced in this area and the high percentage of these companies that filed stands 

out. Pooling together the four most notable related SIC codes reveals 52 filings out 

of 57 companies. 108 The other industry that stands out is retail department stores. 

Pooling the most impacted SIC codes shows that 31 out of 39 filed. 109 

Also notable is the range of industries affected. Sixty percent of SIC codes 

had at least one filing. 110 As seen above, in some cases a high percentage of 

106 The following jewelry-related SIC codes are included in the above calculation 

(with filers out of potential filers in parenthesis): 3910 (jewelry, silverware & plated ware) 

(1/l ); 3911 (jewelry, precious metal) (1/1); and 5944 (retail jewelry stores) (3/3). In 

addition, two unlisted companies with the SIC code 5944 filed. 107 The following SIC codes are included in the above calculation (with filers out of 

potential filers in parenthesis): 3760 (guided missiles, space vehicles, and parts) (3/4); 3812 

(search, detection, navigation guidance, aeronautical systems) (11/ll); and 3726 (aircraft 

parts and auxiliary equipment) (10/10). 108 The following SIC codes were included in this calculation {with filers out of 

potential filers in parenthesis): 3829 (measuring and controlling devices) (10/11); 3825 

(instruments for measurement and testing of electricity and electrical signals) (14/16); 3826 

(laboratory analytical instruments) (15/ I 5); and 3823 (industrial instruments for measuring, 

display, and control) (13/15). 109 This calculation includes the following SIC codes {with filers out of potential filers 

in parenthesis): 5311 (retail department stores) (6/6); 5600 (retail apparel and accessory 

stores) (5/7); 5621 (retail women's clothing stores) (10/13); and 5651 {retail family 

clothing stores) (10/13). 110 While I have used the more commonly referenced 4-digit SIC codes, there are also 
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companies within an industry submitted disclosures; in other cases, it was only a 

small fraction of those doing business in the space. 

Finally, during the rulemaking process, commentators expressed special 

concern for smaller companies. 111 Because of their size, compliance costs likely 

loom proportionally larger for each small firm subject to the rules. 112 While 

summary statistics cannot reveal proportionate costs, organizing filers by size does 

illuminate the extent to which the rules impacted these firms. A showing that they 

filed in disproportionate numbers would exacerbate cost concerns. Fortunately, the 

table below suggests that this was not the case. Based on the sample, larger firms 

actually filed at a slightly higher rate. 

Table 3: Filers Sorted by Company Size 

S&P S rna llC aQ 6001! 1 ap 3 S&P M'dC 400114 S&P 500115 

Filers 194 134 182 

Percent Filing 32% 34% 36% 

In the end, the most surprising thing the data reveals is the SEC's vast 

miscalculation regarding the number of likely filers. Otherwise, the data mostly 

confirms predictions about where the compliance burden would most heavily fall. 

It also quells some concerns about smaller firms. Compliance may cost such 

companies proportionally more, but at least the rules do not unintentionally single 

them out. 11 

2-digit SIC codes, which group companies into much broader categories. Seventy-three 

percent of 2-digit SIC codes were represented. 111 See Conflict Minerals, 77 Fed. Reg. 56,274, 56,286-87, 56,359-60 (Sept. 12, 

2012) (codified at 17 C.F.R. pts. 204.13p-l & 249b.400). 112 See id.; Jeff Schwartz, The Law and Economics of Scaled Equity Market 

Regulation, 391. CORP. L. 347, 381-83 (2014). 113 This is an index of 600 smaller companies. S&P Small Cap 600, S&P Dow JONES 

INDICES, http:f/us.spindices.com!indices/equity/sp-600. (last visited, Dec. 16, 2014). 114 This is an index of 400 midsized companies. S&P MidCap 400, S&P Dow JONES 

INDICES, http://us.spindices.com/indices/equity/sp-400 (last visited, Dec. 16, 2004). 115 See supra note 6. 116 Some noted that smaller companies would be affected as members of the supply 

chain of larger companies. See Conflict Minerals, 77 Fed. Reg. 56,274, at 56,359. The data 

does not reveal whether smaller firms were disproportionally impacted in this way. 
101 


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B. The Content of the Compliance Effort 

1. The Content of Form SDs 

Over 200 firms in the S&P 500 submitted a Form SD. Since the vast 

majority-88%-supplemented this basic filing with a Conflict Minerals Report as 

well, the Form SDs themselves were generally pithy references thereto, consisting 

of one or two sentences. 117 When companies detennined that they were justified in 

only filing Form SDs, they included more detail pursuant to the rules' 

requirements. For these companies, the forms averaged about 3.75 pages. 118 

In principle, Form-SD-only filers are those that do not source conflict 

minerals from the Congo region. More specifically, companies were permitted to 

stop with this form if (i) they determined, based on their RCOI, that their conflict 

minerals did not originate from the area; 119 (ii) their RCOI gave them no reason to 

believe that the area was the source of their conflict minerals; 120 or (iii) after 

conducting due diligence, they determined that conflict minerals that, based on 

their RCOI, they had reason to believe originated from the Congo region did not 

actually come from there. 121 

The second category was almost universally relied upon as the justification 

for only filing a Form SD. Only two companies claimed to have affirmatively 

determined that they did not source from the Congo region. 122 In addition, not a 

single S&P 500 firm filed a Form SD, but declined to file a Conflict Minerals 

Report, based on the final category. Taking the filings at face value, this means 

that due diligence never convinced a company that it was not sourcing from the 

Congo when its RCOI pointed in the opposite direction. 

According to the rules, firms relying on either of the first two categories as 

the basis for stopping at the Form SD stage were required to briefly describe their 

RCOI and their conclusion as part of the form. 123 As the above paragraphs suggest, 

the reported conclusion was almost always that the company had no reason to 

believe conflict minerals in its products came from the Congo region. 124 

Companies described an RCOI that generally consisted of a survey of their 

ll? Of the 207 S&P 500 fim1s that filed conflict-minerals disclosures only 25 filed 

only a Form SD. Fifty-two of the remaining 182 Fonn SDs were only one sentence long. 118 Because it includes both cover pages and exhibit lists, this is a generous pagenumber calculation. 119 See Fonn SO, supra note 26, at Item l.Ol(b). 120 See id. 121 See id. at Item I. OJ (c). 122 See Meadwestvaco Corp., Specialized Disclosure Report (Fonn SO), at 2 (May 30, 

2014); Mohawk Industries Inc., Specialized Disclosure Report (Fonn SO), at 2 (Jun. 2, 

2014). 123 Fonn SO, supra note 26, at Item l.Ol(c). 124 See, e.g., Clorox Co., Specialized Disclosure Report (Fonn SO), at 2 (May 30, 

2014); Hershey Co., Specialized Disclosure Report (Fonn SO), at 2 (June 2, 2014). 
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suppliers. 125 Firms varied on the detail they provided about these surveys and the 

extent to which they described what suppliers actually said in response that led 

companies to believe their supply chain did not involve the Congo. Hershey, for 

instance, which uses tin in its decorative containers, merely noted that it surveyed 

its suppliers and, based on the survey, had no reason to believe its tin comes from 

the Congo region-and ended the discussion at that. 126 Altria Group, however, 

whose e-cigarettes and related chargers contain a small amount of tin and gold, 

provided far more detail. 127 It explained that its conclusion was based on a 

certification by its sole supplier that the conflict minerals in the products it supplies 

did not originate from the Congo. 128 Altria also explained that the supplier was 

able to certify as much by obtaining similar certifications from its sub-suppliers 

and crosschecking smelter information against CFSI's conflict-free list. 129 

In describing their RCOI, around 40% of companies did not reveal their 

survey response rate. And a number of those that supplied the information, failed 

to hear back from everyone. Norfolk Southern, a railroad company, only filed a 

Form SD even though it had a response rate of just 80%,130 and Patterson 

Companies, a health-care products supplier, did the same with a response rate of 

just 45%.13l In doing so, firms like Norfolk Southern and Patterson took advantage 

of SEC guidance permitting companies to declare that they have no reason to 

believe they are sourcing conflict minerals from the Congo even with incomplete 

information in this regard. 132 

2. Tbe Content of tbe Conflict Minerals Reports 

Conflict Minerals Reports are required of companies that, after conducting 

due diligence, have been unable to rule out the Congo region as a potential source 

of their conflict minerals. 133 As noted above, almost nine out of ten S&P 500 

companies that filed a Form SD also filed such a report. The average length of the 

125 Rather than conducting a survey, some companies already had, or were able to 

obtain, supplier certifications regarding the countries of origin of their conflict minerals. 

See, e.g., Altria Group Inc., Specialized Disclosure Report (Form SD), at 2 (May 30, 2014); 

Newmont Mining Corporation, Specialized Disclosure Report (Form SD), at 7 (May 31, 

2014); LyondeliBascll Industries NV, Specialized Disclosure Report (Form SD), at 2 (May 

31, 2014). 126 Hershey Co., supra note 124, at 2. 127 Altria Group Inc., supra note 125, at 2. !2R Jd. 

129 !d. 

130 Norfolk Southern Corp., Specialized Disclosure Report (Form SD) (June 2, 2014). 131 Patterson Companies, Inc., Specialized Disclosure Report (Form SD), at 3 (June 2, 

2014). 132 See Conflict Minerals, 77 Fed. Reg. 56,274, 56,312 (Sept. 12, 2012) (codified at 

17 C.F.R. pts. 204.l3p-l & 249b.400). 133 See Form SD, supra note 26, at Item l.Ol(c); supra text accompanying note 54. 
103 


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2015] THE CONFLICT MINERALS EXPERIMENT 23:56 

report was about 5.5 pages. Although there was a wide range-·with the shortest 

being one page and the longest being thirty-five--more than 80% were between 2 

and 6 pages. 134 Thus, even though Chairwoman White had expressed concern 

about "information overload," the actual reports were usually brief, particularly as 

securities-law filings go. 135 

The key reporting requirement for firms is to describe their due-diligence 

efforts, the substance of which must conform to the OECD Guidance. 136 Almost 

every company noted in its report that it constructed its due diligence in adherence 

with this framework. About 80% of firms also broke down their diligence 

description into the five steps outlined therein; company responses are detailed 

below and in a table at the conclusion of this section. 

The first OECD step, "establish strong company management systems," 

includes a number of instructions for companies: 137 

Adopt and disseminate a conflict-minerals policy. 138 About three out of 

four companies established such policies and made them available on their 

websites. Some included the text in their filings; most only noted that the policy 

was accessible online. 

Set up a conflict-minerals diligence team. 139 Almost 90% of companies 

reported creating some type of internal cross-functional team to manage their 

reporting obligations. For example, on its compliance team, the giant aluminum 

company, Alcoa, included its chief legal officer, among other executives, as well 

as representatives from each unit involved with products potentially containing 

conflict minerals. 140 

Establish a system for mapping the conflict-mineral supply chain. 141 

Almost all companies followed essentially the same procedure for understanding 

their supply chain. They identified the suppliers of their conflict minerals and sent 

them each a survey. 142 The survey was almost always based on a template created 

134 Much of the difference in length is attributable to whether the fim1 chose to 

disclose smelter and refiner information. See inji·a text accompanying note 169. 135 White, supra note 90. 

37. 

136 See Form SD, supra note 26, at Item l.Ol(c); supra text accompanying notes 35-

137 See OECD GUIDANCE, supra note 37 at 17. 138 See id 

139 See OECD GUIDANCE, supra note 37 at 17. 140 Alcoa Inc., Conflict Minerals Report (Form SD exhibit 1.02), at 3 (June 2, 2014). 141 See OECD GUIDANCE, supra note 37 at 17. 142 The OECD and others have noted that companies typically only have a 

relationship with their direct suppliers. See, e.g., OECD STUDY, supra note 50, at 59-60; 

!PC, supra note 84, at 2. The filings are consistent with this observation. Only five 

companies explicitly noted engaging with indirect suppliers: EMC Corp., Conflict Minerals 

Report (Form SD exhibit 1.02), at 2-3 (June 2, 2014); Home Depot Inc., Conflict Minerals 

Report (Form SD exhibit 1.02), at 3 (June 2, 2014); Intuit Inc., Conflict Minerals Report 

(Form SD exhibit 1.02) at 2 (June 2, 2014); Kohl's Corp., Conflict Minerals Report (Form 

SD exhibit 1.02), at 4 (May 30, 2014); Macy's Inc., Conflict Minerals Report (Form SD 
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24:56 6 HARV. BUS. L. REV. (forthcoming 2015) [2015 

by CFSL 143 This template includes a number of questions about company diligence 

and policies.144 Most importantly, it asks whether the supplier's goods contain 

conflict minerals, where they originate from, and in what facility they are 

processed. 145 To assist suppliers, it even includes a list of over 200 known 

smelters. 146 

Almost 75% of companies also followed up with suppliers that provided 

answers that were incomplete or internally inconsistent, as well as those that did 

not respond at all. About half of companies included information on their ultimate 

response rate. 147 Based on those that provided this figure, which likely skews the 

numbers higher, the average was 71%. There was a great amount of variability, 

however, with a reported low of 21%, a high of I 00%, and a standard deviation of 

24%. 

Seventy companies provided further insight into their supply chain by 

disclosing the number of conflict-mineral suppliers therein. The range was 

extraordinary wide, with a high of 40,312 reported by Caterpillar and a low of 2 

reported by Intuit. 148 The average number was 2,265; the median was 510 (because 

of the wide range and Caterpillar's astonishing figure, which was three-times 

larger than the next highest, the median is likely the better summary of the data). 

Incorporate a supply-chain policy in agreements with suppliers. 149 

Companies were less than diligent about including language in supplier 

agreements. Only about one-half reported doing so. 150 And companies often were 

not forthcoming about what the language actually said. When companies did 

include this information, they frequently described the language as calling on 

suppliers to furnish Dodd-Frank mandated information on conflict minerals when 

requested. 151 A dozen companies went further, though, and included language 

requiring their suppliers to be conflict free. 152 

exhibit 1.02), at 3 (June 2, 2014). 143 The template is publicly available. Conflict Minerals Reporting Template, 

CONFLICT -FREE SOURCING INITIATIVE http://www .conflictfreesourcing.org/conflictminerals-rcporting-template/ (last visited Nov. 25, 2014). 144 !d. at Tab 2, "Instructions." 145 !d. 146 Jd. at Tab 5, "Standard Smelter Names." 147 This figure does not include companies that listed a response rate in terms of total 

spend or some other accounting metric rather than as a percentage of those surveyed. 148 See Caterpillar Inc., Conflict Minerals Report (Form SD exhibit I .02), at 1 (May 

30, 2014); Intuit Inc., supra note 142, at I. 149 See OECD GUIDANCE, supra note 37, at 17. 150 Sixteen percent noted, however, that they were planning to do so in the future. 151 See. e.g., Lam Research Corp., Conflict Minerals Report (Form SD exhibit 1.02), 

at 3 (June 2, 2014); Medtronic Inc., Conflict Minerals Report (Form SD exhibit !.02), at 3 

(May 29, 2014); Zimmer Holdings Inc., Conflict Minerals Report (Form SD exhibit 1.02), 

at 3 (June 2, 2014). 152 See, e.g., Eeolab Inc., Conflict Minerals Report (Fom1 SD exhibit 1.02), at 2 (June 

2, 2014); Jabil Circuit Inc .. Conflict Minerals Report (Fonn SD exhibit 1.02), at 3 (June 2, 
105 


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2015] THE CONFLICT MINERALS EXPERIMENT 25:56 

Establish a grievance mechanism. 153 Many companies ignored the OECD 

instruction to set up a grievance procedure. Less than half reported compliance 

with this seemingly ministerial requirement. 

"Inconsistent" would be the best way to describe firm compliance with the 

first OECD step and its five subparts. It is also an appropriate description of their 

responses to the remaining requirements. The second step requires companies to 

assess risks in their supply chain by analyzing the due-diligence practices of their 

smelters and refiners. 154 This overlaps with step four, which requires an 

independent audit of those same facilities, an assessment that would include a 

review of their due diligence. 155 About 30% of companies failed to address these 

requirements. Remaining companies were able to identify at least some of these 

facilities, and addressed these steps by referring to audits done in connection with 

CFSI's conflict free smelter program. 156 They reported crosschecking the names of 

the smelters or refiners identified by their suppliers against CFSI's list of those that 

are conflict free. If smelters or refiners were not on the Jist, companies by and large 

did not investigate the facility's due-diligence practices or hire independent 

auditors to do so. 157 

Step three is where companies were required to establish and implement 

plans to transition existing suppliers to conflict-free sourcing or abandon them. 158 

Less than 30% of companies reported that they had outlined a plan. 159 Of those, 

none reported taking any remedial action. 160 Since step five---publicly reporting on 

conflict-mineral diligence-is redundant with the rules themselves, all companies 

that at least filed something complied with this requirement. 161 

The SEC mandated several other compliance steps beyond the duediligence reporting. A key requirement was that companies list aU products that 

they had not determined to be conflict free (although, thanks to the Circuit Court 

2014); Sigma-Aldrich Corp., Conflict Minerals Report (Fonn SD exhibit 1.02), at I (May 

30, 2014). 153 See OECD GUIDANCE, supra note 37, at 17. 154 !d. at 18, 42. 155 !d. at 19,47. 156 See supra text accompanying note 50. 157 The biggest exception was Intel, which reported inspecting 29 processing facilities. 

See Intel Corp., Conflict Minerals Report (Fonn SD exhibit 1.02), at 2 (May 22, 2014). 158 See OECD GUIDANCE, supra note 37, at 18; supra text accompanying notes 44-

47. 159 This statistic does not include companies that merely reported escalation measures 

with respect to companies that failed to respond when surveyed regarding their use of 

conflict minerals. 160 A handful of companies, in fact, reported that they had adopted policies, but found 

no instances requiring attention. See, e.g., Boeing Co., Conflict Minerals Report (Fonn SD 

exhibit 1.02), at 3 (June 2, 2014); Emerson Electric Co., Conflict Minerals Report (Fonn 

SD exhibit 1.02), at 4 (June 2, 2014); Microsoft Corp., Conflict Minerals Report (Fonn SD 

exhibit 1.02), at 4 (June 2, 2014). 161 OECD GtJIDANCE, supra note 37, at 19. 
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holding, they were not required to provide any particular label for this list of 

products). 162 Some companies ignored this part of the rules or provided a general 

description of their business. But about 70% did include some type of product list. 

Most produced a list at a high level of generality, describing their products as 

"apparel" or "household products," rather than including brand names. 163 Some 

firms housed in generic-sounding parent companies included these bland 

descriptions and left out important identifying information. TJX Companies, for 

instance, the parent of low-cost departments stores TJ Maxx and Marshalls noted 

that its "apparel" may contain conflict minerals, but never mentioned the names of 

its stores. 164 

One question raised by the Circuit Court opinion was how companies 

would note the conflict status of their products now that they were not forced to 

use the labels "not. .. 'DRC conflict free"' or "conflict undeterminable."165 The vast 

majority of companies took advantage of this freedom. About 80% chose to give 

no conclusion as to their products' conflict status. Often, company products that 

contain conflict minerals were listed near the beginning of the report. Towards the 

end, companies then had language indicating that, despite their due diligence, they 

were unable to determine the conflict status or origin of their products. 166 About 

20% of companies, however, were a bit bolder and listed their products as "conflict 

undeterminable" even though not mandated. Finally, only one firm, Intel, claimed 

to have a conflict-free product. 167 

The rules also required that companies list the smelters and refiners of the 

conflict minerals in products not found to be conflict free, as well as the countries 

of origin of those minerals. 168 About 70% of companies failed to provide smelter 

and refiner information. Many did not list these processing facilities even though 

they had identified at least a portion of those in their supply chain. 169 Some gave 

no reason for omitting the names, 170 but many claimed that even though they could 

162 See Form SD, supra note 26, at Item l.OI(c)(2), supra text accompanying notes 

71-77 (discussing the Circuit Court holding). 163 See, e.g., Best Buy Co. Inc., Conflict Minerals Report (Form SD exhibit 1.02), at 4 

(June 2, 2014); Nordstrom Inc., Conflict Minerals Report (Form SD exhibit 1.02), at 3 

(June 2, 20 14); TJX Companies Inc., Conflict Minerals Report (Form SD exhibit I .02), at I 

(June 2, 2014). As noted supra text accompanying note 59, the SEC did not require the 

listing of brands. Nevertheless, 12 companies did so. 164 TJX Companies Inc., supra note 163, at I. 165 See supra text accompanying notes 71-77. 166 Although unusual, some companies gave no conclusion at all. See, e.g., Procter & 

Gamble Co., Conflict Minerals Report (Form SD exhibit 1.02) (June 2, 2014). 167 Intel Corp., supra note 157, at 4, 7-8. 168 Form SD, supra note 26, at Item I.OI(c)(2). 169 As noted supra text accompanying note 156, about 70% of companies reported 

checking their processing facilities against the CFSI conflict-free list. Out of the 134 that 

claimed to have done so, however, only 50 actually listed their facilities-less than 40%. 170 See, e.g., Ailegion pic, Conflict Minerals Report (Form SD exhibit 1.02) (June 2, 

2014); Berkshire Hathaway Inc., Conflict Minerals Report (Form SD exhibit 1.02) (June 2, 
107 


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2015] THE CONFLICT MINERALS EXPERIMENT 27:56 

identity such facilities, they could not link particular minerals to particular 

products. According to these companies, when they polled their suppliers, they 

would get a response at the "company level," meaning that they were told all of the 

smelters and refiners that the supplier used.m In many cases, however, suppliers 

apparently did not take the additional step of informing companies which of these 

facilities processed the minerals that made it into the company's specific products. 

Companies, therefore, could not match conflict minerals from a particular smelter 

or refiner with their particular goods, and, based on this, claimed not to have 

enough information to include facilities in their filings. 172 

On the other hand, about 30% of filers did list the processing facilities in 

their supply chains, sometimes with the caveat that, for the reason noted above, 

they could not be sure that their products actually contained conflict minerals from 

those included. 173 In addition, some companies that included facility information 

chose to only list those that appeared on the CFSI conflict-free list, omitting others 

without explanation. 174 

Country-of-origin disclosure was even scarcer. Eighty percent of 

companies failed to provide this information. As with facilities, some companies 

provided no explanation for the omission. 175 Others claimed that they could not 

determine the country of origin for the conflict minerals in their products. While 

some left it at that, 176 others provided details as to why. When smelters and refiners 

2014); Broadcom Corp., Conflict Minerals Report (Fonn SD exhibit 1.02) (June 2, 2014). 171 See, e.g., Danaher Corp., Conflict Minerals Report (Fom1 SD exhibit 1.02), at 2 

(June 2, 2014); Harley-Davidson Inc., Conflict Minerals Report (Form SD exhibit 1.02), at 

5 (June 2, 2014); Honeywell International Inc., Conflict Minerals Report (Form SD exhibit 

1.02), at 5 (June 2, 2014); Lockheed Martin Corp., Conflict Minerals Report (Fom1 SD 

exhibit 1.02), at 4 (June 2, 2014); Reynolds America Inc., Conflict Minerals Report (Form 

SD exhibit 1.02), at 3 (June 2, 2014); TJX Companies Inc., supra note 163, at 3; Whirlpool 

Corp., Conflict Minerals Report (Fonn SD exhibit 1.02), at 4 (May 30, 2014). 172 See, e.g., sources cited supra note 171. 173 See, e.g., Ecolab Inc., supra note 152, at 3 n.l(a); KLA-Tencor Corp., Conflict 

Minerals Report (Fonn SD exhibit 1.02), at 5 (June 2, 2014); Garmin Ltd., Conflict 

Minerals Report (Form SD exhibit 1.02), at 6 (June 2, 2014); Micron Technology Inc., 

Conflict Minerals Report (Fonn SD exhibit 1.02), at 4 n.6 (May 30, 2014). 174 See, e.g., Kroger Co., Conflict Minerals Report (Form SD exhibit 1.02), at 2 (June 

2, 2014); Goodyear Tire & Rubber Co., Conflict Minerals Report (Form SD exhibit 1.02), 

at 4 (June 2, 2014); Xerox Corp., Conflict Minerals Report (Fonn SD exhibit 1.02), at 5 

(May 29, 2014). 175 See, e.g., Covidien plc, Conflict Minerals Report (Form SD exhibit 1.02) (May 30, 

2014); Ingersoll-Rand plc, Conflict Minerals Report (Form SD exhibit 1.02) (June 2, 

2014); Sigma-Aldrich Corp., supra note 152; Teradata Corp., Conflict Minerals Report 

(Form SD exhibit 1.02) (May 30, 2014); Thermo Fisher Scientific Inc., Conflict Minerals 

Report (Form SD exhibit 1.02) (May 30, 2014); VF Corp., Conflict Minerals Report (Fonn 

SD exhibit 1.02) (June 2, 2014). 176 See, e.g., Johnson & Johnson, Conflict Minerals Report (Fom1 SD exhibit 1.02), at 

5 (May 30, 2014); PVH Corp., Conflict Minerals Report (Form SD exhibit 1.02) (June 2, 
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process conflict minerals, ores from different regions are combined and the 

location of origin becomes impossible to track. 177 Thus, the only way to trace the 

source of a conflict mineral in a product is to identity the smelter from which it 

came. If, for example, a particular smelter only processed minerals from Asia, then 

a company downstream from the smelter could know that is where its raw 

materials came from. Since companies could not match smelters to products, they 

claimed to be unable to match products to countries as well. 178 

As with facilities, despite these obstacles, some companies included a list 

of countries, sometimes with a qualification to reflect their uncertainty about the 

exact match to their products. 179 Curiously, of the filers that provided country-oforigin information, some did not include any from the Congo region. 180 If none of 

their facilities sourced from there, however, the companies would not have had to 

file a Conflict Minerals Report in the first place. 

The histogram below summarizes the country-of-origin information for 

companies reporting sourcing from the Congo area. It is a small sample because so 

few companies listed specific countries therein, but Rwanda and the DRC stand 

out as the ones noted most frequently. They are cited 40% more than Burundi, the 

next most commonly mentioned. 

2014); Stanley Black & Decker Inc., Contlict Minerals Report (Form SD exhibit 1.02), at 5 

(June 2, 2014). 177 Conflict Minerals, 77 Fed. Reg. 56,274, 56,321 (Sept. 12, 2012) (coditied at 17 

C.F.R. pts. 204.13p-l & 249b.400); PRENDERGAST & LEZHNEV, supra note 82, at 6. 17 See, e.g., Danaher Corp., supra note 171, at 2; Honeywell International Inc., supra 

note 171, at 5; Medtronic Inc., supra note !51, at 3; Lockheed, supra note 171, at 4; TJX 

Companies Inc., supra note 163, at 3. Although companies stopped at this point, there is an 

additional layer of complexity in that even if a particular smelter is matched to a particular 

product, country-of-origin information may still prove out of reach. Smelters often process 

minerals from more than one region. PRENDERGAST & LEZHNEV, supra note 82, at 6. In 

this case, even if a company identifies one of its smelter, the company cannot know for 

sure if minerals from a particular country processed in that smelter made it into its specific 

products. After the metals are liquefied, melded together, and then apportioned to different 

manufacturers, who is to say which country's minerals ended up in which company's 

products. 179 See, e.g., Cerner Corp., Conflict Minerals Report (Fonn SD exhibit 1.02), at 3 

(June 2, 2014); Garmin Ltd., supra note 173, at 6; Micron Technology Inc., supra note 173, 

at6. 180 See, e.g., McKesson Corp., Conflict Minerals Report (Form SD exhibit 1.02), at 4-

5 (June 2, 2014); Sandisk Corp., Conflict Minerals Report (Form SD exhibit !.02), at 4 

(May 30, 2014). 
109 


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2015] THE CONFLICT MINERALS EXPERIMENT 

Figure 1: Country-of-Origin Information of Conflict Minerals 

30 ~------------------------------------------

25 +---------------~--

20 +----------· 

15 +---

10 

5 

0 

29:56 

The rules' attention to country of ongm includes one additional 

requirement-this one relates to process rather than results. Companies were 

required to describe their efforts to "determine the mine or location of origin [of 

their conflict minerals] with the greatest possible specificity." 181 This aspect of the 

rule was essentially shrugged off. More than one-half of filers ignored it Those 

that did address it frequently referenced their due diligence and RCOI descriptions 

as their efforts to determine this information. 182 

Finally, the rules called for all companies using the "conflict 

undetenninable" category to list the steps they were taking or planned to take to 

improve their diligence and to mitigate the risk that they source from militarized 

mines. 183 Despite no longer having to choose any particular label, almost 90% of 

companies had a section on this. Many referenced specific OECD requirements, 

like updating their supplier contracts, as things they planned to do. 184 Many others 

contained platitudinous language about continuing to "engage with" their suppliers 

'

81 Form SD, supra note 26, at Item l.Ol(c)(2). 182 See, e.g., L Brands, Inc., Conflict Minerals Report (Form SD exhibit 1.02), at 4 

(June 2, 2014); Newell Rubbermaid Inc., Conflict Minerals Report (Form SD exhibit 1.02), 

at 6 (May 30, 2014); Zimmer Holdings Inc., supra note 151, at 4. 183 See Form SD, supra note 26, at Item l.OI(c)(l)(iii). 184 See, e.g., Agilent Technologies, Inc., Conflict Minerals Report (Form SD exhibit 

1.02), at 6 (June 2, 2014); Autodesk Inc., Conflict Minerals Report (Form SD exhibit 1.02), 

at 4 (June 2, 2014); C.R. Bard, Inc., Conflict Minerals Report (Fom1 SD exhibit 1.02), at 2 

(June 2, 2014); Garmin Ltd., supra note 173, at 7. 
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on the conflict-minerals issue. 185 The following table summarizes the contents of 

S&P 500 Conflict Minerals Reports. 

Table 4: S&P 500 Company Compliance Steps in Conflict Minerals Reports 

Conflict-Minerals Rules Compliance Steps 

Requirement to Describe Due Diligence 

Noted OECD Guidance 

Described Due Diligence in Terms of OECD 

Guidance's 5 Steps 

Step 1 

Enacted Conflict-Minerals Policy 

Made Conflict-Minerals Policy Publicly 

Available 

Created Internal Conflict-Minerals Team 

Surveyed Suppliers 

Reported Response Rate 

Used CFSI Template for Survey 

Followed up on Incomplete/Inconsistent 

Responses & Nonresponses 

Conducted Site Visits of Suppliers and 

Processing Facilities 186 

Amended Supplier Agreements 

Put in Place a Grievance Procedure 

Steps 2 and 4 

Incorporated Results of CFSI Smelter Audits 

Conducted Own Processing Facility Audit 

Step3 

Reported Findings to Senior Management 

Percent of 

Companies 

Taking Step 

Listed 

-

98% 

82% 

-

85% 

75% 

87% 

99% 

47% 

92% 

73% 

4% 

51% 

47% 

-

73% 

0%187 

-

55% 

185 See, e.g. Autodesk Inc., supra note 184, at 4; Cummins Inc., Conflict Minerals 

Report (Fonn SD exhibit 1.02), at 6 (May 30, 2014); Harley-Davidson Inc., supra note 

171, at 7. 186 Apple, General Electric, Intel, and Qualcomm reported visiting smelters. See 

Apple, Conflict Minerals Report (Form SD exhibit 1.02), at 2 (May 29, 2014); General 

Electric Co., Conflict Minerals Report (Form SD exhibit 1.02), at 7 (June 2, 2014); Intel 

Corp., supra note 157, at 2; Qualcomrn Inc., Conflict Minerals Report (Form SD exhibit 

1.02), at 6 (June 2, 2014). 187 Intel was the only company to do so. See Intel Corp., supra note 157, at 2. 
111 


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2015] THE CONFLICT MINERALS EXPERIMENT 31:56 

Adopted a Risk Management Plan 29% 

Step 5 - Reported on Due Diligence 100% 

Other Requirements - Listed Future Risk-Mitigation Efforts 87% 

Described Products Not Found to be Conflict-Free 71% 

Listed Processing Facilities 31% 

Listed Countries of Origin 20% 

Described Efforts to Determine Mine or Location of 40% Origin with Specificity 

Conflict-Status Categorization - Conflict Free 1% 

Not Conflict Free 0% 

Conflict Undeterminable 21% 

"Unable to Determine" or No Specific Conclusion 77% 

What stands out in the above chart is the frequency of low compliance 

percentages. While in some cases companies may have good--or at least 

defensible-reasons for omitting information, the end result is a set of Conflict 

Minerals Reports that reveal quite little about conflict-mineral supply chains. 

C. What the SEC I<'ilings Reveal About the Conflict-Minerals Rules 

The nature of compliance provides particular insight into the costs and 

benefits of the conflict-minerals rules. For most companies, compliance appears to 

have involved little cost. Due diligence essentially boiled down to sending out a 

survey created by a third party and checking certain results against a third-partygenerated list. Companies also took procedural steps, like setting up a conflictminerals policy, an internal team, and a grievance mechanism. No doubt all of this 

takes some time, particular for those companies with a wide range of products and 

a complex supply chain, but the burden appears relatively insubstantial. That the 

final work product-the filings themselves-were brief and devoid of detail 

further supports the idea that little effort went into compliance with these rules. 

It is true that the rule contemplates some trickle-down costs. As noted 

above, companies required to file these reports are often many levels removed 

from the actual mines. 188 Thus, for a company's suppliers to provide meaningful 

information when requested, these firms must poll their own suppliers. To 

illuminate an entire supply chain, this process would have to continue all the way 

to the source, which necessarily adds expense. 

188 See supra note 82 and accompanying text. 
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But compliance often did not follow this idealized conception. In 

describing their survey results, many companies noted that numerous suppliers 

responded with inconclusive answers. 189 A survey reply along the lines of, "we 

don't know," entails little cost and eliminates expenses further up the chain. And 

answers like this should be expected. Unless suppliers arc themselves subject to 

the SEC rules or otherwise contractually obligated to follow up, there is nothing 

that says they have to assist in a company's diligence efforts. They might do so to 

maintain good relations with customers that push them, but buyers have little 

reason to exert much force. From a risk-averse company's perspective, no answer 

is better than one that links minerals to conflict mines. Thus, while costs extend 

past the actual filers, it is easy to overstate how far they reach. 

Finally, costs in the aggregate must be lower than anticipated, at least by 

the SEC, because, as noted above, the agency overestimated the number of filers 

by around 350%. 190 Given the perfunctory effort and unexpectedly small number 

of filers, the true costs of compliance were likely far less than critics warned. 

As might be expected, the lower costs appear to be accompanied by lower 

benefits. There were certainly no bombshells. Not a single company admitted 

sourcing from a militarized mine; no products or companies could be singled out 

as conflict-mineral offenders. Meanwhile, scant few appeared worthy of praise--

conflict-free declarations were almost nonexistent. 191 Naming and shaming 

189 See, e.g., Ball Corp., Conflict Minemls Report (Form SD exhibit l.02), at 3 (June 

2, 2014) ("We have elected not to present smelter and refiner names that have been 

identified by suppliers in this report due to the number of nonresponders and incomplete 

responses that were received to our survey"); Caterpillar Inc., supra note 147, at 1 ("The 

majority of suppliers surveyed either provided an incomplete or inconclusive response or 

did not provide any response."); Costco Wholesale Corp., Conflict Minerals Report (Form 

SD exhibit 1.02), at I (June 2, 2014) ("a number of suppliers failed to respond."); 

Qualcomm Inc., supra note 186, at 5 ("The vast majority of our direct suppliers reported 

unknown countries of origin for their necessary conflict minerals."). 190 See supra text accompanying notes 100-10 I. 191 See supra note 167 and accompanying text. Arguably, those companies that chose 

only to file a Form SD could be described as conflict free. This has a few problems, 

though. The first is that such companies were not the target of the rules. The idea was to 

encourage responsible sourcing from those involved in the region rather than celebrate 

those with no connection. Second, 23 out of the 25 S&P 500 companies that only filed a 

Form SD claimed they were entitled to do so because they lacked a reason to believe that 

the contlict minerals they used were from the Congo. See supra text accompanying note 

122. Under SEC rules, they were allowed to make such a claim, so long as none of their 

survey responses, or other information at their disposal, indicated otherwise. See Conflict 

Minerals, 77 Fed. Reg. 56,274, 56,312-13 (Sept. 12, 2012) (codified at 17 C.F.R. pts. 

204.13p-1 & 249b.400). But this is not the same as being certified as conflict free. It is a 

claim based on supply-chain ignorance rather than knowledge of conflict-free sourcing. As 

noted supra text accompanying notes 130-132, some companies claimed they lacked a 

reason to believe that they were sourcing from the Congo despite limited knowledge of 

their supply chain. Finally, neither of the S&P 500 firms that actually established that their 
113 


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2015] THE CONFLICT MINERALS EXPERIMENT 33:56 

requires that activist consumers and shareholders be able to distinguish between 

good actors and bad, so that they can take action against the latter. But the 

information in the reports does not provide sufficient information to get such 

campaigns oti the ground. The filings lack the type of specifics that could inspire 

investors to reallocate their money or consumers to reassess their purchasing 

habits. Almost every company fell into the category of having a reason to believe 

they were sourcing from a country in the Congo region, but being unable to tell 

whether their minerals were really from there, or despite being from there, were 

actually conflict free. Disclosures such as these provide paltry basis for change. 192 

It could be argued that despite their inconclusiveness, the reports are still 

of some use, because activists can use them to differentiate among companies 

based on how diligently they complied. The compliance effort itself can be used as 

a measuring stick even if the substance of the filings provides little basis on which 

to discriminate. 193 There is certainly some truth to this, but sorting companies 

based on compliance is a high cost, partly subjective, endeavor. The benefits also 

pale in comparison to true naming and shaming. It is much less salient to criticize a 

company for cursory compliance than it is to identifY it as sourcing from a mine 

linked to human-rights abuses. Compliance-based sorting is also only beneficial in 

extreme cases. Because many companies complied in an almost identical fashion, 

this metric is only useful to call out those that turned in a truly excellent effort and 

those that all but ignored the rule. 

Finally, benefits from this approach exist only on the margin. There are 

ways companies can demonstrate their commitment to conflict-free sourcing other 

than through careful compliance. They can, for instance, join industry 

organizations committed to this goal. In fact, before the conflict-minerals rules 

went into effect, the Enough Project had ranked electronics companies based on 

supply chain did not involve the Congo were from heavily impacted industries like 

electronics, where such a declaration would be most meaningful. 192 In a forthcoming paper, Robert Eccles and George Serafeim suggest that "even 

without stakeholder engagement," disclosures may serve an "internal transformation 

function." Robert Eccles and George Serafeim, Corporate and Integrated Reporting: A 

Functional Perspective, in STEWARDSHIP OF THE FUTURE 3 (Lawler eta!. ed., forthcoming 

2015). In the conflict-minerals context, this theory would suggest that the disclosure 

mandate may be beneficial, regardless of successful naming and shaming, because 

companies may change what they do in order to change what they report. While this is a 

provocative argument, there is scant evidence that it reflects what happened here. Rather 

than change their behavior, companies buried it in jargon. 193 Global Witness, for example, makes this argument. See Myth Buster, supra note 

92. Responsible Sourcing Network published a pilot study ranking 51 filers. It sorted them 

into three groups based on their level of compliance. See RESPONSIBLE SOURCING 

NETWORK, MINING THE DISCLOSURES: AN INVESTOR GUIDE TO CONFLICT MINERALS 

REPORTING 35 (2015), available at http://staticl.l.sqspcdn.com/static/f/432032/26314376/ 

14 343 88831653/mining-the-disclosures-20 14. pdf?token=Tn%2FLtdmEO WjjELkOAODM 

RZI%2F%2BIU%3D. 
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activities like this. 194 While compliance may be a cleaner signal, the fact remains 

that it is only its added benefit that matters-the extent to which this tells us 

something we did not already know. If achieved, the true hope of the conflictminerals rules-to allow us to sort companies based on where they source-would 

have greatly expanded our awareness. 

The calm that greeted the public dissemination of the reports supports the 

conclusion that they lack the content necessary to bring about the intended social 

change. A few complained about the lack of substance/ 95 but there has been no 

semblance of public outrage. The press noticed the revelation, completely 

unrelated to conflict minerals, that a few companies were using a gold refinery in 

North Korea in violation of the U.S. embargo. 196 But companies are claiming that 

this was simply a reporting error. 197 

AU of this suggests that the results of the conflict-minerals rules are a faint 

shadow of the controversy that has surrounded the initiative ever since Congress 

approved the original legislation over four years ago. This is a troubling 

conclusion, not only for those concerned with conflict minerals and the humanrights abuses related thereto, but also for those looking at the regulation as a model 

for future supply-chain transparency efforts. If there is a silver lining, however, it 

is that the data at least provides a starting point for an investigation into what went 

wrong. 

III. Why the Conflict-Minerals Filings Proved Unilluminating 

A review of the filing data suggests that the conflict-minerals rules have so 

far been a disappointment. This conclusion leads to two related questions: what 

explains the lackluster first-year filings and what, if anything, should be done to 

lay the groundwork for better results in the future? In this Part, I address the former 

question. I argue that the flawed and incomplete disclosures can be attributed to 

194 See generally ENOUGH PROJECT, GETTING TO CONFLICT FREE: ASSESSING 

CORPORATE ACTION ON CONFLICT MINERALS (2010), available at http://www.cnough 

project.org/files/publications/corporate action-l.pdf. 195 See, e.g., Joe Mont, First Co~jlict Minerals Reports Lack Substance, if Filed at 

All, COMPLIANCE WEEK (June 10, 2014), http://www.complianceweek.com/news/newsbullctin/first-conflict-minerals-reports-lack-substance-if-filed-at-all-O; Elena Popina, Intel, 

HP Seen as Exceptions in Conflict-Mineral Reports, BLOOMBERG BUSINESSWEEK (June 3, 

20 14 ), http://www .businessweek.com/news/20 14-06-02/intel-hp-seen-as-exceptions-inconflict-mineral-reports; As June 2nd Conflict Minerals Deadline Approaches, Global 

Witness Warns That First Reports Lack Substance, GLOBAL WITNESS (May 29, 2014), 

http://www.globalwitness.org/library/june-2nd-conflict-minerals-deadline-approachesglobal-witness-warns-first-reports-lack. 196 See Jamila Trindle, U.S. Companies Still Puzzling Over North Korean Gold 

Question, FOREIGN POLICY (June 5, 2014), http://www.foreignpolicy.com/articlcs/20!4/06/ 

05/us 19~ompanies _still _puzzling_ over_ north _korean _gold_ qucst.ion. 

!d. 
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2015] TilE CONFLICT MINERALS EXPERIMENT 35:56 

difficulties inherent in the naming-and-shaming approach to regulation, a failure to 

draft rules that maximize this approach's potential despite such difficulties, and a 

halfhearted corporate compliance effort. This theory of regulatory failure, along 

with information gleaned from the filings themselves, then informs the reform 

proposals I present in the Part that follows. 

A. The Difficulty of Naming and Shaming Conflict-Mineral Users 

The central shortcoming of the conflict-minerals filings is that they fail to 

provide the information necessary to name and shame companies sourcing from 

militarized mines. This is likely because a number of factors conspire against 

successful naming and shaming in this arena. The approach works best when the 

culpable can be clearly identified and separated from the rest, and when the latter 

face severe public sanction. 198 The use of conflict minerals does not present the 

ideal circumstances for either. 

Parties are easier to single out for undesirable conduct when the wrongful 

behavior can be identified without the cooperation of those same parties. Those 

fearful of being named and shamed have a large incentive to make the relevant 

information difficult to obtain. Naming and shaming conflict-mineral users through 

self-reporting was thus destined for resistance. 

Naming and shaming also works better if the repercussions for culpability 

are significant. This incentivizes parties to undertake the steps necessary to clear 

their name. Companies, however, could not be sure this was the case with conflict 

minerals. Undoubtedly, some shareholders and customers are deeply concerned 

about the humanitarian crisis in the region and are committed to ethical 

sourcing. 199 But conflict minerals do not appear to be a top social issue. The 

legislation did not stem from a public outcry; nor has one greeted the leaden 

filings. 200 If people are not clamoring for the elimination of conflict minerals, then 

companies are less likely to undertake potentially costly efforts to avoid their use. 

A regulatory approach that relies on companies to implicate themselves is 

an inherently weak starting point, which likely provides part of the answer for why 

the reports arc unsatisfying. Weak starting points, however, are commonplace in 

198 See Scott L. Cummings, The Internationalization of Public Interest Law, 57 DUKE 

LJ. 891, 1014 (2008) (naming and shaming has more "resonance" when the activity 

"arouses international outrage"). 199 See John Bagwell, Congo Activism in the Face of the Chamber of Commerce's 

Lawsuit, RAISE HOPE FOR CONGO (Oct. 26, 2012), http://www.raisehopeforcongo. 

org/blog/post/congo-activism-face-chamber-commerce%E2%80%99s-lawsuit-O 

(discussing a shareholder proposal at Cisco related to conflict minerals); Dipietro, supra 

note 11 (discussing support for the conflict-minerals rules from socially conscious 

investing groups); List of Initiatives, RAISE HOPE FOR CONGO, http://www.raisehopefor 

congo.org/content/initiatives/list-initiatives (last visited Nov. 24, 2014) (discussing support 

for the rules on college campuses). 200 See Woody, supra note 4, at 1325-·27. 
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extraterritorial contexts such as this, where more hardline alternatives-like 

embargos or direct intervention-present a host of more significant problems. The 

challenge then is to recognize and respond to the difficulties inherent in the 

naming-and-shaming approach. As discussed below, lawmakers did poorly in this 

regard. 

B. Shortcomings in the Implementation of Naming and Shaming 

Even though naming and shaming presents difficulties in this context, the 

rules could have been drafted so as to provide a great deal more illumination. The 

manifold gaps in the reports suggest that the rules failed to perceive and take steps 

to mitigate the incentives for minimal compliance and failed to structure the 

compliance obligations in a way that maximizes transparency. 

One way to incentivize compliance is to severely penalize failure to do so. 

This would tilt the corporate cost-benefits analysis more in favor of the rules. But 

neither Congress nor the SEC included any specific fines for delinquent or evasive 

companies. Failure to make the appropriate conflict-minerals filing or to include 

the required content is subject to the same sanction as any other missed reporting 

obligation. The basic penalty is a $100 per day of tardiness. 201 Rather innocuous. 

The penalties escalate for more egregious conduct, but these are unlikely 

to be triggered. For example, missing reporting obligations could lead to a 

suspension of trading.202 But the SEC only has authority to pursue this action to 

protect investors203-and their wellbeing as traditionally conceived is not 

implicated here. The final rules also make clear that the filings are subject to socalled Section 18 liability.204 This cause of action, however, which is triggered by 

material misstatements, is rarely used because of its strict requirements.205 While 

fraud liability under Rule lOb-5 still looms/06 firm conduct so far does not rise to 

this level. 

It is also highly questionable whether the SEC would expend resources 

ferreting out and bringing enforcement proceedings against defiant companies. As 

noted above, the Chairwoman herself expressed regret over her agency's mandated 

201 Securities Exchange Act of 1934 § 32(b), 15 U.S.C. § 78f1~b) (2011). 202 15 U.S.C. 781(j). 203 /d. For a broader discussion of penalties available to the SEC for failure to meet 

reporting obligations, see I BRENT A. OLSON, l PUBLJCLY TRADED CORPORATIONS: 

GOVERNANCE & REGULATION § 6:28 (2d ed. 2014); ROBERT J. WILD, CORPORATE 

COMPLJANCE SERIES: DESIGNING AN EFFECTIVE SECURITIES AND CORPORATE 

GOVERNANCE COMPLIANCE PROGRAM § 1:154 (20 13 ). 204 Conflict Minerals, 77 Fed. Reg. 56,274, 56,304 (Sept. 12, 2012) (codified at 17 

C.F.R. pts. 204.13p-l & 249b.400). 205 See id. at 54,349 n.8l3; DAY PITNEY LLP, CONFLICT MINERALS PROVISION OF THE 

DODD-FRANK ACT MAY RESULT IN SECTION 18 CIVIL LIABILITY l--2 (20 12), available at 

http://www.daypitney.com/ncws/docs/dp 4294.pdf. 206 - - 17 C.F.R. § 240.10b-5 (2013). 
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2015] THE CONFLICT MINERALS EXPERIMENT 37:56 

involvement with these rules.207 Commissioners of the SEC have also made their 

dissatisfaction clear.208 All of this sends a signal to companies that compliance 

with the conflict-minerals rules is low on the agency's radar. Indeed, it is hard to 

picture an agency that sees itself as the investor's guardian devoting its limited 

resources to the pursuit of companies that fail to draft meaningful human-rights 

disclosures. The absence of stricter penalties and the hints of SEC indifference 

likely contributed to an impression that noncompliance would be tolerated. 

Not only did the rules fail to signal the importance of compliance, they 

also lacked key transparency requirements for the companies to comply with. One 

problem that becomes evident in the filings is the level of generality at which the 

companies described their products. If the rules are at least partially aimed at 

consumers, then they need to be able to tell which particular goods are 

problematic. But the high-level descriptions found in company filings make this 

difficult. 209 The vexing ambiguity can be traced back to the SEC's reluctance to 

provide specific guidance to companies on how to describe their products. 2 J

0 

Asking companies to disclose the facilities and countries of origin of their 

conflict minerals also proved problematic. The key miss was to frame the rule in 

such a way as to suggest that this information only need be provided if the 

companies could actually link specific minerals to specific products. As noted 

above, the structure of corporate supply chains and the nature of the information 

provided to downstream companies prevented many filers from making a clean 

connection, giving them plausible grounds for leaving this information out.2ll 

Failure to appreciate how this central disclosure requirement fit with the 

pragmatics of supply-chain diligence is thus a big reason why the filings are so 

thin. 

This same oversight also undermined the sorting ability of the rule. Even 

though most companies chose not to use the "conflict undeterminable" label, 

almost all of them nevertheless concluded that they were unable to determine the 

conflict status of their products.212 This is perfectly understandable given the 

above. If companies could not link specific minerals to specific products, then the 

conflict status of such products would be undeterminable. It, therefore, appears that 

a subtle wording choice not only explains the omission of key supply-chain 

information, but also why so many of the companies' conclusions were essentially 

identical. 213 

207 See supra note 90 and accompanying text. 208 See Kester, supra note 11. 209 Anything that drives up the transaction costs of discovering which companies and 

products are problematic dampens the efficacy of the rules. See Schwartz, supra note 112, 

at 376 (discussing a transaction-cost boundary on market forces). 210 See supra text accompanying note 59. 211 See supra text accompanying notes 171-172. 212 See supra text accompanying notes 166-167. 213 The universality of this conclusion also suggests that companies did not view the 

chance of being one of the first to be certified as conflict free to be worth the expense of 
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What also stands out from reading the reports is that they are muddled, 

redundant, and difficult to compare. Much of this can be traced back to the 

structure of the rules. One of the rules' key features is the distinction between two 

concepts-the reasonable country of origin inquiry and due diligence. 214 In the 

SEC's eyes, the latter is supposed to be a more in depth version of the former. 215 

But in practice the concepts essentially merge. It would not be efficient for 

companies to conduct two rounds of inquiry; it makes sense for them to ask for all 

of the information at once. And this is what they did. The same CFSI survey was 

used to shed light on all of the relevant sourcing information.216 

The merging of the two concepts led companies to repeat themselves in 

their filings. It also made filings challenging to compare, as some companies listed 

an activity as part of its RCOI while others listed the same thing as part of its due 

diligence. Compliance would have been more streamlined had the SEC never 

invented the RCOI concept. 

This ephemeral distinction is also the conceptual undergirding of another 

core redundancy-the two-tiered reporting structure. The idea was that companies 

would report on their RCOI in the Form SD217 and their due diligence in the 

Conflict Minerals Report.218 Since these two investigations have collapsed into 

one, there is no need to have two separate reports. One filing that discusses a 

company's supply-chain inquiry would suffice. 

Yet more redundancy is built in via the requirement that companies 

describe their efforts to uncover the "mine or location of origin [of their conflict 

minerals] with the greatest possible specificity."219 This obligation seems to be 

completely swallowed by a company's duty to describe their due diligence into 

"the source and chain of custody of [the company's] conflict minerals."220 Perhaps 

there is an abstract distinction in that companies are to go into more depth in 

describing this singled-out aspect of their diligence, but this did not play out in the 

reports and it is difficult to conceptualize how it could. 

Finally, the OECD Guidance is itself a source of confusion and 

duplication. As noted above, step two of the guidance, identifY and assess supply 

chain risk, and step four, perform audits of smelters in the company supply chain, 

the prerequisite audit. 214 See Fonn SD, supra note 26, at Item I.Ol(a) (pertaining to the RCOI); id. at Item 

l.Ol(c) (pertaining to due diligence); supra text accompanying notes 28-56. 215 See Form SD, supra note 26, at Item l.Ol(c). 216 Also, as noted earlier, although the rules left open the possibility that companies 

could reverse the conclusion of their RCOI in their due diligence, this never occurred. See 

supra text accompanying notes 122-123. This further suggests the merger of these two 

inquiries in practice. 217 Fonn SD, supra note 26, at Item l.Ol(a)-(b). 218 ld. at Item l.Ol(c). 219 !d. at Item l.Ol(c)(2). 220 !d. at Item l.Ol(c). 
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2015] THE CONFLICT MINERALS EXPERlMENT 39:56 

focus on understanding company processing facilities. 221 In practice, most firms 

addressed both steps by referencing the results of the CFSI audits.222 To signal 

compliance with each, some firms noted twice in their reports that they consulted 

the CFSI audit list.223 The final OECD step--publicly report on due diligence-is 

completely redundant with the regulations themselves.224 Out of an abundance of 

caution, however, some firms listed this step and reported meeting it by filing the 

Conflict Minerals Report. 225 

The failure to give the rules teeth and the drafting oversights that allowed 

companies to avoid providing key information stand out as the central problems 

with implementation of the naming-and-shaming approach. The sloppiness in the 

rules, however, is troubling in its own right because it bred reports that suffered 

from the same flaw. By paving the way for disclosures that were difficult to absorb 

and compare, the regulations undermined the very market processes on which they 

depend for their efficacy. 

C. Reluctant Compliance 

The final explanation for the opaque filings has to do with the behavior of 

the regulated entities. Companies responded to the rules' flawed incentive structure 

in the way one would expect: they put forth an uninspired compliance effort. Firms 

interpreted language in the rules in ways that frustrated their transparency goals, 

they simply failed to comply with the enumerated requirements, and many failed to 

file at all. 

For the most part, companies took full advantage of the flexibility granted 

to them in how to describe their products. Firms were not required to list their 

goods at the highest level of generality; they did so because they could. And in so 

doing, companies made it more difficult for activist consumers to single out 

products for boycott. Firms also overwhelming embraced a narrow reading of the 

requirement to report facility and country-of-origin information with respect to 

their products. The claim that they could not link specific minerals to their goods 

may be true, but failing to include this information when they had it at their 

disposal certainly runs counter to the spirit of transparency that motivated the 

rules. More firms could have acted like the few that provided this data with a 

caveat to reflect their uncertainty. 

221 See supra text accompanying notes 154--155. 222 See supra text accompanying note 156. 223 See, e.g., EMC Corp., supra note 142, at 6; Macy's, Inc., supra note 142, at 4; 

Western Digital Corp., Conflict Minerals Report (Fonn SD exhibit 1.02), at 5-6 (June 2, 

2014). 224 OECD GUIDANCE, supra note 37, at 19. 225 See, e.g., Ford Motor Co., Conflict Minerals Report (Fonn SD exhibit 1.02), at 3 

(May 28, 2014); Google Inc., Conflict Minerals Report (Fonn SO exhibit 1.02), at 3 (June 

2, 2014); Under Annour, Inc., supra note 189, at 4. 
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While it is perhaps unsurprising that companies largely chose to hue to the 

letter of the law rather than its spirit, in this case there was also a high level of 

noncompliance. Table 4 illustrates just how spotty the overall compliance effort 

was. Only about one-half of companies complied with the OECD instructions to 

set up a grievance mechanism and alter their supplier contracts?26 And only 30% 

said they set up a risk management plan.227 Moreover, companies unable to 

determine the conflict status of their minerals were required to report on what they 

will do better in the future. Many listed action items that were clearly required in 

year one, implicitly acknowledging a compliance gap. 228 The enthusiasm with 

which companies dove into the rules' loopholes projects an air of cynicism and 

their failure to comply with even ministerial requirements of the OECD Guidance 

reflects a sort of casualness not usually seen in SEC filings. 

And all of this says nothing of those who filed nothing. As mentioned 

above, far fewer companies filed reports than the SEC anticipated.229 The agency 

arrived at its figure by adding up companies within industries most likely to have 

products containing conflict minerals.230 Although the SEC could have made some 

adjustments, the approach is reasonable, and it is hard to see how this logic could 

have led the agency so far astray.231 The most obvious explanation seems to be that 

companies failed to comply.232 

While the above analysis supports the claim that corporations are to blame 

for the unsatisfying first-year filings, it also reveals that the full answer is more 

complex. They simply responded to the incentives baked into the naming-andshaming approach by taking advantage of ambiguities and oversights in the rules 

implementing it. Thus, while we may want corporations to act like saints, their 

226 See Table 4, supra Part ILB.2. 227 See Table 4, supra Part II.B.2. 228 See supra text accompanying note 184. 229 See Table 1, supra Part II.A. 230 The SEC's estimate of 5,994 total filers comes from aggregating the estimates of 

three different types of filers: domestic issuers (which file Fom1 10-Ks), foreign private 

issuers (which file Form 20-Fs), and Canadian issuers that utilize the Multijurisdictional 

Disclosure System (which file Form 40-Fs). See Conflict Minerals, 75 Fed. Reg. 80,948, 

80,966 & n.l76 (proposed Dec. 23, 2010)(to be codified at 17 C.F.R. pts. 229, 249b) 

(estimating 5,551 !0-K filers); id. at 80,967 & n.l79 (estimating 377 20-F filers); id. at 

80,967 & n.l82 (estimating 66 40-F filers). 231 Even though the final rules were narrower than those proposed, the SEC did not 

revise its estimate. See. e.g .. Conflict Minerals, 77 Fed. Reg. 56,274, 56,350 (Sept. 12, 

2012) (codified at 17 C.F.R. pts. 204.13p-l & 249b.400) (eliminating the requirement that 

mining companies file conflict-minerals disclosures). 232 The data analyzed herein sheds little light on which companies are flaunting the 

rules by failing to file conflict-minerals disclosures. The only hint comes from the analysis 

of filers by industry SIC code. See Table 2 supra Part II.A. and text accompanying notes 

106-109. Where a high percentage of companies in a particular industry filed, it may be the 

case that the non-filers are violating the rules. Follow-up with these companies is likely the 

only way to tell whether their conduct is justified. 
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2015] THE CONFLICT MINERALS EXPERIMENT 41:56 

shortcomings here can be seen as a reasonable, if not eminently rational, response 

to the incentive structure regulators created. 

IV. SUPPLY-CHAIN TRANSPARENCY THROUGH REFORM 

The first-year filings failed to provide the information necessary for the 

conflict-minerals rules to work as intended. Knowing this, there are a spectrum of 

alternatives available to Congress and the SEC. In this Part, I analyze and 

ultimately reject the two extreme options--maintain the status quo and repeal the 

rules. Rather, I argue that the information contained in the filings, together with the 

theory of regulatory failure just described, suggest how the rules can be reformed 

in a way that sheds a great deal more light on the conflict-mineral supply chain 

without increasing compliance costs. 

A. Maintain the Status Quo? 

At this point, one potential avenue would be to do nothing, to maintain the 

status quo. There are several potential arguments for this approach-all of which 

are addressed below-but the main one is that the conflict-minerals rules need to 

be given time to work. It could be argued that over time companies will improve 

their compliance efforts and the international institutional framework necessary for 

conflict-free sourcing and proper due diligence will continue to improve. Sticking 

with what we have, therefore, makes sense. 

While it would be nice if this were true, such hopes appear fanciful. There 

is little reason to suspect that the corporate response or the institutional structure 

would significantly improve if the current rules were left in place. In coming years, 

corporations would be faced with the same incentive to shirk that they faced this 

year. And the muted response to their subpar first-year reports would give them no 

reason to try harder. In fact, their resolve in token compliance would have been 

strengthened because their suspicion that nobody would call them out on their 

behavior would have been proven right. 

A potential counterargument is that things will be different in coming 

years because the rule itself becomes more stringent once the ramp-up period 

expires. According to this logic, the stricter requirements would provide more 

transparency even if companies remain uncooperative. 

Looking at how the rules would change, however, shows that this is a false 

hope. Substantively, the expiration of the ramp-up would mean that corporate duediligence efforts would have to be audited.233 While this would surely improve the 

quality of the reports somewhat, the results would likely be insignificant. An audit 

means that companies would have to check all of the boxes in the OECD 

Guidance. Companies would be forced to put in place risk management plans and 

233 Form SD, supra note 26, at Item l.Ol(c)(l)(ii)(A); id at Instruction 2 to Item 1.01. 
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grievance mechanisms?34 But changes like these do not address the core problems 

in the rules. More uniform adherence to these procedural technicalities would do 

little to improve supply-chain transparency. 

There is also a distinct possibility that the Circuit Court holding gets 

overruled.235 The ruling is under reconsideration, and there is even the possibility 

of Supreme Court review after that. 236 If the rules were returned to their original 

form, would this render them effective? 

A decision to overrule would mean the return of the SEC's labeling regime 

in the mandated reports. Companies would be required to list their products as 

"not... 'DRC conflict free"' or "conflict undeterminable." Adding such labels, 

however, would do little to improve corporate filings. Even though the majority of 

companies did not use any particular label in this year's version, it was clear that 

almost all of them would have chosen "conflict undeterminable." Forcing them to 

actually say this changes nothing. 

Assuming the rules were restored to their original form, when the ramp-up 

period expired, this "conflict undeterminable" category would become unavailable. 

All of the companies that today fall into this category would thus be forced to say 

they are "not... 'DRC conflict free."' While this label has more of a negative 

connotation, firms would be permitted to explain that they are choosing it because 

it is the only option for those that have not been able to definitively establish that 

they are conflict free. 237 These explanations should negate any impact of the 

change. The bottom line is that so long as the nature of corporate compliance 

remains unchanged, it does not matter what company products are labeled in their 

reports. 

If things are allowed to continue as they are, the other side of the 

equation-the institutional framework supporting conflict-free sourcing-is also 

unlikely to improve. The key is the CFSI audit program. If the number of smelters 

certified as conflict-free grows, then more companies would be able to report that 

they are conflict free and there would be more choices for those firms that aspire to 

join them. 238 But the notion that this program would grow with the current rules in 

234 OECD GUIDANCE, supra note 37, at 17-!8. 235 See Yin Wilckzek, In Strategic Move, SEC Petitions for Rehearing of Conflict 

Minerals Case, BLOOMBERG BNA (June 6, 2014), http://www.bna.com/strategic-move-secn 17179891084/. 236 See Hunton & Williams LLP, When Can Companies Be Forced to Say What They 

Don't Want To Say?, LEXOLOGY (Oct. 9, 20!4), http://www.lexology.com/library/detail. 

aspx?g=dc7c l399-3c5f-4657 -b3df-59572dc5dfc4. 237 Conflict Minerals, 77 Fed. Reg. at 56,322 n.562. 238 At last count, there were 128 certified smelters and refiners: 22 CFSI-certified tin 

facilities, Conflict-Free Tin Smelters, CFSI, http://www.conflictfreesourcing.org/tinconflict-free-smelters/ (last updated Dec. 15, 2014); 41 CFSI-certified tantalum facilities, 

see Conflict-Free Tantalum Smelters, CFSI, http://www.conflictfreesourcing.org/tantalumconflict-free-smelters (last updated Dec. 17, 2014); 9 CFSI-certified tungsten facilities, 

Conflict-Free Smelter Program Tungsten Smelter List, CFSI, http://www.conflict 
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place is dubious. CFSI audits are expensive for the smelters and refiners.239 It is 

possible that those firms that think the expense worthwhile have already gone 

through the process. Also, firms may have borne the expense expecting there to be 

more demand from U.S. firms for conflict-free minerals. Given the nature of 

compliance, this appears to have been a miscalculation. The filings contain little to 

suggest corporations are significantly altering their sourcing practices.240 Such a 

tepid reaction to the rules must give pause to those smelters and refiners 

considering whether to go through the costly process. Moreover, audits must be 

renewed annually.241 In light of the above, processing facilities that are currently 

certified as conflict free may question whether it is worth the effort and expense to 

maintain their status. While Section 1502 may have provided a jolt to the audit 

effort, if nothing is done to the current rules, it would likely face headwinds in the 

future. 

There is also one further argument that could be made for the status quo, 

which is that the rules are actually working. One could claim that although the 

reports have proven to be unhelpful, the specter of compliance has already led to 

important changes. There have been claims, for instance, that the mere presence of 

the legislation has led to a two-tiered market in certain conflict minerals, with 

those traceable to conflict-free mines going for much more than the rest.242 The 

discount applied to untraced minerals aligns with the rules' goal of decreasing the 

funding available to Congolese militant groups. 243 

Even if this is so, however, the lack of substance in the reports changes 

everything. Now that it is evident that companies are not taking the rules seriously, 

the price discrepancy- and any other positive changes along these lines-should 

evaporate. The increased price of traceable minerals can be viewed as a bubble. 

freesourcing.org/tungsten-conflict-free-smelters/ (last updated Dec. 13, 2014); and 56 

CFSI-certified gold facilities, Conflict Free Gold Refiners, CFSI, http://www.conflict 

freesourcing.org/gold-conflict-free-smelters/ (last updated, Dec. 10, 2014). 239 Despite Mounting Costs, Conflict-Free Minerals Catch On, MONITOR GLOBAL 

OUTLOOK (July 7, 20 14), http://www.monitorglobaloutlook.com/Briefings/20 14/07 I 

conflict-minerals (describing costs of up to $1 million per year). 24° Cf Christoph Vogel & Ben Radley, In Eastern Congo, Economic Colonialism in 

the Guise of Ethical Consumption?, W ASII. POST (Sept. I 0, 20 14), http://www.washington 

post.com/blogs/monkey-cage/wp/20 14/09/l 0/in-eastem-congo-economic-colonialism-inthe-guise-of-ethical-consumption/ ("almost no corporate stakeholder . . . has visibly 

engaged in eastern Congo to help Congolese actors comply with regulations, improve labor 

security, or increase decent livelihoods."). 1 41 

• LEVIN ET AL., supra note 37, at 44 tb1.5. 242 FIDEL BAFILEMBA ET AL., THE IMPACT OF DODD-FRANK AND CONFLICT MINERAL 

REFORMS ON EASTERN CONGO'S CONFLICT 2, 8 (2014), available at http://www.enough 

project.org/files/Enough%20Project%20-%20The%20Impact%20of"lo20Dodd-Frank%20 

and%20Conflict%20Minerals%20Refonns%20on%20Eastem%20Congo%E2%80%99s% 

20Conflict%2010June20l4.pdf; but see LEVIN ET AL., supra note 37, at 38 n. 138 (citing 

field research indicating that uncertified minerals sometimes go for higher prices). 243 See id at 2. 
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Like overzealous stock-market investors predicting a market shift, it looks as 

though intermediaries in the conflict-mineral supply chain predicted that U.S. 

companies would demand conflict-free minerals to comply with the rules. 

Anticipating their ability to pass on the cost, they bid the prices up. But the reports 

give scant indication that companies are moving in this direction. That being the 

case, the disappointing reports should cause the price of conflict-free minerals to 

decline like stock prices when subpar earning are announced. 

The status quo, therefore, has little appeal. Most likely, companies would 

continue to go through the motions without providing much illumination, and in so 

doing they would stall any momentum for change that Section 1502 had originally 

engendered. 

B. Repeal the Conflict-Minerals Rules? 

Another socially minded Dodd-Frank rule, the requirement that companies 

disclose the pay ratio of their executives versus their rank-and-file employees, is 

under congressional reconsideration.244 Perhaps the conflict-minerals rules should 

be next. There are two arguments for repeal--that the rules are ineffective and that 

they do more harm than good. 

One could argue that since the conflict-minerals filings are not yielding the 

type of information that would lead to market pressure and reformed sourcing, they 

should be rescinded. Even though countless dollars and hours have been spent on 

drafting and compliance, these costs are sunk and therefore irrelevant. 

Repeal is likely better than maintaining the status quo, where money 

would continue going toward compliance with little coming in return. But such a 

response is premature. Rather than look at the conflict-minerals rules as an ali-ornothing proposition, these rules can be seen as version 1.0. An improved iteration 

can be produced based on the results of this one. As I argue below, while the 

filings shed little light on conflict-mineral supply chains, they do provide insight 

into how the rule itself can be salvaged. If the rules are adjusted and evidence 

shows that they are still not working, then further reform or even repeal may be the 

best solution. 

There is also an argument that the rules should be repealed because they 

are actually worsening conditions in the Congo. As I noted earlier, some have 

lamented that these rules have caused a de facto embargo of the region, which has 

plunged local conflict-free miners deeper into poverty_245 

The idea that the rules are having this unintended consequence is 

worrisome. But it is also contestable. The Enough Project, for instance, claims that 

they have seen "electronics companies . . . expanding [their] minerals sourcing 

244 Emily Chasan, Legislators Take Aim at Dodd-Frank Pay-Ratio Rule, WALL ST. J. 

BLOG (June 20,2013,3:15 AM), http:l/blogs.wsj.com/cfo/2013/06/20/legislators-take-aimat-dodd-frank-pay-ratio-rule. 245 See supra notes 85-88 and accompanying text. 
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from the Congo."246 In discussing the de facto embargo, a leading critic 

acknowledges that, "as with most data in the ... Congo," displacement figures "are 

extremely difficult to verify" and "[t]here are no polls or surveys showing ... 

reliable figures on how many miners are out of work" as a result ofDodd-Frank.247 

There is also a problem with causation. A lot has happened in the Congo 

that might explain any movement away from Congolese minerals or displacement 

of local miners. 248 In 20 l 0, for instance, the president of the DRC issued a ban on 

mining in two of the country's provinces?49 Moreover, there have been an 

astounding number of international efforts, aside from Dodd-Frank, aimed at 

cutting off funding from militarized mines in the region.Z50 These efforts might 

also explain any decreased demand for Congolese minerals. 251 

In addition, the idea that there is a de facto embargo attributable to DoddFrank conflicts with the data in the disclosures. Nothing therein suggests that 

companies are abandoning the region. 252 If there is really some semblance of a de 

facto embargo and Section 1502 is to blame, it is not because U.S. companies are 

leaving the Congo, it is because intermediaries have anticipated that they will, and 

have adjusted their practices accordingly. Once it becomes clear that companies 

are not actually demanding conflict-free minerals, the pressure to abandon the 

region should dissipate. In a strange twist, because the rules in their current form 

are ineffective, it makes little sense to blame them for a de facto embargo or 

adverse effects on individual and family mines. 

Finally, even if Dodd-Frank or other transparency etTorts are decreasing 

demand for Congolese minerals, the answer is not necessarily to dismantle such 

initiatives. Another alternative is to complement these programs with others that 

provide assistance to displaced miners. Indeed, human-rights groups and scholars 

246 BAFILEMBA ET AL., supra note 242, at 3. See also Myth Buster, supra note 92 

("Major international companies have recently begun to engage in responsible sourcing 

programs in some areas of Congo."). 247 Seay, supra note 85, at 14 n.33. 248 See generally BAFILEMBA ET AL., supra note 242. 249 Seay, supra note 85, at 13. 250 See DOMINIC JOHNSON, No KIVU, NO CONFLICT? 9-12 (April 2013), available at 

http://goodelectronics.org/news-cn!new-report-from-pole-institute-about-conflict-mineralsfrom-congo/at_ download/attachment. 251 See KEN MATTHYSEN & ANDRES ZARAGOZA MONTEJANO, 'CONFLICT MINERALS' 

INITIATIVES IN DR CONGO: PERCEPTIONS OF LOCAL MINING COMMUNITIES 8 (2013), 

available at http://www.ipisresearch.be/publications detail.php?id=426. 252 In fact, some companies acknowledged the ~isk of a defi1cto embargo and pledged 

not to contribute. See, e.g., Microchip Technology Inc., Conflict Minerals Report (Form 

SD exhibit 1.02), at 5 (June 2, 2014); Seagate Technology pic, Conflict Minerals Report 

(Form SD exhibit !.02), at 9 (May 30, 2014); Uroplasty, Inc., Conflict Minerals Report 

(Fonn SD exhibit 1.02), at 3 (June 2, 2014); cj Ken Tysiac, Conflict Minerals Rule Poses 

Compliance Challenge, 1. OF ACCOUNTANCY (Apr. 2013), available at http://www.joumal 

ofaccountancy.com/Issues/20!3/Apr/20127083.htm ("So far, it appears that companies are 

trying to source their minerals without causing harm to the entire region."). 
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that have raised concerns about Dodd-Frank's potential de facto embargo have 

pointed to programs such as these-rather than repeal-as the right solution.253 

C. Reforming the Conflict-Minerals Rules 

The first-year filings were a failure in that they did not produce 

information capable of being used to name and shame companies. But they made 

two contributions that are essential to a well-grounded reform proposal. They 

revealed what companies were able to uncover about their supply chain even with 

minimal effort and they provided the basis for identification of the problematic 

aspects of the regulatory framework. An understanding of what companies can 

ascertain and a theory of where the current rules missed the mark are the key 

precursors to reform. 

1. Getting the Incentives Right 

The first thing that needs to be addressed is the incentive problem at the 

heart of the rules. Companies naturally resist revealing negative-or even 

potentially negative-information about themselves, but this is necessary for the 

rules to work.254 As noted above, one way to combat this predilection is to provide 

for specific and large penalties for noncompliance with these rules. 255 Companies 

would be inclined to put more effort into their due diligence if they suspected real 

penalties for failure to do so. Along the same lines, companies seem to be under 

the impression that, when it comes to conflict minerals, the SEC is not inclined to 

pursue the remedies currently at its disposal. 256 The agency has a built in 

mechanism to reverse this impression: it frequently signals its enforcement 

priorities to the securities bar and can include conflict minerals the next time that it 

does so. 257 

2. Disclose or Explain 

The substance of the rules also needs to be changed. The overarching 

framework should be one where firms are required to disclose key aspects of their 

supply chain and, where they lack the necessary information, are provided the 

opportunity to explain the gap and detail any anticipated steps to close it. 

253 See BAFILEMBA ET AL., supra note 242, at 14-15; Seay, supra note 85, at 25. 254 See supra Part III. A. 255 See supra text accompanying notes 201-206. 256 See supra text accompanying notes 207-208. 257 See, e.g., Christian Bartholomew et al., Wei! Gotshal Discusses SEC Speaks 2014: 

Charting a New Course for Enforcement Efforts, CLS BLUE SKY BLOG (Apr. I, 2014), 

http://clsbluesky .law .columbia.edu/20 14/04/0 1/weil-gotshal-discusses-see-speaks-20 14-

charting-a-new-course-for-enforcement-efforts/. 
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2015] THE CONFLICT MINERALS EXPERIMENT 47:56 

The entire effort starts with the firm's products, which must be clearly 

disclosed. The discretion given to companies today to describe their products as 

they see fit should be eliminated.258 For consumers to better discern what is 

happening on a product-by-product basis, they need specific brand information. 

The SEC should, therefore, require that companies include it. 

The next step is to mandate that companies link these clearly identified 

products to the smelters and refiners in their supply chain. One thing that becomes 

clear in the reports is the importance of these processing facilities to the conflictfree effort. Even though companies av~ided .disclosin9 ~eir. s~elters ~nd refiners, 

many acknowledged that they could Identify them.- This IS crucial because, 

thanks to the CFSl audit program, companies need go no further to determine that 

their products are conflict free. The processing facility is the place where top-down 

and bottom-up diligence converge. The CFSI audit determines whether the supply 

chain reaching this point is conflict free. 260 Since conflict minerals cannot enter the 

supply chain after processing, once companies identify that their products are only 

incorporating materials from conflict-free smelters or refiners, they can declare 

their goods to be conflict free as well. 

A key argument against the rules has been that it is almost impossible for 

companies to determine the conflict status of their products.261 While it is perhaps 

not feasible for companies to reach all the way to the mines on their own, the CFSI 

audit program means they do not have to. Supply-chain transparency is therefore 

possible, but the rules need to be specifically structured around the only realistic 

way to achieve it. 

This means that the requirements should be changed so that companies are 

clearly required to reveal smelter information. All that needs to be done to close 

the loophole in the current rules is to require that companies list all smelters and 

refiners in a particular product's supply chain regardless of whether they can 

determine if minerals from a particular processing facility made it into the 

particular product. The rules should further instruct fim1s to organize their list 

according to the type of mineral processed in each facility. Firms would thus be 

required to describe each product that incorporates conflict minerals, the particular 

conflict minerals in each product, and the smelters or refiners that potentially 

processed each of those minerals. 

Not all companies would be able to provide smelter and refiner 

information. Their suppliers might be unwilling to disclose or unwilling to take the 

steps necessary to make such data available.262 To address this, the rules should 

258 See supra note 59 and accompanying text. 259 See supra text accompanying note 156. 260 See BAFILEMBA ET AL., supra note 242, at 7; BAYER, SU'Pra note 79 at 28. ~ ' - See supra note 84 and accompanying text. 262 Many companies with gold in their supply chain would have difficulty identifying 

their processing facilities. A large portion of the world's gold is sold through the Shanghai 

Gold Exchange or commingled therewith. This market, however, does not keep records 

with regard to where its gold is processed or sourced. See COMMERCE REPORT, supra note 
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give companies unable to provide this information the opportunity to explain why 

and what steps they are taking to improve their ability to provide it in the future. 

Future plans, for instance, might include switching suppliers or including 

contractual language in future supply agreements mandating that suppliers provide 

processing-facility information. 

In addition, the key piece of information is whether the smelters aud 

refiners that a company lists have been CFSI-certified as conflict free. 

Corporations should therefore be required to disclose whether this is the case. 

Since CFSI makes their results publicly available, all companies that have 

identified their smelters and refiners, should also be able to provide their conflict 

status. 263 

Since only 128264 out of over 300 smelters and refiners have been 

audited,265 large companies with diverse product lines likely source from both 

audited and unaudited processing facilities. To accommodate these companies, the 

rules should provide firms that have unaudited facilities in their supply chain the 

opportunity to explain why and if they have any plans to change their sourcing 

practices. 266 

The same disclosure rules should apply for more detailed information as 

well, including the country and mine of origin of a company's conflict minerals, 

and whether mines in a corporation's supply chain are under the control of armed 

groups. Many companies declined to reveal country-of-origin information based on 

a narrow reading of the rules rather than ignorance.267 Moreover, CFSI-certified 

smelters and refiners must have provided both country and mine-of-origin 

information to the CFSI auditor.268 And to certify the smelter, the auditor must 

have been able to verify who controls the mines. This shows that information all 

the way back to the mine is available at least with respect to some products for 

some firms. It is just a question of getting it into the reports. If companies are able 

to obtain this information, they should sort it by smelter. If they are unable to, then 

just as above, they should be given the opportunity to explain why and what, if 

anything, they are doing to further future efforts to obtain this information. 269 

2l,at2. 263 See Conflict-Free Smelters & Refiners, CFSI, http://www.conflictfreesourcing.org/ 

conflict-free-smelter-refiner-lists/ (last visited, Dec. 16, 2014). 264 See supra note 238. 265 The exact number is unknown. The GAO counted 287, but said there are believed 

to be almost 500. GAO REPORT, supra note 43, at 3-4. The Commerce Department 

identified over 300. See COMMERCE REPORT, supra note 21, at tables 1-4. 266 Companies that have both certified and uncertified smelters in their supply chainbut process most of their conflict minerals through the former-may wish to explain that 

this is the case. 267 See supra text accompanying notes 177-178. 268 See BAFILEMBA ET AL., supra note 242, at 7; BAYER, supra note 79, at 28. 269 CFSI publicly identifies certified smelters, but it only makes country-of-origin 

information available to its members. Reasonable Country of Origin Inquiry Data, CFSI, 
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2015] THE CONFLICT MINERALS EXPERIMENT 49:56 

All of this required information should be presented in a flowchart or 

outline depending on the complexity of a company's supply chain. A flowchart 

would start with a particular product. It would then list the conflict minerals 

therein, processing-facility information (along with audit status), country-of-origin 

information, and mine-of-origin information (along with what group is in control). 

As shown in the example below, the flowchart would clearly show the lineage of 

each mineral in each product. Many companies would likely have blanks in this 

diagram. In a narrative accompanying it, companies would be free to explain them 

and describe what steps, if any, they are taking to better their understanding. An 

outline would follow the exact same organization and provide the exact same 

opportunity for explanation. 

Figure 2: Conflict-Minerals Flowchart 

r· .. ···~~L-~--· 

!Smelter B ! (CFSI 

!Company' 

iProductA i 

1 Certified) ,_~,..,.,;,¢ 

Tin 

http://www.conflictfreesoureing.org/rcoi-data/ (last visited Dec. 22, 2014). Membership 

costs $5,000 annually. Benefits of Membership in the Conflict-Free Sourcing Initiative, 

CFSI, http://www.conflictfreesourcing.org/membership/ (last visited Dec. 22, 2014). In 

addition, some companies reported that CFSI tells its members the category of countries 

from which a smelter or refiner sources rather than the specific nation. See, e.g., Ecolab 

Inc., supra note 152, at 5-6. If this is the case, then CFSI would have to be willing to share 

more infom1ation to provide the level of granularity sought in this proposaL 
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By asking for detailed supply-chain information, this approach allows 

companies that are conflict free to stand out. It also exposes those that are using 

facilities that have chosen not to go through the CFSI audit and those that know 

little about their supply chain. This is actual naming and shaming. Consumers and 

shareholders would be able to sort companies based on real information about their 

sourcing practices and diligence efforts. 

In addition, under this approach, there would be no need for any type of 

complex labeling regime. In fact, the SEC's attempt to sort companies into 

categories was a mistake, a gross oversimplification of supply chains and corporate 

efforts to disentangle them from human-rights abuses. Companies have varying 

levels of commitment to the idea of ethical sourcing and have had varying levels of 

success in achieving it. The SEC's labels fail to appreciate these distinctions and 

create categories that are at best unhelpful and at worst deceptive. Rather than 

force things into categories, this proposal brings out the details of corporate supply 

chains. The only labeling rules should be that companies should not be permitted 

to call their products conflict free unless they have only conflict-free smelters and 

refiners in their supply chain and should not be able to declare themselves conflictfree unless all of their products meet this criterion. 

As noted throughout the discussion above, the rules contain opportunities 

for companies to explain gaps in their knowledge or shortcomings in their sourcing 

practices. This feature causes the approach set forth above to resemble a so-called 

"comply-or-explain" framework. With comply-or-explain regulation, companies 

are given the choice to comply with a legal rule or explain why they are opting 

out. 270 Similarly, under this disclose-or-explain approach, companies are required 

to disclose the information that they can obtain or explain why they are 

uninformed. They are also given the opportunity to provide context for revelations 

that might cast them in a negative light. Giving companies this opportunity allows 

consumers and shareholders to better assess which companies align with their 

social goals. Firms with legitimate excuses and tangible plans would come out 

looking much better than those that respond with platitudes. Requiring detailed 

disclosures, but providing ample opportunity for explanations, effectuates the 

overarehing purpose of the rules in that it provides as much information as possible 

for concerned stakeholders. 

In addition, even though this revised template would result in far more 

transparency, it would not require additional effort by the regulated entities. It is 

not as if companies chose to disclose abstract product categories because it would 

be too expensive to ascertain and reveal the brands within. Companies were 

intentionally vague to reduce any chance of reprisal. Similarly, many companies 

were able to identify smelters and countries of origin, but chose not to disclose. It 

would not cost these companies more to make this information available. 

270 See Mark J. Roe, Legal Origins, Politics, and Modern Stock Markets, 120 HARV. 

L. REv. 460, 474-75 (2006). 
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2015) THE CONFLICT MINERALS EXPERIMENT 51:56 

In fact, this refonn proposal blesses certain cost-saving practices that firms 

employed in the first year and saves firms money in other ways. The original 

roles----and much of the controversy surrounding them-were built on the premise 

that individual firms would undertake costly efforts to trace their conflict minerals 

back to their source. In practice, firms outsourced the expense to CFSI. This makes 

sense because centralizing efforts through an institutional mechanism is both a 

more efficient and effective approach. Under this proposal, therefore, firms would 

be explicitly relieved of any obligation to replicate CFSI's efforts. 

Reliance on this institutional mechanism also calls into doubt the for-nowdelayed requirement that firms have their due-diligence efforts audited. When 

firms are expected to trace minerals all the way to mines on their own, it may make 

sense to require oversight of this process. If this is now the job of an institution 

designed solely for this purpose-and firms only need to conduct sufficient 

diligence to identity their smelters and refiners-then firm-level audits seem 

unnecessary. Firms should be permitted to have their efforts audited if they think 

the cost is worth the signal of seriousness it sends to the public, but it should not be 

mandated. 271 

The structure set out above would also eliminate the redundancies and 

clutter that mar the current framework and drive up compliance costs. As alluded 

to above, the distinction between the RCOI and due diligence is meaningless and 

should be abandoned.272 The way to fix this is to eliminate the RCOI concept. 

Under the new framework, companies would just conduct due diligence into their 

supply chains and disclose the results in an outline or flowchart. If companies are 

not sourcing from the region, this would become clear from the information 

therein. Once firms conclude that they are not involved in the area, they would not 

be required to inquire into the identity of the mines in their supply chains or into 

who runs those operations. They could also report that they are conflict free. Once 

the RCOI is eliminated, there is also no need for a separate Form SD and Conflict 

Minerals Report. One filing would suffice. 273 

Under this revised framework, there would be no need to rely on the 

OECD Guidance. Much of what it calls for would be naturally included in 

company efforts to explain gaps in their supply chain. A risk-mitigation plan, for 

instance, would be something concerned companies would no doubt describe if 

forced to reveal the use of uncertified processing facilities. Instead of incorporating 

271 Another problem with the audit requirement is that, once in place, it would create 

an incentive for firms to source from outside the region, thereby amplifying concerns about 

a de facto embargo. As currently written, firms that only file a Form SD because they do 

not obtain minerals from the conflict area are not required to obtain an audit and are 

thereby saved the expense. See Form SD, supra note 26, at Item l.Ol(c)(l)(ii) (requiring an 

audit for the Conflict Minerals Report). 272 See supra text accompanying notes 214-216. 273 Along the same lines, the redundant requirement to describe efforts to determine 

country- and mine-of-origin information with specificity should be deleted. See supra text 

accompanying notes 219-220. 
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the entirety of the OECD Guidance, the SEC could point companies to it as a 

useful resource; disclosure mandates regarding specific details on corporate 

diligence could take its place. For example, firms should be required to discuss 

whether they used the CFSI questionnaire or some other mechanism to trace their 

conflict minerals. If they surveyed their suppliers, they should be required to 

disclose their follow-up procedures and their response rate. Such information 

would not necessarily appear in corporate efforts to explain supply-chain gaps, but 

should be included because it illustrates the seriousness of a company's 

investigation. 

The chief way this reform proposal improves upon the current rules is by 

doing a better job of fitting the regulatory demands to the realities of conflictmineral supply chains and corporate due-diligence practices. The filings largely 

fail in their intended purpose, but they provide a sliver of transparency that gives 

insight into how the rules can be mended to achieve this fit. Though the reform 

proposal presented in this Part is by no means a panacea, it has the potential to 

yield far more promising information and drive more ethical sourcing practices.274 

At the same time, because it asks companies to reveal more rather than do more, it 

should not drive up compliance costs-its simplified structure may even translate 

to savings. 

3. Concerns with the Disclose-or-Explain Template 

The most poignant concerns about this approach revolve around the 

content and trustworthiness of the resulting filings and the potential unintended 

consequences of the new rules. While the worries have merit, none is severe. 

The first concern is that corporations would respond to the disclosures 

mandated in this proposal with the same type of unintelligible boilerplate with 

which they greeted the current rules. While this is the course some would no doubt 

choose, the incentive structure in this template should make doing so much less 

prevalent. By raising the stakes of noncompliance, the proposed rules would make 

it less appealing to include nonresponses in corporate filings. In addition, under the 

current rules, companies can blend in by offering evasive and vague answers. This 

would not be an option, however, under the proposal. 

274 It is beyond the scope of this article to analyze fully whether each of the suggested 

changes would require amended legislation or could be accomplished solely through SEC 

rulemaking. Many of the suggestions, however, appear to be within the SEC's power. For 

instance, the RCOI concept, the reliance on the OECD Guidance, and the two-tiered 

reporting structure were all SEC inventions. On the other hand, some of the 

recommendations herein would need congressional approval. The audit requirement, for 

example, was specifically included in the Section 1502. See Dodd-Frank, Pub. L. No. 11 I203, § 1502, 124 Stat. 1376, 2213 (2010) (codified at 15 U.S.C. § 78m(p) (2012)). The 

SEC would not have authority to unilaterally remove it. See Chevron U.S.A., Inc. v. 

NRDC, 467 U.S. 837, 842-44 (1984) (setting out the boundaries of agency discretion). 
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2015] THE CONFLICT MINERALS EXPERIMENT 53:56 

Most importantly, companies would have to disclose their use of smelters 

or refiners that have not been cleared as conflict free. Many companies probably 

would have a good reason for relying on such facilities. For example, they may be 

in a long-term supply contract with firms that source from them. They may also 

plan to reassess this relationship when the contract expires. This is information 

that, under the proposed rules, corporations would want to include. Failure to do so 

would risk sanction by dissatisfied consumers or shareholders. This stands in 

contrast to today where companies can avoid providing any of this information 

with little risk of blowback. Because the proposed rules would clearly ask for the 

most important information, and provide companies with ample opportunity to 

explain weaknesses, those that shirk would be far easier to identifY. They would, 

therefore, be far less tempted to do so. 

Another concern has to do with the faith put in the CFSI audit program. 

CFSI is an industry organization and there is the potential that it seeks to appease 

industry members by setting a low bar for certification. Indeed, the ability of CFSI 

to successfully declare smelters and refiners conflict free to a certain extent belies 

the claims of those who argue that successful tracing of minerals to their source is 

nearly impossible.275 

While this is not a concern that can be dismissed, at this point it is 

speculative. The risk at issue here-really one of industry capture-is always 

present with regulation. Regulation occurs in spite of industry capture, and all 

lawmakers can do is acknowledge the risk and design institutional 

countermeasures. While capture potential may appear particularly pronounced in 

this case, there has been no indication that the audit process is compromised. 

Human rights groups celebrate its actions.276 Moreover, compliance with the rules 

would reveal whether anything sinister is occurring. The rules require disclosure 

not only of the conflict-free label, but also of the country and mine of origin of the 

275 See supra note 84 and accompanying text. The Commerce Department, which 

Dodd-Frank instructed to list "all known conflict mineral processing facilities worldwide," 

caused a stir when it claimed that it could not ascertain which facilities were contributing to 

armed conflict in the Congo. See Dodd-Frank,§ !502(d)(3)(c); COMMERCE REPORT, supra 

note 21, at I; Emily Chasan, 'Conflict Minerals' Too Hard to Track, Commerce 

Department Says, WALL. ST. J. (Sept. 5, 20!4, 5:57PM), http://blogs.wsj.com/cfb/2014/09/ 

05/conflict-minerals-too-hard-to-track-commerce-department-says/. This admission should 

be given little weight, however, because the department appears to have merely aggregated 

preexisting smelter lists rather than conduct independent research and analysis. See 

COMMERCE REPORT, supra note 21, at l-3. 276 See, e.g., Conjlici-Free Smellers for All Four Conflict Minerals, ENOUGH PROJECT 

(Jan. 31, 2014), http://www.enoughproject.org/blogs/conflict-free-smelters-all-four-conflict 

-minerals-first-time; see also LEVIN ET AL., supra note 37, at 47 (describing CFSI, the 

institution responsible for the audit program, as "one of the most utilized and respected 

resources for companies addressing conflict minerals issues."). A part of the conflict-free 

certification process, iTSCI, which monitors mines and traces conflict minerals, see id. at 

36-37, has been criticized-not for lack of independence-but because of the costs it 

imposes on miners and its limited reach. See Vogel & Radley, supra note 240. 
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54:56 6 HARV. Bus. L. REV. (forthcoming 2015) [2015 

minerals processed in the smelters and refiners. NGOs with knowledge of the 

Congo would be able to see if any of the minerals-and therefore any of the 

processing facilities-had been miseharaeterized. 

A final concern has to do with the potential for a de facto embargo. I 

argued above that because the current rules appear to be unsuccessful in altering 

corporate sourcing practices, there is little concern that Dodd-Frank compliance is 

a long-term threat to legitimate mining in the Congo. 277 The de facto embargo 

concern resurfaces if the current rules are swapped out for ones that work. In 

particular, this proposal creates pressure on companies to choose conflict-free 

smelters and refiners. Perhaps many of these processing facilities are conflict free 

because they do not source from the region.278 Or perhaps the easiest way for 

smelters and refiners to become conflict free is to process minerals solely from 

other areas. These companies might, therefore, abandon the region to respond to 

demand for certified facilities. Thus, if the proposal is successful, the de facto 

embargo concern rises anew. 

The worry that the regulations would hurt those who it is aimed to help is 

no doubt troubling, but once put in the proper context, it is far less fearsome than it 

first appears. Properly viewed, the potential injury to individual and family miners 

is a potential cost of the rules. As such, it should be weighed against its benefits. 

The real question is whether the marginal loss to these miners, who must seek 

other employment, is larger than the gains in cutting off the funding to warring 

Congolese groups. 279 This question is unanswerable in the abstract, but the filings 

would provide a market-based mechanism for doing so. 

The filings would show which companies are using conflict-free 

processing facilities that source from the region and which are using conflict-free 

processing facilities that source from elsewhere (with the benefit of multiple years 

of disclosures, readers would even be able to see if smelters and refiners become 

conflict-free by fleeing the Congo). Socially motivated shareholders and 

consumers would care not only about the conflict-free status, but also about how 

the status is achieved, and reward or punish companies accordingly. These 

individuals would likely not be inclined to reward companies that use smelters and 

277 See supra text accompanying notes 246-253. 278 Some commentators have suggested this may be the case, but have stopped short 

of presenting evidence. See, e.g., MATTHYSEN & ANDRES ZARAGOZA MONTEJANO, supra 

note 251, at 9 (claiming that "most smelters decided to stop sourcing from the DRC to 

enable them to acquire 'conflict-free smelter' status."); Aronson, supra note 4 (asserting 

that "the smelting companies that used to buy from eastern Congo haves stopped"). One 

commentator discusses the departure of the Malaysian Smelting Corporation from the 

region; but it looks like the company has recently reversed course. Compare Seay, supra 

note 85, at 15, with MSC to Invest in DR Congo Smelter, INDUS. TECH. RESEARCH lNST. 

(June 6, 2012), https://www.itri.co.uk/index.php?option=com zoo&task=item&item id= 

2455&ftemid=143. Moreover, nothing in the filings suggests thi~ is occurring. - 279 The loss to the miners is a subject of debate. Compare BAFILEMBA ET AL., supra 

note 242, at 3, with Seay, supra note 85, at 14. 
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2015) THE CONFLICT MINERALS EXPERIMENT 55:56 

refiners that have taken the easy way out and thus there would be no incentive for 

the processing facilities to do so. If, however, companies did see some gains with 

these concerned constituents even when they choose smelters or refiners that left 

the region, then it would indicate that those most concerned about these issues 

believe that firms that use processing facilities that exited the Congo are still better 

actors than those that continue to use uncertified smelters and refiners. The logic of 

naming and shaming relies on the decisions of these individuals. Who better to 

make the cost-benefit calculation regarding the overall social impact of leaving the 

regioni80 

Finally, after only a few years it would become apparent from the filings 

whether smelters are fleeing. Since this would be the result of socially driven 

market forces, however, it would not mean that the rules should be changed. The 

appropriate response would be for human-rights groups to build assistance and 

jobs programs for displaced miners-and, at this point, they would have data to 

support their pleas for funding. In the end, as with all attempts to regulate, there are 

risks-of failure, industry capture, and unintended consequences-that accompany 

this proposaL But none of them stain its potential efficacy. 

D. Implications for other Supply Chain Transparency Efforts 

While this Article has focused on assessing and improving the U.S. 

conflict-minerals rules, the analysis and proposals carry implications for U.S. 

states and other countries currently considering similar actions, both with respect 

to conflict minerals and with respect to other unethical sourcing practices.281 As it 

pertains to conflict minerals, rather than copy current U.S. federal law, concerned 

governments should, as in the above template, seek transparency on smelters and 

refiners in corporate supply chains and leverage institutional efforts to certify them 

as conflict free. They should also provide ample opportunity for companies to 

explain knowledge gaps or practices that raise concerns. 

More broadly, rules designed to name-and-shame companies into more 

socially responsible sourcing practices need to have teeth and they need to be 

tailored to closely reflect how the relevant supply chains work and what companies 

can be expected to know about them. Regulated entities will not do the work of the 

regulators. Rather, they should be viewed as uncooperative witnesses. Lawmakers 

must ask pointed and relevant questions or else they will come back emptyhanded. Companies must also fear reprisal. Therefore, in contrast to what 

happened with Section 1502, the task of regulation and enforcement should be 

280 While individual shareholders and consumers could inform themselves through 

these filings, it is more likely that human-rights groups and other concerned intermediaries 

would distill the information and make recommendations that drive their decisions. This 

market dynamic cannot function today because the disclosures offer so little to go on. Cf 

Ronald J. Gilson & Rcinier H. Kraakman, The Mechanisms of Market Efficiency, 70 VA. L. 

REv. 549 (1984) (discussing the role ofintem1ediaries in efficient stock markets). 281 See supra text accompanying notes 95-97. 
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56:56 6 HARV. BUS. L. REV. (forthcoming 2015) [2015 

assigned to a body that empathizes with the social goals instead of one that 

begrudgingly takes on the duties. 

CONCLUSION 

So far, the debate about the conflict-minerals rules has offered more 

polemics than insight. A review of the filings themselves, however, provides an 

abundance of data about the efficacy of the rules and how they could be improved. 

Section 1502 and the SEC rules that bring it to life fail in their principal goal of 

naming and shaming companies that source minerals from militarized mines in the 

Congo. While this failure supports the legislation's repeal, I argue that a close read 

of the filings points to a better alternative. 

Rather than give up on the worthwhile goal of fighting human-rights 

abuses in the Congo, the rules can be reformed so as to demand the transparency 

that failed to materialize in the first-year reports. To do this, the central 

requirement should be that corporations disclose the identity and conflict status of 

the facilities that process their conflict minerals. These pieces of information are 

largely obtainable and illuminate corporate supply chains more than a thousand 

other details. While supply chains would not become conflict free overnight, such 

revelations would provide concerned shareholders and consumers with the 

information necessary to apply the type of pressure that leads to change. 

(This Article may not be copied without the written permission of the Harvard 

Business Law Review.) 
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99780.104

COMMITTEE ON FINANCIAL SERVICES 

MONETARY POLICY AND TRADE SUBCOMMITTEE 

HEARING ON "DODD-FRANK FIVE YEARS LATER: WHAT HAVE WE 

LEARNED FROM CONFLICT MINERALS REPORTING?" 

TESTIMONY OF KAREN E. WOODY 

ASSISTANT PROFESSOR OF BUSINESS LAW AND ETHICS 

KELLEY SCHOOL OF BUSINESS, INDIANA UNIVERSITY 

NOVEMBER 17,2015 

Chainnan Huizenga, Ranking Member Moore and members of the Subcommittee, thank 

you for the invitation to appear before you today. My name is Karen Woody. I am an 

Assistant Professor of Business Law and Ethics at the Kelley School of Business at 

Indiana University. I have researched and written about the mandate and role of the 

Securities and Exchange Commission, particularly in enforcing Section 1502 ofDoddFrank.1 I also teach classes on corporate and securities law. I am honored to appear 

before you today, along with this panel of distinguished experts. 

My remarks are focused on the SEC's role in implementing and enforcing Section 1502. 

In particular, I will address the suitability of the SEC as the agency tasked with 

promoting humanitarian policy objectives, and the implications of extending disclosure 

mandates similar to the conflict minerals disclosure requirement. 

Background 

The Securities and Exchange Commission was founded in 1934 and bestowed by 

Congress with a three-pronged mission: (l) protecting investors; (2) maintaining fair, 

orderly, and efficient markets; and (3) facilitating capital fonnation. The focus of the 

mandate is the creation and preservation of market integrity. In other words, the SEC was 

created to help assure investors that their investments are safe. Markedly absent from 

this congressional mandate is any administrative authority or charge to effect 

international, diplomatic, or human rights-oriented goals. 

The mandate is met, in theory and practice, by the establishment of a rigorous disclosure 

regime. Disclosure regulations assist with the accurate valuation of securities, boost 

investor confidence, and incentivize corporate managers to behave diligently. The SEC 

mandate --market transparency, fairness, and investor protection-- is achieved through 

this dissemination of material infonnation to investors. 

1 Conflict Minerals Legislation: The SEC's New Role as Humanitarian and Diplomatic 

Watchdog, 81 Fordham L. Rev. 101 (2012); Securities Laws as Foreign Policy, 15 Nev. L. J. 297 

(2014). 

1 
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99780.105

As the SEC states on its own website: "The laws and rules that govern the securities 

industry in the United States derive from a simple and straightforward concept: all 

investors, whether large institutions or private individuals, should have access to certain 

basic facts about an investment prior to buying it, and so long as they hold it."2 

Companies are required to make certain statutorily-mandated disclosures, triggered by 

events such as issuing new securities or electing new management. In addition to these 

disclosures, publicly traded companies must disclose any information considered 

material. Neither Congress, the SEC, nor the Supreme Court defined "material 

information" until 1976, when the Court held that a material fact is one that "would have 

been viewed by the reasonable investor as having significantly altered the 'total mix' of 

information made available." 3 This was generally understood to mean information that 

significantly affected a company's financial performance and consequently translated 

into stock market gains or losses. 

The SEC, through its regulations, also has implicitly defined material information as 

information that bears on the economic value of an investment. The SEC's understanding 

of the materiality standard is that a reasonable investor "generally focuses on matters that 

have affected, or will affect, a company's profitability and financial outlook."4 

SEC's Inabilitv to Regulate or Measure Humanitarian and Diplomatic Goals 

Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act is not 

a financial regulation, but rather a provision aimed at ending the atrocities of a war 

occurring seven thousand miles from Wall Street. Indeed, the SEC's proposed rule stated 

exactly that point: 

It appears that the nature and purpose of the Conflict Minerals Provision is 

for the disclosure of certain information to help end the emergency 

humanitarian situation in the eastern DRC that is financed by the 

exploitation and trade of conflict minerals originating in the DRC 

countries, which is qualitatively d(fferent from the nature and purpose of 

the disclosure of information that has been required under the periodic 

reporting provisions of the Exchange Act. 5 

Assigning the SEC with oversight of conflict minerals disclosure is well beyond the SEC 

mandate and overextends the agency in ways that could prove harmful to its sole mission: 

investor and market protection, and capital formation. 

2 The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and 

Facilitates Capital Formation, SEC, http://www.sec.gov/about/whatwedo.shtml (last visited Nov. 

12, 2015) 3 TSC Industries v. Northway, Inc., 426 U.S. 438 (1976). 4 Memorandum from David B.H. Martin, Dir., Div. of Corp. Fin., U.S. Sec. & Exch. Comm'n, to 

~aura Unger, Acting Chair, U.S. Sec. & Exch. Comm'n (May 8, 2001) (emphasis added). 

Conflict Minerals Proposed Rule, 75 Fed. Reg. 80,948, 80,960 (proposed Dec. 23, 2010) 

(codified at 17 C.F.R. pts. 229, 249b) (emphasis added). 

2 
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99780.106

When tasking an agency to work towards a goal outside of its mandate and outside of its 

expertise, the agency and the population it is designed to protect are losing out in two 

ways: ( 1) by losing the opportunity that the proper agency (i.e., one with the particular 

expertise and resources) and its experts would achieve the goal in a more efficient and 

more successful manner; and (2) by reducing the ability of the mis-tasked agency to do 

its best with the proper tasks it should be accomplishing. In other words, by tasking the 

SEC with regulation such as that of conflict minerals, one is foregoing the opportunity 

that another agency, such as the Department of State, can design a better solution to 

achieve the humanitarian goals of the provision. Moreover, there is an increased risk that 

the SEC will not have sufficient resources to accomplish the goals for which it was 

created; in practicality, this means that the risk of another Enron or Madoff scandal 

increases because the agency is overextended. 

Even if the SEC had the resources and expertise to handle enforcement of Section 1502, 

the structure of the legislation is one that makes regulation ineffective. For instance, what 

is the consequence for a company that uses conflict minerals, and then complies with 

Section 1502 and discloses this fact? In such a situation, the SEC plays no role because 

the company has complied with regulatory standards. Ostensibly, a company can file a 

conflict minerals report with the SEC, publish the report on its website, and cross its 

fingers hoping that there is no public backlash that affects its bottom line or its brand. 

From a public international law standpoint, it would seem that the possibility of a 

remorseless, albeit SEC-compliant, company reduces the legislation to a toothless tiger. 

Based on citizen outcry related to conflict minerals, however, it is very possible that the 

"name and shame" aspect of the legislation could prove to be effective in creating 

transparent supply chains. This would be a positive result, but one that does not reach the 

stated goal of the legislation. The stated goal of Section 1502 is reduction of violence in 

Congo. Unfortunately, the SEC is not capable ofmcasuring or quantifying that goal, or 

assessing its progress towards that goal. The result of this is that the goal of the law is 

unrealized, while the SEC and issuing companies expend vast resources in an attempt to 

meet this inherently elusive goal. 

Effect of Increasing Disclosure Requirements for Nonmaterial Information 

Section 1502 added a provision to Section 13 of the Exchange Act of 1934. Section 13 of 

the Exchange Act includes the list of mandatory disclosures that issuing companies must 

make. Amending the securities laws, in this case Section 13 of the Exchange Act, to 

include the conflict minerals disclosure requirement is not in keeping with the traditional 

understanding or function of disclosure requirements. As T mentioned earlier, companies 

are required to disclose all material information. The ultimate question, therefore, is 

whether the use of conflict minerals is material information. In practicality, this question 

is moot because disclosure is now statutorily required, rather than being analyzed in 

principle. Meaning, the threat of noncompliance with the statute puts a company on the 

hook for disclosing information regarding conflict minerals, regardless of whether that 

information is actually material. 

3 
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99780.107

However, it is worth considering the implications of requiring disclosure of arguably 

nonmaterial information. Statutorily requiring disclosure, rather than trusting companies 

to perform a qualitative assessment of materiality of corporate infonnation, can result in 

an overload of information for investors. In such a situation, an overabundance of 

information is functionally the equivalent of providing no information, because vast 

swaths of information cannot practically be processed by investors. Further, there is an 

increased risk that the principle-based analysis of materiality gets dismissed in favor of 

disclosure regime more akin to a Napoleonic code, in which companies merely will check 

the box for each statutorily-required disclosure. 

Absent the statutory requirement in Section 1502, information about conflict minerals 

likely would not meet the threshold for materiality. Conflict minerals disclosure is not a 

financial disclosure. Disclosure of social and environmental information is typically not 

required because that information, to date, has not been regarded as relevant or material 

to the financial condition of a company. As I noted earlier, the SEC regulations, while 

not explicitly adopting an economic standard for materiality, implicitly define material 

information as that which bears on the economic value of an investment. 

For example, consider the scenario in which a company files a conflict minerals report 

with a clear misstatement of fact, and is sued by a shareholder for that misstatement. The 

materiality question that would be paramount to the analysis of such a case is whether the 

shareholder could prove loss, or loss causation. Loss is typically proven by evaluating 

the change in stock price when the issuer makes various announcements, such as the 

corrective disclosure. In the case of conflict minerals, it seems unlikely that such a 

disclosure would drastically move a company's share price. As a result, a shareholder 

would not be able to prove that the misstatement of information was material enough to 

create any financial or economic loss. 

Proponents of Section 1502 and other measures enhancing disclosure requirements point 

out that the general public's increased awareness of conflict minerals has rendered it 

material information. The general public, however, is not the constituency of the SEC; 

investors are. That is, the SEC was created to protect those who own Apple stock, not 

everyone who owns an iPhone. If the SEC administered its regulations with an eye 

toward protecting all citizens, rather than only shareholders, it would be difficult to 

maintain capital formation and to balance the requirements of the agency's mandate. For 

this reason, the SEC has never waded very far into regulation of human rights or foreign 

policy. Furthermore, requiring the SEC to enforce these disclosure requirements 

stretches thin an already overburdened agency, and demands that it oversee diplomatic 

and humanitarian regulations for which it lacks the subject matter expertise and 

enforcement resources. 

Thank you again for the invitation to testifY today. I welcome any questions you may 

have. 

4 
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99780.108

Statement for the Record 

of Linda Menghetti Dempsey 

Vice President, International Economic Affairs 

National Association of Manufacturers 

For the Hearing of the House Committee on Financial Services 

Subcommittee on Monetary Policy and Trade 

on "Dodd-Frank Five Years Later: 

What Have We Learned from Conflict Minerals Reporting" 

November 17,2015 
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99780.109

Statement for Record by 

Linda Menghetti Dempsey 

Vice President, International Economic Affairs 

National Association of Manufacturers 

For the 

Hearing of House Committee on Financial Services 

Subcommittee on Monetary Policy and Trade 

on "Dodd-Frank Five Years Later: 

What Have We Learned from Conflict Minerals Reporting" 

November 17, 2015 

The National Association of Manufacturers (NAM) is the largest and oldest industrial 

trade association in the United States, representing small and large manufacturers in every 

industrial sector and in all 50 states. Its membership includes both large multinational 

corporations with operations in many foreign countries and small and medium manufacturers 

engaged in international trade on a more limited scale. Our members depend heavily on the 

global supply chain to compete within the U.S. marketplace and abroad. NAM members have a 

strong track-record of working with the U.S. government to improve supply chain transparency 

and compliance practices. 

The overly burdensome, and challenging requirements of Section 1502 of the DoddFrank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") have had a 

negative impact on U.S. manufacturers operating globally. 

The Oodd-Frank Act was enacted by Congress and signed into law by President Obama 

in 2010. Section 1502 of the Act requires that companies publicly traded in the United States 

annually report to the SEC any use of conflict minerals in their supply chains. It defines "conflict 

minerals" as "columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives" 

(which are commonly referred to as tantalum, tin, gold and tungsten, respectively, or 3TG), and 

it directs companies to disclose whether those minerals originated in the Democratic Republic of 

the Congo (DRC) and its adjoining nations- Angola, Zambia, Tanzania, Rwanda, Burundi, 

Uganda, South Sudan, Central African Republic, Republic of the Congo and Cameroon. In 

August 2012, the SEC promulgated rules outlining how publicly traded companies should 

comply with the Dodd-Frank Act 

While the NAM supports the underlying objective of Section 1502 of the Dodd-Frank Act 

to address the atrocities occurring in the DRC, the NAM and our member companies of all sizes 

and across all industry sectors have deep and serious concerns that Section 1502 of the Act 

has created a hugely burdensome, unworkable, and unfeasible system with which industry must 

comply. 
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99780.110

In particular, the disclosure requirements laid out by the SEC: 

Pose a huge financial, reporting, and auditing burden on reporting manufacturers, 

given the breadth of use of the 3TG minerals throughout the manufacturing process 

and the depth, complexity, and constantly evolving nature of modern supply chains. 

Many companies have thousands of multi-tier suppliers for their products. Tulane 

University's business school has issued a series of studies on Section 1502 of the 

Dodd-Frank Act, which have found that it would cost industry almost $8 billion to 

implement, and that publicly traded companies "worked a combined 6,139,983 

hours" on the first annual filing alone.' 

Affect thousands of small- and medium-sized companies not subject to SEC 

reporting because they supply large, publicly traded companies and are asked by 

those issuers to conduct the due diligence required by the rule. Downstream users 

are forced to rely almost entirely on the due diligence of their suppliers throughout 

the supply chain, even when they have limited or no influence on those smaller firms. 

Moreover, years of experience have made clear that smelters and refiners are 

almost invariably unable or unwilling to disclose the mines of origin of the ores they 

purchase, despite very extensive efforts from downstream industry to elicit such 

disclosure. As a result, the disclosure mandated by Section 1502 of the Dodd-Frank 

Act has failed to obtain the desired results. The most recent study conducted by the 

United States Government Accountability Office (GAO) of the first year by U.S. 

publicly traded companies, found that "[m]ost [filers] were unable to determine 

whether [their] minerals came from [the Democratic Republic of the Congo], and 

none could determine whether the minerals financed or benefited armed groups .. "2 

Are not consistent with the realities of global supply chains, and fail to acknowledge 

the practical limitations that issuers face in attempting to gather information, let alone 

influence the behavior of other parties in supply chains that stretch from downstream 

users across multiple tiers. Moreover, NAM member companies' supply chains, like 

those of other businesses, are not static but dynamic, as companies continuously 

seek new suppliers with better products or more competitive prices or delivery terms 

to deliver value for their customers. 

Are questioned by the very officials at the SEC charged with implementing them. In 

an Oct. 3, 2013 lecture at Fordham University, Chair Mary Jo White made the 

following statement regarding the conflict minerals rules: 

" ... other mandates, which invoke the Commission's mandatory 

disclosure powers, seem more directed at exerting societal pressure on 

companies to change behavior, rather than to disclose financial 

information that primarily informs investment decisions ... As the Chair of 

the SEC, I must question, as a policy matter, using the federal securities 

1 "A Critical Analysis of the SEC and NAM Economic Impact Models and the Proposal of a 3nd Model in view of the 

Implementation of Section 1502 of the 2010 Dodd-Frank Wall Street Refonm and Consumer Protection Act." Tulane 

University (Oct 17, 2011). "Dodd-Frank Section 1502: Post-Filing Survey 2014," Tulane University (2014). 2 "SEC Conflict Minerals Rule: Initial Disclosures Indicate Most Companies Were Unable To Detenmine the Source of 

Their Conflict Minerals." Government Accountability Office (August 2015). 

2 
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99780.111

Conclusion 

laws and the SEC's powers of mandatory disclosure to accomplish these 

goals."3 

On behalf of our 14,000 member companies, the NAM cannot overstate the detrimental 

impact that Dodd-Frank Act has had on the competitiveness of manufacturers in the United 

States. 

3 Remarks by SEC Chair Mary Jo White at Fordham University on "The Importance of Independence," (Oct. 3, 2013). 

3 
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99780.112

ASSODIP 

ASSOCIATION FOR THE DEVELOPMENT OF THE INITIATIVES OF THE PEOPLE 

Congolese Human Rights NGO' 

Goma, 15 November 2015 

Object : Public declaration to the House Financial Services Subcommittee on 

Monetary Policy and Trade - on the subject of Section 1502 and supply chain due 

diligence 

Dear Chairman Huizenga, Ranking Member Moore and Members of the 

Subcommittee: 

With this declaration I would like to congratulate the American people for the interest 

that they have shown towards the Congolese people, of whom the human rights have 

been violated over a period of many years. These violations have a direct link with 

the control and exploiation of natural resouces by local and foreign armed ground 

aas well as certain members of the Congolese army. 

Section 1502 of the Dodd Frank Act is aimed at reducing or, better, stopping these 

multiple violations of Congolese human rights that are engendered by the natural 

riches bequeathed to them by their ancestors. In this respect, I call on the Securities 

and Exchange Commission to do everything to ensure that this law is implemented 

by American companies who use minerals from the Democratic Republic of Congo 

and the Great Lakes region. It would also be worth reflecting on the monitoring 

mechanisms that exist in the upstream part of the supply chain at this point. This is 

with an eye to seeking proper reassurance that supply chain due diligence norms are 

being respected. In my opinion, closer attention here would be useful and would be 

for the good of the Congolese communities who have, for a longtime now, suffered 

from the conflict linked to their minerals and for whom the term 'development' 

remains an empty word. 

For ASSODIP asbf 

MURAIRI BAKIHANA YE Janvier 

Adresse: Avenue Goma, n" 43 Quartier Himbi, Commune de GOMA 

Ville de Goma, Nord-Kivu/Republique Democratique du Congo 

Tel. +243997250214 E-mail: assodipkivu@yahoo.fr 

B.P. 348 Gisenyi /Rwanda 
146 


99780.113

November 17,2015 

"Dodd-Frank Five Years Later: What Have We Learned from Conflict Minerals Reporting?" 

Financial Services Subcommittee on Monetary Policy and Trade 

Conflict-Free Campus Initiative Statement 

Submitted for Congressional Record 

Dear Chairman Huizenga, Vice Chairman Mulvaney, Ranking Member Moore, and Members of the 

Subcommittee: 

We are writing to express our support for Section 1502 of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act and the corresponding Conflict Minerals Rule promulgated by the Securities 

and Exchange Commission. As student leaders with the Conflict-Free Campus Initiative- a joint 

initiative led by the Enough Project's Raise Hope for Congo campaign and STAND, the student-led 

movement to end mass atrocities -this legislation is a crucial component to our mission to support peace 

in the Democratic Republic of Congo. 

We work with university administrators, student governments, and our local communities to enact 

measures that pressure electronics companies and other relevant industries to help end the conflict 

minerals trade and responsibly invest in Congo's minerals sector. So far, 19 universities, colleges, and 

high schools have passed resolutions to this effect, and students from more than 175 schools across the 

United States, Canada, and the United Kingdom have participated in the campaign. Our goal is to bring 

attention to the consumer link between conflict minerals and the financing of armed groups in Congo, 

while also advocating for additional reforrns that will benefit Congolese communities. 

The reports companies are required to submit under Dodd-Frank 1502 and the corresponding Conflict 

Minerals Rule provide a critical resource for our school administrations to assess which companies are 

working towards the goal of sourcing conflict-free minerals from Congo and, therefore, help institutions 

make purchasing decisions. Additionally, as concerned consumers ourselves, we value the transparency 

provided by these reports that allows us to be better informed buyers. 

Conflict minerals are not the only source of funding to armed groups in Congo, but they are some ofthe 

most lucrative. The connection between conflict minerals in Congo and products such as cell phones, 

laptops, and jewelry means that we as have the opportunity to leverage our consumer power to ensure our 

purchases fund sustainable peace in Congo, not conflict. In order tor this process to unfold, Dodd-Frank 

1502 and the corresponding Conflict Minerals Rule must be fully implemented, not abandoned, and 

strengthened with livelihood projects and additional support to mining communities in Congo. 
147 


99780.114

We urge the members of the Subcommittee to reaffirm the intentions of Dodd-Frank 1502 to improve the 

transparency of corporate supply chains, and reduce the profits gained by armed actors in Congo from the 

minerals trade. 

Thank you for your time, your leadership, and your consideration of this important initiative. 

Sincerely, 

Ellen Bresnick 

Middleton High School 

Middleton, WI 

Danny Cheng 

University of Central Florida 

Orlando, FL 

Emily Collinson 

American University 

Washington, DC 

Sarah Cox 

Antioch University New England 

Keene, NH 

Jane Dimnwaobi 

Boston University 

Boston,MA 

Jenna Dresner 

University of Southem Califomia 

Los Angeles, CA 

Ntekcreze Enock 

Rochester Institute of Technology 

Henrietta, NY 

Kayla Finstein 

Southern Methodist University 

Dallas, TX 

Francesca Freeman 

University of Chicago 

Chicago, lL 

Samantha Ivaturi 

Purdue University 

Purdue, IN 

Jacqui Johns 

Georgetown College 

Georgetown, KY 

MadiMcEwen 

SUNY Buffalo 

Buffalo, NY 

Allie McNamara 

lllinois College 

Jacksonville, IL 

Stephanie Nicoson 

St. Norbert College 

DePere, WI 

Dylan Okabe-Jawdat 

Columbia University 

New York, NY 

Zachary Peloquin 

Clark University 

Worcester, MA 

Larissa Peltola 

Claremont McKem1a College 

Claremont, CA 

Jake Ramirez 

University of Arizona 

Tucson, AZ 

Marissa Sandrgen 

Lewis & Clark College 

Portland, OR 

AmitSen 

University of Arizona 

Tucson,AZ 

Ceci Steyn 

McGill University 

MontreaL Canada 

Bethany Vance 

University of North Carolina at Chapel Hill 

Chapel Hill, NC 

Savannah Wooten 

University of North Carolina at Chapel Hill 

Chapel Hill, NC 
148 


99780.115

The Conflict··Free Sourcing Initiative 

www.conflictfreesourcing.org ! @E!CCoa!ition j @GeS!Connect 

Hearing on Dodd-Frank's Conflict Minerals Provision 

Written submission of the Electronic Industry Citizenship Coalition (EICC) 

Before the SUBCOMMITTEE ON MONETARY POLICY AND TRADE OF THE COMMITTEE ON FINANCIAL 

SERVICES U.S. HOUSE OF REPRESENTATIVES 

Thank you for the opportunity to provide written testimony to your subcommittee today. The EICC is a nonprofit coalition of 

electronics companies dedicated to the social, environmental and ethical responsibility of their global supply chains. The EICC 

is comprised of more than 100 electronics companies with combined annual revenue of approximately $3 trillion, and directly 

employing over 5.5 million people. EICC works across a range of issues areas by providing tools, processes and programs to 

combat trafficked and forced labor, improve health and safety, raise environmental sustainabi!ity, and other issues related 

to workers and their communities affected by electronic sector supply chains worldwide. 

The use of tantalum, tin, tungsten and gold (3TG) in electronics has led the global electronics industry to take a leadership 

role in responding to armed groups involved in the severe humanitarian crisis in the DRC that is partially funded from the 

extraction and sale of confllct minerals. This is why in 2008, with support from the Global e-Sustainability Initiative, we 

founded the Conflict-Free Sourcing Initiative, or CFSI, a program that helps companies make informed decisions about the 

sourcing of minerals in their supply chains. This program was founded before Dodd-Frank Section 1502 was enacted, and has 

grown into a respected resource for companies addressing conflict minerals issues in their supply chains. 

While CFSI's membership began in the electronics industry, it has since broadened to include other industry sectors as the 

economy-wide impact of conflict-minerals became evident. Today CFSI membership consists of nearly 300 companies and 

associations from electronics, aerospace, apparel, automotive, equipment, general manufacturing, jewelry, medica!, retail, 

and extractives industry sectors whose products are sold in every country in the world. CFSJ's staff and audit program is 

funded by membership contributions of approximately $650,000 per year plus in~kind support from CFSI of approximately 

$200,000. We receive no income from smelter audits, which are billed at actual cost. 

In 2014, the SEC received 1,300 reports from issuers, and CFSI had around 200 members. In 2015, the SEC received 1,267 

reports from issuers and we had around 270 member companies. 

CFSI's core values and activities inform the common tools and resources we provide to improve companies' abilities to source 

responsibly. At the core of our program are smelters and refiners\ who are recognized as the critical pinch point in the 3TG 

supply chain. It is the smelters who decide where to source their minerals from, and given the relatively small number 

companies in the world that process ore, this information is highly confidential. Smelters that desire to be validated as 

"conflict-free" may participate in the Conflict Free Smelter Program (CFSP). The CFSP uses an audit standard and procedure 

1 For ease of reference, we will refer hereafter only to smelters, though our program encompasses both smelters and 

refiners. 

An initiative of the Electronic Industry Citizenship Coalition and the Global e-Sustainabifity !nltlative 
149 


99780.116

The Conflict-Free Sourcing !nlt!atlve 

www.conflictfreesourcing.org I @EICCoalition I @GeS\Connect 

and third-party auditing system to assess smelters' material procurement activities, sourcing policies, and management 

systems to determine if the smelters can demonstrate that the minerals they process originate from conflict-free sources. All 

smelters that are confirmed compliant to the protocol are posted to the CFSI web site. 

CFSI operates within both the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected 

and High-Risk Areas and Dodd-Frank Act frameworks to help companies meet legal requirements in the United States and 

the expectations of the global community. Under Dodd-Frank, US-listed companies that use 3TG in their manufactured 

products must undertake a Reasonable Country of Origin {RCO!) Inquiry to determine whether the 3TG was mined in the DRC 

or one of the surrounding countries {the "Covered Countries"). CFSJ collects (RCOI) data from our smelter audit program, and 

provides these data to our members. 

The OECD Guidance recommends that downstream companies attempt to identify and review the due diligence process of 

the smelters in their supply chains, and assess whether the smelters adhere to due diligence measures aimed at supporting 

the procurement of conflict-free 3TG. In accordance with the OECD Guidance, downstream companies may participate in 

industry-wide schemes that assess smelters' compliance, such as the CFSI, and may draw on the information these schemes 

provide to help them implement the OECD recommendations. 

So what are the results to date? The total number of identified 3TG smelters is roughly 320. The first smelter was validated 

as CFSP compliant in 2010. Today, we are proud to say that 205 smelters from over 40 countries have joined the program, 

and are validated as having the systems and processes is place to support sourcing of conflict-free 3TG. An additional 42 

smelters are in the process to become audited. Taken as a whole, 77% of identified smelters for all four metals are 

participating in the CFSP today. In terms of global metal supply processed by CFSP-compfiant smelters: a rough estimate for 

tin Is around 75-85% of global production while tantalum coverage Is likely >95%. We continue to work on estimates for gold 

and tungsten. We have a 100% retention rate for smelters in the program so far. The smelters in our program have 

demonstrated the highest level of responsible sourcing management systems in the industry. The value of this 

accomplishment to downstream companies cannot be overestimated, 

Our work is far from finished, however. The number of 3TG smelters is likely to grow. Smelters continue to be identified as 

we learn more about the 3TG industry and as new links in the supply chain are discovered. 

The CFSI strongly believes that conflict-free does not mean Congo-free. Our system supports on-going market access for the 

legitimate mineral trade in the DRC. Among the CFSP-comp!iant smelters, 22 source from the Covered Countries, and of 

those, 14 source from the DRC. The CFSI does not encourage or condone company policies that ban purchases from the 

Covered Countries. We continue to receive requests for information from smelters that are interested in sourcing in-region 

but want to do so responsibly. Unquestionably, companies have shown that they can source 3TG without funding armed 

groups in the DRC and stl!l source from the region. 

An initiative of the Electronic Industry Citizenship CoaJltlon and the Global e-Sustainabi!lty Initiative 
150 


99780.117

The Conflict-Free Sourdng Initiative 

www.confHctfreesourcing.org I @E!CCoaHtion I @GeSlConnect 

The CFS! facilitates this process through our partnership with in-region traceability and due diligence programs that connect 

smelters to legitimate sources of 3TG. These include the Better Sourcing Program, fTRI Tin Supply Chain Initiative, PublicPrivate Alliance, and Solutions for Hope, and the International Conference on the Great Lakes Region (ICGLR) Regional 

Certification Mechanism. In-region programs provide key documentation, oversight, and assurances of mineral traceability 

and risk assessment to smelters to help them undertake supply-chain due diligence. These programs also help smelters meet 

the CFSP's traceability and chain of custody standards. Without this or similar infrastructures in place, both smelters and 

downstream companies would be severely limited in their ability to identify and respond to risks in their supply chains and 

to support a legitimate trade in minerals that benefits all actors involved. 

The CFSI supports harmonized, efficient, and supportive mechanisms for assessing the mineral supply chain (mine to smelter). 

Accordingly, for gold, we serve as a complement to the London Bullion Market Association and Responsible Jewelry Council 

certification programs and cross-recognize the refiners that participate in those programs. We are currently evaluating the 

potential for further cross~recognition with emerging programs in China and the EU as well. This is a critical part of global 

efforts to ensure a responsible minerals trade while minimizing the private sector's burden. 

We provide other tools and resources for companies beyond direct smelter auditing. For example, we created the Conflict 

Minerals Reporting Template, abbreviated as CMRT, which is the emerging accepted standard for downstream companies to 

share data relative to the list potential smelters that are in their supply chain. Companies can also use the CFSI to share and 

!earn about best practices around due diligence and risk assessment, regulatory compliance, OECD conformance, and how 

smelters and members can better adopt the values of responsible sourcing, 

Measuring the effectiveness of Dodd-Frank in reducing conflict on the ground is not our role. Dodd Frank has created focus 

and attention to this important issue and it has galvanized about 25% of the issuers to contribute col!aboratively within the 

CFSI to enable responsible sourcing. 

CFSI member companies have demonstrated they are willing to do their part to enable responsible sourcing of minerals. 

However, companies cannot effectively address all causes and contributors in conflict-affected areas such as lack of 

governance and security, corruption, and rule of !aw. Conflict-free supply chains require the efforts all stakeholders: 

governments, private companies, industry associations, and non-governmental entities. NGOs, governments, and the 

international community broadly should continue efforts to build governance, security and stability in the DRC and elsewhere. 

An rn~tiative of the Electronic Industry Citizenship Coa!itlon and the Global e·Sustainabi!ity Initiative 
151 


99780.118

A.Ciaigan 

November 16, 2015 

House Financial Services Subcommittee on International Monetary Policy and 

Trade 

Statement of Claigan Environmental Inc. 

Dear Chairman Huizenga, Ranking Member Moore and Members of the Subcommittee: 

Claigan Environmental wishes to correct a number of fallacies and misconceptions 

concerning the effectiveness and costs of compliance to Section 1502 of Dodd-Frank. 

Claigan is an industry expert on practice compliance to Section 1502 of Dodd-Frank. 

Claigan has previously testified to the Subcommittee on International Monetary Policy 

and Trade and Claigan's original work on conflict minerals is featured extensively in the 

SEC Final Rule on Section 1502 of Dodd-Frank. Claigan's original cost projections 

included in the SEC Final Rule have proven to be the most accurate of all of the cost 

estimates submitted to the SEC during the formulation of the Final Rule on Section 1502 

of Dodd-Frank. 

Claigan Environmental is the only service provider to be audited against the OECD Due 

Diligence Guidance'. Statements here regarding attainability of DRC Conflict-Free 

status are consistent with due diligence processes that have been independently 

audited. 

The key fallacies I misconceptions we wish to expose are-

#1 - It is impossible to trace the country of origin of the smelters in my supply 

chain. 

#2 - It is not possible to be conflict free. 

#3 - The compliance cost is very high 

Fallacy #1 

It is impossible to trace the country of origin of the smelters in my 

supply chain. 

There are many publicly available sources that provide data on the country of origin of 

many smelters. 

Electronics Industry Sources 

a) The Conflict Free Sourcing lnitiative2 provides a complete list of all smelters that have 

been audited by a 3'd party according to the OECD Due Diligence Guidance (i.e. they are 

1 Independent Auditor's Opinion. Claigan Environmental Inc. Step 2 ofOECD Guidance. 

http:/ jwww.claigan.com/auditreport.pdf 

z The Conflict Free Sourcing Initiative 

http:/ fwww.contlictfreesourcing.orgjconflictMfreeMsmelterMrefiner-lists/ 
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t:\.Ciaigan 

conflict free). Every smelter on this list has a conflict minerals policy, some of which 

indicate the sourcing of their minerals. For example, the tin smelter PT ATD Makmur 

Mandiri Jaya is conflict free3 and has a link to their conflict minerals policy4

, which clearly 

states they only smelt, refine, and process tin from Indonesia. 

Mining Industry Sources 

b) iTSCi, the on the ground certification network of mines in the Covered Countries, 

provides an up-to-date list of its members, which includes several smelters that source 

from the Covered Countries-" For example, the tantalum smelter Jiujiang Jinxin 

Nonferrous Metals Co., Ltd. is an iTSCi member and their profile states they source from 

the Great Lakes Region. 

Smelter Industry Associations 

c) The Tungsten Industry- Conflict Minerals Council is an association of tungsten 

smelters and other related tungsten industry members.s The corporate members have 

profiles that often provide country of origin data. For example, the profile of Hunan 

Chuangda Vanadium Tungsten Co., Ltd., which operates 2 different tungsten smelters, 

states that all of the ores and concentrates they process come from three mines in 

China, Shi Zhuyuan, Xin Tianling, and Yao Gangxian-' 

Direct Data from Smelters 

d) Many smelters provide country of origin data directly on their website. For example, 

the gold smelter Caridad, which is operated by the Grupo Mexico Mining Division and its 

subsidiary AMC, provides a list of all countries from which it sources minerals8 This 

smelter only sources from Mexico, Peru, USA, Chile, Ecuador, and Argentina. 

Google and Internet Sources 

e) General Internet searches including a smelter's name and the name of a covered 

country can also lead to country of origin data. For example, the first hit from an Internet 

search of the tungsten smelter Wolfram Bergbau und Hiitten AG and the country 

Rwanda links this smelter to the country.9 

The above list provides only some examples of how SEC issuers can acquire country of 

origin data for the smelters in their supply chain. The best way to acquire this data is to 

contact the smelters directly, as specified in the OECD Due Diligence Guidance (Step 

2C). 

3 The Conflict Free Sourcing Initiative- Conflict Free Tin Smelters 

http:/ fwww.conflictfreesourcing.org/conflict-free-smelter-program/smelter-refiner-lists/tin-testing/ 4 PT ATD Makmur Mandiri jaya- Product.~ 

http:/ /atdmmj.comfwpfproduct.'/ 

s iTSCi Full Members 

https:f/www.itri.co.ukjindex.php?option=com_mtree&task=viewlink&link_id=S2326 

6 Tungsten Industry- Conflict Minerals Council 

http:/ /www.ti-cmc.org/ 7 Tungsten Industry- Conflict Minerals Council, Hunan Chuangda Vanadium Tungsten Co., Ltd. 

http:/ fwww.ti-cmc.org/member_profile.asp?ID=33 

s Grupo Mexico Mining 

http:/ /gmexico.com.mxjenfmining 

9 Wolfram Mining and Processing 

http:/ /www.wmprwanda.com/ 
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t:\..Ciaigan 

Refer to Annex I for an in-depth example of an issuer stating that they could not 

determine whether or not their supply chain sources from the DRC or adjoining 

countries, and how a simple Google search shows that the issuer obviously made no 

effort to determine whether or not they source from the region. 

Fallacy#2 

It is not possible to be conflict free. 

The SEC Final Rule clearly states that the country of origin inquiry is not absolute and 

only needs to be reasonable and performed in good faith. The independent private 

sector audit (IPSA) is not based on the results of a conflict minerals program; it is based 

on the design and execution of the conflict minerals program. As long as an issuer 

designs their conflict minerals program to conform to the OECD Due Diligence Guidance 

and they follow that guidance (while documenting the processes), they will be able to 

pass an IPSA and be conflict free (n.b. the IPSA is only mandatory if an issuer claims 

some or all of their products are DRC Conflict-Free). 

There are two major deterrents to companies going through with declaring themselves 

conflict free (1) the lack of enforcement and (2) the cost of the audit. Since there are 

currently no negative repercussions for a company not to declare themselves conflict 

free, many companies are electing to save the additional expenses of an audit. Similarly, 

since the SEC to date has not provided commenVcastigated any SEC issuers for their 

Jack of effort, many companies are attempting to get away with the "bare minimum". This 

has created a culture of doing the bare minimum amongst many SEC issuers regarding 

conflict minerals. Since the conflict free designation and the accompanying audit are not 

requirements, they currently fall well outside of doing the bare minimum. 

The other major deterrent for companies declaring themselves DRC conflict free is the 

potential cost of the audit. Claigan has contacted roughly a dozen different auditors. The 

difference in cost between these different auditors is staggering. On the lower end, 

auditors are quoting $20,000-$25,000. On the higher end, auditors are quoting over 

$100,000. Perhaps most troubling is that the auditors on the lower end are much more 

adept at articulating which specific parts of an issuer's conflict minerals program falls 

under the scope of the audit and which do not. The audit is meant to assess two 

requirements: (1) does the design of the issuer's conflict minerals program adhere to the 

OECD Due Diligence Guidance, and (2) did the issuer execute their program according 

to the design of their program. Auditors on the higher end are more likely to increase the 

scope beyond these specific requirements, thereby greatly increasing the overall cost of 

the audit. 

Despite the recent Court of Appeals ruling, the audit is still necessary for any company 

that wishes to claim itself as DRC Conflict-Free. It is certainly possible for issuers to be 

DRC Conflict-Free, but the lack of enforcement and the cost of the audit are making it 

much easier for them to follow the course of resistance rather than action. 
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t:\..Cia iga n 

Fallacy#3 

The compliance cost is very high 

The compliance cost has been far lower than we originally projected in 2011. The cost 

of compliance for issuers to the SEC has been closer to $105 million. This is significantly 

lower than the $815 million we projected in 2011 and far lower than the costs projected 

by Tulane or the National Association of Manufacturers. 10 

The cost is expected to decrease further in the following years since the cost to 

completely outsource an average issuer's conflict minerals program is now under 

$30,000. We do expect to continue some level of profiteering by predatory consulting 

and software companies, however we expect market forces to continue to significantly 

reduce costs year over year. 

A recent study by Tulane University funded by software and consulting service providers 

showed remarkable improvement in cost modeling from their previous estimates ($709 

million11 down from their original estimate of closer to $7.9 billion12) but is still not 

representative of current costing or employment data. 

Key pointUS Employment data does not support Tulane's cost assessment 

A long discussion could be held on the fine points of the reasons Tulane's cost study 

went astray (based on survey responses -which are more common from companies 

with full time conflict minerals program managers and rely on contact information which 

is more likely to be obtainable from companies leading the compliance effort, as 

opposed to the average issuer). But the fundamental indictment of Tulane's cost study 

is that the current US employment data does not even remotely support Tulane's 

contention of man hours spent on compliance. 

Tulane's studies identify 6 million man hours spent on compliance. With over 1 ,265 filing 

issuers, that is roughly 2.7 full time people per year. If you estimate a job turn over of 

at least 5% per annum, there would be roughly 171 full time job posting per annum for 

conflict minerals primes. 

Number of current full time job postings for Conflict Minerals in the United States 13 -

1. 

There are a number of jobs where conflict minerals is a small fraction of someone's 

role 14 15 (the most common situation), but only one full time internet job posting in all of 

the US. 

1° Claigan Environmental, https:ffwww.sec.gov jcomrnentsfs7-40·10/s7 4010-431.pdf 11 Wall Street Journal, http:/ fwww.wsj.comjarticles/u-s-firms-struggle-to-trace-conflict-minenl!s-1438636575 12 Tulane University, A Critical Analysis of the SEC and NAM Economic Impact Models and the Proposal of a 3rd 

Model. http:/ flawprofessors.typepad.comjfilesjtulane-study.pdf. 13 Search "conflict minerals" at wv,rw.indeed.com. 

http://www.indeed.comjjobs?q=%2Z-;;;;-fiict:;;;;inerals%22&1= 

14 Thermofisher- Enviromental Compliance Manager. https:/ jjobs.thermofisher.comjjob/-/-

/1143/65 7373?apstr=%26codes%3Dindeed&ss=paid 
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t:\.Ciaigan 

As a consulting company specializing in conflict minerals, we would love for conflict 

minerals to be a $709 million a year business - but it just isn't. 

Final Statement 

The culture of doing the bare minimum coupled with the greatly exaggerated costs of the 

audit provides a perfect storm for issuers to claim that it is not possible to be conflict free. 

The SEC would observe a significant improvement in the quality of disclosures for 

Section 1502 of Dodd-Frank if they used their investigative and enforcement powers. 

Many issuers have been taking the path of least resistance and so far these issuers 

have been allowed to get away with this approach. 

15 Nordstrom -Social Responsibility Specialist- Nordstrom Product Group, 

http' //jobs.nrf.comjjobseeker fjob/25 712598/Sociai%20Responsibility% 20Specialist<>Al20-

%20Nordstrom%20Producf:Ok20Group/Nordstrom/?vnet=O&str=26&max=2S&long=1 
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Claigan 

ANNEX I - Simple Example of Issuer with Disclosure Gaps 

1. Example SEC Filing 

Below is an example SEC filing from a company that stated that they cannot determine 

whether they source from the DRC or adjoining countries (Abbott Laboratories). 

We analyzed the products we manufacture or contract to have manufactured, and found that small quantities of tin, tantalum, tungsten, 

and gold (3TG) may be present in a number of our products; primarily, in electronic diagnostic and monitoring instruments, in medical 

and surgical devices. and equipment, and in product components containing metal alloys. After requesting infonnation from our 

suppliers as described below, we are unable to detennine whether the limited quantities of 3TG actually present in our products 

originated from the Democratic Republic of the Congo or adjoining countries, and whether such 3TG came from recycled or scrap 

sources. We similarly have been unable to conclusively identify the specific facilities used to process the 3TG actually present in our 

products. 

2. Smelter list in conflict minerals report 

The conflict minerals report included a list of smelters providing tin, tungsten, tantalum, 

or gold to the issuer's suppliers. 

Gold 

Gold 

Gold 

C'>Old 

Gold 

Gold 

Gold 

Gold 

Annex I 

Smelter or Refiner Name 

Advance.d Chemical Company 

Aida Chemical Industries Co. Ltd. 

Allgemeine Gold-und Silbers<::heideanstalt AG. 

Almalyk Mining and Metallurgical Complex (AMMC) 

AngloGold Ashanti COrrogo do Sftio Miner~o 

Argor-Heraeus SA 

Asahi Pretec: Corporation 

Asaka Riken Co Ltd 

Atasav Kuvurnculuk Sanavi Ve Ticaret A.S. 

3. Example Simple Smelter Due Diligence 

Smelter or Refiner Country 

Location 

UNITED STATES 

JAPAN 

GERMANY 

UZBEKJSTAN 

BRAZIL 

SWITZERLAND 

JAPAN 

JAPAN 

TURKEY 

Included in the list of smelters provided by the issuers was Malaysia Smelting Corp. 

lUI 

Tin 

Tlu 

Tin 

Tin 

Tin 

Ltut.:UUU I....Illlla 1 Ul 

Magnu's Minerais Metais e Ligas LTDA 

Malaysia Smelting Corpo~tion (MSC) 

Melt Metais e Ligas S/A 

Mentok Smelter 

Metallo Chimfoue 

BRAZIL 

MALAYSIA 

BRAZIL 

INDONESIA 

BELGIUM 

4. Example Simple Smelter Reasonable Country of Origin Inquiry 

Even if the company had only conducted the most rudimentary due diligence, they would 

have been able to determine that this smelter sources from the DRC or adjoining 

countries. 

Malaysia Smelting Corporation DRC 
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Claigan 

5. First Google Hit 

Malaysia Smelting Corporation's sourcing information is the first google hit from the 

search. 

Malaysia Smelting Corporation DRC 

6. Sourcing Details 

This link leads directly to MSC's sourcing details. 

7. Confirmation of Sourcing from the DRC and Rwanda 

MSC (which is conflict free certified) confirms that they are sourcing from the DRC and 

adjoining countries. 
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enough 

November 17,2015 

"Dodd-Frank Five Years Later: What Have We Learned from Conflict Minerals Reporting?" 

Financial Services Subcommittee on Monetary Policy and Trade 

Enough Project Statement 

Submitted for Congressional Record 

The United States Congress took a strong step forward in 2010 when it passed Section 1502 of the DoddFrank Wall Street Reform and Consumer Protection Act. The growing number of investors and 

consumers in the US. who care about corporate responsibility, along with the people in central Africa 

affected by U.S. companies' sourcing practices, deserve the transparency this law requires. The value of 

maintaining the law as it is currently written cannot be overstated. Its sustained and strengthened 

implementation will continue to improve the transparency of corporate supply chains, and reduce the 

profits gained by armed actors in Congo from the minerals trade. 

Minerals and Conflict 

Conflict minerals have fueled and continue to help sustain armed violence in eastern Democratic Republic 

of Congo (Congo), linking them to the deadliest conflict globally since World War II. The four conflict 

minerals (gold, along with tin, tantalum, and tungsten, tl1e "3Ts") arc not the only source of income to 

armed groups, but they are some of the most lucrative. The illegal exploitation of natural resources today 

is a manifestation of the grand corruption linked to violence that has marked successive governments in 

Kinshasa and the broader region since colonial times. 

The ongoing violence is real, and its links to the minerals trade are clear. A mortality study by the 

International Rescue Committee looking at conflict-related deaths between August 1998 and April 2007 

estimated that more than 5.4 million people died as a result of armed conflict in Congo.' There has been 

continuing violence since that study. The U.N. Group of Experts on Congo found in 2015 that gold 

continued to be a source of funding for armed groups and Congo's army.'' A study !rom the Enough 

Project found that armed groups made an estimated $185 million from conl1ict minerals in 2008.'ii In 

2007 the Pole Institute noted "minerals are a major source of income and of conflict in North Kivu as in 

the whole of the DRC,"" and in 2001 the UN experts found that "minerals [were] the engine of the 

conflict."v 

The Law: Dodd-Frank 1502 

Section 1502 on conflict minerals of the Dodd-Frank Wall Street Reform and Consumer Protection Act is 

a transparency measure, one part of a comprehensive approach to Congo's challenges. Passed in 20 I 0 and 

implemented by the U.S. Securities and Exchange Commission in 2012, it creates a reporting requirement 

for all companies publicly traded in the United States with products containing any of the four conflict 
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minerals. This creates a lever to support transparency, security, and the rule of law in the mining sector. 

Companies must now publicly disclose annually whether any of the gold or 3Ts in their supply chains 

originated in Congo or a neighboring country and, if so, describe the due diligence measures taken to 

determine the source of the minerals. Dodd-Frank 1502 does not require companies to divest from Congo 

or source from conf1ict-free mines. The law only requires companies to report on their mineral sourcing 

and due diligence practices. 

Compliance with the Conflict Minerals Rule is an achievable task for companies, of which the benefits 

outweigh the costs. The cost of compliance has been significantly overestimated by industry lobbyists. 

Claigan, an independent environmental consulting firm with expertise in supply chain management, 

estimates the total cost of Dodd-Frank 1502 compliance was approximately $140 million for 2014." This 

is a fraction of the U.S. Securities and Exchange Commission's estimate of$3-4 billion for the first year. 

Impact of the Law 

Consistent with its objective, Dodd-Frank 1502 along with related reforms has led to significant 

improvements in the transparency of corporate supply chains and to a major reduction in the 

number of 3T conflict mines in eastern Congo. More than 60 percent of the world's smelters for the 

four minerals have now passed conflict-free audits. Before Dodd-Frank 1502, there was no certification 

mechanism for distinguishing conflict mines (i.e. mines controlled by armed groups or the Congolese 

army) from conflict-free mines, and there were no federal transparency requirements for companies on 

conflict minerals. The law and related reforms have changed these circumstances and created a two-tier 

market whereby the price for untraceable 3T conflict minerals is significantly lower than the price for 

verified conflict-free minerals. This price difference has made the trade in 3T minerals significantly less 

lucrative for armed groups. 

By 2014, the International Peace Information Service found that 70 percent of 3T mines it surveyed 

across several provinces in eastern Congo were not controlled by anned actors.v;;, This is a significant 

change given that the U.N. Group of Experts stated as recently as 2010 that "in the Kivu provinces, 

almost every mining deposit (was] controlled by a military group."" As of May 2014, nearly threequarters (74 percent) of 3T miners were working in mines where no arn1cd group involvement has been 

reported.x 

As of November 16 2015,206 out of approximately 321 smelters/refiners worldwide (over 60 percent) for 

the four conflict minerals have passed audits by the Conflict-Free Sourcing Initiative or associated 

programs, and an additional 43 smelters/refiners are participating in the program (i.e. are in the process of 

being audited) for a total of249 participants (over 75 percent).'" 

There is now an emerging certification mechanism run by the International Conference on the Great 

Lakes Region (ICGLR), and mines have begun to be validated as conf1ict-free.'"; As of June 25, 2015, 141 

mines in eastern Congo had been validated as conflict-free by multi-stakeholder teams made up of U.N. 

officials and Congolese civil society, business, and government representatives."';, In surveyed locations, 
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"minerals that do not go through conflict-free programs sell for 30 to 60 percent Jess" than minerals 

verified as conflict-free,x<v thus reducing profits for armed group trying to sell conflict minerals. 

Mining Communities 

Dodd-Frank 1502 must be fully implemented, not abandoned, and strengthened with livelihood projects 

and other support to mining communities. Similar to other places where black markets are being 

disrupted, many Congolese miners who have relied on 3T mining have been affected by the transition to a 

conflict-free economy and are experiencing livelihood challenges. The original cont1ict minerals draft 

legislation included resources for livelihood programs for mining communities, but unfortunately those 

provisions were omitted from the final law and thus resources were not forthcoming in a timely way, 

causing hardship for some communities. Some aid has been disbursed to support conflict-free mining, but 

more support for livelihoods projects is needed. The solution to uncovering and eliminating these harmful 

illicit markets is not to reduce transparency measures but rather to strengthen and expand them. 

Congolese Support 

Finally, many Congolese communities and leader&--including Nobel Peace Prize nominee and Sakharov 

Prize winner Dr. Denis Mukwege, community activist Justine Masika Bihamba, and Archbishop 

Franvois-Xavier Maroy Rusengo ofBukavu, South Kivu-support Dodd-Frank 1502. Leaders and 

activists support the Jaw because they have seen direct positive impacts, because they believe in 

transparency and the rule of law, or both. 

Dr. Denis Mukwege notes that: 

A conflict-free minerals industry would contribute to ending the unspeakable violence the people 

of Congo have endured for years. Government must not only enact strong legislation, they must 

be willing to enforce the law. Companies bear the responsibility of compliance and public 

disclosure, and acting transparently as consumers are increasingly aware of conflict-free 

components on the market. Tens of thousands of legitimate miners would benefit from a clean, 

transparent minerals industry ... The mineral trade is one of the components that drive suffering in 

Congo.xv 

Furthermore, an open letter signed by 31 Congolese civil society leaders, experts, and former 

ambassadors argues that, "It is time for another broader push for reform on conflict minerals and natural 

resource governance in order to complement the Dodd-Frank legislation and deepen related minerals 

reforms. Dodd-Frank has been the primary driver of corporate and regional policy change on conflict 

minerals. ,xvl 

'Benjamin Coghlan, Pascal Ngoy, Flavien Mulumba, Colleen Hardy, Valerie Nkamgang Bemo, Tony Stewart, Jennifer 

Lewis, and Richard Brennan, "Mortality in the Democratic Republic of Congo: An ongoing crisis," pp. ii, 16 (New 

York: International Rescue Committee, January 2008), available 

at http:l/www .rescue.org/sites/ default/files/resou rce-file/2006-7 congo Mort a litySurvey. pdf. 
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n U.N. Security Council, "Final report of the Group of Experts submitted in accordance with paragraph 5 of Security 

Council resolution 2136 (2014)," S/2015/19, paras. 79, 80, 116, 124, 125, 193-198, 200, 201; Annex 36, January 12, 

2015, available at http://www.un.org/ga/search/view doc.asp?symboi=S/2015/19. 

iii The Enough Project Team and the Grassroots Reconciliation Group, "A Comprehensive Approach to Congo's 

Conflict Minerals," Appendix 2, p. 17 (Washington: Apri12009), available 

at http://www.enoughproject.org/publications/comprehensive-approach-conflict-minerals-strategy-paper. 

"Aloys Tegera and Dominic Johnson, "Rules for Sale: Formal and informal cross-border trade in Eastern DRC," p. 40 

(Goma: Pole Institute, May 2007), available at http://www.poleinstitute.org/sites/default/files/regard19 anglais.pdf. 

~U.N. Security Council, "Final report of the Group of Experts submitted in accordance with paragraph 5 of Security 

Council resolution 2136 (2014)," S/2015/19, paras. 79, 80, 116, 124, 125, 193-198, 200, 201; Annex 36, January 12, 

2015, available at http://www.un.org/ga/search/view doc.asp?symboi=S/2015/19. 

~' Email correspondence with Claigan, August 2015. 

"i U.S. Securities and Exchange Commission, Release No. 34-67716, p. 302, August 22, 2012, available 

at http://www.sec.gov/rules/final/2012/34-67716.pdf. 

~"i Between March 2013 and March 2014, International Peace Information Service (!PIS) researchers conducted 

research to map artisanal mining sites in eastern Congo. IPIS researchers found 116 of 167 cassiterite mines (70 

percent), 26 of 31 coltan mines (84 percent), and 11 of 21 wolframite mines (52 percent) to be free of armed 

groups, making a total of 153 of 219 mines surveyed (70 percent) free of armed groups in eastern Congo. By 

contrast, I PIS survey results showed inverted proportions for eastern Congo's gold mines, with only 330 of 943 

gold mines (35 percent) surveyed free of armed actors. International Peace Information Service, "lnfographicMapping Mining Areas in Eastern DRC," January 28, 2015, available at http:/(ipisresearch.be/2015/01/infographicmapping-security-human-rlghts-minlng-areas-eastern-drc/. 

i< U.N. Security Council, "Interim report of the Group of Experts on the DRC," S/2010/252, para. 77, p.17, May 24, 

2010, available at http://www.un.org/ea/search/view doc.asp?symboi=S/2010/252. 

'Steven Spittaels, Ken Matthysen, Yannick Weyns, Filip Hilgert and Anna Bulzomi, "Analysis of the interactive map 

of artisanal mining areas in Eastern DR Congo: May 2014 update" (Antwerp: International Peace Information 

Service, May 2014), available athttp:ljipisresearch.be/wp-content/uploads/2014/04/20141031-

Promines analysis.pdf. 

"Electronics Industry Citizenship Coalition and Global eSustainability Initiative, "Conflict-Free Smelter Program 

Indicators," available at http://www.conflictfreesourcing.org/members/active-and-compliant-smelter-count/ (last 

accessed October 28, 2015 ). 

"'International Conference on the Great Lakes Region Mineral Certification Scheme, "ICGLR Regional Certification 

Mechanism (RCM) Certification Manual," available at http://www.oecd.org/investment/mne/49111368.pdf (last 

accessed August 2015). 

'i" Uwe Naeher and Yasmine Nzuma, "Summary of Joint Missions and CTC Mine Site Audits in Eastern DRC," Federal 

Bureau of Geosciences and Natural Resources (BGR), Kinshasa, June 2015. 

""Fidel Bafilemba, Timo Mueller, and Sasha Lezhnev, "The Impact of Dodd-Frank and Conflict Minerals Reforms on 

Eastern Congo's Conflict," endnote 5, p. 20 (Washington: The Enough Project, June 2014), available 

at http://www.enoughproject.org/reports/impact-dodd-frank-and-conflict-minerals-r~forms-eastern-congo's-war. 

~ Panzi Foundation, "Statement from Dr. Denis Mukwege: EU Vote is a Victory for Human Rights," May 20, 2015, 

available at http://www.panzifoundation.org/news/dr-mukwege-statement-eu-conflict-minerals-vote. 

'~'"Open Letter: Conflict Minerals: A Broader Push for Reform is Essential," October 30, 2014, available at 

http:l/www.enoughproject.org/files/OpenletterConflictMinerals October 2014.pdf. 
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November 17,2015 

"Dodd-Frank Five Years Later: What Have We Learned from Conflict Minerals Reporting?" 

Financial Services Subcommittee on Monetary Policy and Trade 

Georges Nzabanita Iyamuremye Statement 

Submitted for Congressional Record 

Dear Chairman Huizenga, Vice Chairman Mulvaney, Ranking Member Moore, and Members of the 

Subcommittee: 

I would like to submit the following blog post from November 2013 in order convey my thoughts on 

conflict minerals a~ they relate to my life in the Democratic Republic of Congo. While studying in the 

United States, I had the opportunity to be a campus leader for the Conflict-Free Campus Initiative and 

have continued to promote the importance of conflict-free mineral sourcing since returning to my home 

country. 

My Passion for Building Peace in Congo 

My name is Georges Nzabanita Iyamuremye and I am from the Democratic Republic of Congo. I am a 

student at Georgetown College in Kentucky finishing my last semester of undergraduate studies. I was 

born, grew up and studied in Rutshuru in the North Kivu province and I went to college in Nairobi, 

Kenya. Since 1996, I have been surrounded by rebel armies and local militias all violently competing for 

power in the midst of a crowded civilian population with no infrastructure. In 1996, I lost two cousins 

who were killed by rebels fronted by the late president Laurent Kabila. In addition, my younger sister and 

her friends were victims of a mass rape by the Democratic Forces for the Liberation of Rwanda or FDLR, 

in my village. My family was forced to leave in fear of torture, rape, looting and killings in our 

neighborhoods by the FDLR together with the local militia. My family and many of our fellow villagers 

are still living as internally displaced persons, or IDPs, in Congo. 

In 2011, I met an American medical doctor, Dr. George Record, who was working for Doctors Without 

Borders in my hometown ofRutshuru. I told him that I was passionate about contributing to the peace 

process in eastern Congo by trying to get involved with local Congolese communities working towards 

sustainable development, and by spreading this peacehuilding effort throughout the Great Lakes region. 

When I explained my desire to gain greater skills in peacebuilding and advocacy for peace and conflict 

resolution, Dr. Record accepted to support me for one year and a half to move to the U.S. and finish my 

studies in sociology and sustainable community development. 

The conflicts in eastern Congo have been mostly fueled by natural resources which rebel groups smuggle 

through neighboring countries such as Rwanda and Uganda. Rebels in eastern Congo have no plan to 

change the regime of Kinshasa which is characterized by corruption in private and public sectors, but 

rather they are more interested in plundering the Congo's natural resources for their own gain. I 

understand that I must do something to advocate for peace by uniting my experiences and knowledge with 

organizations which believe in human rights. 

At the end of September 2013, my American sponsor, Dr. Record sent me a link to the Enough Project 

website. I opened the link and when I saw their mission to "to end genocide and crimes against humanity" 

I was so excited to contact them and see how I could get involved. In early October, Annie Callaway, the 

Advocacy Associate and Coordinator for the Conflict-Free Campus Initiative at Enough, contacted me 

and I shared with her my dreams to work for peace and reconciliation for a sustainable development in 
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my country. I was invited to an event titled "Celebrating Congo'' sponsored by Yole!Africa in North 

Carolina, where I was able to engage in fruitful discussions concerning advocacy and strategies for 

obtaining peace in eastern Congo and I became even more passionate to join the Raise Hope for Congo 

campaign and promote peace in Congo and the Great Lakes region. 

Today, I am the campus leader of Conflict-Free Campus Initiative at Georgetown College. Twenty-two 

students are part of our chapter and we have gained the support of many more on campus, including Dr. 

Melissa Scheier, the head of the political science department and our faculty advisor. We recently hosted 

our first big event called '·Raise Hope for Congo", which was attended by over 80 people who were 

interested in learning more about the conflict in Congo, and hearing about how they can help. The 

Georgetown College CFCI chapter has amazing, committed students dedicated to raising awareness about 

the ongoing conflict in eastern Congo and asking our college to pass a resolution to support conflict-free 

electronics products. 

I will graduate in December, and am now working to make sure that CFC! will continue its work at 

Georgetown College after I leave. I hope to find an internship with a human rights organization so that I 

can continue to build my knowledge about this type of work. I plan to return to my home in Congo soon, 

where I want to get involved with local Congolese communities by founding my own organization 

focused on reconciliation and peace building for a sustainable development through a communal reflection 

on the root causes of the cycle of violence we have experienced for almost two decades. By combining 

the local, national, regional, and international effort for peace, we can prevent the social and 

environmental crises caused by war, and make Congo and the world a safer place to live for every person. 
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global witness 

November 17, 2015 

House Financial Services Subcommittee on Monetary Policy and Trade Hearing on 

"Dodd-Frank Five Years Later: What Have We Learned from Conflict Minerals Reporting?" 

Statement of Global Witness 

Dear Chairman Huizenga, Ranking Member Moore and Members of the Subcommittee: 

Global Witness welcomes the opportunity to submit a statement for the hearing on Section 1502, the Conflict 

Minerals Provision of the Dodd-Frank Act. Global Witness is an international advocacy organization that 

works to break the links between natural resources exploitation, human rights violations, corruption and 

conflict. For over a decade, Global Witness has carried out research and advocacy on a broad range of issues 

relating to natural resources in the Democratic Republic of Congo (DR C). Our work is directly informed by 

regular, in-depth field investigations in eastern DRC where research is done by experienced staff, some of 

whom have previously lived in the region. We consult with a range of Congolese local civil society partners, as 

well as mineral traders, provincial mining authorities and other government representatives. 

For almost two decades, armed groups and members of the Congolese national army have used profits from 

the trade in tin, tantalum, tungsten and gold to finance themselves and their operations in eastern DRC. The 

local population in North and South Kivu provinces has borne the brunt of a war characterized by murder, 

rape, pillage and mass displacement. Although the region's mineral wealth is not the root cause of the 

conflict, competition for access to these resources has been an incentive for warring parties to continue 

fighting. Sporadic armed conflict continues today in eastern DRC has led to an estimated 2.7 million internally 

displaced people within the country in 2014 and, in 2015, approximately 430,000 refugees from the DRC in 

neighboring countries, according to the United Nations.' While this law will not alone end the conflict, it is 

intended to reduce the opportunities for armed groups to keep fighting and enrich themselves. 

A landmark opportunity to address the role of minerals in fueling conflict and human rights abuses, Section 

1502 is a significant step forward and has promoted global action towards making mineral supply chains 

responsible and free of conflict. Before Section 1502 was passed in 2010, there was very little progress by 

governments or companies to tackle the conflict minerals trade even though the issue had been identified as 

a problem since 2002. The provision has catalyzed the creation of new supply chain due diligence legislation 

and standards in the DRC, Rwanda, Burundi and other African countries, and the development of industry 

schemes aimed at facilitating responsible sourcing of minerals. It has set an important precedent for the legal 

responsibility of companies to ensure that their supply chains do not contribute to conflicts and human rights 

violations. Following the leadership of the US, the European Union is drafting its own responsible sourcing 

regulation. 2 The European Parliament has recently proposed regulation that would require supply chain due 

diligence for all upstream and downstream companies. The Chinese Chamber of Commerce of Metals and 

Chemicals Importers and Exporters (CCCMC), supervised by China's Ministry of Commerce is also currently 

developing guidance for its members which would include supply chain due diligence as well 3 Thus, the 

United States is in good international company in this trend towards ensuring companies conduct reasonable 

supply chain due diligence in their operations. 

Reporting Requirements and Status of Compliance 

Section 1502 is a disclosure provision that requires, among other things, companies who manufacture 

products containing one of the four conflict minerals to conduct supply chain due diligence if they know or 

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have reason to believe those minerals originate in the Democratic Republic of Congo {DRC) or surrounding 

countries. The SEC's final rule requires that this due diligence be conducted in accordance with a nationallyor internationally-recognized framework.' The only such recognizable framework at present is the due 

diligence guidance developed by the Organization for Economic Cooperation and Development {OECD). This 

framework is a five-step process centered on identifying and addressing risks in a company's supply chain and 

publicly reporting on those efforts. In June 2014, 1,321 companies filed reports with the SEC for the first 

reporting year. The second round of reports-1,267 in total-were filed in 2015. 

In April 2015, Global Witness and Amnesty International released a comprehensive analysis of 100 of the first 

conflict minerals reports filed in 2014.5 The report found that 21% of the company reports we analyzed met 

the minimum requirements of the U.S. conflict minerals legislation in their first year of reporting, 

demonstrating that responsible supply chain management can be done, and that the requirements are not 

unreasonably burdensome. As such there is no excuse for companies failing to properly investigate their 

supply chains. Within the filings, we found a full spectrum of compliance and lack thereof: there were several 

reports filed by companies that included a lot of detail and demonstrated that they had undertaken their 

required supply checks and there were some reports that were barely a page long, with virtually no 

information about their due diligence efforts. Global Witness believes that the majority of companies can 

improve their supply chain reporting through closer adherence to the OECD due diligence guidance. 

The second conflict minerals reports were released in June of this year, and we've seen some improvement in 

the depth of companies' due diligence and in the quality of their reporting. More companies are providing a 

list of the metal processors they've identified in their supply chains and more companies are providing 

country of origin information than in the first year. For example, Apple was able to identify an additional 39 

smelters and refiners in 2015, bringing their total number to 225.6 In 2014, Google reported that 36% of its 

metal processors were certified as conflict-free, yet in 2015, the percentage of their conflict free smelters and 

refiners jumped to 68%. 7 This demonstrates that even though the reports show there is still more room for 

improvement, companies are learning more about their supply chain as they continue to conduct due 

diligence on the minerals in their products, thereby reducing the risk to viability of their business operations. 

We've also seen that some private and foreign companies that are not covered under the scope of the law 

are doing their own due diligence, showing that these supply chain checks are not as overly burdensome or 

costly as some industry associations have previously argued, but also that these efforts are worthwhile. For 

example, the computer company, Acer, has written and published its own version of a conflict minerals 

report on its website for two years in a row8

, despite being a foreign company outside of the scope of Section 

1502. Other non-US listed or private companies including Dell and Panasonic have also put information on 

their website about due diligence activities they1ve undertaken. Many other companies, such as Nissan and 

Samsung have also developed a conflict minerals policy and published their policy on their website, often in 

response to consumer demand. 

Impacts in the DRC and Great Lakes Region 

The law is gradually changing the way that supply chains are understood and, ultimately, how they function. 

The law has set a critical precedent for the legal responsibility of companies to ensure that their supply chains 

do not contribute to conflicts and human rights violations. That said, we must consider that at the time of 

this hearing the law is in only its third year of implementation. While progress is being made, it takes time to 

change behavior along supply chains that have previously been almost wholly without scrutiny. 

In the upstream section of the supply chain (between the mine and the smelter or refiner of metals), Section 

1502 has been a catalyst for some important reforms to DRC's minerals sector. On-the-ground efforts to 

clean up the mineral trade are expanding. These include private sector-led efforts, such as responsible 

sourcing programs like the International Tin Supply Chain Initiative {iTSCi), which now works to improve 

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supply chain functioning in Rwanda and Burundi as well as DRC, and domestic efforts by both the Congolese 

and Rwandan governments to facilitate responsible trading. 

Given the intertwined history of Rwanda and DRC's conflict minerals trade, cross border steps to address 

regional supply chains are critical and ground-breaking. In DRC, local NGO watchdogs have begun mine-site 

monitoring and surveillance. The Congolese government has led a multi-stakeholder committee made up of 

the DRC government, civil society groups and representatives from international donors to 'validate' 180 

mines in eastern Congo as conflict-free (though there are over 2000 mining sites). Though faced with 

challenges, the validation missions are, at least, an indication of renewed political will in DRC to clean up the 

mineral sector in the east. These missions, and other efforts, have been supported by a joint Department of 

State and USAID strategy on conflict minerals, called for in Section 1502, as shown by the Government 

Accountability Office report of August 2015." 

There is a growing awareness among artisanal miners, regional civil society and in some sections of the 

Congolese army about what responsible mineral trading should look like and what the rights of miners are. In 

addition, there is more scrutiny over operations at mining sites. At some tin, tantalum and tungsten sites this 

has meant that armed men have abandoned digging, which they engaged in before the passage of Section 

1502. 

While there have been some positive impacts from the law, challenges do remain that have contributed to 

adverse impacts on the ground in eastern DRC. There was a decline in exports after the law was passed. A 

combination of a six-month mining ban by the Congolese President in 2010 (which was not required by the 

law), an overly stringent interpretation of the law by some industry groups and a crisis of confidence in the 

tin, tantalum and tungsten (known as the 3Ts) markets, many companies' initial response to Section 1502 

was to stop buying these minerals from the DRC and covered countries- rather than to continue sourcing 

from the region in a responsible way. The irresponsible response to the law by some companies led to a drop 

in legal 3T exports from DRC and Rwanda in particular, that had an impact on many miners' livelihoods in the 

DRC. However, this is not entirely attributable to the law's actual requirements, but was instead a 

misinterpretation of the law by some companies. Section 1502 is not a sanctions regime requiring companies 

to stop sourcing from the DRC; it is a disclosure provision that requires companies to disclose the results of 

their due diligence. 

Despite an initial dip in official artisanal 3T mining exports post 2010, our initial analysis of export and 

production data from the region indicates that legal exports increased markedly in 2014. For example, in 

2010, no tantalum was legally exported from South Kivu, but in 2014, official exports were recorded at 5 

tons. In North Kivu official tantalum exports since 2007 have fluctuated over time: the province exported 74 

tons of tantalum in 2007, 236 tons in 2010, 122 tons in 2012 and 195 tons in 2013. In the first six months of 

2014 alone official tantalum exports were recorded as 296 tons, a substantial increase. 

Tackling Cross-border Mineral Smuggling 

That said, Global Witness research has revealed that cross-border mineral smuggling, particularly between 

Rwanda and DRC, remains a problem. This appears to be motivated by a number of issues that include new 

Congolese laws that stipulate that minerals may only be legally exported from validated mines where a 

traceability scheme is operating, a lack of proper state oversight of mine site production in DRC and an 

(often) higher price per kilo of 3T minerals in Rwanda. The gold sector experiences a separate set of issues 

that are, in part, linked to its higher value by volume and the use of gold as money, making it much harder to 

regulate and credibly trace from mine to end-user. The Rwandan and Congolese authorities both have a 

responsibility to reduce cross-border smuggling. It is therefore critical that companies operating in or buying 

from Rwanda undertake robust supply chain due diligence, to look for and address the risk of minerals 

smuggled into Rwandan supply chains, which may have funded conflict in the DRC. Both sides have taken 

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some steps, including increasing the number of rotations at key border patrols, but more needs to be done, 

by governments and companies alike. 

Section 1502 is about changing international business norms with respect to the way companies source their 

minerals-not just from the DRC. We would like to see: supply chains that are conflict-free rather than 

Congo-free, that benefit and support responsible trade from artisanal miners and not armed groups. We 

would like companies to remain engaged in high-risk areas like DRC, with the appropriate systems and risk 

processes in place. Divestment in order to avoid engaging in responsible sourcing or to avoid risk is not 

required by the law, and is an irresponsible over-reaction to the law that can lead to the most vulnerablethe artisanal miners- losing their livelihoods. Blaming Section 1502 for this divestment not only shirks 

responsible sourcing, but risks returning Eastern DRC to the violent free-for-all that exemplified the minerals 

trade prior to the law coming in. 

Conclusion 

This important law was not designed to be the one solution that would bring immediate peace to a war-torn 

region. Rather, it is an important tool aiming to tackle the economic drivers of conflict. It is already catalyzing 

important change but more must be done. 

Policy Recommendations: 

Companies must do their part by continually working to improve the depth and scope of their due 

diligence and publishing meaningful and detailed reports, containing more information on their 

supplier outreach, identified smelters and refiners and their efforts to address supply chain risk. 

The SEC must also uphold its obligation to enforce the rule by holding companies accountable for 

incomplete reporting and not meeting basic requirements. 

The US government should use its influence to advocate for the DRC government to reform its 

mining sector at the national and local levels, including strengthening and enforcing domestic laws 

banning the involvement of the military in mining activities and stamping out impunity among highranking members of the Congolese army and other criminal and corrupt actors benefitting illegally 

from eastern Congo's mineral wealth. 

Governments of the African Great lakes region, including Rwanda, must step up efforts together to 

reduce cross-border smuggling of minerals and enforce domestic due diligence legislation. 

1 UNHCR, 2015 UNHCR Country Operations Profile- Democratic Republic of the Congo, http://www.unhcr.org/pages/49e45c366.htm! 2 European Commission, "Proposal For A Regulation OfThe European Parliament And OfThe Council: Setting Up a Union System for Supply 

Chain Due Diligence Self-Certification of Responsible Importers of Tin, Tantalum and Tungsten, Their Ores, and Gold Originating in ConflictAffected and High-Risk Areas" March 5,2014,http://trade.ec.europa.eu/doc!ib/docs/2014/ march/tradoc_l52227.pdf 3 CCCMC, "Guidelines for Social Responsibility in Outbound Mining Investments," http://www.g!obalwitness.org/sites/default/files/ 

!ibrary/CCCMC%20Guidelines%20for%20Sociai%20Resposibi!ity%20in%200utbound%20Mining%20 lnvestments%200ct%202014%20CHEN.pdf. See also Global Witness, ''Tackling conflict minerals- How a new Chinese initiative can address Chinese companies' risks," October 

2014, http:/jwww.g!obalwitness.org/sites/defau!t/fi1es/library/GW%20Tacklfng%20conflict %20minerals%202014-10%20lr.pdf 

Securities and Exchange Commission, "Conflict Minerals; Disclosure of Payments by Resource Extraction Issuers; Final Rules," 17 CFR Parts 240 

and 249b {hereafter, "SEC Final Rule"), Sept 12, 2012 http://www.gpo.gov/fdsys/pkg/FR-2012- 09-12/pdf/2012-21153.pdf, p. 56274,56281 5 "Digging for Transparency," Global Witness and Amnesty International, April22, 2015, https://www.globalwitness.org/<.:ampaigns/democraticrepublic-congo/digging-transparency/ 

s Apple's 2015 Conflict Minerals Report, page 2, https://www.apple.comlsuppherresponsibi!ity/pdf/ Conflict_Minerals_Report.pdf 1 

Google's 2014 Conflict Minerals Report, https://static.googleusercontent.com/media/www.google.com/en//about/company/ pdfs/goog!e2013-conflict-minerals-report-v2.pdt See also Google's 2015 Conflict Minerals Report, hnps://static.googleusercontent.comjmedia/ 

www.goog!e.com/en//aboutjcompany/pdfs/google-2014-conf!ict-minera!s-report.pdf 

8 

Acer's 2014 Conflict Minerals Report, http://www.acer-group.com/public/Sustainabi!ity/pdf/ConflictMinera!sReport_E.pdf and Acer's 2015 

Conflict Minerals Report, http://www.acer~group.com/public/Sustainabl!ity/pdf/Conf!ict-Minera!s-Report-2014,pdf 9 GAO, 2015, "'SEC Conflict Minerals Rule", August, http://www.gao.gov/assets/680/672051.pdf 

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12 November 2015 

The International Corporate Accountability Roundtable (ICAR) is a coalition of leading human 

rights, environmental, development, and labor organizations working to ensure corporations 

respect human rights throughout their global operations. 

We, along with our member organizations, advocated for the passage and implementation of 

Dodd-Frank's Section 1502 pertaining to conflict minerals sourced from the Democratic 

Republic of Congo and surrounding areas. We write today to urge continued support for this 

critical provision. 

The responsibility of business to respect human rights, including through supply chains, is clear 

and well recognized. In the United States, advancements in corporate reporting on human rights 

have further clarified the materiality of human rights to corporate decision-making and 

disclosure in recent years. For instance, the Dodd-Frank Financial Reform Act was passed in 

2008, and the final rules implementing Section 1502 from the SEC were adopted in 2013. This 

trend is further exemplified by increased enforcement of the Foreign Corrupt Practices Act, 

reporting obligations created through Executive Orders pertaining to procurement, and U.S. 

Department of State requirements related to investments in Burma, which require public 

companies to conduct due diligence and make issue- and sector-specific disclosures regarding 

their human rights and anti-corruption practices.' 

The trend towards increased human rights reporting can also be seen in the EU. To give 

investors a more comprehensive understanding of company performance, the European 

Commission enacted Directive 2014/95/EU on December 6, 2014, which requires EU-Iisted 

companies with over 500 employees to disclose in their management reports information 

regarding policies, risks, and outcomes related to human rights, sustainability, bribery, and anticorruption issues.2 

International institutions, including the UN and OECD, have also sought to develop substantive 

and procedural standards for disclosures related to human rights and sustainability, including 

through the OECD's Guidelines on Multinational Enterprises, which emphasize and encourage 

businesses to integrate human rights and sustainability information into their routine 

1 

THE INTERNATIONAL CORPORATE ACCOUNTABILITY ROUNDTABLE (ICAR), "KNOWING AND SHOWING": USING U.S. 

SECURITIES LAWS TO COMPEL HUMAN RIGHTS DISCLOSURE 18-19, available at bit:gj/iQlt:.,!JJ~Ql\1,/fl: 

content/uplq~;!_QblL10/ICAR~nowing-_illld-Showing-Report4J:l.Qt 

2 European Commission, Non Financial Reporting, http://ec.europa.eu/finance/accounting/nonfinancial_reporting/index_en.htm. 

1 
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disclosures.' In addition, the UN Guiding Principles on Business and Human Rights (UNGPs), 

endorsed by the United States Government in 2011, call on businesses to report how they 

address human rights risks in their operations through a variety of methods, including formal 

reports to be made available to all affected stakeholders.• 

Regulatory advancements aside, reporting results in clear benefits to companies. Research 

conducted by accounting firms Deloitte and Ernst & Young has revealed tangible benefits for 

companies disclosing non-financial information related to human rights and sustain ability and 

how this information better informs investors about issues related to corporate reputation and 

risk. 5 Recognizing this demand, leading financial information providers such as Bloomberg and 

Thompson Reuters have sought to incorporate human rights and sustainability information into 

their own analytics and reporting." 

We urge you today to indicate your strong support for Section 1502 of the Dodd-Frank Act, to 

stand up for a provision addressing serious and grave human rights conditions, and to 

understand that the trend towards corporate disclosure for human rights is increasing through 

regulatory regimes around the world. Section 1502 is not creating a burden on business. 

Instead, it brings tangible value to companies and investors. The public also benefits when 

companies are motivated by disclosure requirements to map their supply chains, conduct 

human rights due diligence, and ensure that they are engaging responsibly in their activities. 

3 ICAR, supra note 1, at 21. 

Sincerely, 

Amol Mehra, Esq. 

Director 

International Corporate Accountability Roundtable 

@1]10I@lcar.l)gQ 

4 John Ruggie, Special Representative of the Sec'y-Gen. on the Issue of Human Rights & Transnational 

Corps. & Other Bus. Enters., Guiding Principles on Business and Human Rights: Implementing the United 

Nations "Protect, Respect and Remedy" Framework, U.N. Doc. A/HRC/17 /31, Principle 21 (June 2011) 

ovailable ot http:/ /www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf. 5 See Value of Sustainabi/ity Reporting, ERNST & YOUNG & BOSTON COLL. CTR. FOR CORPORATE CiTIZENSHIP (May 

2013), available at http://www.ey.com/Publication/vwlUAssets/ACM_BC/$FilE/1304-

1061668_ACM_BC_Corporate_Center.pdf; Disclosure of Long-Term Business Value: What Matters, 

DELOITTE (March 2012), available at 

http://www.deloitte.com/assets/DcomUnitedStates/locai%20Assets/Documents/us_scc_materialitypov_ 

032812.pdf. 

6 !CAR, supra note 1, at 22. 

2 
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FIGHT GENOCIOE !lOT STAND llli.YQY 

House Financial Services Committee 

Subcommittee on Monetary Policy and Trade 

November 13; 2015 

Dear Members of the House Financial Services Subcommittee On Monetary Policy and l'rade: 

Jewish World Watch (JWW) submits this statement for the record to express our support for Section 1502 

of the Dodd-Frank Act JWW is an anti-genocide/atrocities_ P::evention organization focused on educ~tion, 

advocacy, and grantipaking. We have supported on the ground projects, led by local civil $Ociety 

organizations, in eastern Democratic Republic of the Congo (DRC) since 2009, and our staff frequently 

visits the region. 

JWW has beeri, and remains supportive, of legislation that aims to curb mineral exploitation throughout 

ea..<;;tem Congo. While conflict minerals are not the only driver of violent conflict, and legislation such as 

Dodd-Frank is not a panacea, it is clear that many rebel groups are able to sustain their efforts through 

very lucrative mineral exploitation. Cutting off the main source of funding for militias and rebel groups, 

and providing rebels with viable alternatives to taking up arms through effective reintegration programs, 

will reinforce the process of disarmament and demobili7..ation. This is essential to ending the cycle of 

predatory violence throughout the region, and measures like Dodd-Frank aid in this process. 

Many civil society leaders from the DR C. including JWW partners, have been outspoken in their support 

of Dodd-Frank. They have seen the impact transparency measures can have on resource flows to anned 

groups, and the long-tenn vision of what laws like Dodd-Frank can do to transform their country. The fact 

that Dodd-Frank is a piece of a long-term strategy cannot be overly stated. While the results from 

implementation of Dodd-Frank have already shown promise. it is important to remember that the first 

Conflict Minerals Reports were only submitted in May 2014. Given more time, with more companies 

effectively doing their due diligence repmting, coupled with measures being implemented inside the 

DRC, Dodd-Frank can have a meaningful impact in the region. 

After analyzing I 00 reports submitted from the first filing deadline, it is disconcerting to know that 

Global Witness and Amnesty International found that nearly 80 percent of US companies are to 

adequately follow through on their supply chain checks and disclosures. With that said. one in 

companies surveyed were able to adequately comply with the law; proving compliance is achievable. To 

reap the full benefits of the law's intended impact, additional pressure must be exerted over companies to 

ensure they are complying, and more time must be given to realize the Jaw's potentiaL 

We ask that you use your position to encourage companies to comply with the law, and work with your 

colleagues to develop additional tools and resources to assist in breaking the cycle of violence in eastern 

Congo. 

Sincerely. 

Mike Brand, Director of Policy and Programs 

Rabbi Harold M. Schulwels :n, Co-Fnunder"' Janice Kamenir-Reznik, Co-Founder & President • WilliamS, Bernstein, Executive Director 

5551 Balboa B!vd. • Encfno, CA 91316 • tel {SlS) 501·1836 •fax !818)501-1835 • info@jwvv.org ~www.jww.org 
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Financial Services Committee Hearing 

Monetary Policy and Trade Subcommittee 

"Dodd-Frank Five Years later: What Have We Learned from Conflict Minerals Reporting?" 

Representative McDermott Statement for the Record 

"It was almost six years ago to the day that I introduced the Conflict Minerals Trade Act, which 

was designed to help stop trade in conflict minerals that were sustaining the brutal civil war in 

the Democratic Republic of the Congo (DRC). 

I am very proud that many of the provisions in that original, bi-partisan bill were incorporated 

into Dodd-Frank Section 1502 and though we are still in the early days of its implementation, it 

is clear that the law is having its intended effect. After two rounds of company sourcing 

disclosures, we already have better identification of metal processors, greater scrutiny of supply 

chains, and further understanding of where American companies do business. 

It is important to remember why we enacted 1502 in the first place: to take a real step forward in 

monitoring the mining and trade minerals that contributes to violence in the DRC. That is not to 

say that 1502 was ever going to end the war or even resolve the many challenges DRC faces. 

What my colleagues and I originally envisioned was a vehicle by which the links between the 

mineral trade and conflict could be broken. Measured against that objective, 1502 has already 

achieved substantive progress. 

While opponents of Dodd-Frank in general, and Section 1502 specifically, continue to maintain 

that these provisions disadvantage American companies and interfere with the free flow of 

business, the truth of the matter is 1502 actually helps companies be part of the solution. This 

law set a new bar for corporate responsibility. In requiring companies to continually work to 

improve the depth and scope of their diligence by publishing meaningful and detailed reports, 

companies are better able to mitigate the risk that the minerals in their products may have funded 

conflict or human rights abuses. 

This was designed to be a thorough and comprehensive process and I applaud those companies 

who from the start showed that compliance was possible by undertaking a complete and detailed 

account of their mineral supplies. I am further encouraged by the Conflict Minerals Disclosures 

that were released in June, which saw a marked improvement from the initial2014 reports as 

more companies shed greater light on their supply chains. 

This law is changing the way supply chains are understood, and ultimately, how they function. 

Moreover, 1502 is helping to create an unprecedented opportunity to reform eastern Congo's 

mineral trade. The road to conflict resolution is a slow process, but absolutely a worthy one. This 

law, in concert with American businesses, deserves credit for taking a positive step toward 
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bringing about peace in one of the most violent and troubled parts of Africa. This is a good law, 

that benefits millions at the comparable cost of very few and its further implementation deserves 

fortitude, diligence, and patience." 
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NAE I 

Evangelicals 

November 16, 2015 

Chairman Bill Huizenga 

Subcommittee on Monetary Policy and Trade 

Financial Services Committee 

United States House of Representatives 

Washington, DC 20515 

Dear Chairman Huizenga and Members of the Subcommittee, 

As you meet to review the Dodd Frank Wall Street Reform and Consumer Protection Act, please maintain and 

strengthen rhe transparency provisions of Section 1502. These reforms have already restricted the flow of illicit profits 

to rebel groups and criminal gangs that rape and enslave innocent civilians in conflict-ridden eastern Congo. 

The National Association of Evangelicals (NA£) represents millions of evangelical Christians in nearly 40 

denominations, as well as in nondenominational congregations, and numerous evangelical organizations, schools and 

ministries. For more than l 00 years, evangelicals have generously supported missionary and humanitarian work in 

Congo, building hospitals, schools and churches in underserved areas. Through these connections we have become 

aware of the tragic impact of ongoing violent conflicts involving sexual violence, murder, pillaging and abuse of 

children as child soldiers. The conflict has for years been fueled by the proceeds of illicit mining operations using 

forced labor. 

While more work is still needed, the transparency requirements of Section 1502 have significantly reduced the market 

price for minerals mined under illegal and inhumane conditions, thereby cutting off funding to armed rebels groups. 

According to monitoring reports, as many of70 percent of mines in Congo are now free from control by armed rebel 

groups. 

Please do not rescind or water down the requirements of 1502. To do so would endanger thousands of Congolese 

men, women and children and subject them to further misery and oppression. Such conditions also threaten rhe peace 

of Congo's neighbors, and destabilize the region and beyond. 

NAE 

Evangelicals NAE. 
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N E I 

Evangelicals 

As American citizens who care deeply about respect for human life and dignity, we seek assurance that our own funds 

do not inadvertently support the violation of fellow human beings. Section 1502 enables us to make ethical 

purchasing decisions. 

Thank you for your service to our country, and for considering these concerns. 

Sincerely, 

Galen Carey 

Vice President, Government Relations 

E i 

Evangelicals NAE net 
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16 November 2015 

Statement: Dodd Frank, Section 1502 

From Dr. Denis Mukwege, PhD 

Founder and Medical Director, Panzi Hospital and Foundations 

"A conflict-free minerals industry would contribute to ending the unspeakable violence the people of 

Congo have endured for years. Government must not only enact strong legislation, they must be willing 

to enforce the law. Companies bear the responsibility of compliance and public disclosure, and acting 

transparently as consumers are increasingly aware of conflict-free components on the market. 

"Tens of thousands of legitimate miners would benefit from a clean, transparent minerals industry. 

Communities and families torn apart by conflict deserve a viable path to peace. At the Panzi Hospital 

and through our mobile and rural clinics, we have treated more than 40,000 survivors of sexual violence. 

Their bodies are used as the battlefield, leaving them with physical and psychological scars as a result. 

The mineral trade is one of the components that drive suffering in Congo. 

These laws must be enforced. Those guilty of crimes in Congo must be brought to justice. More must be 

done to support the lives of ordinary men and women who work in the mines. Responsible companies 

should continue to source from mines in Congo and other high-risk areas that are free from armed 

groups. We need a conflict-free minerals trade that brings benefits from these resources to the people 

of Congo." 
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RESPONSIBLE 

sourcing 

November 13, 2015 

House Financial Services Subcommittee 

on Monetary Policy and Trade 

2129 Rayburn House Office Building 

Washington, D.C. 20515 

Dear Subcommittee Members: 

In response to the subcommittee hearing on Section 1502, on Conflict Minerals, of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act, we are restating our support for the law and its 

importance to tbe investor community. 

We represent a group of leading investors and professionals that engage in the practice of 

sustainable, responsible, and impact investing or "SRI." The interest in owning sustainable 

diversified portfolios has grown significantly in the last two years. For example, the U.S. Forum for 

Sustainable and Responsible Investment's .2014 repoLt': notes that SRI assets grew 76% between 2010 

and 2012 to $6.57 trillion, now accounting for one in six dollars professionally managed in the U.S. As 

fiduciaries, with a long-term view of capital appreciation, analyzing and integrating environmental, social, 

and governance data into our investment decision-making process is necessary and prudent. 

Sustainable investors value companies' responsible management of global supply chain risks and have 

been particularly concerned in recent years by the use of four minerals, referred to as "conflict minerals" 

to fund the continuing violence in the Democratic Republic of the Congo (DRC). Conflict minerals disclosure 

is material to investors and will inform and improve investors' ability to: 

Assess social (i.e., human rights) and reputational risks in a company's supply chain. 

Assess a company's long-term mitigation of risks related to the supply of minerals, liability, and 

other material risks. 

The SEC's 1502 final rule makes disclosures related to conflict minerals consistent and accessible to all 

investors, thereby improving efficiency in U.S. markets in allocating capital to issuers with the best 

overall prospects for long-term shareholder value. Although we know that the transformation to a 

peaceful and prosperous mining industry in the DRC region has been slow and challenging, having 

companies disclose information on their sourcing practices has provided investors with important 

transparency about this human rights risk. We believe that continued engagement and reporting on 

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RESPONSIBLE 

sourcing 

corporate activities on this issue are vital for improvement on the ground. 

Responsible Sourcing Network (RSN} coordinated several statements and recommendations by the 

SRI community to submit to the SEC during the rule making process. A number of the signatories on 

this letter played an active role in the rulemaking process. Ultimately, we believe that the final rule from 

the Commission appropriately considered the costs and benefits involved and charted a workable path 

forward for companies to report on the source of and due diligence processes associated with conflict 

minerals, which was set forth in the Dodd-Frank legislation. 

Many of the same investors submitted a letter (i!Y.i!.i!i!b_ll"_heL"D to the SEC, signed by 48 investors on 

November 30,2012, to express opposition to the lawsuit filed before the D.C. Court of Appeals by the U.S. 

Chamber of Commerce, the National Association of Manufacturers and the Business Roundtable; see 

Petition for Review, Nat'/ Assoc. of Mfr. v. SEC. No. 12-1422 (D.C. Cir. Oct. 19, 2012}, which sought to set 

aside in whole or in part the SEC's rule on Conflict Minerals. The lawsuit brought by the three industry 

groups undermines the protection of investors. We continue to believe that companies with the best 

overall prospects for long-term shareholder value will devote their risk management efforts toward 

successful implementation of the existing 1502 rule, rather than attempt to weaken it. 

Responsible Sourcing Network's MininJLtllfL!2isclo_!iure_s_fJJ15: A.ILJnvest.QLG.!ll!if!JO CQJJ}lict A:JjlJ§ra)d 

B_gporti.!1g_jn Yeo.r 1\y.Q:', one of at least four recent studies evaluating companies' responses to Section 

1502, shows that a significant number of companies have responded to the Congressional mandate by: 

Exceeding reporting requirements and furnishing additional transparency, 

Creating innovative solutions to due diligence challenges, 

Collaborating to an unprecedented degree in building leverage over suppliers and metal 

processing facilities located overseas, and 

Contributing to a prosperous, conflict-free minerals trade in the DRC region. 

The report also shows that an increased number of companies have joined the .C:Q!lflict FITOQW:.Cl!lg 

!llill<itlYe~J an initiative of the electronics industry, demonstrating that Congress' mandate in Section 

1502 and the accompanying SEC rule have helped drive increased coordination among peers and 

industries in the private sector. Corporate funding of and participation in projects like the £.l!.Wlc PriyJ!t.<C 

Alli.Qpce fo_r~ons_fulLM!nera~Tra_d _ _.,s highlight how the law has driven increased cooperation 

between the public and private sector. Multi-stakeholder efforts that include the private sector are 

recognized by the international community as an important means toward ending the conflict in the 

DRC region. Section 1502 is an important tool for these initiatives that must be maintained. 

Section 1502 reflects consumers' demand to know that products have been safely and ethically sourced. 

Such legislation has value to consumers and investors, and also benefits companies. Conflict minerals 

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RESPONSIBLE 

sourcing 

disclosure requirements have increased some companies' knowledge of and leverage over their supply 

chain, and several companies reported that conflict minerals due diligence has opened up a new level of 

risk management for global supply chains. Companies based in other countries have also responded to 

Section 1502 through voluntary public reporting and industry collaboration. 

This legislation is not yet fully implemented, but it is already incentivizing stakeholders on the ground in 

the DRC to promote mining activities free of violence. Section 1502 has brought much-needed support to 

leading companies who cannot change global supply chains at the needed scale without the cooperation 

of other industries. The law has helped raise the degree of collaboration and urgency for companies, 

which has contributed to a rising market demand for conflict-free minerals. Besear~from.IlliQilllh 

l:'Loj~c;.t2 shows that miners in the DRC can now make a premium for conflict-free minerals, while armed 

groups are only able to sell their minerals at a below-market rate. This research also shows that, with the 

assistance of USAID, the number of certified conflict-free mines and processing facilities is on the rise in 

the DRC region. 

No single law can solve all the underlying problems that are causing conflict in the DRC region, but 

Section 1502 is already working to minimize revenue flows to the militia groups. The law has also been a 

catalyst for positive change in the region's mining sector, and a vital step toward a more effective 

response by U.S. companies to address material risk in their supply chains. Congress can learn lessons 

from the challenges around implementing Section 1502, and build upon its successes. 

Prosperity walks hand in hand with justice. As sustainable and responsible investors we look to Congress 

to continue to lead in promoting a peaceful and prosperous conflict-free minerals trade in the DRC 

region, and to take further steps to encourage respect for human rights in the global supply chains of U.S. 

companies. 

Yours sincerely, 

Susan Baker, Vice President, Shareholder Advocacy, Trillium Asset Management, LLC 

Lauren Compere, Director of Shareholder Engagement, Boston Common Asset Management 

Bennett Freeman, Chair of Advisory Board, Responsible Sourcing Network 

Eric Holterhues, Head of Socially Responsible Investment Funds, Triodos Investment Management 

Patricia Jurewicz, Director, Responsible Sourcing Network 

Emily Kaiser, Senior Sustainability Analyst, Calvert Investments 

Azadeh Sabour, Associate Director, Advisory Services, Sustainalytics 

Rev. David Schilling, Senior Program Director, Interfaith Center on Corporate Responsibility 

Lisa Woll, CEO, US SIF: The Forum for Sustainable and Responsible Investment 

1611 Telegraph Ave., Suite ~450 • Oakland, CA 94612 • 510.735 8145 .. sourcingnetwork org 
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RESPONSIBLE 

sourcing 

Additional signatories: 

~-

Name 

Lura Mack 

Joy_ Poland 

Sr. Louise Gallahue, S.C. 

~E!ssandra Viscovi 

Mark RePier 

Shane Yonston AIF, CFP, MFP 

David Schilling 

~_Lewis 

Lisa Heinz 

MollyMurP:hY. 

~~tZer~ 

Michael Kramer 

~,Nash,OSF 

Danielle Ginach 

Lisa Laird 

Patricia Farrar-Rivas 

Aaron Ziulkowski 

Sonia Kowal 

Hyperlinks: 

Title Orvanization 

Director, Portfolio Advisory Board Adrian Dominican Sisters 

Consultant BuildinP B~idges More Value & Profit Progra~-

Provincial Oau2hters ofCharitv, Province ofSt Louise 

CEO Etica SGR 

VP of StewardshiQ Investing Everence and the Praxis Mutual Funds 

Principal Advisor lmnact Investors 

Senior Program Director Interfaith Center on Coroorate Resnonsibilitv 

Couns~.l - Investor Environmental Health Network 

CFO Mennonite Education Agency 

Chief Investment Officer Mercv Health 

Director Sha~~hold~E_Advocacv Mercv Investment Services 

Managing Partner Natural investments 

Director Corporate Social 

Responsibility Sisters of St Francis of philadelphia 

Impact Manager Son en Canital 

VP. Investments and Cash 

M~~ment St joseoh Health 

CEO/CCO Vcris Wealth Partners 

Senior ESG Analy?t Walden Asset Manae:ement 

President Zevin Asset Management 

1 20 14_ll_S_3fJlgnpJ!,J)illpjf;"1l'_W_jjJ's_if&rgLEil§LPub]kiJtioQs_fSlLT_l:lill~l ;H-ES"J:>ill} 

2 lD~~~or _I,.nt~J~Jl_yaila_ble El 

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+f!J'IA[,_+__tlQ\':+__~0+2012-&<!I?tok~_n3!_sY£v;___VjQ1lmkUN8Qyg0ALaYW1LlE%1Ql 

3 Mini_nQJ}'!gJ)fi_r;/2.lliLf:IL?015~n fnl!§.tQI_GuidgJpJ£mJlict &Lagr._qJs Rt;PQLt;ing_ &Year_I~~ 

(llttp://w~w-~.$ourcll)g!l~!:Yi_ork.Qrgjmining:tlt~_:_t:iisc~~.!-U:g~} 

4 C:Q!JDJct Fc~SlLurcing !nlii<ltivubJI:rr:JL'!Lww,conflictlli>_esolJ[clQ&Qfg} 

1'1!1llic_PdYa_te_Al!iiill~:e_fm:B<g;onsible Min"fl!l!iT11!!lti!illpjfuww,resolv,Qrgj5ite,p_pJ1Jl 

6 R~'.esiT!Lfrom3.!1&liD!l\lgl>_j'_roj~(J:,(bitflJ_fen!ltJghPJ:()jgc_tA>rfJspg<;Lal-t()llk'>LPrqgr_ess-a_n<i:Jhi!_U!'M<C'i:mnllicJ:: 

m illeraJj;_:fu£U::\l_QJld-f@llk-1 s 011!.&-4nJ 4J 

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180 


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BRIGADIER GENERAL JOHN ADAMS, U.S. ARMY (RETIRED) 

OtJsemfn~ted by WlrtflfngStrotetJles Woshlngto11~ M agent of o foretgn pdndpol. Additionotlnjcmtatlort 

is ott file with the Oeportnumt of Justif:tt. 

ALLIANCE FOR 

amencan 

manufactunng 
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CHAPTER 3 • SPECIAlTY METAlS 

Specialty metals are used in countless ways, including high-strength alloys, 

semiconductors, consumer electronics, batteries, and armor plate, to name a 

few. The United States possesses significant reserves of many specialty met~ 

als, with an estimated value of $6.2 trillion. However, it currently imports over 

$5 billion worth of minerals annually, and Is almost completely dependent on 

foreign sources for 19 key specialty metals. 

Industrial metals are a group of specialty metals that are most often added 

to base metals to form alloys. These metals play critical roles in many steel 

alloys, adding hardness, heat resistance, and strength. They are often highly 

reactive transition metals and require complex and expensive extraction 

processes. In a few cases they can only be extracted as byproducts of other 

metals. As such, production is dictated by production of their carrier metals~ 

resulting in limited supply and mounting demand. 

Rare earth elements (REEs), a second important group, have unique properties that make them essential for many defense products, especially 

high-technology ones. Currently, China dominates REE production, controlling 90 percent of global supply. This market share was achieved in part by 

undercutting competitors through overproduction, which drove U.S. and other 

mines out of business. Upon obtaining a near monopoly, Chinese produc ... 

ers have scaled back production to Inflate prices through restricted supply. 

Quotas limiting the amount of raw REEs that may be exported have been 

used to force foreign investment in Chinese manufacturing, while exports to 

Japan were halted temporarily in 2010 after a diplomatic incident Western 

companies scrambled to invest in REE mining to secure supplies just as the 

speculative bubble burst In fall 2011, sending prices downward and leaving 

the industry outside China in disarray. China slill controls the global supply 

chain of REE oxides. 

Production of the platinum group metals (PGMs) is dominated by South 

Africa. The country possesses more than 90 percent of known PGM reserves, 

and accounts for almost 40 percent of global palladium production and 75 

percent of world platinum production. PGMs are commonly used in automo~ 

tive engines and advanced electronics, and do not have viable substitutes. 

South Africa's dominance over PGM production threatens the Integrity of 

defense industrial base supply chains. as political and economic lnstabili~ 

ties within South Africa could restrict U.S. access to these metals. Recent 

CHAPTER 3 • SPECIALTY METALS 41 
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Specialty metals are crucial to U.S. national security 

and are used in a wide range of military end-Items 

COMPUTER CHIPS 

AND DEVICES MISSILE GUIDANCE 

AIRCRAFT 

COMPONENTS 

Total U.S. annual consumption of new non-fuel minerals per capita 

••••• ••••• ••••• ••••• ••••• 

2 

THOUSAND 

POUNDS 

China Is thaleadlng supplier of rare earth elemants--osscnUal to national oocurity 

CHINA PRODUCES 

90% OF THE WORLD'S 

SUPPLY OF REES 

The U.S. Is wholly reliant on foreign suppliers 

for 19 key minerals used In specially metals 

1 % 

IMPORT -REliANT FOR 

19 KEY MINERALS 

Many specialty metals are vastly more valuable than other commonly used metals 

$3600 $1.60 

PER KILOGRAM PER KILOGRAM 

Protecting U.S. access to specialty metals 

STRENGTHEN DEVELOP INTERAGENCY & NATIONAL DOMESTIC INTERNATIONAL STOCKPILE CAPACITY COORDINATION 
183 


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Ill Missile guidance 

systems (gallium, 

neodymium, and 

rhenium) 

ll BGM-71 TOW Anti-Tank 

missile {tantalum) 

a Missile guidance 

systems (gallium, 

neodymiumJ and 

rhenium) 

Iii Submarine-launched 

ballistic missiles 

{tungsten) 

Ill Missile guidance 

systems (gallium, 

neodymium, and 

rhenium) 

II Missile guidance 

systems (gallium, 

neodymium1 and 

rhenium} 

Ill GBU-28 laser-guided 

bomb 

Ill M1 Abrams main battle 

tank {tantalum) 

Iii Platforms that use Steel 

Armor Plate (molybdenum) 

Ill Platforms that use Steel 

Armor Plate (molybd•em•ml 

mil Jet engines (rhenium and 

tungsten) 

Ill! MQ-1 B Predator drones 

(indium) 

!Jill F-22 Raptor fighter 

(yttrium) 

Ill C· 17 Military transport 

aircraft (yttrium) 

ll Lithium-ion batteries 

(lithium) 

Ill Night vision devices 

(lanthanum and gallium) 

Ill Night vision devices 

(lanthanum and gallium) 

Ill Laser Rangefinders 

(neodymium) 

!Jill lithium-ion batteries 

(lithium) 

II Night vision devices 

(lanthanum and gallium) 

1!11 Laser Rangefinders 

(neodymium) 
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reforms have increased taxes on PGM 

mines and introduced Chinese investment 

into those mines, Increasing scarcity and 

forcing prices to rise while creating uncertainty over the future availability of the 

commodities. 

Mitigating these risks is complex, and 

strategies will vary among commodities. 

The United States should maintain strategic resllrves of those defense-critical elements that lace likely shortages (REEs and 

PGMs) while seeking alternative sources. 

Congress Is beginning to give this Issue 

the necessary attention, and is shilling 

towards a more bottom-up approach to 

securing the supply chains of key materials-but more must be done. The federal 

government has not formulated a comprehensive and coherent policy approach to 

address the national security risks of inadequate access to many key minerals and 

metals. Strengthening efforts to identify 

substitutes and Improve recycling will help 

mitigate these risks. 

This chapter will investigate "specialty 

metals," categories of metals that are 

also known as industrial, rare, or precious metals. Other common names lor 

these types of metals include military, 

green, clean, critical, minor, technology, 

and strategic metals. It should be noted 

that specialty metals are not base metals 

(e.g. Iron, copper, nickel, lead and zinc), 

or metals that oxidize, tarnish, or corrode 

easily. In addition, specialty metals are not 

energy metals (e.g. uranium and thorium). 

This chapter will examine specialty metals, 

comparing their properties and assessing 

their vulnerabilities with respect to U.S. 

military capabilities and U.S. economic 

44 REMAKING AMERlCAN SECURITY 

competitiveness associated with the 

extraction and production of these metals. 

It is currently estimated that an average 

U.S. consumer's lifestyle requires roughly 

25,000 pounds of non-fuel minerals per 

year, requiring massive efforts to either 

extract or import these materials.' Each 

year, the U.S. Department of Defense 

(DoD) acquires nearly 750,000 tons of 

minerals for an array of defense and milItary functions? For example, tungsten, 

which is almost as hard as diamond, has 

the highest melting point of all non-alloyed metals, and is commonly used in 

turbine blades, missile nose cones, and 

other applications requiring exceptional 

heat resistance. Other minerals acquired 

are Rare earth elements (REEs) (some of 

which are used to fabricate permanent 

magnets), which maintain their magnetic 

fields even at high temperatures and 

are used in missile guidance and nearly 

every other small motor. Yet another 

example is palladium, which is part of 

the platinum metals group (PGMs), and 

is used In catalytic converters. 

Despite possessing an estimated $6.2 

trillion worth of key minerals reserves, the 

United States recently recorded a small 

surplus on the trade balance of raw mineral materials: It exported $9 billion and 

imported $8 billion of unprocessed minerals In 2012. However, the United States 

runs a deficit of $27 billion on the balance 
185 


99780.152

of processed mineral materials because it 

exported $120 billion and Imported $147 

billion In 2012? In short, although the U.S. 

is self-sufficient in many minerals and has 

the chemical engineering know-how to 

process them, to some extent, it has chosen to rely on imports. 

Increasingly, it is recognized that minerals are central to modern life and modern 

defense preparedness. Yet the federal government has not formulated a comprehensive and coherent response to the mineral/ 

materials supply vulnerabilities, and there 

is no standard definition of which minerals or materials are critical and strategic 

and how the government should improve 

access to key minerals. • 

The Defense Logistics Agency (DLA) 

Strategic Materials stores 28 commodities 

at 151ocations.ln FY2012, DLAStrategic 

Materials sold $1.5 million of minerals and 

materials from its stockpile. At the end of 

the fiscal year, mineral materials valued 

at $1.4 billion remained. The stockpile is 

meant to help remedy the fact that the 

U.S. is completely import-dependent for 

19 key minerals 6ncluding arsenic, asbestos, bauxite, graphite, fluorspar, indium, 

manganese, mica, niobium, tantalum, 

yttrium, and all REEs).• (fhe DLA Strategic 

Materials stockpile does not adequately 

compensate for the import dependence on 

a host of minerals because It emphasizes 

zinc, cobalt, chromium, and mercury, which 

are mined or recycled in the United States.) 

The stockpile Is meant to protect against 

domestic and foreign supply constraints, 

spiking prices, and excessive speculation. 

However, because the U.S. government 

lacks a working understanding of which 

minerals are absolutely critical and which 

are strategic, the selection of metals for 

inclusion in the future stockpile managed 

by the DLA seems somewhat arbitrary. 

In the past, a global abundance of minerals has been more than able to meet 

U.S. demand. However, as mineral-producing countries begin to consume more 

of their domestic production to fuel their 

own growing economies, the quantities 

available in the global marketplace have 

decreased. The Increased demand for minerals has encouraged resource nationalism, where countries seek to exert greater 

control over the extraction and processing 

of key elements. Furthermore, many minerals are mined In only a few countries (some 

of which are politically unstable), exposing the United States and other Importing 

countries to potential supply disruptions 

and other risks. 

This situation is widely recognized as 

critical. In the words of one observer, "the 

whole periodic table is under siege ... 

the growing demand for complex materials is leading to exploding demand for 

elements that are now used in only small 

quantities. "6 

The metals in this chapter fall into three 

different groups. The first group is industrial metals (e.g. antimony, manganese, 

tungsten, molybdenum, vanadium, and 

magnesium), which are usually mixed 

with base metals to create alloys to manufacture different kinds of steel products. 

Demand has risen for these alloyed metals 

because of their special properties that 

make them essential in aviation, engine 

turbines, green technology, and nuclear 

energy. Many of these metals are scarce 

because they are the byproduct of the 

other processes and because they are 

expensive to produce. Moreover, processIng these metals involves advanced Industrial chemistry and metallurgy that is more 

complex than extracting copper, zinc, and 

iron ore. 

CHAPTER 3 • SPECIALlY METALS 45 
186 


99780.153

The second group consists of REEs, 

which are found across a surprisingly 

wide variety of applications and devices 

that enhance modern life in advanced 

industrialized countries. REEs are almost 

exclusively mined in China, which has 

by far the largest concentration of these 

elements. Mining REEs requires a more 

complex process than that used to mine 

gold or zinc, for example. From Initial 

extraction to production, the process 

takes approximately 10 days. REEs are 

separated based on atomic weight, with 

actual processing duration based on the 

specific element. The most abundant REE 

is cerium. Terbium, a heavy REE, is more 

difficult to extract, and its extraction can 

take an additional 30 days.' Neodymium is 

also found with cerium, but the mine must 

first separate cerium and then extract the 

neodymium. This explains the length of 

production time and the costs. Importantly, 

companies cannot know beforehand 

whether valuable REEs are mixed in with 

the more common kinds, as each individual mine is different. Geologists and 

mining engineers must study each mine to 

find out which elements are available. The 

many engineering and processing challenges make REE mining among the most 

difficult types of mining operations.• 

Mine operators need to know in advance 

how the REEs are going to be used so 

that they can determine the appropriate 

extraction and refining process. (Different 

processes must be used depending on 

the intended end-use of the REE. 9) In fact, 

REEs are not inherently rare. but they are 

costly to mine and process because they 

are found in minute quantities mixed in 

with other ores. As Table 4 shows, REEs 

are used In a strikingly diverse range of 

products. including high-tech permanent 

magnets (see this report's chapter on 

magnets) and night vision devices (see this 

report's chapter on night vision devices). 

46 REMAKING AMERICAN SECURITY 

The third group of specially metals is 

very small and consists of the platinum 

group metals (PGMs), which are used 

In a range of applications such as vehicle production, future power sources, 

and many key military technologies. 

Palladium and platinum are used in catalytic converters. The largest concentrations of these deposits and reserves are 

found in South Africa. 

Key themes discussed In this chapter are: 

111 Within the past decade, many countries 

rich in natural resources have taken a 

stance of "resource nationalism" and 

are attempting to control and manipulate extractive mining by threatening 

to impose extra taxes, reduce exports, 

nationalize mining operators, and 

restrict licensing. 

111 Western countries and mining operators 

face competition from less developed 

countries for access to specialty metals 

as well as from China. which has moved 

aggressively offshore to guarantee 

access to natural resources. 

• Advanced Industrialized countries. 

including the United States. have abandoned mining and mining exploration. 

even though global demand for economically and militarily significant ores 

and chemical elements has risen and 

will continue to rise. 

111 Many specially metals are found in only 

a handful of countries, and often In 

regions that are politically and economically unstable. 

11 The risk of disruptions to the supply 

chains that use specialty metals is high, 

jeopardizing U.S. national security. 
187 


99780.154

Ill Various U.S. agencies recognize the 

risks, but they provide different and 

divergent answers and solutions. The 

lack of a mechanism to coordinate 

policies among agencies hampers the 

development of a comprehensive and 

coherent strategy. 

A NOTE ON CRITICALITY 

Access to many natural resources is 

largely a function of geography. Although 

different types of specialty metals face 

different levels of risk (as described below), 

PGMs are consistently classified as facing the highest risks. Global reserves are 

situated almost exclusively in South Africa, 

which is the only country possessing 

significant long-term production capability. Limited global production capacity Is 

coupled with high and increasing demand 

for PGMs, leading to high, unstable 

prices. Any number of events could create temporary or protracted shortages 

of PGMs, the most likely of which being 

internal political and economic instabilities 

associated with the South African government. The geographic concentration 

of PGM reserves, the high potential for 

disruption to the primary global provider, 

and the scarcity imposed by heightened 

demand indicate an extreme risk of these 

metals becoming unavailable. 10 

An insufficient supply of PGMs would have 

a significant impact on national defense 

capabilities. Although PGMs are most 

commonly known for their role in catalytic converters that reduce emissions 

from internal combustion engines, they 

also play an Important role in advanced 

electronics used by the military (such 

as guided missile systems) due to their 

exceptional performance and ability to 

withstand high temperatures. 

BACKGROUND 

The issue for most advanced industrialized countries is that demand for rare 

elements has risen, while proven reserves 

and mining operations are increasingly 

THE COST OF FAILURE TO ADDRESS POTENTIAL SPECIALTY METALS SUPPLY CHAIN 

DISRUPTIONS (a notional though realistic scenario) 

The inauguration of the new South African president has led to a strengthening of ties between the 

Republic of South Africa and the People's Republic of China. In return lor financial assistance in achieving 

its internal developmental policies and goals, South Africa has agreed to export manganese exclusively 

to China. Department of Defense supply chain specialists have begun to seek other sources of the metal; 

however, the effect on the market of this exclusive deal is expected to be pronounced. South Africa 

possesses one of the largest deposits of this mineral, and the removal of this source Is expected to 

significantly increase prices for remaining sources. Reduced manganese supply means Increased defense 

costs, as the U.S. military is a major consumer of manganese as a component of a variety of weapons 

systems and capabilities, Including In the manufacture of steel armor plate and munitions. 

CHAPTER 3 • SPECIALTY METALS 47 
188 


99780.155

concentrated in a handful of countries that 

have sought to exploit their geological 

advantages and their desire to meet their 

own growing domestic needs. In 2011, 

the British Geological Survey published 

a "risk list" that employed four variables 

{detailed below) to assess the risk factors of 52 elements or element groups 

with economic value." The variables they 

used were scarcity (or the abundance of 

elements In the earth's crust); production 

concentration (the location of current 

production); reserve base distribution (the 

location of reserves); and governance (the 

political stability of those locations). Using 

these categories, experts determined that 

the chemical elements or element groups 

with the highest supply vulnerabilities were 

antinomy, which Is produced in China and 

is used in micro-capacitors; PGMs, which 

As the United States frees itself from fossil fuel 

dependence, it may replace it with dependence 

on energy sources from power-generating 

equipment that relies on specialty metals. 

are produced in South Africa and used in 

automobile catalytic converters, fuel cells, 

seawater desalination equipment; mercury, 

which is produced in China; tungsten, 

which is produced In China and is a hard 

metal used in all cutting tools; REEs, which 

are produced in China; and niobium, which 

is produced In Brazil and used in MRI 

scanners, touch screens, micro capacitors, 

and ferroalloys.12 

4B REMAKING AMERICAN SECURITY 

The German government also has 

expressed concern, as the country's large 

manufacturing base requires substantial 

amounts of REEs. As demand from emerging economies has risen, the German government has been aggressive in securing 

access to REEs in regions or countries 

other than China. The German government 

entered into multiple agreements with 

Kazakhstan to give German companies 

better access to REEs.13 

Last but not least, the European Union has 

pushed the governments of Its member 

states to agree to a "critical metals" list, 

and to approve new policies to ensure 

continuous access to gallium, indium, tantalum, and tungsten, In addition to REEs. 

One of the measures on the agenda is to 

establish a critical metals stockpile, which 

would include gallium, indium, tantalum, 

and tungsten." 

It is not surprising that the U.S. Geological 

Survey (USGS), DoD, the Department 

of Energy (DoE), and the Congressional 

Research Service have joined the chorus 

of concerned voices by publishing numerous reports and presenting long lists of 

critical minerals. Critical minerals are indispensable to modern life and security, yet 

they may be at risk because of their geographic availability, the costs of extraction 

and processing, the dearth of (manmade) 

substitutes, and limited potential for recycling. USGS puts REEs highest on their 

list, 15 followed by cobalt, Indium, and tellurium, which are needed for many important 

applications including magnets for motors 

and super alloys common in turbine blades 

and other aeronautical functions. In light of 

the rapid growth in demand for advanced 

batteries, most of which require minute 

amounts of lithium, USGS also has raised 

concerns about the possibility of depleting 

all known reserves of the element (see this 

report's chapter on lithium-ion batteries). 
189 


99780.156

Tables 1 and 2 demonstrate the trend of 

the last 1 0 years during this relatively short 

period of time, U.S. import dependence 

has radically Increased across the board. 

A wide variety of metals are plagued by 

the same issues that account for this 

current state of affairs. For one, political 

leaders of advanced industrialized countries have abandoned mining In light of 

the substantial negative externalities and 

pollution of waterways, soil, and air. Take 

the example of REEs. In reality, they are 

abundant in the earth's crust, but they tend 

to be found in small concentrations and 

deposits. They rarely exist in pure form 

and must be extracted from other oxides, 

which increases the costs of processing. 

More importantly than the expense of 

extraction, RE mining also creates radioactive environmental pollutants. 16 In every 

mining operation, the extraction process 

results in tailings (ground rock, processing agents, and chemicals), which cannot 

be fully reclaimed or reused or recycled. 

Frequently, the unrecoverable and uneconomic metals, minerals, chemicals, and 

process water are discharged, normally as 

slurry, to a final storage area. RE mining, 

however, produces tailings that contain 

radioactive uranium and thorium, which 

pose additional environmental threats 

beyond the risks associated with normal 

mining waste. In Western countries, governments and the public essentially have 

decided that it is easier to offshore this 

process to localities with less vocal and 

organized citizens or less democratic and 

transparent regimes. China, for example, 

has witnessed extreme degradation of its 

soil, water, and air quality to a degree that 

would not be tolerated in advanced industrialized countries. 11 

Another issue is that global demand is 

being driven higher by new discoveries of 

these metals' special properties, and by 

new technological innovations in how to 

design, fabricate, and Incorporate them 

into consumer and military products. For 

example, neodymium (an REE) combined 

with iron and boron was discovered to 

possess strong magnetic properties, and 

it became the foundation of the high-tech 

permanent magnet sector (discussed in 

this report's chapter on high-tech magnets). Other examples include: gallium and 

tellurium, which are used in completing 

types of solar panels; rhenium, used in 

the super alloys employed In jet turbines; 

indium, which Is used in flat panel displays; and graphite, used in lithium-ion 

(Li-ion) batteries. Green technology (such 

as hybrid cars, wind turbines, electric 

motors, and lightweight metals) relies 

heavily on specialty metals and REEs. 

Many technological devices consume tiny 

amounts of specialty metals, without which 

the product would not operate or would 

need to be much larger and heavier. For 

example, every guided missile requires 

modest amounts of oxides, the form in 

which REEs occur in the mineral ore. While 

the amount of REEs used In a guided missile is genuinely small In quantity, without 

them the missiles would be heavier, less 

precise, and less advanced. In a similar vein, 

some metals must be able to withstand high 

temperatures, which are primarily achieved 

by adding minor elements to steel. 

Additionally, more than two billion people 

(notably, the populations of China and 

India) are moving towards higher standards of living more closely resembling 

those in advanced industrial nations such 

as the United States and those in Europe. 

This development means that demand for 

electronic devices, green technology, and 

other advanced applications will continue 

to rise and in spite of economic crises in 

Europe, the United States, and Japan. 

CHAPTER 3 • SPECIAlTY METAlS 49 
190 


99780.157

Table 1: U.S. Net Import Reliance for 

Selected Nonfuel Mineral Materials in 2000 

K1i •~ ,, , " :',, ';z" '" , ,,,, , ', Qercen p 

t~~~v,Bteo@ ?;c'fi4'"' ~ f, s,,~yj' ~ , ~~"" ~ § "' 1°~,", Ztl! 

ARSENIC (TRIOXIDE) China, Chile, Mexico 

ASBESTOS Canada 

COLUMBIUM (NIOBIUM) Australia, Guinea. Jamak:a. Brazil 

BAUXITE & ALUMINA Brazil, Ganada, Germany, Russia 

FLUORSPAR China, South Africa, Mexico 

GRAPHITE (NATURAL) China, Mexico, Canada 

MANGANESE South Afnca, Gabon, Aust<af". France 

MICA, SHEET (NATURAL) India, Be{gium, Germany, China 

QUARTZ CRYSTAL Brazil, Germany, Madagascar 

STRONTIUM Mexico, Germany 

THALLIUM Belgium, Canada, Germany, United Kongdom 

THORIUM France 

YTTRIUM China, Hoog Kong, France, United Kingdom 

GEMSTONES Israel, India, Belgium 

BISMUTH Belgium, Mexio, UnHed l<ifllldom, China 

ANTIMONY China. Mexico, South Afnca, Bolivia 

TIN Chlna,Brazil. Peru, BoiMa 

PLATINUM South Africa, United Kingdom. Russia, Germany 

STONE Italy, Croatia, Spain, India 

TANTALUM Austratia, China, Thailand, Japan 

CHROMIUM South Africa, Kazakhstan, Russia, Zmbabl.ve 

TITANIUM CONCENTRATES Sooth Africa, Austrafta, Canada, India 

COBALT NorwaY. Aniand, Zambia, Canada 

RARE EARTHS China, France, Japan, United K'lf19dom 

BARITE China. India, Mexico, Morocco 

Source US Geolog~c,?J Survey, Mmeral Comnwiilly Summnnes 

2000 (Waslungton DC. US Geological Survey) 

50 REMAKING AMERICAN SECURITY 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

95% 

94% 

86% 

83% 

801% 

80% 

78% 

76% 

74% 

72% 

71% 
191 


99780.158

Table 2: U.S. Net Import Reliance for 

Selected Non~fuel Mineral Materials in 2011 7%'0'<'7'""' -~""' '2"' ""~ ~w mpr 10 ~> ·- ~~ ~ ~~ ~ ~ weJ•1" "~";;,::s,r,%~ oz~ ~ ~ ~0/i<~ n: 

~~ " ,r:~::x~"fft7-iti: "Jt ~'~~~"u:;l" ~~q~~~%~~1~~~' \»'4\j~ ~a\! ~\~JJ!till w 

ARSENIC (TRIOXIDE) Moroxo. China, Belgium 

ASBESTOS Canada. Zimbabwe 

BAUXITE & ALUMINA Jamaica. BmzH, Guinea, Austral~ 

CESIUM Canada 

FLUORSPAR Mexioo. China. SOu!h Africa, Moogolla 

GRAPHITE {NATURAL) China, Mexico. CMada, Brazil 

INDIUM China. C'-aoada. Japan, Belgium 

MANGANESE Sooth Africa. Gabon, China Aus!<aHa 

MICA, SHEET {NATURAL) China, BrnzJI, Belgium, India 

NIOBIUM (COLUMBIUM) Branl. CanacUl, Germany, Russ!a 

QUARTZ CRYSTAL (INDUSTRIAL) China, Japan Rvssia 

RARE EARTHS Otirw. france, Es!Ofia, Japan 

RUBIDIUM Canada 

SCANDIUM China 

STRONTIUM Mexico, GermatW 

TANTALUM ChiDa, Germany, Kru:akhstao, Austra!la 

THALLIUM Russia, Germany, Kaza!<hsiM 

THORIUM France, India, Canada. Uni\e<l Kn1gdom 

YTTRIUM China, Japan, france, United i'(;r\g<!Om 

GALL!lJM Germany. Canada, Unlted l<ingdorn, China 

IODINE Chile, Japan 

GEMSTONES Israel, India, Belgium, South Africa 

GERMANIUM China, Offigium. Russia. Ge«naoy 

BISMUTH China, Belgium, UnHed Kingdom 

DIAMOND (DUST, GRIT, & POWDER) China, Ireland, Repvbtlc of Korea. Russia 

Source U.S GeologJCi!l Survey, Mmemt Commodity Summaues 

2012 (Washmgton D.C. US Geoiogwal Sumy). 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

99% 

99% 

98% 

90% 

89% 

89% 

CHAPTER 3 • SPECIAlTY METALS 51 
192 


99780.159

Finally, metal and mineral suppliers have 

witnessed booming mining sectors due 

to rising prices. Thanks to the rising value 

of natural resources, producing countries 

have pursued a policy of resource nationalism. Many of the most sought-after 

elements are found in developing countries 

that face multiple economic and political 

challenges. To finance development projects or to extract rents, governments of 

these countries might be tempted to push 

for a greater share of the profits made by 

mining companies. Examples of this trend 

are ubiquitous. Ghana has been reviewing 

mining contracts, and may renegotiate 

existing arrangements to Increase governmental revenue. Zambia doubled its 

copper royalty to six percent. Guinea, 

which controls the largest known reserves 

of both bauxite and Iron ore, has taken a 

15 percent stake in mining operations. In 

Namibia, a state-owned company controls 

all new mining and exploration. Foreign 

mining operations in Zimbabwe must cede 

a 51 percent stake to local owners.'• 

To ensure the country benefits from its 

mineral wealth, South Africa may impose 

a 50 percent windfall tax on mining profits 

and a 50 percent capital gains tax on prospecting rights. The ruling African National 

Congress wants to collect a larger share 

of the resource boom. Even Australia, an 

advanced industrialized country, plans to 

impose a new, $8 billion tax on mining.'" 

This state of affairs has not gone unnoticed. Since the mid to late 2000s, 

Increased scrutiny and heightened alarm 

surround the fact that the U.S. economy 

and national security depend on specialty 

metals-many of which are vulnerable to 

supply threats resulting from sovereign risk 

and resource nationalism, geological scarcity, lack of viable substitutes, byproduct 

sourcing, and inadequate post-consumer 

recycling and recovery programs. 20 

52 REMAKING AMERICAN SECURITY 

In 2008, the National Research Council 

Committee on Critical Mineral Impacts on 

the U.S. Economy (Committee on Earth 

Resources) compiled a statistical approxImation to assess supply restrictions 

Impact on the entire U.S. economy and 

defense capabilities. The report also took 

into consideration the technical substitution potential of a mineral!' 

The National Research Council report presented a criticality matrix that juxtaposed 

the probability of a supply disruption with 

the overall economic impact of that supply disruption. Supply disruptions can be 

caused by the physical unavailability of a 

commodity or by increasingly restrictive 

prices as a result of scarcity or of artificial 

means. The study considered five factors 

that contribute to availability: geological; technical; social and environmental; 

economic; and political. Economic Impact 

was assessed by the availability of a close 

substitute, the costs associated with that 

substitution, and the consequences of the 

supply restriction. The committee examined 11 metals or metal groups: copper, 

gallium, indium, lithium, manganese, 

niobium, PGMs (including Iridium, osmium, 

palladium, platinum, rhodium, ruthenium), 

REEs, tantalum, titanium, and vanadium 

to determine their criticality. The study's 

conclusions are presented in Figure 1 . 

Indium, manganese, niobium, PGMs, 

and REEs fall in the "critical" zone of 

the matrix.22 They are considered critical 

because of the importance of their applications In catalytic converters, industrial 

chemical production, electronics, batteries, 

liquid crystal displays, and hardeners or 

strengtheners in steel and iron alloys. In 

addition, if a physical disruption or sudden 

price surge jeopardizes supplies, there are 

no readily available mineral substitutes for 

these applications. 
193 


99780.160

• Copper •Tantalum 

•Vanadium 

• Lithium 

•Titanium 

However, the study concludes that essentially any mineral could be considered 

critical, because both economic importance as well as factors influencing availability could change. Additionally, the 

report stresses that import dependence 

alone is not means for alarm; however, the 

• Manganese • Rhodium 

•Indium • Palladium 

• Niobium • Platinum 

• Rare Earth 

Elements 

•Gallium 

concentration of supplies in a small number of countries plagued by political instability could be disastrous. Alternatively, 

rapid growth in the Internal demand of 

exporting countries could limit the quantities available on the global market, resulting in rising prices and restricted supply. 

CHAPTER 3 • SPECIALTY METALS 53 
194 


99780.161

INDUSTRIAl METALS 

Industrial metals (also called minor metals) 

are in vogue because new uses for these 

metals are discovered frequently. They 

are classified as minor metals because 

until recently they were largely ignored by 

Industry. They are not readily available or 

mined in the United States. Often, the elements are in fact rare and are not abundant 

in the earth's crust, with only a few parts 

per million of recoverable ore, even In the 

geologically significant deposits. As many 

of these elements are only found in a few 

dense concentrations globally, extraction 

may be dominated by a handful of countries. Subsequently, the price and supply 

of the element may be subject to export 

controls, price manipulation, and sudden 

disruptions. In some cases, elements are in 

fact a byproduct of a primary ore and are 

uneconomical to extract independent of 

the refining process for those other ores. 

These metals are therefore relatively costly 

and challenging to produce. Finally, the 

time required to adapt to new production 

and utilization processes is long, making 

planning and investment difficult. 

The United States (along with almost ail 

Organization for Economic Co-operation 

and Development [OECD] countries) relies 

heavily on imports for these materials, 

while the main producers are often countries with rapidly expanding economies 

(such as China, Russia, Chile, and South 

Africa) with sizeable and increasing domestic demand for these metals. Because 

certain metals are only commercially produced in a few countries, they can claim 

near monopolies over global reserves and 

Influence pricing and availability. 

The evolution of computing circuitry over 

the past three decades clearly illustrates 

the critical importance of industrial metals. 

The number of elements used in computer 

54 REMAKING AMERICAN SECURITY 

circuitry has expanded from 12 in the 

i 980s, to i 6 during the 1 ggos, to over 60 

today.'3 These circuits are found in nearly 

every piece of modern technology, and 

especially in highly specialized, high-tech 

defense applications. 

The summary of the industrial metals 

sector below Includes an overview of the 

different metal groups, selected elements, 

their most significant uses, and some of 

the concerns surrounding these commodities. The next section presents a more 

general discussion of the dominant risks 

facing this sector. The critical importance 

of these metals should be readily apparent. 

At the most basic level, many of them are 

used in heat-resistant, hard metal alloys 

that are used in aircraft, ships, submarines, and countless other defense-related applications. Other metals are at the 

core of solar energy, which is necessary 

for defense satellites and has a growing 

importance for civilian energy. Others still 

are used in electronic components such as 

rechargeable batteries, which are essential 

to consumer electronics, communication, 

and hybrid engines. 

THE UNIVERSE OF 

INDUSTRIAl METALS 

Most of the elements in industrial metals 

are used in alloys in order to improve heat 

resistance, reduce the weight of a metal 

item, or harden steel. (Table 3 provides 

an overview of the different metals and 

their defense applications and describes 

the particular risks or vulnerabilities 

associated with each industrial metal.) 

Many industrial metals are in demand 

in consumer electronics, high-energy 

rechargeable batteries, and the computer 

industry. They also are indispensable 

in numerous and wide-ranging military 
195 


99780.162

defense applications. Radar systems, 

airframes and engines, optical equipment, 

armor plating, coatings, electronic display 

screens, solar cells, and military batteries 

rely on small but vital quantities of industrial metals. 

The universe of industrial metals can be 

divided into different chemical classifications. Each chemical group possesses 

different properties and advantages, which 

are further discussed below. 

ALKALI AND ALKALI EARTH METALS 

Alkali and alkali earth metals are located 

in the first two columns of the periodic 

table (excluding hydrogen). They are highly 

reactive elements, and as such, are not 

found in their elemental form, but Instead 

as compounds in the earth's crust. Alkali 

metals (such as lithium) are relatively soft 

with low melting points, and form weak 

bonds with other elements because they 

have only one electron available for bonding. Alkali earth metals (such as beryllium) 

are harder and denser than the alkali metals, though not to the same extent as the 

transition metals. 

LITHIUM 

Lithium (LI) is a light and highly reactive 

metal, and is a key component of the 

rechargeable, high-energy lithium-ion 

(Li-lon) batteries that are widely used in 

the military and have a bright future as the 

main power source for electric or hybrid 

vehicles. Chile, Australia, Argentina, and 

China are the leading producers of lithium; 

almost the entirety of the U.S. import market comes from Argentina and Chile. Chile 

possesses over half of the world's known 

lithium reserves and is the main producer, 

extracting lithium from the Atacama 

Desert." U.S. production of lithium is 

insignificant. 25 Because lithium is highly 

reactive and reacts with water, producing 

the pure form of lithium is very complex 

and requires a dry environment." 

Increase in demand for lithium, especially 

from China, have caused a recent expansion of production In many countries. 

Production of lithium was reported to have 

Increased 20 percent In both Australia and 

Chile in 2011, while Chinese production 

was reported to have increased 30 percent. 27 This expansion corresponds to the 

growing demand for high-purity lithium for 

use in LHon batteries. 

Analysts in the advanced battery sector and green technology community 

express considerable concern about 

the world's reliance on lithium, because 

most of the reserves are concentrated in 

two countries (Chile and Argentina) and 

may outstrip global demand as soon as 

2017. Currently, there Is no substitute 

for lithium, which is the ideal material to 

create rechargeable batteries and energy 

network stations to store surplus power 

from solar and wind power (see this 

report's chapter on lithium-ion batteries)?' 

Unlike with other specialty metals, the 

main concern about lithium is not price or 

the potentially monopolistic behavior by 

foreign governments but rather that the 

world may face supply restrictions as reliance on technologies that require lithium 

increases and the world's known reserves 

of lithium are depleted." 

BERYLLIUM 

Beryllium (Be) currently is considered a 

material critical to U.S. national defense, 

and is retained in the DLA Strategic 

Materials stockpile. Beryllium is critical to many military systems, including 

the airborne Forward-Looking-Infrared 

(FUR) system, missile guidance systems, 

and surveillance satellites. There are no 

CHAPTER 3 • SPECIALTY METALS 55 
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(Li) Batteries Chile, Australia, 

Chlna, Argentina 

(Be) Lightweight alloys, radiation U.S., China windows, nuclear reactors 

Low melting~point alloys, high~ 

(Ga) 31 power high~frequency electronics China, Germany. 

semiconductors, light emitting Kazakhstan, Ukraine 

diodes {LEOs}, solar cells 

liquid crystal displays (LCDs), low 

(In) 49 melting~polnt alloys, bearing alloys, China, South Korea, 

transistors, thermistors, Canada 

photoconductors, rectifiers, mirrors 

Fiber optics, infrared optics, solar 

(Ge) 32 photovoltalc cells, semiconductors, China 

alloys 

(Sb) 51 Flame re1ardant, semiconductors, China bearing alloys, batteries 

[Te) 52 China, Canada, 

Philippines 

(V) 23 Nuclear reactors, springs, carbide China, Soulh Africa, 

stabilizer {alloys), batteries Russia 

Tempered steel, gun barrels, boiler 

(Mo) 42 plates, armor plating, nuclear China, U.S., Cl>lle 

energy, missile components 

Brazil, Australia, 

[Ta) 73 Mozambique. 

(W) 74 

(Re) 75 

(Pd) 46 

(PI) 70 Catalytic converters (diesel) Russia, Canada, 

u.s. 

56 REMAKING AMERICAN SECURITY 
197 


99780.164

substitutes for beryllium, and in previous 

years there was a shortage of high-purity 

beryllium due to high production costs and 

health and safety issues. Foreign-sourced 

beryllium is not of sufficient purity for 

defense applications. 

In 2005, under Tille Ill of the Defense 

Production Act (P.L. 81-774), DoD 

invested roughly $90 million in a pri· 

vale-public partnership with domestic 

beryllium producer Brush Wellman, Inc. 

(now called Materion Brush Beryllium 

and Composites) to produce a primary 

beryllium plant In Ohio.30 That plant 

became operational in early 2011, dropping the reported U.S. import dependence from 61 percent in 2010 to 21 

percent in 2011. Twelve percent of the 

annual U.S. beryllium consumption is 

attributed to defense applications. The 

USGS reports that the U.S. currently 

possesses about 65 percent of the 

world's beryllium reserves and, with the 

opening of the Materion Brush plant in 

2011, accounts for almost 90 percent of 

world production.31 

TRANSITION METALS 

The group of transition metals contains 3B 

elements that are grouped together due to 

their common electron configuration, and 

are generally hard, malleable, and possess 

high melting points. They are good electric 

conductors and are often magnetic. The 

uses of transition metals are vast, making 

their use common. 

RHENIUM 

Rhenium (Re) is a rare metallic element 

that is important to the defense community because of its contribution to the 

properties of high-temperature alloys 

and coatings. The USGS reports that 

nearly 70 percent of rhenium is used for 

high-temperature engine turbines common to jet engines, while an additional 

20 percent is a key catalyst in refining 

oil. 32 Rhenium is also used as a promoter 

in catalysts in gas-to-liquid operations, 

which may become more important in the 

future In light of the rapid expansion of 

shale gas output in the United States and 

elsewhere. 

Rhenium is obtained almost exclusively 

as a byproduct of the processing of a 

special type of copper deposit known as 

a porphyry copper deposit. Specifically, 

rhenium is obtained from the processing 

of the mineral molybdenite (a molybdenum 

ore), which in itself is a copper byproduct. 

Therefore, rhenium is among the most 

expensive and volatile metals in the world, 

and its price fluctuated from $10,000/ 

kg in 2008 to $3,500/kg In March 2013.33 

Currently, the United States is the world's 

second leading producer of rhenium (after 

Chile), with about a 12 percent market 

share. However, because rhenium is a 

byproduct of a byproduct, its production 

Is limited by the production of molybdenum, which is in turn limited by copper 

production. In 2012, the U.S. imported 

nearly seven times its domestic production of rhenium, mainly from Chile and 

Kazakhstan."' Rhenium is part of the DLA 

Strategic Materials stockpile. 

MOLYBDENUM 

Molybdenum (Mo) is an Important alloying 

agent that contributes to the hardening 

and toughness of tempered steels, and 

is used in steel armor plate, gun barrels, 

and boiler plates. Almost all ultra-high 

strength steels contain up to eight percent 

molybdenum. Molybdenum is used in 

nuclear energy applications and for missile 

and aircraft parts. Molybdenum is both 

mined as a primary ore and recovered as a 

byproduct of copper. The United States is 

CHAPTER 3 • SPECIAlTY METALS 57 
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the second largest producer of molybdenum with about one quarter of the global 

share, and currently exports about half of 

Its annual output. 35 

VANADIUM 

Vanadium M is used predominantly as 

an additive In steel that is then used in 

nuclear energy applications and in rust-resistant springs and high-speed tools. 

Ferrovanadium, an alloy of steel, accounts 

for 95 percent of the vanadium used in the 

United Stales. Vanadium Is a non-substitutable component of aerospace titanium 

alloys; however, for many other applications, other metals such as molybdenum, 

tungsten, manganese, niobium, or titanium 

may be substituted for vanadium." Small 

amounts of vanadium are added to Iron 

alloys to improve corrosion resistance; 

ferrovanadium is mostly used in gears for 

cars, jet engines, and springs. The type 

of vanadium used in steel does not face 

immediate supply constraints. Due to 

increasing demand for steel In expanding 

economies, the demand for vanadium is 

expected to increase. 

Three countries -China, South Africa, and 

Russia-dominate the vanadium market, 

and together account for more than 96 

percent of current global production. The 

United States depends on imports for 80 

percent of its domestic consumption of 

ferrovanadium; its main import sources 

are South Korea, Austria, Canada, and the 

Czech Republic.37 

Twenty percent of the vanadium market 

consists of vanadium pentoxide, which 

is more valuable than ferrovanadium. In 

2012, the major exporters of vanadium to 

the United States were Russia (47 percent), South Africa {32 percent), and China 

(19 percent). Vanadium pentoxide is used 

as a catalyst In petroleum refineries, in 

58 REMAKING AMERICAN SECURITY 

ceramics, and in super-conductive magnets. Currently, however, vanadium pentoxide is considered suitable for vanadium 

redox batteries, a new type of advanced 

rechargeable battery that is able to store 

renewable energy coming from wind or 

solar generation. This new type of battery 

can store more energy more efficiently 

than Li-ion batteries, with a faster recharge 

time and a longer lifecycle (see this 

report's chapter on Li-ion batteries). 38 

Demand for vanadium pentoxide Is 

expected to expand 30 percent in the 

next three years while supply is tight; 90 

percent of the vanadium on the market is 

not suitable for processing into vanadium 

pentoxide, and is only appropriate for 

strengthening steel." Vanadium pentoxide 

(used in large format batteries) is a byproduct of combusting fossil fuels containing 

vanadium. The byproducts containing 

vanadium pentoxide can be in the forms of 

dust, soot, boiler scale, and fly ash. 

TANTALUM 

Tantalum (Ta) is used In several alloys due 

to its thermal and corrosion resistances, 

ductility, and strength. Many types of tantalum minerals are mined in different parts 

of the world and possess slightly different 

properties. In many applications, it cannot 

be substituted without lessening quality. 

For example, tantalum carbide Is among 

the most durable materials currently 

known.'"The United States has no identified reserves of tantalum and depends on 

imports for all its tantalum consumption. 

Tantalum Is found in selected geological 

regions of the world, namely in the eastern areas of the Democratic Republic 

of Congo as well as in Australia, Brazil, 

Canada, and Mozambique. Furthermore, 

a related mineral, eolian, the industrial 

name for a columbite--tantalite mineral 
199 


99780.166

from which columbium (also known as 

niobium) and tantalum are extracted,4

' is 

widely used to manufacture capacitors 

found in consumer electronics, computers, 

and automobiles." In the last 10 years, 

demand for coltan-extracted tantalum has 

surged, stirring armed conflicts in central 

Africa as paramilitary groups mine and 

smuggle the chemical elements in order 

to finance their own activities. Callan 

is the mineral equivalent of "blood diamonds," which received large amounts 

of publicity and incited a human rights 

campaign in the late 1990s and early 

2000s. Coltan-related conflicts also have 

destroyed the habitat of lowland gorillas 

and the livelihood of numerous indigenous 

communities. 

In spite of tantalum's importance to the 

U.S. economy and national security, the 

DLA Strategic Materials sold off most of its 

tantalum mineral, tantalum metal powder, metal ingots, and metal oxides in the 

2000s. In 2013, it still holds small quantities of tantalum carbide powder. The latter 

is extremely hard and brittle, and is commonly used in tool bits for cutting applications or sometimes added to tungsten 

to create a metal alloy. The United States 

consumes 120,000 metric tons annually, with no reserves; the United States 

Imports all tantalum from China, Germany, 

Australia, and Kazakhstan. 

Although USGS forecasts that supplies 

of tantalum are sufficient for projected 

demand, and significant untapped 

reserves exist in Brazil and Australia, a 

third of the current tantalum production 

originates from politically unstable sub-Saharan African countries.43 

TUNGSTEN 

Tungsten (W) possesses the highest 

melting point of all metals (3,400 degrees 

Celsius or 6,150 degrees Fahrenheit) 

and Is nearly as strong as diamond. 

Additionally, it is an excellent electrical 

conductor. The most common use is as 

tungsten carbide, a "hard metal" known for 

industrial drilling and other cutting tools." 

Additionally, tungsten carbide and tungsten alloys are used for armaments, heat 

sinks, turbine blades, and rocket nozzles.•• 

China is the largest producer of tungsten 

is. accounting for about 80 percent of 

global production and possessing roughly 

two-thirds of world tungsten reserves. 

China is also the world's top consumer 

of tungsten, and using a majority of the 

tungsten it produces. The Chinese government actively intervenes in the tungsten 

industry to limit supply: foreign investment is forbidden; exports are controlled 

by licenses, taxes, and quotas; overall 

Figure 2: Global Production of Tungsten in 2010 

,_~ - - ~ 

CHAPTER 3 • SPECIALTY METALS 59 
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99780.167

production is limited; and exploration and 

new operations are lightly controlled. In 

the immediate future, China is expected 

to be even more protective of its domestic 

supply, and is likely to attempt to further 

reduce exports as well as increase tungsten imports.46 

Accordingly, tungsten prices are expected 

to increase in light of increasing demand 

and constricted supply. Historically, the 

United States and Russia have stockpiled 

tungsten, although both countries have 

been disposing of their stockpiles over 

recent years. The Russian stockpile is 

thought to be depleted, while the entire 

U.S. government holding of tungsten has 

been authorized for disposal. 47 

Although the United States imports a fair 

amount of tungsten, thanks to Improved 

recycling of scrap consumed by processors and end-users, import reliance 

dropped from 63 percent in 2010 to 36 

percent In 2011.46 Nevertheless, there is 

only one domestic source of tungsten 

concentrates in the United States. The 

U.S. military cannot function without tungsten, and there are no substitutes for most 

applications. World demand slackened due 

to the global financial crisis, but scarcity 

will push up tungsten prices, especially 

since strategic manufacturing sectors 

would be willing to pay inflated prices49 

POST-TRANSITION METALS 

Post-transition metals are softer than transition metals, with lower melting points, 

but they have high electronegalivity, 

meaning that they are better at attracting 

electrons than the transition metals and 

more readily form polar bonds. They are 

malleable, ductile, and generally good 

conductors. 

60 REMAKING AMERICAN SECURITY 

GALLIUM 

Gallium (Ga) is not produced in the United 

States even though it is a critical component of optoelectronic devices, solar 

cells, light-emitting diode (LED) lights, 

and photo-detectors. Gallium is essential 

for creating high-brightness LEDs, and 

many governments in Asia are committed 

to introducing widespread LED lighting. 50 

Therefore, demand for gallium likely will 

increase. Moreover, gallium is also a key 

component for thin filrn photovoltaic technology, a sector expected to grow by a 

factor of 9 by 2018; however, falling prices 

of silicon-based solar cells are limiting 

the current demand for more expensive 

gallium-based cells.51 The primary military 

application of gallium is in high-power, 

high-frequency communications, such as 

those used in missile guidance systems. 

Gallium semiconductors can function at 

much higher temperatures than silicon, 

allowing them to function at a much higher 

capacity and reliability than more common 

silicon-based chips.•• While silicon-based 

alternatives may be viable for commercial 

uses, they are not suitable replacements 

for defense-related applications. 

The leading producers of gallium are 

China, Kazakhstan, and Ukraine. The 

United States is roughly 99 percent 

import-dependent on gallium, which is 

produced as a byproduct of bauxite (aluminum ore) and zinc ores, making it very 

difficult to accurately calculate gallium 

reserves. United States bauxite resources 

generally are not economical to extract, 

because their high silica content makes 

domestic production uneconomic and 

very unlikely. 53 Because gallium is primarily 

a byproduct of bauxite, and only a small 

portion of gallium in bauxite is recoverable 

(approximately 50 parts per million [ppm]), 

it is uneconomical to recover gallium independently of aluminum. The demand for 
201 


99780.168

aluminum will likely continue to dictate the 

world's supply of gallium. 

INDIUM 

Indium (In) is used in liquid crystal displays 

(LCDs) as the compound indium tin oxide, 

and Is a byproduct of zinc ores. Indium Is 

unevenly distributed in the earth's crust, 

causing the United States to be completely 

reliant on imports (although lower-grade 

imported indium is refined domestically). 

Due to its low abundance in most ores 

(less than 100 ppm in most zinc ores), 

recovering indium separately is uneconomical except as the byproduct of refining 

other ores. Currently, over half the world's 

indium is produced in China, with another 

16 percent coming from South Korea. 

While there are techniques for reclaiming 

indium from discarded LCD screens, this 

option is only economically viable when 

indium prices are already high."' 

Indium is used in transistors, thermistors, 

photoconductors, and low melting point 

alloys. It can also be used to create corrosion-resistant mirrors. 55 Indium is used 

in short-wave infrared (SWIR) imaging, 

including advanced night vision applications. Its advantage over traditional night 

vision systems is that a single SWIR device 

can function in both daylight and night, 

and does not require the extreme cooling 

that alternative technologies require. Such 

indium devices are used in Unmanned 

Aerial Vehicles, such as the Spectre-Finder 

and Predator. Because this technology 

does not rely on detecting heat but rather 

reflected light, it provides crisp images 

in starlight conditions, allowing for much 

greater accuracy In identifying targets than 

the alternative imaging technologies."' 

METALLOIDS 

Metalloids are elements that possess 

properties of both metals and non-metals. 

They are generally metallic in appearance, 

but are often brittle rather than malleable. 

They often possess good semiconductor 

qualities, and can serve as good insulators. Chemically, they behave as both 

metals and non-metals depending on the 

substance with which they react. 

GERMANIUM 

Germanium (Ge) is constrained in its 

availability because it is not found in concentrated deposits. It is relatively rare in 

the earth's crust (approximately 1.6 ppm), 

and while certain minerals do contain 

high levels of germanium, those minerals 

do not exist In any mineable deposits. 

Instead, germanium is most often produced as a byproduct of zinc extraction. 

Significant quantities of germanium are 

also recoverable from ash that comes 

from the burning of certain coals in energy 

production. China is the main producer 

of germanium, with a 68 percent market 

share, although significant reserves do 

exist within the United States. In 2011, 

the price of germanium nearly doubled 

as a result of increased Chinese export 

taxes and the closing of one germanium 

plant in China due to "environmental concerns. "57 However, germanium recycling 

has become increasingly common, with 

roughly 30 percent of consumed germanium coming from recovered scrap (recycled optical devices and window blanks 

in decommissioned tanks and other military vehicles)."' 

Germanium is used in fiber and infrared 

optics and in solar photovoltaic cells. 

Silicon shares many similar semiconducting properties with germanium, and may 

be a suitable substitute (at the expense 

of performance). 

CHAPTER 3 • SPECIALTY METALS 61 
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99780.169

The estimated value of U.S. germanium 

consumption in 2012 was only about $55 

million. Germanium sales represent an 

extremely small market. Yet germanium 

has been considered a critical material, 

and DLA Strategic Materials holds a small 

stockpiled Inventory in case of sudden 

shortages. None was released in 2012.59 

The United States has known reserves of 

germanium though it has not mined them. 

Certain military applications will not work 

without germanium, and the metal's price 

fluctuates wildly because of the policy 

decisions by the most important mining 

regions. 

The Chinese government restricts supplies 

by imposing new export controls or closing down germanium mines. These export 

restrictions are aimed at encouraging more 

finished production in China and stimulating the growth of an industry that relies 

on raw germanium such as optical lenses, 

fiber optics, LEOs, and solar cells. Chinese 

authorities have also identified germanium 

as a strategic resource and Included It in 

their stockpile. 60 

ANTIMONY 

Antimony (Sb) is used In a variety of 

applications, including semiconductors 

and batteries. It is most widely used as a 

flame-retardant, which accounts for about 

36 percent of its use, and for which there 

is no effective substitute. While antimony 

sometimes occurs in pure form, it is more 

common as stlbnite (Sb2S3, a sulfite), with 

other heavy metals, and as oxides. 

China accounts for about 88 percent of 

annual antimony production, and over 60 

percent of the global antimony reserves. 

Government officials in the Hunan region 

(where nearly 60 percent of China's antimony is produced) recently closed many 

62 REMAKING AMERICAN SECURITY 

antimony plants, citing health and safety 

concerns. As a result, the price of antimony increased by 20 percent between 

January and September 2011. Additionally, 

at current production levels, the Chinese 

supply is projected to be depleted within 

five years.•• The U.S. previously stockpiled 

antimony; however, these stocks were 

disposed of by 2003. 

TELLURIUM 

Tellurium (Te) Is a relatively uncommon 

element, and acts as a semiconductor. 

Tellurium's major use is as an alloying 

additive in steel to improve machining 

characteristics. It is also used as a vulcanizing agent for rubber and as a catalyst 

for synthetic fiber and is important for 

photovoltaic (solar) cells, which will likely 

become a major source of solar electricity 

in the future. These cells are incredibly 

thin-usually only 1 to 10 micrometers 

(~m) thick-and can be flexible and highly 

adaptable to various designs in different 

applications. Tellurium Is also used in 

creating fiber-optics capable of functioning 

in harsh environments, which are likely to 

become increasingly prevalent In military 

aircraft. 

Tellurium is most often produced as a 

byproduct of copper processing. Tellurium 

Is extremely rare, with its presence In copper concentrates often below 100 ppm. 62 

Most imported tellurium comes from 

China, although tellurium is also produced 

in the United States, which possesses 

sizeable reserves (about 15 percent of 

known global reserves). 63 The metal is 

commercially profitable to recover only 

when it is concentrated in residues collected from copper refineries. 
203 


99780.170

EXTRACTION RISK 

FACTORS 

Many of these metals or metal-type 

elements are in fact byproduct metals 

of a carrier metal such as zinc, copper, 

or bauxite. Consequently, many of these 

metals are uneconomical to produce 

independent of the production of the 

carrier metal. Demand for the carrier metal 

therefore drives the production of these 

Industrial metals, creating the potential for 

undesirable market conditions including 

price spikes and shortages. Germanium, 

gallium, and indium, for example, are all 

extracted from zinc ores; gallium is also 

obtainable from the processing of bauxite (aluminum) ore; tellurium, gallium, and 

molybdenum are recovered as byproducts 

of copper ores. Rhenium is a special case, 

as it is produced as a byproduct from 

molybdenum, which in itself is a byproduct of copper, making it among the most 

expensive metals in the world.64 

Many of these elements simply are not 

found In concentrations high enough to 

warrant extraction as a primary product 

and are produced only as the byproduct 

of other metals. This fact raises problems 

with both increasing supply and supply 

availability. For example, it is uneconomical to increase the mining of copper in 

order to extract more tellurium. In 2009, 

copper production approached $80 billion, 

while the production value of tellurium 

was only about $30 mlllion.65 Because 

tellurium's abundance in copper ores Is 

very low (less than 1 00 ppm), there would 

have to be a massive increase in copper 

production to have any impact on the 

tellurium supply. Given the values of the 

two markets, and the resultant drop in 

copper prices if such an expansion were to 

occur, producers would lose money overall 

if they attempted to expand the supply 

of tellurium. Expanding tellurium production does not appear economically viable 

despite the fact that tellurium's role in 

photovoltalc panels that could dramatically 

reduce the costs of solar energy. 

Another example is gallium, which is 

experiencing a surge in demand due to 

increased interest in LED lighting. Gallium 

arsenide (GaAs) is commonly used in 

high-efficiency, high-brightness LEDs 

because it has the ability to convert electricity directly into laser light. Many governments, Including that of South Korea, are 

encouraging the adoption of LED lighting 

in the private sector and mandating it 

In the public sector, resulting In a rapid 

increase In gallium demand. According 

to the USGS, gallium consumption more 

than doubled between 2009 and 2011, 

resulting in a price increase of more than 

50 percent.66 However, gallium is mostly 

extracted as a byproduct of bauxite (aluminum). If demand for bauxite ore declines, 

then there would also be a reduced supply 

of gallium, even though the demand for 

gallium appears to be rapidly increasing. 

GEOPOliTICAL RISKS 

The United States relies on imports for 

many of the industrial metals (see Tables 1 

and 2), a trend that has grown over the last 

decade. According to data collected by 

the USGS, the United States now imports 

more than 50 percent of 43 key minerals (compared to 29 in 1995). The United 

States is now totally reliant on importing 

19 minerals, compared to iO in 1995. 

Thus, Import reliance or dependence has 

increased as the importance of certain 

minerals has grown. 

The concentration of an important commodity among only a small number of 

CHAPTER 3 • SPECIALTY METALS 63 
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99780.171

sources creates significant potential 

for supply disruptions. For example, 

cobalt and tantalum are produced in the 

Democratic Republic of the Congo. The 

extraction of these elements has fed 

political instability, poverty, and human 

rights violations. In other situations, the 

presence of raw materials encourages 

monopolistic practices and price manipulation. For example, South Africa nearly 

has a monopoly over PGMs; citing concerns over shrinking reserves, China, 

the dominant producer of antimony, has 

tightened its production restrictions. As 

countries become dependent on the 

extraction and global production of oftenscarce elements, they may be tempted 

to impose extra fees, taxes, and prices 

in order to exploit their unique position 

in the global market. They also may be 

tempted to restrict exports in order to build 

up a domestic processing and fabricating 

industry, as China did with the REs market. Even in the best of cases, the United 

States faces risks if it depends on a few 

suppliers of critical elements, since a major 

earthquake, accident, Industrial strife, or 

lack of investments may disrupt supplies. 

RARE EARTH 

ElEMENTS 

REEs are necessary for many of the modern world's most advanced technologies: 

missile guidance systems, flat-screen 

lVs, cellphones, generators In windmills, 

and motors In hybrid cars, to name just 

a few. During the last decade, China has 

cornered the market on REEs-a group of 

17 elements including scandium, yttrium, 

and 151anthanide elements at the bottom of the periodic table (see Table 4). 

Demand for REEs is expected to continue 

to increase. 

6<1 REMAKING AMERICAN SECURITY 

In the short term, REE demand has fluctuated, because the state of the global 

economy strongly determines the need for 

REEs. Demand rose again in 2009, after the 

Immediate Impact of the global economic 

crisis had passed. As demand increased, 

the Chinese authorities cut export quotas, 

artificially reducing the supply of REEs. 

This fueled fears of possible shortages 

and caused stockpiling, driving prices to 

historically high levels by 20ii.ln 2012, 

prices plunged by as much as 90 percent 

in international markets (see Figure 3). 

During the two years of surging prices 

for REEs, many mining companies and 

investors decided to go into the business 

of extracting REE oxides. When prices 

fell suddenly, mining companies suffered 

financial setbacks. In fact, the collapse of 

prices has been devastating for Western 

mining companies, which were trying 

to bring online new operations to take 

advantage of the high prices and reduce 

the West's dependence on Chinese 

oxides. Molycorp of the U.S. and Lynas of 

Australia suffered financial difficulties and 

ran Into operational problems, Both companies have seen their share prices drop 

by more than half." Many smaller players 

have also suffered calamitous financial setbacks, and their fate hinges on being able 

to mine so-called heavy REEs. Not all17 

rare earth elements are equally rare; DoE 

has identified five of them as "critical." 

Neodymium, a light REE, and dysprosium, 

a heavy REE, are used in permanent magnets for wind turbines or electric vehicles. 

Europium, terbium, and yttrium are heavy 

REEs, and are used in flat-screen electronics and energy-saving lightbulbs. Demand 

growth for these REEs will be strong, while 

mining them will be challenging. 

REE mining is unlike any other type of 

mining. Unlike other metals used in many 

consumer and defense items, REEs are 
205 


99780.172

Figure 3: Price Trends for Four Rare Earth Elements 2008-2012 

(Renminbi per ton) 

- ~ ~ - --~ ~- -~ ~ ~ ~ - - " ~~"· ~ -~- ~-~ 

Neodymium oxide 

Terbium oxide 

Jun 2011 

1,475,000 

Jun2011 

21,000 

Yttrium oxide 

Europium oxide 

Jan 2008 

2,400 

Jun 2011 

490,000 

Jun 2011 

29,500 

"'~"""- '"''" =~"' '"-~ ~~~ = ~ = ~;&~ --~- ~ ~~~ ~""" "" ><'M>'N 

Source. Adapted /ronr Helen Tllomas, "Mmers ready to take punt on 

rare eanl1s," Tile Fmanctal Times, December 30, 2012. 

to some extent abundant though they are 

hardly ever found in high enough concentrations to make mining them economical. 

Rather, REEs are mingled with other metals and must be carefully extracted and 

refined. REEs are often found together; 

mine operators must identify and isolate 

the individual oxides. Moreover, each REE 

oxide possesses different and distinct 

properties; mine operators must take the 

customer of their oxides into consideration. Thus, a mine that has a contract 

to sell neodymium must first reline the 

oxides and then extract the neodymium 

elements. The length of this process 

makes REE mining costly and complex. 

First the miner must extract the ore, and 

then the mine operator must separate the 

REEs according to atomic weight. The 

various separation processes differ in 

complexity because some REEs (such as 

cerium) are common, while others {such 

as terbium) require a month of separation 

before ample oxides can been extracted.68 

Accordingly, mine operators cannot ramp 

up production quickly in response to 

changing global demand. Not only is it 

time-consuming to extract and reline the 

CHAPTER 3 • SPECIALTY METALS 65 
206 


99780.173

REE oxides, but deposits vary by mine and 

each separation plant must be tailored to 

the specific local situation of that particular mine. For this reason, REEs represent 

some of the most technically challenging 

mining operations.•• 

60 REMAKING AMERICAN SECURtTY 

Nevertheless, It is worth remembering that 

REEs are Important to many renewable 

energy technologies. To a large extent, 

green energy technologies rely on an 

abundance of REEs. Electric vehicles use 

large amounts of neodymium and dysprosium (magnets) and lanthanum. Wind 
207 


99780.174

Lanthanum Night vision goggles 

Neodymium 

Europium 

Erbium 

Samarium Permanent magnets that are stable at high temperatures, precision-guided 

turbines need large quantities of neodymium and praseodymium for their powerful 

magnets. Energy-efficient lighting, such as 

LEDs and compact fluorescent bulbs, use 

RE phosphor powders made from yttrium, 

europium, and terbium.70 

In short, the appeal of REEs lies in their 

ability to perform highly specialized tasks 

effectively (see Table 4). Europium is 

needed to create the red phosphor for 

television and computer monitors; cerium 

is needed to polish glass. Because they 

are light-weight and have high magnetic 

strength, REEs have reduced the size of 

many electronic components dramatically, 

and are common in consumer electronIcs, cars, and many military platforms. 

Common devices such as flash memory 

sticks depend on rare earth magnets 

(REMs), which can contain dysprosium, 

gadolinium, neodymium, praseodymium, 

and samarium. These elements are used 

in nuclear control rods, smart missiles, 

carbon-arc lamps, miniature magnets, 

high-strength ceramics and glass, and 

countless other applications.'' 

In spite of their importance to the overall 

economy and national security, for most 

of the past decade, the United States did 

not have a secure supply of REEs. (The 

Mountain Pass mine closed in 2002 and 

re-opened in 2012.) By 201 0, Chinese producers moved into the global market for 

REEs and ended up controlling about 97 

percent of world production and refining 

of REEs {see Chart 2).72 The situation has 

changed somewhat since 2012 because 

U.S. and Australian mining companies, 

drawn by the high prices, opened or 

re-opened REE mines. Currently China is 

estimated to control 90% of global supply of REEs.73 Since the 1990s, Chinese 

authorities pursued an explicit policy of 

controlling a resource they considered 

"strategic and critical."" In the 1990s, 

Chinese operators (both legal and illegal) 

flooded international markets with lowpriced oxides, ores, and raw materials. 

Many mining companies in the United 

States and Australia {a country with a 

wealth of natural recourses) could not 

compete against these prices, causing 

many non-Chinese mining companies 

to shut down. Subsequently, Chinese 

CHAPTER 3 • SPECIALTY METALS 67 
208 


99780.175

Metallurgy & alloys 29% 

Electronics 18% 

catalysts 14% 

s for monitors, television, lighting 12% 

Catalytic converters 9% 

Glass polishing 6% 

Permanent magnets 5% 

Petroleum refining 4% 

Other 3% 

~"~ "'"'" ';~==""'"'""' 0 '"'=" ~"""' "'"' 0"""'~""' "'W" - ~ ' ~- * ""'" 

Source· Hobart King REE - Rare Eart/1 Elements and tfletr Uses 

11/tp://geo/ogy.comlartic!esllare-earlfJ-e/ements/ 

operators have gained control over many 

different mineral resources while driving 

out production in advanced economies. In 

Australia, dozens of mines closed in the 

early 2000s due to a collapse of prices 

for many metals. In the United States, the 

Mountain Pass Mine in California, which 

is owned by Colorado-based Molycorp, 

closed in 2002 as production became 

uneconomical due In large part to Chinese 

mercantilist practices. 

In the 2000s, Chinese authorities decided 

that, rather than exporting raw materials, 

it would be preferable if the processing, 

refining, and fabrication of final product 

applications would take place in China 

itself so that Chinese companies could 

6B REMAKING AMERICAN SECURITY 

reap the benefits of the added value. In 

2007, Beijing instituted a 25 percent export 

tax on europium, terbium, and dysprosium. 

In 2010, Chinese authorities implemented 

further export restrictions on REEs by 

tightening export quotas.75 The impact of 

a series of new measures to restrict the 

export of REEs meant that foreign REE 

consumers were paying a third more for 

REEs than Chinese fabricators. According 

to the World Trade Organization, Chinese 

manufacturers of REEs have a distinct 

price advantage over foreign firms.76 

In response, many foreign refiners and 

producers of final products that use REEs 

relocated to China to gain access to REEs 

and to avoid the export quotas and taxes. 

Japanese and U.S. companies established 
209 


99780.176

a foothold in China and moved production 

and manufacturing offshore. (In another 

chapter of this report, we examine permanent magnets and present an extreme 

case of outsourcing and offshoring that 

has led to a situation wherein the defense 

industrial base wholly depends on Chinese 

processing of REEs and the U.S. economy 

and defense industrial base must import 

virtually all of their high-tech magnets.) 

China's near monopoly In this strategic 

sector raised concerns in Washington, 

D.C., and Tokyo, particularly when China 

suspended REs shipments to Japan during 

a diplomatic dispute In 2010. That Incident, combined with broader concerns 

about the reliability of Chinese supply, triggered a surge of investment in RE mines 

outside China and brought down prices 

and speculative hoarding of REE oxides. 

Subsequently, the small REE global market has been depressed. In response, 

China cut production of REEs at its mines, 

in an effort to bolster global prices; this 

production cut has had a huge Impact on 

prices. Current market dynamics do not 

support high RE prices. Supply is up and 

demand Is down. 

Supply is up because non-Chinese companies have aggressively invested in REE 

mining. Japanese companies have opened 

rare earths mines and processing in 

Kazakhstan, India, and Vietnam. The production of elements outside China is predicted to grow tenfold over five years, from 

6,000 tons in 2011 to 60,000 tons in 2015.77 

According to industry analysts, as of March 

2013, 50 rare earth mineral resources are 

active, associated with 46 advanced rare 

earth projects and 43 different companies, 

located in 31 different regions within 14 

different countries. The large and sudden 

investments in REE mining and processing 

have brought prices down, especially as 

global demand has softened. 

However, China may ultimately retain its 

dominant position. The price squeeze is 

making it unprofitable to continue operations in advanced industrialized countries. 

Moiycorp reopened Mountain Pass Mine 

when prices skyrocketed. But the mine 

mostly produces light REs, which are 

relatively abundant and the least valuable. 

Australia's Lynas Corp. opened a mine 

called Mt. Weld, which also produces light 

rare earth oxides. Both companies have 

promised to find more valuable heavy 

REEs. These oxides are more difficult to 

locate; China possesses them in abundant 

quantities. Even if mines outside China 

can locate heavy REs, the issue remains 

that China is an extremely low-cost producer. It will be difficult for companies in 

the United States or Australia to compete 

with Chinese mines when Chinese authorities are lax in enforcing health, safety, and 

environmental rules. REE mining is notorious for generating massive amounts of 

toxic waste. Occupational safety rules as 

well as environmental controls make mining in the United States (and other OECD 

countries) more expensive than in China. 

However. the cost differentials between 

countries may be especially striking when 

the extraction is accompanied by a comparatively high amount of radioactive 

tailings, as is the case with REEs 

Ultimately, the real issue is not the oxides. 

Mining and separating the oxides is the 

first step in using REEs for commercial and 

defense applications. The real trick lies In 

converting the oxides into powders, metals, alloys, and magnets. Mining is costly, 

but the real technological skill involves processing the RE oxides into usable items. 

That technology has shifted to China, 

which has sought to build up a "mine-tomagnet" vertical Integration. The supply 

chain starts with oxides and then moves to 

refining, purification, manufacturing metal 

alloys, and finally to fabrication of magnets. 

CHAPTER 3 • SPECIALTY METALS 69 
210 


99780.177

The critical technology for manufacturing 

these magnets is overseas-mostly in 

China. China captured the market gradually 

by transferring U.S. technology to China 

and flooding the market with cheap magnets in the early 2000s. Since then, China 

has continued to improve its manufacturing 

expertise and now possesses a depth of 

engineering skills. 

This explains why Molyoorp bought 

a Canada-based REE company, Neo 

Material Technology, which runs major 

manufacturing facilities in China. Molycorp 

cannot process the oxides Into fabricated 

and finished products in the United States. 

The U.S. mine ships RE material to China, 

where REEs such as dysprosium and 

neodymium are transformed into military-grade magnets.78 

In the FY2007 National Defense 

Authorization Act (NDAA), Congress 

passed reforms to the specialty metals 

restrictions and created the Strategic 

Materials Protection Board (SMPB). The 

SMPB was meant to determine what 

protections were necessary to ensure the 

supply of materials for national defense 

purposes; assess potential risk associated 

with the non-availability of those materials; 

and advise polioymakers on how to ensure 

Figure 4: Global REE Production, 2010 

{ }-'}~L,j~·~,!C:r·JS) 

"""''~"'"""~"- ~~~ - """' ~ ~ - """'~- ~-~-"'" ~"""' --"""' - "" ~ ""= 

India 

2.2% 

Brazil 

0.5% 

Malaysia 

0.3% 

~ ~"'""'"""'"" "'"- "'"'~""- "'"'~~ ~ - -~--=- ~- ~ "-'-~ '~ ~"- ,, ~ ~ ' 

Source Marc Humpilrles, Rare Earth Elements: Tile Global Supply Cllam 

(Wasilington, DC. GRS, June 8, 2012} 111/p'l/www.fas orglsgp/crs/nalsec/R41347 

70 REMAKING AMERICAN SECURITY 
211 


99780.178

that supply. The SMPB is required to meet 

at least once every two years, publish 

recommendations regarding materials 

critical to national security, and vet the list 

of specialty metals. 

The SMPB met twice in 2008 and issued 

its report and recommendations in 

December 2008 and February 2009.79 The 

boards concluded that specialty metals 

were not "materials critical to national 

security," but instead "strategic materials" 

that warranted monitoring but not domestic source restrictions.80 Alternatively, the 

Board recommended relaxing or removing 

domestic source requirements in an effort 

to reduce costs and more readily access 

specialty metals produced abroad. 

The FY2010 NDAA required the 

Government Accountability Office (GAO) to 

assess the domestic and global availability of REMs, their importance to defense 

programs, and the potential for the supply of these metals to be restricted. As a 

result In the April 2010, GAO issued the 

report "Rare Earth Materials in the Defense 

Supply Chain" (GAO 10-617R).81 The 

report stated that dependence on Chinese 

suppliers puts future availability of REMsespecially neodymium-at risk. The report 

also stated that projected domestic supply options would take seven to 15 years 

before becoming fully operational, primarily due to stale and federal regulations. AI 

the time of the GAO report, DoD was still in 

the process of evaluating defense vulnerabilities, and was scheduled to complete its 

analysis by September 2010. That report 

has never been released to the public. 

The FY2012 NDAA calls for DLA to submit a plan to DoD to establish a stockpile 

of REMs, as well as to provide a broader 

assessment of source reliability. The DLA 

report, which was scheduled for completion in July 2012, would require a DoD 

decision on the plan within 90 days of 

submission. At present, the DLA maintains 

a stockpile of 28 materials with a value of 

about $1.4 billion, but does not currently 

stockpile any REs.82 ln a significant change 

that increases the authority of the U.S. 

government to address stockpile deficiencies, Sec 901(a) of the FY2013 NDAA says 

that the Deputy Assistant Secretary of 

Defense for Manufacturing and Industrial 

Base Policy is now responsible for 

"[e]nsuring reliable sources of materials 

critical to national security, such as specialty metals, armor plate, and rare earth 

elements." DoD issued its Strategic and 

Critical Materials 2013 Report on Stockpile 

Requirements In March 2013 and identified 23 strategic and critical materials. 

The report calls for a fund of $1.2 billion to 

mitigate the shortfall of key materials. 

Separate from the NOAA, the 112th 

Congress Introduced at least 13 bills (nine 

In the House of Representatives, four in 

the Senate)"' relating to REs; however, 

none has yet passed out of the relevant 

committee. Additionally, the Congressional 

Research Service has conducted at least 

three studies focused on REs and specialty metals, while GAO has released one. 

Broadly speaking, these reports Indicate 

that Congress should demand renewed 

assessment by DoD of the "strategic 

materials" categorization In light of recent 

global supply chain concerns, and suggest policies including stockpiling REs 

and reinvesting in domestic research and 

production. These suggestions appear 

to be conditional on a new assessment 

of the SMPB/DoD, which appears reluctant to take any further action without 

an additional mandate from Congress. 

It does not appear that DoD is likely to 

alter its opinion expressed in the FY2011 

Industrial Capability Report to Congress, 

which stated that, although securing a 

non-Chinese source of REs is essential, 

CHAPTER 3 • SPECIAlTY METALS 71 
212 


99780.179

only minimal provisions (such as prioritizing defense applications over commercial 

applications) are required."' 

To some extent, DoD's position dovetails 

with the interests of large defense contractors who prefer to source the small amount 

of magnets they need from cheap Chinese 

suppliers rather than to deal with U.S.-

based producers. 

In conclusion, although prices have 

dropped and shortages have disappeared 

in the short term, the Chinese authorities continue to meddle and intervene in 

the global market for RE oxides, mostly 

because they control the global mining of 

these oxides and seek to take advantage 

of that position. The long-term Chinese 

goal is to foster a high-tech RE industry in 

China while preserving RE reserves." 

PLATINUM 

GROUP METALS 

The PGMs (also sometimes called platinum group elements, or PGEs) include 

iridium (lr), osmium (Os), palladium (Pd), 

platinum (PI), rhodium (Rh), and ruthenium 

(Ru). PGMs have excellent resistance to 

heat and serve as catalysts for chemical 

reactions, contributing to their uniqueness 

and importance in a variety of applications. 

The most prominent application of PGMs 

is in catalytic converters, which dramatically reduce the pollution from automobiles. Many PGMs, especially palladium, 

are used as catalysts in fuel cells that find 

wide applications in the auto industry. 

Since the global car industry is projected 

to expand in the next decades (Chinese 

and Indian consumers), demand for 

palladium will continue to grow.00 In addition, palladium is also used in fuel cells in 

72 REMAKING AMERICAN SECURITY 

hybrid cars. Thus, the switch to cars emitting fewer pollutants will not necessarily 

sharply reduce the demand for palladium. 

In addition, platinum and palladium are 

extremely common in most electronic 

devices, including military hardware. 

Although the actual per-unit metal content is minute, a huge quantity of palladium is needed to meet the growing 

demand for electronic goods. Multilayer ceramic capacitors (MLCC), which 

regulate the flow of electricity through a 

circuit, represent the largest demand for 

palladium from the electronics industry. 

While the automotive Industry mostly 

consumes palladium as components of 

catalytic converters, automobiles also 

contain a large number of hybrid integrated circuits (HIC}, which make use of 

silver-palladium tracks to connect different components of the circuit." 

Platinum is reportedly used In some 

capacity during the fabrication process of 

more than 20 percent of all manufactured 

goods.88 It is malleable, ductile, resistant 

to corrosion, and possesses a high melting 

point around 1,770 degrees Celsius (3,215 

degrees Fahrenheit}. Its uses include electronics and chemical catalysts, In addition 

to many other applications. Platinum is up 

to 30 times as rare as gold (another precious metal). 

Platinum and palladium supplies are 

potentially at risk due to their geographic 

concentration in areas that face political 

Instability. In 2011, global production of 

platinum was dominated by South Africa 

(72 percent) and Russia (14 percent). 

The material is found In large commercial 

concentration In only a few regions of 

the world, yet the future of energy, transportation, and the environment relies on 

platinum. Platinum's catalytic property 

aids emissions control in transportation 
213 


99780.180

and combats pollution. Demand is bound 

to increase, not only in advanced industrialized countries, but also in emerging 

markets as governments seek to control 

emissions and smog. U.S. federal agencies' reports identify platinum as subject 

to supply risks with enormous consequences for the U.S. defense and the 

economy at large ... 

In 2011, South Africa accounted for about 

38 percent of palladium production, and 

Russia 41 percent. In all, South Africa 

controls more than 95 percent of known 

PGM reserves."' Two North American 

mines extract palladium, but their share 

of global new production amounts to only 

14 percent. 9' Since the 1980s, the Russian 

government has held a stockpile of palladium. The actual size of the Russian 

stockpile has long been a closely guarded 

secret. But when prices were exorbitantly 

high in the early 2000s, they sold a large 

portion of the stockpile, bringing down the 

price of palladium. 

South Africa traditionally has been aligned 

with the West; its business environment 

is open to Western foreign direct investments and capital flows. Yet many observers are extremely concerned about the 

political situation in South Africa and the 

possibility that its political instability may 

place future supplies at risk. South Africa 

copes with many internal tensions and 

conflicts. For example, different factions 

within the ruling African National Congress 

are pressing for a more aggressive policy 

towards the natural resource sector in 

order to extract greater revenues to accelerate economic development and foster 

wider redistribution. 

Additionally, the South African government has failed to invest in society's 

infrastructure; as a result, many public 

sectors are starved of capital. Also, the 

current vulnerabilities in the mining sector 

may create a window of opportunity for 

more determined outside forces to gain 

control over a slice of the South African 

mineral wealth. The South African Mining 

Charter requires mining companies to be 

at least 26 percent owned by historically 

disadvantaged South Africans. 92 After two 

decades, the black empowerment objectives have not fundamentally changed 

the ownership structure of the mining 

industry, except for some smaller junior 

mines. These mines are scrambling for 

capital Infusions, which may come from 

Chinese investors, which means that 

Chinese companies are moving into the 

PGM sector by propping up junior mining companies in South Africa. Another 

issue is that labor relations in some of the 

largest mines are fraught with conflict and 

tension. In the summer of 2012, a standoff 

between management and miners resulted 

in the deaths of dozens of miners and a 

shutdown of platinum mines. Strikes and 

labor unrest subsequently spread to other 

mines, pushing up prices of platinum and 

gold.93 

As industrial strife and stoppages reduced 

the supply of platinum to its lowest level 

in a decade, the sluggish global economy 

and a rebound in scrap supply have kept 

prices within its historic range. Platinum 

sales from South Africa dropped by 12.5 

percent In 2012, yet platinum's price 

fell from a high of $2,290/oz in 2008 to 

$1,605/oz In March 2013. 

The risk Is that the depressed prices will 

deter Investments in ailing South African 

mines and therefore generate future 

supply constraints. Low prices for platinum and other PGMs have exacerbated 

the plight of the South African mining 

industry, which needs to make enormous 

investments to upgrade existing facilities 

and improve productivity."' 

CHAPTER 3 ~ SPECIALTY METALS 73 
214 


99780.181

Figure 5: Global ~allaaium Rroauction, 2011 

Zimbabwe 

3% 

While major South African mining companies face an uncertain and difficult 

future, Chinese investors have entered 

the market to assist junior mines in 

South Africa-a move that matches its 

larger strategy in sub-Saharan Africa. 

Concerned about supply risks to Its the 

Chinese economy and determined to 

build up its military capabilities, Chinese 

authorities identify access to raw materials as one of their major foreign policy 

goals. To prevent any supply disruptions, 

China has been very active in sub-Saharan Africa, which is one of the regions of 

largely untapped metals and minerals. In 

turn, China's investments and presence 

REMAKING AMERICAN SECURITY 

is welcomed in some African countries. 

Chinese authorities also do not exert 

pressure on African governments about 

human rights, transparency, political 

freedom, internal politics, environmental 

standards, or ethical trading practices." 

The entry by Chinese investors or state 

holdings Into the South African PGM sector should be a source of concern, especially as the established mining sector 

struggles with low productivity 

and underinvestment. 

For these reasons, most OECD countries 

perceive PGMs as one of the groups of 

specialty metals with the single highest 
215 


99780.182

risk factor. First, there are no obvious 

substitutes for palladium and platinum, yet 

they are Indispensable for the global produclion of vehicles, engines, and computer 

storage devices. Moreover, supply risks 

are high because of the political conditions in South Africa, which pull the South 

African government in conflicting directions, resulting in disappointing mining 

performance. Labor disputes add another 

layer of uncertainty, as discontent among 

workers about working conditions and 

pay creates a volatile atmosphere. The 

financial situation In some smaller start-up 

mines is often delicate, and provides 

Chinese operators with the means to gain 

control over sectors of the mining operations. Finally, many mines require major 

upgrades, and the overall transportation, 

power, and public service infrastructures in 

South Africa are In steady decline. 96 

The other country with substantial deposits of PGMs is Russia. Mining in Russia 

is a risky business and many mines have 

failed to attract private sector capital. 

With the fall of communism, state-owned 

mines were privatized and distributed to a 

handful of individuals. Because commodity 

prices were low, capital was sent overseas 

rather than reinvested in the mines, resulting in the decline of the Russian mining 

sector.97 

Today, while greater attention Is devoted 

to the mining sector, Russia is perceived 

as an unpredictable place for Investments. 

Its economic and political environment is 

stable, but the mining sector is subject to 

arbitrary non-transparent decisions and 

immense bureaucratic hurdles. Obtaining 

a permit to explore a region is daunting because of the many technical and 

administrative rules. Once a company has 

secured an exploration license and identified a resource, it must apply for a mining 

license, which requires extensive paperwork as well as approvals from different 

levels of governments and authorities. 

The whole process may take years and 

discourages investment and expansion. 

Foreigners are also dissuaded by various 

laws that privilege domestic operators over 

foreign investors. The Russian state has 

issued laws protecting "strategic" assets, 

including raw materials."' 

MITIGATING THE RISKS 

The metals and chemical elements discussed in this chapter are a diverse group 

and require a differentiated approach, but 

the following recommendations will mitigate risks for most of them. 

Increase the exploration of alternative 

sources for the elements and thereby 

secure a diversification of the supply 

chain. Deposits of specialty metals are 

found in smaller concentrations in various 

parts of the United States. For example, 

northeast Minnesota is thought to possess 

deposits of underground copper, nickel, 

platinum, palladium, and gold. While it 

seems unlikely that this region can meet all 

U.S. needs, mining these deposits would 

lessen the reliance on Imports from unstable parts of the world and also reduce the 

impact of any future supply restrictions. 

The United States should continue the 

search for substitute and synthetic 

materials to replace REEs and REMs. 

Even if mining companies find more geological concentrations of exotic elements, 

In reality at some point the United States 

will run out of easily accessible resources. 

Manmade composites would be the longterm solution to Increased dependence on 

the scarcer elements of the periodic table. 

Recycling must be improved, strengthened, and Increased. Manufacturers and 

CHAPTER 3 • SPECIALTY MEIALS 75 
216 


99780.183

producers should use extracted materials 

in ways that facilitate recycling and re-use. 

The more that is recycled, the less the 

economy will be dependent on imports. 

A new system of stockpiling or inventory should be designed to mitigate the 

impact of possible supply disruptions. 

The DLA currently stores 28 commodities 

valued at over $1.4 billion. Although the 

stockpile contains quantities of PGMs, 

it does not hold REEs, and it does not 

appear to be properly coordinated with 

other agencies. To operate more efficiently, 

DLA Strategic Materials should adopt a 

sensible and proactive plan to acquire 

materials when prices are weak and coordinate with downstream users. Congress 

has recently taken steps that will enable 

U.S. stockpiling efforts to be more proactive; however, sustained, high-level attention will be necessary. 

The United States should continue to 

adequately fund the USGS, which collects and analyzes data, without which 

it would be very difficult to pursue a 

mitigation strategy in the first place. 

USGS is a critical agency in gathering and 

disseminating information on the state 

of affairs of our natural resources. Past 

budget cuts have caused the USGS to 

struggle to meet one of its principal objectives: to inform the nation of the status of 

its geological resources and warn of the 

potential for emerging supply constraints. 

Enforce greater interagency coordination, which is critical to mapping out a 

proper long-term strategy for managing our specialty metals supply chain. 

DoE, DoD, and the White House Office of 

Science and Technology Policy all have 

issued reports on how to address the 

critical materials agenda. There should 

be greater coordination and collaboration 

in establishing a common approach to 

76 REMAKING AMERICAN SECURITY 

addressing the risks of supply constraints 

of critical and strategic materials. In addition, since other advanced industrialized 

countries face very similar challenges, 

It would also be helpful to foster greater 

international cooperation and coordination among the European Union, Japan, 

Australia, and Canada, including possible 

collaboration on topics such as resource 

mapping, substitutes, and recycling. 

U.S. foreign and security policy has paid 

limited attention to sub-Saharan Africa, 

which possesses some of the world's 

richest concentrations of key minerals. 

China has been very active in Africa to 

ensure that it has a presence in countries 

with large concentrations of strategic 

minerals. Because the continent supplies 

many of the most strategic minerals, U.S. 

foreign, trade, and security policy should 

focus on ensuring continued access to 

African mineral deposits. 

CONCLUSION 

Many minerals already were labeled as 

critical and strategic in the early 1980s. 

Advanced technologies upon which our 

economy and national security depend are 

themselves heavily dependent on specialty 

metals and minerals. Nevertheless, over 

time the United States has become more 

dependent on imports of key minerals from 

countries with unstable political systems, 

corrupt leadership, or opaque business 

environments. Moreover, the countries 

themselves (notably, China) have taken a 

more aggressive posture towards mineral 

resources and now compete with Western 

mining operators for extraction control. 

The United States is not the only Western 

country that has increasingly ignored the 

economics of mineral extraction. Many 
217 


99780.184

electronic devices, green technology, and 

advanced weapon systems rely on a host 

of exotic chemical elements. An overarching strategy linking DoD with other government and industry stakeholders Is imperative to address potential shortages before 

they impact U.S. national security. 

ENDNOTES 

1 National Research Council, Committee on Critical 

Mineral Impacts of the U.S. Economy, Committee on 

Earth Resources. Minerals, Critiei11 Minerals, 6/ld the U.S. 

Economy (Washington. D.C.: National Academies Press, 

2008), 39. 

U.S. Department of DefensG, Office of Manufacturing 

and lndus!rial Base Policy, Roconfiguration of the 

National Defense Stockpife Report to Congress (April 

2009). http:J/www.acq.osd.milfmibp/docs!nds~ 

reconfigumtion_reporCto_congr-ess.pdf. 

3 U.S. Geological Survey, MiMrat Commodities Summary 2013 {Reston, Vtrginla: 2013), 5. hHp://minerals.usgs. 

gov/minerals/pubslmcsl20t3/mcs2013.pdf. 

According to the American Resources Policy Network, 

the absence of a working understanding of why a mineral 

may be critical or strategic has greally contribuled to 

tho delay In securing access to key minerals. Daniel 

McGroarty and Sandra Wirtz, "Reviewing Risk: Critical 

Metals & National Security," American Rasoutcos Policy 

Network (June 6. 2012}. http:/lamericanresourccs,orgl 

W!H-;ontenllup!oeds/2012/09/ARPN_Falf_Quarterly_ 

Report_ WES.pd!. 

5 "Minerals Make National Security," National 

Mining Association. http://minenalsmakelite, 

erg/assets flmages!contentfresources/ 

MlneralsMakeNationalSecurityfactSheet.pdf. 

6 Roderick G, Eggert, Mineral and Energy Economics 

Program at Colorado School of Mines, quoted in David 

J, Hanson, "Ctilica! Materials Problem Continues Debale 

over Use of and Substitutions for Rare Earth E!emonls 

Points out a Need for Much More Research," Chemical & 

Engineering News 89 (October 24, 2011), 28. 

7 Rare earth elements (REEs) are a oroup of i 7 chemical 

elements 1hat occur together In the periodic table. These. 

metals have many similar properties, which explains 

why they often are round together in geologic deposits. 

However, the group is divided lnlo hvo categories 

according to their atomic weight on the pariodlc table; 

light and heavy REEs. Many light REEs aro In fact 

abundant and of less value than the heavy ones; heavy 

REEs are of higher value In spite of a smaller market for 

them. See Chapter 3 on Magnets for a further dlscuss1on 

of light and heavy REEs. 

8 U.S. Geofoglcal Survey (UGS}, Principal Rare Earth 

Efements Depos#.s of the United Stat\ts: A Summary of 

Domestic Deposits and a Global Perspectlve Kaith R. 

long et al., {Reston, VA: USGS & U.S. Department of 

the Interior, Scientific Investigations Report 2010-5220). 

http://pubs.usgs gov/sir/201 0/5220/downtoads/S!A1 0· 

S220.pdl. 

9 Brian Sylvester. "Rare Earth Metals-Not Your Father's 

Mintng Biz:: Byron Ktog," The Gold Report, January i3, 

2012. http://www.fhesureport.com/pub/na/12440. 

10 Elisa Alonso. frank R. Fletd. and Randolph E. 

Klrchain, "Platinum Availability for Futuro Automotive 

Technologies, .. Environmental Science & Technology 46, 

no.12(2012),965·1012. 

11 British Gao logical Survey (BGS), Risk List 2011. http:// 

\'l\'rN.bgs.ac.uk/downloads/slart.cfm?id"'2063. See 

also, 80S, Critical Raw Mat&Jiats, http://www.bgs.ac.uk! 

mineralsuklstatistlcs!cdticalRawMaleriafsJ;tm!. 

12 Other elements wlth substantial supply risks are blsmuth 

(Chlna}, carbon graphite (China), germanium (China). 

indium (Chlna},lodine {Chile), thoolum (Chile}, strontium 

{China}, and thorium Qndia}. British Geological Survey, 

Risk Ust 2011. hUp://ww>v.bgs,ac.ukldownloadsJstart. 

cfm?id-"'2063. 

13 Gerrit Wiesmann, "Merkel Strikes Kazakh Rare Earth 

Accord," The Financial Times, February B. 2012. 

14 "Eoropean Union Crilical Raw Materfa!s Analysis the 

European Commission Raw Materials Supply Group," 

Executive Summary by Swiss Metal Assets (October 1, 

2011). http://W\-'i'N.swissmela!ass~ts.comiwp·conteJlV 

uplo®s/2011/10/EU~Critica!-Meta1s-SurnmaryCkt-3-2011.pdf. 

15 U.S. Geological Swvey. Rare Earths Statistics and 

Information 2012 (Reston, VA: USGS, 2012}. htlp:// 

minera1s.usgs.gov/minera!$1pubs/commodity/ 

rare, earths!. 

16 The Mountain Pass Mine in Califomla was one- or 

the largest produc~rs of REE until it closed in 2002 

as a result of falling REprices as China stepped 

up production and heightened U.S. environmental 

regula1lons and concerns regarding pollution from 

the exlraclion and refining processes. A series of 

environmental disasters betwooo 1984 and 1998 

released thousands of gallons of toxic studge into 

tne California desert, prompting a major lawsuit. 

The mine reopened in 2012. Russell Mclendon, 

"What Am Raro Earth Metals?" Mother Nature 

Network, June 22, 2011. hUp://wwvunnruom/ 

earth·matters/translating-uncle-samfslories! 

\'lhat~are~rare·earth-metals. 

17 Bryan Tilt. The Struggle for $ustalnabifity In Rural Cllina: 

Envlronmental Values and Civil Society {New Yorfl, NY: 

Columbia University f'r«lS, 201 0}. 

Shunsuke Managi and Shinji Kaneko, Chinese Economic 

Development and the Environment, (Northampton, MA: 

Edward Elgar, 2008}. 

18 "Wish You Were Mine,"' The Economist, February 11 1 

2012. hllp://www.ec-onomlst.comfnode/21547285. 

19 "Wish You Were Mine," The Economist, February 1 i, 

2012. http://www.econom!stcom!oodc/215472$5, 

Alex MacDonald, "AU$!ralia Gives Africa a 

Lesson in Resource Nationalism," The Wall 

Street Journal, February 13, 2012. http://b!ogs. 

wsj,com/dealjoumalaustmlia/2012/02/13/ 

austra!ia·gives-africa-a-lesson·in-resowce-natlonalisrn/. 

Andrew England, "Zuma Seeks to Allay Fears over 

Nationa!izat!on,"The Financial 7imes, February 10, 2012. 

http://mvw.ftcomlintl/cms/s!O/cfc3f05a-5403-11e1-

bacb-OOi44feabdcO,hlrn!. 

20 Brian Sylvester, "Richard Karn: 50 Specialty Metals 

Under Supply Threat," The Cn11cal Metals Report, June 

14, 2011. http://www.theaureport.com/put:/nat9867. 

CHAPTER 3 • SPECIALTY METALS 77 
218 


99780.185

21 National Research Council, Minerals, Cn'ticaJ Minerals, 

and the U.S. Economy (VVa.shlngton, D.C.: National 

Academies Press, 2008). 

22 Na1iona! Research Councn, Minerals, CritiClll Minerals, 

and the U.S. Economy {Washington, D.C.: National 

Academies Press, 2008), 165. 

23 National Research Council, Minerals, Critical Minerals, 

and the U.S. Economy (Washington, D.C.: National 

Academies Ptess, 2006), 58. 

24 U.S. GeclogicaJ Survey, Mineral Commodity Summaries, 

Uth!um {Reston, Vk. January 2012). hllp:l/minerals. 

uS<js.g:ovlrninerals/pubs/commodilyllithiumlmcs~2012H 

!lthi.pdl. 

25 There is one acllYe Ulhlum mlne fn Nevada. The mine's 

production capacity was expanded in 2012, and there 

is a small amount of recycled lithium. Nevertheless, the 

U.S. Imports more than 70 percent of Its lithium. U.S. 

Geological Sl.Jrvey, Mineral Commodltfes Summaries 

2013 (Reston, VA: January-2013). http://minerals.usgs. 

gov/rninera!s!pubslmcs!2013/mcs20i 3.pdf. 

The Ame.rlcan Physical Society and Materials Research 

Society, The Energy Critical Elements; Secudng 

Materials for £mergfng Tcchnolagi&s. (Washington, 

D.C.: February 18, 2011}. http://wwvJ.aps.org/poHcy/ 

reportsfpopa,roportsfload.:r.cfm?csModu!e=secority/ 

gelfi!e&Page!D=236337. 

26 David J. Hanson, "Critical Materials Problem Continues 

Debateo over Use of and Substitutions for Rare Earth 

Elements Points out a Need for Much More Research," 

Chemical & Engineering News 89 (October 24, 2011), 29. 

27 U.S. Geological Survey, Mineral Commodity Summalfes, 

Uthlum (Reston, VA: January 2012}. http://minera!s. 

usnsc"gov/minera!slpubs!commotltty/lithium/mcs-2012-

nthi.pdf. 

28 Thomas Cherico Wangef, "The Ulhiom FutureRasour-C(Js, Recycling, and the Enllirooment," 

ConseNation Letters 4 {2011), 202,206. 

29 Thomas Goonan, "Uthium Use in Batt~ries;• U.S. 

Geo!Of}ical SurveyClrcufar 1371 (Reston, VA: USGS, 

2012). hl!p:J/pubs,usgs.gov/circ/1371/. 

30 U.S. Department of Defense, Office of Manufacturing 

and Industrial Base Polley, Annue.J Industrial Capabilities 

Report lo Congress {2011). http://www.acq.osd.mil/ 

mlbp/doe&'mmuaUnd_cap_fpt_to_congress-2011.pdf. 

31 U.S. Geological Suf\ley, Mineral Commodity Summaries, 

Beryllium (Reston, VA: January 2012). http://minerals, 

tJsgs.gov/ minarals!pubs!comrnodity/bely!fi:Jm!rncs2012-beryl.pd'. 

32 U.S. Geolog!ca! Survey, Mineral Commodity $ummarles1 

Rhenium (Reston, VA: Jatluary 2-012). hHp~//mlncra!s. 

usgs.gov/ mlnerals/pubs/commodilyhh~niumlmcs-2012-

rheni.pdf. 

33 live price of Rhenium Price acc~ssed on 

March 10, 2013. h!tp:/!v.'\vw.!axfreegold.co.uk/ 

rheniumprioosusdo!fars.h!nll. 

34 U.S. Geological Swvay, Mineral Commodity Summaries, 

Rhenium (Reston, VA: January 2012}. http:/lrninera!s. 

Lsgs.gov/lninem!slpubs/commodi1ylrhenilJtn/mcs-2012-

rhenLpdf. 

35 U.S. Goofoglcal SuJVey, Mineral Commodity Summaries, 

Molybdenvm (Reston, VA: January 2012}. htlp://minom!s. 

usgs.gov/minerals/pubslcommodity/mo!ybdenurn/mcs2012-mofyb.pdf. 

78 REMAKING AMERICAN SECURITY 

36 U.S. Geotoglcal Survey, Mineral Commodity Summaries, 

Vanadium (Reston, VA: Jan-uary 2012). http://minera1s. 

usgs,gov/m!nerals!pubsloommodily/vanadium.Jmcs2012·vanad.pdf. 

37 U.S. Geological Su!Yey, Mineral Commodity Summaties 

2013 (Reston, VA: January 2013). 

38 Brian Sylvester, "Solving Critical Rare Eanh Metal 

Shortages: Dt. Michael Berry and Chris Berry," The 

Critical Metals Report, January 10, 2012. hUp://www, 

theaureport.com/pub/na/122! 7. 

39 Steve Gagnon, "Vanadium." Jefferson Lab. http:!/ 

education.jlab.orgl!tselement.al/ele023.htm!. 

Nick Hodge, "Vanadium: The Best Thing Since 

Uthlum," Ene1gy& Capftal, May 25, 2011. 

h1tp://www.energy.andc;aplta!.com/artic1es/ 

tha-besHhlng-since-!l!hium/1531. 

40 "Tantalum Facts: Chemical and Physical Properties," 

Anne Marie Helmensllne for About.com. http://chernistry. 

about.-com/od/elementfac1sla/taota!um.htm. 

41 Columbite is an older name. no longer in use except 

in the context of colvmbile-tantalite. Co!umbife comes 

ftom columbium, whlch was renamed niobium in the 

1950$. 

42 U.S. Geological Survey, Minoral Commodity Summaries, 

Tantalum (Reston, VA: January 2012), http://minerals. 

usgs.gov/m!nerals!pubs!commodity/niobiumirncs-2012-

t.anta.pdt. 

43 Both the Securities Exchange CQmmision and OECO 

are contemplating new ruh~s to force corporations 

to conduct business ethically in central Africa. The 

Dodd~Frank Act has banned the export of minerals 

ftom regions where mining appears to be intertwined 

with ongoing civil strife. U.S. Geologica! Survey, 

Mineral Commodity Summaries, Tantalum (Reston, VA: 

January2012}. http://minera~s.usgs.gov/mineratsfpubs/ 

commodity/niobiurn/mcs~2012-lanta.pdt 

Michael Nest, Co/tan {New York: Polity Press 2011). 

44 "AboutTUf\g$ten," Ormonde Mining, PLC,, http:JI\'.'\'J\'1. 

otmondomining.com/enllnvestorslabout_tungsten/ 

abouUungsten_dslai!s. 

45 ''Tungsten: Statistics and lnformaUon," last modified 

March 11, 2013, U.S. Geological Survey. 

http:!/minerals.usgs,gov(mlnera!s!pubs!cornmodity/ 

tungstenlindex.h!ml. 

46 U.S. Geological Survey, Minora/ Commodity Summaries, 

Tungsren {Reston, VA: January 2012}. http://rnir.erols. 

usgs.gov/mirwrals!pvbsicommodlly/tungsten/lncs· 

2012-tungs.pdL 

47 U.S. Under Secretary of Defense for Acquisition, 

Technology, and logistics. Strategic and CriUcal 

Materials Operations Report to Congress, Janua!)' 

2011. https:J/vr.•;w.dnsc.dla.mil!Up:oads!lvlaterials/ 

dladnsc2 _9-13-2011_ 15-9-40_FY10%200ps%2J 

Report%20·%2005·05,2011 .pdf. 

48 U.S. Geological Survey, MinernJ Commodfty Summaries, 

Timgsten {Reston, VA: January 2012). htlp"//mlnerals. 

usgs.gov/minera!slpubsJcommodity/tungsten/mcs2012·lungs.pdf, 

49 Jonathan Marshall, "Opium. Tungsten, and the Search 

for National Security, 194G-52;' Journal of Policy History, 

3 (October 1991), 89-116. 

Mildred Gwen Andrews. Tungsten: The Story of an 

llldispensab!e Metal, (VVash!ngton. D.C.: Tungsten 

fos1itute, 1955). 
219 


99780.186

50 For exampla, South Korea plans to convert 100 percent 

of public sector lighllng to LEO by 2020, tmd aims to 

reach 60 percent LEO lighting naUonwlde. 

51 U.S. Geological Survey, Mineral Commodity Summaries, 

Gallium (Reston, VA: January 2012). http://minarals. 

~gs.gOv/rninem!s/pubs!cornmodJtylgalliOrn/mcs~2012· 

gaHi.pdf, 

52 Keith Gorneu and Tom Adams, "Taming the Gallium 

Arsenic Diclng Process," Military & Aerospace Eleclronlcs, 

December 1, 2006. http://\'Nl\'l.milllaryaemspace.com/ 

attk~lt-".1/pliHVvo!ume-17/issue-12/newsftamlng-lhe· 

ga1ii!:m-arsenide-diclng-process.html. 

53 U.S. Geological Survey, Minerai Commodity Summaries, 

Ga!iium (Reston, VA: January 2012). http://minernls.usgs. 

gov/rnlnerals!pubs/commodity/gallium/mcs-2012-gaH!.pdf. 

54 U.S. Geological SUrvey, Mineral Commodity Summaries, 

Indium (Reston, VA: January 2012}. http://minerels.usgs. 

gov/mlneralslpubs./commoditylindium/mcs-20 i 2-indiu. 

pdf. 

55 "Indium." Cherolcool Periodic Table, Chemicool.com, 

November 9, 2012. 

http://vNIW.chemicool.com/e!ements!indium.htm!. 

56 ''Technology: Why SWIR? What is The Value of 

Shortwave Infrared?"' Sensors Unlimited, Inc., Goodrich 

Corporalion. http://www.sensorsinc.comiwhyswlch!ml. 

57 U.S, Geological Survey, Minerol Commodity Summaries, 

Germanium (Reston, VA: January 2012). htlp://minera!s. 

usgs.gov/minerals/pubs!c:omrnodity/gr:o:manium/tncs2012-gerrna.pdf. 

58 U.S. Geological Survey, Mineral Commodity Summaries, 

2013 {Reston, VA: January 2013}. http:/Jmh"'era!s.usgs. 

gov/minemls/pubs/commodily/germJnlumfmcs-2012-

germa.pdt 

59 For (l.>:.ampfe, the 2012 OlA made only 3000 kg available 

for purchase of a 16000 kg total holding. Sea Defense 

logistics Agency, Strategic Materials~ Annual Material 

Pian (FY2012) (2012). htlps:J/vNtw.dnsc.d!a.mi!!UpiondrJ 

NewsRe!ease!bbeructc_10 6-2011 1 i -9-18 3028%20 

FY12%20AMP.pdf. - -

60 U.S, Geological Swvey, Minera!Commodity Summaries, 

Germanium (Reston, VA: January 2012}. 

61 U.S. Geofoglca! Survey, Material Commodity Summaries, 

Antimony {Reston, VA: January 2012). htip;//mi:lem!s. 

usgs.gov/n1inera1s/pubs/cornmodit:>;/antimony/mcs2012~a.n\im.pdf. 

62 U.S. Geological Su!Vey, Byproduct Mineral CommOdities 

usrul for the Production of Phofovaltafc Ce/fs, by Donald 

B!elwasy. (Reston, VA: 2010}. http://pubs.usgs.gov/ 

circf136S/Girci3BO.pdf. 

63 U.S, Geologica! Survey, Material Commodity Summr:uies, 

Te!fwium (Reslon, VA: Jaouaty 2012). http://minera!s. 

us.:;s.gov/rnlnera!s!pubs/comnlodiiy/seleniv111Jmcs· 

2012-teHu.pdf. 

64 Uve price of rhenium, Tax Free Gold, accessed 

February 17,2012. http:/1\W-1\VJaxfreego!d,co.uk/ 

rhcniumpricesusdol!ars.html. 

65 American Physical Society. Energy Critical Elements: 

Secun'ng Materials for Emerging Technologies. hHp:f/ 

VI\WI.aps.orgfpoiicy/reportsfpopa-reports!ioader. 

cfm?csModula=:securily/gethle&PngeiD"'238:337. 

66 U.S. Geological Survey, Mlneral Commodity Summaries, 

Gaflium (Reston, VA: January 2012}. http://rninerals.usg:s. 

gov/miner.a!s!pubs/commodi\y/gal!lumJmcs-2"012·ga!"!. 

pdf. 

67 Molycorp's share prico dropped balovJlts IPO price of 

$14/share. It rose to $76/share on April 28, 2011, and 

then dropped as low as $5,75/share In November 2012. 

It lraded at $6.50/share In March 2013. 

68 K!a Ghorashl, lucinda Gibbs, Polly Hand, and 

Amber Luong, Rare Earth Elements: Strategies to Ensure Domestic Supply. (Stanford, CA: Bay Area 

Couocll and tho Breakthrough lnstiiUte, March 10, 

2011). http:/Jpub1icpo1icy.stan!ord.edlJ/system/fiies/ 

nareEarthE!ements.pdf. 

69 Kia Ghorashi, lucinda Gibbs, Polly Hand, and 

Amber Luong, Rare Earth Elements: Strategies to 

Ensure Domestic Supply. (Stanford, CA: Bay Area 

Council and the Breakthrough Institute, March 10, 

2011). hUp://publlcpo!icy.stanford.cdu/systcmfh!csf 

RareEar1hE!ements.pdf. 

70 United States Department of Energy, Critical Matertafs 

Strategy (INashington, D.C.: DOE/PI-0009, December 

2011}. http://energy gov/sites/prodlfiles!OOE_CMS2011_ 

FJNAL~Full.prif, 

71 Russell Mclendon. "What Are Rare Earth Metals?" 

Mother Nature Network, June 22, 2011. http://~o•N/W. 

rnnn.com/earth-mattersl!ranslating-uncle-samtslorle.s! 

what-are-rare-e.arth-meta!s. 

72 Marc Humphries, Rare Earth Elements: The Global 

Supply Chain {V/ashington, D.C.: Congressional 

Research Service 7-5700, September 6, 2011). 

73 ResearchfnChina, China Rare Earth Industry Report. 

2012-2015 (Beijing: ResearchlnChlna, Apri12013), 

74 John Tkaclk, Jr., Magnequench: CFJUS and China's 

Thirst for U.S. Defense Tcchnofogy(Volashlngton, D.C.: 

The Heritage Foundation, May 2, 2008). http:l/www. 

heritage.o;g/research/reports/200S/OS!magneqoench· 

cftus-and·chinas-thlrst-for-us-de:ense~technotogy, See 

also Chapter 3 on Magnets. 

75 Patti Waldmelr, "China Ups Rare Earth Reserve," Tho 

Financial Times, February 12,2010. http://wv:w.ft.com/ 

intl!cmsls/O/fe51 dd3c~ 1775-11 df-87f6-00144feab49<L 

him!. 

76 Michael Martina, "China Says Ready to Defend 

its Rare Earth Policies," Reuters, February 1, 

2012. hUp://wwvJ.rn:t.lters.comhu1ic!e/2012/02/01/ 

us·china.-rare-earths-ldUSTRE8t010T20120201. 

77 Leslie Hook, "China to Subsldlse Rare Earths 

Producers," The Financial Times, November 22, 2012. 

htlp:/Avww.ft.comli:n!l/cmslsJO/b3332eOa-348c-11e2-

8986·00144fe-abdcO.htm!#axzz2NBcKoeAw. 

78 Lou Ki!ze, "Pentagon 'naive' on rare earth outlook, 

several expert.s. say," Pittsburgh Tribune-Review 

April 10,2012. hltp:t/trlbHve.com/x/plUsburghtrib/ 

news/s_7B05799.h!m!l#axa2NCMazsVs. 

79 U.S. Department of Defense, "Report of Meelfng, 

Department of Defense, Strategic Materials Protection 

Board, December 12, 2008" (December 2008). http:// 

www.acq.osd.mlVmibp/docs/reporUrorn 2nd mtg of smpb_i2-200S.pdf. - -- - ·· 

"Analysis of National Security Issues Associated' With 

Specialty Metals:· Federal Register 4, no. 34 {February 

23, 2009), 8061-64. h!!p:l/edocketaccess.gpo. 

gov/2009/pdf/E9-3708.pdf. 

CHAPTER 3 • SPECIALTY METALS 79 
220 


99780.187

80 U.S. Department of Defense, "Report of Meeting, 

Department of Defense, Strategic Materials Protection 

Soard, December 12, 2008~ (Oecembet 2008). http:// 

www.acq.osd.miVmlbp/docs!report_trom_2nd_mtg_oL 

smpb_12-2008.pdf. 

81 The GAO report Is available online at http://www.gao. 

gov/new.Hems/d1 061 ?r.pdf. 

82 However, in March 2013, DoD suggested adding heavy 

rare earth clements to the stockpile in the amount of 

$120.43 million. DoD would !lave to buy these elements 

from China, because !here Is no domestic producer 

of heavy AEEs. Dorothy Kosich, ~u.s. DoD, Congress 

Worry on Rara Earths Stockpiles, Supplies, • Mine Web, 

MatCh 25 2013. hltp:l/www.mfneweb.com/mlncwcb/ 

contenVen/minew·eb,indus\rlal-me!als-minetalsold?oid= 1 83283&sn= Dotal!. 

U.S. Department of Defense, Under Secretary of Defense 

for Acquisillon, Technology, and Logistics, "Strategic 

and Criltcal Materials Operations Roport to Congress" 

{Washington, D.C.: January 2011}. h!lps:IAwiw.dnsc. 

dla.mi!!Up1oads!Materia!s/dladnsc2_9-13-2011. 15-9-40_ 

FY1 0%200ps%20Repoot%20-%2005-06-2011.pdf. 

83 H.R. 618, H.R.952, H.R.1314, H.R.1367, HR.1388, 

H.R.1875, H.R.2011, H.R.2184, H.R.22847, S. 734, S. 

1113,S.1270,S.1351. 

84 U.S. Department or Defense, Office of UTRfer Secretary 

of Defense for Acquisition, Technology, and LogistiC$, 

"Annual industrial Capabilities Report to Congress" 

(Washington, D.C.: Seplember2011),10-12. h!lp:// 

W\'1\Y.acq.osd.miVmibpJdocs/annual_ind_cap~rPUo_ 

cnngress-2011.pdf. 

85 Rebecca Keenan, •china May Double Rare Earth Exports 

as Demand Rebounds," Bloomberg News, r ebruary 27, 

2012. http:/hmw.b!oo:nberg.corn/news/2.012-02·26/ 

china-may·doubla·rare-earth·exporls·as-overseas~ 

demand-rcbounds-on·prico.html. 

86 Daniel Sperling and ~borah Gordon, Two Billion Cars: 

Driving Toward Sustslnabiiity (Naw York, NY: Oxford 

University Press. 2009}. 

87 '"Electronic Uses of Pa!ladium," Stillwater Palladium, 

http://W\'t .. 'l.s\i!!waterpalladium,corn/electronlcs.html. 

88 "Gold Depository,"WHYY, hllp:/Awr.v.whyyorg/tv12/ 

secretslgold.htmL 

89 Elisa Alonso. Frank R. Field, and Randolph E. 

Kirchaln, "Platinum Availability for Futuro Aulomot!ve 

Technologies;" Environmental Science & Technology 46, 

no. 12 (2012), 986·1012. 

Daniel McGroarty and Sandra Wirtl, .. Reviewing R!sk: 

Critical Metals & National Security," American Resources 

Policy Network {June 6, 2012}. http;/lamerlcanresources, 

org/wp·contenVup!oads/2012109/ARPN~Fai!_Quartcrly_ 

Fleport_WEB.pdf. 

80 REMAKING AMERICAN SECURITY 

90 U.S. Geological Survey, Material Commodity Summaries, 

Platinum Group Met;,fs {Ros!on, VA: January 2012). 

http://mlnera!s.l1$gs.gov/minerals!pubs/commmHy/ 

p!alinum/mcs·2012·plati.pdf. 

91 The two mines are Stillwater Complex in Montana and 

North American Palladium In the Thunder Bay District of 

Ontario. Luke Burgess. "Investing In Palladium: Investment 

U Research, February24, 2012. hltp://mYW.inveslmentu. 

com/20"12/fcbiUnry/investing-in~pa.lladium htm!. 

Luke Burgess, 'The Definitive Guide to Palladium Investing 

in 2012, .. /nvestmoot U Research, Februruy 28, 2012. 

ht!p:/A•l\'JWJnvestmentu.com/20t2/February/paHadallnfnvesttng,htmL 

92 Peter Leon, "Business Should Be Driving Empowerment 

of Workers," The Financial Times, February 8, 2012. 

hl!p:l/wwwJt.comlln!Vcmsls!O/dfe79f60·4c-e0-1iei~ 

874i-00144fe~bdcO.hlmlffaxzz25SIRqVhy. 

93 Andrew England, "Marikana Mine- Bus Crews Face 

Threats," Th& Financial Times (August 27, 2012). http:!! 

www.ft.com/intVcmslslO/d405cd72·i058·11 e 1-b7b2-

00144feabdcO.hlm!#axzz25S!RqVhy. 

Andrew England, "S Africa Gold Miners Strike as Strife 

Spreads,"' The Finandal Times (August 31, 2012). http:// 

W\Wt.ft.comfir.tVcmslsJ0/1 b(H6d3c-f378· 1 1 e 1·9c6c· 

00144feabdcO.h!ml#axn25SlRqVhy. 

94 Jack Farchy, "Platinum Shortfalt Largest In Decade," The 

Financial Times, November 13, 2012. httpJ/\'f\'/W.ft.com/ 

intlfcms/s!OI99c.85de0-2cf9-11e2-beb2-00144feabdc0. 

htm!#axzz2NBcKoeAw. 

95 Masuma Farookl, .. Chlna's structural demand and 

commodity prices.n edited by Christopher M. Dented, 

Implications for Africa China and Africa development 

relations {New York, NY: RouUcdge, 2011), 121-142. 

Deborah Brautigam, Th& Dragon~ Gift: The Real Story of 

China in Africa (New York, NY: Oxford Unlversl!y Press, 

2010). 

96 Hein Marais, South Afdca Pusf1ed to tile Limit: Tlu> 

Political Economy of Change (london: Zed Books, 2011}. 

Bill Freund and Harald Witt. eds., Development dilemmas 

in post-apartheid South Africa {CoUsvl!le, South Africa: 

University of Kwazulu-Nalal Press, 201 0}. 

Jan!ne Aron, Brian Kahn, and Geeta Kingdon, South 

African Economic Policy under Democracy {New York, 

NY: Oxford University Press, 2009). 

97 Gtobal Business Reports, .. Mining in Russia: Braving 

the Bear," Engineering & Mining Journal, Febn1ary 2012. 

50·54. h!lp:/h1\·iw.gbreporls.com/admin/reportslEMJ· 

Rvss!a-2012.pdf. 

98 Ibid. 
221 


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11/5!2.015 The long arms of a U,S.lav.' reach Congo I Marketplace.org 

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The long arms of a U.S. law reach Congo 

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Mining workers stand on a muddy cfiff as they work at a gold mine ln 2008 in the northeastern Congo. 

''Y Sabt•i Hen-Aclww· (lpeople/salll·i-ben-acholl/') 

httrsday1 Decem.ber 11, 2014 ~ .15:08 

Three hours from the nearest city and 120 feet underground, at the end of a long tunnel just big enough for a 

person to crawl through, 25-year-old Nami Fusi is listening to his favorite music while digging. 

"Here, this is a patch!" he says, shoveling. Fusi is one of the Democratic Republic of Congo's estimated soo,ooo 

artisanal miners. 

11 \"Ve advance a meter or two each day/' he says. He can spend as 1nany as 12 hours duvvn here, pursuing purple 

seams in the hard orange clay, hoping to see flecks of gold appear on his shovel or spring from his pick 

This is how a lot of the mining in Congo has heen done for the past few decades: by hand. Ores regarded as the 11 ce1lphone elen1ents"- the three T's: tungsten, tantalum and tin- were mined in much the smne way. These ores 

earned the moniker "conflict minerals" because the profits made from mining them haloed to finance armed 

groups in Eastern Congo that controlled mines and waged brutally violent campaigns against one another and 

against civilians. The groups killed nearly a million people by the most conservative estimates, and possibly as 

many as 6 million . 

• any things can shut down a mine like the one worked by Nami Fusi -collapses, toxic gases, and, it turns out, 

the Dodd-Frank act. 

"Which, in itself, I think sounds a bit odd," notes Aloys Tegera, wryly. Tegera is director of the Pole Institute, a 

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think tank based in the Congo in Goma. "There was this strong .American lobby, they wanted to slot into this 

American internal act, smnething concerning Congo.~~ 

'ithin the 2,300 pages of Dodd-Frank is one small section that requires companies that buy minerals from 

Congo to certify whether those minerals are financing armed gwups. The idea was to help end the atwcities that 

armed groups were committing. Outside of Capitol Hill, pressure to do something came in the form of 

campaigns on campuses, Facebook and YouTube to hold cellphone companies and computer makers 

accountable. 

"But they didn't really foresee the reaction, the local reaction, how it was going to work," says Tegera, referring 

to lawmakers. 

Reaction was swift and dramatic. In 2010, many companies started looking elsewhere for minerals. The 

government of the DRC, finally waking up to the issue of conflict minerals, unilaterally suspended all mining 

operations. Even when the suspension was eventually lifted six months later, many international companies 

realized they couldn't certify anything about Congolese minerals. Not when the supply was dominated by long 

chains of middlemen and thousands of workaday people- men and women with picks and hammers. So 

companies stopped buying. 

"They didn't buy, these pastfewyears, they don't buy anymore," says Gaspard Kashafali, an unemployed miner 

wearily standing on the side of a street in Bukavu. "I can't do this job anymore, and up until now I have nothing. 

I earn nothing. I don't work." Before Kashafali was a miner, he was a guerdlla fighter in the Mai Mai, one of the 

1ngo's dozens of armed groups. 

"Artisanal miners were all of a sudden unemployed," says Tegera. It was a defacto embargo. 

There were broader ripple effects beyond miners, says Tegera. "Government revenue dropped, and we had for 

instance local traders who would sell spare parts, food, beer, and these people also conldn't sell." 

Tegera and others allege that the loss of jobs pushed erstwhile guerrilla fighters like Kashafali back to the 

banditry trade, ironically increasing insecurity- contrmy to the aims of the efforts to reign in conflict minerals. 

The initial suspension, which closed down legitimate mining operations, also allowed rebel groups out of the 

reach of government, lil<e the National Conference for the Defence of the People, to monopolize the mineral 

trade in the short term as they smuggled their materials into Rwanda or Uganda. 

Unlike the artisanal miners, "industrial mining operations were not hit," says Tibere Kajcmba, program director 

at Observatoire Gonvernance et Paix, a human rights organization. "They have a closed supply chain, they can 

show that their minerals are conflict free." 

·sot nnintended 

lby Whitney was legislative director for Rep. Jim McDermott, R-Wash., and the lead drafter of the Doddhttp:Jlw\wJ.marketplace.orgltopicsfw<xld/1ong-anns-us-lrJ>•J·reach-congo 217 
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Frank section on conflict minerals. Whitney bristles at the notion that drafters were't aware of the consequences. 

"When you're going to break a black market, and provide some chance for peace and prosperity in the region, 

·,ere's going to be some dislocation," he says. "And it was worth some amount of dislocation to stop funding the 

Jailing of a thousand people a day." 

"This behavior has been going on for 20 years, funding a huge war, and we are saying you have to care about 

this, be transparent at a 1ninimum, 11 Whitney says. 

Tegera and others complain that if the people behind Dodd-Frank knew in advance what would happen to the 

miners, they failed to come up with a plan to support them. 

Attempts to cope 

Four years into the disruption to one of Congo's most important industries, numerous efforts have arisen to 

help artisanal miners trace the origins oftheirproducts to show it is "clean." That's what designers of the law 

hoped for. 

The human-rights organization that Kajemba leads is helping the DRC government monitor mines for the 

presence of armed gmups. They also monitor for adherence to other standards banning child labor and pregnant 

nmcn or women carrying small children on their backs from worl<:ing in the mines. The organization has helped 

put together a classification system of green sites (conflict free and up to standards), yellow sites (meets some 

standards but not others), and red sites (armed gmups arc demonstrably present). 

There are also programs that bag and tag ore mined by artisanal workers, offering a seal of sorts that marks the 

minerals as conflict free. 

"These programs exist and have been ratcheted np, so there's an improvement," says Jason Stearns, senior 

fellow at NYU's Center on International Cooperation. "But we are at such a low level- fewer than a dozen areas 

out of hundreds, and its very cumbersome infrastructure." 

These programs have almost certainly not heen able to absorb all the displaced miners. Nor are all of 

these classification systems internationally recognized, which means they are not sufficient for a company to 

meet the requirements of Dodd-Frank. 

A consequence of the traceability schemes has been the creation of monopoly dynamics, says Laura Seay, an 

assistant professor at Colby College in Maine. Her research focuses on U.S. foreign-policy effects in the African 

Great Lakes region. 

"Tn the places where there is traceability, there's only one buyer. That buyer gets to set the price. There are 

.<liners who think they are being cheated and are probably right, in terms of what they're getting for the 

minerals," Seay says. "And so what we're seeing is that it's a relatively tiny number of miners who are benefiting 

from the new traceability schemes and the vast majority are still excluded." 

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Bitter medicine 

One of the U.S. groups largely behind the Dodd-Frank section on conflict minerals is the Enough Project, a 

Washington, D.C., nonprofit with a mission to end genocide and crimes against humanity. For proponents like 

Fidel Bafilamba, the Enough Project's country director for DRC, the law is like Quinine: bitter hut necessary. He 

admits that many miners suffered nuder the rule, hut he argues that the people worldug in mines under the 

control of armed groups suffered without the rule. 

When armed gt•oups and militm·ies took over, "artisanal mining became synonymous [with] tragedy, 

malediction to the local communities." He compares the condition of some mining communities controlled by 

armed groups to urban areas like Goma, "despite the nice buildings coming up in Goma, these connnunities still 

have nothing." 

And despite the hardship, the law worked, Bafilambasays. 

"Five years hack, most of the mines- especially three T mines- were under the control of armed militias. 

Today, 67percent of mines are conflict-free," he says. 

The International Peace Information Service, a Belgium-based independent research institute promoting peace 

and development in Sub-Saharan Africa, backs up this claim. However only a third of gold mines are conflictee. 

Silver linings and gold chains 

There is no reliable data on exactly how many miners were put ont of work in the long run, and to what extent 

their financial hardship persists. A World Bank-funded report suggests one possibility: It estimates four out of 

five attisanal miners iu the DRC arc now working in gold, a largely unregulated and untraced sector. 

"There's heen a large migration from the three T's-tantalum, tin, tungsten- to gold, which is by far the largest 

mining trade or sector in the eastem Congolese economy," NYU's Stearns says. "So that has buffered and 

cushioned the impact of Dodd Frank." 

Gold has also offered armed groups an escape route. 

Gold has a high intrinsic value, and it doesn't need to be smelted or refined before attaining that value. It is also 

easily smuggled, easily sold, and many of the mines are in areas not fully controlled by the government. Now 

that cellphone minerals are less profitable, it is the alternative of choice for both miners and militants. 

ion definitely have more armed groups henefiting from gold. That is shown in data we have gathered this 

year," says Anna Bulwmi, an analyst with the International Peace Information Service. "It is very challenging to 

say that gold is sourced responsibly right now." 

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Two-thirds of gold mines in the Congo operate under some kind of armed group according to the International 

Peace Information Service. 

"he main hubs for gold are in places that so far have not been particularly active in the global conversation on 

conflict minerals," says Bulzomi. "For instance, a lot of gold from the [African] Great lakes region ends up in 

Dubai where the level of commitment is not as high as the U.S. or EU or players with large roles in other supply 

chains," she says. 

A pilot project at the Nyamorale gold mine where Nami Fusi works is seeking to change this, but it is one out of 

more than 6oo sites. Other sites are in isolated or rebel-controlled areas where conflict free certification 

programs are not possible, but fwm which smuggling certainly is. 

Competing narratives 

Dodd-Frank's harshest critics say that the law missed the point. "It underestimated or overestimated the 

government's ability to provide law and order," says Tegera. The underlying factor behind Eastern Congo's 

lawlessness and illicit mineral trading is not mineral wealth, it is a collapsed, feckless government. To address 

the conflict international organizations and governments should strengthen the government's ability to do what 

governments do: provide services and stability, according to Tegera with the Goma-hased think tank. 

w those like Bafilemha, who favor Dodd-Frank's approach of taking action at the economic level, the DRC 

government's fecklessness is precisely the reason not to wage reform through said government. "They are not 

interested in stability, or basic services," he says. For Bafilemba -who views the CUtTent Congolese government 

as a puppet of neighboring Rwanda and the United States, bent on extracting Congo's mineral wealth for 

personal or foreign gain- working to support the government's capacity before reforming it would be 

counterproductive. 

"We won't know whether [Dodd-Fran!<] has been a success or failure for another five or six years," says Stearns, 

the NYU fellow. He says the law could have used "more foresight and preparation ... hut the baby shouldn't he 

thrown out with the hathwater," he says. "Now that it's in place we have to work with it and improve it." Stearns 

says the current standard put in place by the law requires too high a burden of proofto certify that a mineral is 

conflict free. "Supply chains are so confused through so many intermediaries that it's impossible to verify" to 

that standard, which he says should he lowered. 

"No, it's the standard," says Whitney, one of the law's drafters. "If you bring a toy into this country and it's 

painted, yon need to !mow whether it was made with lead paint or slave labor. You're not allowed to say 'I'm 

bringing something in this country with lead paint in it and it's too complicated for me to figure out, so sorry 

eople got poisoned.'" 

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Of tninera1s and n1en 

Regardless of the governmenfs utility and role in the minerals sector, Congo1s minerals are not the primary 

·iver motivating the anned groups operating here. 

"Aecordingto the U.N., only 8 percent of conflicts are overresource conflicts- fighting over control of a mine to 

have access to particular mineral resources, hut that means the other 92 percent of conflicts are not about 

minerals," Seay says. It is about identity, belonging, ethnicity and money. 

In the past, many of those conflicts were funded by minerals but, Seay says, "in a wartime economy, everytl1lng 

looks like a source of revenue." 

"If one source goes away, that doesn't have an effect on the '~olence because the armed groups continue to 

finance their activities through a \Vide variety of means, 1

' she says. 

Groups have funded themselves by trading charcoal, timber, marijuana, even by poaching animals. "The M23 

group that existed in 2012 and 2013, they were bringing in 200, 300, $40o,ooo a month just by informally 

taxing trade at a border post." 

The conflict-mineral cell phone narrative "was very deliberately chosen because it is simple, anyone can 

understand it, it's relatable- everyone has a mobile phone. So if you say your phone has blood iu it fueling 

violence, that gives everyone an immediate and personal connection. lt1

S very clever.'1 

·rhe problem, says Seay, is that despite "the good intentions of mobilizing people around the issue when you 

have a simple narrative, it's reductionist and }eaves out important dimensions of the crisis.~~ 

That is one thing that both critics and supporters of Dodd-Frank can agree on: The roots of the conflict are deep 

and wide, and no simple stroke of a pen by an outside power can solve that problem alone. 

Comments 

About the author 

Sabri Ben-Achour is a reportet· for Marketplace, based in the New York City bmeau. He 

covers W.all Stl·eet, finance, and anything New York and money related. 

Read More » 1/people/sabri-ben-acl!QJJJJ 

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How Dodd-Franl< Is Failing Congo 

The campaign to stop conflict minerals is supposed to be protecting people's lives in one 

of the most fragile parts of Africa. In fact, it seems to be doing the opposite. 

BY LAUREN 

l\1incrals are ruining lives. For several years now, in conversations about conflict and crisis in the 

Democratic Republic of Congo, this has been a common refrain. 

About $24 trillion worth of gold, tantalum. tin, and tungsten are estimated to be in Congo's eastern hills. 

They are dug from the fertile, brown mud there through exploitation: Kilos upon kilos of rocks and water 

are lifted and filtered each day for a few dollars per laborer. Minerals are smuggled, too, and help to line 

the pockets of the security guards, militias, and Congolese soldiers who lord over mining sites, wielding 

weapons and perpetrating sexualized violence against women. By extension, the advocacy message goes, 

the "conflict minerals" from Congo that wind up in devices like !Phones cause rape. U.S. electronics and 

other expensive, shiny things fuel war. Individuals and companies must not huy dirty minerals, because 

exposing and cleaning up supply chains will reduce the stranglehold armed groups have on Congo's 

mines. 

These ideas helped shape a tiny section of the Dodd-Frank financial reform Jaw, passed by the U.S. 

Congress in2010, called Section 1502. This section requires companies registered with the u.s. Securities 

and Exchange Commission to disclose whether they are receiving tantalum. tungsten, tin, and gold from 

Congo, and whether those minerals are connected to sites of conflict, which is determined through an 

expensive certification process on a mine-by-mine basis by something known as the Regional Certification 

Mechanism of the intergovernmental International Conference on the Great Lakes Region. Companies 

had to file their first disclosures in May 2014. 

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But declaring products "conflict-free," as the label is known, is not so simple, many critics say, and the 

message that Congo's minerals cause rape and other horrors is not exactly true. 

At the beginning of September, 70 academics, researchers, journalists, and advocates published a 

blistering open letter criticizing Dodd-Frank and its backers, asserting that the groups and activists 

pushing to stop the trade of conflict minerals risk "contributing to, rather than alleviating, the very 

confiicts they set out to address." Their campaign "fundamentally misunderstands the relationship 

between minerals and conflict" in Congo. the signatories said. (Some critics have gone further stilt 

charging that the advocates who sculpted and pushed Dodd-Frank have even misrepresented, in the name 

of what they see as a greater good, the situation on the ground in Congo.) Two months later, on Nov. 30, 

the Washington Postpublished a long investigative featme describing how Dodd-Frank "set off a chain of 

events that has propelled millions of miners and their families deeper into poverty." 

Ben Radley, a signatory of the September Jetter and an independent researcher who is making a 

documentary about Dodd-Frank's impact in Congo, summed his concerns up in an interview: While the 

concept of conflict minerals is convenient for people far from Africa, it is inducing incredible hardship for 

the miners and their families. "Congolese miners," he said. ·'are paying to case the consciences of Western 

consumers." 

At the root of this dilemma is a series of loudly propagated myths about what is going on in Congo's mines, 

how conflict is affecting the country, and how exactly the supply chain that feeds minerals into tile global 

market is regulated. 

It is high time these myths were dispelled. 

Myth: Armed groups control and rely on most of Congo's mines, and Dodd-Fran!< has helped to counteract 

them. 

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Mirellle Mbale has used a jagged rock for a stool as she works since she was three years old. Squatting in a 

long red skirt, she sifts the coppery dirt of eastern Congo through a piece of mesh as fine as she can find 

the tinier the holes, the more hits of gold distinguish themselves in her smashed-up stones, and the more 

money she is paid. With the $1 to $5 she earns each day, Mbale supports her herself and her daughter. "I 

pay my rent and the food ration for my household," she said in an interview in 2014. Although she suffers 

dust in her lungs and pains in her back, she said she hopes her work in the mine will help her realize her 

dreams: "getting my daughter an education up to the university level, and buying a small piece of land to 

take care of my household." 

Mbale is one of an estimated 8 million to 10 million people who rely on mining to earn a living in eastern 

Congo. Where Mbale works, at a gold mine in Kamituga in South Kivu province, armed warlords are not a 

problem. Her mine is controlled instead by civilian men who insult and neglect her, she said. 

Many Congolese mines, iu fact, are not controlled or affected by armed groups. Radley and Christoph 

Vogel, an independent analyst on Africa, wrote in September in the Washington Post that their own 

fieldwork, backed up by other academic research in eastern Congo, shows that mines controlled by armed 

actors actually constitute "a small number." It is bard to determine exactly how many, because the 

number is always shifting in the murk of conflict; it is "very dynamic and very unstable," said Sophia 

Pickles, the lead campaigner on conflict minerals at the U.K.-basect advocacy organization Global Witness, 

which focuses on resources and corruption around the world. But Radley and Vogel's work at least 

provides a snapshot of the situation on the ground. 

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Barnard College political science professor Severine Autesserre has offered a broader critique in a similar 

vein: In 2012, she estimated that only 8 percent of the country's ongoing conflict has anything to do with 

natural resources. Moreover, in the September 2014letter, the signatories noted that "armed groups are 

not dependent on mineral revenue for their existence." Many groups can easily turn from minerals to 

palm oil, charcoal. timber, or cannabis to make money- not to mention extortion, illegal taxesJ and other 

means. What's more, some civilians who work in artisanal mining began doing so as a way to support 

themselves when militias pushed them out of their agricuittJral fields. academics and activists in eastern 

Congo said in interviews. 

In other words, the relationship between mining and conflict is not nearly as clear-cut as many DoddFrank backers say. Nonetheless, the anti-conflict-minerals campaign has focnsed intensely on this link. 

Recently, the claim has been pushed even further: Advocacy groups- especially the Enongh Project, a 

U.S.-based anti-genocide group and a key supporter ofDodd-Franl<- have asserted that the 2010 law has 

decreased the presence of armed groups at Congo's mines. The Enough Project said this past summer that 

such groups have lost power of over two-thirds of mines they previously controlled because of DoddFrank. According to the Guardian, Enough said it had carried out "five months of field research in eastern 

Congo, interviewing220 people in 14 mines and towns, ln addition to 32lnterviews in the U.S. and 

Europe." What did it find·/ "Armed groups and the Congolese army are no longer present at two-thirds 

(67percent) oftin, tantalum, and tungsten mines surveyed in eastem Congo's North Kivu, South Kivn, and 

Maniema provinces," the group told the newspaper. 

The assertion that any decrease was due to Dodd-Frank. however, is simply impossible to prove. That two 

things- armed groups' loss of control and the law's implementation -happened over the same four 

years (2010 to 2011) does not mean that the latter caused the former, Laura Seay, an assistant professor of 

government at Colby College and one of the September letter's signatories, said in an interview. "They are 

mal<ing a classic correlation/causation error here," Seay explained. Plenty of other developments could 

have led to armed groups losing their grip on whatever mines they did control: During the same period, for 

instance, there was an increased number of U.N. and Congolese army missions fighting rebel groups. 

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In March 2014, Seay wrote in the lVasbinglon Post that Enough's founder, John Prendergast, had wrongly 

attributed the fall ofM23, a militia gmup considered '~defeated" by the U.N .• in pan to the campaign to 

stop conflict minerals. According to Seay, "M23 never controlled mining areas" in the first place. 

Similarly, a 2012 report by the International Peace Information Service, an independent Belgian research 

group on sub-Saharan Africa, found that though M23 had profited from smuggling and taxation of 

minerals, "establishing full militaty control over mining areas to maximize profits is not M23's priority for 

now. As a consequence it has to rely on other means to sustain its war effort." Scay also noted that research 

actually shows that violence seems to have increased in eastern Congo afterDodd·Frank went into effect. 

She cited research by the AidData Center for Development Policy (ACDP) at the College ofWilliatn and 

Mary, which found that "a narrative of increasing violence and diminishing productivity in the DRC's 

natural resource sector" hints at "a possible correlation between the two." 

Critics ofDodd·Frank are very direct: "Despite successes of activists in shaping policy, the conflict 

minerals campaign fundamentally misunderstands the relationship between minerals and conflict in the 

eastern DRC," the authors of the September letter wrote. They went on to write, "As a result, the conflict 

minerals movement has yet to lead to meaningful improvement on the ground, and has had a number of 

unintended and damaging consequences." 

Myth: Dodd-Fran!< willmal<e life better for Congolese civilians. 

Holly Dranginis, a Congo policy analyst at Enough, is confident her group's work is paying off, slowly. 

Certification required by Dodd-Frank and other related efforts, she said in an interview, will eventually 

mal<c life "just a lot better for the lowest-levelminers." 

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But for now at least, the law seems to he doing the opposite. When Dodd·Frank passed, Congolese 

President Joseph Kahila put a ban on all mining and mineral exports in North and South Kivu and 

Maniema provinces. Though the ban was officially lifted in 2011 after the government supposedly had a 

chance to put programs into place that could trace where minerals came from, its ripple effects have 

persisted: Many artisanalmines have remained closed, and countless livelihoods have heen destroyed, 

according to academics and activists. Seay estimated in 2012 that between five and 12million Congolese 

had been "inadvertently and directly negatively affected" by the loss of employment created by the ban 

and its aftershocks. (Mbale lost her job for a period, but was able to find work at a new mine after the ban 

was lifted.) 

As just one example of an aftershock, Malaysia Smelting, one of the world's largest producers oftin, 

stopped buying ore from Congo altogether. Like many companies, it feared being labeled a user of conflict 

minerals and felt it could not determine which were conflict free. (Due diligence under section !502 is 

expensive: A 2011 Tulane University study commissioned by U.S. Senator Dick Durban estimated the 

implementation cost of1502 at $7.93 billion to private companies.) Previously, Malaysia Smelting had 

purchased more than 80 percent of Congo's tin, Reuters reported, so the economic loss was dramatic. In 

May 2011, Bloomberg News reported that sales of tin from North Kivn "fell more than 90 percent" the 

previous month as a result of companies like Malaysia Smelting pulling out. And indeed, Malaysia 

Smelting wasn't alone: According to a March 2014 article in TecfiRepttblic, other smelters have also joined 

in a "de facto boycott" of Congo minerals. 

According to the Washington Posts November 2014 investigative report, hack before Dodd·Franl< passed, 

miners sold a kilogram of tin for $7. Today, that number has dropped to just $4, even tbough the global 

market price for the ore has risen. "[T]he loss of American and other Western clients has been keenly felt" 

in Congo, the newspaper noted. 

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Donatien Nakalonge ofVoiunteers for Rural Development, a non-governmental group that works in South 

Kivu and is known by its French acronym (YODER), has witnessed the impacts of this economic crisis up 

close. "This law [Dodd-Frank) has taken food out of the mouths of the artisanal miner's family," he said in 

an interview. 

In early December, Sash a Lezhnev, a senior policy analyst at Enough, wrote in an email that the 

legislation's immediate impact on miners' livelihoods "is a real and serious pmblem that must be 

addressed through more robust initiatives to aid and empower Congolese miners." He pointed out that 

Enough has been pushing the u.s. government, as weH as metal and tech companiP~<>, to contribute to 

"livelihood funds" for miners, and he said progress is being made through a number of programs: In 2014, 

the u.s. Agency for International Development began a $5.8 million Capacity Building for Responsible 

Minerals Trade project and a $20 mlllion community recovery project. Unfortunately, Lczhnev also said, 

$20 million was allotted for such programs in the Conflict Minerals Trade Act (which was floating around 

Congress before being nixed in favor of1502) but "got taken out at the last minute when it was folded into 

the Dodd-Frank Act." However, this account is disputed by Didier de Failly, director of a Congolese 

science and technology research institute, who claims Prendergast told him in 2010 that Enough actually 

chose to support only the regulatmy language that became Section 1502. Lezhncv countered by saying 

Failly "must have misunderstood John" and noting that "Enough had lobbied heavily for the inclusion of 

livelihoods provisions into the bill." 

conceivably, corporations buying conflict-free minerals could bring job training to local communities 

while slowly implementing tracing schemes and other ways by which to extract clean minerals. nut there's 

only so much any one company can do~ and no one I spoke to in eastern Congo said they've seen evidence 

of such programs yet. Meanwhile, Mike Loch, who leads a supply chain corporate responsibility program 

for Motorola, which sources minerals in Congo, said in an interview, "We're not looking to subsidize the 

mining industry; that would not be a sustainable business model. Our role is to lend our brand and 

reputation to say we're willing to accept legitimate, verified, conflict-free minerals from the region into 

our products." 

http·/!forelgnp:::)jicy.coml2015/021021hcn-d00d-ftank-is-fa11ing-ccngo-minfng-cooflic!·minerals/ 7/11 
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11!512015 How Dodd-Frank Is Falling Congo! Foreign Polley 

Myth: Dodd-Frank is being successfully enforced. 

If you ask the Enough Project, Dodd-Frank is working. But even the advocacy group admits that 

companies are struggling with regulating at least one of the minerals named in the law. "Market changes 

spurred by the 2010 Dodd-Frank law on conflict minerals have helped significantly reduce the 

involvement of armed groups in eastern Democratic Republic of Congo ("Congo") in the mines of three out 

of the four conflict minerals," Lezhnev and other staffers at the project wrote last June. The fourU1, more 

difficult, mineral they are referring to is gold. 

Smuggling remains a huge problem- for gold especially, but also for other minerals. A lot of criticism is 

aimed at what is known as the "tag and bag" system, which involves tying a small plastic tag around a bag 

of minerals to certify it as "clean." According to Radley, "The closer you get to the ground, the more 

farcical it looks." In Marcll2013, for instance, Global Witness discovered that the Congolese militaty had 

been running a racket at the Kalimbi cassiterite mine in South Kivu: It was siphoning off ore before it 

could be bagged and tagged, and selling it through a parallel supply chain for the local colonel's profit. As 

a result, two tons of uncertified ore had slipped quietly out ofKalimbi and ended up north, in Goma, the 

previous December. There have also been eases of mine officials selling tags at $20, which are then used to 

label "dirty" tin as "conflict-free," a local NGO worker named Eric Kajemba told Deutsche Welle in 

October. "Mine officials only earn $60 a month, so they are still easy to bribe." 

"Congo is a place where almost evety public official is bribable," Scay said in an interview. "I think there's 

a huge level of naivete about how enforceable this is." 

Smuggling also allows illegal traders to offer a better price by at least 2 percent, according the U.N. Group 

of Experts on the Democratic Republic of the Congo, which reports regularly on the situation in Congo. 

because they don't have to pay export taxes. The group says that in addition to illegal traders' fudging 

weights of smuggled minerals, "the lack of regulation of the trade facilitates fraud at the local, 

intermediate and regional levels." 

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111512015 HQI.v Dodd-Frank Is Failing Congoj Foreign Policy 

There are other problems with enforceability, too: Minerals can be laundered through places like China or 

Brazil, making their actual origin unidentifiable- but also allowing them to be deemed clean. Global 

Witness's Pickles calls this a "kind of a cop-out." 

On-the-ground certification is also cumbersome and slow-moving: In South Kivu alone, out of more than 

900 mines, only 11 are tagging minerals at this point as "conflict-free," Adalbert Murhi Mubalama, the 

province's minister of mines, told the Washington Post. And, at the beginning of September, the U.S. 

government announced that it "does not have the ability to distinguish" which refiners and smelters 

outside of Congo are financing sites within the country that are in fact run by militias. 

Some critics are starting to see a revision or repeal ofDodd·Frank as inevitable. Rosa Whitaker, a former 

negotiator at the World Trade Organization (WTO) and assistant U.S. trade representative for Africa, says 

that countries that are economically impacted by Dodd-Frank are considering bringing a suit against the 

United States through the WTO on the grounds that Section1502 is against its rules of trade. Whitaker 

added that meddling with such a massive source of income for the decrepit Congolese economy is more 

than an economic gamble it is an ethical lapse. "I think a Jot of the NGOs really have to examine their 

own humanity," she said. 

Congolese miners, in the meantime, are caught in a number of liminal states~ between no job and a 

grueling one, and among NGOs trying to help but actually hurting them, companies seeking to make a 

profit from their labor while navigating international regulations, and a government that largely ignores 

them. 

Radley, echoing other 1502 watchers, said, "l think at the moment [Dodd-Frank has] done more harm than 

good." He has hope that it could "do good -10, 20, 30 years down the line." 

But, he added, "It's going to be a long, painful process." 

Junior D. Kannah/AFP/Getty Images 

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111912015 Ho<.v Congress Devastated Congo- The New York Times 

The Opinion Pages OP-ED CONTRIBUTOR 

How Congress Devastated Congo 

ByDAVIDARONSON AUG. 7, 2011 

Washington 

IT'S a long way from the marble halls of Congress to the ailing mining 

towns of eastern Congo, but the residents ofNyabibwe and Nzibira know 

exactly what's to blame for their economic woes. 

The "Loi Obama" or Obama Law- as the Dodd-Frank Wall Street reform 

act of 2010 has become know·n in the region - includes an obscure provision 

that requires public companies to indicate what measures they are taking to 

ensure that minerals in their supply chain don't benefit warlords in conflictravaged Congo. The provision carne about in no small part because of the work 

ofhigh-profile advocacy groups like the Enough Project and Global Witness, 

which have been working for an end to what they call "conflict minerals." 

Unfmtunately, the Dodd-Frank law has had unintended and devastating 

consequences, as I saw firsthand on a trip to eastern Congo this summer. The 

law has brought about a de facto embargo on the minerals mined in the region, 

including tin, tungsten and the tantalum that is essential for making 

cellphones. 

The smelting companies that used to buy from eastern Congo have 

stopped. No one wants to be tarred with financing African warlords -

especially the glamorous high-tech firms like Apple and Intel that are often the 

Oissemlnottd by WinningSttotegi~s Woshlnoton~ on agent of o /ottlgn prindpol. Additional fnjom1ob'on 

is on fite with th~ Oeparl.ment of.ltistice. 

~:tlwvNJ.nytimes.com/2011/0&'00iopinlonlhaN·congress·devastated-congo.hlml?_r=O 114 
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11/912015 How Congress Oevasta\ed Googe- The New York Times 

ultimate buyers of these minerals. It's easier to sidestep Congo than to sort out 

the complexities of Congolese politics especially when minerals are readily 

available from other, safer countries. 

For locals, however, the law has been a catastrophe. In South Kivu 

Province, I heard from scores of mtisanal miners and small-scale purchasers, 

who used to make a few dollars a day digging ore out of mountainsides with 

hand tools. Pal tty as it may seem, this income was a lifeline for people in a 

region that was devastated by 32 years of misrule under the ldeptocracy of 

Mobutu Sese Seko (when the counttywas known as Zaire) and that is now just 

beginning to emerge from over a decade of brutal war and internal strife. 

The pastor at one church told me that women were giving birth at home 

because they couldn't afford the $20 or so for the maternity clinic. Children 

are dropping out of school because parents can't pay the fees. Remote mining 

towns are virtually cut off from the outside world because the planes that once 

provisioned them no longer land. Most worrying, a crop disease periodically 

decimates the region's staple, cassava. Villagers who relied on their mining 

income to buy food when harvests failed are beginning to go hnngty. 

Meanwhile, the law is benefiting some of the vety people it was meant to 

single out. The chief beneficiaty is Gen. Bosco Ntaganda, who is nicknamed 

The Terminator and is sought by the International Criminal Court. Ostensibly 

a member of the Congolese Army, he is in fact a freelance killer with his own 

ethnic Tntsi militia, which provides "security" to traders smuggling minerals 

across the border to neighboring Rwanda. 

All this might be a price worth paying if the law were having its intended 

effect of economically asphyxiating the warlords who turned eastern Congo 

into the deadliest conflict zone since World War II. As Representative Barney 

Frank, the Massachusetts Democrat for whom the act is partly named, 

memorably put it, "The purpose is to cut off funding to people who kill 

people." 

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111912015 Ho.v C{)(Jgfess Devastated Congo~ The New Y<Xk Times 

But by the time President Obama signed the Jaw last summer, the conflict 

had moved into a different phase. Most of the militias that wreaked havoc 

between 2003 and 2008 have since been incorporated into the Congolese 

Army. The t\vo or three of any significance that remain get their money from 

kidnapping and extortion, not from controlling mining sites or transport 

routes. The law has not stopped their depredations. 

The people of eastern Congo agree that it would be beneficial to bring 

greater clarity and transparency to the mineral trade. A variety of local and 

international initiatives to do so were under way when the embargo hit. Those 

efforts may now become a casualty of the Dodd-Frank law. 

The Chinese have recently opened a trading post in North Kivu; they 

make cellphones as well, and don't feel the need to pa1ticipate in transparency 

schemes the way Western companies do. And because they know they're the 

only market in town, they arc buying at a steep discount. 

Rarely do local miners, high-level b·aders, mining companies and civil 

society leaders agree on an issue. But in eastern Congo, they were unanimous 

in condemning Dodd-Frank. The Rev. Didier de Failly, a Belgian priest who 

has lived in Congo for 45 years, insistently warned Western advocacy groups of 

the dangers posed by their campaign. He told them it was no defense for them 

to claim that they weren't proposing an embargo, since what they were doing 

would inevitably lead to one. 

But once the advocacy groups succeeded in framing the debate as a 

contest between themselves and greedy corporate interests, no one bothered 

to solicit the opinion of local Congolese. As the leader of a civil-society group, 

Eric Kajemba, asked me, more in confusion than in anger, "If the advocacy 

groups aren't speaking for the people of eastern Congo, whom are they 

speaking for?" 

David Aronson is a freelance journalist and blogger focusing on Central Africa. 

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1119/2015 !low Congfess Devastated Congo~ The N(MI Y(l(k Times 

A version of this op-ed appears in print on August 8, 2011, on page A19 of the New Yoti< edition 

with the headline: How Congress Devastated Congo. 

© 2015 The New Yoti< Times Company 

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99780.207

AN OPEN LETTER 

Dear governments, companies, non-governmental organisations, and other stakeholders implicated in 

efforts of various kinds related to the issue of 'conflict minerals', 

In early 2014, two international industry giants Intel and Apple - issued refined corporate social 

responsibility policies for minerals sourced in the eastern Democratic Republic of the Congo (DRC). The 

announcements followed an unprecedented wave of guidelines, law-making, and initiatives over the past 

few years to 'clean up' the eastern DRC's mining sector, and were met with widespread praise. 

Perhaps the most widely publicised of these efforts is US legislation known as Section 1502 of the DoddFrank Act, which asks all companies registered on the US stock market to reveal their supply chains to the 

Securities and Exchange Commission (SEC) when sourcing minerals from the eastern DRC or 

neighbouring countries. Canada is in the advanced stages of developing similar legislation, and many 

other countries are looking closely at the issue. The European Union has introduced a voluntary conflict 

minerals regulation scheme for all member states, and the United Nations (UN) and Organisation for 

Economic Cooperation and Development (OECD) have developed guidelines on sourcing natural 

resources in high-risk areas such as the eastern DRC. 

These efforts primarily target artisanal (or 'informal') mining in the eastern DRC, due to widespread 

international recognition that so-called conflict minerals (most notably tin, tantalum, tungsten, and gold) 

produced by artisanal mining in this part of the world have helped conflict actors generate revenue to 

finance their operations in the DRC over the past two decades. 

The Situation 

Despite successes of activists in shaping policy, the conflict minerals campaign fundamentally 

misunderstands the relationship between minerals and conflict in the eastern DRC. First, while the 

minerals help perpetuate the conflict, they are not its cause. National and regional political struggles over 

power and influence as well as issues such as access to land and questions of citizenship and identity are 

just some of the more structural drivers of conflict. The ability to exploit and profit from minerals is often a 

means to finance military operations to address these issues, rather than an end in itself. Internal UN 

assessments, for instance, show that only 8% of the DRC's conflicts are linked to minerals, and specific 

motivations vary greatly across the vast array of different armed groups. 

Second, armed groups are not dependent on mineral revenue for their existence. The eastern DRC is a 

fully militariscd economy, in which minerals are just one resource among many that armed groups and 

the national army FARDC- can levy financing from. The M23, until recently the most powerful non-state 

armed group in DRC, never sought physical control over mining activity. 

Moreover, few focal stakeholders have been included in on-going international policy-making, and as a 

result realities on the ground have not always been taken into account. Setting up the required systems 

and procedures to regularly access and audit thousands of artisanal mining sites in isolated and hard-toreach locations spread across an area almost twice the size of France would be a challenge for any 

government. In the eastern DRC, where road infrastructure is poor to non-existent and state capacity 

desperately low, the enormity of the task is hard to overstate. But in demanding that companies prove the 

origin of minerals sourced in the eastern DRC or neighbouring countries before systems able to provide 

such proof have been put in place, conflict minerals activists and resultant legislation - in particular 

Section 1502 of the Dodd-Frank Act inadvertently incentivize buyers on the international market to pull 

out of the region altogether and source their minerals elsewhere. 

Dl$stmlnoted by Witlnlng Sttoteg/es Woshltlgton, on ogtmt of o foreign principal. Additional 1 1o • Is on file with th• Department of Jus~ce. 11 otmalion 
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99780.208

The Result 

As a result, the conflict minerals movement has yet to lead to meaningful improvement on the ground, 

and has had a number of unintended and damaging consequences. Nearly four years after the passing of 

the Dodd-Frank Act, only a small fraction of the hundreds of mining sites in the eastern DRC have been 

reached by traceability or certification efforts. The rest remain beyond the pale, forced into either illegality 

or collapse as certain international buyers have responded to the legislation by going 'Congo-free'. 

This in turn has driven many miners into the margins of legality (for instance, feeding into smuggling 

rackets), where armed actors return through the loopholes of transnational regulation. Others have simply 

lost their jobs, and in areas where mining has ceased, local economies have suffered. To put this in 

context, an estimated eight to ten million people across the country are dependent on artisanal mining 

for their livelihood. Some former miners have returned to subsistence agriculture, but persisting insecurity 

levels leave them in abject poverty facing dire living conditions, in fear of missing harvests due to 

displacement. Others have been prompted to join militias as a means to quick cash in the absence of 

other opportunities; a particularly perverse impact, when one considers the intentions of the movement. 

Alongside the impact on mining communities and local economies, several armed groups have 

responded by turning to different businesses such as trading in charcoal, marijuana, palm oil, soap, or 

consumer goods. Those remaining in the mining sector have largely traded mineral exploitation on site 

for mineral taxation a few steps down the supply chain, operating numerous roadblocks that can bring in 

millions of dollars a year. Others are reported to have sent in family members or civilian allies to run 

business for them on site, while they remain safely at a distance. 

For the few mining sites fortunate enough to be reached by Joint Assessment Teams responsible for 

determining their 'conflict-free' status, these teams have been unable to provide the regular, three-month 

validation visits envisaged in legislation. There is an additional delay of several months following these 

visits before the Congolese Ministry of Mines reviews and approves the assessment at the national level. 

Given the speed at which situations can change in volatile environments, infrequent assessments and 

lengthy delays raise concerns over the accuracy of certification and the credibility of the system. 

More worrying still, multinational corporations such as Apple and Intel are auditing smelters to determine 

the conflict-free status of the minerals they source, and not the mines themselves. As smelters are located 

outside of the DRC and audits are not always conducted by third parties, these processes raise further 

concerns over whether conflict-free certifications reflect production realities. 

By far the most advanced site in terms of producing 'conflict-free' minerals for sale to the international 

market is Kalimbi, a tin mining area home to externally-financed initiatives running an industry-led 

bagging-and-tagging scheme called iTSCi. Yet even here, despite the establishment of a 'closed pipeline' 

from mine to exportation, the mine still suffers from the sporadic influence of armed actors, and miners 

are made to bear the additional costs of 'conflict-free' schemes. This raises further concerns over the 

credibility of the system in place, and its suitability for the scale-up and expansion to other, more remote 

mine sites currently underway. Coupled with slow progress in implementation, the trend towards the 

monopolisation of 'conflict-free' supply chain initiatives, in particular traceability by iTSCi, is economically 

damaging to local populations since it currently excludes and isolates the overwhelming majority of 

mining communities from legal access to international markets. 

The Alternative 

There is broad consensus for the need to clean up the eastern Congo's minerals sector, yet much 

disagreement about the international community's current model for achieving this goal. As such, efforts 

to improve transparency in the eastern DRC's mineral supply chains should continue. Yet a more nuanced 
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99780.209

and holistic approach that takes into account the realities of the eastern DRC's mining sector and the 

complexity of the conflict is needed. To this end, we make the following five recommendations: 

• Improve consultation with government and communities: Congolese government and civil society 

were poorly consulted on Section 1502 of the Dodd-Frank Act prior to its passing, and as a result many 

were unaware of its implications. The few who were consulted were unanimously pro-Dodd-Frank, 

creating additional conflicts on local levels where endorsement and dissent compete. More Congolese 

voices must be listened to, and the local context and power structures taken into account. This would 

ensure greater understanding of the local context and better harmonisation with existing national and 

regional initiatives, such as the International Conference of the Great Lakes Region's (ICGLR) Regional 

Initiative against the Illegal Exploitation of Natural Resources. 

Work towards meaningful reform: The audit process should be designed to improve policies and 

practices rather than to just provide window-dressing. The dominant belief that static oversight and 

validation processes ensure 'conflict-free' mineral trade is misplaced given the volatile security 

situation in most of the eastern DRC. Both mines and smelters should be regularly inspected and the 

time period between inspection and certification minimized. Where this is not feasible, additional 

waivers or similar measures should not be ruled out. 

Create incentives towards better practice: legal frameworks must be supported by real projects on 

the ground that can meet their requirements. If this is not possible - which is clearly still the case 

today, nearly four years after the passing of Dodd-Frank - then transition periods must be extended 

and the lowering of excessively high standards for 'conflict-free' minerals should be considered. 

Similarly, former conflict actors should be incentivised where appropriate to join new 'conflict-free' 

schemes. This may help avoid the eventual subversion or infiltration of the 'clean' system put in place, 

as has been seen to date. 

Promote fair competition: Regulation must be based on competition that allows not only 

international businesses but also Congolese producers to influence (i.e. increase) local price schemes. 

This in turn would encourage a regime that ensures minimum wages which mining cooperatives can 

guarantee to their members based on their increased leverage on the price fluctuation. 

Widen the lens: Root causes of conflict such as land, identity, and political contest in the context of a 

militarized economy, rather than a single focus on minerals, must be considered by advocates seeking 

to reduce conflict violence. Furthermore, efforts to eradicate conflict minerals should not overlook the 

fact that artisanal mining is a key livelihood in the eastern DRC that holds as much potential to help 

steer the region away from conflict as it does to contribute towards it. More supportive measures are 

needed such as those found in the earlier 2009 draft of the US Conflict Minerals Act- that can help 

capture the economic potential of artisanal mining. Finally, other critical challenges such as access to 

credit, technical knowledge, hazardous working conditions, and environmental degradation should not 

be ignored by multinational corporations if they seek to improve business practices and increase 

transparency in their supply chains. 

So far, progress has been made in producing more ethical products for consumers, but stakeholders have 

not yet proceeded to improve the lives of Congolese people, nor address the negative impact current 

'conflict-free' initiatives are having. If the conflict minerals agenda is to lead to positive change on the 

ground, legislation passed by national governments and steps such as those outlined by Apple or Intel 

need to be grounded in a more holistic approach that is better tailored to local realities. Failure to do so 

will continue to seriously limit the ability of conflict minerals initiatives to improve the daily lives of the 

eastern Congolese and their neighbours. Worse, these initiatives will risk contributing to, rather than 

alleviating, the very conflicts they set out to address. 
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99780.210

List of Signatories 

1. Aloys T egera (Director, POLE Institute Goma) 

2. Ann Laudati {Lecturer at the School for Geographical Sciences, University of Bristol) 

3. Ashley Leinweber (Assistant Professor of Political Science, Missouri State University) 

4. Ben Radley (Researcher, International Institute of Social Studies & 'Obama's Law' Producer) 

5. Bonnie Campbell (Professor of Political Science, Universite du Quebec a Montreal) 

6. Christiane Kayser (Independent Analyst & Civil Peace Service-Bread for the World mobile team) 

7. Christoph Vogel (Researcher, University of Zurich & Independent analyst/writer) 

8. Cyprien Birhingingwa (Executive Secretary, COSOC-GL & Coordinator of CENADEP Kivu) 

9. Daniel Rothenberg (Professor of Practice, School of Politics and Global Studies, Arizona State University) 

10. David Rieff (Independent Author and Commentator) 

11. Deo Buuma (Executive Secretary, Action pour Ia Paix et Ia Concorde- APC, Bukavu) 

12. Didier de Failly s.j. (Directeur, Maison de Mines du Kivu, Bukavu) 

13. Dominic Johnson {Africa Editor and Deputy Foreign Editor, die tageszeitung) 

14. Dorothea Hilhorst (Professor of Humanitarian Aid and Reconstruction, Wageningen University) 

15. Emmanuel Shamavu (Director, APRODEPED, Bukavu) 

16. Eric Kajemba (Coordinator, Observatoire Gouvernance et Paix, Bukavu) 

17. Esther Marijnen (Researcher, Institute for European StudiesNrije Universiteit Brussel) 

18. Evariste Mfaume (Executive Director, 'Solidarite des Volontaires pour I'Humanite") 

19. Gabriel Kamundala (Researcher, CEGEMI & Universite Catholique de Bukavu) 

20. Ganza Buroko (Cultural Operator & Coordinator of Yole!Africa, Goma) 

21. Godcfroid Ka Mana (Professor, ULPGL Goma & UEA Bukavu & Universite Kasavubu Boma) 

22. Godefroid Muzalia (Professor, lnstitut Superieur Pedagogique de Bukavu) 

23. Henning Tamm (Postdoctoral Prize Research Fellow, Nuffield College, University of Oxford) 

24. Herbert Weiss (Emeritus Professor of Political Science, City University of New York) 

25. James Smith (Associate Professor of Anthropology, University of California/Davis) 

26. Jeroen Cuvelier (Postdoctoral Researcher, Wageningen University and Ghent University) 

27. John Kanyoni (Independent Consultant and Vice-President of the Congolese Chamber of Mines) 

28. Josaphat Musamba (Assistant Professor, Universite Simon Kimbangu of Bukavu) 

29. Joschka Havenith (Independent Researcher and Consultant, Cologne) 

30. Jose Diemel {Researcher, Special Chair for Humanitarian Aid & Reconstruction, Wageningen University) 

31. Joshua Walker (Postdoctoral Research Fellow, University of the Witwatersrand) 

32. Josue Mukulumanya (President of the South Kivu mining cooperatives board GECOMISKI) 

33. Justine Brabant (Independent Researcher and Journalist) 

34. Juvenal Munubo (Member of Parliament, Democratic Republic of the Congo) 

35. Juvenal Twaibu (Director, Centre lndependant de Recherches et d'Etudes Strategiques au Kivu) 

36. Ken Matthysen (Researcher on artisanal mining in eastern Congo, Antwerp) 

37. Kizito Mushizi (Member of Parliament, Democratic Republic of the Congo) 

38. Koen Vlassenroot (Director, Conflict Research Group & Professor, Ghent University) 

39. Kris Berwouts (Independent Consultant and Author) 

40. Kristof Titeca (Assistant Professor, University of Antwerp) 
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99780.211

41. Laura Seay (Assistant Professor of Government, Colby College) 

42. Ley Uwera (Independent Journalist and Author, Goma) 

43. Loochi Muzaliwa (Programme Coordinator, Life and Peace Institute DRC) 

44. Micheline Mwendike (Activist, on behalf of LUCHA- Lutte pour le Changement/Struggle for Change) 

45. Manuel Wollschlager (Conseiller Technique, ZFD-AGEH in Bukavu) 

46. Milli Lake (Assistant Professor, Arizona State University) 

47. Nicole Eggers (Assistant Professor of African Histooy, Loyola University New Orleans) 

48. Odile Bulabula (Deputy Coordinator, RIO- Network for Organisational Innovation, Bukavu) 

49. Padraic MacOireachtaigh (Regional Advocacy and Communications Officer, Jesuit Refugee Service) 

50. Pamela Faber (Researcher, St. Catherine's College, University of Oxford) 

51. Passy Mubalama (Independent Journalist and Author, Goma) 

52. Paul Muhindo Mulemberi (Member of Parliament, Democratic Republic of the Congo) 

53. Paui-Romain Namegabe (Professor of law, Director of CEGEMI, Universite Catholique de Bukavu) 

54. Paulin Bishakabalya (Director of Humanitarian Assistance and Development Committee, Bukavu) 

55. Peer Schouten (Postdoctoral Researcher, University of Gothenburg) 

56. Phil Clark (Reader in Comparative and International Politics, SOAS I University of London) 

57. Rachel Niehuus (Postdoctoral Researcher at University of California, San Francisco) 

58. Rachel Strohm (Researcher in Political Science, University of Berkeley) 

59. Remy Kasindi (Director, Centre for Research and Strategic Studies in Central Africa, Bukavu) 

60. Rodrigue Rukumbuzi (Coordinator, AGAPE-Hauts Plateaux, Uvira) 

61. Rosebell Kagumire (Independent Consultant and Blogger, Kampala/Addis Ababa) 

62. Salammbo Mulonda Bulambo (Director, PIAP, Bukavu) 

63. Sara Geenen (Postdoctoral Researcher, Institute of Development Policy, Antwerp University) 

64. Sekombi Katondolo (Director, Radio Mutaani, Goma) 

65. Severine Autesserre (Assistant Professor, Barnard College, Columbia University) 

66. Thomas ldolwa T chomba (Consultant and Mining Expert, Goma) 

67. Timothy Makori (Researcher, Department of Anthropology, University of Toronto) 

68. Timothy Raeymaekers (lecturer in Political Geography, University of Zurich) 

69. Yvette Mwanza (President of the Mining Committee, Federation des Entreprises Congolaises North Kivu) 

70. Zacharie Bulakali (Independent Researcher on mining in eastern Congo) 

All the signatories listed express their support to the open letter in its above form but not necessarily approve of 

accompanying opinion pieces and/or explanatory notes, which remain their respective authors' views. 
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I 

11/512015 Rwanda Has Become Wtt!d's Largesl CoHan Expcx-ter. RefX)(ls Kf Press-· KIGALI, Rwanda, Dee. 16, 2014/PRNewswire-USNewswire/--

.:: i• :: :: ...... PRNewsw1re Urll!cctf.Rl\H1t%Un!1 

(http://www.prnewswire.coml) <!~ PRINTTHIS 

Rwanda Has Become World's Largest Coltan Exporter, Reports 

KTPress 

Dec 16, 2014, 08:27 ET from KT Press (http://www.prnewswire.com/newslkt+press) 

KIGALI, Rwanda, Dec. 16, 2014/PRNewswire-USNewswirel-- Rwanda is now the world's single 

largest exporter of tantalum mineral known as coltan and the government says that is only a small 

portion of the country's production capacity. 

In 2013, Rwanda exported 2,466,025kgs of tantalum -accounting for 28% of totai8,807,232Kg of 

tantalum produced globally. Total revenue from the eolian was $134.5M. 

Minerals were exported despite effects of the US Dodd-Frank Wall Street Reform and Consumer 

Protection Act (DFA) that controls the purchase of minerals sourced from the Democratic Republic 

of Congo (DRC) and its 11 neighbours, including Rwanda. 

Countries subjected to DFA law contributed only 23% of global tantalum exports. 

Statistics from the Rwanda's central bank or BNR indicate that in 2013 the country earned 

$226.2M from minerals. 

Dintmlnottd by Winning Stmtegie$ Woshlngto()~ OfJ ogtttt of o /Drtion ptintlpol. Acldib'onol in/ormotiort 

11 on /if~ with the De-portment of Justice. 

http:Jiwww.printthis.clickat¥1ity.com/pl/cpt?expro=&UIIe=Rwanda+Has+Becoole+Wocld'>k.27s+Largest+Coltao+Exp:x!er%2C+Repor!:s+KT+Pressh-+KIGA.,, 113 
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11151'2015 Rwanda Has Become World's Largest Coltan Exporter, Reports KT Press -- KIGALI. Rwanda, Dec. 16, 2014/PRNewswlre-USNewswire/--

Evade lmena, State Minister in Charge of Mining said the mining sector targets $400M from 

1ineral exports by 2017, creating over 600,000 jobs. 

Meanwhile, by October 2014, the country had exported 1 ,931,041kgs of tantalum worth $87.4M. 

The central bank says minerals have fetched $178.1 M in the same period. 

The mining industry celebrated International Mining Day on December 4 in capital Kigali, under the 

theme 'Professional Mining as pillar of growth and sustainable development.' 

The earnings have dropped largely due to the fall in global tantalum prices although volumes are 

expected to rise by end of year. 

Officials at the Rwanda Development Board {ROB) told KT Press that government has 22 new 

orojects mainly in exploration worth $110.5 in investment commitments since 2011. 

Trade minister Francois Kanimba told KT Press that government is engaging banks to provide loan 

facilities for miners to boost exports. "The banks have been waiting for small-scale miners to have 

concession contracts and properly conducted turnover-assessments in order to access loans," he 

said. 

In response to the Dodd-Frank legislation, Rwanda has a Minerals Traceability Program where all 

minerals mined there are tagged from the mine-sites until they are ready to be exported. 

Companies sourcing minerals from Rwanda are forced to export only those that are conflict-free. 

However, the law tias dissuaded potential buyers from purchasing minerals. 

"We can't change this Act, but we have been able to adhere to it," the trade minister said. 

hltp:llwww.Pfintthls.cfickati!ity.eomlptlcpt?cxf)re=&title=Rwanda+Has+Becoole-t-W<rl<f'k27s+largest+Ccltan+Expor!er%2C+Reports+Kf +Press+~-+KIGA ,. 213 
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111512015 Rwancla Has Become Worl<fs Largest Coltan Exporter, Heporls Kl Press-- KIGALI, Rwanda, Dec. 16, 2014/PRNewswire-USNewswire/--

Safari Eria, the Operations-Manager of Wolfram Mining Processing Ltd said, "We had already 

een tagging our minerals ... all our minerals are exported with certificates of origin to ensure 

traceability." 

For Media Enquiries: 

Patrick Bigabo 

KT Press 

Email (http:l/pressreleaseheadlines.com/contact?pid=267804) 

+250788746953 

SOURCE KT Press 

Find this article at: 

htlp:/lwww.prnewswire.com/news-releases/rwanda-has-become-worlds-largest-co!tan-exporter-reports·l<t-press-300010371.html 

[} Check the box to include the fist of links referenced in the article. 

http:llwww.printthis.dickablfity.com/ptlcpt?expire=:&liti~Rwanda+Has+Beoone+Wald%27s+Largest+Coi!an+Exwter%2C+Repats+Kr+Press+--+KIGA... 313 
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Dissemlnoled by WinnlngSirotegie$ Woshington, an ogent of 11 foreign princlpol. Additionollnfomlation 

Is on file with the Deportment of Justice. 

99780.216

This certificate remains the 

property of the Government of 

Rwanda. Any illegal use of it is 

punishable by law. 
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11/5!2015 'Coofilct Minerals' Too Hard To Track, Commerce Oep.:lrtmcn! Says~ 1heCFO Report· WSJ 

September 5, 2014, 5:57 PM ET 

'Conflict Minerals' Too Hard To Track, Commerce 

Department Says 

ByEmiry Chasan 

The U.S. government finally acknowledged Friday it cannot determine which refiners and smelters around 

the world are financially fueling violence In the war-torn Congo region. 

The Commerce Department pub1ished a list of more than 400 sites from Australia to Brazil and Canada, but 

said it "does not have the ability to distinguish" which are being used to fund militia groups, 

Reuters 

Afllsanal gokj miners irllhe Democratic Republic of the Congo 

The department missed its original January 2013 deadline, under the 2010 Dodd-Frank Act, to list "all 

known conflict mineral processing facilities world-wide." In June, the Government Accountability Office 

blasted the department for the delay, which the Commerce Department has blamed on the time required to 

track artisanal miners in eastern Congo that smelt small amounts of these metals, and locating guerrilla 

operations where makeshift smelters process metals to ship overseas. 

The vast majority ofthe sites on the department's list are small operators, although it also includes a 

handful of larger corporations such as U.S.-based Asarco Inc. and Germany's H.C. Starck Group. Many 

of the firms on the list have already been certified as conflict-free. 

The inconclusive report underscores the challenges faced by hundreds of U.S. public companies that also 

had to comply with the rule and file reports on their efforts to discover conflict minerals in their supply 

chains by June 2. 

Companies including Intel Corp. and 8!:l!lli2 Inc. said they spent years and millions of dollars investigating 

hUpJ!blogswsj.comlcfof20t4ft:19!D5.1cooHict·mlnerals·too-hard-!o-!rack~commerce-depa-r!ment-sayshablprintf 1/2 
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11/5/2015 'Confflcl Minerals' Too HardT o Track, Cornmerce Department Says - The CFO Re;xxt- WSJ 

their supply chains to figure out which components might contain gold, tin, tungsten and tantalum from 

mining operations blamed for funding armed militia groups in the Democratic Republic of the Congo. 

The vast majority said they also couldn't be certain, but a dozen companies, including Google Inc., J. Crew 

Group Inc. and Deere & Co., acknowledged their suppliers may have obtained metals from such mines. 

"The Commerce Department is trying to bring clarity to the rule, but as with everything else on this issue, 

only sows more confusion and deprives businesses of certainty," said Tom Quaadman, vice president of 

the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness. "At the end of the day, the 

conflict minerals rule creates the worst outcome-it has not helped lessen the conflicts in the Congo and 

creates economic harm in the U.S." 

Only about 100 smellers have been certified as conflict-free by the Electronic Industry Citizenship 

Coalition, which has been tracking suppliers for some 200 technology companies since 2008. 

"It's been a massive effort," said Julie Schindall, communications director for the trade group, "This whole 

exercise in mapping the smelters has revealed a lack of knowledge about the metals refining industry." 

Gold purchased through the Shanghai Gold Exchange, which includes about 15% to 20% of all gold sold 

world-wide, is also "untraceable," the Commerce Department said, since the SGE doesn't keep records of 

where its gold is sourced. 

Kimberly S. Johnson contributed to this arlic/e. 

Write to Emily Chasan at emily chasan@wsj com. 

Copyright 2015 Dow Jones & Company, Inc. All Rights Reserved 

This oopy is for your pe~nal, non-commercial use only. Distribution and use of this material are governed by our Subwiber Agreement mtd by 

oopyright law. For non-personal use or to order multiple oopies, please oontact Dow Jones Reprlnts at 1-800-843·0008 or visit 

W\VW.djreprlnts.com 

http:/lblog3 .wsj.corn/cfo/2014J09/05!confiict-minerafs-too-hard-to-track ~commerce-depar!ment-says:Jlab/prin!l '212 
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~Tulane V University 

A Critic<ii lAna lysis of the SEC and NAM !economic Impact Models 

, ' 1. and the Ptoposal of a 1rd Model, . 

' : I 

in ',view of the lmplem(mtation of Section'1502 

of the 2010 Dodd-Frank Wall Street Reforrn and Consumer Protection Act i j ' ~ < ' 

~ .• ' ' j ! 

Prepared by Chris Bayer with contributions fran\. Dr, E)ke de 'Buhr (Payson Center/Tulane 

University), in consultation with experts from t~e consulting, IT and auditing community. 

Contact information: 

Chris Bayer 

Tulane University 

cell: + 001 504 428 9062 

email: cbayer@tulane.edu 

October 17,2011 

Dlssemlnoted by WMn1ngStmteoils Wo1hlngton; on oge11t of o foreign prindpol. Addiliol1olln/at'n1fltron 

Is on /ile ~vuh the Dtpcutment of Justic~. 
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Table of Contents 

I. Executive Summary .................................................................................................................. 3 

II. Background .............................................................................................................................. 3 

Ill. Objective of White Paper ......................................................................................................... 6 

IV. Analysis of the SEC Economic Impact Model ......................................................................... 7 

A. Issue #1: Affected companies .............................................................................................. 7 

B. Issue #2: Lack of materiality threshold clause ...................................................................... 8 

C. Issue #3: Recycled/scrap materials ...................................................................................... 9 

D. Issue #4: Indeterminate origin .............................................................................................. 9 

E. Issue #5: Phase-in ............................................................................................................. 10 

F. Issue #6: USDS endorsement of the OECD Guidelines ...................................................... 10 

V. Analysis of the NAM Economic Impact Mode/ ........................................................................ 11 

A. Issue #1: Not all issuers are created equal ......................................................................... 12 

B. Issue #2: Number of 1•• tier suppliers ................................................................................. 12 

C. Issue #3: Cost of performing internal due diligence reform ................................................. 13 

D. Issue #4: Diffusion of solutions and efficiencies ................................................................. 19 

E. Issue #5: Nature, scope and cost of CMR audit... ............................................................... 20 

F. Issue #6: The use of information technology for record keeping ......................................... 22 

VI. A Third Economic Impact Model ........................................................................................... 24 

A. Estimated number of affected companies ........................................................................... 24 

B. Efficiencies, overlap and synergies in the implementation of Section 1502 ........................ 29 

C. Model comparison SEC vs. NAM vs. Third model .............................................................. 31 

D. Internal versus external company costs ............................................................................. 33 

E. Economic costs to issuers versus suppliers ....................................................................... 34 

F. Sunk versus recurring economic costs ............................................................................... 35 

VII. Conclusion ........................................................................................................................... 35 

IX. Definitions ....................•.•...............•..........•.......•.............•.....................................•............... 36 

2 
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I. Executive Summary 

The Democratic Republic of Congo (DRC) holds vast resources of minerals, and many of 

the mines are controlled by parties that have perpetrated severe human rights abuses in 

the region. In an effort to enhance transparency in the minerals supply chain, Section 

1502 of the 201 0 Dodd-Frank Wall Street Reform and Consumer Protection Act 

mandates company disclosure of the mineral origin contained in their products. 

Pursuant to the charge of formulating specific regulation, the Securities and Exchange 

Commission (SEC) is in the process of drafting rules for this provision. A realistic 

economic impact estimate is important as the careful consideration of the most salient 

cost drivers informs the precise formulation of rules, which in turn enables 

implementation. 

Our analysis shows that the published figure of $71.2 million by the SEC underestimates 

the implementation cost, in part because it does not take into account the range of actors 

affected by the statutory law. In light of Section 1502, substantial traceability reforms 

would need to be implemented throughout the supply chain -from the mine to final 

product manufacturing -in order for disclosure to work. 

On the other hand, the NAM estimate of $9-16 billion overstates these costs by inflating 

the supplier number and not taking into account significant overlap in supplier/customer 

relationships, as well as cost efficiencies from existing (and developing) information 

exchange platforms. 

We present a third model focusing on the burden to the affected issuers and their 1st tier 

suppliers estimating that the actual cost to and of implementing the law is $7.93 billion. 

Almost half of the total cost- $3.4 billion - would be met with in-house company 

personnel time, and the rest $4.5 billion -would comprise outflows to 3rd parties for 

consulting, IT systems and audits. Comparing the costs to the issuers vs. the suppliers, 

the bulk of the total costs - $5.1 billion or 65%- would be incurred by the suppliers (the 

group not included in SEC's analysis), while the smaller portion of the total- $2.8 billion 

or 35%- would be carried by the issuers. 

The implementation costs would however be borne by thousands of individual firms in 

lucrative industries such as the industrial, aerospace, healthcare, automotive, chemicals, 

electronics/high tech, retail and jewelry industries. Nevertheless, we regard Section 

1502 as a "major" rule as its effect on the economy will exceed $100 million per year. 

fl. Background 

Due to the linkages between mineral extraction and the Second Congo War which has 

thus far directly and indirectly lead to the deaths of 5.4 million Congolese since 1998,1 a 

1 Robinson, Simon. The Deadliest War In The World. Time Magazine. May 28, 2006. 

3 
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groundswell of support for conflict-free minerals originating from central Africa emerged 

in recent years, largely led by civil society organizations such as the Enough Project, 

Global Witness, Raise Hope for Congo, Conflictminerals.org and Congo Siasa. For 

years, the mineral extraction sector in eastern Congo has been controlled by militia 

groups and foreign and domestic military forces, proceeds flowing into the informal 

market or benefiting neighboring countries rather than effectively translating into revenue 

which could strengthening the Congolese state and allowing it to assert control over its 

rich natural resources and the eastern regions of the country. A catch 22. 

The US Conflict Minerals Act (Section 1502) in the 2010 Dodd-Frank Wall Street Refotm 

and Consumer Protection Act is intended to help put an end to abusive labor practices 

and conflict in the DRC by requiring US registered companies to disclose whether the 

minerals they source originate from the DRC or its neighboring countries. In short, the 

goal of the law is to provide transparency of material origin and allow customers to make 

purchasing decisions based on that information. Moreover, companies in the mineral 

and metal sectors are collectively charged with taking responsible measures that identify 

and respond to risks - and in doing so help mitigate conflict and systemic human rights 

violations in Central Africa. 

The four minerals from DRC mines or adjoining countries defined as "conflict minerals" in 

Section 1502(e )(4) of the Act are cassiterite (tin). columbite-tantalite2 (tantalum) and 

wolframite (tungsten)3 - also referred to as the "3Ts" and gold. The act furthermore 

enables the U.S. Secretary of State to designate any other mineral or its derivatives as 

"conflict minerals" to be financing conflict in the DRC and neighboring countries. 

According to figures and estimations compiled by the Enough Project based on sources 

including the DRC government and the U.S. Geology Survey, the DRC accounts for 

approximately 15-20% of global tantalum ore production, 6-8% of global tin ore 

production, 2-4% of global tungsten ore production, and less than 1% of global gold 

production.4 Thousands of manufacturers- ranging from Fortune 500 companies to 

companies with $10 million in annual sales- in the industrial, aerospace, healthcare, 

automotive, chemicals, electronics/high tech, retail and jewelry industries are consumers 

of these metals, and thus affected by the new law. 

Sponsored by Senators Sam Brownback, Russ Feingold, and Dick Durbin as well as 

Representative McDermott, the intended effect of the legislation is that the public 

disclosure of mineral chain of custody from extraction to production -and the prospect of 

steep fines for noncompliance -would discourage companies from supporting the 

production of "conflict minerals" but rather encourage ethical sourcing. The law however 

----------------····-

http:/lwww.time.com/time/magazine/article/0,9171, 1198921,00.html 2 Commonly referred to as "caftan," a colloquial shorthand for columbite-tantalite, refers to the ore itself 

rather than a refined product. 3 Tungsten is also produced from another mineral (scheelite}, but that ore and the tungsten derived 

therefrom is not within the scope of the law. 4 Enough Project. A Comprehensive Approach to Congo's Conflict Minerals. April 2009. 

http:l/www.enoughproject.org/files/publications/Comprehensive%20Approach%20to%20Congo's%20Confll 

ct%20Minerals.pdf 

4 
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99780.223

does not ban or prohibit the purchase/use of conflict minerals, nor are there any legal 

penalties for purchasing/using conflict minerals.5 There is also no mandate to find or 

evaluate alternative materials, suppliers or sources. 

Recognition for urgently needed action also is expressed by the nation's largest trade 

association, the National Association of Manufacturers (NAM). In the introduction of the 

comments submitted to the SEC, NAM states: "We support the underlying goal of Sec. 

1502 to address the atrocities occurring in the Democratic Republic of Congo (DRC) and 

adjoining countries and are actively working with other stakeholders to help address the 

problem.''6 General Electric (GE) for example, the diversified industrial conglomerate 

ranked by Fortune as the 6th largest company in the U.S., is cognizant of the issue: 

"Recognition of this link between the minerals trade and the financing of armed groups in 

the DRC has moved companies like GE to identify their use of potential conflict minerals 

and find ways to sever the link between these minerals and the armed groups."7 Many 

corporations are consequently in the process of devising - some with the help of experts 

compliance strategies based on the new law. 

Companies however recognize that individual corporate action -in the absence of 

collective action- will not suffice. As Motorola, the co-chair of the Electronics Industry 

Citizenship Coalition (EICC) - Global e-Sustainability Initiative (GeSI), stated: "If the goal 

is to stop the flow of money to illegal armed groups then, like stopping the flow of water 

in a river, the dam must be built all the way across."8 GE agrees, positing that 

"companies with overlapping supply chains have greater influence over their suppliers 

when acting together, enabling them to encourage greater transparency and action."9 

Even the DRC, arguably the biggest stakeholder in the matter, has appealed to the SEC 

to craft regulation that follows due-diligence guidance developed by the United Nations 

and the OECD, and to prevent the rules from causing a "de-facto embargo" on trade 

from the Central African nation.10 

5 Section 1502(c) requires the Secretary of State, in conjunction with USA I D. to develop "a strategy to 

address the linkages between human rights abuses, armed groups, mining of conflict minerals, and 

commercial products," which includes "A description of punitive measures that could be taken against 

individuals or entities whose commercial activities are supporting armed groups and human rights 

violations in the Democratic Republic of the Congo: As yet, no info1111ation has been made available 

concerning the punitive measures. 6 National Association of Manufacturers (NAM). Comments submitted to the SEC. March 2, 2011. 

http:l/www.sec.gov/commentsls?-40-1 Ols7401 0-212.pdf 1 General Electric. Conflict Minerals and the Democratic Republic of Congo: Expanding Supply Chain 

Efforts. August 24, 2011. http:/fwww.gecitizenship.com/conflict-minerals-and-the-democratic-republic-offOngol 

Enough Project. Getting to Conflict Free. December 2010. 

http://www.enoughproject. org/fileslpub!ications!corporate action-i.pdf 9 Ibid. 10 Kavanagh, Michael. Congo Government Asks U.S. to Use OECD Guidance for Conflict-Mineral Rules. 

Bloomberg. July 28, 2011. 

http://www.bloomberg.com/news/20 11-07-28/congo-government-asks-u-s-to-use-oecd-guidance-forconflict-mineral-rules.html 

5 
257 


99780.224

At the heart of the debate is the extent of the economic cost impact and how best to 

structure the regulations such that objectives are met without placing undue burden on 

actors who seek to conform to the law. While the SEC estimates that the cost to the 

affected companies would come to $71.2 million. the National Association of 

Manufacturers (NAM) "believes that the proposed rule is a significant rulemaking and will 

cost U.S. industry between $9-16 billion to implement."11 Part of the reason for this 

discrepancy is the general ambiguity in the current language of Section 1502 - which 

lends itself to a host of interpretations. Perhaps the biggest reason for the discrepancy 

between models is the question how many actors are affected by the new rules. While 

the SEC considers 20% of the 5,994 publicly traded companies will be required to 

implement all aspects of the law- an estimated 1,199 actors - it has not taken into 

consideration the number of privately held and supplier companies affected. NAM on the 

other hand claims that on average there are 2,000 suppliers to each issuertheoretically 5,994 companies and therefore close to 12 million companies could be 

affected.12 As another example, the SEC and NAM are applying differing operational 

definitions of what constitutes relevant due diligence and what constitutes "audits." 

Currently, the SEC is drafting the "rules" for this provision which will clarify how 

companies should concretely implement the law. The challenge is how to mandate in 

favor of principles of transparency and accountability in the value chains that source 

minerals from the Congo and surrounding countries, however without excessively 

burdening the private sector actors and driving smaller enterprises out of business. 

Ill. Objective of White Paper 

On September 26, 2011, faculty members Dr. Elke de Buhr and Dr. Laura Haas at 

Tulane University's Payson Center for International Development were contacted by 

Jessica Simon of Senator Durbin's office with a specific request for help in providing a 

detailed estimate of what it would cost companies to implement the Congo Conflict 

Mineral Act. This request was met by a Tulane team agreeing to prepare this paper. 

At the heart of the debate is how the SEC should calibrate regulation that implements the 

law in a manner consistent with the goals of the legislation without needlessly burdening 

industry and undermining American competitiveness. 

The various possible regulation formulations function as parameters to determine the 

act's economic impact. This paper analyzes and critiques both the SEC and NAM 

economic impact models- as both models contain significant shortcomings- and 

proposes a more accurate 3'd model. By honing in on the main deliverables under DoddFrank, focusing on actual costs, assigning fair valuations, and basing the extrapolation to 

·------~---

11 National Association of Manufacturers (NAM). Comments submitted to the SEC. March 2, 2011. 

http://www.sec.gov/comments/s7-40-10/s74010-212.pdf 12 as for example per NAM's calculation on page 24 of their March 2011 comments to the SEC. 

6 
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99780.225

the macro-level on the best available figures, this model may help shed light on central 

issues at the heart of the discussion and inform the crafting of practicable regulation. 

IV. Analysis of the SEC Economic Impact Model 

A. Issue #1: Affected companies 

SEC estimated that 1,199 companies will require a full Conflict Minerals Report (CMR). 

The method the SEC employed to derive this figure, as explained in its proposed rules, 13 

was to find the amount of tantalum produced by the DRC in comparison to global 

production (15%- 20%), then select the higher figure, 20%, and multiply that by the total 

number of affected issuers, which they stated is 5,994.14 By reasoning that since an 

estimated 20% of all minerals in question originate from the DRC, therefore only 20% of 

companies- 1,199 -would be affected by the new rules, the SEC committed a non- sequitur. For two principal reasons: 

1) Conflict minerals are as omnipresent as the ballpoint pen -and that is not just a 

metaphor. Tungsten, particularly resistant to deforming, is used to manufacture the ball 

in the ballpoint pen. Metals such as tin and tantalum are ubiquitous in products such as 

electronics, medical devices, tools, canned goods, automobiles and jet engines/turbines, 

and many alloys contain only small percentages of minerals in their total composition. 

Specific recipes of various metal powders are turned into an array of products used in 

such things as computer motherboards, capacitors and carbides for example. It is 

therefore much more plausible, as the NAM has stated, that in fact the bulk of the 5,994 

publicly-traded companies will be affected. IPC,15 agreeing with NAM, characterizes the 

SEC figure as based on "a flawed assumption because 1) the minerals supplied by the 

DRC may be distributed such that they account for 20% of the supply for 100% of users, 

and 2} the vast majority of users will be unable to identify the origin of their conflict 

minerals, especially until more viable audit and tracking systems are in place, and 

therefore will need to complete a CMR." IPC concludes that it expects "that nearly 100% 

of affected issuers will need to complete a CMR, especially in the initial years of the 

regulation."16 This is supported by NAM as they pointed out that the proposed regulation 

requires a CMR even for issuers who -after reasonable inquiry- are unable to 

determine the origin of their materials. 17 In short, a more realistic assessment yields that 

the bulk of U.S. based issuers, 5,994 would be required to complete the full CMR- a 

figure which becomes important as it comprises the denominator of affected companies 

with which to calculate the full cost implications. 

13 Fed. Reg. 80948 et. seq. (Dec. 23, 2010) 14 75 Fed. Reg. 80966 15 IPC is an industry association within the electronics industry. !PC also conducted research into the 

economic impact of the proposal on its membership and submitted comments to SEC. 

:~SEC also recognizes that first year implementation costs will be higher. 75. Fed. Reg 80966. 

See NAM comments, p. 25 and 75 Fed. Reg. 80958. 

7 
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99780.226

2) SEC made no estimate of the impact of the rule on suppliers or privately-held 

companies in issuers' supply chains. Even while privately-held companies are not 

subject to SEC's filing requirements or the focus of the current law, they will however be 

requested by their customers - the issuers -to undertake due diligence in order for the 

issuers to provide the information necessary to meet their SEC obligations under the 

conflict minerals law. According to the law firm Dykema Gossett, the CM requirements 

"will have a significant impact on countless U.S. suppliers of automotive, consumer and 

other products that use certain common minerals in their products, including suppliers 

who themselves are not publicly traded companies."18 NAM put it like this in comments 

submitted to the SEC: 'While the new reporting mandate only applies to companies 

required to report to the SEC, we expect these requirements will rapidly be passed 

through the entire supply chain. The requirements will effectively force suppliers not 

subject to SEC reporting to maintain extensive records of their source materials ... " On a 

similar note, IPC's study stated: "privately held companies, which represented two thirds 

of respondents, anticipated being Impacted by the requirements of the rule despite not 

being directly regulated."19 This paper estimates the number of affected suppliers in 

Section V.B. Issue #2. 

B. Issue #2: Lack of materiality threshold clause 

In its proposed rules for conflict minerals, the SEC states that it does not propose "to 

include a materiality threshold for the disclosure or reporting requirements in our 

proposed rules." NAM, in its corresponding comments, however argues that a "de 

minimis standard is not a loophole or exemption, and, if properly designed, it will not 

materially decrease efforts to increase supply chain transparency. Rather, it would allow 

the SEC and issuers to focus on the products containing a significant amount of the 

conflict minerals in a manner that will change supply chain behavior. It thus avoids a 

very high cost and burden associated with tracing miniscule amounts of materials with 

little corresponding effect on ameliorating the DRC-region atrocities."20 We agree. A 

materiality threshold would reduce the number of companies who would unduly be 

burdened to implement programs and incur undue costs, and more appropriately place 

the burden on companies with the largest consumption and so provide an opportunity for 

the biggest cost/benefit. Although such a threshold is not reflected in the language of the 

law, it would be appropriate and beneficial for SEC to establish one, eliminating costs 

and efforts where they are not truly justified. 

Setting a very low de minimus threshold would effectively rule out free-riding - a situation 

which would undermine the efforts of all other companies complying with the law. We 

therefore agree with NAM's fairly reasonable suggestion, "that the conflict minerals must 

trigger a threshold content value of 0.1 percent or greater of the part or component." 

18 Paul M. Laurenza, Sheryl L. Toby and Ronald L. Rose. Conflict Minerals Act will have widespread 

impact on global supply chain. Dykema Gossett PLLC. April27, 2011. 

http://www.lexology.com/library/detail.aspx?q=688bf426-82b4-43a9-b45e-292de61d554a 19 IPC Comments on SEC Proposed Rule on Conflict Minerals, March 2, 2011, p. 20 

~~tp:lhvww.sec.gov/comments/s7 -40-1 Ols7 401 0-131.pcjf 

NAM Comments. p. 20 

8 
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99780.227

However, we do suggest that the term "part or component" be clearly defined, as well as 

whether the 0.1 percent refers to "percent by weight" or "percent by volume." 

C. Issue #3: Recycled/scrap materials 

The SEC proposal formulated amendments such that recycled or scrap minerals would 

be partially exempted from the due diligence and CMR requirements. It reasons that if a 

"conflict mineral was obtained from recycled or scrap minerals, that mineral would be 

considered DRC conflict free. This approach for recycled or scrap minerals is not 

included in the Conflict Minerals Provision, but we believe it is appropriate because such 

conflict minerals would not be implicating the concerns that prompted the enactment of 

this statutory provision."21 

We agree with the SEC. In its comments to the SEC, NAM also emphasized that 

"treating recycled materials as 'conflict full' intrinsically does not make sense.''22 This is 

truly justified as recycled materials are fundamentally not equivalent to newly mined ore 

in the context of the law or as a conflict funding source. Many companies impacted by 

this are scrap companies which are overwhelmingly small, privately-held companies in a 

highly fragmented industry. Industry anticipates that SEC's final regulations will provide 

a substantive exclusion for scrap materials. Although such an exemption is not reflected 

in the language of the statutory law, it would be reasonable and beneficial for SEC to 

establish such an amendment, appropriately eliminating extraneous cost and effort. 

However, we point out that a specific and consistently-applied definition of the term 

"recycled" and "scrap material" is necessary. 

D. Issue #4: Indeterminate origin 

NAM's request for allowing an "indeterminate origin" exception to be in effect over a 

transition period is valid as the necessary documentation with which to determine origin 

may just not exist, especially in the first year of the rule's implementation. The IPC 

survey of companies within the electronics industry found that on average 18% of their 

companies could not determine the origin of their minerals I metals.23 In the absence of 

operational rules for Section 1502, and such rules having yet to be implemented, gaps 

do exist in traceability documentation or chain-of-custody documentation for pertinent 

minerals and metals. Such concerns are furthermore valid in the case of recycled (or 

scrap) material, where oftentimes there is no paper trail. 

While it therefore may be most appropriate to allow such a "indeterminate origin" status 

over an initial transition period, it should however be backed up with a 3rd party audit to 

21 75 Fed. Reg. 80963. 22 NAM Comments. p. 22 23 Results of an fPC Survey on the Impact of U.S. Conflict Minerals Reporting Requirements February 2011 ' 

9 
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verify the veracity of the management system the company relied on to come to the 

determination. A robust oversight mechanism, heavily policed through audits, would 

comprise a disincentive to use it. A $25,000 to $100,000 charge to have an audit 

performed -with the uncertainty of what the audit determination would be is not a 

prospect any company would take lightly. In short, an "indeterminate origin" provision in 

effect only for a transitional period which, if invoked by a company would incur an audit, 

would not constitute a loophole. 

E. Issue #5: Phase-in 

The provision of a phase-in period for the rules, to be finalized by the SEC within 2011, 

makes sense for multiple reasons. From a management and disclosure perspective, 

considerable time and effort will be required to establish, on a company level, the 

management systems, render them operational, and commission the audits and prepare 

the related reports and SEC forms. NAM argues that transition rules apply for an 

implementation period which "is needed for the disclosure requirements, for inventory 

already at smelters, for products made from existing inventories, and for acquisitions."24 

We agree with NAM thai at least a year would be needed before issuers may be able to 

provide conflict minerals disclosures. Conversely, if the entire industry was jolted by the 

rules going into effect immediately without a transition phase, and the required time to 

build systems and align procedures was not permitted, the de facto embargo against the 

minerals of the Central African region, against which NAM cautions, could become 

entrenched. Since April 2011, owing to the decision of EICC companies to stop sourcing 

from the DRC if the material is not fully traceable, a de facto embargo on Congolesesources minerals is currently in effect. 

F. Issue #6: USDS endorsement of the OECD Guidelines 

Section 1502 instructs the SEC, in consultation with the Department of State (USDS), to 

promulgate regulations requiring, in part, certain companies to submit annually a 

description of the measures taken to exercise due diligence on the source and chain of 

custody of the four "conflict minerals." As of July 2011, the U.S. State Department 

endorsed The OECD Due Diligence Guidance for Responsible Supply Chains of 

Minerals from Conflict-Affected and High-Risk Areas- a guide which provides 

recommendations for global responsible supply chains of minerals and helps companies 

to respect human rights and avoid contributing to conflict through their mineral or metal 

purchasing decisions and practices. "The Department specifically endorses the guidance 

issued by the Organization for Economic Cooperation and Development (OECD) and 

encourages companies to draw upon this guidance as they establish their due diligence 

practices. We encourage companies, whether or not they are subject to the Section 1502 

disclosure requirement, that are within the supply chain of these minerals to exercise due 

diligence based on the OECD guidance and framework as a means of responding to 

24 NAM Comments. p. 15 

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requests from subject suppliers and customers. " 25 Furthermore, according to IPC, "it is 

anticipated that the U.S. Securities and Exchange Commission (SEC) may base 

regulatory compliance with the Dodd-Frank conflict minerals laws on the OECD 

guidance." 

While the OECD guidelines advance the concept of progressive due diligence principles 

and improvement of mining circumstances in the central African region, some aspects of 

the scope of the due diligence process and audits have been critiqued as presenting 

significant issues and potential inconsistencies with SEC auditor standards. 26 The "final" 

OECD guidelines (issued by the Organization as Final in May 2011 ), are now being 

tested by 50 companies globally in a real world setting, in participation with the fPC and 

six IPC-member companies, through a "pilot evaluation program to review and refine the 

(OECD) due diligence guidance for conflict minerals."27 This pilot, sponsored by the 

OECD itself, is considered by some to be an acknowledgement by the Organization that 

the framework at this stage remains more theoretical than pragmatic. 28 This pilot study 

is therefore vitally important for all industries impacted by CM rules: having streamlined 

and actionable due diligence rules is vital for the prospect of their being implemented. 

However, the timing of OECD's guidelines testing -scheduled to be completed in June 

2012 (which arguably should have been completed prior to the Organization's issuance 

of their "final" version)- is not aligned with the SEC's final rulemaking schedule.29 

Precisely because the SEC and USDS have both directly stated their support for, and 

clear intention to rely upon, the OECD Guidelines, we caution that without careful 

consideration of consistency with US standards, liabilities and deadlines, compliance 

risks and additional latent penalties/costs may be created for industry. 

V. Analysis of the NAM Economic Impact Model 

As stated in its comments to the SEC, "NAM believes that the proposed rule is a 

significant rulemaking and will cost U.S. industry between $9-16 billion to implement."30 

25 USDS. Statement Concerning Implementation of Section 1502 of the Dodd-Frank Legislation 

Concerning Conflict Minerals Due Diligence. July 15, 2011. 

http://www.state.gov/e/eeb/diamonds/docs/168632.htm 

""NAM Comments, p. 14; The Elm Consulting Group International LLC, OECD to SEC: Make us the 

Conflict Minerals Due Diligence/Audit Standard for the US. July 7, 2011. 

http:l/elmconsultinggroup.wordpress.com/2011/07/07/oecd-to-sec-make-us-the-conflict-minerals-duediligenceaudit-standard-for-the-us/ 

21 I PC. /PC Invited to Participate in Pilot Evaluation of OECD Conflict Minerals Due Diligence Guide - Six 

Member Companies Join Pilot Implementation. September 2, 2011. 

http:/lwww.ipc.ora/ContentPage.aspx?pageid-JPC-Invited-to-Participate-in-Pilot-Evaluation-of-OECDConflict-Minerals-Due-Diligence-Guide 

28 The Elm Consulting Group International LLC, OECD Backs Up A Step on Conflict Minerals Guidance. 

September 8, 2011. http://elmconsultinggroup.wordpress.cgml2011109/08/oecd-backs-up-a-step/ 

::The first meeting by OECD to discuss the status of the pilot is scheduled for late November 2011. 

NAM Comments, p. 2 

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To determine whether this figure comprises a fair estimate, this paper will itemize the 

primary cost drivers and establish whether the cost per unit estimate is reasonable. 

A. Issue #1: Not all issuers are created equal 

While NAM acknowledges throughout their comments that companies of different sizes 

will be impacted by the rule, their economic impact analysis did little to identify the 

differences. To be fair, neither did SEC. As neither SEC nor NAM provided information 

or guidance on important statistics related to the 5,994 issuers, we refer to the 2011 IPC 

survey of the impact of the rule on their membership, which was reportedly "balanced in 

terms of representation by companies of various sizes based on annual sales." The 

survey sample was comprised of 32% small companies (under $10 million in safes), 40% 

medium-sized companies (in the $10 million to $99 million range), and 28% large 

companies (more than $100 million in sales). Therefore, the following assumptions and 

estimates are used throughout this paper relative to the 5,994 potentially impacted 

issuers: 

• We consider annual revenues of $100 million as the threshold value between 

"small" and "large" companies. 

• Using that revenue threshold -and in the absence of any other authoritative, 

relevant and credible information -we accept the IPC study benchmarks of 72% 

small/medium companies and 28% large companies.31 

B. Issue #2: Number of 1st tier suppliers 

A central issue in the discussion of economic impact is the number of suppliers to every 

issuer. Using NAM's estimate of an average 2,000 direct (or "1 51 tier") suppliers to each 

issuer, of which there are 5,994, the total number of suppliers comes to 12,000,000. The 

question that arises at this point: is 12 million a realistic estimate of the number of 1st tier 

suppliers furnishing 5,994 issuers with 3T and gold? 

NAM's attempt at developing 1s' tier supplier estimates is laudable, but misses three 

critical factors: 

1. Suppler overlap/mutualitv: A supplier is almost certain to have multiple customers 

that are issuers, therefore the issuer/supplier connectivity is more complex than a 

simple 1-to-1 relationship. The 12 million figured implied by the NAM calculation 

may be reflective of the total number of business relationships (i.e., material 

supply contracts), but we argue that is different from the number of unique 

businesses that must deploy conflict minerals programs. A supplier with multiple 

customers will not have to expend 1 00% of CM program development costs 

31 Results of an IPC Survey on the Impact of U.S. Conflict Minerals Reporting Requirements, February 2011 p. 3 

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repetitively for each of its customers as implied by NAM's straightforward 

multiplication calculation. This concept is explained below in detail. 

2. Exclusion of suppliers that do not provide CM materials. parts or components: 

NAM's estimates assume that 100% of an issuer's 1st tier suppliers will be 

required to "make substantial changes to their corporate compliance policies and 

supply chain operating procedures."32 However, such changes are, in reality, only 

required for suppliers who provide materials, parts or components that are 

identified as having 3T and gold. 33 Suppliers of such things as services, 

paper/wood products, fossil fuels, many polymers/plastics/gasses/chemicals and 

raw textiles (to name but a few) will not need to change their corporate 

management systems to address the CM requirements. 

3. Smaller companies have fewer suppliers: NAM's estimate of 2,000 1st tier 

suppliers is not likely to be representative of small companies. We believe that a 

better estimation of the supplier-customer ratio for small companies is the IPC 

2011 survey of its members in the electronics supply chain. This is explained in 

more detail below. 

C. Issue #3: Cost of performing internal due diligence reform 

In order to evaluate NAM's analysis on due diligence efforts, a framework is necessary. 

In its 2011 Guidelines, OECD defines due diligence as "as the process through which 

enterprises can identify, prevent, mitigate and account for how they address their actual 

and potential adverse impacts as an integral part of business decision-making and risk 

management systems."3 OECD's framework for risk-based due diligence in the conflict 

mineral supply chain involves five principal steps: 35 

• Establish strong company management systems 

• Identify and assess risks in the supply chain 

• Design and implement a strategy to respond to identified risks 

• Carry out independent third-party audit 

• Report on supply chain due diligence 

The discussion in this section addresses the first three steps within the full due diligence 

process concerning company-specific policies and procedures that are carried out 

32 NAM Comments, p. 24 33 Non CM suppliers may have to undertake some level of minimal effort to affirmatively prove the absence 

of CM in the items they manufacture/selL However. once this is proven, those suppliers will not have to 

implement internal management systems specific to non-existent CM. 34 OECD. OECD Guidelines for Multinational Enterprises. 25 May 2011. 

http:/!www.oecd.org/dataoecd/43/29/48004323.pdf 

35 OECD. Recommendation of the Council on Due Diligence Guidance for Responsible Supply Chains of 

Minerals from Conflict-Affected and High-Risk Areas. 25 May 2011. C/MIN(2011 )12/FINAL. 

http://acts.oecd.org/lnstrumenls!ShowlnstrumentView.aspx?lnstrumen!ID-268&1nstrumen!PID-272&Lang 

=en&Book=False 

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internally within a company. The audit and reporting steps are discussed in a separate 

section within this analysis. 

NAM estimates the cost of changing the corporate compliance policies and supply chain 

operating procedures to be $1.2 billion, which was calculated as "2 hours x $50 per hour 

x 2,000 suppliers x 5,994 companies." NAM affirms that within a CM due diligence 

process, "reliable due diligence" must go hand-in-hand with a "commercially practicable 

effort" with regard to the expected and actual level of effort to be undertaken.36 Yet 

NAM's estimate for the issuing companies' that "at a minimum that two hours of 

employee time at $50 per hour will be required to change legal obligations to reflect a 

company's new due diligence" is, in our estimation, understated for the following 

reasons: 

1. Incorrect level of effort: two hours to review and revise of wide range of internal 

policies- from the supplier code of conduct to business practices, from contingency 

planning to quality assurance- is not enough time. Based on information available from 

various experts in the industry (as well as our own experiences in other sectors/studies), 

we believe that if the matter were approached from a management system perspective, 

this activity involves multiple tasks, including: 

• initial reviews of the current policies/procedures/controls (to locate where/which 

policies, departments and functions will be impacted);37 

• developing a gap analysis and compliance plan (identifying what specific 

modifications are needed for the affected policies/procedures/controls); 

• developing draft revised policies/procedures/controls; 

• conducting initial testing on those revised policies/procedures/controls to 

determine if they function correctly in a desktop test setting; and 

• implementing them as final, including training of personnel as well as 

communication to suppliers. 

The effort we envision may take multiple people several weeks for a large company with 

complex business management systems and controls. For small companies it may take 

one person a full week {40 hours). For large companies affected, we estimate an 

average of 100 man-hours would be required. In addition, this process may be facilitated 

by 3rd party, which would entail Consultancy fees. We estimate consultancy fees at 

$200 per hour38 and expect that large companies will employ consultants less than small 

companies will. We estimate that approximately one-quarter of the total man-hours for 

small companies will involve consultants, while that number may be 10% for large 

36 NAM Comments, p. 13-14 37 In our view, this step includes the identification, review and analysis of internal risk assessment 

programs for vendors and related information. We believe it is appropriate to include that element within 

an overall management system review rather than breaking it out as a separate step as NAM suggests. 38 SEC used a cost of $400 per hour which generally reflects the rates for Big 4 accounting firms. Although 

we anticipate that some of this work will be performed by the Big 4 accounting firms, a substantial portion 

of required consulting work will also be carried out by lower cost environmental and sustainability 

consulting firms hired for these projects. We thus estimate that the average consultancy charge would be 

$200. 

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companies. These estimates are aligned with SEC's estimates for consultancy support 

for the 1 0-K, 20-F and 40-F forms. 39 

2. Supplier overlap I mutuality: NAM did not address the concept of supplier overlap I 

mutuality, accounting for the fact that issuers have some (and sometimes many) 

suppliers in common. We believe there is substantial overlap/mutuality in the relevant 

business relationships; therefore, once a supplier modifies their management systems to 

satisfy the CM requirements for one customer, that supplier will not need to wholly 

replicate those CM program development efforts/costs again for other customers (see 

Figure 1 below). Changes to the management system will most likely be addressed at 

the supplier's corporate or divisional level. Once established, that management system 

framework functions the same to serve the needs of all issuers who are that supplier's 

customer.40 This creates "overlap" or "mutuality" cost efficiencies not recognized in the 

NAM model. NAM's methodology multiplying 5,994 by 2,000 incorrectly assumes that 

separate/unique policy/procedure changes will be required on the part of each supplier to 

support each individual issuer. That calculus is more determinative of the number of 

contractual supplier relationships, a concept that is different from the number of unique 

businesses within the supply chain. We recognize there may be slight differences in 

information demands on suppliers by various issuers, but we believe those differences 

will be minor and 100% cost redundancy is not justified. 

Figure 1: 

FIGURE 1: Areas of shape overlap illuslrate where customers have relationships with multiple suppliers, 

therefore creating supplier overlap/mutuafi/y. 

The mineral smelters for example represent obvious choke points at which to 

differentiate chain of custody tracking and internal controls over the mineral supply chain. 

CM users can take advantage of the smelters' position in the supply chain. If smelters 

39 75 Ref. Reg. 80966. 0 

This ~as been proven over the past 20 years for management systems developed by companies under 

mternal!onal standards (ISO) for quality programs (IS09001), environmental management (IS014001), 

occupational health and safety (OHSAS18001) and more recently by the management systems 

implemented for the EU RoHS compliance. 

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are verified as not having or purchasing DRC-sourced materials that contribute to 

conflict, that information can be distributed up the smelter's supply chain, which is the 

intent and theory of the EICC Conflict Free Smelter (CFS) program. 41 Furthermore, the 

CFS information is made available to other companies and the general public for free, 

which eliminates costs at other points in the supply chain. There are currently 19 

tantalum smelters, 45 Tin smelters, 13 Tungsten smelters and 61 Gold smelters that 

have enrolled to participate in the CFS program.42 

3. Not a// 1st tier suppliers require CM management systems: CM management 

programs are only required for suppliers dealing in materials, parts or components that 

contain 3T or gold. Many suppliers in each tier furnish products unrelated to minerals 

(e.g., service vendors, suppliers of paper products, fossil fuels, and raw textiles to name 

but a few). As only a portion of the NAM-estimated 2,000 1st tier suppliers fall under the 

mineral/ metal category, one must therefore employ a correction factor take into account 

only those suppliers with relevant materials/products. NAM did not however provide data 

on what percentage that may be. Therefore, in the absence of other credible, relevant 

and authoritative data, we rely on data from the lPG study, 43 summarized in Table 1 

below: 

Table 1· 

Percentage of supply Percentage of supply Percentage of supply 

base known to NOT base known to contain base with unknown 

Respondent Industry contain the metals the metals status 

Electronic Manufacturing 24 38 38 

Services {EMS) 

Printed Circuit Board 85 7 8 

(PCB) Manufacturers 

Materials Industry 49 51 0 

Equipment Industry 27 47 26 

Suppliers 

Average 46.25 35.75 18 

Given that SEC's proposed rules requires the same level of effort for unknown sources 

as for DRC-source materials, we combined the percentages in the last two columns to 

41 The most recent update of the CFS list {May31, 2011)indicates only 3 companies (limited to tantalum} 

have been cleared as "compliant" by EICC. The CFS Program Status Update 

(http://www.conflictfreesmelter.org/CFSandDueDiligenceProgramStatusUpdate.hlm) states that as of 

September 30, 2011, 12 tantalum companies have been assessed, and only 6 have been deemed 

"compliant". As of October 15, 2011, there are no compliant smelters for tin, tungsten or gold. 

http://www.conflictfreesmelter.org/cfshome,htm 

42 EICC-GeSI. CFS and Due Diligence Program Status Update. September 30, 2011. 

http://www.conflictfreesmelter.org/CFSandDueDiligenceProgramStatusUpdate.htm 

43 Results of an IPC Survey on the Impact of U.S. Conflict Minerals Reporting Requirements, February 

2011 p. 5-6 

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obtain an estimated percent 53% (35% + 18%) of suppliers that deal in minerals and 

metals that would be subject to CM requirements. Therefore, we estimate that only 53% 

of the NAM-estimated 2,000 1st tier suppliers (1 ,060) provide materials, parts or 

components that contain 3T or gold and would thus be subject to CM management 

program efforts/costs. However, for complete clarity, it is our opinion that this is actually 

the number of material supply contracts involved, not the number of unique businesses. 

4. Many issuers have fewer 1•1 tier suppliers: NAM's estimate of 2,000 1st tier suppliers 

(along with our corrected estimate of 1,060 material supply contracts) is not likely 

representative of small companies as we have defined that term. We believe that a 

better estimation of the supplier -customer ratio for small companies is the IPC 2011 

survey of its members in the electronics supply chain. Respondents in the IPC survey 

had a median of 163 direct suppliers. 44 As with large issuer suppliers, only a portion of 

the 163 direct suppliers deal in CM materials, parts and components. Applying the same 

factor as above (53%), the estimated number of 1st tier suppliers who (a) serve small 

issuers and (b) are expected to need CM management program efforts/costs is 86. 

Again, we clarify our opinion is that this is actually the number of material supply 

contracts involved, not the number of unique businesses. 

Issuers: 

Using the definition of small and large stipulated in Section V.A. Issue #1, the 

calculations below are bifurcated into 72% small issuers (using 40 hours of effort) and 

28% large issuers (using 100 hours of effort). To reiterate other assumptions, we believe 

external consulting will be used for 25% of the labor for small companies, 10% for large 

companies, and a billing rate of $200 per hour based on the variety of consultancies that 

will be hired. 

i. Internal (small companies): 

5,994 issuers x 72% x (40 man-hours x 75% of total work load) x $50/hr = $6,473,520 

(internal labor costs) 

ii. Internal (large companies): 

5,994 issuers x 28% x (100 man-hours x 90% of total work load) x $50/hr = $7,552,440 

(internal labor costs) 

iii. Consultant (small companies): 

5,994 issuers x 72% x ( 40 man-hours x 25% of total work load) x $200/hr = $8,631,360 

(consultant costs} 

iv. Consultant (large companies): 

5,994 issuers x 28% x (1 00 man-hours x 10% of total work load) x $200/hr = $3,356,640 

(consultant costs} 

Thus, the total estimated cost for 5,994 issuers is $26,013,960. 

44 IPC Comments on SEC Proposed Rule on Conflict Minerals, March 2, 2011, p. 20 

http://\o\MIW.sec. gov/comments/s 7-40-1 0/s 7 401 0-131.pdf 

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Suppliers: 

To determine the additional impact on the supplier base to those 5,994 issuers, we 

employ a supplier-issuer overlap factor of 60%. This factor attempts to differentiate -

and correct for- the number of estimated material supply contracts within the scope 

versus the number of unique businesses impacted. A 60% overlap factor means that the 

efforts are reduced by 60%, and only 40% of the effort/cost is required. Since NAM, 

SEC and lPG did not provide data on the amount of supplier overlap/mutuality, we based 

on our estimation that in general there is likely to be greater than a 50% customer 

overlap/mutuality throughout the supply chain, we chose 60% as a conservative overlap 

factor. 

We furthermore factor in the size of the company employing the same benchmarks for 

"small" and "large" companies used for issuers as stipulated in Section V.A. Issue# 1 -

an important variable not taken into account in the SEC and NAM models. The 

calculations below are bifurcated into 72% small companies (using 40 hours of effort) 

and 28% large companies (using 100 hours of effort). 

In order to estimate the number of suppliers, we multiply the issuers by the company size 

factor (large or small), and multiply the number of relevant 1st tier supplier contracts by 

the overlap factor.45 Our estimate of total suppliers is 860,066, comprised of 148,459 

small company and 711,607 big company suppliers. 

The calculation estimating the cost of strengthening internal management systems in 

view of performing due diligence is therefore: 

i. Internal (suppliers that are small companies): 

Suppliers (small companies)= (5,994 issuers x 72%) x (86 relevant 1st tier 

supplier contracts x .4 overlap factor)= 148,459 

Internal labor costs= 148,459 suppliers (small companies) x (40 man-hours x 

75% of total work load) x $50/hr = $222,688,500 

ii. Internal (suppliers that are large companies): 

Suppliers (large companies)= (5,994 issuers x 28%) x (1060 relevant 151 tier 

supplier contracts x .4 overlap factor) = 711 ,607 

Internal labor costs = 711,607 suppliers (large companies) x (100 man-hours x 

90% of total work load) x $50/hr = $3,202,231,500 

iii. Consultant (for suppliers that are small companies): 

Consultant costs= 148,459 suppliers (small companies) x (40 man-hours x 25% 

of total work load) x $200/hr = $296,918,000 

iv. Consultant (for suppliers that are large companies): 

45 A 60% overlap factor converts to 40% in the mathematical equation. The concept of "overlap" reduces 

the number of companies subject to the requirements by 60%, leaving the remaining 40% of the 

companies subject to the requirements (100%- 60% = 40%, or 0.40). 

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Consultant costs= 711,607 suppliers (large companies) x (100 man-hours x 10% 

of total work load) x $200/hr = $1,423,214,000 

Thus, the estimated total cost to suppliers is $5.14 billion ($5, 145,052,000). The 

estimated grand total amount for issuers and suppliers is $5.17 billion ($5, 171 ,065,960). 

D. Issue #4: Diffusion of solutions and efficiencies 

NAM does not recognize or anticipate that common solutions will be developed, migrated 

across multiple companies/industries and create cost efficiencies. Some of these 

solutions that already exist or (in advanced development) include EICC-GeSI CFS 

audits, EICC Supplier Information templates, common cross-industry product content 

information platforms and consulting firms expertise/tools applied across their client 

bases. In contrast, NAM's numbers reflect an assumption that each individual company 

must reinvent the wheel in isolation from other existing or developing solutions. 

As discussed above, one assumption underlying most of NAM's calculation is that there 

is always an exclusive and Ho-1 relationship between each issuer and each supplier, 

which is unfounded.46 Rather than reinventing the wheel at every link in the supply chain 

-and therefore repeatedly expending 100% of the costs for developing that CMR and 

supporting information - a more pertinent metaphor is the Microsoft model. Once the 

product (the CM information) has been produced, it can be replicated at little to no cost 

(and is still valid for other links in the supply chain). Work performed once can be 

diffused to multiple customers who request the same type/scope of conflict minerals 

information (assuming reasonable consistency in the effort scope and information 

outputs). With CM information completed, a supplier with only one customer gains no 

efficiencies in cost or labor- however, if that supplier has many customers, the efficiency 

gains are significant. Indeed, the supplier-issuer relationship is in many cases complex, 

and in most cases the issuer's supply chain is not wholly unique. Nevertheless, multiple 

issuers will almost certainly ultimately receive minerals from the same ore refinery. In 

other words, once the smelter has developed its CM program, those costs are not 

repeated for each individual customer conducting business with that smelter, and 

likewise for other layers in the supply chain. The very structure of the mineral supply 

chain thus allows for the creation of labor and cost efficiencies due to mutuality of 

suppliers -a significant efficiency factor not recognized by NAM. 

This efficiency gain however assumes that (1) credible, consistent and validated 

information rolls up to the CMR and SEC filings and (2) there is a reasonable alignment 

between the supplier's available information and the information needed by its 

customers. The more exclusive the supplier-customer relationship the fewer the 

customers among which the CM program cost/efforts may be spread. The less 

46 In reality, we believe there is substantial overlap/mutuality in customer relationships; therefore, once a 

supplier satisfies the CM requirements for one customer. that supplier will not need to wholly replicate their 

CM program development efforts/costs for other customers. This creates ·overlap" or "mutuality" cost 

efficiencies that are not recognized in the NAM model. 

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exclusive, the more customers there are, the more pertinent the Microsoft metaphor. 

Thus, mutuality at certain points in the material flow, e.g. the smelting level, creates 

overlap which translates into effort reduction and cost efficiency. 

E. Issue #5: Nature, scope and cost of CMR audit 

The nature and scope of the audit, while a principle cost factor determinant, has not yet 

been clearly defined by the SEC. Neither the law nor the SEC's proposal specifies the 

requirements for the scope or execution of a due diligence process for the Conflict 

Minerals Report or the related audit. Instead, SEC has stated that it would be 

inappropriate for them to prescribe any specific guidance on the due diligence efforts.47 

This allows companies/industries to develop a framework reflecting their own unique 

circumstances, products and supply chain. However, the scope of the effort and the 

information relied upon must be specifically described in the Report."48 

Consequently, interpretations vary of what constitutes a "due diligence process" or the 

related "audit." If one were to follow the OECD Guidance, mineral traceability audits and 

chain of custody audits would be required as well along the supply chain. The variability 

in defining the audit scope thus also accounts for differing implementation cost 

estimations. 

Due diligence not only involves company-led management system development and 

implementation, the CMR to be submitted to the SEC must contain a certified audit which 

"shall constitute a critical component of due diligence in establishing the source and 

chain of custody of such minerals.''49 As a part of the due diligence requirement, NAM 

estimates that 75% of issuers (4,500) would have to conduct a CMR audit. 5° NAM goes 

on to posit that suppliers will "be asked to use the same diligence as issuers," which 

includes audits, 5

1 and continues by estimating that this audit mandate will impact 20% of 

the nation's 278,000 small companies (55,600). At the same time, using other figures 

provided NAM, the collective number of material supply contracts potentially subject to 

audits under their scenario could be 12 million (2,000 x 5,995 11,990,000). 

Yet there is no requirement in the rule or law that suppliers be audited- only the issuers 

who are subject to the regulations must conduct audits of their CMRs.52 Suppliers will be 

subject to auditing only if they are (a) themselves also an issuer, or (b) required to do so 

by their customers. The burden and cost for such audits are voluntary in the context of 

the regulation and the impetus for such audits is likely to be reduced if issuers are 

47 75 Fed. Reg 80961. 48 75 Fed. Reg. 80958, 80972- 80975 49 Exchange Act Section 13(p)(1)(B). 

><> Page 25 of the NAM reports states: 'We conservatively estimate that 75 percent, or 4,500, of the nearly 

6,000 affected issuers will have to submit a CMR." 51 NAM comments, p. 26. 52 See Section 1502(b) and the preamble discussion at 75 Fed. Reg 80958. Further, the OECD Guidance 

only discusses audits of smelters - not other points in the supply chain, not even from the mine to the 

smelter. 

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allowed to use "reasonably reliable representations" from suppliers, a concept that is 

both included in SEC's proposal53 and supported by NAM. Therefore, because supplier 

audits are outside the regulation and the driver of/need for such audits is likely to be 

reduced by "reasonably reliable representations" from suppliers, we are excluding those 

from our analysis and we focus on issuers only. 

By applying the small/large company ratios to the NAM estimate of 4,500 issuers: 

• 4500 x 72% "' 3240 small company issuers required to develop/audit a CMR; 

• 4500 x 28% "' 1260 large company issuers required to develop/audit a CMR. 

As specified in Section 1502(b) of the law, the audits undertaken by issuers must be 

conducted in accordance with SEC audit/auditor standards 54 and focus on the existence, 

functionality and controls of the issuers' CM management processes that are included in 

the CMR (i.e., a management system audit). It is critical to understand that a 

management system audit reviews and assesses how (or if) the audited entity:55 

• establishes, maintains and communicates standards/expectations of behaviors; 

• obtains, reviews and verifies relevant information; 

• establishes and implements related control mechanisms; 

• uses information in its decision-making; 

• documents, tracks and reports data/decisions; and 

• conducts follow-up on problems, concerns or issues that are identified within their 

business processes, audits or from external parties. 

In performing such an audit- and in establishing expectations for the efforts and results 

-certain key factors must be considered: 

• As with other SEC audit scopes, the CMR audits wlll provide "credible and/or 

reasonable assurance"- not absolute assurance, certainty or guarantees; 

• As in any audit scope/process, limitations will exist in the quality and quantity of 

data; 

• The instability in DRC and the region sets the stage for rapid and unforeseen 

changes in location/scope of conflict areas. While a mine or transportation route 

may be identified as "conflict free" at a point in time during supplier due diligence 

and the CMR development, supply chain reviews and audit process, it isJ>ossible 

for the status to change subsequent to the due diligence/CMR activities; 

• CM management systems and controls will be tested within the audit process, 

which means that a sampling of the technical supporting data will be assessed. 

Sample size determination factors and methodologies are incorporated in SEC 

audit standards; in many cases, the sample size will be less than 100%. 

53 75 Fed. Reg 80957. 54 Such as Government Auditing Standards: July 2007 Revision (GA0-07-731G), commonly referred to as 

the "Yellow Book." This publication is referenced in SEC's proposal as the appropriate standard 

recommended by the GAO (see Footnote 101 at 75 Fed. Reg 80958). The Yellow Book incorporates 

many audiUauditor standards of the American Institute of Certified Public Accountants (AICPA). 55 This is the general framework used for audits conducted under Sarbanes-Oxley, certain other financial 

~uditing processes and certification systems such as IS09001, IS014001 and OHSAS18001. 

NAM concurs. See NAM Comments, p.14 

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To summarize, a CMR audit is not intended to confirm the technical accuracy of the 

material content, product certifications, supply chain linkages or other supporting data. 

Instead, the CMR audit will determine what, if any, internal processes exist to obtain 

appropriate technical information on product content, the supply chain flow, and how that 

information is assessed, used and reported by the audited company. 57 

Given the above, the scope of CMR audits is highly dependent on the complexity of an 

issuer's management systems and less dependent on the number of suppliers within the 

supply chain. We assume that larger companies have more complex management 

systems than smaller companies58 and agree that NAM's unit cost estimates of $25,000 

(small company) and $100,000 (large company) are reasonable. Therefore, our audit 

cost estimates are as follows: 

Small issuers: 

• 3240 x $25,000 per CMR audit= $81,000,000 

Large issuers: 

• 1260 x $100,000 per CMR audit= $126,000,000 

Thus, the total cost for CMR audits of small and large issuers will come to $207,000,000 

per year as issuers are to file the CMR including a certified audit with the SEC on an 

annual basis. 

F. Issue #6: The use of information technology for record keeping 

Apart from preparing the policies, procedures and controls, a significant level of effort is 

further required to implement the program at the issuer and supplier level. According to 

IHS,59 as seen in the electronics sector faced with the EU-RoHS directive; and the 

chemical, process and manufacturing sectors for the EU-REACH regulation, it takes time 

to adopt and develop standards {what information, in what format, updated in what 

frequency, communicated via what mechanism, etc.). Even when standards are in 

place, companies commonly are faced with the "diversity of data" problem. Obtaining 

the appropriate content from suppliers is a major challenge: some suppliers provide 

documents explaining their compliance, some may not provide much useful information 

(e.g. eYes/No compliance), some provide full material disclosure (FMD), some provide 

FMD but omit portions they consider a trade secret, others provide test reports. 

Generally speaking, considerable effort is usually required to obtain and transform 

supplier-furnished information into a usable parametric format that applications can 

57 A position that NAM also seems to take - see comments on "reliable due diligence" and "commercially 

practicable effort", p.13 

~This assumption is supported by our analysis of IT systems and costs in Issue #6. 09 JHS is a global information company in the pivotal areas such as energy, economics, geopolitical risk, 

sustainability and supply chain management. (http://www.ihs.com) 

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understand and be useful to engineers, procurement personnel, auditors and 

regulators.60 

NAM's comments to SEC state that: "issuers must collect information and maintain 

auditable records for the SEC. To do so, issuers may need to develop new IT systems to 

collect information on their suppliers. Most manufacturers and suppliers may have to 

develop new computer systems or revise existing systems to track, store, and exchange 

data regarding mineral origins. Because of the global nature of supply chains, these 

systems will need to be available globally, have high storage capacities, and advanced 

communication, and data transfer functiona/ities. Based on previous changes to supply 

chain computer systems over the last several years, the cost per company is likely to 

range from $1 million to $25 milfion depending on the size and complexity of the supply 

chain. Again making a conservative estimate of $1 million per IT system, the collective 

cost would be $6 billion ($1 million X 5,994 = $6.0 bil/ion)."61 

While among the 5,994 issuers there are large companies that would typically use highly 

sophisticated enterprise systems (such as SAP or Oracle) in order to manage complex 

supply chains, the remainder of the 5,994 companies should be estimated using a lower 

unit cost. Therefore, using the IPC survey as an indication of company size distribution, 

the total annual revenues of the small and medium companies would in no reasonable 

way support the idea that all 5,994 issues have IT requirements that justify a $1 million 

modification each. 

Moreover, in its economic impact analysis NAM apparently did not consider the 

possibility of shared software solutions and shared product information platforms. In the 

business world, a ubiquitous modus operandum is that once a software company has 

developed an appropriate piece of software tailored to the information capture and 

storage needs of an issuer, it is sold or licensed to other companies in the same market. 

Examples also abound of shared product information platforms, such as in the chemical 

industry. IHS' Design & Supply Chain group for example provides critical information 

and insight typically in the form of reference databases on a wide variety of goods 

including electronic components - including compliance with regulations such as RoHS 

and REACH. IHS explains:62 

We aggregate content from suppliers, we standardized and classify the content, 

and we "describe" parts and materials in standard ways to allow part research, 

comparison, selection and reporting. This is labor-intensive work that many 

companies choose to outsource. In the IHS model we make these valueadded databases available to our subscribers where the cost of content collection, 

processing and maintenance is shared across our installed base. This typically 

saves our subscribers considerable expense. Of course, not all parts or materials 

that all our subscribers use are in our database - so we offer content services to 

obtain this content specifically for them. This is especially true for their custom 

parts. Sourcing and processing individual parts for a client is very cost-intensive. 

- 60 written correspondence with IHS. October 1, 2011. 61 NAM Comments, p. 24 62 written correspondence with IHS. October 1, 2011. 

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We've seen ranges of prices in indus tty of about $5/patt to more than $30/part for 

chemical compliance information over the last 5 years. With a reference database 

the prices reduce considerably. For "mature" databases, developed over an 

estimated 5 years, companies would be able to match up to 60% of their parts 

and would reduce their annual "build and maintain" cost/part by up to 80% for 

matched parts. 

In sum, the efficiency effect due to replication and adaptation of a viable software 

solution seems not to have been considered by NAM. Furthermore, the Internet and 

encryption - commonplace in viable businesses -could serve in the place of the "data 

transfer functionalities." Indeed, this has already begun with the EICC-GeSI Supplier 

Information Template Tool.63 

Based on its 2011 survey, IPC found that "anticipated costs for information technology 

modifications ranged from 12,500 to 750,000 dollars."64 The survey result details 

indicate an average unit cost of $205,000 for IT system changes, which was sl<ewed by 

the single largest value of $750,000.65 According to their survey demographics, 72% of 

the respondents are companies with revenues less than $100 million. In looking at the 

data as a whole, the IPC study supports the position that the actual number of 

companies likely to incur IT system modification expense levels as posited by NAM is 

much smaller than 5,994. 

Small issuers: 

We apply the small company ratio of the 5,994 issuers to the small company cost 

estimates from I PC: 5,994 x 72% x $205,000 = $884,714,400 

Large issuers: 

The large company costs from NAM may then be applied to the large company ratio of 

the 5,994 issuers: 5,994 x 28% x $1,000,000 = $1,678,320,000 

Thus, the total estimated cost to issuers for instituting the necessary IT systems 

modification in view of conforming with the Conflict Mineral Act is $2.56 billion. 

VI. A Third Economic Impact Model 

A. Estimated number of affected companies 

1. Width and depth of mineral/metal supply chain 

63 EJCC & GeSI. GeS/ and the EICC® Launch Conflict Minerals Reporting Template and Dashboard. 

August 3, 2011. 

http:lleicc.infoiPDF/GeSI%20and%20the%20EICC%20Launch%20Conflict%20Minerals%20Reporting%20 

Template%20and%20Dashboard.pdf 

: IPC Comments on SEC Proposed Rule on Conflict Minerals, March 2, 2011, p. 21 

If the outlier figure is factored out, the average drops more than 50% to $96,000. 

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Each company has its own supply chain, consisting of a certain number of direct or 1st 

tier suppliers and each of those direct suppliers has its own set of suppliers. In the 

analysis below, we use the term "width" to refer to the number of suppliers across each 

supplier tier and "depth" to refer to the number of tiers between the company and the 

mine. Clearly, each company's width is variable. Issuers will not readily know the width 

of their supply base beyond the 151 tier, but generalized estimates can be made by using 

industry association data and basic inquiries to points within the supply chain.66 

In addition, not every supplier in each tier will be subject to conflict minerals activities 

(e.g., service vendors, suppliers of paper products, fossil fuels, and raw textiles to name 

but a few). Therefore, the width of a company's supply chain reasonably expected to be 

subject to CM efforts is a percentage (less than 100%) of their total supply base. The 

width for purposes of CM efforts consists only of materials/products that contain CM. 

For many companies/industries (especially in the electronics industry and supply chain). 

a significant amount of product content information is likely to exist already within 

information management systems required by other laws in the US and EU. 67 As an 

example, we refer to the results of the IPC survey replicated in Table 1 above indicated 

that 35.75% of the supply base was known to contain the conflict mineral, whereas 

46.25% of the supply base was known not to contain the conflict mineral. 68 

A typical supply chain also consists of multiple layers (depth), but the number of layers is 

wholly dependent on the type of product, the distance from the ore source and/or 

ultimate final product. Therefore, each company's supply chain depth is variable. 

Companies may obtain information on their supply chain from publically available 

information, industry association data and basic inquiries to suppliers.69 

Figure 2 below illustrates the width and depth concept in the mineral supply chain, which 

takes on an hourglass shape. The upstream supply chain is best defined as companies 

handling mineral concentrate, and the downstream supply chain as companies using 

refined metal, separated by the smelter I refinery link. The figure furthermore depicts the 

conflict minerals flow through the various mineral and metal supply chains. The top 

section blue background (A.) marks the sectors considered by this paper's economic 

impact model. The bottom light yellow background {B.) denotes tiers not considered by 

this paper's economic impact model.70 

---------~----------

68 For instance, Figure 1 of Comments on SEC Regulatory Initiatives Under the Dodd-Frank Act Title XV: 

Miscellaneous Provisions- Section 1502 Conflict Minerals (P.L 111-203), fPC-Association Connecting 

Electronics Industries, November 22,2010. 67 More details on this matter are provided in Issue #6 on software systems. 68 Results of an IPC Survey on the Impact of U.S. Conflict Minerals Reporting Requirements, February 

2011 p. 5-6 69 Figure 1 of Comments on SEC Regulatory Initiatives Under the Dodd-Frank Act Title XV: Miscellaneous 

Provisions- Section 1502 Conflict Minerals (P.L. 111-203), fPC-Association Connecting Electronics 

Industries, November 22, 2010. l:illQ://wv.w.sec.govlcomments/dl-title-xvlspecializeddisclosureslsoecializeddisclosures-78.pdf 

70 Neither does SEC or NAM: SEC (Vol. 75, No. 246) only considers the burden to issuers; NAM (in its 

Comments to the SEC) only considers costs to the issuers and 1 ''tier suppliers. 

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Figure 2: Width and depth illustration of mineral/metal supply chain 

A. 

--Concentrate Traders & Mineral Re-processors 

-Intermediaries and Consolidators (may include 

minimal processing) 

Mineral Producers: 

+----Artisanal & Small Scale Mining (ASM) 

Conflict mineral flow 

Source: supply chain sequence adapted from OECD publication71 

Yet to begin to determine the economic impact also on the lower tiers of the supply 

chain, we propose a formula. The following formula applies previously discussed 

concepts to estimate the total number of suppliers within a company's supply base that 

may reasonably be expected to address CM requirements: 

n 

ScM=~ (Sr * x% * .4) 

i=1 

Where: 

ScM= Estimated total number of the company's' suppliers subject to CM due diligence 

efforts 

n = Estimated number of tiers in the company's supply chain (i.e., depth) back to mine of 

origin 

ST = Estimated number of suppliers in each tier n (i.e., width) 

x = Percent of materials/product per each tier n identified (or estimated) as containing 

3TG.** This factor will (a) increase as the supply tier nears the smelter, and becomes 

100% for tiers between the smelter and the mine, and {b) probably decrease as the 

supply tier moves closer to the final product. 

"OECD {2011), OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from ConflictAffected and High-Risk Areas, OECD Publishing. ]Jttp:l/wv.w.oecd.org/dataoecd/62/30146740847.pdf 

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.4 = The mathematical factor reflecting supplier overlap. A constant, this factor converts 

the number of contractual relationships to the number of unique businesses that would 

be required to implement CM programs. 

* In this context, "the company" refers to a single business entity that is located at any 

point in the supply chain. 

•• Determination made based on screening activities. This is not the overlap factor, but 

screens out suppliers in each tier that provide services or materials that do not contain 

3TG such as fuel, copy paper, etc. 

2. Traceabilitv in the conflict mineral supplv chain 

A distinction needs to be made between traceability of minerals from mine to smelter 

(upstream) and from smelter to end product (downstream) as is illustrated in Figure 2 

above. An investigation by the Enough Project provides general contours of the 

upstream supply chain of conflict minerals from the eastern Congo. 72 The 5 principal 

upstream links in the conflict mineral supply chain, between each of which are providers 

of material transportation, are: 

1. Mines: 

• 13 major mines and approximately 200 total mines in the region 

2. Trading hubs: 

• Minerals: two major trading hubs in the region, Bukavu and Goma; 

• Gold: Butembo and Uvira are also key trading hubs 

3. Exporters: 

• There are currently 17 exporter companies based in Bukavu and 24 based in 

Goma 

4. Neighboring transit countries: 

• Rwanda, Uganda, Burundi, Tanzania, Kenya 

5. Smelters and Refineries: 

• Tin: 10 main smelting companies process over 80 percent of the world's tin, 

almost all of which are based in East Asia 

• Tantalum: four companies make up the overwhelming majority of the market 

based in Germany, the U.S., China, and Kazakhstan 

• Tungsten: several processing companies in China, Austria, and Russia. 

• Congolese Gold: Dubai, Switzerland, Italy, and Belgium 

Based on this study, the upstream supply chain of conflict minerals appears to be a 

significant and definable sub-set of the mineral supply chain universe that involve many 

more countries than just the DRC. 

The smelter level, representing the choke point in the hourglass figure above is a critical 

link. The EICC Conflict Free Smelter (CFS) program for example specifically reviews the 

documentation from mine to smelter. While the CFS program does not certify products, 

72 Enough Project. From Mine to Mobile Phone: Tile Conflict Minerals Supply Chain. Nov 10, 2009. 

http://\WJW.enoughproject.org/files/publications/minetomobile.pdf 

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it approves smelters. According to UL-STR, auditor of the EICC Conflict Free Smelter 

program, the key point of the program is that smelters are 100% input verified, which 

means "an approved smelter has undergone a 100% documentation review for all 

purchases of minerals in the audit period.''73 Consequently, inputs used to manufacture 

a given product are conflict-free. An additional benefit is that 100% input verification 

does not require internal lot traceability, a rather tedious process which involves 

controlling which raw material lots were processed into which final product lots. Thus, 

100% input verification appears to be the easier approach than internal lot traceability. 

Furthermore, the 100% input verification approach is progressive in that it is concerned 

with recent purchases only.l4 

The information is then made available "upwards" to their customers, such that actors 

within higher tiers can track their minerals back to the smelter and match the results to 

the publicly available list of "conflict-free" smelters. Downstream traceability is enabled 

when suppliers in lower tiers submitting the same information as the 1st tier suppliers in 

effect establishing a chain of custody system. 

While it is not within the scope of this white paper to describe in detail and provide the 

economic impact analysis also for the upstream supply chain, we point to the 

International Tin Research Institute's (ITRI) Tin Supply Chain Initiative (iTSCi) which, 

inter alia, seeks to provide verifiable mineral chain of custody information auditable by 

the smelter validation programme of downstream industry as recommended by the 

OECD Guidelines, and enable relevant US companies to report on due diligence efforts 

to the SEC as required by the Dodd-Frank Wall Street Reform and Consumer Protection 

Act. 75 ITRI argues that a 3-month pilot project in North and South Kivu and Maniema in 

late 2010 proved the concept of rapid and simple implementation of chain of custody 

(employing bag-and-tag system as well as certification system) in the 'conflict affected' 

areas of the DRC activity. ITRI's 5-year plan, authored in February 2011, provides 

details and costs projections on how much it costs to build a clean supply chain for tin, 

estimated in the tens of millions. As the iTSCi establishes a viable paradigm for a clean 

tin supply chain, it may also serve as a model for doing the same for tungsten, tantalum 

and gold. 

Implementing upstream traceability in Central Africa is however associated with a host of 

challenges which differ significantly from those in the downstream supply chain. Fieldproof systems are required to ensure traceability of DRC sourced material, and the costs 

and challenges (including the rapidly changing security situation) may surpass the 

management systems approach. Aside from the need for lower tier levels to 

adapt/revise management systems to respond to CM customer requirements, technical 

requirements of tagging and bagging minerals generate other, non-management system 

related costs. Other cost factors include the need for additional capacity for mine 

inspectors, police, and customs officials. Thus, the challenges associated with 

73 Written correspondence with UL·STR. October 17, 2011. http://www.strguality.corn 74 1bid. 75 International Tin Research Institute. iTSCi 5-Year Plan: DRC & Rwanda. February 2011. 

htto:llwww.sec.gov/cornrnents/s7-40-10/s74010-326.pdfhttp:l/www.sec.gov/cornrnents/s7-40-10/s74010-

326.pdf 

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strengthening the infrastructure and institutional capacity of the country of origin present 

significant obstacles to traceability in the supply chain of the DRC and certain 

neighboring countries.76 

B. Efficiencies, overlap and synergies in the implementation of Section 1502 

i. Mutualitv I overlap 

As we have discussed above in various sections of this analysis, each company's 

program development and implementation costs are only partially proportional to the 

depth and width ("DIW"} of their supply chain. Due to the overlap in supplier 

relationships, per-company program costs may increase to some extent as DIW 

increases, but the incremental cost for each supplier/tier is not 100% as NAM assumes. 

Most of the CM program is a management system -a framework of policies, procedures, 

training, internal controls and monitoring that will be developed at a corporate/business 

unit level to be applied across the company's operations and through the supply chain as 

determined by ScM (i.e., the "Microsoft model"). Certain on-going information 

management activities within the program will be directly proportional to ScM, but the 

operational tasks supporting those activities will be governed by this overarching 

management structure, the development of which is not repeated for each supplier 

(assuming reasonable consistency in information demands through the supply chain). 

NAM assumes that all CM program costs will be fully replicated for each company in the 

supply chain. As we explained above, this assumption is incorrect as it should be 

anticipated that companies will share suppliers of certain products/materials. Where 

overlap exists, the incremental costs for CM program development will be generally 

reduced as explained above. This is most clearly demonstrated at the smelter level, 

which is generally considered by industry to be the "choke point" for CM material flow. 

Ores must be processed into commercially usable material by the smelters and there are 

a limited number of smelters worldwide; therefore smelters are the point in the supply 

chain that has the highest degree of mutuality. Mutuality will occur at other points in the 

supply chain, but perhaps not to the extent as seen in smelting. Regardless, as 

mutuality increases, the lower the incremental costs for implementing overarching 

management systems. 

ii. Correction factors 

The NAM estimate fails to recognize a number of important factors impacting costs. 

This paper applies three correction factors in order to properly gauge the extent of 

economic impact 

1. Large I small companies: As previously discussed, we divide the issuers and their 

suppliers into two groups: big and small. We estimate that 72% of issuers are 

small and 28% of issuers are large. 

----------- 76 Written correspondence with UL-STR. October 17,2011. http://www.strguality.com 

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2. Non-CM mineral suppliers: based on findings from the IPC survey, only 53% of 

1st tier suppliers provide materials, parts or components that contain 3T or gold 

and would thus be subject to CM management program efforts/costs. 

3. Overlap I mutuality of suppliers: this correction factor accounts for the fact that 

issuers have some {possibly many) suppliers in common and so controls for 

overlapping issuer-supplier business relationships. This paper operationalizes this 

overlap factor as 60%, which means on the aggregate only 40% of the number of 

3TG material supply contracts unique effort/cost is required. 

iii. Technology transfer efficiencies 

The NAM model implies that each company implementing CM programs will do so wholly 

independently. In reality, this is not likely. There are already a number of initiatives and 

se1vices in the market that allow companies to take advantage of "shared solutions." 

These include: 

• Shared platforms: Industry initiatives (such as in the electronics and tin mining 

industries) are already creating common platforms for information collection, 

tracking, reporting and even auditing to reduce the labor effort/cost burden on 

companies. This includes various material declaration and certification programs 

and standards that currently exist, such as fPC 1752 Materials Declaration 

standard for electronic data exchange of product materials information. Other 

current initiatives include the EICC-GeSI CFS and Supplier Reporting Template, 

the ITRI "Bag and Tag", and the recently announced Public-Private Alliance for 

Responsible Minerals Trade (PPA).77 

• Internal information management svstems: As mentioned in Section V.F. Issue 

#6 above, many companies impacted by the CM law are also subject to other 

regulations related to product content, such as the EU Regulation on Registration, 

Evaluation, Authorisation and Restriction of C/Jemica/s (REACH) and Reduction of 

Hazardous Substances (RoHS). REACH is a chemical registration and 

authorization legislation with a growing list of chemicals that require 

manufacturers to register the use of those chemicals if used or released by 

products above certain amounts as well as reporting to customers upon request 

the presence of any of those chemicals about certain limits. RoHS and its 2011 

update (known as "RoHS recast") set threshold amounts for certain elements in a 

variety of product types that require manufacturers to restrict their use. 

Information required by REACH and RoHS regulations is managed in a similar 

manner even though the restrictions, information reporting and registration 

requirements are quite different. At the heart of each of these regulations is the 

need for information collection and management systems to ensure that all the 

needed data is gathered from the supply chain and that it is consistently reviewed, 

updated, verified and ultimately disseminated to customers and regulators. These 

77 U.S. Department of State. Under Secretary for Democracy and Global Affairs Maria Otero Travels to the 

Democratic Republic of Congo. Oct. 6, 2011. 

http://kinshasa.usembassy.govlpressrelease english 10062011.html 

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systems contain substantial overlap with the information tracking needs for CM 

programs. There are many vendors for IT-based systems for managing REACH 

and RoHS data. 

iv. Human resource efficiencies 

• Cross-cutting consulting firms: Consultancies provide management system 

development, supply chain due diligence and audit services that leverage their 

experience in management systems development/implementation, material 

traceability, sourcing, information management systems, auditing and specifically 

conflict minerals programs. Companies choosing to use such firms/services are 

likely to see improved process development and launch times as compared to 

internal program development in a vacuum. 

• Cross-cutting law firms: Law firms that are developing expertise in the subject 

area who can advise multiple clients and cross-pollinate best practices across 

their client base. 

v. Customer/supplier synergies 

We have referenced the idea of"reasonable consistency in information demands through 

the supply chain" within this analysis. SEC's final regulations will create the platform for 

such reasonable consistency, therefore providing opportunities for cost efficiencies. In 

addition, it is expected that suppliers will also communicate with their customers to 

ensure alignment between their mutual CM data needs, which will also support 

reasonable consistency and cost efficiency. 

C. Model comparison SEC vs. NAM vs. Third model 

With our Third model's cost estimations previously justified, Table 2 below juxtaposes 

SEC's and NAM's economic impact model with that of our Third model, itemizing the 

main cost drivers as laid out in the SEC proposed rule and NAM comments. As with the 

NAM and SEC estimates our Third model only takes into account the economic impact 

incurred by issuers (5,994) and 1st tier suppliers (860,066), and not all the actors 

throughout the entire mineral/metal supply chain. However, unlike NAM and SEC, our 

paper provides a conceptual mathematical model that can be applied to estimate 

companies beyond the 151 tier. Thus, the geographical scope of all three models focuses 

on companies operating within U.S. jurisdiction, or those who directly supply U.S. 

issuers. 

Table 2· 

Task SEC NAM Third model 

estimation of costs estimation of costs (low estimation of costs 

end estimate) 

1. Strengthening "an aggregate estimate $1.2 billion (which is $26 million for the 5,994 

internal management of $16.5 million for the calculated as 2 hours x issuers; $5.14 billion for 

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systems in view of 1,199 issuers" $50 per hour x 2000 1'1 tier suppliers to 

performing due suppliers x 5,994 those issuers, for a total 

diligence companies of $5.17 billion 

2. Instituting the $6.0 billion ($1 million x $884 million fer issuers 

necessary IT systems 5,994) who are small 

(to collect information companies; $1.68 

and maintain auditable billion for issuers who 

records for the SEC) are large companies, 

for a total of $2.56 

billion 

3. Commissioning CMR 'We estimate that the Big companies: $450 As only issuers are 

audit 1 , 199 affected issuers' million ($100,000 x required to conduct 

$25,000 cost would 4,500 issuers) audits: 

result in to an industry Small and Medium $81 million for issuers 

wide audit of sized companies: $1.39 who are small 

approximately billion (278,000 companies; $126 

$29,975,000." companies x .2 x million for issuers who 

$25,000) are large companies, 

for a total of $207 

million 

4. issuer-led $300 million (1000 X (We believe task 4 and 

implementation of risk- $50= $50,000; $50,000 5 are embedded in the 

based programs that X5,994) first activity scope and 

use company control cost within 

processes to verify that management system 

suppliers are providing modifications. 

credible information Therefore we are not 

5. cost of filing SEC $24,768,000 

costing out these 

elements individually.) 

forms 

Total $71,243,000 $9.34 billion $7.93 billion 

(not including internal (including internal (including internal 

company labor) company labor) company labor) 

Thus, the total charge to implement due diligence according to our Third model, as 

itemized in the table above, would come to $7.93 billion. We thus regard Section 1502 

as a "major" rule as it will have an annually effect the economy exceeding $100 million. 78 

Yet the order of magnitude of $7.93 billion must also be viewed relative to the size of the 

industries that depend on these minerals - including the industrial, aerospace, 

healthcare, automotive, chemicals, electronics/high tech, retail and jewelry sectors- and 

the trillions of dollars in wealth creation these sectors combined generate. 

Figure 3 below visualizes the costs breakdown per task and per implementer. 

78 According to the designation as per the Small Business Regulatory Enforcement Fairness Act of 1996 

("SBREFA") 

32 
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Economic impact analysis - third model 

$(in millions) 

81126 

D. Internal versus external company costs 

m strenthenfng management 

systems 5~994 issuers 

u strenthenlng management 

systems 1st tier suppliers 

w tT issuers (large companies) 

11 JT issuers {smafl companies) 

"CMR Audit issuers {small 

companies) 

m CMR Audit Issuers {large 

companies) 

Indeed, $7.93 billion represents considerable resources that would need to be dedicated 

to the fulfillment of the law. Yet it should also be considered what proportion of that 

amount comprise costs that can be covered with "in-house" human resources that may 

already exist within the individual companies (effectively diverting internal resources), 

and what proportion of those resources would go to cover external costs. Table 3 below 

delineates each type of "cost" 

Table 3: In-house resource costs vs. monev outflows 

Task Internal human resource costs Money outflows 

i. Strengthening lssuem: (internal costs l Issuers: (consultant costs} 

internal management small companies: $6,473,520 small companies: $8,631,360 

systems in view of large companies: $7,552,440 large companies: $3,356,640 

petiorming due 

diligence Suppliers: (internal costs} Suop!iers: {consultant costs) 

small companies: $222,688,500 small companies: $296,918,000 

large companies: $3,202,231,500 large companies: $1,423,214,000 

2. Instituting !he (Some company personnel time would Small issuers: $884,714,400 

necessary IT be required for operating the IT Large issuers: $1,678,320,000 

systems systems} 

3. Commissioning (Some company personnel time would $207,000,000 

CMRaudit be required for working with the 

auditors) 

Total $3,438,945,960 $4,502,154,400 

33 
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The delineation above shows that slightly more than half of resources expended for the 

law would comprise resource outflows -money paid to 3rd parties for consulting, IT 

systems and audits. Yet almost half of the $7.93 billion burden may be covered with "inhouse" human resources that may already exist within the companies affected by the 

law. 

E. Economic costs to issuers versus suppliers 

A further object of analysis is the supplier I issuer breakdown of economic cost. Simply 

re-arranging the organization of costs as presented in Table 3 above, Table 4 below 

tabulates the issuers I suppliers costs. 

Table 4: Economic costs to issuers versus suppliers 

'Task. Economic cost to issuer Economic cost to suppliers ______ 

1. Strengthening Issuers: (internal costs) Suppliers: (internal costs) 

internal management small companies: $6,473,520 small companies: $222,688,500 

systems in view of large companies: $7,552,440 large companies: $3,202,231 ,500 

performing due 

diligence Issuers: (consultant costs) Suppliers: (consultant costs) 

small companies: $8,631,360 small companies: $296,918,000 

large companies: $3,356,640 large companies: $1,423,214,000 

--- 2. Instituting the Small issuers: $884,714,400 (minor costs may be incurred by 

necessary IT systems Large issuers: $1,678,320,000 suppliers confonning with the issuer IT 

- • parameters} -- ------ 3. Commissioning $207,000,000 - CMRaudit 

L-__ Total ______ $2,796,048,360 $5,145,052,000- ---~---- ------

As the issuers/suppliers cost comparison reveals, the bulk (65%) of the total cost- $5.1 

billion, would be incurred by the suppliers, while the smaller portion (35%) of the total-

$2.8 billion -would be carried by the issuers. This is due to the fact that there are 

multiple suppliers for each issuer, even taking into consideration our various correction 

factors. As we noted earlier, SEC's analysis failed to include the impact on - and 

associated costs incurred by- the suppliers. 

If one were only to consider the efforts/costs necessary at the issuer level -which SEC 

effectively did- the economic impact according to our model is $2.8 billion. However, 

since in light of Section 1502 the entire supply chain needs to be reformed in order for 

traceability/chain-of-custody to work from mine to CMR disclosure - and arrive at an 

accurate determination of whether "conflict" is in the mineral -the suppliers along the 

supply chain must also be factored into the economic impact equation. 

34 
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F. Sunk versus recurring economic costs 

While there would be some internal operational costs associated with performing 

ongoing due diligence and maintaining the necessary IT systems on a company-tocompany basis over the years, the initial implementation of these efforts could be 

considered "sunk costs" in the economic sense in that they are one-off costs in exchange 

for services which cannot be thereafter sold or the value otherwise recuperated. Once 

the management systems are place, the codes of conduct have been revised, the new 

procedures are instituted, etc., the recurring cost of operating same is very low 

compared with the initial implementation. Thus, the estimated $7.73 billion it would take 

to implement Section 1502 (without taking into consideration the annual $207 million 

expenditure in independent CMR audits), would constitute a one-time cost/investment. 

Thereafter, the most notable "external" cost the issuers would incur on an annually 

recurring basis is a $207 million expenditure in commissioning independent CMR audits. 

VII. Conclusion 

All parties seem to agree that the Dodd-Frank Section 1502 is an important catalyst for 

action, and that only collective action can implement systems that will be able to track 

and account for the source of the minerals originating from Central Africa. Our model 

contends that affected companies in the U.S. would need to carry out three principal 

actions in order to be in a position to comply with the new law: (1.) strengthening internal 

management systems in view of performing due diligence, (2.) instituting the necessary 

IT systems, and {3.) commissioning CMR audits. We estimate that the cost of 

implementing these actions comes to $7.93 billion. However, almost half of the total cost 

- $3.4 billion -would be met with in-house company personnel time, and the rest- $4.5 

billion -would comprise outflows to 3'd parties for consulting, IT systems and audits. 

Comparing the costs to the issuers vs. the suppliers, the bulk of the total costs- $5.1 

billion or 65% -would be incurred by the suppliers (the group not included in SEC's 

analysis). while the smaller portion of the total - $2.8 billion or 35% -would be carried by 

the issuers. These implementation costs would however be borne by thousands of 

individual firms in lucrative industries such as the industrial, aerospace, healthcare, 

automotive, chemicals, electronics/high tech, retail and jewelry industries. 

This white paper estimates the economic impact of the law to the issuers and 151 tier 

suppliers, and thus focuses on the impact to companies and their suppliers operating 

within U.S. jurisdiction. Yet costs will also be incurred throughout the upstream and 

smelter supply chain links. While promising traceability initiatives -such as the ITRI's 

Tin Supply Chain Initiative (iTSCi) and the Conflict Free Smelter {CFS) programdemonstrate market viability, law enforcement and customs protocols in affected central 

African countries would need to be significantly strengthened to make such schemes 

truly viable. 

35 
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As this economic impact analysis demonstrates, transparency and disclosure in the 

mineral/ metal sector will come at a significant cost. As a sweeping law affecting a 

multitude of industries in the U.S., we regard Section 1502 as a "major" rule as its effect 

on the economy will exceed $100 million per year. The challenge facing the SEC is to 

fashion regulation that enforces the spirit of transparency and disclosure as envisioned 

by Dodd-Frank Section 1502, yet promulgate circumspect regulation that prevents undue 

burden being placed on the industries involved in the mineral/ metal sector, and so avert 

whole industries extricating themselves from DRC originating minerals. 

IX. Definitions 

Te1m Definition 

1st tier supplier Companies that supply materials/products to original product 

manufacturers. retailers and issuers. 

2"d tier supplier Companies that directly supply the 1•' tier suppliers. 

3T Tantalum, tin and tungsten 

3TG Tantalum, tin, tungsten and gold 

Chain of custody The ability to physically track the minerals at all points along their trading 

chain, from their source in the mine to their point of export and delivery to 

the smelter/refinery. 

CM Conflict Mineral 

CMR Conflict Mineral Report 

Downstream Companies using refined metal 

Due diligence "The process through which enterprises can identify, prevent, mitigate and 

account for how they address their actual and potential adverse impacts as 

an integral part of business decision-making and risk management 

systems.''79 

Issuer "An organization that registers, distributes, and sells a security on 

the primary market.'~0 An issuer is thus an organization that sells securities 

(stock) to the public. 

Upstream Individuals and companies handling raw ore or slightly processed ore 

products such as mineral concentrate 

79 OECD. OEGD Guidelines for Multinational Enterprises. 25 May 2011. 

http://www.oecd.org/dataoecd/43/29/48004323.pdf 

80 F art ex Financial Dictionary. 2009. 

36 
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Contents 

Acronyms ...... . ••••....••••.•• iv 

A Time for Action .•.•••••••••.• . .............. v 

rore\vord .....••....•.•......•.•.........•..........•.....•.. ............... vi 

WhyWe-andi- DoTlds Work .•.....•......• . .........•.....••. vi 

Unconflkted ..•....................•..• . ........•.•.• , .••....•.•....•. 1 

Awareness ofConftktMinerols Grows...... . .......... 2: 

Private Industry and Government React • . . • . • . . • . .. . • . . • • . • • •••..••.••. 2 

The1mpactofDodd·l''rankand Efforts to Respond ............•. , ......... , •. , ..........•.•. . 3 

iTSCi System Launches .••..•.•••• , ••. , •••• 

Beginnings of Pact's Involvement .••.••.••••• 

The Impact of Dodd-Frank 

How the System Works .•. 

The Current Implementation ofiTSCi !n Numbers. 

Current Challenges for the iTSCi System .••.•..•• 

The Next Five Years ..••.. , , ..•.•• 

I.cvcragingandF.xpanding:SecurityZones •...•..•• 

Strengthening Governance in the Mining Sector .•• 

Formalization of Artisanal Mining ... , . 

Greater Regional Collaboration 

Greater Transparency Leads to Greater Prosperity .• 

Local Ownership .. , 

Ongoing Challenges . 

Conclusion and Recommendations 

Closing Thoughts .... , ............ . 

. .................... 4 

. .................••. 4 

·•·············•••·•·· 6 

. ....•.•............ 6 

• •••....•..•••••••• 10 

• ••..•..•••..••••..•...••.•• 10 

• ........................... 11 

• ••••.•••••••••..•••. 11 

.. ......... 12 

.. ....... 12 

•••• 13 

.. ... 13 

........... ,. ............ 13 

. .• , ........ 13 

............ 15 

. .•••....• , ... 16 

UNCONFL!CTED 2015 m 
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Acronyms 

3Ts Tin, Tantalum and Tungsten 

CEEC Centre for Evaluation, Expertise and Certification 

CFSP Conflict Free Smelter Program 

CFTI Conflict Free Tin Initiative 

DBSA Development Bank of Southern Africa 

OMFA Dutch Ministry of Foreil,'TI Affairs 

ORC DemocraticRepublic:ofCongo 

EICC Electronic Industry Citizenship L'U:aliti-on 

EIT! Extractive Industries Transparency fnitiative 

FF! Fauna and Flora International 

GeSI Global e-Sustainabllity IniHative 

GMD Geology and Mines Department of Rwanda 

ICGLR International Conference on the Great Lakes Region 

ITRI International Tin Industry AssoCiation 

iT SCi ITRI Tin Supply Chain Initiative 

MIMIRENA Ministry of Natural ResourcesofRwanda 

NGO Nongovernmental organization 

OECO Organization for Economic Cooperation and Development 

OECD DOG Organization for Economic Cooperation and Development Due-Diligence Guidance fot 

Responsible Supply Chains of Minerals from Conflict-Affected and High-RiskAreas 

OSH Occupational Safety and Health 

RNRA Rwanda Natural Resources Authority 

SAESSCAM Service for the Organization and Assistance: of Attisanal and Small-Scale Miners 

SEC The U.S, Securities and Exchange Commission 

SfH Solutions for Hope 

T.I.C International Tantalum Association 

WF(L WorstFormsofChild T,abor 

iv UNCONFUCTED 2015 
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l lim_ o~~~-~ke~ \i~1y Fat?~~~ '~e~hl~ptn~n~'otita~~i-?-~!~·'isJrof~~,~,on ~ ~Ud~~~tryptOj~~t~~t, ~n~n~~~,mi~er~ n:aders and ~~i~te,r~~~~Nll~ ~~ot ~ C<1~~~r~ht1 ~~p~y~nd ~e ~~~~ n~ tJ:~~t~l i~t,ere~t i,n t~e !rt~iJ?!l ,~usiness~ an~ yet we cboos~:t~ W~t~ln~l~ par~cr~b~ ~~~~~~~stryJn 

implement a milJeraJ ttac¢ability and due diU~e'i\tQ'SJrsJe'm in Africa's G~ilt l.13:~es reglQf!~ ' \' ,, ,'' 

WhY dO \~ci ~o ~~\~S wor~? ?act believes U~a~~e~I~r:¢8~l~~eliJ~~si~e~ iS:ap efft:c~i~~ an~SU~t~in~ ab1~ )li.':h!de to ~('liver th~ dev~i~p~lCnt:r!'ee~~d ~~:dirt~~O,P1,7 o~~,?t~?v~~-t),'~at,u~,~-re~:ur,~, 

eXt~a:tion_i~ ~~,~9non~~e ,~ckbon~<yfthe ~onomy il-:)!'ru:tYtl??-11.tri:Cs w_h~re ~-ct~vor~s~ ~n~~ri' 

int¢!?a,~~~~,pproa~,h todev~tnpn~ent that combi~e~ ~e~pq~il~~~ )?usJ11~ss~~tt ~6~ gov~m:a\\te ,, 

and strepgthefl.ed local ~apadty,can deliverb~ttcr. saf~~~ heall:~ier UvCllhoo~s,. ' 

:Pact stffi1e,d ~ar,ki~t f117 mi~erals seetor~fth~ ~e'{ll:ocr.tit,c~~~Pu~~~,o( ~~~~Cno~h~~Jr~ t~~ qtlltedstateS Con~~ss en,act~d ~~)krmin~ratslegjsla!l<:J~i,n20:1~ (Sedion lSOi:tJfthe,no,d:~~' 

Ff<i~ik Act); It~ faCJ,:~mrwork lt;ts t¢togniz~ ~hei~~o!iance ofthe ~~o~ ~o ec?~P~i<; d~~IO;P~ 

rnlmtsi~re20D$. "fh~ w~ I~Wlched a~u1ti-projetH1J~~'>',~o ~3tket~ l?~o'g(~,\vith P;art,nt:~~~, 

:soyermuent;,lndustt¥ a11d civil s<?ctety tOl?laxi!ftize the bene~ts ~f~in!ng ,f!)tJ1\ralcoffimun!tt,~ 
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UNCONf!UCTED 2015 
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I 

In 2010, when the United States adopted legislation to stop the use of conflict minerals in American products, the system known as iTSCi, that today 

is in use at more than 8oo mines in Africa's Great I.akes region, was in its 

infancy. The road to this point has not been easy. It involved many partners working in muddy trenches to build a local answer to an international 

question demanding immediate action: How do you reliably trace hundreds of thousands of tonnes of minerals from mine to market in one of the 

most challenging environments in the world? 

Of course, the iTSCi system is not perfect. But by all measures, it works. 

What follows is an explanation of why iTSCi exists, how it was created, 

how it works and what must be done to expand the system and build on 

its success- information that is especially critical as additional Western 

governments consider their own conflict minerals legislation. 

UNCONFLICTI:W 2015 
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Awareness of Conflict 

Minerals Grows 

Perhaps surprisingly, the first news articles 

linking the conflict in east em DRC to minerals 

markets appeared around 2000, when illegal 

bush meat hunting ln protected areas- to feed 

the burgeoning coltant mining camps in eastern DRC- came- to public attention. An early 

initiative to address this issue was the Durban 

Process, led by wildlife conservationists who 

sought to engage industry in regulating supply 

chains to address illegal mining. However, 

attention soon widened, with headlines about 

violence and human rights abuses by armed 

groups that controlled min('ral flows and 

preyed upon miners, using their profits to fund 

corrupt administrations. 

Over the following years, reports from the 

United Nations Group ofExperts and nongOv· 

ernmental organizations (NGOs) such as Global 

Witness and Fauna and Flora International 

(FFI) drew attention to the complex conflict in 

the region and the devastatingimpactofthe 

illegal mineral trade. The key minerals ide:nti~ 

fied as being the source of the conflict were tin, 

Sourc¢s oftrze '3Ts' 

Cassiterite fs the ore containing tin 

Tantalite (also locally called coltall) is the 

ore containing tantalum 

tantalum and tungsten (now often referred to 

as the '3Ts'} and gold. The terms 'blood minerals' and 'conflict minerals' became regular 

features in the media, and orga.nizations such 

as The Enough Project launched a powerful lob~ 

by in the Unitt'<! States to push for legislation to 

control mineral sourcing in the region. 

Private Industry and 

Government React 

Consumer companies and industry associations 

were highly sensitive to the negative publici· 

ty and took steps to respond. Notable among 

these steps were the actions of the Interna~ 

tional Tin Industry Association (JTRI), which, 

later joined by the Jntemationai Tantalum 

Association ("t.I.C.}, began deve1oplng a due 

diligence and traceability mechanism to enable 

their members to buy so-called dean miner~ 

als from the region. This was the start of the 

JTRI Tin Supply Chain Initiative (i'fSCi). At the 

same time, the Electronic Industry Citizenship 

Coalition (EIGCJ and the Global e-Sustainability 

Initiative (GeSI} started to work on a mechanism to control minerals entering their supply 

chains from metal smelters, called the Conflict 

Free Smelter Program (CFSP), 

In 2010, the powerful NGO"led lobby achieved 

a significant milestone. The Dodd-Frank 

Wall Street Reform and Consumer Protection 

Act, passed by Congress in July of that year" 

contained a specific sec! ion on conflict minerals. Dodd-Frank Section 1502 directs the u.s. 

Securities and Exchange Commission (SEC) to 

require companies publicly traded on u.s. stock 

markets to disclose thdr use of the 3Ts or gold 

if the mineral is "necessary to the functionality 

or production of a product!' Companies must 

ensure that minerals in their supply chain are 

110t produced under conditions of conflict, 

do not fund conflict and are not connected to 

lmmanrightsabuses. The regulatiQn applies to 

minerals coming from the DRC or any adjoining 

'(;;;1t~n it a !O<:al name fM ore tonlillll!llg the mllleril!s columblum {al~o knovm as nlob!um} and tantalu~n The n<~me come~ from the abbrevlatloo of co!umbo-t~mta!it"!'. 

UNCONFLICTED 2015 
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country.lThe SEC rules were aligned with the 

Organization for Economic Cooperation and 

Development's (OECO) Due Dlligence Guidance 

for Responsible Supply Chains of Minerals from 

Conflict· Affected and High· Risk Areas (also 

known as OECD DDG). 

The Impact of Dodd-Frank 

and Efforts to u~rn'"'" 

ln the Great Lakes region of Mrita, mining of 

tin, tantah1m and tungsten has been carried 

out for decades under varlous systems and at 

various scales. ln the colonial era, industrial 

tln mines existed in many areas. However, 

these feU into disrepair and decay in the latter 

decades of the twentieth century. When Dodd· 

Frank was passed, all mining of the sTs in the 

region was being carried out on anartisanal 

basis using rltdimentaty tools and manual 

labor, orin some cases with a degree of mecha" 

nization and investment by small~scale mining 

companies, although stU! using manual labor. 

Some mines were reportedly controlled by state 

and non-state armed groups, or their minerals were assumed to be financing conflict and 

human rights abuses, But many others with no 

connection to conflict were merely providing a 

living for miners, traders .and their families. 

Dodd-Frank caught the region- including the 

DRC, Rwanda and eight other countries- off~ 

guard and unprepared. The law was drafted 

without consultation with governments in the 

region and with no mechanisms or resources 

in place to help them cope with the immediate 

and massive impact on their minerals indusUNCONFL1CTED 2015 
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tries. Economies with no connection to the 

targeted conflict were among those affected, 

'I' he power of Dodd-Frank created bewildef'-

mentin central Africa, with miners asking, 

How can an American law <lie tate bow we work 

in Africa? Locally, Dodd-Frank is often ref€rred 

to as "Obama's Law:· Dodd-Frank did not have 

the support of the United Nations, was not 

developed as a multi-country treaty or agree~ 

ment, and does not have legal jurisdiction in 

the DRC or other affected countrie-s. Despite 

this lack of local legitimacy, the legislation has 

had enormous influence, Dodd-Frank did not 

need the cooperation of the DRC to achieve its 

goal; it pulled the powerful lever of the market. 

End-user industries faced negative pressure 

from NGOs and lobby grottps and reputation 

and brand risks, as well as legal reporting re~ 

quirements, costs of compliance and penalties 

for failure to dean up their supply chains. The 

easiest response was to cut~~ central African 

material from their products, and this is what 

many chose to do. 

UNCONPLfCTED 2015 

The immediate impact was the threat of a 

de-facto embargo on the sector if mineral 

buyers suspended their trading relationships in 

the region. !he livelihoods of tens of thousands 

oftin, tantalum and tungsten miners and other 

operators were at risk, with no warning or 

explanation. No alternative employment was 

offered. 

iT SCi Launches 

lt was against this background that iTSCi start· 

ed operations. The system had been in development by ITRI and others be-fore2009 based 

on United Nation Group of Experts reports and 

ITRI's desire to improve artisanalminingareas 

-a large and important part of the tin business, 

There was also an assumption that regulation 

was coming and industry needed to get ahead 

of it to maintain local markets and livelihoods. 

ITRI teams visited 31' mines, studied supp-ly 

chains" identified local partners, held negotiations with governments in the region, and 

developed documentation to comply with 

anticipated regulations. 

iTSCi was designed as an industry-led, holistic 

system to deliver due diligence and mineral 

traceability. It conformed to OECD DDG, Dodd· 

Frank and, critically, requirements oftheCFSP 

smelter audit process that had been developed 

by EICC and GeSL 

Beginnings of Pact's 

Involvement 

In early 2010, ITRI and Pact entered into a 

partnership for the field~lcvel implementa~ 

tion ofiTSCi. The system was piloted in the 

DRC in May of that year1 just before passage of 

Dodd*Frank. Ironically, the pilot v;as halted 

immediately after the passage, as DRC Presi· 
300 


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dent Joseph Kabila suspended aU mining and 

mineral exports from eastern DRC for a period 

of several months. 

Rwanda was the first country in the Great Lakes 

region to commit to large-scale implementation 

ofi'I'SCi. Starting in December 2010 (before 

CFSPcame into force in AprlJ 2011), the country 

quickly moved to have an of its 3Ts mines covered by the system. This alone was a remarkable step, as popular opinion was that Hwanda 

had few, if any, mines. This myth was dispelled 

when more than soo were visited and recorded 

in the course of start-up baseline studies. In 

the DRC, also just before CfSP came into force. 

the southern province ofKatanga implemented iTSCi with funding from local businesses 

and the Development Bank of Southern Africa 

(DBSA). Within months~ dozens of mines and 

thousands of miners were working again in 

Katanga. With considerable awareness already 

raised in the tin industry, buyers transitioned 

smoothly to the iTSCi system. Motorola Solu~ 

tions set up a project to engage tantalum buyers 

in a direct~purchase, "closed· pipe" supply 

chain through the Solutions for Hope (Sffi) 

initiative at one conflict-free mine in Katanga 

using theiTSCi system. Electtonic components 

supplier Kemet set up a similar project in Ka· 

tanga usingiTSCi. These efforts helped signal 

to consumer~focused, end-user industries that 

resumption of tantalum purchases from the 

region was possible. 

Mineral traceability in the eastern DRC provinces of South Kivu and Maniema followed, when 

the Dutch Ministry of Foreign Affairs (DMFA) 

gave funding for startup in South Kivu in 2013 

through the Conflict Free Tin Initlativi':' {CFTI). 

More support came from local businesses, 

especially in Maniema. The start of activities in 

the volatile province of North Kivu in 2014 de· 

pended entirely on local business investment. 

It was only in 2015 that the program could be 

launched in the critically important Walikale 

area ofNorth Kivu, which was the subject of 

much attention during the pre-Dodd· Frank 

ronllict minerals campaign, 

Startup in Burundi took several years and was 

finally achieved in2014 with the support of 

the national government, local businesses and 

the World Bank. In 2015, the DMFA committed funding for three years of expansion plus 

strengthening of the iTSCi system. 

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The Impact of Dodd-Frank 

There inevitably have been negative reper4 

cussionsofDodd-Frank. These include loss 

oflivelihoods with resulting economic hard~ 

ship, the cost and time needed for compliance 

and heavy burdens of reporting and audits. 

An entirely new industry has sprung up for 

researchers, consultants, auditors and others who deliver a new suite of services to the 

"conflict-free" mineral market. A plethora of 

systems and services are offered to companies 

to handle SEC reporting with initial compliance 

costs estimated to reach between $8 billion and 

$16 billion,3 dwarfing the sum available for upstream implementation. The annual s<:hedule 

of meetings, forums, conferences and work~ 

ing groups tHl these issues is a full one. Easily 

accessible mines suffer from "conflict~mineral 

tourism," with some receiving12 to 15 visits per 

month from researchers, journalists, activists, 

NGOs, government delegations, donors and 

authorities. 

However, despite these unresolved issues and 

frustrations, it is important to note that DoddUNCONFLICT£D 2015 

.Frank, coupled with the iTSCi system, has had 

a remarkable impact in the region. 

Mines in remote areas where exploitation and 

abuse went unrecorded are now operating under government supervision and are regularly 

checked to ensure that no armed groups are 

benefitting, This rnarks a huge achievement 

and has been extremely impmtant in delivering security to remote parts oft he DRC. Local 

stakeholder committees have been established 

with mandates to work with communities to 

resolve dispute-s tela ted to the system. Accurate 

data arc available on miners and in productiOJ1 

and export levels, enabUng governments to 

improve their management of the sector. Hun· 

dreds of local businesses that were operating 

under the radar five years ago are now reporting on their efforts to implement international 

standards for responsible operations, Tens of 

thousands of people are making a living and 

working in safer conditions, supporting hun· 

drcds of thousands of people in the region. 

This level of uptake and change would not have 

happened if adoption had been discretionary. 

The change came about because the market demanded lt- because Dodd-Frank demanded it. 

How the Works 

iTSCi is a comprehensive due diligence and 

mineral traceability system that in<:entlvlzes 

positive change in the Great Lakes region by 

providing information on dean minerals. en· 

abling acct'Ss to international markets. Through 

its various components, indudingstringent 

membership standards, audits, baseline studies 

of mines, mineral tracking, data analysls and 

incident monitoring, iTSCi has created sacure 

mines that are free of the presence or influence 

of armed groups and in which human rights 

abuses are rare, recognized, reported and 

resolved. 
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201$ 
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The field components ofiTSCi include: iden· 

tification of conflict-free mines and mineral 

trade routes; engagement of local stakeholders 

in monitoring th-eir status; mineral tracking; 

mineral production and trade data collection; 

mineral sampling; and a mechanism for ind· 

dent reporting and resolution. Data collected in 

the field is entered into a centralized database, 

which provides complete chain~of-custody in· 

formation from mine to smelter. iTSCi involws 

a multi-step mineral tagging and tlata collect! on 

process implemented by three govermnents 

in the Great Lakes region and designetl to be 

entirely absorbed into the normal management 

practices of government mining services. iTSCi 

provides complementary services relating to 

due dil!.g.encc on coo1panles, 1nanagernent 

of data within the supply chain and forCFS 

audits, as well as indepenrlent governance 

assessments, company audits (carried out by 

ITRI's partner, Synergy Global Consulting) 

and a dispme resolution proces.<:> through an 

ombudsman, Foley Hoog LLP in Washington, 

D.C. iTSCi also has an advisory board comprised 

of experts in conflict minerals, including Globa1 

Witness. 

The iTSCi program is successful due to the combination of these essential components and is 

UNCONPLICTED 2015 

designed to achieve sustainable self~financing 

when operating at scale. 

In sum, as illustrated at leO:, the iTSCi program 

is funded by industry and implemented by governments in the region. under the monitoring 

and training of civll society. Each mmponent is 

essential to the effective implementation of the 

program. 

iTSCi operates under memorandums ofun· 

derstandingwith the governments of the DRC, 

Rwanda and Bunmdi.ln aU countries~ iTSCi 

mineral tagging and data collection is carried 

out by government agents. This is essential to 

local ownership and to reinforcing the authority and resources of the state_. strengthening 

good governance and ensuring sustainability 

of the system. i'I'SCi is designed to build the 

capacity of goverrnnent agencies and workers, 

strengthening good governance and enabling 

mineral traceability to be absorbed into the 

normal functioning of state mining services. 

Pact is ITRt's partner for field implementation 

ofiTSCi and supports the governments of the 

DRC, Rwanda and Burundi in the daily manage~ 

ment of mineral traceabllity and facilitation of 

participation oflocal civil society in monitoring 

the iTSCi process. In the field, working with 

local partner NGOs, Pact pn;vides training and 

ongoing support to government agents who are 

active at three major points along the domestic 

supply chain: the mine and washing/processing 

point, the intermediate trading point and the 

point of expott. Minerals are tracked and data is 

collected at each ofthese points by the relevant agents. The primary agencies involved in 

implementing iTSCi are: 

• DRC: the small-scale mining service, SAESS~ 

CAM; the Division of Mines~ and the mineral 

export ceftification authority, CEEC. AU 

of these are in the Ministry of Energy and 

Mines. 

• Rwanda; The Geology and Mines Department 

(GMD} of the Rwanda Natural Resource Au-
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46 sites, 43 acttve 38 

15 sitos, 14 ~ctlyo 89 

990 

*Pactfiguros.Mtyetwr!fiedhyiTRI 'Lat~ndl~dMarth1014 •latmthedAprl!10f4 

thority{RNRA}, which is part of the Ministry 

ofNatural R-esources (MINIRENA}. 

• Bunmdi: The Ministry of Energy and Mfnes. 

Pact also supports partner governments in fadl· 

itating multi-stakeholder consultation meetings-at national, provincial and local levels. 

At these meetings, other government services 

are represented including dvilian and military 

secmity forces and local and traditional au~ 

thorities~ During these meetings, stakeholders 

including: miners, traders, companies, security 

services, m:lning services, local administration 

and civil sodetydiscuss issues related to the 

mining sector, They also implement mitiga~ 

tion measures to lower risks offraud,conflict, 

human rights violations or other abuses in the 

mineral supply chain. 

As of April2015, there were 30 national, pro~ 

vincial and local committees overseeing the 

inlplementation of the program and following 

up on risks in the supply chain. 

iTSCi uses an incident matrix: to identify and 

categorize by severity violations of the system 

and abus~s that occur in mining areas or during 

transport. These incidents may include infractions oft he tagging system, security problems, 

instances of corruption or human rights violations. Every incident is recorded and examined 

using the OECDTisk assessment and mitigation 

model for progressive movement. 

iTSCi is designed to operate as a sustainable 

self-financed system through a levy paid by 

mineral exporters. The levy is paid per tonne of 

metal contained in each tonne of ore covered 

by the system and varies by mineral. Howev~ 

er, the time lag from mine to smelter can be 

considerable, and local exporters have struggled with years of embargo. Loss of earnings 

have limited their cash flow to restart business, 

Therefore, iTSCi needs external donor support 

to get the system up and mnning- to prime the 

pump, so to speak- before levies can be collected, iTSCi is a noHor-profitsystem in that it 

covers its operating costs and nothing more. 

UNCONFLICTED 2015 
305 


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10 

iTSCi now has 231 members. This is an extreme~ 

ly important factor in the system's success. 

About 67 percent are local businesses that justa 

few years ago were invisible to outside observ~ 

ers. These companies are working to achieve 

OECD standards in their operations to comply 

with iTSCi membership requirements, and this 

represents a sea-change in the way business is 

done in the region.lTSCi's policy ofinclusivity, 

which promotes best practice, provides market 

incentives for change and engages actors by 

bringing them in from the cold, has been critical to its success. 

The Current Implementation of 

lTSCi in Numbers 

Five years after the first iT SCi pilot was 

launched in Nyabibwe, South Kivu, there are 

now 1,326 identified mlne sites in the iTSCi 

program in the DRC, Rwanda and Burundi (of 

which more than soo are currently active as 

of the date ofthis report). lnMarch2015, there 

were more than Bo,ooo miners participating ill 

the program. Mines provide employment for 

many additional individuals who transport, 

process and trade minen1ls and other goods 

and services. Jfthey are counted, along with 

immediate dependents of miners- conservatively estimated at five: per miner- the total 

number of people whose livelihoods have been 

t)NCONFI.lCTED 2015 

safeguarded by the iTSCi program is estimated 

to approach 1 million. This number does notre· 

fleet the development of communities around 

mining hubs, the inclusion of which would con~ 

siderably increase the total numberofindirect 

beneficiaries of the program. 

ln 2013, it was estimated that 1,395 metric 

tonnesofthe3TS were produced within the 

iTSCi program on a monthly basis. In 2014, this 

number increased to 1,793 metric tonnes. So 

far in 2015, production figures have dropped 

somewhat as there has been a significant drop 

in the price oft in due to reduced international 

demand. This is not related to conflict~free 

mineralssourdngissues but is a global issue 

affecting tin production woddwide. 

The latest analysis of the international mineral 

trade estimates that 87 percent ofDRC cassiter· 

ite and 92 percent of central African cassiterite 

came from a mine that was formally included 

in the iTSCi program. Percentage coverage of 

tantalum and tungsten trade Is expected to be 

similar, although it is more difficult to define 

precise figures for those metals. Added to this, 

the trade has generated legal taxes paid to governments in the region. 

Current Challenges for the 

iTSCi System 

Over the years, despite its importance for local 

communities, the lTSCi program has faced challenges, 

The ITSCi program had to cope with the 

mobility oft he sector. as artisan a! miners 

frequently move among sites looking fur better 

opportunities. This means that new baselines 

are always required for mines, yet there are 

limited resour~s for this kind of repeat activ· 

ity. Artisan a! miners lack proper equipment 
306 


99780.273

to maximize production, but funding fort he 

system depends on production levels. resulting 

in difficulty achieving financial sustalnabil· 

ity. Solutions undertaken by the iTSCi team 

have induded expansion oft he program and 

motivating other acrors in the supply chain 

(such as mtne owners and mineral traders) to 

pwvide more equipment tOr miners. However, 

prob1ems remain in places such as Manlema 

and Burundi where low production levels make 

economies of scale difficult. 

With expansion of the program to North and 

South Kivu, the level ofrequired monitoring 

of the se£:urity and human rights situation at 

mines and along transport routes is high. While 

this monitoring is essential for every mine in 

the program to stay conflict free, it comes at 

a cost. The iTSCi team has also reinforced its 

anti-smuggling work and is in the process of 

starting a partnership with a I oral NGO to carry 

out a whistle-blowing mechanism to reinforce 

iTSCi's efficiency in reporting and following up 

on incidents along the supply chain. 

other challenges indude difficulty transmitting data from remote sites, missing or illegible 

information and limited numbers of available 

government agents, some of whom are not consistently paid. Continued retraining of government agents is necessary, although many have 

become experts in traceability procedures. The 

introduction ofdec:tronk data collection and 

transfer is helping, but it is not an ideal solution 

ln all areas and comes with additional costs. 

The Next Five Years 

Five years after Dodd-Frank, the landscape for 

the 3Ts in the Great Lakes region is dramaticaUy 

differ-ent th~n it was In July 2010. At that time, 

there was a palpable desperation about what 

was going to happen and extreme frustration 

that regulation was being forced upon the 

region against its wilL Today, these frustra· 

tions persist, yet the bf'n('fitsofDodd-Frank 

are visible and tangible, with transparency in 

a prevjously Qpaque sector and security as the 

norm rather than a distant aspiration. 

The current reality of visible, identifiable mines 

where government agents arc present and dvll 

society is monitoring security is an exceptional 

platform for strengthening security and good 

governance in the milling sector iu the region. 

There is enonnous opp01tunlty to invest in 

local monitoring committees, to strengthen 

government capacity and to address other challenges in the mining se<:tor by partnering witll 

and building on the n~twork of traceability and 

on-the-ground field teams. 

So what do the next five years hold? 

Leveraging and Expanding Security 

Zones 

To date, there has been a failure to routinely 

connect broader security processes with what is 

being achieved in the mineral sector. The value 

of these monitored oas-es of security should be 

built upon for effective scaling-up of stabilization. Unless this happens, 3Ts sites will remain 

islands of secmily in a landscape of conflict. 

Dodd-Frank is based on the expectation that 

cleaning up the minerals sector wlll result in 

less conflict in the-region, However, this is not 

automatic. It requires an integrated, coordinat~ 

cd and large-scale approach. Imagine the illegal 

trade as a balloon: Squeezing one part simply 

pushes air into another part. As conflict has 

gone down at 3Ts mines, it has increased for 

gold, charcool and other natural resources. 

UNCONFLJCTEb 2015 ll 
307 


99780.274

12 UNCONFLIC1'ED 201S 

Strengthening Governance in the 

Mining Sector 

Important efforts are being made to improve 

governance in the sector, and this is a key area 

for further development in the coming years. 

The PROMINES project oft he govemment of 

the DRC and World Bank is supporting the ar· 

tkulation of appropriate policy and building of 

essential capacity to manage the artisanal min· 

ing sector, as well as supporting interventions 

such as the registration ofartisanal miners. 

The government of Rwanda has articulated. its 

vision for the formal development of its sector 

with impressive commitments to business 

resources, investment and gender equity. 

The government ofBurundl is undertaking 

measures to facilitate and accelerate access to 

licenses for artisanal miners. The World Bank 

Js supporting Pact and the government ofBu~ 

rundi to usc mineral traceability as the basis for 

revenue transparency with a groundbreaking 

project to implement the Extractive Industries 

Transparency Initiative {ElTl) using iTSCias its 

base. All of these are building on the basis of 

vibrant, formal trade that has been facilitated 

by mineral traceability. 

Formalization of Artisan a! Mining Even though iTSGi is creating safer mines 

where miners work free from abuse and preda~ 

tion by armed groups, their working and living 

conditions in many mines remain pitiful. Some 

local companies and cooperatives ate making 

real efforts to improve their mining operations, 

but these are the exception, Artisanal mining 

remains blisteringly hard manual labor carried 

out with little consideration for health and 

safety. The legal status of many mlners is, at 

best, fragile. The sector is under·resourced 

and performs poorly in terms of efficiency and 

productivity. 

Jt will be a game-changing achievement if ef· 

forts to dC"liver conflicHn~e minerals become a 

stepping stone to a comprehensive process for 
308 


99780.275

the fom1allzation of artisa:nal and small~scale 

mining in the region. Tlm ultimate goal is to 

strengthen legal, safe and secure artisanal and 

small-scale mining under an appropriate policy 

framework that allocates resource rights and 

access, with investments to make it an effective, eftkient and resllient livelihood for the 

men and women of the region. 

Greater Regional Collaboration Three countries in the Great Lakes region are 

u-sing the same system for tracking their mineral flows. This presents an important opportunity for regional collaboration and cross~border 

strengthening. 'l'he International Conference on 

the Great Lakes Region UCGLR) is the primary 

mechanism for collaboration between these 

countries on natural resource flows, and iTSCi 

is integral to the ICGl.R Regional Certification 

Mechanism. Improved data sharing, tax harmo· 

nlzation, customs integration and related activities can build on the shared system currently 

in operation. 

Incorporating other countries into the shared 

process will also strengthen regional coordina· 

tion of natural resource governance and flows. 

Uganda, Tanzania, Republic of Congo and 

Zambla are natuml points for expansion of a 

unified due diligence and traceability system in 

the region. 

The DRC, Rwanda and Burundi have all made 

great etrorts to turn an nbligation into an 

opportunity. Each one of these countries is 

using iTSCi as a means to extend the reach of 

their mining services, to gain visibility into 

their mining sectors_. to attract new investment 

to the country and to generate taxes for the 

national treasury. The conilicHree minerals 

agenda is creating opportunities for the mining 

sector to develop. Importantly. the inclusion 

of civil society in the process of developing 

new policies has become the norm through 

multi-stakeholder monitoring ofiTSCt As due: 

diligence and traceability become the at"cepted 

standard, their relative importance will reduce 

as other mineral sectoral governance issues 

come to the forefront. 

Local Ownership A key part ofPact's vision for the coming years 

is that our involvement will be reduced. This 

is Pact's signature approach, which focuses on 

building the capadtyoflocal partners in government, business and civil society so that over 

time they can sustain the work with true local 

ownership, independent of international NGO 

support. We believe that our success comes 

from creating an environment in which we are 

no longer needed. However, our ability to with· 

draw depends on several factors: donor investment in capacity building to allow responsible: 

transfer of duties to local partners ln a timely, 

planned manner; the confidence of international markets in local partners; and the context of 

the legislation and market changes. 

Ongoing Challenges 

Many reports about the region focus on diffi· 

cuttles and challen!,TCS. While these indeed exist 

a11d should not be downplayed, they are not the 

only story, A concerted effort focused on collective commitment to improvement by strengthening systems that includes some celebration 

of positive change could make an important 

contribution to donor and industry confidence 

in remaining cngah'':ed in the region. 

The idea of altemative, competing traceability 

systems is sometimes proposed. However, the 

practicalities of having multiple systems oper~ 

UNCONVLICTF.D 2015 13 
309 


99780.276

14 

ating should be evaluated, as this could lead to 

exporters and other industry actors effectively 

paying for multiple sets of compliance, cost 

barriers to participation for miners, govern» 

ment agents expected to cover two or more 

UNCONFLICTED 201S 

systems, mineral mixing at depots becoming 

impossible (so only closed pipe monopolies 

can operate, rather than an open market) and 

a breakdown in the integrity of having a single 

system across the region's borders.ln the next 

five years, a consolidation of progress and a 

strengthening of a single system for the 3Ts, 

operating in partnership with national govern~ 

ments and lCGLR, can be a n~allty if aU actors 

agree to focus on strengthening what already 

exits. 

The issue of mineral fraud in the Great Lakes 

region persists as a point of concern. However. 

it is important to note the difference between 

mineral fraud (illegal or criminal activity) and 

conflict minerals (an issue specific to Dodd~ 

Frank and or:cO). Any system for mineral 

traceability will focus specifically on the 

minerals moving through its processes and 

cannot be held accountable for operations that 

choose to ronduct business outside the system. 

Expansion of traceability so that it is available 

in aU sites on an equal basis will go a long way 

toward reducing incentives for fraud. 

Despite the success seen in the 3Tssupply 

chain, gold remains a challenge. Dodd-Frank 

aspires to control gold but is probably not the 

most appropriate instrument. A reassessment is 

required to design an approach that is grounded in the realities of the international gold 

market and local supply chains. The approach 

should bring local industry, intermediate 

traders and all other local actors to the table 

and be rooted in business barriers and incen~ 

tives. Treating gold traceability as agovemance 

project will have only limil>O!:d success; gold 

traceabl!ity needs to be framed as a busines..<;. 

opportunity and should embrace the concept of 

inclusion, which has been an important factor 

in the 3Ts transformation. 
310 


99780.277

New legislation will be enacted by the European Union, and perhaps also by Canada and 

others, in relation to conflict minerals. It is 

important that there ls a reasonable degree of 

coherency among the various instruments to 

avoid delivering mixed messages and allowing 

for so-called compUance shopping as miners, 

traders or illegal actors seek to find opportuni· 

ties and loopholes. 

lntemationaJ supply and demand, mineral 

prices, competitive sources, new conflicts, 

changes in government, geopolitical priorities 

and other macro-level issues all will continue 

to shape the context in whkh mineral sector 

interventions occur. These factors will contribute to determining the relevance and success. of 

Dodd~ Frank in Africa. What is sure is that the 

last five years have delivered huge 11pheaval, 

extraordinary change and unexpected benefits 

ln equal measure. The next flve may be even 

more dramatic. 

Conclusion and 

Recommendations 

ln considering how different actors and sectors 

can consolidate andscale·up the success of 

conflict-free programs in the region, the following-points arc raised for consideration. 

Governments in the region should embrace 

opporumities for sectoral governance that are 

presented by the new dynamics related to con· 

met-free mineral markets. Governments must 

also recognize that systems depend on gen· 

uine security in mining regions and credible, 

coordinated effort to address violations of the 

system and mineral fraud. Market confidence 

is relatively fragile and is knocked by media 

reports ofviolence, NGO reports of fraud and 

other negative storles. The governments ofthe 

DRC, Rwanda and Burundi need to make all 

possible efforts to maintain market confidence 

by ensuing rigor in the credibility of the system 

and integrity in the actions of their agents as 

well as penalizing infractions in a timely and 

appropriate manner. 

External governments in their capacity as bilateral donors should also determine how their 

development resources can strengthen and 

expand achievements to date. Seed funding for 

the final stages of expansion of3Ts traceability 

is still needed. Investment in security interventions, social opportunities and needs and 

bettt:r local business services and opportunities 

all will make major contributions. Artisanal 

and small-scale mining is a ctitkally important 

rural livelihood in the region,. and investment 

in mal<ingitsafer, moreeffident, and more 

productive, coupled with initiatives to reinvest 

mining rev!!nues into improved income·gener· 

at!ng activities, are desperately needed. 

For companies, the most :important point is 

to remain engaged. Compliance takes time, 

costs money, absorbs staff and creates legal 

and mputational risks. Committing to source 

minerals from the remote artisanal mine oft he 

Great Lakes region is not necessarily the easiest 

option, but it is the right one. The successes 

that have been achieved in terms of improved 

security can only be maintained by ongoing 

markel engagement that demonstrates and 

delivers peace dividends to aU. 

There are key technical, organizational and 

soclal issues still to be addressed as a matter 

ofpriority, although it must be noted that this 

could increase operating costs.. In considering 

how donors and downstream actors might add 

value, attention shoukl be given to: Occupational Safety and Health (OSH) to improve 

working conditions in mines; the eradication 

oft he Worst Fomts of Child Labor (WFCL) from 

mines; technical and financial assistance to 

miners, along with support for organization 

tJNCONFLfCTEn 2015 15 
311 


99780.278

16 

and representation; and gender equity in the: 

sector. 

There are challenges in asking companies to 

go beyond compliance and add social value 

to their purchasing activities. Social program· 

ming by upstream businesses ln the region 

does occur, both as part of managing local 

stakeholder relations as well as ensuring that 

these companies can meet local social invest~ 

me11t obligations. However, some downstream 

companies are also engaging with the social 

agenda. Qualcomm Technologies, Inc, is sup~ 

porting improved OSH through development 

of an appropriate curriculum to be rolled out 

in iTSCi mines. Boeing, General Electric and 

Microsoft have made significant contributions 

to pilot projects to eradicate child labor from 

mines in the DRC in line with the requirements 

of the m:cn guidelines. If more companies 

could make conm1itments to support collective 

efforts for social benefit, the impact could be 

significant and would further galvanize local 

support for traceability. 

Media, researchers, NGOs, lobby groups and 

others have an important role to play. Lobbyists successfully brought the issue of conflict 

minerals to the attention of policy makers, as 

shown by the enactment of Dodd-Frank. As a 

1esult, huge efforts have been made to develop 

conftict,free mineral supply f'hains, and for 3Ts, 

the vast majority of these minerals in the region 

are now formal, traceable and conflict-free. 

iTSCi handles 35,000 transactions per week 

to enable 400 metric tonnes of dean minerals 

to enter the intemational market every week, 

However, this side ofthe story gets very little 

attention in a region where too often good 

news is no news. Reports still focus on prob· 

lems and often report them at a disproportionate scale and out of context. Jnfoonation and 

observations that would allow the systems to 

be strengthened would be immensely valuable 

if shared in the spirit of improvement. 

UNCONFLICTED 2015 

Closing Thoughts 

Pact did not support the passing ofDoddw 

Frank. Wewere-deeplyroncernedaboutits 

likely negative impacts on the already impov~ 

erished and vulnerableminersoftheGreat 

Lakes region and the lack of resources available 

to respond to this new' legislation. However, 

we are now the first to say that it has had a 

profoundly important impact in the region. Yes, 

it has caused hardship and created costs and 

burdens, and it is too broad in reach and inap~ 

proprlate in some parts ofits focus. But without 

it, we simply would not have seen the massive 

change that has come about. 

iTSCi was developed by industry in partnership 

with the governments of the region. When 

Dodd-Frank was enacted, iTSCi was ready as 

a viable, effective solution to enable respon~ 

sible mineral sourcing to take pla-ce. Through 

the implementation ofi'fSCi, Pact Jsproud to 

report that, today, tens ofthousands of miners 

are working in hundreds of conflict-free mines 

supporting hundreds of thousands of people. 

Artisanal mining is still hard and dangerous 

work, but it is an essential livelihood without 

which these miners and their families would 

be in even worse poverty. Hundreds of com~ 

panies in the region are seeking to adhere to 

international standards of operation :and to be 

credible suppliers to the international market. 

They bear considerable costs and participate in 

audits and reviews to do this, but they do it to 

safeguard their operations ami the jobsufthousands of people they employ. The governments 

ofthe DHC, Rwanda and Burundi have made 

enormous efforts to comply wlth international 

expectations and every day hundreds of their 

agents carry out the tasks necessary to trace 

huge volumes of minerals from remote mines. 

They a reusing the system to improve the gov~ 

ernance of their mineral sectors and to increase 

their national revenues. 

There is a remarkable-success story to teJl in the 

Great I.akes region of central Africa. Of course 
312 


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there are challenges. as no system is perfect. 

But collaboration to strengthen the system can 

contribute enormously to our vision of a time 

when we would no longer need to categorize 

minerals as •conflict free'- as this would be the 

norm, not the exception. 

UNCONFLfCTED 2015 17 
313 


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18 UNCONFI.!CTED 2015 
314 


99780.281
315 


99780.282

EUSGS 

science for a changing world 

An Exploration in Mineral Supply Chain Mapping Using 

Tantalum as an Example 

ByYadira Soto-Viruet, W. David Menzie, John F. Papp, and Thomas R. Yager 

Open-File Report 2013-1239 

U.S. Department of the Interior 

U.S. Geological Survey 

Dissemlnoted by Winning Strategies Woshington, on ogenl of o foreign prindpo/. Addill'onolin/otmolion 

Is on ftle with the Deportment of Jus6<e. 
316 


99780.283

U.S. Department of the Interior 

SALLY JEWELL, Secretary 

U.S. Geological Survey 

Suzette M. Kimball, Acting Director 

U.S. Geological Survey, Reston, Virginia: 2013 

For more information on the USGS-the Federal source for science about the Earth, 

ils natural and living resources, natural hazards, and the environment-visit 

http:Jiwww.usgs.gev or caii1-888-ASK-USGS 

For an overview of USGS information products, induding maps, imagery, and publications, 

llisit hltp:JAwm.usgs.gcvlpubprod 

To order this and other USGS informal'on products, llisit hUp:Jistore.usgs.gcv 

SUggested citation: 

Soto-Viruet, Yadira, Menzie, W.O .. Papp, J.F., and Yager, T.R., 2013, An exploration in mineral supply chain 

mapping using tantalum as an example: U.S. Geological Survey Open·file Report 2013-1239, 51 p., 

http:l/pubs.usgs.gcv/of/2013112391. 

Any use of trade, firm, or product names is for descriptive purposes only and does not imply 

endorsement by the U.S. Government. 

Although this information product, for the most part, is In the public domain, it also may contain 

copyrighted materials as noted in the text Permission to reproduce copyrighted items must be 

secured from the copyright ovmer.Conlents.Contents. 
317 


99780.284

Contents 

Physical Properties of Tantalum .................................................................................................................................... 2 

World Mine Production .................................................................................................................................................. 2 

Tantalum Refined Products and End Uses .................................................................................................................... 3 

Production of Mined Tantalum Minerals ........................................................................................................................ 3 

Tantalum Processing Plants .......................................................................................................................................... 5 

Supply Chain for Tantalum ............................................................................................................................................ 6 

Tantalum Capacitors ...................................................................................................................................................... 7 

Discussion and Conclusions .......................................................................................................................................... 8 

References Cited ........................................................................................................................................................... 9 

Figures 

1. Chart showing percentage of mined tantalum produced in the world in 2011, by country .............................. 14 

2. Chart showing refined tantalum (Ta) products, intermediate products manufactured from them, 

and the final goods produced .......................................................................................................................... 15 

3. Significant tantalum (Ta) mines in the world ................................................................................................... 16 

4. Prospective tantalum (Ta) producers in the world ........................................................................................... 17 

5. Significant tantalum (Ta) fabricators and refineries in the world ..................................................................... 18 

6. Chari showing the relationship of selected tantalum (Ta) mines (or source materials) and processing 

facilities and their refined products ................................................................................................................. 19 

7. Chart showing tantalum (Ta) refineries in Japan and their products ............................................................... 28 

8. Chart showing selected tantalum capacitor manufacturers ............................................................................. 29 

Tables 

1. Significant tantalum mines .............................................................................................................................. 30 

2. Prospective tantalum deposits and producers in the wo~d ............................................................................. 36 

3. Significant tantalum plants .............................................................................................................................. 39 

4. Locations of tantalum capacitor manufacturing facilities for three leading manufacturers .............................. 42 

5. Product name, description, and applications for selected tantalum capacitors produced by AVX Corp .......... 43 

6. Product name, product description, and applications for selected tantalum (Ta) capacitors produced by 

KEMET Corp .................................................................................................................................................. 44 

iii 
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99780.285

Conversion Factors 

Silo !ncb/Pound 

kilomeccr (km) 

meter(m) 

Multiply 

square kilomect~· (km2

) 

sqtc1J'< kilomeltl' (lan2

) 

mesagraru (Mg); rnecrie con (t) 

metric con per year 

gram per metric con (gil) 

By To obtain 

Leoglh 

0.6214 mile (mi) 

1.094 yard (yd) 

/Ilea 

247.1 acre 

0.3861 squore mile (mi2

) 

Mass 

1.102 con, short (2,000 lb) 

1.102 Con per year (c/yr) 

0.03215 troy ounce per short con 

Temperature in degrees Celsius (•C) may be converted to degrees fahrenheit (•f) as ronows: 

•F:(1.8x•C)+32 

iv 
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An Exploration in Mineral Supply Chain Mapping Using 

Tantalum as an Example 

By Yadira Soto-Viruet, W. David Menzie, John F. Papp, and Thomas R. Yager 

This report uses the supply chain of tantalum (Ta) to investigate the complexity of mineral and 

metal supply chains in general and show how they can be mapped. A supply chain is made up of all the 

manufacturers, suppliers, information networks, and so forth, that provide the materials and parts that go 

into making up a final product. The mineral portion of the supply chain begins with mineral material in 

the ground (the ore deposit); extends through a series of processes that include mining, beneficiation, 

processing (smelting and refining), semimanufacture, and manufacture; and continues tlu·ough 

transfonnation of the mineral ore into concentrates, refined mineral commodities, intermediate forms 

(such as metals and alloys), component parts, and, finally, complex products. This study analyses the 

supply chain of tantalum beginning with minerals in the ground to many of the final goods that contain 

tantalum. 

One of the great difficulties to overcome in mapping a supply chain is lack of transparency in the 

chain-whether it is related to the locations and types of facilities, the materials that the facilities 

consume and (or) produce, the facilities' production capacities, or the users ofthe products produced. 

Not knowing this information presents a significant barrier to understanding the risk of dismption in 

supply. Also, the geographic distribution of facilities may increase the risk of supply dismption if those 

facilities are dependent on the same infi·astmcture. 

Supply chain mapping and analysis are tools used to identify the risks of dismption in supply. 

Each of the facilities that provide key components, perform pmticular processes, or produce goods is a 

node on a supply chain map; linkages between nodes are material flow paths. The supply chain nodes 

and paths constitute the S\lpply chain stmcture. Singular nodes in a supply chain are unique facilities 

that provide a key component or perform a key process in the production of a good; they are sometimes 

called "pinch points." 

Disruptions in a supply chain can occur when there is a significant change in the supply structure; 

the likelihood and possible magnitude of a dismption are determined in part by the characteristics of the 

chain. A supply chain with multiple facilities that perform each production process or that possess unused 

capacity (redundancy) is likely to be less subject to dismption-and to be more resilient····than a chain in 

which only one facility is able to perform a part of the production process or when the facilities in the 

chain are all operating at full capacity. Although there are significant benefits to redundancy in a supply 

chain, the cost of building and maintaining redundancy may be large enough to lead organizations to 

forego those benefits. Failures of production at singular nodes are more likely to cause disruptions in the 

production of a final good than are failures at redundant nodes. Singular nodes in the supply chain of a 

good may be difficult to identify, and failures of singular nodes can have smvrising results. Multiple 

linkages suggest redundant material supply routes, implying a more robust supply chain. 

A recent example of supply chain dismptions involving the failure of a singular node was owing 

to a natm·aJ disaster--the magnitude 9.0 earthquake and associated tsunami that struck 

Northern Honshu, Japan, on March ll, 2011. The earthquate and tsunami caused widespread 
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devastation across the region, as tens of thousands of people were killed, hundreds of thousands of 

homes were damaged and (or) destroyed, and the commercial operations of firms were intem1pted. The 

ea1thquake also disrupted a number of supply chains, so study of the event can provide some 

perspectives on supply chain disruption. 

Northern Honshu is home to a large number of significant mineral production facilities, 

including nine cement plants, eight iodine plants, four iron and steel plants, four limestone mines, tln·ee 

copper facilities, two gold refineries, two lead refineries, two zinc refineries, one titanium dioxide plant, 

and one titanium dioxide sponge plant. Damage from the event resulted in a significant reduction in 

Japan's mineral production. Production of high-purity aluminum, cadmium, smelted and refined copper, 

and nickel in fell"onickel was reduced by more than l 0 percent, while production of ferroalloys, gold, 

lead, steel, silver, and zinc decreased by lesser amounts (Menzie and others, 201 J; Kuo, 2013). 

Much ofthe reduction in production was owing to the reduced availability of electricity and 

damage to impo1tant infi·astructure, such as roads and ports, which affected the operations of many 

facilities. In some cases, damage to facilities affected only a particular site. In one case, damages to a 

singular node had surprising results. Titanium dioxide is used to make paint, and, because of the 

widespread use of paints, there are many such plants. Therefore, one would not have expected 

far-reaching consequences to result from damage to a single titanium dioxide plant. The plant in 

Northern Honshu, however, was the sole supplier of black and red paints used by Ford Motor Co. 

(United States) for a large number of it.~ vehicles. The damage to the titanium dioxide plant interrupted 

the production of red and hlack vehicles of cettain models until substitute paints could be identified. In 

this instance, the titanium dioxide plant constituted a singular node in the production chain {Naughton, 

2011; Kuo, 20 13). 

Physical Properties of Tantalum 

Tantalum is a transition metal with physical and chemical properties that are very similar to 

those of niobium. A refractoty metal, tantalum is ductile, easily fabricated, resistant to C0!1"osion by 

acids, and a good conductor of heat and electricity. Tantalum is also characterized hy high melting and 

boiling points of2,996 degrees Celsius eC) and 5,425°C, respectively. The abundance of tantalum in 

the Earth's cmst is 0. 7 parts per million. Tantalum does not occur naturally as a free metal; however, 

tantalum occurs in a range of oxide mineral species, including ixiolite, microlite, tantalite, tapiolite, and 

wodginite. Tantalum-bearing mineral deposits arc found in igneous rocks, which include carbonatites, 

granites, pegmatites, and syenites (British Geologica! Smvey, 2011; Papp, 2012a; Roskill Information 

Services Ltd., 2012). 

World Mine Production 

In20ll, world mine production of tantalum increased by 7 percent to 706metric tons (t) from 

660 tin 2010. Rwanda accounted for 27 percent of total mine production in 2011; Brazil accounted for 

20 percent; the Democratic Republic ofthe Congo [Congo (Kinshasa)], 15 percent; Ethiopia, 

14 percent; China, II percent; Mozambique, 6 percent; Nigeria, 5 percent; and Bunmdi, 2 percent 

(fig. l; Mobbs, 2012; Papp, 2013; Tse, 2013; Yager, 2013a--c). 

The leading producers of tantalum have varied considerably since 2000. Australia, which was 

the leading producer from 2001 through 2008, ceased production in 2010, although it continues to have 

large resources of tantalum. For most years between 2001 and 2013, Brazil was the second ranked 

producer of tantalum. Since 2007, the proportion of production coming from Central Afi·ica has 

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increased. In 2011, production from Central Africa accounted for more than 40 percent of world 

production (Papp, 2009,2010,2011, 2012b). 

Tantalum Refined Products and End Uses 

Products made of refined tantalum include carbides, ingots, oxides, powders, and metal 

products, including plates, sheets, rods, and wires. Major industries that consume tantalum include the 

automotive, ceramic and surface coating, chemicals, constmction, engineering, electronics, medical, and 

metallurgical industries, as well as the military. The electronics and metallurgical industries are the 

leading users oftantalum. The electronics industry accounts for about 50 to 60 percent of tantalum 

consumption, and the metallurgical industty accounts for aboul20 percent of consumption. In the 

electronics industty, capacitors, which arc the largest single end use for tantalum, accounted for about 

40 percent of total tantalum consumption in 20 II. Tantalum capacitors are intermediate manufactured 

products that are used in a variety of final goods, such as automotive electronics, cell phones, hard disc 

drives, light-emitting diodes, and personal computers. In the metallurgical industry, tantalum 

superaltoys are used mainly in aerospace applications (such as jet engine blades) and land-based gas 

turbines. These superalloys contain from about 3 to 11 percent tantalum. Metallurgical products include 

sheets, plates, welded tubes, rods, and wires. These products account for about 8 to II percent of 

tantalum consumption (Roskill htformation Services Ltd., 2012). Figure 2 shows the relationship among 

refined tantalum products, intemtediate manufactured products, and final (consumer) goods. 

Production of Mined Tantalum Minerals 

Brazil and Rwanda, which were the leading producers of tantalum ore and concentrates in2011, 

together accounted for 47 percent of the world's mine production of tantalum. The locations of 

significant tantalum mines and prospective producers are shown in figures 3 and 4, respectively, and 

selected deposits and producing areas are briefly discussed below. Tite mines and prospective producers 

are identified in tables I and 2, respectively, along with their annual capacities, facility type, ownership, 

and status. The numbers used to identify locations in figures 3 and 4 are keyed to the "!D" in tables I 

and 2, respectively. 

Tantalum production in Australia stopped in 201 0; however, Australia contains large resources 

of tantalum in the Greenbushes and the Wodgina deposits, and production is expected to resume in the 

future. Green bushes is located about 250 kilometers (km) fi·om Perth in southwestern Western Australia. 

The Greenbushes Mine, which is hosted by the Archean Greenbushes pegmatite and includes surface 

and underground workings, had a production capacity of about 550 metric tons per year (t/yr) of 

tantalum pentoxide (Taz05). The Green bushes pegmatite contains significant resources of lithium, 

tantalum, and tin. The Greenbushes operations include a crusher and primary and secondary processing 

plants, which produce concentrates (Partington, McNaughton, and Williams, 1995; Global Advanced 

Metals Pty Ltd., 2013a). 

Global Advanced Metals Pty Ltd. (GAM) has also mined tantalum at its Wodgina operation, 

which is located about 100 km southeast ofPort Hedlaud in the nm1hwestern part of Western Australia. 

Wodgina had a production capacity of about 250 t/yr of Ta20 5 from tantalum-bearing pegmatite at the 

Mount Cassiterite and the South Tinstone open-cut mines. The Wodgina deposit is hosted in the 

Archean North Pilbara Craton, which contains at least 120 pegmatites in more than27 pegmatite 

groups, including the Wodgina (albite type) and the Mount Cassiterite (albite-spodtuncnc type) 

pegmatites, which contain high-grade tantalum mineralization. The Wodgina processing plant produces 

primary tantalum concentrate grading between 8 percent and 19 percent Ta20 5, which is transported to 

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Greenbushes for secondary processing (Sweetapple and Collins, 2002; Global Advanced Metals Pty 

Ltd., 2013d). 

Galaxy Resources Ltd. of Australia owns the Mt. Cattlin Mine, which is located about 2 km 

north of Ravensthorpe in Western Australia and has a production capacity of about 25 t/yr ofTa20s. 

Tantalum ore from Mt. Cattlin is initially processed at the Grecnbushes secondary processing plant 

(Global Advanced Metals Ply Ltd., 2013a). 

In Brazil, tantalum production comes largely from the Volta Grande and the Pitinga deposits. At 

Volta Grande in southern Minas Gerais State, a field oflarge pegmatitcs is associated with early 

Proterozoic granite along the southern margin of the Archean Sao Francisco Craton. Tl1e pegmatitcs are 

zoned and contain abundant spodumene. The Volta Grande Mine produces ceramic feldspar, niobium, 

tantalum, and tin. The tantalum capacity of the Volta Grande Mine is about 25 t/yr oftantalum 

concentrate. At the Pitinga deposit in Central Amazonas State in northern Brazil, Paleoproterozoic 

volcanics of the Iricoume Group and U111pi Fonnation are intruded by granite plutons of the Madeira 

Suite, including the Madeira and the Agua Boa plutons. The granite plutons have Rapikivi and biotite 

granite phases as well as significant metasomatic and hydrothermal alteration. The Pintinga Mine, 

which is operated by Minera<;ao Taboca S.A., has an ammal capacity of about 91 t ofTa205 (180 t of 

tantalum concentrate). The company mines columbite ore at the mine and produces a 

ferroniobiumtantalum alloy that contains 45 percent niobium, 25 percent iron, and 4.2 percent tantalum 

and is used as a raw material in the production of niobium and tantalum oxide (Lagache and 

Quemeneur, 1997; Borges and others, 2009; Pohl, 2013; Minera<;iio Taboca S.A., 2013). 

The Tanco deposit, which was a leading producer of tantalum fimu 1969 to 1982 and has a 

histmy as a smaller producer since then, is located in southeastern Manitoba Province, Canada. At 

Tanco, tantalum has been produced from several zones within a pegmatite. Recently, the capacity of 

Tanco has been about 80 tlyr ofTa20 5 (Thomas and Spooner, 1988). 

Central Africa-specifically Bumndi, Congo (Kinshasa), and Rwanda-was the source of more 

than40 percent (more than 300 t) of world primmy tantalum production in20ll. In recent years, 

tantalum and tin have been mined from alluvial and elluvial deposits; however, in the past, lode deposits 

were mined. The lode deposits are principally quartz veins and pegmatites associated with a series of 

late- to post-orogenic granites that intmde the Kibara belt, which extends from Katanga Province and 

Kivu Province in Congo (Kinshasa) into parts of Burundi, Rwanda, and Tanzania, as well as Maniema 

Province in Congo (Kinshasa). Many of the pegmalites are thought to be small deposits; however, a 

large zoned pegmatite has been identified at Manonn (Pohl, 1994; Kokonyangi, 2004; Dewaele and 

others, 20 10). 

The Yichun tantalum-niobium-lithium mine is hosted by a small body of topaz-lepidolite granite 

that is a fl-actionatcd phase of the Yashan batholith in Jiangxi Province, China. The Yichun deposit is 

the best known of China's tantalum deposits. In Ftyian Province, the Nanping pegmatite field also hosts 

tantalum-niobium-tin mineralization (Yin Lin and others, 1995; Yueqing and Wenying, 1995). 

In 2012, Gippsland Ltd. of Australia held 50 percent interest in the Abu Dabbab tantalum-tin 

deposit in joint-venture with the Egyptian Mineral Resomces Co. (50 percent), which is located 770 km 

south of Cairo (Petra Capital Pty Ltd., 2012, p. 6). Also in 2012, resources at Abu Dabbab were 

estimated to be 44.5 million metric tons (Mt) at an average grade of 250 grams per metric ton (g/t) 

Ta20s and 90 g/t tin (Petra Capital Pty Ltd., 2012, p.12). Abu Dabbab is a fine-grained cassiterite and 

niobium-containing tantalite deposit hosted in altered granitic rocks. The ore zone is about 

400 meters (m) long and 200m wide and has a depth of 400 m fi·om the maximum surface elevation 

(Petra Capital Pty Ltd., 2012, p. 12-13). The deposit is controlled by a northwest-trending shear zone 

and intersecting north-east structures. The deposit is expected to produce about 420 t ofTa20 5 in 2016 

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(Petra Capital Ply Ltd., 2012, p. 3). In 2010, Gippsland signed an offtake agreement with H. C. Starck 

GmbH of Germany, which included the purchase of about 300 t/yr of contained TazOs for a period of 

10 years (Petra Capital Ltd., 2012, p. 5). Each of the two companies in the joint-venture also held 

ownership (50 percent each) in the Nuweibi tantalum-tin-feldspar deposit. Indicated and inferred 

mineral resources at Nuweibi were estimated to be 98 Mt at average grades of l43 g/t TazOsand 92 g/t 

niobium (Petra Capital Pty Ltd., 2012, p. 4). The company expected to produce of about 52 t ofTazOs in 

2015 and 427 I ofTaz05 in 2016 (Petra Capital Pty Ltd., 2012, p. 4). 

The Kenticha Mine, which is operated by Ethiopian Mineml Development Share Co. (EMDSC), 

had an annual capacity of about 90 t oftantalmn (which could produce 200 t/yr oftantalite concentrate 

grading 45 to 60 percent Ta20 5). The open pit mine is located about 550 km south of Addis Ababa and 

is hosted by the Kenticha pe~matite field, which is granitic pegmatite that covers an area of about 

2,500 square kilometers (km ). At Kenticha, the tantalum-bearing pegmatite deposit is exposed in an 

area that is more than 2 km long and 400 to 700 m wide (Mining Journal, 2011, p. 8; Geological Smvcy 

of Ethiopia, 2012, p. 3). The project produces tantalum concentrates composed of colmnbite-tantalitc 

and other tantalum oxides. In Febmary 2013, EMDSC (through its subsidiary Iris Mining Pic) and its 

strategic tantalum partner H. C. Starck submitted an Expression oflnterest to the Privatization and 

Public Enterprises Supc•vising Agency to further develop the Kcnticha Mine. Under the proposal, the 

companies would increase the tantalum reserves, create 12,000 jobs directly and indirectly, and produce 

high-end products, such as 99-perccnt-purity tantalum penloxidc powder and capacitor-grade tantalum 

powder (Business Wire, 2013). The EMDSC envisioned production of 600 t/yr oftantalite-columbite 

concenlmte; however, no further details as to when these developments might take place were available. 

The company expected to add hundreds of tons of production from artisanalmines and local 

cooperatives (Eienilto Minerals & Mining, 2013). 

Noventa Ltd. of the United Kingdom through its subsidiary Highland African Mining Co. Ltd. 

operated the Marropino niobium and tantalum mine, which is located about 350 kmnmthcast of 

Quelimane, Zambezia Province, Mozambique. The mine had an annual production capacity of about 

140 t of contained Ta205. The company's project is hosted by the Marropino pegmatite, which is a 

zoned lithium-rare-metal pegmatite of the lithium-cesium-tantalum family. The Marropino deposit is 

exposed for a strike length of about 800 m and a width of about 200 m. The company reported that there 

is an increase in the tantalum grade toward the center of the deposit. The known mineralization at 

Marropino is limited to the current area of mining and processing. As of 2010, indicated mineral 

resources at Marropino were estimated to be 7.40 Mt at an average grade of 223 gil Ta20 5 (Hains and 

Mounde, 2010, p. 3, 5). 1n20!0, Noventa signed a 3-year offiake agreement with H. C. Starck for the 

sale of a substantial portion of its projected production of tantalum concentrate. During 2010, Noventa 

began shipment of material from the Mozambican Port of Quclimanc to Nacala, Thailand, and to the 

United States (Noventa Ltd., 2011, p. 10, 12 ). 

In Russia, tantalum has been mined at the Lovozerskoye deposit on the Kola Peninsula and the 

Etykinskoye deposit of the Zabaykalskiy mining and beneficiation complex from a massif of nepheline 

syenite that is enriched in elements, including beryllium, lithium, niobium, tantalum, thorium, rare-earth 

elements, zirconium, and volatiles, such as chlorine and fluorine. The combined capacity of these two 

deposits is estimated to be about I 0 t/yr of tantalum ore (Smimov, 1977). 

Tantalum Processing Plants 

As of2012, at least 10 international companies were engaged in some stage of post-mining 

tantalum production. Tantalum refiners included Advanced Metallurgical Group N.V. of the 

Netherlands; GAM of Australia; H. C. Starck of Germany; and Chinese companies 
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Congua Tantalum & Niobium Smelter, Jiangxi Tungsten Group Limited Corp., King-Tan Tantalum 

Iudustty Ltd., and Ningxia Non-Ferrous Metal Smelter. Tantalum fabricators included Austrian 

companies Plansee SE and Treibacher lndustrie AG; Heraeus Holding GmbH of Germany, and 

U.S. companies KEMET Blue Powder Corp. and Molycorp Inc. 

Figure 5 shows the locations of significant tantalum fabricators and refineries. The fabricators 

and refineries are identified in table 3, along with each facility's annual capacity, facility type, 

ownership, and so forth. The numbers used to identify locations in figure 5 are keyed to the "ID" in 

table3. 

In January 2012, GAM completed the acquisition of the supcrmetals business of Cabot Corp. of 

Boston, Massachusetts, which included tantalum-processing plants in Boyertown, Pennsylvania, and 

Aizu, Japan. The company integrated the two processing plants with its existing mining and processing 

operations in Australia. GAM produces tantalum capacitor powders and metallurgical products at its 

Boyertown plant. Tantalum is often alloyed with tungsten, which improves its mechanical propCities 

and strength but retains the fabricateability of pme tantalum. GAM's tantalum metallurgical products, 

which may be produced as foil, sheet, plate, wire, rod, !ttbe, and metallurgical-grade powder, include 

ttmgsten alloy containing 2.5 percent tantalum and tungsten alloy containing 10 percent tantalum. The 

company's primary tantalum concentrate supply was the Wodgina Mine in northwestern Western 

Australia (Global Advanced Metals Pty Ltd., 2012; 2013 a-c; Roskil! Information Setvices Ltd., 2012). 

In Fcbruaty 20 12, the capacitor manufacturer KEMET Corp. of Greenville, South Carolina, 

signed an agreement to acquire Niotan Inc. of Carson City, Nevada, which had been a significant 

supplier of tantalum powder to KEMET for several years. The Niotan tantalum fabrication facility was 

renamed KEMET Blue Powder. KEMET reported the acquisition to be part of its strategy to secure and 

stabilize its supply of tantalum raw material. In March 2012, the company also reported exclusive rights 

to secure raw material fi·om Tantalite Resources of South Africa, which is a new supplier that would 

process conflict-fi·cc ore from the Kisenge Mine in Katanga Province in Congo (Kinshasa) (KEMET 

Cot1l., 20!2a, c; Roskill Information Services Ltd., 2012). 

In 20 l I, Molycorp Inc. of Greenwood Village, Colorado, acquired a 90 percent interest in the 

AS Silmet facility located in Sillamae, Estonia; this facility is one of the leading producers of tantalum 

metal in Europe. The processing plant manufactures tantalum hydroxides, oxides, and metals (Molycmp 

Inc., 2011 ). 

King-Tan Tantalum Industry Ltd. produces tantalum bars, carbides, ingots, oxides, and powders. 

King-Tan, which is located in Jiangxi Province, China, sells its products to domestic and international 

customers, including customers in Germany, Japan, Singapore, and the United States (King-Tan 

Tantalum Industry Ltd., 2009a, b). 

Supply Chain for Tantalum 

The tantalum supply chain begins with the mining of ore and ends with the manufacture of 

consumer products or goods. The supply chain includes the mines, smelters, and refineries identified in 

figures 3, 4, and 5 and tables l, 2, and 3 and extends downstream to include fabricators and 

manufacturers of intermediate and consumer goods, of which the significant ones are identified in 

figure 5 and table 3. Any dismption along the supply chain can result in higher prices that could affect 

many industries and, potentially, the availability of final goods. Identifying connections between the raw 

materials and the downstream entities that produce products that contain tantalum is critical to mapping 

the supply chain and analyzing the likelihood of supply disruption. 

Sources of tantalum include artisanal mining, conventional (surface and underground) mining 

operations, and the recovery of tantalum from slag fium tin smelting operations and from scrap 

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recycling. Based on data from Roskill Information Services Ltd., mining opemtions accounted for about 

74 percent of the tantalum supply in20ll, followed by 18 percent from scrap recycling and 8 percent 

from tin slags (Roskill Inf01mation Services Ltd., 20 12). Conventional hard rock mines around the 

world include surface and underground mines in Australia, Brazil, Canada, and Russia. Production 11-om 

Burundi, Congo (Kinshasa), and Rwanda is mostly from artisanalmining of placer deposits. After the 

extraction of the raw material, the ore is physically concentrated by gravity separation and then 

processed by a smelter and refinery to obtain refined products, which include tantalum metals, oxides, 

and powders. Fm example, portions of tantalum concentrate mined from the Kenticha, the Volta Grande 

(Fluminese), and the MatTopino Mines were sent to H. C. Starck in Gennany for refining into tantalum 

fabricated products, such as foils, ingots, plates, rods, sheets, and tubes, and tantalum powder and 

compounds, whicl1 included carbides and oxides. 

Figure 6 shows examples of the relationsl1ips among selected tantalum producing mines or 

source materials, and processing facilities and their refined products for selected countries. Those 

entries for which the information given is speculative or uncertain are marked with a question mark. 

Figure 7 lists tantalum processing facilities in Japan along with the refined products they produce. 

Tantalum Capacitors 

One of the main uses oftantalum is in capacitors. Capacitors are used to store electrical charge 

for later usc and are common to all types of electronic equipment, including that used in automobiles, 

cameras, computers, engine management systems, light-emitting diodes, and cell phones and other 

telecommunications equipment. The authors identified 25 companies engaged in the manufacture of 

tantalum capacitors: including Ningxia Orient Tantalum Industry Co. Ltd. of China; NEC TOKTN Corp. 

of Japan; Samsung Electro-Mechanics of the Republic of Korea; and U.S. companies AVX Corp., 

KEMET, and Vi shay Intertechnology Inc. (fig. 8). As of 2012, leading tantalum capacitor producers 

included A VX, which accounted for about 30 percent of the total market value, KEMET, NEC TOKTN, 

and Vishay. A VX manufactures tantalum capacitors for automobile, aerospace, and medical 

applications (KEMET Corp., 20 12a, c; Roskill Information Services Ltd., 20 12; A VX Cmp., 20 13a). 

Table 4 presents the location of the facilities at which AVX, KEMET, and NEC TOKIN 

manufacture tantalum capacitors. AVX and KEMET each have five manufacturing sites, and NEC 

TOKTN has seven sites. All three companies have facilities in geographically diverse areas. 

A VX produces about 10 different series of capacitors, which are used in a variety of aerospace, 

medical, and military applications (table 5). KEMET's product list includes 85 capacitor series. Series 

differ based upon a number of characteristics, including composition of the capacitor, electrical 

characteristics, reliability, the temperature at which they will operate, and how they may be mounted in 

a product (table 6). 

Clearly, there are a large number of manufacturers, facilities, and types of capacitors. The large 

number of producing companies, manufacturing facilities, and types of capacitors contributes to the 

complexity of estimating the probability of a disruption of the supply of final goods that contain 

Ta-bearing capacitors. One would need to understand the relationship between manufacturing facilites 

and the types of capacitors tl1ey produce to evaluate the likelihood that a disruption at a plant might 

diswpt production of final goods that usc a particular type of capacitor. Further, one would need to 

know if the type of capacitor used in a particular product could be replaced by one of the many other 

types of capacitors. The large number of potential combinations of plants, capacitor types, and potential 

substitution between types of capacitors makes estimation of the probability of dismption of a supply 

chain a! the stage of capacitor manufacture a daunting task. 

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Discussion and Conclusions 

The present investigation of the supply chain of tantalum, although only partial with regard to 

the products that use or depend on tantalum, the facilities that manufacture tantalum-containing 

products, and which products can substitute for one another, demonstrates several important points and 

provides some perspectives concerning the strategies that might be employed to map supply chains. 

First, supply chains, when considered in their entirety (from material in the earth to the final consumer 

product), are incredibly complex, and reducing this complexity to a manageable level requires clearly 

defined questions that partition the complex supply chain into manageable parts. For example, questions 

about how a disroption in the supply of a key input may affect the availability of end products that use 

that input will be quite different than questions about what is the likelihood that a particular good could 

suffer a particular supply disruption. In the former case, the level of complexity at the beginning of the 

supply chain (mining and initial processing of mineral material) is relatively limited, as mining and 

mineral processing sites are relatively few and knowable. The number of final goods, their component 

parts, and the facilities in which they are manufactured is considerably larger, however. If supply chain 

disruption is approached from the end of the chain-that is, if one wants to know what is the likelihood 

that there will be a disruption in the availability of a particular final good-the number of final goods 

one must analyze is reduced but the number of initial mineral materials that must be considered will be 

large. Although one may limit the complexity by focusing on one pmt of the chain based upon the 

question asked, the complexity in other parts of the supply chain may not be reduced. Defining the 

question clearly still may not reduce some types of complexity, such as the number of particular 

products and the extent to which tl1ey can substitute for one another. A supply chain "map," then, must 

be designed to answer patticular questions, and those questions will determine the level of detail that the 

supply chain map needs to contain to answer the questions. This is very much analogous to the approach 

used with topographic and geologic maps, which, depending on tl1e scale of the map, contain more or 

less detail about land forms and geology of the mapped entity. To detennine the likelihood that the 

supply chain of a particular product could be dismptcd, a very detailed analysis of the supply chain 

involving all materials and their subsequent transfonnations and potential substitutes is necessary. Such 

an analysis is expensive to perfonn and can become obsolete if part of the production process for that 

good changes, and so, a detailed map of a supply chain is usually not available. The question then 

becomes at what 'scale' a supply chain map can be prepared that will be of use in evaluating the 

vulnerability of supply chain disruption without f\illy mapping the chain. 

In the case oftantalum, there are a few mines that produce tantalum minerals; however, those 

mines supply several processing facilities, directly or tln·ough traders. Refined mineral products are 

finthcr processed to make chemicals, metals (or alloys), or simply a more-refined mineral (that is, 

greater purity and (or) more controlled physical properties, such as particle size). Metals and chemicals 

can go through sel'eral steps while being inCOl})orated into a product, and the number of facilities 

involved often increases. So, tantalum starts with a few facilities (mines), passes through a complex web 

of facilities, and then becomes incmporated in a large number of products. The increasing number of 

facilities, material paths, and buyer-seller needs (as they relate to material requirements) result in greater 

complexity as one moves down the supply chain fi·om mining to consumer product. 

At some point in the supply chain, material requirements are replaced by perfonnance criteria, 

which further complicates analysis. Take, for example, the large number of tantalum capacitors 

described in the capacitor section of this rep01t. Looking backwards through the supply chain (that is, 

from product to material source) is a useful way to analyze risk. Bear in mind, however, that not all 

supply paths are connected or overlap. Materials in the early part of the supply chain (for example, 

minerals) have more possible uses than materials at the end of the supply chain (for example, cell 
327 


99780.294

phones and turbine engines). As a result, a supply disruption at the beginning of the supply chain can 

have a broader effect as material changes paths among processing facilities than would a supply 

disruption at the downstream end of the supply chain. On the other hand, a downstream interruption 

affects fewer products. It is possible that certain products depend on materials that follow a path through 

one facility, making that facility critical to that product; that is, a "pinch point" in the supply chain. 

Many supply chain maps produced to date have focused on the front end of the chain; that is, the 

extraction of mineral materials and their initial processing, and provide a list of final goods that may 

contain those materials (European Commission Enterprise and Industry Directorate, 20 I 0). Such an 

approach typically focuses on the degree of concentration of the production of mineral materials. This is 

useful for identifying those materials that are more likely to be subject to dismption. These maps, 

however, provide only very general information about the downstream parts of the supply chain. What 

is needed is infonnation that could be applied to a number of different end products. One such approach 

would be to gather information on key technologies that are used in a large number of final goods. This 

approach still entails considerable work as the situation with tantalum-containing capacitors 

demonstrates. It can, however, provide information on the downstream parts of the supply chains of a 

large number of final goods. It can also map which products are connected to which mines tlu'Ottgh 

which processing facilities. 

Another issue is how best to present information about material flow that is useful in identifYing 

risk and is understandable. In this report, maps show geographic facility location and charts show 

connections between producers and in the supply chain that may be linked by ownership, investment 

connection, and (or) purchase contracts. 

Other factors that contribute to supply risk but that are not included in this report are commercial 

infrastntchtre (for example, competent manpower, electrical power supply, and transportation) and good 

governance (for example, the legal infrastructure and the business friendly nature of the geographic 

area). 

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9 
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99780.295

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10 
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99780.296

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ll 
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12 
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13 
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Figure 1. Chart showing percentage of mined tantalum produced in the w01id in 2011, by country. The amount of 

contained tantalum in the ore totaled 706 metric tons. Data are from Mobbs (2012), Papp (2013), Tse (2013), 

and Yager (2013a-c). 

14 
333 


99780.300

Fl.\'AL GOODS 

(COXSl'liER J>KODl'CIS) 

Culting: tools 

Computer hard disks{6% Ta shape memory) 

"==========j~::;::::----;:=.:::;:::::==~~~--~E.'>;pi~tt~~ :~t:C:i:;i~!~ for >.;: SputJering tar8ets[tbin 

coatmgsofTa.Ta20s, orTal'4" (tantalum nihide) or semiconducton to pre\'el\t 

copper migration] 

P~;~~~~~!~::h~it:!s, 1-----------------;r~placef:;b:~~~~!~~·sten(s 

HigbNtemperature furnace parts 

Inkjet printers, lenses for 

1!------------------1 eregl~~li~:~~~=:~deras, 

'k===~======d X·ray film 

Ta capacitors 

lt'------1Ta capa~~~hfe~f~:ortrays 

'k=:====d 

Tantalum powder 

Ta capacitorsinolher 

equipment 

Medica! appliances (hearing aids and pacemakers) 

Lig.htNemitting diodes 

Portable electtooics (la,~;~tops. celt phones, ,;deo cameras, sttll cameras) 

Autos [anti-!ockbraking system (ABS), ai~ acli\-alion,. engine 

regulation, Global Positioning System 

(GPS)J 

Figure 2. Chart showing refined tantalum (Ta) products, intermediate products manufactured from them, and the 

final goods produced (British Geological Survey, 2011; Tantalum-Niobium International Study Center, 2013). 

15 

99780.301 ~N ttr'N ,., ,.... . ... ,,., ,., " .r ""' TA .. ~Z.:\.'"tt..o\ , .. IXPL&"''hflO)! !0 Mine -

0 l~~p:ro4udng COlU

0 Son~tnrt:al'l'lltl pro-ducing a

Figure 3. Significant tantalum (Ta) mines in the world. Insets A an B show the location ofT a mines in Burundi, the Democrat

of the Congo [Congo (Kinshasa)], and Rwanda in detail. The numbers used to identify locations are keyed to the "ID" in tab

16 

99780.302

w;·w ,_,.. ..... 

. ..., 

W-' 

WI! 

tM'!! 

A 

CliiNA .. n 

,.s ~':'> •10 

::rw "'"' WI! '""" ,..,.. L'G'L~"( A!IOOi 

• Ptosp-ea.ir<etutdmtt prcdttetr 

0 l"lo$Jtec.1:i'«t:u.ttabtm .. producitt;eonatrid 

0 Countrienot prnrptctir~fortattlunt pnldudon 

.. 1 

• ~.::\ 6P 

Figure 4. Prospective tanlalum (Ta) producers in the world. Inset A shows the locations of prospective producers in China in detaiL 

numbers used to identify locations are keyed to the "ID" in table 2. 

17 

99780.303

1.:.}-1: 1~~-v VN 

''), 1;:l~ 1~ 1~~ A 

"" 

!S"N 

.... 

.s 

<:llU.t\.W 

,,.. ,.,.. 

EXPLA..'UJ:ION 

A R.dhJ.n;y 

Bf:fllhri=tol' 

0 Tnulunl ... pro-i!ttclngC®.ntrits 

0 !'ioa..t:Jrntaiwu If1:'1WtUdngeut

Figure 5. Significant tantalum (Ta) fabricators and refineries in the world. Inset A shows the locations of Ta refineries in Japan in de

Inset B shows the locations of Ta fabricators and refineries in Austria and Germany in detail. The numbers used to identify locatio

are keyed to the "ID" in table 3. 

18 

99780.304

A 

ll 1Hl PROCEs=GFAcrurr 

Green bushes :\fiDe 

Sunbury, WffiemAustr.Wa 

capacitv• SSO metrietonspervear(tfvt) of tantalum pento:tide (Ta;o,) • 

Batdmn :\fine 

Kaclbalda, WestemAustnlia 

Capacity= 100 tJyrofTa;P$ 

Wodgina :\fiDcBunbury, WesternAustralia. 

capacity= :::so tJyrofTa:0.1 

Cattlil'lltine 

Rz..-e:nsthorpe, WestemAusttalia 

Capacity=2S t'yrof!a:OJ 

Chiaa? 

.Japan? 

Globa.IA4nn<:ed lletalsPtyLtd. 

Aizu, Japllll 

Capacity=NA 

GlobalAdnru::d :\fetal$ Pty Ltd. 

Pennsyl\<"ania. United States 

C3pllcity=NA 

II J

Ta tapacitorpowder 

1 1 Ta o:dde, CApacitor

Figure 6. Chart showing the relationship of selected tantalum (Ta) mines (or source materials) and processing facilities and their refine

products for mines or deposits located in A, Australia: B, Brazil: C, Burundi; D, Canada: E, China: F, Democratic Republic of the 

Congo [Congo (Kinshasa)]; G, Egypt; H, Ethiopia; I, Mozambique; J, Thailand; K, Russia; and L, Rwanda. A question mark after the 

entry indicates a probable location. Abbreviations for compounds and other terms are defined at first use in the figure. For Burundi, 

indicates combined capacity. For Thailand, theTa production capacity was estimated based on tin slag smelting operations in the 

country. 

!9 

99780.305

B 

Figure 6.-Continued 

~fATElUAI. llBRAZa 

.Pit:inga)IineAmazol1as State 

Capacity =91 t/yrofTa::O!I 

Volta Grtade lline 

Minas Gerais Stat! 

Capacity""' 136 t/yr ofTa~Os 20 

ChU.t? 

l!olycoxpSihnuAS 

Sillamae, :Estonia 

Capac:ity=NA. 

H.C. St.trek GmbH 

Germany 

Capaeity=NA 

REf'r-"ED l'll0Dt:C1S 

11---ll Tantal""' ~~;;.'~:;?giu:d Ta met

Ta carbide; Ta f\0'\·der, Ta oxides; 

lf-----11 

T~·~:~.o~.::.~:~:;

and foil; and Ta capacitors 

99780.306

c 

Figure G.-Continued 

BURti;).1>! 

:\line at Kabarore 

Kabarore.Kayant.a Province 

Estimatedcapaci.tv=6 ti'>'TOfc:olumbiam(Nb). Ta, and eolnmbiti~tantal.ite ore and concentrate l11lt~atK1}1lllZI: Produce• 

I<ayan:za Province 

Estimated.eapacity = 160tljTcfNb, Ta. and columbite·tantalitecre andconeentrate 

:\Uiles :at.Klnmdo Proliace• 

l<.h'undoPrminee 

Estimatedeapacitv=160ti\T00.'"b, Tt, and 

colmnbite·tantiliteoreaDdconcentrate 

lfiues at~gozi Pro\ince"" 

Ngo.ziP'ro\.ince 

Estimatedcapacitv=l60Vvrofl\'b, Ta. and eotlll%1.bite-tantilite ore aU4 concentrate 

21 

99780.307

D 

E 

ij l\ID"EISO'L'RCE MATERIAL CA.".4.DA 

Tanco 1\ti.ae 

:Manitoba 

Capacity ... so t/yr ofTtt~O:s Ml:\"E!Sou 

CB:!xA 

Tantalum & ~iobium MiD.t ~fille414) Figure 6.-Continued 

ll If PROCESS~GF.4.Cil.ll'Y 

Globll.Adnnc~ l:letals PtyLtd. 

PeaDSj'lvacia, United Stat .. 

c.p.city ~ NA 

Shiznishan City, N' 

c.p.city~NA 

22 

II !I RI:Fl::\<:D PRODt:CTS 

Ta oxide, ta metal ingots, and 

capacitor -gra<le !a powder R:E~ PRODUCT

Estimated production ~300tl\7 o

120 t)'l' ofT a '\\ire, 30 ti)TOfT

25 t/yr ofT a metal, nnd 6 ttyr o

Est.i:t:oatedproduction'1111350tlyr

300 t/vr of potassium floUrtm

90t ofTi p¢\\"der, and ;;o t/yro

100t/yr.ofTaoi.ides 

99780.308

F 

Ml:\"E!SOilltCE ~IATDUAL Co~mo (Kl::>tSIIASA) 

Bibatama :\11De 

Bibatama in Nord.K.iw Pro\'ince 

Ca.pacity•l::!OtJyrofNband Ta eonc:entrate 

Lues be :\tine 

NorthKivul'r<Mol:< 

Cap:1eit:t= 1,440Vyrofpyroch1Qfe 

)UnesatKalemi~l'emtory 

Kalemie, Katansa Pro\ince 

Estimated capacity= 130 tlyr ofcolumbite.tantalite 

Mi.Qes at=""yunzu Territoey 

Nl1Nyw:l4U, Katanga PtO'\'inee 

capacity= 130 tlyrofcolumbite-bmtalite 

llilles2t1\faciema 

.Mmiema, Nord-Kivu Province 

Capacity•NA 

:Mines at:\tu.ono Territoxy 

M:mono, Katanga Province 

'l.Unes tt'Xord-Ktn 

Nord.KhuProvittee 

Capacity aNA 

?!filtes :at Suet-Kivu 

Sot;!..Kivu Province 

Capacity=NA 

Figure G.-Continued 

23 

99780.309

G 

H 

Ml:'; 

EGYPT 

Abu :Oabbab Deposit 

E:q>ected initial production of 

420 or320t/yrof!a 

Keatteha :\lioe 

Addis Ababa, Ethiopia 

Capacity • 90 ti)T of! a. ll 0 ti]T ofTa:O$ 

Figure G.-Continued 

24 

l'ROCESSIXGFAcn.ITY 

Startk GmbH 

Ge:nuny 

Capacity=NA 

l'ROCESSIXG FACILITY 

R.C.Starde.GmbH 

G•rmany 

Capacity•NA 

REFD."ED PRODt;CTS 

T.a carbide; Ta J?O.;Vder, ta Qxides

I j Ta 

Ta capacitors 

REFD."ED PRODCCT

Ta ta ?0:"'-de:r; Ta o

I I 

Ta capacitors 

99780.310

I 

J 

ML\"EISOL'RCE MAtElUAL 

MOZA..,miQL'l: 

ltarropillo )tbu~ Peba:ne,:v!ozambique 

Capaeity•140t/yrofTa~Os 

1\fu.'i:/SOL'RCE :\IAT£RIAL 

TB:AII.A"\'D 

Figure 6.-Continued 

GlobalAdlueed ~:letalsPt)"Ltd. 

Pe!I!IS)'~.ma, Umted smtes lr----t 

c.paoi!y• NA 

B.C. Stuck GmbH 

25 

Gennany 

Capacity=NA 

Ta o:tide, !a met:alill$0ts, and oapacitor-grule ra po•w 

Tametalpo"'der 

99780.311

K 

MD."E/SOL'RCE 

[ -=GFA= l [ .. -,=. ::I!An:RI.o\1. RtiSS!A 

Molycorp SllmetAS 

!a hvdride, !a:os, !a metals, 

I 

Sillamae, Estonia • ingots, and eblps Capacity= NA 

Lovozersl:oye Deposit L1balllttallurgl<:a1Plaut? 

Kola Peninsula Oskemen, Kazakhstan Ta oxides and Ta capacitor ,.....,_...wfuo< \ &-..-.-uw,o< powders Ta • • Ta 

' 

SoUkamskMagnesium Works 

Sollkamsk, Rllssia Ta eompouods 

Capacity=SS 

Figure 6.-Continued 

26 

99780.312

L 

Figure 6.-Continued 

T etiml>«e Cell 

eolmnbiteGiseke :\·tine 

Nyarubuye Cell 

Xdam.a :\lice 

Rwil:UtiroCell 

c.apacitv= 11 :mel Ta, columbite-- tmta1ite ore ind concentrate 

Ruban)line 

Gishyeshye cen 

,,,,.,. 

27 

r .. --ll 

G=)1 ] 

99780.313

[[ l':ROCESSI:\'G FACll.ITY H REFI:\"ED PRODt:crs JAPA.'1 

:\1itslli:\:!WD:g ud Smelting Co. 

II ll Fukuoka Prefe<:tUr< Ta Qxide!l:. carbides, and metal Capacity= NA 

GlobllAdv:mced Met:tlsPty Ltd. 

l[ ll Aizu, Japan Ta capacitorpowder Capacity=NA 

HC StJ.rck~'V Tecb Ltd. II 

II 

Ibmki Prefec""" 

II 

Ta capocltorpowder 

Capacity= NA 

Japa.a ~·e\\-" )fetals Co. Ltd. 

\[ ll 

Akita Prefect= Ta carbides 

Capacity-:N"A 

Figure 7. Chart showing tantalum (Ta) reiineries in Japan and their products. 

28 

99780.314

Figure 8. Chart showing selected tantalum capacitor manufacturers. 

29 

:1 Others . ·11 

I ...... . li.OllllllOljl(e Philips 

Electronics N.V. 

Netherlands 

Multi Co!p Pty Ltd. 

Austr.alia 

Samsung ElectroMechanics 

RepUblic of Korea 

99780.315

Table 1. Significant tantalum mines. 

(Mine locations are shown on the map in figure 3 ..... , not applicable or no data; A, active; CM. care and maintenance; e. estimated; GL. general location; 

km, kilometer; M, mine; NA, not available; S. surface/open pit; SL, specific location; SU, surface/open pit and underground; Ta,O,, tantalum pentoxide; 

U, underground. Data are from U.S. Geological Survey Minerals Yearbook 2011, vol.lll (http://minerals.usgs.gov/minerals/)] 

Specific 

mineral 

Location Facility Mining Annual capacity Latitude Longitud<

10 Year commodity Country Location name Own~r.ship Status (d~cima! (decimal 

and(or) description type method (metric tons) degree.) degrees] 

product 

2011 Tantalum. Australi:t 60km Bald Hill tantalite M su Altura Mining Ltd.,IOO% 100 Ta~Os CM -31.672 12!.894 

bnUilitc. southeast of mine 

Ta:Os Kamb:~.lda, Western 

Australia 

20ll Tantalum, Australia 250kmfrom Greenbuf>hcs open M su Global Ad' .. ':lnced Metals SSOTazOs A ·33.857 116.051 

tantali:e, Perth pit/underground Pty Lld .. SO% and T<n.xys Ta~Os bntalite-spodumene Tantllum LP (Traxys 

mine Group),20% 

2012 T::mtalum. Austr:lia 2 km north of Mt Cattlin Mine M s G::~lllXY Resources Ltd. 2STa20.< A -33.582 120.048 

bnta!ite, Ravensthorpe 

Ta::Os. 

2011 Tant::dum. Austro!ia JOOi<m Wodgina open pit M su Global Advanced Metals 250 T:i~O~ CM -21.184 118.671 

W.ntalitc, southeast of tantalitcminc Pty Ltd .. 800/o. nnd Tmxys Ta~o~ PortHcdkmd T.ant:Aium LP (Traxys 

Group).20% 

2011 T3ntalum, Br:J.Zil Flumincnse Fluminense Mil'.O M s Compa:nhia Industrial 25 concentrate A ~2l.OS4 -44.583 

concentr:.lte Mine, Minas (VoTta Grande Mine) Fluminensc (AMG 

Gerais State Advanced Metallurgical 

GroupN.V.) 

2011 Tantalum. Brozil Pitinga Mine. The Pitinga Mine M s Minera.y5o Taboca S.A l SO concentrate A ·0.784 -60.079 

concentrate Amazonas (pri¥3te, 1000/o) 

State 

2012 Niobium Bunmdi Kabarore. Mine at Krlbarore M - Comp1oir Minier des 6' A ~2.824 29.581 

(columbium) Kayanza Exploitations du Burundi and tantahtm. Province S.A. (COMEBU) columbite.-

t:antalite,ore 

and 

c¢ncentrnte 

30 

99780.316

Table 1. Significant tantalum mines.-Continued 

[Mine locations are shown on the map in figure 3. --, not applicable or no data; A, active; CM, care and maintenance; e, estimated; GL. general location; 

km, kilometer; M, mine; NA, not available; S. surface/open pit; SL, specific location; SU, surface/open pit and underground; Ta,O,, tantalum pentoxide; 

U, underground. Data are from U.S. Geological Survey Minerals Yearbook 2011, vol. lll (http://ntinerals.usgs.gov/ntinera1s/)] 

Specific 

mineral Location Facility Mining Annual capacity Latitude Longitud

10 Year commodity Country Location name Ownership Status (decimal (decimal 

and (or) description lyfl" method (metric tons) degrees) degrees) 

product 

2012 Niobium Burundi Kayonza Mines a1 Ko.yanza M - Artisanal miners 160'· A -3.010 29.656 

(columbium) Province Province 

and tantalum, columbite~ taotalitc, OTC 

and 

conccntr:ltc 

2012 Niobium Burundi Kirundo Mines at I<.irundo M - Artis:mal miners 160~· A -2.504 30.223 

(columbium) Province Province 

o.nd tantalum, 

columbite.. 

tantalitc.ore 

and 

concentrate 

10 2012 Niobium Bur.mdi Ng:o:ti Province Mines o.t Ngo;ri M - Artisanal miners 160c,l A ~2.9t8 29.837 

(columbium) Province 

and t:mt:llurn. 

columbitetantalite. ore 

and 

conccntmtc 

11 2011 Tn;ntalum. Conadt~. Bcmicl.ak--c, TnncoML."l:c M s C:iliot Corp .. 100% 80Tnz0s CM 50.433 -95.450 

tantalitc, Mo.nitoba Ta:O~ 12 2012 Tantahc:n China Nanping. XikengMine M u - NA A 26,600 118.042 

Fujian 

Province 

13 2012 Tantalum China Yichun, Yichu.."l Tantalum & M s China Mlnmeta[s Corp., NA A 27.649 114.518 

Jinngxi Niobium Mine Jiangxi R.·u·c Earth Metal 

Province and Rare Metal~ T\mg.~ten Group Co. Ltd. 

31 

99780.317

Table 1. Significant tantalum mines.-Continued 

[Mine locations are shown on the map in figure 3. -, not applicable or no data; A, active; CM, care and maintenance; e, estimated; GL, general location; 

km, kilometer; M, mine; NA, not available; S, surface/open pit; SL, specific location; SU. surface/open pit and underground; Ta20,, tantalum pcntoxide; 

U, underground. Data are from U.S. Geological Survey Minerals Yearbook 2011, vol. Ill (http://minerals.usgs.gov/minerals/)] 

Specific 

mineral Location Facility Mining Annual capacity Latitude Longitude 

ID Year commodity Country Location name Ownership Status {decimal (oecimal 

and(or) description type method (metrk:tons) degrees) degrees) 

product 

14 20!0 Niobium Congo Blbatamain Bibatama Mine M .. Mw:mgnchuchu Hizi 120 concentrate A -1.579 28.891 

(columbium) (Kinshasa) Nord-Kivu International 

and tantalum Province 

15 2011 Niobium Congo Lueshe Mine Fluminense Mine M - Societe Minit:re du Kivu 1.440 pyroch!ore S -0.987 29.141 

(columbium) (Kinshasa} (VoltaGrnndcMinc) (Simikivu) [GfE Mcbllc 

andt::mtalum und Mo.terialien GmbH. 

70%) 

16 2011 Niobium Congo Ka1cmic. Mines at Kalcmic M - Artisan::~! miners and l30c oolumbitc-- A ~S.935 29.180 

(columbium) (Kinsho.~) Katango. Tcnitory smaH-scalo miners t::mtalitc: 

and tantalum Province 

17 2011 Niobium Congo Ny.tnzu, Mine at K:lbarore M - Artisanai miners and 130t columbite~ A ·5.943 28.014 

{columbium) (Kinshasa) Kat;1ngz,. srr.a11~sc:~lcminers to.ntaliti" 

ondtantahtm Province 

IS 2011 l\iobium Congo Manicma. Mines at Maniema M - Arti:~~.ana[ miners 311d - A -3.073- 26.041 

(columbium) (Kinshasa) Nord~Kivu small ~ru.e miners 

and t:mtahun Province 

19 2011 Niobium Congo Manono. Mines at Manono M - Artisanal miners and 1 oo~ columbitc~ A ·7.309 27.464 

(columbium) (Kinsb>sa) Kzttanga Territory sm::tll~scale miners tantalite 

n.nd tantalum Province 

20 201! Niobium Congo Nord~Kiw Mines at Nord-Kivu M .. Artisano.J miners and NA A -07.92 29.046 

(columbium) (Kinshasa) Province small-scale miners 

and tantalum 

21 2011 Niobium Congo Sud-Kivu Mines at Sud-Kivu M Artisanal miners and NA A ·3.085 2S.354 

(columbium) (IGnsha!>a) Province small-scale miners 

andtn.ntalum 

22 20!2 Tantalum. ore Ethiopia SSO km south Kenticha Mine M .. Etenito Mineral 90tanmlum A 5.454 )9.017 

of Addis Development Share Co. (current) (Expansion 

Ababa proposed by 

2017) 

32 

99780.318

Table 1. Significant tantalum mines.-Continued 

[Mine locations are shoVIIl on the map in figure 3. -.not applicable or no data: active; CM, care and maintenance: e, estimated: GL. general location; 

km. kilometer; M, mine; NA. not available: S, sutface/open pit; SL, specific location; SU, surface/open pit and underground; Ta20 5, tantalum pentoxide; U, underground. Data are from U.S. Geological Survey Minerals Yearbook2011, voL !!I (http://minerals.usgs.gov/mineralsl)] 

Specific 

mineral Location Facnity Mining Annual capacity Latitude l.ongitude 

10 Year commodity Country description Location type method Ownership (metric tons} Slatus {decimal (decimal 

aod(or) degrees) degrees} 

product 

23 2011 Niobium Mozambique 350km Marropino Mine M s Novcnm Ltd. (Highland A -16.515 3i.901 

(columbium) northeast()f African Mining Co. Ltd.) 

andtmtalum. Quclimanc, columbite- Zambezia 

tant:llite., ore Province 

and concentrate 

24 2010 Tantalum., ore RussiZI ZAbaykalskiy Etykinskoye deposit M .. 10<',) A 47.560 134.720 

mining and 

beneficiation 

complex 

25 20!0 Tantllum,oro Russia Lovozcrskoyc Lovozcrskoye: M - - A 67.333 37.000 

deposit [Kola deposit [Kola 

Peninsula] Pcninsulll] 

26 2012 Niobium Rwanda Vn.riousSitcs Artisan.:tl Mines M - Art1san!1.1mincrs 85' A -1.940 29.874 

(columbium) 

and tantalum, 

colllmbitctanUJ.!itc. ore 

and 

concentrate 

27 2012 Niobium Terimbere Cell GihingaMine M - KODUBU l$' A .. 1.936 29.500 

(columbium) 

n.ndt;:u;ta!um, 

tant::l!itc,orc 

and 

concentrate 

33 

99780.319

Table 1. Significant tantalum mines.-Continued 

[Mine locations are shown on the map in figure 3. --, not applicable or no data: A, active; CM, care and maintenance; e, estimated; GL, general location; 

krn, kilometer; M, mine; NA, not available; S. surface/open pit; SL, specific location; SU, surface/open pit and underground; Ta,05, tantalum pentoxide; U, underground. Data are from U.S. Geological Survey Minerals Yearbook 2011, vol.lll (http://minerals.usgs.gov/mineralsl)] 

Specific 

minerai Location Facility Mining Annual capacity Latitude Longitude 

10 Year commodity Counhy Loeation name Ownership Status (decimal (decimal 

and(or) description type method (mattic tons) deg,..s) degrees) 

product 

28 --2012 NIObium Rwanda 1'\yarubuye Gisckc Mine M - KUAKA w A -2.$52 29.829 

(columbium} Cell 

and tantalum. 

columbite· 

tantalite, ore 

:md 

concentrate 

29 2012 Niobium Rwtmcfu Kabageshi Cell Mason> Mine M Ets Munsad Minerals 34' A .. J.833 30.049 

(columbium) 

and tantalum. 

columbite--

tnnt:li.ite.ore 

nnd 

concentrate 

30 2012 Niobium Rwanda Ngororcno Mine at Ngororcno M Gntumba Mining 17' A -1.651 29.871 

(columbium) District District Concessions Ltd. (GMC) o.ndt:antalum. (Kivu Gatumba 36 columbitc- Resources Ltd., S l %, and 

tanbHte. ore Government. 4~/o) and 

concentrate 

31 2012 Niobium Rwru1da RuhcmbcCcll MizbiriMinc M EPROCOM1 22' A -1.651 29.871 

(columbium) 

omdtantalum, eolumbitc~ tantalitc, ore 

""d 

conccntr.ltc 

34 

99780.320

Table 1. Significant tantalum mines.-ConUnued 

[Mine locations are shown on the map in figure 3. --l not applicable or no data; A, active; CM~ care and maintenance~ estimated; GL. general location~ km. kilometer; M, mine; NA, not available; S, surface/open pit; SL. specific location: SU, surface/open pit and underground; Ta20 5, tantalum pentoxide; 

U, underground. Data are from U.S. Geological Survey Minerals Yearbook 2011, vol. !II (http://minerals.usgs.gov/mineralsl)] 

ID Year 

Specific 

mineral 

commodlty 

and (or) 

product 

32 2012 Niobium 

(columbium} 

and tantalum. 

co!umbltew 

tMttalitc, ore 

and 

concentrate 

Country 

Rwanda 

33 2012 Niobium Rwand:!. 

(columbium) 

and tantalum. 

columbitetantalitc,ore 

and 

concentrate 

Location 

desct1pt!on 

Rwikinlro Cell 

Gishyeshye 

Cell 

Location name 

NdamaMine 

RuhareMine 

1Comblned cap;~ciry of fucilities corresponding to 10 numbers 8 thtougb :0 in this mblc. 

!Combined capucity offuci!itie~ COrte$pOnding to ID numbers 16 and 17 in this tlbie, 

lcombined capacity offucilities com:sponding to JD numbers 24 and 25 in thi:~l:lblc. Facility type M M 

35 

Mining Annual capacity Latitude Longitude Ownership Status (decimal (decimal method (metric tons) degrees) degrees) 

- VISIOO-Miilingco~--- 11' A -1.3S7 30.473 

Ets Knlinda 30~ A -1.600 29.463 

99780.321

Table 2. Prospective tantalum deposits and producers in the world. 

[Producer locations are shown on the map in figure 4. -. not applicable or no data: A. active; CM. care and maintenance: D, deposit; e, estimated: 

GL, general location; km.lcilometcr; M~ mine; NA, not available; P20 5; phosphorus pentoxide; REO, rare~earth oxide; S, surface/open pit; 

SL. specific location; SU. surface/open pit and underground; Ta00 5, tantalum pentoxide; U, underground; UD, under development. Data are from 

U.S. Geological Survey Minerals Yearbook 2011, vol. lli (http://minerals.usgs.gov/minerals/)] 

Specific Annual mineral Location Facility Mining Tonnage Grade capacity Latitude Longitude 

ID commodity Countly L.ocatlonname Ownership (million me-tric (partspor Status (decimal (decimal description type method (metric 

and (or) tons) million} tons) degrees) degrees) product 

Tantalum Australia 35 kmsouth of Mount Weld D s Lynas Corp. -· - UD ·28.897 122.384 

L:lvcrton, Ltd. 

Western 

Australia 

Tantalum Austnllia Dubbo. New Dub;w ZircQnia D s Australian 73.2 0.03 Ta:O~ 600 Ta,o, A ~32.418 148.713 

S<luth Wnles Project Zirconia Ltd., 

100% {Alkane 

Resources 

Ltd.) 

Tantalum Australia. 13Skm Nolan!' Rare D s Arafura 47 2.6%REO. 200eTn.:O$ A ~23.617 133.857 

northwe.c;t of Enrth~ Project R¢Source~ 1l%Pz0$ 

Alice Springs Ud .. !OO% 

Tantalum Canada 100km >Jechillacho D u AvalonR.orc 14.5 (probable 400 Ta~Os - UD 62.096 -112.489 

southeast of R:lrC·Elll'th Metals Inc .• rCS(:rves) 

Yellowknife Element 100% 

Deposit 

Tantalwn Dnad"' 10 km north of Blue River D u Commerce 36.35 (indicated)/ 195Ta.:Os/ 27S~T:l~Os UD 52.232 -119.169 

Blue River Tamalum~ Resource 6.40MI 199 Ta,o, 

Niobium 

Project, Upper 

Corp .• 100% (inferred) 

Fir Deposit 

Tantalum Cnnada Crevier Crevlor Deposit D su MDN!nc .. 25.4 (measured 234Ta:O$ 100~ Ta:Os UD 49.500 -72.SI6 

Township.L::&c 72.5%, and and indicated)/ 1252 Ta:~Os Saint~Jeun !AM GOLD. 15.4 (inferred) 

Region 27.5% 

Tantalum China Dajishnn. Dajishru1 D - Lynns Corp, - u 24.583 114.381 

Jiangxi Deposit Lid. 

Province 

36 

99780.322

Table 2. Prospective tantalum deposits and producers in the world.-Continued 

[Producer locations are shown on the map in figure 4. -, not applicable or no data; A, active; CM, care and maintenance; D, deposit; e. estimated; 

GL, general location; Ian, kilometer; M, mine; NA, not available; P,05; phosphorus pentoxide; REO, rare-earth oxide; S, surface/open pit; 

SL, specific location; SU, surface/open pit and underground; Ta,05, tantalum pentoxide; U, underground; UD, under development Data are from 

U.S. Geological Survey Minerals Yearbook 2011, vol. Ill (http://minerals.usgs.gov/mineralsl)] 

Specific Annual mineral Location Farulity Mining Tonnage Graclt capacity latitude Longitude 

10 commodity Counl!y Location name Ownership (million metric (parts per Status (decimal (decimal 

and(or) description type mE.'thod tons) million) {metrh;: degrees} degrees} 

product tons) 

- - - .. 

Province 

Tantalum China Boluo, Bol\!o Depo.•>it D .. - - - u 23.132 113.267 

Guangdong 

Province 

10 Tantalum China Limu, Guangxi Limu Deposit D - - u 24.850 ll0.800 

Province 

11 Tantalum China Xiangdong. D - - - - u 26.492 112.911 

Hunan Province Deposit 

12 Tanta.lum Egypt 16kminland AbuDabOOb M s Tantalum 44.5 2:$0Ta:Os 420Taz0$ UD 49,500 -72.816 

from the andNuweibi EgyptJ.S.C. 

western shore project (Egypti:m. 

of the Red Sea Company for 

Minet".d Resources 

SO%, and 

Tantalum 

International 

PtyLtd .. $0% 

(Gipp.tand 

Ltd.) 

13 Tantalum Mo.lawi 150km from IU.nyika D s Globe Metals 60 - - UD -12.$13 33.460 

MttlawiCity. Niobium &Mining 

Lilongwe, Project Mzimba 

District 

14 Tantalum Mozambique Zambczi.a MorruaMinc D s Noventa Ltd. 4.6 (indicatcdY .. - CM ·16270 37.866 

Province (Highland 3.: (inferred) 

Africn Mining 

Co. Ltd.) 

37 

99780.323

Table 2. Prospective tantalum deposits and producers in the world.-Continued 

[Producer locations are shown on the map in flgure 4. -.not applicable or no data: A. active; CM, care and maintenance; D~ deposit; e, estimated; 

GL, general location; km. kilometer; M, mine; NA, not available; P20 5; phosphorus pentoxide; REO. rare-earth oxide; S, surface/open pit; 

SL, specific location; SU, surface/open pit and underground; Ta20 5, tantalum pentoxide; U, underground; UD, under development Data are from 

U.S. Geological Survey Minerals Yearbook 2011. vol. III (http://mincrals.usgs.gov/minerals/)] 

Spec if~ Annual mineral Tonnage Grade l.otitudo 

10 commodity Coontry Location Location name Facility Mlnlng Ownership (mnuonme!tic (parts per capacity Status [decimal 

and (or) description type method tons) million) (metric degrees) 

product tons) 

IS Tant:llum Mozombiquc Thmbczia MutalaMinc 0 s NovcntaLtd. - - - CM -15.930 

Province (High!:md 

Africa Mining 

Co. Ltd.) 

16 Tantalum Saudi A.~i:l. Tabuk Gh~trayyah 0 Tertiary 400 (inferred) 245Ta:.!Os 21S~ra~Os s 28.375 

T:m.talwn· Mineral:!! pic. 

NiobiumREE SO% .• AH 

Project Algosaibi 

Bros Co .. 

25%.n.nd 

A!No.hla 

Trading& 

Contracting 

Co.,25% 

38 

Longitude 

(decimal 

degrees) 

37.912 

36.527 

99780.324

Table 3. Significant tantalum plants (fabricators and refineries). 

[Locations of fabricators and refineries are shown on the map in figure 5. --.not applicable or no data;?, uncertain; A, active; e. estimated; 

F, fabricator; GL, general location; NA, not available; P, plant; R, refmery; SL, specific location. Data arc from U.S. Geological Survey Minerals 

Yearbook 201!, vol. III (http://ntinerals.usgs.gov/ntineralsl)] 

Specific mineral Annual l.ati!Ude Longitud

ID Year commodity Country Location description Location name Facijity Ownership capacity Status (decimal (decima

and(or) type (metric tons) degrees) degrees

product 

2012 Tantalum Austria Althofcn. Carint1ia Treibacher Industric AG P(F) Treib:tcher - A 46.867 14.46() 

Industrie AG 

2012 Tantalum Austria Liezen PLA..XJSEE Liezen P(F) P1ansee SE. - A 47.561 14.247 

100% 

2012 Tanulum Brazil Sao Joao del Rei. Industrial p (R) Companhia - A -21.084 -44.583 

Minas Gerais Flumincnsc Industrial 

Fluminensc 

(AMG 

Advanced 

Metallurgical 

Group N.V.) 

2012 Tant!l.lum China YeJin Rood. Ningxia Non-Ferrous P(R) Ningxia Non- 300"tantalum A 38.994 106.375 

Shlzuish:m City. Metal Smelter ferrousMet:ll powder. 

Ningxia Province Smelter 120c tantalum 

wire, 3!f tantalum 

oxide. 

2Sttmltalum 

metal. mntalum tube 

2012 Tantalum China. Shish! Industrial King;-Tan Tantalum P(R) IGng-Tan 350" tantalum A 28.256 114.777 

Zone. Yifeng. Industry Ltd. Tantalum powder. 

Jiangxi Province Industry Ltd. wire. 

30ct oxide. 

2S0 tultalum 

metal, carbide 

2012 Tantalum China Conghua. Conghua Tantalum and P(R?) Congua Tantalum so: tantalum A 23.548 113.587 

Guangdong Niobium Smelter &Niobium powder, 

Province Smelter 70" tantalum oxide 

2012 Tantalum China Jiang:d Province Jiujiang Tanbrc's Smelter P (R?) Jhmgxi Tungsten sot tantalum metal. A 29.705 116.002 

Group Limited 1 oo· tantilhun 

Corp. oxide 

39 

99780.325

Table 3. Significant tantalum plants (fabrtcators and refineries).-Continued 

[Locations of fabricators and refineries are shown on the map in figure 5 . .. ~~not applicable or no data;?~ uncertain; A, active; c .. estimated: 

F. fabricator: GL, general location; NA, not available: P, plant; R, refinery; SL, specific location. Data are from U.S. Geological Survey Minerals 

Yearbook 2011, vol. Ill (http://minerals.usgs.gov/mineralsl)] 

Speclflc mineral Annual latitude Longitu

10 Year commodity Counby Location description LocatWn name Facility and(or) Ownership capacity Status (decimal {decim

type (metric tons) degrees) degree

product 

2012 Tantalum Estonia Sillamae Molycorp Silrnet AS P(R) Molywrplnc •• .. A 59.401 27.746 

90% 

2012 Tantalum Germ~my Im Sch!eek, Goslor GoslarPl::l!lt P(R) H. C. Starck - A 51.909 10.474 

GmbH 

iO 2012 Tantalum Germany Ferrowcg. Rhina Piant P(R) H.C.Sum:k - A 47.556 8.039 

Laufenburg GmbH 

ll 2012 TJntalum GcrmMy Saekinger Strasse, ENAGPiont P(R) H.C. Starck A 47.559 8.048 

Laufcnburg GmbH 

12 2012 Tantalwn Germany Hnnau Heroeu.~ Material P(F?) Hemeus Holding - A 50.131 S.92S 

Technology GmbH & GmbH 

Co. KG 

13 2012 Tant!l!umand Japan Akiw.Akim Akita P(R?) Jap<~.n New 95~ concentrate A 39.760 140.065 

nicbium Prefecture MctalsCo.Ud. 

14 2012 TantAlum and Japan Alzuwakamatsu~ Aizu Refinery Plant P(R?) Global Advanced A 37.460 139,936 

nlobium shi, Fukushima Metals Pty Ltd. 

prefecture 

15 2012 Tantalum and Japan Fukt1oka prefecture MiikeR.arcMetal P(R) Mito;uiMining NA A 33.606 130.419 

niobium and Smelting 

Co. Ltd. 

16 2012 Tant.,!um :md Japan Hitachi~Ohrciyn. H. C. Starck-V Tech Ltd. P(R) H.C.Starck NA A 36.506 140.615 

niobium rbamki prefecture GmbH 

17 2012 Tantalum, metal K:t7..akhstan Oskernen (also Oskemen (also known as P(R) Ulba NA A 49.982 82.627 

known as Ust~ Ust-Kamenogorsk) Metallurgical 

Knmenogorsk) Plant 

1S 20!2 Tant:~lum Russia Solikamsk, Perm Solikams:k. Magnesium p (R) Solikamsk ss A 59.634 56.767 

Krni Works Mt~.gnesium Works 

40 

99780.326

Table3. Significant tantalum plants (fabricators and refineries).-Continued 

[Locations of fabricators and refineries are shown on the map in figure 5. ~~. not applicable or no data; ? . uncertain~ A~ active: e. estimated: 

F. fabricator; GL, general location: NA, not available; P, plant; R., refinery; SL, specific location. Data are from U.S. Geological Survey Minerals 

Yearbook 201 !, vol. Ill (http://minerals.usgs.gov/mlneralsl)] 

Specific mineral Annual Latitude Longitud

10 Year commodity Country Location description Location name Faenity Ownership capacity Status {decimal (dtcima

and(or) type (metric tons) degrees) degroes

product 

19 2012 Tantalum, metJ.l Thail:J.nd MlljlTaPhut H. C. Starck (Thailand) P(R.) H.C. Starck 250 contained in A 12.688 101.141 

powder and oxides Rayong Province Company Ltd. (Thailand) slags 

Company Ltd. 

(H.C. Starck 

Gn>bH, 94.98%, 

and others. 

5.02%) 

20 2012 T:mt:llum United States Boyertown, Boyertown Plant P(R.) Global Advanced - A 40.346 -75.612 

Pennsylv~nia Metals Pty Ltd. 

21 2012 Tantalum United SUites Newton, H.C.Star<:klnc. P(R.) H.C.Starcklnc. - A 42.311 ·71.214 

Mass;~.chusct1s 22 20!2 Tantalum United States Carson City. KEMET Blue Powder P(F) KEMETCorp. - A 39234 -119.65

Nevada Corp. 

41 
360 


99780.327

Table 4. Locations of tantalum capacitor manufacturing facilities for three leading manufacturers. 

[Sources: A VX Corp. (20 13a), KEMET Corp. (201 2b, d), and NEC TOKlN Corp. (2013}] 

Manufacturing company 

AVXCorp. 

KEMETCorp. 

NEC TO KIN Corp. 

Tantalum capacitor manufacturing location 

Adogawa, Japan (formerly Nichicon Corp.) 

Bidderford, Maine, USA 

Lanskroun, Czech Republic 

San Salvador, El Salvador 

Tianjin, China (formerly Nicbicon CoqJ.) 

Carson City, Nevada, USA 

Cuidad Victoria, Mexico 

Evora, Portugal 

Matamoros, Mexico 

Suzhou, China (2 facilities) 

Sendai City, Miyagi, Japan 

Shiroishi City, Miyagi, Japan 

Nyuzen-machi, Shimoniikawa District, Toyama, Japan 

NEC TO KIN Electronics (Thailand) Co. Ltd. 

NEC TOKlN Electronics (Xiamen) Corp. 

NEC TOKlN Electronics (Philippines) Inc. 

____ --------____ :_N:::E'"C"-"J;OKJN Electronics (Vietnam) Co. Ltd. 

42 
361 


99780.328

Table 5. Product name, description, and applications for selected tantalum capacitors produced by AVX Corp. 

[Source: AVX CO!]>. (2013b)] 

Tantalum capacitors 

· TAZSeries 

TCP Series 

TBJSeries 

TBM Multianode 

TBW Series 

TBCSeries 

TWA Series 

T\VMModulc 

TAJ ESCC Tantalum Capacitors 

TAJ CECC Tantalum Capacitors 

Dascriptlon 

CWR09-MlL-PRF-55365/4; CWRI9 MIL-PRF55365/11; CWR29 MIL-PRF-55365/11; Extended 

Range-63V COTS-Plus Rating 

TCP Series Low ESR Tantalum Modules 

CWRII- MIL-PRF-55365/8 Established Reliability, 

COTS-Plus & Space Level; COTS-PLUS-DSCC 

Dwgs 07016 & 95158 Weibull Grade & Space Level 

Tantalum Ultra Low ESR COTS-Plus \Veibull Grade & 

Space Level 

Tantalum Fused DSCC Dwg 04053 COTS-Plus Weibull 

Grade & Space Level 

CWR15 MIL-PRF-55365112 Established Reliability, 

COTS-Plus & Space Level; TBC COTS-Plus 

TWA Wet Electrolytic Tantalum Capacitor 

A VX modular packaged 93026 qualified capacitors 

SMD Solid Tantalum Chip Capacitors 

SMD Solid Tantalum Chip Capacitors 

43 

Applications 

Include m.cdica1 

devices and 

military/aerospace. 
362 


99780.329

Table 6. Product name, product description, and applications for selected tantalum (Ta) capacitors produced by 

KEMET Corp. 

[ABS, anti-lock braking system; OC, direct cun·cnt; DSCC, Defense Supply Center Columbus; ESL, Equivalent Series 

Inductance; HOD, hard disk drive; kHz, kilohertz; Mn01. manganese oxide; PC, personal computer; SSD) solid-state drive; 

USB, Universal Serial Bus (USB); V, volt. Source: KEMET Corp. (2013a, b)] 

Tantalum capacltors _________ D_e_s_c_rip'-t-lo_n ___________ A.c.p-=-p-lic_a_tl_on_s _____ _ 

Tantalum Surface Mount Capacitors T491 Industrial Grade Mn01 Series Include decoupling and filtering in 

Standard Tantalum industrial and automotive end 

Tantalum Surface Mount Capacitors Mn01 applications} such as DC/DC 

Low Equivalent Series Resistance T494 Industrial Grnde Low ESR converters, portable electronics} 

(ESR) Mno2 Series telecommunications, and control units. 

T495 Surge Robust Low ESR Mn02 

Series 

T51 0 Multiple Anode Low ESR 

Mn02 Series 

Tantalum Stack Mn02 (TSM) Series 

Polymer 

T520 Series Polymer Tantalum 

T521 High Voltage Polymer Tantalum 

T525 125°C Rated l)otymer Tantalum 

T528 Low ESL/Faeedown Terminal 

Polymer Tantalum 

T530 High Capacitancc/12S•C Rated 

Polymer Tantalum 

KEMET Organic Capacitor 

(AO-CAP) 

A 700 Series Polymer Aluminum 

44 

Include dccoupling and filtering in 

industrial and automotive end 

applications. such as DC/DC 

converters, portable electronics, 

telecommunications, and control 

units requiring high-ripplc..current 

capability. 

Include decoupHug and filtering in a 

variety of market segments. The 

T493 COTS stack devices can be 

utilized in military and aerospace 

applications. Other KEMET series 

can be utilized in filtering and 

dccoupling applications to servi<:e 

various market segments. 

Include DC/DC converters, notebook 

PCs, portable electronics, 

telecommunications (cell phone and 

base station), displays, SSD, HDD 

and USB. 

Include DC/DC converters, power 

supply input and higher voltage 

applications, such as 12V to 28V 

power input rails in tbc 

miJitary/aerospace and industrial 

markets. 

Include automotive> industrial, and 

military as per DSCC 04051. 

lnclude high-speed server, 

microprocessor decoupling, and 

high-ripple-current applications. 

Include DC/DC converters, notebook 

PCs, telecommunications, displays, 

and industrial applications. 
363 


99780.330

Table 6. Product name, product description, and applications for selected tantalum (Ta) capacitors produced by 

KEMET Corp.-Continued 

f ABS, anti-lock braking system; DC, direct current; DSCC) Defense Supply Center Columbus; ESL, Equivalent Series 

Inductance; HDD, hard disk drive; kHz, kilohe1iz; Mn0 ~ manganese oxide; PC, personal computer~ SSD, solid-state drive; 

USB, Universal Serial Bus (USB); V, volt. Source: KEMBT Col]l. (2013a, b)] 

Tantalum capacttors 

Tantalum Suditcc Mount Capacitors 

High Temperature 

Tantalum Surface Mount Capacitors 

MIL-PRF (CWR Series) 

Tantalum Smface Mount Capacitors 

Fused 

Tantalum Surface Mount Capacitors 

High Reliability CommercialOft' The-Shelf (COTS) 

Tantalum Surf..>tce Mount Capacitors 

Automotive Grade 

Description 

T498 1so•c Rated Mn01 Series 

T499 175°C Rated Mn01 Series 

T409 Series C\VR09 Style MIL-PRF5536514 

T419 Series C\VR 19 Style MIL-PRF55365/11 

T429 Series CWR29 Style MIL-PRF5536518 

T492 C\VRII Style MIL-PRF5536518 

T496 Fused Mn01 Series 

T493 Military/Aerospace COTS 

Mn01 Serics 

T497 High Grade COTS Mn01 Series 

1"540 Polymer COTS Series 

T54! Polymer COTS Series 

T491 Jndustria1 Grade MnO, Series 

T 494 Industrial Grade Low ESR 

Mn01Series 

T489 Low Leakage Mn02 Series 

45 

Applications 

Include decoupling and filtering in 

industrial and autom.otivc end 

applications, such as DC/DC 

converters, po1iahle electronics, 

teleeommunications, and control 

units operating at temperatures up to 

ns•c. 

Include decoupling and filtering in 

military and aerospace applications 

requiring CWR09, CWR19, CW29, 

and CRWRll devices (precisionmolded devices wilh compliant 

tem1inations and indelible Jaser 

marking). 

Include decoupting and filtering in 

computing and telecommunications 

end applications, such as high-end 

servers requiring built-in fuse 

capability. 

Include decoupling and filtering in 

military and aerospace applications 

Include decoupling and filtering in 

military, medical, and aerospace 

applications. 

Indude decoupJing and filtering in 

militaty and aerospace applications 

that require low ESR or a benign 

failure mode. 

Include decoupling and filtering in 

industrial and automotive end 

applications, such as DC/DC 

converters~ pm1ablc electronic;.;, 

telecommunications, and control 

units. 

Include decoupling and filtering in 

industrial and automotive high-end 

applications. 
364 


99780.331

Table 6. Product name, product description, and applications for selected tantalum (Ta) capacitors produced by 

KEMET Corp.-Continued 

[ABS, anti-lock braking system; DC, direct current; DSCC, Defense Supply Center Columbus; ESL, Equivalent Series 

Inductance; HOD, hard disk drive; kHz, kilohertz; Mn01• manganese oxide; PC, personal computer~ SSD, solid-state drive; 

USB, Universal Serial Bus (USB}; V, volt Source: KEMET Corp. (2013a, b)] 

Tantalum capacitors 

Tantalum Surface Mount Capacitors 

Automotive Grade-Continued 

Tantalum Surface Mount Capacitors 

Space Grade 

Description Applications 

------------------------------- T495 Surge Robust Low ESR Mn01 

Mn02Series 

T498 l so•c Rated Mn01 Series 

T499 l?s•c Rated MnO, Series 

T5!0 Multiple Anode Low ESR 

Mn02 Scries 

T525 12s•c Rated Polymer Tantalum 

T493 Series COTS Space Grade 

T496 Series Fail-Safe Fused Space 

Grade 

T497 Series High Grade COTS Space 

Grade 

TS I 0 Series Multiple Anode Low ESR 

Space Grade 

46 

Include decoupling and filtering in 

industrial and automotive end 

applications, such as DC/DC 

convettcrs, portable electronics, 

telecommunication~ and control 

units requiring higiH·ipple-cmTent 

capability. 

Include decoupling and filtering in 

industrial and automotive end 

applications, such as DC/DC 

converters, portable electronics, 

telecommunications, and control 

units operating at temperatures up 

17s•c,. 

Include decoupling and filtering in 

industdal and automotive end 

applications1 such as DC/DC 

converters, pottable electronics, 

tclccomnnmications, and control 

units requiring high-ripple-current 

capability. 

Include automotive, industrial, and 

milit.:1ry applications as per DSCC 

04051. 

Include dccoupJing and filterhtg in 

militmy and aerospace applications. 

fnclude decoupling and filtering in 

computing and telecommunications 

end applications, such as high-end 

servers requiring built-in fuse 

capability. 

Include dccoupling and filtering in 

mi!itaty, medical, and aerospace 

applications. 

lnclude decoupling and filtering in 

industrial and automotive end 

applications, such as DC/DC 

converters, portable electronics, 

telecommunications, and control 

units requiring-high ripple-cmrent 

capability. 
365 


99780.332

Table 6. Product name, product description. and applications for selected tantalum (Ta) capacitors produced by 

KEMET Corp.-Continued 

[ABS, anli~lock braking system; DC, direct current; DSCC, Defense Supply Center Columbus; ESL, Equivalent Seties 

Inductance; HDD, hard disk drive; kHz, kilohctiz; Mn01, manganese oxide; PC, jJersonal computer; SSD, solid-state drive; 

USB, Universal Serial Bus (USB); V, volt. Source: KEMET Corp. (2013a, b)] 

_______ T_a_nt_a_lu_m_c_a~p_ac_lt_o_ffi _________________ D_e_scnpt_lo_n _____________________ A_p_p_ll_ca_t_~_n_s __________ _ 

T409 Series T409 Series CWR09 Style MIL-PRF- Include decoupling and filtering in 

T419 Series 

T429 Series 

1'489 Series 

T491 Series 

T492 Series 

T493 Series (COTS) 

T493 Series Space Grade 

T494 Series 

T495 Series 

T496 Series 

1'496 Series -Approved to DSCC 

Drawing 04053- Faii..Safe 

Fused Tantalum Chip 

55365/4 military and aerospace applications 

T419 Series CWRI9 Style MIL-PRF55365/1 J 

T429 Series CWR29 Style MIL-PIU'-

55365/8 

T489 Low DC Leakage Mn02 Series 

1'491 Industrial Grade Mn02 Series 

T492 CWRll Style MIL-PRF5536518 

T493 Series- Approved to DSCC 

Drawing 070 16· 

Military/Aerospace COTS Mn02 

T493 Series COTS (CWRll Style) 

T494 Industrial Grade Low ESR 

Mn02 Series 

'f495 Surge Robust Low ESR Mn02 

Series 

1'496 Fused Mn02 Series 

T496 Series- Approved to DSCC 

Drawing 04053- Fail-Safe Fused 

Tantalwn Chip 

47 

requiring CWR09 devices. 

Include decoupli11g and filtering in 

military and aerospace applications 

requiring C\VRI9 devices. 

Include clecoupling and filtering in 

military and aerospace applications 

requiring CWR29 devices. 

Include decoupling and filtering in 

industrial and automotive high-end 

applications. 

Not available. 

Include decoupling and tillering in 

military and aerospace applications 

requiring CWRll devices. 

Include decoupling and filtering in 

military and aerospace applications. 

Include decoupling and filtering in 

military and aerospace applications. 

Include decoupling and filtering in 

industrial and automotive end 

applications, such as DC/DC 

converters) portable electronics, 

telecommunications, and control units. 

Include decoupling and filtering in 

industrial and autotnotive end 

applications, such as DC/DC 

converters, portable electronics, 

telecommunications, and control units 

requiring high-ripple~cmTent 

capability. 

Include decoupling and filtering in 

computing and telecommunications 

end applications, such as high-end 

servers requiring buiJt~in fuse 

capability. 

Not available. 
366 


99780.333

Table 6. Product name, product description, and applications for selected tantalum (Ta) capacitors produced by 

KEMET Corp.-Continued 

[ABS, anti~lock braking system; DC, direct current; DSC~ Defense Suppty Center Columbus; ESL, .Equivalent Series 

Jnductance; HDD, bard disk drive; kH~ kiloherlz; Mn02, manganese oxide; PC. personal computer; SSD. solid-state drive; 

USB, Universal Serial Bus (USB); V, volt. Source: KEMET Cmp. (20!3a, b)] 

Tantalum capacitors 

T496 Series Space Grade 

T497 Series 

T497 Series Space Grade 

T498 Series 

T499Series 

T5l0 Series 

TS 10 Series Space Grade 

TSU Series 

TSMScries 

TSP Series 

Descriplion 

T496 Series Fail-Safe Fused Mn02 

T497 High Grade COTS Mn02 Series 

T497 Series High Grade COTS 

(C\VR09/19/29 Style) 

T498 150"C Rated MnO, Series 

T499 l75°C Rated Mn02 Series 

T510 Multiple Anode LowESR 

Mn02 Series 

T51 0 Series Multiple Anode Low ESR 

Mn02 

T513 Multiple Anode Low ESR 

COTS Mn02 Series 

TSM Series Tantalum Mn02 Surface 

Mount Stack Capacitors 

TSP Series Tantalum Stack Polymer 

Surface Mount Capacitors 

48 

Applications 

Military and aerospace customers in 

high-reliability space applications. 

Include decoupling and filtering in 

militaty, medical, and aerospace 

appllcations. 

Include dccoupling and filtering in 

industrial and automotive end 

applications, such .as DC/DC 

converters, pm1able electronics, 

tcleconummications, and control 

units operating at temperatures up to 

l50°C. 

Include dccoupling and filtering in 

industrial and automotive end 

applications, such as DC/DC 

converters, portable electronics~ 

tclccomnmnications, and control 

units operating at temperatures up to 

175'C. 

Include decoupling and filtering in 

industrial and automotive end 

applications, such as DC/DC 

converters, potiable electronics, 

telecommunications, and control 

units requiring high-ripple-cun-ent 

capability. 

Suitable for the industrial) 

communications, military, and 

aerospace markets. Typical 

applications include decoupling and 

filtering in radar, sonar, power 

s.upply, guidance systems, and other 

high-reliability applications. 

Include decoupling and filtering in a 

variety of market segments. The 

T493 COTS and 540 stack devices 

can be utilized in military and 

aerospace applications. Other 

KEMET series can be utilized in 

filtering and decoupling applications 

to service various market segments. 
367 


99780.334

Table 6. Product name. product description, and applications for selected tantalum (Ta) capacitors produced by 

KEMET Corp.-Continued 

[ABS~ anti-lock braking system; DC, direct current; DSCC, Defense Supply Center Columbus; ESL, Equivalent Series 

Inductance; HDD, hard disk drive; kHz. kilohertz; MnOlt manganese oxide; PC. personal computer; SSD, solid-slate drive; 

USB, Universal Serial Bus (USB); V, volt. Source: KEMET Coq>. (20l3a, b)] 

Tantalum capacitors 

T540 Series 

T54! Series 

T520 Series 

T52l Series 

T522Series 

T525 Series 

T525 Series- Approved to DSCC 

Drawing 04051 -HighTemperature TantaiUJn Chip 

T528Series 

T530 Series 

T530 Series- Approved to DSCC 

Drawing 04052 • HighCapacitance/Ultra-Low ESR 

Tantalum Chip 

. ·-----·----...,--

Description Applications 

---------------- T540 Polymer COTS Include dccoupling and filtering in 

T541 Polymer COTS Multiple Anode mifitaty and aeros11ace applications that require low ESR or a benign 

failure mode. 

T52{) Series Polymer Tantalum 

T.\21 High Voltage Polymer Tantalum 

T522 Reduced Leakage Polymer 

Tantalum 

T525 125"C Rated Polymer Tantalum 

T525 Series - Approved to DSCC 

Drawing 0405 I · HighTemperature Tantalum Chip 

T528 Low ESL/Facedown Tenninal 

Polymer Tantalum 

T530 High Capacitance/125°C Rated 

Polymer Tantalum 

T530 Series- Approved to DSCC 

Drawing 04052- HighCapacitance/Ultra-Low ESR 

Tantalum Chip 

49 

Include DC/DC converters. notebook 

PCs, portable electronics, 

telecommunications (cell phone and 

base station), displays, SSD, IIDD 

and USB. 

Jnclude DC/DC converters, power 

supply input, and higher voltage 

ap]>lications, such as 12V to SOV 

power input rails in the military, 

aerospace, and industrial markets. 

Include battery-dependent 

applications, such as handheld 

consumer electronics, global tracking 

systcms1 energy llarvcsting, wireless 

sensors, and other applications that 

seek high capacitance, low profile, 

safety, and low power consumption. 

Jnclude automotive, industrial, and 

miJitary applications as per 

DSCC04051. 

Not available. 

Include high-speed server, 

microprocessor dccoupling, and 

bigh-ripple-curTent applications. 

Not available. 
368 


99780.335

Table 6. Product name, product description, and applications for selected tantalum (Ta) capacitors produced by 

KEMET Corp.-Continued 

[ABS~ anti-lock braking system; DC, direct current; DSCC, Defense Supply Center Colum.bus; ESL, Equivalent Series 

Inductan.cc; HDD, hard disk drive; kHz, kilohertz; Mn021 manganese oxide; PC, personal computer; SSD, solid-state drive; 

USB, Universal Serial Bus (USB); V, volt. Source: KEMET Corp. (2013a, b)] 

Tantalum capacitors 

B45 Series- Automotive 

B45 Series -High Capadtmu:e 

B45 Series- High Temperature 

845 Serie.>: ~ Low Profile 

Description 

B45196L,B45198L 

B45!96EIH, B45198EIHL 

B45196T, B45!98T 

8450, B45!90E/R, B45192E/R, 

B45194E/R 

50 

Applications 

Automotive electronics (for example, 

safety applications: airbags, ADS> 

motor management) 

Measuring and control engineering 

(tbr example, vollage regulators), 

and DC/DC converters 

Tclcconmumications (for example1 

cell phones, infrastructure) 

Data processing (for example~ 

laptops, mainframes) 

Measuring and control engineering 

(for example, vollage regulators) 

Automotive electronics (for examp.lc, 

safety applications-airbags~ ABS, 

motor management) 

Medical engineering 

DC/DC convetiers 

Automotive electronics (for example, 

safety applications-airbags, ABS, 

motor management, electronic 

control unit) 

Measuring and control engineering 

(for example, voltage regulators) 

Medical engineering 

DC/DC converters 

Telecommunications (for example, 

cell phones, infrastructure) 

Data processing {for example, 

laptops, mainframes) 

Telecommunications (for cxnmple, 

cell phones, infrastructure) 

Data processing (fOr example, 

laptops, mainframes) 

Measuring and control engineering 

(for example, voltage rcgttlators) 

Automotive electronics (for example, 

navigation .systems, electronic 

control units) 

Medical engineering 

Switch mode power supplies with 

very high clock frequencies 

(300kHz) 

DC/DC converters 
369 


99780.336

Table 6. Product name, product description, and applications for selected tantalum (Ta) capacitors produced by 

KEMET Corp.-Continued 

[ABS, anti-lock braking system; DC, direct current; DSCC, Defense Supply Center Columbus; ESL, Equivalent Series 

Inductance; HDD, hard disk drive; kHz, kilohertz; Mn02, manganese oxide; PC, personal computer; SSD, solid-state drive; 

USB, Universal Serial Bus (USB); V, volt Source: KEMET Corp. {20 13a, b)] 

Tantalum capacitors Descrtption 

B45 Series- Multiple A11ode B45396R 

B45 Series- Pe1jormance B45l96P, B45198P 

B45 Series - SpeedPower B450, B451, B45197A, B45198R 

B76 Scti.es- Conduclive Polymer B760 

51 

Applications 

T cleconununications (for example, 

cell phones, infrastmcture) 

Data processing {for examplct 

laptops, mainl.i-amcs) 

Measuring and control engineering 

{for example, voltage regulators) 

Medical engineering 

DC/DC converters 

Automotive electronics (for exatnple, 

safety applications-airbags, ABS, 

motoL· managcm.ent) 

Measuring and control engineering 

Medical engineering 

DC/DC converters 

Telecommunications (for example, 

cell phones, infrastmcture) 

Data processing (for example, 

laptops, mainframes) 

Telecommunications (for example, 

ccl1 phones, infrastructure) 

Data processing (for example, 

laptops, mainframes) 

Measuring and control engineering 

(for example, voltage regulators) 

Automotive electronics (for example, 

navigation systerns, electronic 

control units) 

Medical engineeling 

DCfDC converters 

Not available. 
370 


99780.337

Africa 

-'ow a well-intentioned U.S. law left Congolese miners 

jobless 

By Sudarsan Raghavan November 30, 2014 

LUNTUKULU, Congo -When his father could no longer make enough money from the tin mine, when he could no 

longer pay for school, Bienfait Kabesha ran off and joined a militia. It offered the promise ofloot and food, and soon 

he was firing an old rifle on the front lines of Africa's deadliest conflict. He was 14. 

But what makes Kabesha different from countless otl1er c!Jild soldiers is this: His path to war involved not just the 

wrenching poverty and violence of eastern Congo but also an obscure measure passed by Americanlal\'lllakers. 

Villagers call it "Loi Obama"- Obama's Law. 

The legislation compels U.S. companies to audit their supplyclmins to ensure that they are not using "conflict 

minerals"- particularly gold, coltau, tin and tungsten from artisanal mines controlled hy Congo's murderous 

Jtias.lt was championed by influential activists and lawmakers, both Repuhlicans and Democrats, and tucked into 

the massive Wall Street reform law known as the Dodd-Frank Act. 

The law's supporters argued that it would weaken the militias by cutting off their mining profits. 

But the legislation, signed by President Obama four years ago, set off a cl1ain of events that has propelled millions of 

m.iners and their families deeper into poverty, according to interviews with miners, community leaders, activists, and 

Congolese and \\'estern officials, as well as recent visits to four large mining areas. 

As it sought to comply with the law, Congo's government began by shutting dm·vn the mining industry for months. 

Then, a process was launched to certify the country's minerals as conflict-free. But the process is unfolding at a 

glacial pace, marred by a lack of political will, corruption and bureaucratic and logistk"1l delays. 

That has led foreign companies to avoid buying the minerals, whicb has dl'iven down prices. Many miners are forced 

to find other ways to survive, including hy joining armed groups. Meanwhile, the militias remain potent threats. 

' 1.11e intention of the law was good) but in practice, it was not well thought-out_," said Eric Kajemba, director of the 

Observatory for Governance and Peace, a regional nonprofit group. "This is a country where the government is 

absent in many areas, plagued Ill' vears of war and had governance, where the economic tissue has been destroyed. 

Dl'ssemlnott!d by Wlrmfng Sttoteoits Washington~ on ogt!nt of o foreign pri11dpol. Additional fn/ormation 

1$ oa file wUh the Deportment of Justice. 
371 


99780.338

The American lawmakers didn't appear to take this into consideration." 

Requests for comment were made to former senator Russell Feingold (D-Wis.), a key backer of the conflict-minerals 

asure who is now the U.S. special envoy to the Great Lakes region, which includes Congo. But his office said he 

was not available. The State Department also did not reply to several requests for comment. 

As of June, the government had certified just 25 mining sites out of hundreds in South and North Kivu provinces as 

"green"- meaning there was no presence of armed groups and there were no children or pregnant wumen laborers 

-according to U.N. monitors. As of October, there were only 11 mines out of more than 900 here in South Kivu 

where minerals were "tagged" as conflict-free, said Adalbert Murhi Mubalama, the province's minister of mines. 

Government atld international mine certification agencies, he said, have been unable to audit most mining areas 

because oftheir size, poor roads and insecurity. Shabunda terdtory, where most of South Kivu's mines are located, 

is almost as big as Belgium and is controlled mostly by a ruthless militia. The government, he said, "can't go there." 

Rapid downturn 

The United Nations estimates that Congo has untapped mineral reserves worth $24 trillion. Since the late 1990s, 

militias, rebel groups and armies have plundered these riches, using them to fuel a string of wars that have caused 

•. _Jre deaths than any conflict since World War II. 

In the United States, the furor over conflict minerals intensified with revelations that multinational firms such as 

Apple, Intel and Motorola were unwittingly buying conflict minerals to make products such as smartphones and 

laptop computers. Activists pressured lawmakers to pass the measure in the Dodd-Frank Act. 

It quicldy had an effect. In the fall of 2010, two months after the law's signing, Congo's government halted mining for 

six months- even at facilities not controlled by armed groups. The move had tremendous repercussions in a 

country where, by some estimates, a sixth of the 70 million inhabitants depend on artisanal mining. 

In Luntukulu, a mineral-rich region nestled in rocky hills near the border of Shabnnda territory, more than a dozen 

out-of-work miners joined the Raia Mutombold militia after the government imposed the ban, village elders and 

mining cooperative leaders said. 

"If we were earning more money from mining, I would not have entered the militia," said Kabesha, now 16, as he sat 

grass hut. 

When he joined, he was handed a rifle and taught to shoot. Within months, he was looting villages and fighting 

government forces and other militias. 
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Last year, he fled and entered a program to rehabilitate child soldiers. But he's still not attending school. 

'A weight on us' 

In 2010, before the law passed, miners were selling a kilogram of tin- about two pounds- for $7. The world 

market price averaged $18 a kilo. Scores of buyers came to Luntulrulu for minerals. They were exported to smelters 

around the world, from which American companies purchased them. 

Now, the miners get only $4 for a kilo of tin- even though the global market price this year has averaged $22 per 

kilo. None of the 15 mines in Luntukulu that produce tin and gold have been certified as conflict-free. 

This year, only 12 buyers showed up, miners and community leaders said. 

Some of the untagged minerals are bought by Chinese and Indian firms that are not subject to the Dodd-Frank law. 

But the loss of American and other Western clients has been keenly felt. 

As in many mining communities, with less money flowing in, shops in Luntukulu have closed. Many people here 

stt'Uggle to feed their families through farming. 

Obama's L~wwasn't signed, the ban would not have existed," said Waso Mutiki, 41, president ofthe miners 

cooperative in Luntukulu. "It destroyed everything." 

Even at the few mines certified as conflict-free, miners face hardship. Near Nzibira, a village about 15 miles from 

here, miners in blue uniforms dig in pits, searching for tin ore. The minerals are placed in tagged bags, indicating 

they meet international standards. 

But the miners still get $4 per kilo. That's because there are only a few trading houses in the provincial capital, 

Bukavu, due to the limited supply of tagged minerals and delays in providing government licenses to buy them, 

miners and community leaders said. The houses fix the price, they added. 

"The law of Obama is like a weight on us," said Michel Mushagalusa, 30, vice president of the mining cooperative in 

Nzibira. 

Some activists and researchers say that minerals aren't the core cause of Congo's war- that there are other, more 

·erful factors, such as political and ethnic struggles and conflicts over land. And regulating the minerals, they say, 

does little to thwart the militias. 

Supporters of the American law say the plundering of minerals is a key stimulant of the conflict. They say the 
373 


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legislation has spurred measures by corporations and African governments to help end the illegal trade. But even 

some of the law's biggest proponents say the Obama administration and tech companies should have provided aid as 

the legislation was being implemented 

"Four years went by with almost no support for Congolese miners," wrote the Enough Project, a powerful activist 

group, in an open letter published Oct. 30. It added that American and other donors had only recently set up aid 

programs, "but they have yet to be felt by mining communities." 

Thriving from gold 

In a report published this past summer, the Enough Project found that armed groups were no longer present at twothirds of tin, tungsten and eolian mines in three eastern Congo provinces and cited the law as the reason. 

Nonetheless, some of the most brutal militias are still thriving in those provinces and others. 

In some areas outside ofLuntukulu and in Shabunda territory, the Raia Mutomboki are the lords. 

The militia, whose name means "outraged citizens" in Swahili, sells diggers access to mining pits and takes a 

percentage ofthe minerals uneatthed, a large portion of which are smuggled out through neighboring countries. 

~ -~fighters also exact taxes at cl1eckpoints. 

"Almost all our mines are controlled by Raia Mutomhoki," said Mozart Manigua, 42, president of a cooperative that 

oversees 20 mines in Kimbli, a vast area within Shahunda. Local people "have no choice but to work for the militia." 

In other areas, militias have switched to selling palm oil, charcoal, marijuana, cattle and soap, said community 

leaders, activists and U.N. monitors. Their income is hardlY as much as they earned from minerals, hut it's enough to 

continue destabilizing eastern Congo. 

Gold, though, remains a lucrative financial pipeline for armed groups, according to U.N. investigators. By some 

estimates, $400 million in gold from artisana1 mines was smuggled out last year, most of it fueling armed actors and 

tainting the global gold supply. 

Increasingly, Congo's army is becoming a major player in the conflict-minerals trade. 

liers help smuggle untagged minerals out through Rwanda, Uganda and Burundi, according to U.N. experts and 

Congolese government and law enforcement officials. 

«It's some of the big commanders)" said Mubalama, the mining minister. 
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Sudarsan Raghavan has been The Post's Kabul bureau chief since 2014. He was previously based in 

Nairobi and Baghdad for the Post. 

Your Three. Videos curated 

for you. 

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Qt'J)e l\lt\.tifJ{ltgtOl\ ~ ~ mueminoted byWlnninoStrotegies Woshington,onogentofaforetgnprinclpal. AdditiotwlinformoUoq 

is en fill! with the Ot!podment of JQsti(~. 

Monkey Cage 

r Eastern Congo, economic colonialism in the guise of 

ethical consumption? 

By Chrlstoph Vogel and Ben Radley September 10, 2014 

The following is a guest post by Ch>1stoph Vogel and Ben Radley. Vogel is an Independent Analyst and a PhD 

candidate at the UniversihJ of Zurich. Radley is a Director for Heartland Alliance and a PhD student at the 

Intemational Institute of Social Studies. 

When we think of the Congo today, we may think of bloody resource wars wl1ere women are being raped by armed 

groups to gain access to and control of the country's minerals. If we do so, it's because of the work of numerous 

NGOs, advocacy organizations, and activists such as the EnoughProject or the "no blood in my mobile" campaign, 

who have been campaigning for several years to reduce conflict in the eastern Congo by "cleaning up" the region's 

mineral trade. The struggle against so-called "conflict minerals" has literally become, borrowingAutesserre's words, 

a lopsided "dominant narrative" spanning policy discourses and practical engagement in the sector. 

most significant policy result of this work to date, Section1502. of the Dodd-FrankAcl, was passed by the 

Congress and signed into law in July 2010. It requires companies registered on the U.S. stockmarket to report on an 

annual basis whether their minerals have been sourced from the eastern DRC or neighboring countries, and thus, 

potentially financing conflict. This has in turn led to recent announcements by electronics giants including Apple and 

Intel that more of their products will be "conflict-free" in the future. In the meantime, a coalition of around 70 

Congolese leaders ~nd international experts argue that, in the Congo itself, the movement risks contributing to, 

rather than alleviating, the very conflicts it sets out to address. While not calling to keep transparency and regulation 

at the lowest level, their open letter urges governments, companies, and other stakeholders to carefully rethink and 

increase their engagement on the issue. 

More than four years after the signing of the Dodd-FrankAct, only a small fraction of the hundreds of mining sites in 

the eastern DRC have been reached by practical measures emanating from Dodd-Frank legislation, such as supply 

chain traceability or mineral export certification. As of now, four areas (Nyabibwe, Rubaya, Lemera, and Nzibira) 

have been introduced into traceability schemes allowing for legal trade in tin, tantalum, and tungsten (3T) minerals. 

'le they include around 30 mining sites, tl1e overwhelming majority of mining sites (far more than 1000 across 

the provinces of Nmth and South Kivn alone) has not become part of the bagging-and-tagging system iTSCi, put in 

place by the international tin industry body ITRI. The result is a de facto embargo targeting the lion's share of 

Congolese mining communities, while at the same time violence and the presence of armed groups. h~ve I}O~ 
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sigt}~fi~an~ly decreased in the region. 

As other traceability schemes have not yet become operational, iTSCi (and its partner projects such as Motorola's 

\ :utions for Hope" initiative whic1t seems to be engaging a Httle more constructively on the ground) represents the 

only legal way for Congolese to sell "conflict-free" minerals to international markets. Hence, a large part of the local 

mining economy remains ~'beyond the pale, forced into either illegality or collapse as certain international buyer~ 

have responded to the legislation by going 'Congo-free."' Our own field work in 2013 and 2014 as well as ac.ademie 

research by others in eastern Congo has shown that, while only a small number of mining sites is de-facto controlled 

by armed actors, all players involved in the mineral supply chain are at risk of being captured- that is, taken overby enduring networks of fraud aud violent exploitation that want to retain a chance of selling their minerals. In a 

recent teport, Global VV.itness partly confirms these tendencies \vith a particular focus on military involvement. 

\'Vorsc still, as our recent field observations reveal, the economic situation in the four "clean areas" remains dire. In 

some sites prices have stagnated while others have experienced a ]oss of market competitiveness as the iTSCi system 

creates new costs and new bureaucratic requirements. Although ITRI usually maintains no more than a pseudopresence in the sites- they deploy field staff that rarely if at all visit the actual mining sites- it deeply impacts the 

local econmny. In response to ITRI's requirements, institutions changej creating a cash cow for both state and nonstate actors involved in a myriad of additional, semi-formal taxation systems that go mostly unregulated and 

0ntrolled on the gmund. Then, beyond maintaining its access to mineral supplies, ITRI's employees are mostly 

busy with levying enormous fees from its local partners and preventing the scheme's competitors in the "traceability 

market" ft·om establishing alternative systems. 

All this has had a numher of damaging consequences. I.arge numbers of Congolese miners have lost their johs, with 

some joining armed groups as a way to earn a quick buck in the tota1 absence of alternative employment 

opportunities. At the same time the United Nations Group of Expe1ts found that the region's black market in 

minerals has been strengthened (and the Goma-based mining police is recently reporting heavy increases in transborder fraud attempts), playing into the hands of the very mafia and rebel networks the campaign was attempting to 

starve of mineral revenue in the first place. 

As if this was not devastating enough, the fluidity of armed movements in this area makes the validation of the "clean 

sites" very difficult. With militias (or their civilian-clothed friends and family) present in and around the mines, the 

validity of the "conflict-free" designation is often fluid over time, particularly given the delay between when a mine 

site is visited, validated, included into a traceability scheme, and later audited- all that taking months, if not years in 

some cases. Snell delays are further complicated by an institutional cacophony of interests of international and local 

l Jrs supposed to jointly validate sites. The additional industry audits, on their side, blatantly neglect local realities 

-among the sites included into the scheme so far, many raise .~_eri<?1}S concerns about the credibility of the whole 

traceability effort. In certain cases, the presence of armed actors has not prevented ITRI from including a site for the 
377 


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sake of quick business. 

Hailed by numerous international stakeholders, the first years of implementing systems to create a market for 

1flict-frce" minerals clearly show the limits of such an approach. While it is already difficult as such- an 

argument often used by lazy and profit-oriented international industries- tbe implementation is further hampered 

by a few otherfactors: The same industry proposing to seek a clean market for Congolese minerals appears to be 

completely disinterested in local realities, including n1inerals' actual "cleanliness," as long as tl1e market continues to 

function. Moreover, almost no corporate stakeholder- despite their nicely publicised COl]JOrate social responsibility 

policies- has visibly engaged in eastern Congo to help Congolese actors comply with regulations, improve labor 

security, or increase decent livelihoods. Mosl conflict minerals advocates have yet to address these shortcomings. 

ITRI's bagging-and-tagging scheme has- notwithstanding the costs it burdens onto local producers- neither 

developed a mechanism to prevent untagged minerals from entering the circuit, nor come up with a supply chain 

mechanism that fulfils the due diligence standards proposed by the OECD and UN. Instead, the industry-led 

traceability scheme currently serves more as an artificial price-cDntrol mechanism and a monopolization tool: the 

levy n'RI demands for each ton of tin is directly subtracted from the official selling price (whicl1 corresponds to the 

London Metal Exchange in the case of tin and to bilaterally negotiated prices for the non-listed tantalum). The net 

effect is that Congolese miners must pay the international tin industry for the right to sell their minerals with a tag 

;' 'implies- but does not necessarily achieve- conflict-free status. As argued in a forthcoming Social Science 

Research Council research paper, traceability also triggered a monopolization of the market at various levels ofthe 

supply chain: local producers are beholden to buyer monopolies within a closed pipeline. The choice they face is to 

sell at the artificially reduced, buyer-controlled price or to go "illegal," meaning trespassing the iTSCi scheme. 

Moreover, it remains unclear to what extent the Congolese mining industry is impacted in terms of production and 

exportation. ffRI does not publish any concrete statistics on DRC mineral production levels. Confidential records 

confirm that, for a timej ITRI even tried refusing to share its data with the Congolese government. This surprisingly 

secretive policy runs diametrically counter to any attempts to ~ncrcasc transparency and accountability as repeatedly 

recomrnended. 

With all this, the "conflict minerals" approach appears to arrive at a critical juncture, facing two possible futm·es. If 

the required improvements recommended in the letter and brought forward by other researchers and analysts are 

undertaken, a reliable and viable system ensuring more ethical products are produced and consumed and leading to 

improvements in the daily lives of the Congolese is possible. This includes first and foremost a finer understanding 

of Congo's mineral sector on the one hand as well as of underlying problems '"·eating violence and instability in the 

~erned region on the other. Alternatively, the movement risks descending into "green-washing" of the worst kind, 

whereby multinationals and others improve their public image, while in the Congo -the country on which this image 

is founded- no solutions are found, just new problems created. 
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What's Wrong with DoddFrank 1502? 

Conflict Minerals, Civilian Livelihoods, and the 

Unintended Consequences of Western Advocacy 

Laura E. Seay 

Abstract 

Although its provisions have yet to be implemented, section 1502 of the Dodd-Frank Wall Street 

Refonn. and Consumer Protection Act is already having a profound effect on the Congolese mining 

sector. Nkknatned HQbama's Law" by the Congolese, section 1502 has created a de facto ban on 

Congolese mineral exports, put anywhere from tens of thousands up to 2 million Congolese miners 

out of work in the eastern Congo, and, despite ending rn.ost of the trade in Congolese confBct 

minerals, done little to improve the security situation or the daily lives of most Congolese. In this 

report, L'luta Seay traces the development of section 1502 with respect to the pursuit of a conflict 

minerals-based strategy by US. advocates, examines the effects of the lcgishcion, and recommends 

new courses of action to move fonvard in a way that both promotes accountability and transparency 

and allows Congolese artisanal miners to earn a living. 

Disst:mlno:ed by Wfrmlng Strottgftts Washington, on ogent of o /t>rtign principal. Additional informati ts un file With the Deportment of Justice. on 
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99780.346

Center for Global Development 

1800 Massachusetts Ave., NW 

Washington, DC 20036 

202.416.4000 

(f) 202.416.4050 

www.cgdev.org 

What's Wrong with Dodd-Frank 1502? 

Conflict Minerals, Civilian Livelihoods, and the Unintended 

Consequences of \Vestern Advocacy 

Laura E. Seay 

Assistant Professor of Political Science 

Morehouse College 

CGD is grateful for contrihutions from the UK Department for International 

Devdopment, Nonvcgian Ministry of Porejgn Affairs, and the \V'illiam and FJor-a 

Hcw1ett Foundation in support of this work. 

J~ura E. Seay. ••what's Wrong with Dodd-Frank 1502? Conflict Minerals, Civilian 

livelihoods, and the Unintended Consequences of \\'estern Advocacy." CGD \V'orking 

Paper 284. \\Jashington, D.C.: Center for GJohal Development. 

http:/ /www;cgde\•.org/cootent/publkations/detail/1425843 

The Center for Global Development is an independent, nonprofit policy 

research organization dedicated to reducing global poverty and inequality 

and to making globali7.~tion work for the poor. Usc and dissemination of 

tllis Working Paper is encouraged; however, reproduced copies may not be 

used for commercial pmposcs. Further usage is pernlitted under the terms 

of the Creative Commons License. 

The views expressed in CGD Working Papers are those of the authors and 

should not be attributed tn the board of directors or funders of the Center 

for Global Development. 
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99780.347

Foreword 

Hidden within the 2,300-page Dodd-Frank \\fall Street Reform and Consumer Protection 

Act are two sections (1502 and 1504) aimed not at preventing another financial meltdown 

but, rathet, at fostering transparency about commercial activities in foreign countries. In 

2010, CGD awarded its Commitment to Development Award to Publish \\'hat You Pay in 

recognition of the role it played in passing Section 1504 of tl1e bill, which requires 

companies listed on U.S. stock markets to disclose payments to foreign govcrmnents. 

Section 1504 was hailed as a historic victory for the transparency agenda, and an important 

tool to help citizens hold d1eir governments accountable. Section 1502, on the od1er hand, 

requires publicly traded companies to report to d1e SEC whether they source conflict 

minerals from the Democratic Republic of the Congo (DRq or its neighbors. It is much 

more controversial. 

In tlus paper commissioned by CGD, Laura Seay, assistant professor of political science at 

Morehouse College and specialist on the DRC, analyzes 1502 and its effects--even before 

the mles are implemented. She argues that tlus well-intentioned but ultimately misguided 

provision has already had unintended consequences that hurt those it is supposed to help. 

Aimed at curbing the flow of revenues that fuel conflict, 1502 has led to a de facto boycott 

on Congolese minerals given uncertainty over regulation and the impossibility of tracing 

certain minerals such as gold. The result: millions of artisanalminers are out of work, and 

the livelihood of millions more put at cisk without any significant connection to a reduction 

in the violence. 

Seay explores what went wrong and argues that the initiative was based on misperceptions 

about the relationship between mineral exploitation and conflict in d1e Congo, the nature of 

the conflict, and the feasibility of traceability schemes in such an environment. Seay 

demonstrates the need to reassess this policy with a more careful understanding of the 

dynamics on tl1e ground. Tllis is especially critical as the SEC determines if the pwvision is 

implementable and governments in Europe consider similar legislation. 

Toddl\foss 

Center for Global Development 
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Executive Summary 

Although its provisions have yet to be implemented, section 1502 of the Dodd-Frank \\fall 

Street Reform and Consumer Protection Act is already having a profound effect on d1e 

Congolese mining sector. Nicknamed "Obama's Law" by the Congolese, section 1502 has 

created a de jllclo ban on Congolese mineral exports, put anywhere from tens of thousands up 

to 2 million Congolese miners out of work in the eastern Congo, and, despite ending most 

of the trade in Congolese conflict minerals, done litde to improve the security situation or 

the daily lives of most Congolese. In this report, I trace the development of section 1502 

with respect to the pursuit of a conflict minerals-based strategy by U.S. advocates, examine 

the effects of the legislation, and recommend new courses of action to move forward in a 

way that both promotes accountability and transparency and allows Congolese artisanal 

miners to earn a living. 

Recommendations 

1. Implement Dodd-Frank section 1502 in phases with clear annual benchmarks 

over three years. In order to eliminate confusion about competing traceability 

schemes and to allow corporations time to establish realistic, workable procedures, 

section 1502 should be implemented slowly and in stages. Emphasis should be 

placed on a consensus-building process and improving buy-in for participation in 

traceability schemes in Congolese mining communities. 

2. Provide immediate assistance to affected mining communities. Humanitarian 

assistance should immediately be provided to miners and their families who have 

lost reliable sout·ces of income as a result of the de foe!~ ban on the Congolese 

mineral trade. In particular, donors should assist miners' families with short-tenn 

education and health cate expenses. 

3. Turn traceability into a jobs program. The international community should work 

with local actors to improve economic livelihoods opportunities for Congolese 

minas. Particular efforts should be focused on hit-ing former miners to work for 

traceahility schemes and on developing alternative li\'elihood opportunities beyond 

subsistence agriculture. 

4. Create formal mechanisms for Congolese leadership in the implementation 

process. In order to find practical and realistic ways of combating the conflict 

minerals problem, a wide spectrum of Congolese civil society leaders should be at 

the forefront of traceability scheme implementation processes as well as efforts to 

improve tegional security. TI1e international community should create mechanisms 

by which all voices -including dissenting ones - can be heard and compromises can 

be reached. 
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5. Focus on security sector reform as a distinct issue. Given the lack of 

governance and state control in eastern D.R. Congo, as well as armed groups' access 

to a wide variety of revenue sources, improving mineral traceability in the region is 

high!}' unlikely to improve the security situation. Policy makers should focus 

separately on security sector reform and work to protect civilians independently of 

the conflict minerals issue. 

List of Acronyms 

BGR 

CNDP 

EICC 

EITI 

FDLR 

ITIC 

ITRT 

ICGLR 

PRO:MINES 

OECD 

RINR 

SEC 

German Federal Institute for Geosciences & 

Nah1ral Resources 

Congres National pour Ia Defense du Peuple Fonner DRC rebel group 

Electronic Industry Citizenship Coalition Industry watchdog coalition 

Extractive Industries Transparency Initiative Global standard for revenue 

transparency 

Forces Democratiques de Liberation du 

Rwanda 

DRC rebel group 

Informacion Technology Industry Council Industry lobby organization 

International Tin Research Institute Tin industry organization 

International Conference of the Great Lakes Regional civil society 

Region 

Mineral Sector Project 

organization 

World Bank transparency 

project 

Ot·ganizacion for Economic Co-operation & International organization 

Development 

ICGLR Regional Initiative Against the 

Illegal Exploitation of Natural Resources 

Securities and Exchange Commission U.S. government agencr 
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99780.350

Introduction 

The ongoing crisis in the eastern Democratic Republic of Congo, where up to 6 million 

excess deaths have been recorded since 1998 and government neither controls nor governs 

its territory in a meaningful sense, is cause for concern to the international community and 

the United States government. The D.R. Congo is home to more than 60 million people 

who have suffered profoundly as a result of their state's collapse and a series of local, 

national, and international conflicts cl1at began in the early 1990's and some of which 

continue until todar. In the aftermath of the contentious and contested November 2011 

elections, DRC's future stability and ability to develop are both in (1uestion. In the United 

States, the issue of conflict minerals has become one of the dominant narratives about the 

crisis. As Autesserre notes, however, the overwhelming focus on conflict minerals as a cause 

of conflict in the D.R. Congo has pen,erse consequences tl1at actually prevent international 

and local actors from developing a comprehensive solution to tl1e country's contlicts. 1 

Moreover, Western advocacy efforts on conflict minemls have thus far made life more 

difticult for many Congolese while failing to stop the violence tl1ey purport to address. 

Instead, these efforts have thus far increased smuggling,2 Jed armed groups to seck other 

sources of revenue, and left up to 2 million Congolese artisanalmincrs out of work. As is 

tl1e case with the I<:imberley Process, good intentions and the belief that attacking the 

perceived economic roots of conflict was a path to peace have largely proved ineffective. 

In tlus paper, I seek to explain why efforts to create a nlineral supply chain tracing scheme 

have thus far failed to improve the D.R. Congo's security situation, and why these efforts are 

unlikely to lead to peace in the funtre. I begin by providing brief background on the mineral 

sector in the D.R. Congo and then turn to a discussion of recent advocacy efforts relating to 

the region. Following that, I then turn to a discussion of the creation of legislation tlmt 

became Dodd-Frank Sections 1502 and 1504 and the effects tllis legislation has had since its 

passage in July 2010. I debate the decision to pursue "conflict minerals" as a means by 

which to make progress on improving Congolese security, and critici7.e advocates for 

misunderstanding the relationship between conflict and the local economr. Finally, I 

conclude wid1 a summnty of the debate over the Securities and Exchange Commission 

regulations that are to be issued under section 1502 and make policy t'ccommendations for 

moving forward in a way that can satisfy the advocacy cotmnnnity, industry, and those who 

care about responsible supply chain sourcing while allowing Congolese artisanalmincrs to 

work and provide for their families and moving toward a more transparent, accountable, and 

legitimate mining sector in the eastern D.R. Congo. 

t Se,•erinc Autesserre, "Dangerous Tales: Dominant Narrnti,·cs on the Congo and th•ir Unintended 

Consequences." /Ifii{(IIIA,Qitin (Forthcoming 2012). 

2 Jonny Hogg and Graham Hollidar, "Conflict minerals crackdown backfiring in Congo." Heuters (30 

December 2011). Available: http:/!at~rcuters.com/micle/drcNews/id.AFL6E7Nll25720! l123!bp-tme 
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Background: The Mineral Trade in the Eastern D.R. Congo 

The Democratic Republic of Congo is one of the richest sources of natural resources on 

Earth. Contained ·within the country's borders and territorial waters are oil, gold, mbber, 

cobalt, copper, uranium, diamonds, tantalum, cassiterite, wolframite, and countless other 

mineral resources. Abundant natural resources are found throughout Congolese tetTitory, 

but particular minerals are highly concentrated in certain areas. Katanga province, in 

southeastem D.R. Congo, is home to high concentrations of cobalt, copper, uranium, and 

tin, while much of tl1e region's gold is found in the northeastern Orientale province 

(particularly in Ituri district) and the northern reaches of north Kivu. Diamonds are largely 

located in d1e central Kasai provinces, while the eastern North and Soud1 I<Jvu provinces 

have high concentrations of tin, cassiterite, tungsten, and tantalum. 

The D.R. Congo's natural resources have always been a draw for outsiders looking for 

wealth in the vast territory. Belgian colonialism was intimately tied to tubber extraction and 

used brutal methods to force the Congolese to gather it. American scientists used Uranium235 from Katanga in the atomic bombs dropped on Nagasaki and Hiroshima to end World 

\'i/ar II, and Cold War-era policy makers overlooked dictator Mobutu Sese Seko's excesses 

and cormption to ensure d1at they could maintain access to uranium and other essential 

minerals. 

Congolese minerals again drew global attention in tl1e late 1990's and early 2000's as world 

prices for tantalum skyrocketed. Tantalum, a mineral that is a key component in many 

consumer dectronics, was in high demand as consumer demand for mobile phones and 

gaming systems. Tantalum is found in the D.R. Congo in the form of coltan (columbitetantalite) and armed groups, including d1e armies of Rwanda and Uganda, quickly realized 

that they could profit from the extraction of tantalum and other regional minerals. 

However, it is important to note d1at mineral extraction was neither d1e cause nor root of 

violence in the Kivu provinces or Ituri. As anthropologist Stephen Jackson noted in 2003, 

"The present war in the DRC did not begin with explicitly economic objectives. Rather, as 

the war reached a stalemate nationally, so belligerents turned inwards to the terl'lt01y they 

controlled, capitalising- personally as well as collecti\·ely- on the rich resources available. 

Coltan both finances violence and provides an incentive for it."3 

D.R. Congo's role as a supplier of coltan to international markets has been repeatedly and 

erroneously overstated, as docnmented by Michael Nest. A series of incorrect and 

misinterpreted assertions led to the oft-repeated claim that Congo is home to "80% of the 

world's coltan reserves," or "supplies," yet there is no basis of truth to either of these claims. 

As Nest notes, we do not actually know how much tantalum is in d1e D.R. Congo, hut "The 

most informed estimate is that Central Africa has around 9% per cent of the global reserves. 

3 Stephen Jackson, "Fortunes of war: the col tan tmde in the KiVlls" in Sar:th Collinson, ed. Po11~r, IJrtlihood<, 

aud Cm!}lirl: Cast Studiu i11 Politkol EroJJM!J A11nfy;i; .for H111Uf11Jilnriall Arlio11. 0\'erseas Development Institute 

Humanihl!i•n Policy Group (2003), 21-36. 
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The DRC's reserves are the major component of these- perhaps 7 to 8 per cent of global 

reserves."4 Thus the importance of Congolese minerals in global supply chains for coltan is 

not as large as many have claimed. Its importance to the Congolese econolll}' is still very 

significant. 

There is no question that some Congolese and foreign armed groups fought for control of 

the mineral trade in eastern D.R. Congo, nor is there a q\1estion that some groups engaged in 

mining also engage in civilian-directed violence. The United Nations Group of Experts on 

the Democratic Republic of Congo have done excellent work documenting the ways that the 

mineral trade finances violent armed groups in the eastern Congo.s However, not all 

violence in the eastern D.R. Congo is related to the mineral trade, and not all mines arc 

controlled by violent actors. Moreover, the eastern Congolese economy is largely dependent 

on mineral trade, whether linked to violence or not. As Jackson notes, "tantalum mining has 

become a critical mode of survival for many at the grassroots."6 In many families, mining 

activity is generational and represents their only potential economic livelihomJ.7 

It is difficult to overstate the importance of the mining sector to d1e Congolese economy. 

As Goma's Pole Institute Research Director Aloys Tegera notes, it "accounts for 80% of the 

exports, 72% of the national budget and 28% of GD P according to rl1e latest available 

statistics. Its output and sales are of major importance for the economy. Also odJcr 

economic sectors, for example d1c agricultural sector, are influenced by the mining sector. 

Locally, everybody depends on mining!"8 

Congo Advocacy and the Mineral Trade 

Prior to the late 2000's, there was litde advocacy attention on the situation in the eastern 

Congo. During the war, journalists had actively covered the region, but fmm about 2002 on, 

most international attention focused on the growing crisis in Darfur. While a few newspaper 

articles on the Congo situation appeared from time to time and the International Crisis 

Group and several non-governmental o1·ganizations released regular reports on the ctisis, 

there was no grassroots constituencr centered around drawing attention to or effecting 

change in the D.R. Congo. 

<Michael Nest, Co/Inti (Cambridge: Polity Press, 2011), 18. 

' Reports of the Group of Experts Submitted through the Security Council Committee Established 

Pursuant to Resolution 1533 (2004) Concerning the Democr-atic Republic of Coo go. Available: 

http: I /www.un.org/ sc/ committees/1533 / egtoup.shtml 

6 Stephen Jackson, "Making a Killing: Criminality and Coping in the Kivu War Economy." UtJ•im• rfAfliam 

Po/it;m/ EroJW~l)' 93:94 (September 2002), 516-536. 

7 Sora Geeneo, "Constraints, opportunities, and hope: which future for gold miners and tmders in 

K.1nlituga, South Kivu?" in An Ansoms and Stetaan.Matysse, eds., Na!JmJ/ Ruomw ami uctll LitdiboodJ ill lht 

Grrol I .<~ku fugio11 of Afiim (New York: Palgrave, 20 II). 

8 Aloys Tegcra. Quoted in "Report of Rotmlltable on Conflict Minerals Legislation." make!Tfair Campaign 

(11 July 21)!1). Availabk: http:/ /makcitfair.org/the-facts/rcports/roundt,lble-on-conflict-minerals-lcgislation 
386 


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That changed in 2007 with the launch of the Enough Project, which was created wid1 the 

primary purpose of developing an American constituency around ending and preventing 

conflict in Africa. Enough's early advocacy on the D.R. Congo focused on d1e horrific 

namre of civilian-directed violence and the need for increased civilian protection efforts. 

Their 2007 and 2009 reports and activist briefs emphasized the complex nature of the 

violence there and the need for multi-pronged approaches to crisis tesolution.9 These 

documents contained little or no mention of the mineral issue. They also did little to build a 

grassroots constit1.1ency engaged on Congo in the United States. 

Enough's focus shifted <kamatically in April 2009 with the release of their "Can You Hear 

Congo Now? Cell Phones, Conflict i\.finerals, and the Worst Sexual Violence in the \'{fork!" 

strategy paper in which Enough founder john Prendergast directly linked \\'estern 

consumers' ownership of electronics like cell phones to sexual and other f01ms of violence 

in the eastem D.R. Congo.IO The paper laid out a strategy for engaging \\7estcrn consumers 

on the Congo by pressuring electronics companies and government to avoid using minerals 

tied to cont1ict in consumer electronics. It formed the basis for Enough and od1cr advocacr 

organizations' activities relating for tl1c D.R. Congo from 2009 until today. It is important to 

understand that the shift to a focus on conflict minerals gal\•anized grassroots activists on 

Congo and built a broad constimency around the situation in the eastern Congo. The 

activists' usc of consumer electronics, particularly mobile phones, as a means of tying 

consumers to tl1e cdsis in ti1e Congo was effective in making grassroots activists feel as 

though tl1cy had a connection to ti1e crisis and could make a difference. After tl1e adoption 

of dus strategy, advocacy groups proliferated, news coverage of the D.R. Congo increased 

dramatically, and donations poured in to organizations working on ti1e region. 

Enough also pursued coalition relationships with several leading corporations. The most 

responsive of these corporations was Hewlett Packard, which wished to be at the forefront 

of conflict minerals advocacy among multinational corporations.ll Enough gave high marks 

to HP, Motorola, Intel, Noki~, Microsoft, and Dell in their November 2010 rankings of 

companies making progress on conflict minerals. It is safe to assume that most of those 

companies work closely with Enough on the issue as "Stakeholder Engagement"- defined 

9 See, for example, "Averting the Nightmare Scenario." Enough Project Acti\'ist Brief (10 September 2007). 

Available: httrv//www.enoughproj~ct org/puhlkations/t~vt'rring-Moiglltmare-scenario-eastern-c<"'ngq:3£~h:i~!::br!~.( 

and Rebecca Feeley and Colin Thomas :Jensen, "Getting Serious About E11di11g Conflict and Sexual Violence in 

C.ongo." Enough Project Stmtegy Paper (19 March 2008). Available: 

http://\vww.enonghpro;cct.nrg/publictttions/gettin1J-Seriops-ahout~endfng-cnnt1ict~and-sexual-vio1et1cc-convo. 

10 John Prendergast, "Can You Hear Congo Now? Cell Phones, Conflict Minerals, and the \'\forst Se,·unl 

Violence in the World." Enough Projt'Ct strategy paper (April2009). Available: 

http:/ /www.enoughproject.org/publications/can-you-hcar-congo-now-cell-phones-contlict-minerals-and-worst· 

sexual-violence-world 

l1 Hewlett Pacbrd, DRAFT {07/23/10) Coujlict Mimm!JAnP(!ftlf)' tmd 90-Dtty Arli&/1 Plm1 (Internal document, 

2010). 
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as working with an Enough-led coalition -is one of the indicators used to determine 

ran kings.!' 

The Road ta Dodd-Frank Section 1 502 

Enough and other activist groups working on D.R. Congo pursued a legislative strategy to 

pnss a law that would require companies to be more transparent and accountable in d1eir 

mineral sourcing practices. Their efforts centered on House Resolution 4128, the Conflict 

Minerals Trade Act, the purpose of which was to: 

help stop the deadly conflict m•er minerals in eastern Congo by regulating tbe 

importation and trade of tin, tungsten and tantalum - minerals commonly used in 

cell phones, laptop computers and other popular elect:ronic devices. Under the bill, 

U.S. Commerce Department-sanctioned auditors would audit mineral mines 

declaring them conflict free or not. These mines would be mapped to show which 

ones fund conflict. Furthermore, importers 'l.vould have to certify ·whether they were 

importing conflict minerals - companies that do import conflict minerals will be 

reported to Congress by the United States Trade Represent.'ltive.B 

HR 4'128 was submitted bj• Representative James .McDermott, Democrat of \V'ashin1,>1:0n 

State, and supported by cite Center for American Pr<lgress (Enough's parent organization), 

Human Rights \\latch, Hewlett Packard, the International Labor Rights Forum, and the 

Information Technology lndustr}' Council (l'J1C, an industry lobby group). Despite gaining 

bwad support from several sectors and getting co-sponso1·ship fmm other legislators after 

pressure from grMsroots activists, the bill never moved out of the committees to which it 

was referred. 

In July 2010, two provisions focusing on the D.R. Congo and conflict minerals were added 

to the Dodd-Frank \\fall Street Reform and Consumer Protection Act. Section 1502 

requires publicly trading companies to report to the Securities and Exchange Commission 

(SEC) and on their websites whether they source conflict minerals, defined as "columbitetantalitc (coltan), cassiterite, gold, wolframite, or their derivatives" from the D.R. Congo or 

its neighbors. 14 It rcguircs further reporting and auditing from companies that use D .R. 

Congo or neighboring country conflict minerals, and requires the SEC to create specific 

12 Enough Project, Getting to Conflict Free: Assessing Corporate Action on Conflict llliner.us. (Drccmbcr 

201 0). Available: http:/1\\'\\-w.enoughproject.ow/fties/public:ltions/corpprntc action·l.pdf 

13 OpenCongress Summary, HR 412$: Cmiflict M1!wrds Tmtk Act. Submitted to Congress 19 November 2009. 

Available: http:/ /www.opencongreos.org/bill/lll-h4128/show 

H Resource Consulting Sen·iccs has an excellent explanation of the full implications of section 1502. US 

4~ir/,ttioJJ 011 CoJ!flirt Milltr.tlJ: RCf l'tiMit Smittt G11idmJrt OJJ J}Jt Dodd.Pnmk Art SertioJJ 1502 (April 20 11). 

Available: 

http://www.resourceglobru.eo.uk/documents/RCS_DF _ACT_GU!Dr\NCE_Al'RIL_20ll_lowres.pdf 
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regulations as to how companies will satisfj' the legislation's requiremcnts.15 Section 1504 

requires increased transparency from companies registered 'With the SEC to disclose how 

much they pay foreign governments for access to minerals, oil, and gas.l6 Section 1504 has 

been less conf:t'O\'ersial with respect to the DRC, though there is certainly contention over 

the measure in other cirdes.l7!S 

Consequences of Dodd-Frank 

Section 1502, however, has provoked a great deal of controversy as a number of unintended 

consequences have developed since its passage. While the legislation gave the SEC 270 days 

to t·elcase rules on how companies are to report and audit their activities with respect to 

conflict minerals, meaning they should have been ready by April 2011, as of early January 

2012, the xegulations have yet to be released. The U.S. Chamber of Commerce and its 

member companies are threatening to sue over the legislation because they believe that the 

SEC has not "show[nJ any benefits to investors, increased efficiencies for the marketplace or 

capital formation."!? In other words, the Chamber believes that the regulations impose too 

stiff a bUt·den on commerce 'Without demonstrating market-based reasons for doing so. 

As a result of this controversr, the SEC held a roundtable on conflict minerals on October 

18, 2011 in which corporations and advocacy commuoit)' representatives were invited to 

participate. The meeting was somewhat contentious and featured a lively debate over d1e 

challenges corporations face in implementing section 1502's potential ntles. Most of the 

corporations present at the roundtable asked the SEC to delar implementation of the rules 

dne to the complexity and cost of implementation.211 For example, a representative of Kraft 

Foods noted at the meeting that verifying responsible sourcing with over 100,000 suppliers 

15 "The 'Conflict :Mincmls' Provision in the Dodd-Frank Act Imposes New Disclosure Requirements on 

Manuf.1cturcrs." i\lcDennott Newsletters (22 July 2010). Avail•hle: 

http://www.mwe.com/index.cfm/fuscaction/publications.nldet..'til/objcct_id/13114620-h2dd-466a-8392-

c53c3da0a l62.cfm 

l6 US P\v'YP Law 20!0- Sec. 1504 Dodd-l'mnk W:ill Street Reform Act. RC\·cnue \\'atch Institute. (July 

20 l 0) Available: http: I !respun:es.revcnn<:watch.org /en! ofti<;lablPcUllli:!lU!!§:.pwrp·law-20 l O-see -1504-dodd · 

fctnk-w~l!l-strcet-refonn-:tct 

!7 In particular, the petroleum industry. See Ben Gemen, "Oil Industry presses SEC to keep company 

payment data locked up." 111e I !ill E2 Wire blog. (12 August 2011). Av<tilahle: ht<!"://rhchi!L<:<>m/hlogs/c2-

wirc/t•2~,vire/176629-oH-induqn·~presses-st>c-ro-kccp~c{ln1panr-p.lpm:nt-data~lockcd-up 

H1TI1e relative lack of contrO\TtS}• over section 1504 with rt·spect to D.R. Congo seems to ltave rnore to do 

with the overwhelming focus on 1502~ which is whete sante in industry perceive a greater cost to disclosure .. 

Also, D.R. Congo has rdath·elr limited oil reserves, and many objections to 1504 thus far have come from the 

petroleum sector. 

19 Sarah N. Lrnch, "U.S. SEC to hold round-t<tblc on contlict miner.tls." Reuters. (29 September 2011). 

Avrubhle: http://;J(remcrs.cmn/artide/idAFS1 E7SSQR92Qll0929?sp-tn•e 

2

" Emily Chason, "Companies Urge SEC to Slow Down on Conflict .Miner:~! Rule." !17,71/Shuf jom11al (18 

October 201 1). ,\vaihble: hHp://hloggvsi,wm/cfo/2Qil/10/IS/comrnnies-urge·sec-Jo-slow-rlo\\'1-onconl1ict·mineml-mle/ 
389 


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for every product the companr produces will be an enormous challenge.21 When the SEC 

docs release regulations for section 1502, it is unclear both what they will be and whether the 

Chamber will file suit against the rules, which most obsetYers believe would result in section 

1502 being thrown out by the courts. The \\lcstcm advocacy community has responded to 

these challenges with an almost universally united argument that section 1502 should he 

immediately implemented, and a grassroots campaign against the Chamber's potential 

lawsuit is underway. 

The primary industry lobby, the Information Technology Industry Council, argues that while 

it is committed to improving transparency and accountability in the Congolese mineral 

sector, ultimate!)', the solution to Congo's problems will not come from the private sector. 

Noted ITIC representati,,e Rick Goss: 

ITI members are committed to responsible sourcing practices and supported a 

tedeml disclosure requirement on minerals obtained from the DRC. Our companies 

have implemented a conflict-free smelter program and are working with global 

governments and civil society to jointly develop clean sourcing mechanisms to 

permit suppliers to remain economically engaged in the region. 

Ultimately, however, this terrible conflict is rooted in the wholesale absence of basic 

governance, securiry and accountability in tl1e DRC, whlch allows age-old ethnic 

tensions and conflicts over land rights to rage unabated. The DRC government and 

military are, at best, unable to protect their own citizens and, at worst, are reportedly 

complicit in committing atrocities against them. While the private sector has a clear 

role to play, only the steadfast and coordinated engagement of global governments 

can address these primary causes and finally resolve the conflicr.n 

Some invoh,cd in tllis debate believe that section 1502 should be scrapped and replaced with 

better legislation. This may be unrealistic as getting Congressional attention on the issue a 

second time will be difficult if not impossible. Others argue that amending 1502 to allow 

more time to implement SEC regulations and to improve outcomes for Congolese miners 

would be a nwre viable solution. 

Another problem is the cost of implementation. An independent Tulane University 

economic impact assessment study commissioned by U.S. Senator Dick Durbin found that 

the cost of implementing section 1502 will be approximatclr $7.93 billion dollars -more 

than 100 times the SEC's estimated cost of 571.2 million. The authors of the study note d1at 

the discrepanq' arises from a problem with the SEC estimate: 

21 Jesse Hamilton, "Kraft, GE Officials S•y Conllict-i\!ineml Hule will Burden Farms." Bloomberg (18 

October 2011). A'·ailable: http:/ /\nt'\\' busine>Sweek.com/news/2(lll·W-18/kmf!-ge-oftiriah·")'·Cml11ictmincr.~l·rulc·WiH·burdm-liuns.htrnl 

21 Email correspondence with author. 13 October 2011. 
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Our anal)'sis shows that the published figure ofS71.2million by the SEC 

underestimates the implementation cost, in part because it does not take into 

account the range of actors affected by the statutoty law. ln light of Section 1502, 

substantial tt:~ceability reforms would need to be implemented throughout the 

supply chain- from the mine to final product manufacturing- in order for 

disclosure to work.2-' 

Controversy in \\'ashington is one thing. The effect of section 1502 on the Congolese is 

quite another. Although section 1502 has yet to be implemented, it has already had farreaching consequences, none of which involve a reduction in violence. 1 n September 2010, 

Congolese President Joseph Kabila instituted a ban on all mining in the Kivu and Maniema 

provinces. This ban largely shut down mining activity in the region, but it also Jed to 

increased militarization of the mining sector as the Congolese national army, the FARDC, 

took over many mines that had previously been non-militarized. \\'hile Kabila's reasons for 

implementing the ban are unknown, it is obvious that the ban would not have happened had 

section 1502 not become law. i\>Iining in the Kivus is an activity from which many leading 

Congolese politicians financially benefir, as do members of the Congolese armed forces. 

Some in the advocacy community believe that Kabila instituted the six-month ban in order 

to make section 1502 fail, but this is an implausible claim in light of available evidence. 

Kabila faced a tight re-election battle in November 2011 and desperatelr needed the electoral 

support of communities most affected by his mining ban. The ban put miners out of wotk, 

which is not exactly a promising electoral strategy. The Congolese government claimed 

when they lifted the ban that it led to the disarmament of several militias.24 It is likely that 

this, mtl1er than a conspiracy to undermine section 1502, is what drove Kabila's decision. 

He saw a ban as a chance to persuade voters that he was engaging in constructive activities 

to improve the security situation in the east. 1\lso, it is important to remember that access to 

eastern Congolese minerals is believed by most observers to be a key component in the 

rapprochement Kabila reached with Rwanda's President Paul Kngame in 2009 to end 

hostilities between their counu·ies. Kabila's mining ban apparently allowed the FARDC to 

consolidate control over some previously non-militarized mines (eg, at Kamituga), which 

may have been another goal - ensuring that his u·oops, not others, had control over the 

mines before 1502's rules came into effect would be important if guaranteeing Rwanda 

access to Congolese minerals is part of maintaining the peace. 

23 The authors also reject a National Association of ManuE1cturers estimate of$9·16 billion as being too 

high. Chris Bayer and Elke de Buhr, 'fulanc University Llw Sd10ol Payson Center for International 

De\•elopment. A Critiml Allnfysti if the SEC'""' NAM ErO!Iofllir b!Jf>tltl Modrh aJJd tilt Propotal ~f n 3" Mokl in Vim• 

f!{lbt l!l;pfr!JitJJialioJJ ifSCttiou1502 if!!" 2010 Dodd·l:'nwk W-;J!J St~>vt Rfjbrm tmd Comllllllr Pmtuti011 Art. (October 

2011). Available: http:/lwww.p,rysnn.tulane.edu!:tsst!s/tiles/3rd Ecnnomic Impact Mode!-

Cont1ict l\!inerakpdf 

24 "DR Congo lifts ban on mining gold, tin, and tungsten." BBC News. (10 March 2011). Available: 

Imp:/ /www.bbc.co. uk/ news/world-africn·l2700898 
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Kabila's ban on mining ended in lVIarch 2011, but another de j{IC!O embargo of Congolese 

minerals soon took its place. As the April 2011 deadline for the implementation of section 

1502 regulations approached, the Malaysia Smelting Corporation (lv[SC) began refusing to 

buy Congolese tin under pressure from industry watchdog group the Electronics Industry 

Citizenship Coalition (EICC). The EICC created a tracing scheme for smelters that re(JUires 

corporations to show their orcs to be conflict free, and most companies were to work 

through a tin industry group called ITRI to ensure their minemls were appropriately tagged 

as being conflict-free.25 This tracing scheme went into effect on J\prill, 201"1. However, 

MSC could not guarantee that all of its minerals would be ITRI-taggcd and so stopped 

purchasing minerals from D.R. Congo.26 :MSC had previously purchased up to 80% of 

eastcm Congolese tin, so its exit from the market was devastating to local sellers.27 

The effect ofMSC's decision to exit the D.R. Congo mineral trade means that there is now a 

defat!o boycott on almost aU Congolese tungsten, tantalum, and cassiterite. North Kivu 

exports of tin, which is deJ'ivcd from cassiterite, have fallen by 90%.28 Only three of Goma's 

25 exporters are opemting, and they arc selling minerals primarily to the Chinese. These 

purchases may be illegal under a 2010 UN resolution requiring UN member states to urge 

their corporations not to purchase minerals that might be financing violence in the region, 

but this resolution seems to have had little effect.29 

Section 1502's effect on Congolese artisanalminers and their families, however, has been 

devastating. 30 Congolese artisan a! miners normally work under horrific conditions for little 

pay,Jt but in most mining communities, it is the only paid employment available. There arc 

no livelihoods alternatives, save subsistence agriculture or joining a militia. Now they are in 

25 "GeSI ~nd ElCC Announce Update to Conflict-Free Smelter Prognun." Press Release. {22 ,\pril20l1). 

A,·ailable: 

http:/ /www.gesi.org//l!edia/GcSINewsFul!Story/tabid/85/smid/503/ ArtidciD/75/reftab/37 /t/GcSI%20and 

%20EICC%20Announce%20Update%20to%20Conflict-Ft-ee%20Smclrcr%20Program/Dcfault.aspx 

26 Jon Rosen, "Eastern Congo's Mining at 'fuming Point." Globtt!Posl. (4 April 2011). Available: 

htm: II '"":;y,g!pb.alprm.com I dispatch/news /regions/ afrka/ 110325! Nst~rn-con~o-mining-gold; Michael J. 

Ka\'anagh, "'Congo Tin Sales Tmnhlc 90'% as Compartics .Avoid 'Conflict i\Hncrals."' 13/(){)I!Jbitg Nm·s. (23 ~fay 

201!). Available: http://www.bloombcrg.com/ncws/2011·05-23/ coogo-tin-salcs-tumble-90-percent-ascompanies-avoid·conflict-mincrals-.html . 

27 "Congo in talks with Malaysia Smelting over tin foundry." ll.t111m (3 October 2011). A,·nilnblc: 

http://af.reuters.com/ardclc!in,·cstingNcws/idAFIOE7920K,\f)_Ql1 10():) 

»Michael}. Kavanagh, "Congo Tin Sales Tumble 90% as Companies Avoid 'Conflict /lfincrals."' Bl<wJ!"''J'. 

Nnrs. (23 May 2011). Availahlc: http:/ /www.bloomhecg.com/ncws/201 !-05-23/congo-tin-sales-tumble-90-

pcrcent-as~compani<.·s-a\'Oid-conflkt-minerals-.httnl 

29 Jormy Hogg, "U.S. Buyers Shun Conflict Minerals in Congo's East." Rt111m. (4 October 2011). Available: 

http:/ /nt~reuters.com/ artide/drcNcws/idAFL5E7L31S720111005?sp"'tnle 

JO "Digging for Victol}'·" TIM L?toJJO!!Jisl (24 September 2011). Available: 

http:l/www.econornist.cmn/nodc/215301 Hlnnd Da1·id Aronson, "How Congress De'"stated Congo." J'ln1• 

Y01k Ti!!JU (11\ugust 2011). Available: http://www.nytimes.com/2011 /08/08/opinion/how-congress· 

dewstatcd-congo.html 

.It Free the Slaves, 1"k CoJ{~O Rtport: Slt~~wy in Co11jlit1 Mimmls (June 2011). Available: 

http:/ /www.freedJcslaves.net/Documcot.Doc?id'=243 
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trouble; as the \\lorld Bank PRO;'v!JNES head Paul Yenga Mahalia told Bloo/Jiberg 

B!l.rillemnek, "Almost everydung came to a standstill."-'2 

Local civil society activists engaged in tbe mining sector estimate that 1-2 million Congolese 

artisanal miners and those who work in other aspects of the mining sector are cunently out 

of work. lvlultiplied by the 5-6 direct dependents that each miner has, section 1502 has 

inadvertently and directly negatively affected up to 5-12 million Congolese civilians.·u ·Many 

miners cannot feed their children, their children are not in school tlus year because they 

cannot pay tuition fees, and those who are ill cannot afford medical treatment.3t Many other 

nliners have shifted to work in the gold sector, where smuggling is easy and sales continue. :IS 

That miners are out of work reverberates through the entire eastern Congolese economy. 

TI1is situation was anticipated by Congolese civil society leaders and has been just as 

devastating as they fcared.36 When mine1-s lack earnings, not only can they not pay their 

cluldren's school fees or afford to visit health care professionals, but they do not have 

money to pay for other goods and services in the local markets, meaning that shopkeepers, 

hairdresset-s, seamstresses, and market sellers are also eaming significantly less. In many 

mining areas, economies were based partly on nlinerals rather tl1an cash; it was possible to 

buy goods and services by trading a teaspoon of coltan for, say, school tuition. In addition, 

planes that flew into remote mining areas like Shabunda and Walikale are no longer conung 

to take t11e minerals out. Those planes carried in basic necessities like petroleum, salt, and 

candles to places tl1at are not accessible by road. Today, those communities must do 

without such necessities; even if one has money to purchase the goods, they are no longer 

available. 

The impact on nuning sector liYelihoods, while unintended, is a disaster for the alreadyfragile economy of the eastern D.R. Congo. 1\·finers cannot provide for their fanillies by 

returning to subsistence agriculture. Policy makers must consider the real and immediatealbeit unintended- impact their actions have had on artisanal mining communities. The 

potential for a humatutarian crisis is real; USAID and many non-governmental organizations 

are engaged in assessments in the region to determine how best to aid these nuriers. 

-'2 i\Jark Drajcm,Jcsse Hamilton, and Michael Kavanagh, "A Rule Aimed at Warlords Upends ,\frkm> 

i\lines." BlooJJJ!mg RmiHm;mk (4 August 2011). A\•rulable: http://www.busincssweek.com/magazinc/a-rulcaimcd-at-warlords-upcnds-afriean-mincs-0804201 l.html 

JJ As witl1 most data in the D.R. Congo-, these ntn11bers are extremdy difficult to verify; howe\"Crt the 

numbers listed here arc estimates made by reliable civil society actors with long experience in the D.R. Congo 

m.incra.l sector. 'Il1cre: are no polls or suryeys showing m.ore reli:1b!e figures on how manr miners are out-of-work 

as a result of the d' }[{fo h>n. 

3' Summary of not-for-attribution discussions at the Great L•krs Policy Forum. Washington, DC (October 

2011). 

35 United Nations. Fi11al llrpmt '!fihc UN Gmup ojExptrt; 011 tht Dttllotmfir Rtp!Jblir q(Conf!! {2011). rhailable: 

bttp·//www.un.or~ !g-aise~rchb-iew doc.asp?spnboi=S /20! 1 /738 

30 Letter from South Ki\'U miners' cooperative GECOi\!JNSKI to Intd included in SEC comments. (8 1\pril 

201 1). A,•aihble: http://w ... vw.sec.gov/commems/s7-40-t0/s740l0-219.pdf 
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Advocates anticipated that artisanal miners would be put out of work by legislation targeting 

Congolese conflict minerals. HR 4128 contained provisions to provide assistance to mining 

communities. However, section 1502 provides no such assistance. Advocates have called 

for legislation to support miner lh,elihoods, but there is little money available for these 

programs.37 In any case, a fund to support miners is not a sustainable solution for their 

employment problems. Even if$20 million were available to support miners, such funding 

is grossly inadequate to help communities faced with the need to rebuild their local 

economies from scratch. If they are unable to work soon, the suffering of artisanal miners 

and their families wiU be compounded. 

The real tragedy of this situation is that while 1502 has inadvertently put entire Congolese 

communities out of work, they still live under the constant threat of violence and 

intimidation. There has been no reduction in violence in the Kivu provinces as a result of 

the government-imposed or the international de fodo bans. Armed groups continue to 

terr01·ize local populations and to prey upon communities for food, money, and other 

resources. Moreover, as the 2011 Final Report of the UN Group of Experts on Congo 

notes, tl1e defarto han has led to an increase in cont1ict mineral smuggling via Rwanda and 

pushed Congolese armed groups to seek alternate sources of revenue, including the timber 

trade, and, in the case of the FDJ .R, continuing involvement in trading cannabis and palm 

oil.-'lil Section 1502 has·- albeit unintentionally- thus far caused more problems than it has 

solved. 

What went wrong? Advocacy misperceptions & the D.R. 

Congo conflict 

Advocates correcdy argue that section 1502 has yet to be implemented, and many seem to 

believe tl1at this absolves them of responsibility for the consequences described above. This 

is a disingenuous argument. Neither Kabila's ban or the .MSC's decision to stop buying 

Congolese minerals would have happened had Dodd-Frank not become law. Both the 

.nAn October 2011 Enough paper claims that USAID announced a $20 million program for miner 

livelihoods in August 2011 (1\nron Hall and Sasha Lezhne,., U.S. CMgo Pv/ity: Mntrhiug Duds to Words Jo End the 

If7odd>· Dtlldliutif?ar. Enough Project. (October 2011). Available: http:/ /www.enoughproject.org/files/USCongo-PoHq.pdf). According ton source at USAID, the Community Recovet)' and Uvdihoods Project was 

de,·eloped prior to the passage of the Dodd-Frank Act. Enough's claim is a mischaraeteri7.ation of its purpose. 

However~ this does 11ot mean that proposals cannot focus on mining communities. but ratlter that the program is 

not in response to Dodd-Fmnk. 

A n-ading of the prognun summaty shows that the money is intended to assist with livelihoods 

opportunities for Congolese victims of violence and others in order to alleviate the causes of war. See USAID, 

"Community RecO\-ety and J.il·elihoods Project." Grants.gov. (Announcement date: 15 August 2011). Available: 

http://www.;;r~nts.~"'''lsearchlseard).do·j;cssionid-Gkk9Tf.4GO:\lhkkYsjnXL6(kZjOMTgPq8092GrjhThOik 

MJXC2nlq'747S32409>nppld-114513&mode"'VIEW 

-'8 Unired Nations. Fi11<1/ RtfWJt (jft/;e UN Gro1p ~lExpntJ<II the Dl!IJ{)(rtrfic .Rtpllblk qfCo11go (2011). A,•ailable: 

htm://www.un.nrg/ga/search(,·icw doc.asp>s\'mbnl=S/2011 /738 
394 


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timing of the actual and de fi:cto bans and all rhetoric surrounding them suggests that these 

were clear responses to the perceived future effects of the legislation. MSC and other 

international buyers are not purchasing Congolese minerals due to uncertainty about the 

SEC regulations on Section 1502.39 That the consequences were unintentional and 

unanticipated docs not mean they were not direct effects of 1502's passage. 

While the U.S.-based advocacy community working on D.R Congo has good intentions 

with regards to wanting to improve the quality of life for the Congolese, most advocates 

made several key mistakes in their analrsis of the situation. These mistakes were based on 

misperceptions -most notably about the relationship between mineral exploitation and 

conflict in the Congo, the drh•ers of Congolese armed group behavior, and the feasibility of 

mnning effective traceability schemes in a failed state. \\!hat did the advocates get wrong? 

Minerals don't cause conflict in Congo 

Efforts to pass legislation on conflict minerals in the D.R Congo were based on the 

mistaken assumption that because the mineral trade is one dynamic in some of the region's 

conillcts, tllis means that minerals cause conflict. This underlying belief can be seen in a 

number of early advocacy efforts such as Enough's April2009 strategy paper, "Can You 

Hear Congo Now?" As criticism of this claim mounted, advocates moderated their language 

to refer to conflict minerals as a "key driver" of conflict in the eastern D.R. Congo. 

However, this claim is also misleading. If minerals cause m drive conflict in a failed state, 

then we would expect to see most, if not all, of the Congolese mineral trade to be militarized 

and/or the object of competition between armed groups. This is far from true, however. 

The mines of Kasai and central Katanga are completely free of violence, as are many mines 

in the heart of the contlict regions in North and Soutl1 Kh'U and Itud.40 Another dynamic is 

at work in the Kivus, and it has very little to do witl1 the mineral trade, but is instead about 

the state's weakness and local disputes over land and citizenship rights. As analyst Jason 

Stearns told Alert Net, "There is no doubt that nlinerals constitute a large part of the conflict 

economy in the eastem Congo and dealing with the conflict minerals issue is important, 

... nut minerals were not the origin of the conflict in Congo and solving the conflict minerals 

issue is not going to bring an end to the conflicts."41 The militarized mineral trade is much 

more a symptom of the Congolese state's weakness and inability to govern than it is its 

cause. 

30 Jonny Hogg and Graham Holliday, "Conl1ict minerals crack<lown backtiring in Congo." Reuters (30 

December 2011). Available: http://ai.m•tcrs.com/Mtide/drcNews/idAFL6E7NU23720lll230?sp"'llUC 

.ro One particularly egregious example of misleading claims about the Congolese mineml sector came in a 

segment of CBS's 60 j\fiJmks, in which John Prendergast and CBS correspondent Scott Pelley traveled to Ituri's 

Chudja gold mine lor a 2009 S<l,•mcnt. lmri gold mines have been at peace since 2006, but the Chudja mine"''" 

presented in the segment as a plnce in which violence against ch•ilians was actit·dr occurring. See Scott Pelley, 

"Congo's Gold." 60 Mi11utu (29 November 2009). Availahk: 

http:/ /www.cbsnews.com/video/watch/?id=5825'l90n 

41 Geo.ge Fom.inycn, "J\Iineml certiiication? The path to end Congo's violence?" AlertNet. (6 i\fay 2011). 

Av:~ilahle: http:/ /m.trust.org/alertnet/news/mineml-cerrificatlon-the-path-to·end-congos-violcncc/ 
395 


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Armed groups don't fight because they have access to mineral wealth 

The logic bebind focusing on the mineral trade as a way to slo•v violence in the eastern D.R. 

Congo is as follows: 

1. Armed groups maintain contml of mines so that they can earn money to fuel their 

activities. 

2. If international and local actors cut off armed groups' access to mineral wealth by 

implementing tmceability schemes and responsible sourcing mechanisms, armed 

groups ·will no longer he able to earn as much money. 

3. Therefore, the ability of armed groups to fight and/or terrorize Congolese civilians 

will be diminished. 

\\lhile this logic sounds good on paper, it is based on a misperccption of what motivates 

Congolese armed groups and what they do with the money they earn from the mines. First, 

there is little reason to believe that Congolese armed groups usc the bulk of the money ther 

earn from the mineral trade to buy weapons and ammunition. The eastern D.R. Congo is 

sarurated with weapons; few soldiers need to buy new ones, and those that are for sale are 

extremely inexpen$ive and readily available in local markets,4l 

Instead, most of the money earned by armed groups from the mineral trade is used to pay 

salaries, buy food, and provide other basic necessities to fighters and their fumilics. TI1is is 

particularlr true in the FARDC, where government salaries are .ra1·cly paid and when soldiers 

do receive money, it is often only a partial salary. Even if soldiers are paid their salary, tl1e 

amount (approximately $40-50/month) is far below what is needed to provide for their 

families. Thus they look to earn revenue via the mineral trade. 

Second, C\•en if armed &>roups do depend on the mineral trade to finance their activities, 

most can draw upon other reliable sources of revenue. As Vlassenroot and Adam have 

shown, Congolese civilians face an cnmmous burden from informal taxation schemes, many 

of which are carried out by armed groups:B Reliance on the mineral trade varies widclj' 

among Congolese armed groups, with the FDLR earning as much as 75% of its revenue 

from the mineral trade (mostly from gold), while others like the CNDP earn significantly 

41 Author's ohS<rvacions, 2005-07, 2010. A Small Arms Surver report on the illicit weapons trade between 

southern Sudan and northeastern Congo rnade dear just ho\v many small arms are in the region. 111c SmaH J\nns 

Sun·ey researcher set om to explore the scale of illicit arms trading between the two regions, but found that 

weapons tlows there arc limited because c_l\rilians in northeast Congo do not perceive a need for arms} the 

Congolese am1y rigorously disarms civilians, and southern Sudan was n!re"Jdy saturated with arms. Sec Joshua 

Marks, llmdtr i11 Nnmt OJJ/y: Amlf Tmjjitkillf.. tmd Anmd Gw11ps ''' t!Jt DRC.S~tdmt Bordu: (Gene'''" Small Arms 

Su!Vey, 2007). A\·ailable: http://www.smallumll\SUf\T)>-ud:tn.org/pdfs/HSBA-SWP-4-DRC-Sudan.pdf 

43 Jcroen ;\dam and Kocn Vlasseoroot, "'Lo. Fiscalite de Poche': The politics of taxation in Eastern DR 

Congo." Conference Paper. Presented at the annual meeting of the 1\frican Studies Association (NoYembcr 

2010). 
396 


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less.'"'" In addition to the mineral trade, Congolese armed groups rely on taxation of citizens 

under their control, of revenues collected at roadblocks, and on trade in other commodities 

like charcoal, timber, and bananas. As access to mineral wealth has been limited, Congolese 

armed groups have turned to other forms of revenue extraction with little effect on their 

violent behavior. 

Third, most Congolese armed groups are not motivated to fight by tl1e mineral trade or for 

access to the mines; instead, their violent behavior stems from anger over inequality, 

ideological issues, and/or because there are no constraints on such activities in the eastern 

D.R. Congo. As Se\•erine Autesserre notes, despite the international community's 

overwhelming focus on conflict minerals, only about 8% of Congolese conflicts are over 

natural resources.45 Some groups, including many of the Mai £\hi militias, fight simply 

because they can. Others hm·e specific grievances about their ethnic groups' position in 

society or, in the case of the FDLR, about the Rwandan political leadership. \\lith regard to 

none of the armed groups of eastern Congo is there any evidence that they will stop fighting 

simply because they lose a key source of revenue. The loss of revenue is not likely to affect 

their ability to procure weapons and ammunition, nor is it likely to motivate them to 

negotiate for peace. Instead, they arc likely to prey on civilians to an even greater extent 

than before the de jt~do mining boycott went into effect. 

Traceability is very challenging in a fragile state 

The idea of ensuring that Congolese conflict-free minerals can make it to market is an 

attractive one. Unfortunately, it is based on a poor understanding of how trade and 

governance works in an extremely weak state. The idea for implementing a traceability 

scheme with respect co the D.R. Congo was based on the Kimberley Process for ensuring 

that diamonds sold on international markets would be conflict free. However, ackocates 

failed to take into account that the Kimberley Pmcess only works well in rclativelr strong 

states with functioning governing institutions. 

The situation in the eastern D.R. Congo could not be further from the norm. It is not an 

exaggemtion to say that it is possible to bribe almost cveq' border guard, customs official, 

and immigration authority in the region. These officials arc not paid regular salaries and are 

dependent on money they can raise through bribery :md the imposition of made-up fees to 

provide for their livelihoods. This makes smuggling very easy; indeed, it is obvious that a 

" Nicholas Garrett and Harrison Mitchell, TmdiJig Cm!fli£1.for Dm!opmmJ: Vtilish(~ tht Tmdt i11 Mi11rmls jro!JI 

E,u/em DR CoJ(~~ for Dmlopmml (April 2009). t\vailable: 

http:/!www.resowccglohal.eo.uk/documents/Tr;•ding%20Cnnflict%20for'%20Develnpmcnt.pdf, 6. For more 

detailed descriptions of the dynam.ks of the mineml trade in the eastern Congo, sec Hanison Mitchell and 

Nicholas Garrett, llg·o11d Co'!flitl: UrtoJifi.~miJ(~ App'~'uhu to tl>t Il.<giOJiriiTmdt iJI ;\Ii11rmls Y"'"' F.aslmJ DRC 

Colll!Jitmitiu n11d Sma/1-Sra!t Mi!lillg (1 September 2009). Available: 

http;//\\ww.resourcevlob;U.co uk/documents/Bernnd%20Conllict RCS C;\Si\l.pdf 

45 Sf\·erine Autesscrrc, "Dangerous !ales: D01uinan.t Narmtives on the Congo and their Unintended 

Consequences." Afiit<~IJ /ltfoin (Forthcoming 2012), p. 8. 
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great deal of smuggling is happening even as the de fado borcott continues. Border official$ 

intercepted a load of cassiterite in a MONUSCO vehicle in August, but it is likely that the 

ton they caught there is but a small fraction of what is being smuggled out.46 Smuggling has 

greatly increased since the de facto borcott went into effect, and it seems likely to continue 

into the future regardless of whetl1er the SEC adopts rules or notY 

It is vcrr difficult to see how any traceability scheme could overcome this sitt1ation, for it is 

not only officials at the borders ·who will take bribes, but also those at airports and at the 

mines themselves. An effective traceability sd1cmc would have to involve implementation 

and monitoring at every step of tl1e process, including transport, br disinterested outside 

obscrycrs who cannot be bought. But even this may be problematic as anyone familiar with 

the Congolese spirit of innovation and entl"epreneurial ingenuity expects that smugglers will 

find a way to fake certification before too long. \\1ithout effective oversight from 

functioning government institutions, it is unlikely that even the most carefully planned 

traceability scheme will effectively prevent conflict minerals from being sold on intemational 

markets. 

Traceability schemes were already being developed prior to section 1502's 

passage 

Many who supported Dodd-Frank section 1502 made it sound as tl1ough it would be the 

first traceability scheme to address the problems in the Congolese mining sector. Tius is 

simply untrue. A number of efforts were underway, and many of these were undertaken in 

consultation with local civil society leaders and Congolese mineral trade exports. In 

particular, an effort called PROMINES involving the Congolese government, the \Xlorld 

Bank, and industry had made great strides towards improving transparency and 

accountability. This effort was out of the public eye and intcntionallr low-key and had great 

potential for success. However, it and other ongoing efforts (most notably the International 

Conference for the Great Lakes Region's RINR framcwork4S) to impwve the sector have 

largely ignored and/ or confused with the mess surrounding section 1502. Currently, the 

JCGLR, the ITRI, the OECD, and the SEC are all pursuing traceability regulations and 

schemes, sometimes in consultation with one another and sometimes without doing so. 

Other schemes include MONUSCO's creation of trading centers, an ElTI scheme, and the 

German gm•ernment's BGR program. The pwblem is compounded in that traceability is 

possible with some commodities (cg, diamonds), but e..'tt:raordinarily difficult with others 

""DR Congo tin 'smuggled by UN man."' BBC (23 August 2011). t\v~ilab!e: 

http:/ /www.bbc.eo.uk/ news/world-africa-14629354 

47 United N<1tions. Fi11ol Rtp(J}t f!flk UN Gro11}J t?fExputs b/J the DmJ()(m/ic Rtp111dir q(Co11go (2011). Availahle: 

http: l /www.un m:,;-/ga/sqrchhiew doc.asp);pnh0 I-S/2011/TI8 

<> "Natuml Resources." ICGLR website. Available: https://ic~lr.org/sp.ip.pbp>•.~:tidc94 
398 


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(namely, gold). In short, there is a great deal of confusion surrounding the issue and a 

desperate need for more col!aboration.49 

Regional stability and the mineral trade 

The mineral tmde in the Congo is a regional issue, not simply a local one. so Violence has 

substantially decreased in the Kivu provinces since cady 2009. \~ihile the situation in the 

region is still very volatile in places, d1e overall situation is vastly improved from what it was 

during the transition period and in the flfst years after the 2006 elections. A major reason 

for this stability is tl1e rapprochement between Congolese President Joseph Kabila and 

Rwandan President Paul Kagame. In late 2008 and early 2009, CNDP troops (widely 

believed to be financiall}' backed by the government of Rwanda) were on the brink of taking 

control of Goma, which could not be held by the limited number ofMONUC peacekeepers 

posted there. However, Rwanda stopped the CNDP, arrested its leader Laurent Nkunda, 

and within months, l(.'lbila and Kagame reached an agreement. This agreement 'Was 

negotiated by former Nigerian President Olusegun Obasanjo, acting on behalf of the United 

Nations. It is an oml agreement and its specific contents are only fully known to the two 

heads of state. Most obsenrers believe that the agreement contained some kind of provision 

that guaranteed Rwanda access to Congolese minerals, an important source of revenue for 

Rwanda. 

Rwanda has been careful to voice its support for mineral tracing schemes in the D.R. Congo 

and recently announced its intention to return 70 tons of smuggled, untagged minerals to d1e 

Congolese. 51 However, it is unclear whether Rwanda has been rejecting all smuggled 

minerals from d1e D.R. Congo. Rwanda has very limited mineral reserves in its own 

territory; most minerals sold on world markets as "Rwandan" are actually Congolese. 

Rwanda is very careful to maintain its public image as an international good citizen and so 

d1e government is unlikely to protest the implementation of section 1502 or other legislation. 

However, it is important that Rwanda be able to maintain access to Congolese minerals in 

the interest of regional stability. It does not seem feasible that Rwanda 'Would re-invade 

Congo to gain access to minetals, but it is within the t·ealm of possibilitj• d1at Rwanda would 

turn to secret!}' back a local militia if it felt its economic interests would be best served by 

doing so. 

Why did advocates fall prey to these misperceptions? While it is impossible to know for 

certain, it is dear that many of those who conceived the strategy for dealing with conflict 

minerals either had direct experience working to put together the Kimberley Process or were 

4' For a comprehensive list of traceability scheme efforts, see COt!flirl AJi11erak aJJtltk DtiJJocratit Rtjmblk of 

Co11go: Rupmuible At1im1 iJJ S11pply Choi111, Cmn1111llll FiiiJ!.<W"""' afld CnpatitJ 1J11ildi11g. BSR (May 201 0). 

50 Jcroen Cuvelier, •1mroduction" in Jeroen Cuvelier, cd., The Coo;pk,·i!J• ofResomr< CmvmoJJr~ it1" Co11/txl of 

Stalt Fmgility: IIH Gm ~(Eamm DRC. International Alert (2010), 9. 

51 "Rwanda: Country to Send i\linerals Back to DRC." l7Je Nen• Ti11m (13 Octo her 2011). Available: 

http:/ /allnfric;l.com/storics/201110130016.hunl. 
399 


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inspired by its efforts. This is particularly true with respect to advocates from British 

organization Global \\fitness, which focuses on minerals in conflict and played a major role 

in developing the Kimberley Process. 

The Enough Project took matters a step further as they repeatedly cited the efforts leading 

to the creation of Kimberley Process as instnunental in ending conflicts in countries that 

house significant diamond reserves. 52 For example, Enough's John Prendergast and Aaron 

Hall argued in a February 2011 op-ed that, "The global blood diamonds movement helped 

to end these wars, and the resulting IZimberley Process, although far from perfect, has 

helped to consolidate peace in those areas, playing a significant role in ending conflict in 

Sierra Leone, Liberia, and Angola."53 

lt is true that the IZimberley Process was created largely in response to the cont1icts ill Sierra 

Leone, Liberia, and Angola, where the sale of "blood diamonds" were a major reve11uc 

source for the countries' armed factions. However, it is empirically false to say that the 

Sierra J .concan, Liberian, and Angolan wars ended due to the Kimbedey Process and its 

potential effect on mineral revenue for armed groups. TI1c Sierra Leone conflict ended after 

a stalemate developed between the RUF and government forces. 54 As J. Peter Pham notes, 

"the brutal tactics employed by the rebels as well as their lack of a coherent political program 

other than to overthrow the national government in Freetown rendered it difficult for them 

to rally Sierra Leoneans to their cause." Peace was restored in 2001-02 through a securityrestoration process in which the UN peacekeeping mission UNAl'viSlL's force strength grew 

to 17,500 and was mandated to support government efforts to disarm combatants and 

restore order. 55 

Likewise, the Angola conflict ended Hot because the lZimberley Process cut off revenues to 

rebel fighters, but rather because UNIT A rebel leader Jonas Savimbi was killed in combat in 

2002 and his successors agreed to a ccasefire less than two months later. The ceasefire led to 

51 See, for cxrunplc,John Prendergast, "60 Minutes Spotlights Gold, Conflict Minemls Fueling Congo's 

\\,•:u·.so Enough Project hlog post (30 November 2009). Availnblc: hrtp://ww'.v.cnoughproject.ml/blors/60~ 

n1inutl.'s~spotlij:.fhts-rold-cunflkt-minerrJs-fucling-congys-w;;tr;John Prendergast, ucan "You I-I ear Congo Now? 

Cell Phones, Conflict .Minerals, and the Worst Sexual Violence in the World." Enough Project strnteg)' paper 

(April2009). Amilable: http://www.cnoughproject.org/puhlications/can-you-hear-congo-now-ceU-phonesconflict-minerals-and-worst-scsual-violence-world ; Raise Hope for Congo: An Enough Campaign, "Conflict 

Free Campus Initiative Toolkit." Available: 

h!.!n.J./www.r.th.ehope forcont:o.ot)I I sites /default /mes / Enml~~·h%.20Conflkt- f ree%~20C~mpns(;/v2(ffoo1kiqlli_f. 

53 John Prendcrg>tst and Aaron Hall, "Ccrtit)1ng Congo's Deadly Conflict Minerals." Enough Project (I 

Fdrruary 2011). Available: http:/ /www.enoughproject.org/blogll/ccrtifying-congos-deadly-conflict-minerals 

'' A contentions scholarly debate exists over whether the RUI' were moti\·ated to fight by the presence of 

diamonds or whether the war WolS fought mainly over agrarian grievances. Evklence for both claims is 

incondusivc, but n.·cent findings sugg;cst th~tt agnuian grie\~ances were a kcr driv-er of conflict in the Sierra Leone 

war. Sec Esther Mokuwa, Maartcn Voors, Erwin f\ulte, and Paul Richards, "Peasant Grie••ance and Insurgency in 

Sierra Leone: Judicial serfdom as a drh·er of conflict." AjfiraliAfj:lir,- 1!0:440 (May 2011), 339-366. 

;; J. Peter Pham, "Democracy h)' Force? Lessons from the Rcstomtion of the State in Sierra Leone." T ht 

IVhi!tbMd ]ollnld! rf Dip!o!IM(J mtd ltJ!tmalional fu!ati6JtJ 129:6 (\\linter/Spring 2005), 129-147. 
400 


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a political process by which UNITA soldiers disarmed and the movement became a political 

party. 56 In Liberia, the country's second civil war ended in 2003 because the LURD rebel 

movement attained a set·ies of battlefield victories over Charles Taylor, the primary 

beneficiary of the Sierra Lconean diamond trade, and declared a ceasefire in the face of 

international diplomatic pressure that led Taylor to resign. 

With the exception of Liberia, none of the wars cited by advocates as support for the idea 

that creating a mineral supply chain traceability scheme will reduce conflict had ended by the 

time the Kimberley Process came into effect. There is no evidence that suggests fighters .in 

any of these conflicts were primarily- or at all motivated to lay down their arms due to the 

fear that they might lose sources of revenue from the diamond trade. Instead, decisive 

battlefield victories, external pressure, and negotiated political solutions were what ended 

each conflict. 

Creating on International Norm 

That the Kimberley Process did not end the wars in Sierra Leone or Angola is not in and of 

itself a reason not to pursue traceability schemes and reRponsible sourcing for other mineral 

resources in conflict areas. If implemented well, they can theoretically build more 

accountable and transparent economies in countries that need them. For some advocates 

who supported Dodd-Frank sections 1502 and 1504, the creation of such an international 

norm is by far tl1e most important aspect of the legislation, arguably more so than whether 

tl1e law will lead to greater peace and stability in the eastern Congo. These advocates sec the 

potential failure of the law as disastrous fox their goal of building international norms to hold 

corporations responsible for where and how they source materials for their products. 

\\'hile there is no <JUestion that all D.R. Congo stakeholders want to see less violence and 

more peace and prosperity in the conflict regions, the overarching focus on the creation of a 

norm with respect to conflict minerals is problematic. Advocates used the horrific nature of 

the violence in the D.R. Congo to draw attention to the crisis and leveraged emotional 

language, images, and testimony about rape in the Congo to promote the need foJ· legislation 

on conflict minerals while promising that the violence would abate if the legislation were 

passed. However, many overstated the potential that a traceability and transparency scheme 

·would have for alleviating some of that violence. i\{eanwhilc, the unintended effects of the 

passage of section 1502 have put millions of Congolese artisanalmincrs out of wotk, and the 

violence has not abated despite the fact that few armed groups are making money from the 

nearly-halted mineral trade. Many policy makers and legislators feel as though they have 

been deceived as to what consequences- positive and negative- section 1502 would 

produce, particularly with respect to preventing civilian-directed violence. 

:.<Polity IV Project, Polity IV Co1mtry &port 2008:AI(f(flht (2008). Available: 

hJ.tn:/lw\\'\V.svstemicoeace.org/polit)'/An~oh2008.pdf. p. 3. 
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As noted above, the notion d1at governments and consumers should hold corporations 

accountable for responsibly sourcing materials and labor used to build their products should 

not be controversial. Many consumers have shown that they prefer to pay higher prices for 

f.'lir trade and ethically-produced goods. However, we need to decouple the value of creating 

a norm about supply chain tracing from the notion that doing so will end violence against 

Congolese civilians. There is no evidence that suppl)' chain tracing schemes end conflict or 

pt·event violence, and however Dodd-Frank section 1502 is implemented, it is unlikely that 

this law will do so in the D.R. Congo. Violence in the Congo is rooted in political disputes 

and requires a political solution, not an economic one. Stakeholders could have a more 

productive and honest debate by delinking these issues and focusing on finding appropriate 

solutions to distinct problems. 

Recommendations 

What can be done to impwve the plight of Congolese artisanal miners while simultaneously 

promoting a more transparent and legitimate mining sector? The following 

recommendations seek to address the problem by slowing down the implementation 

process, focusing on miner livelihoods, and incorporating local solutions. 

1. Implement Dodd-Frank section 1 502 in phases with dear annual 

benchmarks over three years. 

The U.S. advocacy community strongly believes that section 1502 should be immediately 

implemented and that the SEC should issue rules on the Congo mining sector without 

further delay. 57 Enough has created a Step Up for 1502 campaign through which its 

grassroots activists are pressuring the U.S. 01amber of Commerce to back down from their 

plans for a lawsuit and through which they are urging the SEC to act immediatcly.58 

Congolese civil society leaders and mining sector officials, however, believe that by slowing 

down the implementation of section 1502 it will be possible to integrate the many existing 

schemes for improving transparency and accountability in the Congo mining sector. They 

are correct; as the SEC regulations arc one set among many, the differences in traceability 

schemes has produced mass confusion while creating no as-yet-viable process for tagging 

and tracing Congolese minerals. By slowing the timeline on implementation of the SEC 

rules and allowing for a three year transitional period, more time will be available for a 

consultative process that integrates the interests of Congolese miners along with industf}' 

and adyocacy interests. It also makes the success of a traceability scheme more likely; with 

buy-in from local actors, the likelihood of smuggling will significant!}' decrease. 

57 Email to Chair and Commissioners of the Securities and Exchange Conmtission from 12 advocacy 

organi2ations. Provided to author. (29 July 2011). 

>S Ktthryn Ha\•ranek, "Step Up for 1502 and Congo." Enough Project blog. {I I October 2011). Available: 

http:/ /www.enoughproject.org/blogs/stcp-1502-and-congo 
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The SEC should develop a series of dear benchmarks for each year of the transitional 

implementation process for section 1502. It is unrealistic to assume that effective and 

transparent traceability schemes can be implemented in D.R. Congo overnight. Benchmarks 

should be progressively sttonger and should be realistic. They should also take into account 

local civil societ)' actors' views on what is and is not feasible, and should be centered on 

building community consensus about the regulations and the need for a traceability scheme. 

Furthermore, the goals should work to integrate and unite the many existing traceability 

schemes into one workable system. Goals for the first year should be primarily focused on 

public education and the creation of basic infrastructure for the system. Over the second 

and third years, rules should require progressively higher standards for conflict-free 

purchases. The SEC should reasonably expect that companies can report d1at about 25% of 

their mineral expons from D.R. Congo are conflict-free at the end of year one, with that 

number rising to 50% by the end of year two and 100% by the end of year three. 

Regulations regarding reporting and auditing of non-conflict-free minerals should not fully 

go into effect until after d1e cod of the third year. 

2. Provide immediate assistance to affected mining communities. 

Congolese miners affected by the dejado ban on mineral exports need immediate, short-term 

assistance for basic necessities, school fees, and health care. This assist:lfice need not be 

tenibly cosdy; allocating approximately SS0-$150 per family dependent on family size would 

help to alleviate their most pressing problems. Foremost among these concerns are the 

ability to purchase food and to pay school fees. For basic needs, families need food aid. 

However, given that section 1502 has shut down much of d1e economy in mining regions, 

aid agencies should consider disbursing aid in the form of direct cash transfers to affected 

families. Tlus would allow them to buy food from local providers, thereby helping the 

Kivutian economy to recover. Assistance should also be provided to the already-stretdled 

health care system. If miners are not given direct cash transfers to pay for health care on 

their own, then donors and aid agencies should temporarily subsidize the full cost of health 

care. Out-of-pocket health care expenses in the region range from about $1 to $5 for most 

visits and overnight hospital stays, so the cost of temporatil)' fully subsidizing health care 

would not be extraordinarily high. 

The Congolese school year operates on a t1·imester S)'Stem and began in early September, but 

most miners were unable to pay their children's tuition, which ranges from $5/trimester for 

primary school to $15-30/trimester for secondary school. Aid agencies normally do not pay 

school fees, but in this case, an exception should be made. Payments for miners' children's 

tuition should be made directly to education providers, which in most cases arc religious 

institutions managing the public schools on behalf of the state. Doing so would allow 

school officials to pay teachers' and administrator's salaries, thereby further helping to 

jumpstart the local economy and support those who are indirecdy affected by the de fot!o 

embargo. 
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3. Turn traceability into a jobs program. 

There is a small chance that delaying the implementation of section 1502 would allow 

Congolese artisanal miners to get back to work while traceability schemes are developed in a 

more collaborative process. Industry watchdog groups and industrial coalitions should 

consider allowing corporations to buy Congolese minerals while meeting yearly benchmarks 

to show improvement. Tllis would help the people of the eastern Congo immeasurably 

while still showing a commitment to tmnsparencr and accountability in the mineral sector. 

i\s benchmarks are achieved over time, it could also create better working conditions and 

improve quality of life for miners. 

However, the professionalization of the mining sector is likely to put many artisanal miners 

out of work, and it is not dear that industry watchdogs would allow companies to buy 

Congolese minerals under transitional conditions. The traceability scheme that is ultimately 

developed should include job creation efforts as part of its structure; there is no t·eason that 

former miners should not be hired as taggers or hold other positions to ensure that minerals 

are certified as conflict-free. 

The international community should increase its emphasis on job creation schemes in the 

Congolese mining regions as well by implementing microcredit programs, investing in 

rebuilding infrastructure, and tht·ough other job-creation effmts. Mining jobs should be one 

economic opportunity among many. 

4. Create formal mechanisms for Congolese leadership in the 

implementation process. 

A major problem with U.S.-based advocacy efforts on the Congo is that their major strategy 

was conceived in \Vashington with little to no reference to Congolese actors and their 

concerns. Local actors that were drawn into the process in its later stages tended to be 

hand .. picked supporters of the process, while dissenting voices were left out. As it stands 

now, many Congolese experts on the mining sector are marginalized in the debate and have 

little incentive to work wid> advocates and policy makers who predously ignored them. 

Many of the problems with section 1502 and its unintended consequences were anticipated 

by Congolese civil society leaders and scholars and could have been avoided had t11eir 

perspectives been integrated in d1e advocacy process before strategies were released and 

advocacy activities had already been determined. Allowing Congolese leaders to have a 

formal role in the implementation process, as well as listening to local leaders on what needs 

to be done to combat regional violence will increase buy-in for traceability schemes, tl111s 

contributing to a decline in smuggling and public support for the new rules. 
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Any such mechanism should include a wide spectrum of Congolese civil society actors, not 

just those known to support 1502 or those selected only by \':'estern advocacy coalitions. 59 

Doing so will ensure that effective compromises reflecting the reality of st.'lte fragility and 

the practicality of implementation schemes on the ground in eastern D.R. Congo. 

5. Focus on security sector reform as a distinct issue. 

The D.R Congo advocacy community has increased its focus on security sector reform in 

recent months.® This is a welcome de\'elopment and one that should continue. As the 

militarized mineral trade in D.R. Congo is a S)'mptom rather than a cause of violence, policy 

makers, advocates, and commentators should make an effort to discuss security sector 

reform as a distinct issue from the mineral trade. lmproving transparency and accountability 

in the mineral trade should be understood as an economic solution to an economic problem. 

Doing so '\Viii help to clarify solutions in the mineral sector -particularly with respect to 

what to do about the gold trade61 -while allowing for a more clearheaded discussion of the 

difficult tasks that lie ahead. These tasks include training and professionalizing the FARDC, 

restoring territorial authority, and disarming rebel factions. The U.S. government should 

expand its efforts via AFIUCOM, particularly with respect to FARDC training and 

professionalization programs. 

Conclusion 

While the debate over Dodd-Frank section 1502 is contentions, all stakeholders share the 

goal of improving the quality of life and security situation of the Congolese people, 

particularly miners and their families. With this common basis of concern, stakeholders can 

and must find wHys to work together to implement traceability and accountability schemes. 

However, these schemes must be realistic and based on a factual understanding of how the 

mineral trade in eastern Congo actually works as well as the limits imposed by an extremely 

weak state and the ease of smuggling under sucl1 conditions. In particular, advocates and 

legislators must understand that cleaning up the mineral trade in eastern Congo -while 

necessary and important- is unlikely to alleviate violence there. Only political solutions and 

59 One useful resource for finding such leaders is the excellent USA 10 /Eastern Congo lnitiati,•c Lmt&m)? 

Alllrfy,is rfCoNN!IJIJIJ!>'-ll,ucd OfJ!.r.llif(!'liMs (May 2011), which provides information on the activities of292 

commmtity-bascd organiza.tiot~s in 63 locn.tions in four eastern Congolese provinces. 

fl! See, for cxan1ple, Aaron Hall :md Sash a Lezhnev, U.S. Co!{t;D l'oliry: Malcbiug Dt<ds to !Fords to E11d tbt 

W'o1Ms Dr.tdliest W'nr. Enough PmjccL (October 20! 1). Available: fmp:l!w\I')V-enoughprojrq.mg/tjles/{ l$-

Convo-Potin-,pdf 

<l The gold ttnde is a key source of revenue for some Congolese armed groups, particularly the FDLR. 

Traceability schemes for gold are currently virtually impossible to implement due to technical issues. It is berond 

the scope of this report to cover in detnil what would need to happen to get the gold tmde under control, bu;, as 

"1th the rest oi Congo's mineral sector, doing so will require political solutions rather than economic ones. For 

more information on the Congolese gold sector, see Jeroen Cuvelier, ed. Tk Comple:dty rfRtsoml? Gommmre ill tt 

Coutr.,1<[State Fmgi/iry: tiM Gm ~[F.nslcm DRC.lntcmational Alert (November 2011). Availahlc: 

http:/ /www.cgmontinstitute.be/papers/ll /afr/201 Oil ResourceGm•EostcrnDRC.pdf 
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a strong commitment to security sector reform will produce a lasting peace that enables the 

Congolese to benefit from their country's rich natural resources. 

It is not too late to correct some of the \mintendcd consequences of Dodd-Frank section 

1502. By slowing the implen1entation process and allowing Congolese civil society voices to 

lead, the SEC can allow time to develop more realistic and feasible solutions to the problem. 

At the internationalleyel, the OECD and other groups developing similar regulations can 

learn from the mistakes of 1502 while pushing for political solutions to D.R. Congo's 

political violence. 

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