THE COSTS AND CONSEQUENCES OF 

DODD-FRANK SECTION 1502: IMPACTS 

ON AMERICA AND THE CONGO 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTERNATIONAL MONETARY 

POLICY AND TRADE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MAY 10, 2012 

Printed for the use of the Committee on Financial Services 

Serial No. 112–124 

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THE COSTS AND CONSEQUENCES OF DODD-FRANK SECTION 1502: IMPACTS ON 

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THE COSTS AND CONSEQUENCES OF 

DODD-FRANK SECTION 1502: IMPACTS 

ON AMERICA AND THE CONGO 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTERNATIONAL MONETARY 

POLICY AND TRADE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MAY 10, 2012 

Printed for the use of the Committee on Financial Services 

Serial No. 112–124 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

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 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

JAMES H. CLINGER, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON INTERNATIONAL MONETARY POLICY AND TRADE

GARY G. MILLER, California, Chairman 

ROBERT J. DOLD, Illinois, Vice Chairman 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

BILL HUIZENGA, Michigan 

CAROLYN MCCARTHY, New York, Ranking 

Member 

GWEN MOORE, Wisconsin 

ANDRE ́ CARSON, Indiana 

DAVID SCOTT, Georgia 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

May 10, 2012 ..................................................................................................... 1 

Appendix: 

May 10, 2012 ..................................................................................................... 45 

WITNESSES 

THURSDAY, MAY 10, 2012 

Calder, Bruce, General Manager, Claigan Environmental Inc. ........................... 22 

Dizolele, Mvemba Phezo, Distinguished Visiting Fellow, Hoover Institution 

on War, Revolution and Peace, Stanford University ......................................... 9 

Lamar, Stephen, Executive Vice President, American Apparel & Footwear 

Association ............................................................................................................ 18 

Lola, The Most Reverend Nicolas Djomo, Bishop, Diocese of Tshumbe, the 

Democratic Republic of the Congo; and President, Catholic Bishops’ Conference, the Democratic Republic of the Congo ................................................. 21 

Pudles, Steve, Chairman, Board of Directors, IPC—Association Connecting 

Electronics Industries; and Chief Executive Officer, Spectral Response LLC 17 

Seay, Laura E., Assistant Professor of Political Science, Morehouse College .... 13 

Vargo, Franklin, Vice President, International Economic Affairs, National 

Association of Manufacturers (NAM) ................................................................. 15 

APPENDIX 

Prepared statements: 

Manzullo, Hon. Donald .................................................................................... 46 

McDermott, Hon. Jim ....................................................................................... 48 

Waters, Hon. Maxine ........................................................................................ 50 

Calder, Bruce .................................................................................................... 52 

Dizolele, Mvemba Phezo .................................................................................. 158 

Lamar, Stephen ................................................................................................ 169 

Lola, The Most Reverend Nicolas Djomo ........................................................ 174 

Pudles, Steve ..................................................................................................... 179 

Seay, Laura E. .................................................................................................. 187 

Vargo, Franklin ................................................................................................ 193 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Miller, Hon. Gary G.: 

Written statement of the Automotive Industry Action Group (AIAG) ......... 213 

Written statement of Kennametal Inc. ........................................................... 215 

‘‘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 Dodd-Frank Wall Street Reform and Consumer Protection Act,’’ prepared by Chris Bayer, Tulane University, 

dated October 17, 2011 ................................................................................. 218 

Written statement of the Retail Industry Leaders Association (RILA) ....... 254 

Written statement of the SBA Office of Advocacy ......................................... 258 

Written statement of the U.S. Chamber of Commerce .................................. 261 

McCarthy, Hon. Carolyn: 

Written statement of Ntama Byalira Bahati (Jacques), Africa Faith and 

Justice Network Policy Analyst ................................................................... 263 

Written statement of Bennett Freeman, Senior Vice President, Sustainability Research and Policy, Calvert Investments ..................................... 267 

Page

VI 

McCarthy, Hon. Carolyn—Continued 

Written statement of Peter Rosenblum, Columbia Law School ................... 268 

Written statement of Earthworks ................................................................... 270 

Written statement of The Enough Project ...................................................... 272 

Written statement of Free the Slaves ............................................................. 276 

Written statement of Global Witness ............................................................. 278 

Written statement of David Schatsky, Principal Analyst/Founder, Green 

Research ........................................................................................................ 280 

Written statement of the International Corporate Accountability Roundtable (ICAR) ................................................................................................... 283 

Written statement of the Social Investment Forum (SIF) ............................ 286 

Written statement of the National Association of Evangelicals (NAE) ....... 298 

Written statement of Hon. Howard L. Berman, a Representative in Congress from the State of California ............................................................... 299 

Written statement of SYNERGIE, A Platform of 35 Women’s Rights 

Groups Standing up for Victims of Sexual Violence .................................. 301 

Written statement of STAND .......................................................................... 303 

Written statement of the Group of Experts on the Democratic Republic 

of Congo ......................................................................................................... 305 

Written statement of United to End Genocide ............................................... 308 

McDermott, Hon. Jim: 

Partial list of companies going conflict free ................................................... 310 

Executive Order 13126 and the List of Forbidden Products for Federal 

Acquisition Starting in 2001 ........................................................................ 314 

Partial transcript of a Foreign Affairs Committee Markup held on April 

28, 2010 .......................................................................................................... 317 

List of States, Cities, and Companies going conflict free .............................. 349 

Waters, Hon. Maxine: 

supplychain article ........................................................................................... 350 

Dizolele, Mvemba Phezo: 

‘‘The Democratic Republic of Congo: Taking a Stand on Security Sector 

Reform’’ .......................................................................................................... 351 

(1) 

THE COSTS AND CONSEQUENCES OF 

DODD-FRANK SECTION 1502: IMPACTS 

ON AMERICA AND THE CONGO 

Thursday, May 10, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON INTERNATIONAL

MONETARY POLICY AND TRADE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:04 a.m., in room 

2128, Rayburn House Office Building, Hon. Gary G. Miller [chairman of the subcommittee] presiding. 

Members present: Representatives Miller of California, Dold, 

Manzullo, Huizenga; McCarthy of New York, Moore, Carson, and 

Scott. 

Also present: Representatives Waters, Miller of North Carolina, 

and McDermott. 

Chairman MILLER OF CALIFORNIA. This hearing will come to 

order. Without objection, all Members’ opening statements will be 

made a part of the record. 

I ask unanimous consent that Mr. Miller of North Carolina, a 

member of the Financial Services Committee, be permitted to sit 

as a member today of the Subcommittee on International Policy 

and Trade for the purpose of delivering a statement, hearing testimony, and questioning the witnesses. 

We are limiting the opening statements to 10 minutes. And I believe Mr. McDermott has shown up. 

Would you like to be heard today also? Unless the Minority side 

objects, I think we can agree to that. 

Without objection, it is so ordered. 

We have agreed the opening statements will be 10 minutes on 

each side. I will start with my opening statement. 

Today’s hearing is entitled, ‘‘The Costs and Consequences of 

Dodd-Frank Section 1502: Impacts on America and the Congo.’’ 

This hearing will explore the impact Section 1502 will have on 

American companies and whether or not it will have a desired effect of reducing violence in the eastern region of the Democratic 

Republic of the Congo (DRC). 

The hearing comes a bit late, in my opinion, as a law was passed 

prior to any congressional hearing on this matter—no legislative 

hearings were held on the requirement to contain the Section 1502 

before it was enacted. In fact, this provision was added in the midVerDate Nov 24 2008 18:21 Feb 05, 2013 Jkt 075730 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\75730.TXT TERRI
2 

dle of the night by the Dodd-Frank conference committee between 

the House and the Senate. 

The House never passed any bill or held any hearings or explored the issue of the policy provisions that were ultimately included in the Dodd-Frank Act. Congress did not have an opportunity to consider the sections implemented and whether it would 

help in the conflict in the DRC, and what effect it would have on 

the DRC and the companies and minerals and manufactured goods 

that come from this area and go to regions and manufacturers in 

the United States. 

Although bills similar to Section 1502 were introduced earlier, 

they were never heard. So we are going to do the legislative due 

diligence that should have happened then. This is what the American people expect of us, and is absolutely critical in this very important issue. We owe it to the American companies. We owe it to 

the people of the Congo to ensure that policies we pass have the 

intended consequences and don’t have unintended consequences, as 

we are hearing are happening today. 

While it is puzzling to me that Section 1502 falls completely outside the scope of the Dodd-Frank Act, that legislation was passed 

as a result of the financial crisis to add stability to the financial 

system. Section 1502 does nothing to ‘‘provide for financial regulatory reform, to protect consumers and investors, to enhance Federal understanding of insurance issues, or to regulate over-thecounter derivatives markets,’’ which were the stated purpose of the 

Dodd-Frank Act. Section 1502 does nothing to address the cause of 

the financial crisis. 

Additionally, Section 1502 will cause regulation by the SEC. This 

is a complex matter beyond the SEC’s normal area of expertise. 

The SEC’s mission is to protect investors; maintain fair, orderly, 

and efficient markets; and to facilitate capital formations. This Section does not protect investors or provide information about the financial health of companies. So development of this well-intended 

law—and I will say it was a well-intended law—seems quite irregular. 

And its impacts on companies are expected to be massive. We 

have been hearing from a number of companies and trade associations expressing concern about the costs and magnitude of this provision. Now is not the time to be placing additional burden on the 

American companies. 

I am incredulous that Congress would pass a mandate down on 

businesses that the National Association of Manufacturers estimates to be between $9 billion and $16 billion. While the provision 

only applies to the SEC-listed companies, the truth is it will affect 

non-SEC companies and small businesses all over this country. 

Companies like Kraft Foods, over 100,000 suppliers and 50,000 

products that contain those minerals, not necessarily from the region, but if the those minerals are included, they have to review 

them as if they were from that region. 

And it is a system where you have to prove yourself innocent, not 

simply prove you are not guilty. You have to prove that none of 

those minerals came from that region, which is a very expensive 

process, and it is a process that is going to be difficult to implement. 

3 

There are over a million parts in a Boeing plane supplied by almost as many suppliers that include these minerals. These suppliers are small businesses and they are job creators in this country. 

I am going to be very clear to my colleagues. This hearing is 

about denying or downplaying the violence in the eastern Congo 

because it is massive and it needs to be dealt with. Just because 

a law is enacted with good intentions and is meant to address 

human rights abuses does not mean the law is the right approach 

to fixing the problem. The costs of implementing a law are still relevant even when the law is meant to address human rights issues. 

So today’s hearing is about the consequences of this law on 

American companies, which must comply with it. We also want to 

learn how Section 1502 is having its intended effect of helping to 

reduce violence in the Congo. And if it is helping to reduce the violence, we want to know that. But if it is not, and it is adding to 

unemployment and the burden on those people, we also want to 

know that. 

During the NCC roundtable on Section 1502, and based upon reports coming out of the Congo from the United Nations, Section 

1502 may have had the unintended consequence of creating a de 

facto embargo on the conflict material minerals covered in this section: tin; tantalum; tungsten; and gold. 

Companies that source these minerals are now sourcing them 

elsewhere, to the detriment of legitimate mining companies in the 

rest of the Congo. This de facto embargo not only affects the Congo, 

but Section 1502 also includes the Congo’s neighboring states. 

The de facto embargo has apparently spread to much of central 

Africa. We are also told that the de facto embargo has spawned a 

growing black market trade in these minerals, which we have 

heard are going to China. 

This hearing is not to say that what is going on there in human 

rights is not a problem; it is. But our concern is, are we hurting 

the people that we say in this legislation we are trying to help? 

I yield back the balance of my time and recognize the Ranking 

Member, Mrs. McCarthy. 

Mrs. MCCARTHY OF NEW YORK. Thank you, Mr. Chairman. And 

thank you for having this hearing. It is very important that we discuss what is going on in the Congo. 

The conflict that has plagued the eastern divisions of the Democratic Republic of the Congo, or the DRC, began over a decade ago. 

There are many factors that contribute to the political instability, 

fueling the conflict in that particular region, such as ongoing 

human rights abuses, widespread poverty, and constant conflict 

over control of state agencies and fiscal resources. Armed groups 

continue to compete for dominance over land rights, agriculture 

commodities and mineral reserves, and mining and trade. 

Conflict minerals in the eastern DRC region are mined under extremely poor and dangerous labor conditions in mines that are controlled by armed groups and state security force elements. The 

main minerals at issue are referred to as the ‘‘3 TGs,’’ as the chairman had mentioned: tin; tantalum; tungsten; and gold. These minerals are used to manufacture products ranging from electronics 

and cellphones to food containers and jet parts. 

4 

The sales of these minerals provide direct and indirect profit to 

the controlling armed groups and allow them to grow and extend 

their reach. The Congo conflict and instability has been a constant 

focus in Congress through hearings and legislation aimed to mitigate the factors fueling the conflict, particularly between trade and 

the conflict in the DRC. 

One such effort is a provision included in the Dodd-Frank Act, 

Section 1502, that requires SEC-regulated firms that use the ‘‘3 

TGs’’ in products to publicly report whether those minerals are 

from the DRC. And if so, what due diligence standards they exercise to ensure that the purchases do not benefit armed groups. 

The SEC issued a proposed rule in December 2010 and the final 

rule should have followed in April 2011. However, due to the complexity of this issue they have repeatedly extended the commentary 

period, causing a delay in final adoption. Absent a final rule, there 

has been progress on conflict mineral migration strategies in several ways. 

For example, the creation of the conflicts smelter program, which 

supports conflict-free mineral processing through a vetting system 

that evaluates and confirms that they are clean minerals. As well, 

the Department of State and the USAID launched a public/private 

alliance for responsible mineral trades made up of nonprofits and 

industry trades to help establish a credible broad spectrum conflictfree minerals supply chain system. 

Industry associates and individual companies have piled the due 

diligence programs based off of the OECD guidance that provides 

recommendations for supply chain and a code of conduct for 

sourcing minerals from these conflicts areas. 

I am hopeful that today’s hearing will provide a constructive conversation on overall compliance of Section 1502, as well as the benefits the provision has had on the DRC region thus far, absent a 

final rule. 

I thank all the witnesses for being here. And I know some of you 

have certainly traveled a long distance to be here. 

I would also like to commend Representative McDermott, as well 

as the members of the full Financial Services Committee, for participating in this hearing. The Members joining us today have been 

leaders on human rights and good governance issues, and I look 

forward to their participation. 

Mr. Chairman, I ask unanimous consent to submit into the 

record a number of statements and letters from human rights, religious, and civic society groups, and investor interests, as well as a 

statement from Foreign Affairs Committee Ranking Member Howard Berman. All of these organizations support a strong and quick 

implementation of Section 1502. 

Thank you. 

And with that, I yield back my time. 

Chairman MILLER OF CALIFORNIA. Without objection, it is so ordered. 

Mr. Manzullo is recognized for 2 minutes. 

Mr. MANZULLO. Thank you, Mr. Chairman, for holding this hearing. I only wish we would have had a similar legislative hearing 

on this topic prior to Section 1502 becoming law. 

5 

As someone who also serves on the Foreign Affairs Committee, 

I am well aware of the situation in the eastern region of the Democratic Republic of the Congo, but I also know that oftentimes unilateral trade sanctions backfire on the very people that we try to 

help. 

In addition, Congress passed the buck to the SEC to resolve complex issues through rulemaking. We need the flexibility of this new 

law so that it becomes practical to implement, but still maintains 

the goal of the legislation. It is also in the interest of the advocacy 

groups, because U.S. small businesses have legal standing to challenge the SEC rule if it does not change in court, because the rule 

currently violates the Regulatory Flexibility Act. 

The SEC did not perform an adequate economic analysis on the 

impact of this proposed rule on small businesses. If the SEC ignores the advice of the SBA’s Office of Advocacy to submit a new, 

more accurate, economic analysis, then the affected small businesses will successfully overturn this rule in Federal court. 

I am probably one of the few Members of Congress who spends 

60 to 70 percent of his time on manufacturing issues, studying supply chain management sourcing. I actually went to warehousing 

school to determine how the final product finds its way into the 

showroom. And I spent my time analyzing extraction of minerals 

and petroleum and gas feed stocks, which are the basis of most 

manufacturing, all of which through export controls. 

With over 2,000 factories in the congressional district that I represent, many of them using tin, it is absolutely impossible for these 

companies to fill out a statement showing the source of the minerals that they get. You can’t do it, because most are bought from 

brokers, and oftentimes the brokers buy these on the open market. 

And so, it is the type of law that has passed, well-intentioned, but 

nobody thought about the details, and nobody thought about the 

tremendous impact it is going to have upon our manufacturing sector. 

Thank you, Mr. Chairman. 

Chairman MILLER OF CALIFORNIA. Thank you. 

Ms. Moore, you are recognized for 3 minutes. 

Ms. MOORE. Thank you so much, Mr. Chairman. 

I do want to thank all of our witnesses for taking the time to 

come here to share your perspective on conflict minerals and ways 

to best implement Section 1502. And I hopefully trust that this 

committee supports disclosure and transparency in U.S. capital 

markets, and thereby the empowerment of investors to make sound 

investment decisions. 

I also trust that we share the goal to stem the plague of violence 

that has engulfed eastern Congo. I am so sympathetic to the industries’ concerns expressed in their comment letters to the SEC regarding the rulemaking and implementation, and I share their desire to have the SEC issue a final rule. Those folks who are starting to comply with Section 1502 are already seeing successes, and 

we should reward those companies which are investing and complying with Section 1502. 

And a final rule, I think, would serve investors by providing the 

transparency that they expect when making an investment, to 

know whether or not and to what extent the companies in which 

6 

they are investing rely on minerals sourced from an unstable or 

unreliable black market, thus making the value of those companies 

vulnerable to the whims of murderous warlords. 

When we talk about the costs of these regulations, I want to 

make sure that we include in that equation the full parade of horrors that have occurred in the Congo since 1996. Most are too 

awful to recount. But I do want to make sure we focus on the correct frame when we are discussing the costs of conflict minerals, 

and not just the dollars and cents and extra paperwork and extra 

compliance officers among our manufacturers, or the costs of extracting these materials from the ground. 

We are talking about some of the most wretched and vile mass 

abusements of humans documented today. Millions of murders and 

rapes, rampant instability and de facto slavery, and the loss of generations of hope and productivity. 

We are talking about wedding days that end in the calculated 

execution of the bridal party, the savage rape of the bride, and the 

beheading of the groom, all as a part of a larger campaign of terror 

to control mineral resources. This is the life in conflict mineral 

zones. In fact, the Democratic Republic of the Congo is the most 

dangerous place in the world to be a woman, we are told. 

I utterly reject attempts to say that 6 million lives are not 

factored into the costs—and the modest costs—of due diligence to 

outsource the war on women, or to support a notion that this committee’s jurisdiction over markets does not include requiring the 

disclosure to investors of reliance on black market or terrorist activity. I simply reject the concept of see no evil, hear no evil, disclose no evil securities law disclosure regime within the United 

States. 

Some have suggested that conflict minerals are outside the realm 

of what the SEC should be worried about. They are wrong. Investor 

protection is absolutely the job of the SEC. The Foreign Corrupt 

Practices Act was enacted to protect investors and the integrity of 

markets. Section 1502 was enacted for the same reason and in the 

same spirit. 

The fact is that Section 1502 is working for investors and for the 

people of the Congo. Businesses have already moved swiftly to secure supply chains and to ensure smelters are taking care to avoid 

smuggled conflict materials. In fact, I understand the Conflict 

Smelter Program has completed the certification review process for 

23 refiners, and many more are moving in that direction. 

Motorola, for example, is creating a closed supply chain. Chemat 

is also working on a closed supply chain. Kester, who supplies 50 

percent of the solder wire, a major source of tin, has completed full 

traceability of their supply chain. Intel announced that it will have 

a conflict-free chip in 2013. 

Chairman MILLER OF CALIFORNIA. The gentlelady’s time has expired. 

Ms. MOORE. Models exist. 

Thank you so much, Mr. Chairman. 

Chairman MILLER OF CALIFORNIA. I yield myself 2 minutes. 

I think what the gentlelady has said is honest and appropriate. 

The problem is the Democratic Republic of the Congo is controlled 

by warlords and thugs. Women are still being raped when they go 

7 

in the fields. You have an incredibly high unemployment rate in 

this region. And it is not like the United States, where if you lose 

your job in one town, you move to the next town to get a job. There 

are no jobs in the next town. 

So if you say we are going to shut down business opportunities 

for people in the Congo, then somehow we need to address whether 

we are hurting the very people we are trying to help by creating 

huge unemployment in the regions, and are we hurting the nations 

around the Democratic Republic of the Congo by this embargo? 

The problem we have is, let us take something like an order that 

goes into tin or gold. When an American company goes to buy 

something that has tin or something that has gold in it, you don’t— 

you have to go prove in some way that none of the ore in the tin 

or the gold came from the Democratic Republic of the Congo. And 

if you can’t prove that, you are guilty. That is not reasonable. 

Yes, there are atrocities occurring. Nobody is arguing that there 

aren’t. Nobody is downplaying that. But does taxing American companies solve the problem in the Democratic Republic of the Congo? 

I question that. Do we need to do something there? Are human 

rights issues paramount? They absolutely are. I applaud the Bishop 

who is here, who knows the region, and the individuals who know 

the region. 

But to say we are going to make life more difficult for people trying to gain employment by making it more difficult for them to 

have a job, and then implementing this complex burden on American companies to have to prove something isn’t true that they 

don’t know even exists in a product is very difficult, too. So these 

are issues we need to deal with. 

I would be happy to yield 1 minute to Mr. Scott. 

Mr. SCOTT. Thank you very much, Mr. Miller. 

I am very interested in this. And I visited the Congo. I saw it 

firsthand. I went to heart of the matter, which is Goma. And if you 

have ever been to Goma, you know what I am talking about. And 

on that point, I would like to thank all those volunteers who go in 

there. 

The number one treatment in the hospital of Goma is not for 

cancer, it is not for heart disease, and it is not for tuberculosis. It 

is not for any of those things. The number one treatment is for sexual violence. Sexual violence, not sexual attacks, but violence 

against women. 

And this is why it is important for us, in Section 1502 of the 

Dodd-Frank Act, to require disclosures by all issuers who use conflict minerals in their manufacturing processes or in their products. 

And according to this section, companies must disclose specific due 

diligence, measures that they have taken to ensure that minerals 

that are imported from the Congo did not contribute to conflict. 

Chairman MILLER OF CALIFORNIA. The gentleman’s time has expired. 

Mr. SCOTT. Thank you, Mr. Chairman. 

I just urge us to be very mindful that we are still that shining 

city and that shining light on the hill and the world looks to us to 

do the right thing. And the right thing is making sure— 

Chairman MILLER OF CALIFORNIA. And I am not trying to cut off 

my good friend. He knows that. We have votes called. I want to let 

8 

Mr. McDemott—we will extend your time a little bit to allow him 

to have 1 minute also. So I am trying to be generous to my friend, 

sir. 

Mr. SCOTT. Sure. You are. 

Thank you very much, sir. 

Chairman MILLER OF CALIFORNIA. Mr. McDermott for 1 minute. 

Mr. MCDERMOTT. Mr. Chairman, I want to thank you for allowing me to participate in this and I will use my time to ask for 

unanimous consent, first of all, to have the markup of the conflict 

minerals bill in 2010 from the Foreign Affairs Committee entered 

into the record. 

This bill was heard and was extensively worked. Many companies were heard from and the record exists. And in fact, this bill 

was written bipartisanly. If you read Ms. Ros-Lehtinen’s remarks 

at the Foreign Affairs markup, it is a very strong endorsement of 

this bill. So it was not as though there were no markups on this. 

Second, I ask unanimous consent to submit for the record the Executive Order from the White House, EO13126, which is a list of 

the products and countries that business already must look at. 

They cannot accept carpets from Nepal and Pakistan. They can’t 

take coffee from Cote d’Ivoire, and so forth. It is in the record. 

Third, I would ask unanimous consent that a list of colleges, 

States, and cities that have already enacted this and have begun 

to implement this in their purchasing agreements be entered into 

the record. 

Chairman MILLER OF CALIFORNIA. The gentleman’s time has expired. 

Mr. MCDERMOTT. And finally, the companies which are already 

going conflict-free—we have a partial list and I ask unanimous consent to submit that for the record. 

Chairman MILLER OF CALIFORNIA. Without objection, it is so ordered. 

Mr. MCDERMOTT. They don’t want a conflict-free question to become a boycott. 

Chairman MILLER OF CALIFORNIA. Thank you. 

I am going to attempt to introduce the witnesses prior to going 

to vote. If I completely botch these names, I absolutely apologize 

beforehand. I am going to make an attempt. 

Mr. Mvemba Dizolele is a distinguished visiting fellow at Stanford University’s Hoover Institute, and is currently an adjunct professor at Johns Hopkins University. He is a native of the Congo, 

and a veteran of the U.S. Marines, someone who has been abducted 

and held in prison by Congolese security police. He has a profound 

understanding of the complex security situations in the Democratic 

Republic of the Congo today. 

Dr. Laura Seay is an assistant professor of political science at 

Morehouse College in Atlanta, Georgia. Her areas of concentration 

include African politics, conflict, international affairs, and a particular focus on Sub-Saharan Africa and the Democratic Republic 

of the Congo. She has been studying central Africa since 1996 and 

conducting extensive fieldwork in the Kivu province of the Congo. 

Mr. Frank Vargo—I think I got that one right—is vice president 

of international economic affairs for the National Association of 

Manufacturers. NAM is the Nation’s largest industrial trade assoVerDate Nov 24 2008 18:21 Feb 05, 2013 Jkt 075730 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\75730.TXT TERRI
9 

ciation representing small and large manufacturers in every industrial sector in all 50 States. NAM is particularly well-suited to assess the cost of regulations passed by Congress, so I am pleased 

Mr. Vargo is here today to help us understand how in the DoddFrank provision, we considered all costs to American businesses 

are estimated to be between $9 billion and $16 billion. 

Mr. Steve Pudles is chief executive officer of Spectral Response, 

an employee-owned electronic manufacturing service company located in Lawrenceville, Georgia. Mr. Pudles has also served as 

chairman of the board of IPC, a global trade association representing all facets of the electronic industry. Mr. Pudles, thank 

you for being here today and sharing how this provision has affected your industry. 

Mr. Stephen Lamar is executive vice president of the American 

Apparel & Footwear Association, a national association of apparel 

and footwear industries, as well as their suppliers. Mr. Lamar has 

several years experience working in the Executive Branch in the 

Commerce Department’s International Trade Administration. 

Members of this panel may be surprised to see him seated here 

today, because the connection between conflict materials and apparel and footwear is not obvious. We look forward to hearing 

about how the Dodd-Frank provision is affecting your industry. 

The Most Reverend Nicholas Djomo Lola, a Bishop of the Diocese 

of Tshumbe, is the president of the Catholic Bishops’ Conference of 

the Congo. Bishop Djomo oversees all of the Conference’s national 

pastoral, human developments, and peace and justice activities. 

Mr. Bruce Calder is the general manager of Claigan Environmental. He has managed material compliance programs for many 

companies and is a regular speaker at the U.S. and Canadian Business Forum. 

We will now adjourn this hearing to go vote, and we should be 

back in just a few minutes. If you will be patient with us, we have 

two votes, and we will be right back. 

The committee is temporarily adjourned. 

[recess] 

Chairman MILLER OF CALIFORNIA. The hearing is reconvened. I 

would now like to recognize Mr. Dizolele for a 5-minute opening 

statement. 

STATEMENT OF MVEMBA PHEZO DIZOLELE, DISTINGUISHED 

VISITING FELLOW, HOOVER INSTITUTION ON WAR, REVOLUTION AND PEACE, STANFORD UNIVERSITY 

Mr. DIZOLELE. Chairman Miller, Ranking Member McCarthy, 

and members of the Subcommittee on International Monetary Policy and Trade, thank you for the invitation and honor to testify before your committee today. 

This hearing is the most important and pertinent discussion yet 

on Section 1502 of the Dodd-Frank Act and its consequences for the 

people of the Democratic Republic of the Congo. Today, I speak before you as a Congolese and a concerned U.S. citizen and consumer. 

I own two laptops, a smartphone, and several electronic devices, 

which may or may not contain minerals from the Congo. 

I would like also to thank our friends in the many organizations 

that promoted Section 1502. I know that it galvanized people in the 

10 

campaign to raise awareness on the continued conflict in the 

Congo. Thanks to their work, many more people know about the 

Congo today. 

The views expressed today in this statement are mine and mine 

alone. The best way to access the costs and consequences of Section 

1502 is to look at its premise, claims, and impact on institutionbuilding in the lives of Congolese. 

In essence, Section 1502 seeks to bring peace to eastern Congo 

by regulating mineral trade through U.S. law, cleaning up the supply chain, and reducing malicious to financial through financial 

means. Such a regulation will de facto curb the violence in human 

rights abuses. 

This approach to conflict resolution, however, is not grounded in 

the sound fundamentals of political economy and public policy; Section 1502 may work in the short run, but it is not sustainable. 

Mineral trade in eastern Congo is part of the wider world economy, which can only be regulated either by the most powerful 

armed groups working in collusion, the biggest armed group imposing its way on the smaller ones or their backers, seeking to maximize profit and preserve their own interests. 

As such, Section 1502 builds on a weak foundation and requires 

a buy-in of the very negative actors it seeks to tame. This approach 

prevents basic peace-making models and rewards criminals and 

would-be spoilers. 

Proponents of Section 1502 build their case on the most widely 

accepted narrative of U.S-Congo policy, which defines the predicament as a humanitarian crisis with a binary prism of social violence and the so-called conflict minerals. Section 1502 oversimplifies the problem, and makes American taxpayers believe that if 

only the challenges of sexual violence and conflict minerals were 

solved, then the Congo would get back on track and peace will follow. 

But this narrative is wrong and it has led to several ineffective 

initiatives, which have effectively turned U.S.-Congo policy into a 

Kivu policy. The Kivu’s represent no more than 1/15th of the 

Congo. Their problems stem from the failure of the state to discharge its duties, and should be treated only as a part of the comprehensive national policy-making 

This binary prism also reflected biggest image of the Congo and 

disenfranchises the Congolese people before the world, casting 

them as incompetent and incapable to solve their own problems. It 

then becomes imperative that they be rescued from their hopeless 

situation by the good people of the world. As a result, the Congolese have been excluded from the policy discussions around Section 

1502. 

This was evident last October when no Congolese was invited to 

speak at the SEC’s public roundtable on Dodd-Frank Section 1502, 

which was held here in Washington, D.C. The truth is that no one 

understands mining in the Congo better than the Congolese. 

By failing to engage the Congolese in an honest dialogue on the 

relationship between conflict and mining, proponents of Section 

1502 failed to spur a national ownership of the initiative through 

a true partnership with the Congolese. The Congo may be a dysVerDate Nov 24 2008 18:21 Feb 05, 2013 Jkt 075730 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\75730.TXT TERRI
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functional state, but the Congolese are among the world’s most resourceful peoples. 

Over the past several years, they have quietly and effectively undertaken landmark initiatives that are positively changing the 

mining landscape in their country. These initiatives include the 

Ndandula report, which exposed the OPEC exploitation of mineral 

resources and led to the comprehensive review of mining contracts. 

As a result, several western companies, including Canada’s First 

Quantum, lost the exploitation title. 

Pressured by a local civil society organization, the parliament 

pushed for the restructuring of the Chinese barter investment deal, 

reducing its terms and downgrading its value from $9 billion to $6 

billion. The Senate recently published a report by the 

Moussambani Commission, which audited the mining sector and 

documented millions of dollars of financial loss by the Congolese 

state incurred due to mismanagement and bad governance. 

Today, as we discuss Section 1502, the Parliament, the Federation des Enterprises Congolaise, which is the equivalent of the U.S. 

Chamber of Commerce and civil society organizations, is supported 

by international groups such as the Open Society Foundation, are 

engaged in discussions setting the guidelines for the new mining 

code that will be enacted in the near future. 

The current mining code, which was written over a decade ago 

as part of a World Bank project, disproportionately favors foreign 

investors at the expense of the Congolese state and the Congolese 

people. So far, the proponents of Section 1502 have marched to 

their own beat, antagonizing corporations, inculpating consumers, 

and ignoring Congolese initiatives. 

If they really want to effect positive change in the Congo’s mining sector, there is an opportunity here for them to join the debate 

on policymaking in Kinshasa to ensure that the new mining code 

addresses their concerns. This is the best way to empower the Congolese, strengthen the local institutions, and induce national ownership of the transparency they seek. 

This conflict, which has indirectly caused the deaths of over 6 

million Congolese, has gone on for too long, and is now a scourge 

on the face of the planet. As we struggle to solve this calamity, we 

will be better served by looking into the Congo’s early history. 

Between 1885 and 1908, the Congo, then known as the Congo 

Free State, was the private estate of Belgian King Leopold II, and 

was the theatre of yet another holocaust, driven not by mineral exploitation, but by the world’s hunger for another commodity. The 

Industrial Revolution demanded rubber, and more of it. Business’ 

insatiable need for rubber and King Leopold’s immeasurable greed 

pushed the Belgians to design one of the world’s most repressive 

forced labor structures. 

The king’s agency established a quota system, which required 

that each village produce a specific amount of rubber over a specific 

time. Forced public troops were then used to enforce the quota and 

demand taxes of the population. 

Failing to meet the quota or tax requirement led soldiers to chop 

off limbs of the unlucky Congolese who fell below the mark. Villages were torched, women raped, and the people left to starve to 

12 

death or die of disease. By 1924, over 10 million Congolese had perished under the yoke of the Leopoldian regime. 

The similarity to the current situation is eerie. Like the conflict 

minerals, which are primarily exploited in the east, rubber was 

only exploited in some areas of the Congo Free State. Both problems were symptoms of larger systemic and regime perversions, 

thus subjugating an entire country. 

But there is a big difference between the approach the activists 

took to expose and denounce King Leopold’s crimes, and the way 

we choose to deal with the calamity today. At a time when there 

was no computer, no Internet, no fax, and the telephone was still 

a curious invention, a shipping clerk in Liverpool decided to expose 

the mighty king and launched a campaign that would not end until 

Leopold relinquished possession of the colony and the regime and 

the system changed. 

Working under great stress, those activists could have easily chosen the easy route to fundraising on behalf of victims: send them 

medicine and physicians to mend their wounds. They could have 

also elected to set a blood-free pre-certification scheme to ensure 

that the rubber that reached Europe and America was clean. 

No. They knew that such a timid campaign would make them 

Leopold’s accomplices’ enablers, and prolong the suffering of the 

Congolese. Instead, they set out to destroy and change the repressive regime, and took the necessary time to accomplish their goal. 

Today, at the time of instant satellite imagery, Internet, Instant 

Messaging, and other technological advances, our activism is lackluster and devoid of moral courage in the face of the unnecessary 

suffering of the Congolese. We hedge our action and refuse to see 

the reality before us by covering our faces like little children hoping it will go away. 

Instead, we search for enemies where they do not exist. Last 

month, over 300 Congolese civil society groups and their international counterparts showed great courage and published the report on security sector reform in the Congo. This report calls for 

an end to the conflict through a comprehensive reform of security 

institutions, which include the military, law enforcement institutions such as the police and the courts, as well as customs and revenue agencies. 

Mr. Chairman, with your permission, I would like to submit a 

copy of that report for the record. 

Chairman MILLER OF CALIFORNIA. Without objection, it is so ordered. 

Mr. DIZOLELE. Thank you, sir. 

In the Congo, businesses are not the enemies. Armed groups and 

their international local backers are. If we are serious we should 

go after them and help restore safe authority, so that the Congolese 

government can finally meet its obligation towards the people. This 

means that together we need to end impunity at all levels of the 

polity. Only then can the Congolese know real peace. 

The Congolese people want and deserve peace. We should empower them to that end. The Congolese government’s inability to 

protect its people and control its territory undermines progress on 

everything else. A competent, professional military, which is organized, resourced, trained, and vetted is essential to solving probVerDate Nov 24 2008 18:21 Feb 05, 2013 Jkt 075730 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\75730.TXT TERRI
13 

lems from displacement, recruitment of child soldiers, gender-based 

violence, economic growth, and the trade in conflict minerals. 

In the absence of a strong Congolese state to protect its interests, 

Section 1502 will effectively certify the looting of the Congo’s minerals, not only by its neighbors, but by everyone else. 

Thank you. 

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

158 of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you. 

Dr. Laura Seay is recognized for 5 minutes. 

STATEMENT OF LAURA E. SEAY, ASSISTANT PROFESSOR OF 

POLITICAL SCIENCE, MOREHOUSE COLLEGE 

Ms. SEAY. Thank you, Mr. Chairman. 

Chairman Miller, Ranking Member McCarthy, and members of 

the subcommittee, thank you for this opportunity and the honor of 

speaking before you today. I do need to emphasize that I am speaking only as an individual and not for Morehouse College or in any 

official capacity in that way. 

The rules for adopting Section 1502 have yet to be released, but 

the policy is having unintended consequences and unanticipated 

consequences that I am not certain could have been foreseen by 

those who pushed for its passage and worked to make it happened. 

Beginning in September of 2010 the Congolese government 

placed a ban on all mineral exports from the Kivu and Maniema 

Provinces in eastern Congo. This ban lasted approximately 6 

months, through March of 2011. And it actually resulted in increased militarization of the mineral sector in the Congo. 

So there were some mines in the eastern Congo that were not 

militarized prior to the development of this ban, but the Congolese 

National Army used that as an opportunity to take over these 

mines, and to begin carrying out human rights abuses against people in those areas. A good example of this is the Kamituga mine 

in south Kivu. 

The Kabila government ended its ban on mining in March of 

2011, but it was quickly replaced by what has come to operate as 

a de facto boycott of the mineral sector in the eastern Congo. Since 

April of 2011 and continuing until today, many major purchasers 

of Congolese minerals have declined to purchase those minerals. 

They have made this choice because they believe that given the circumstances in the Congo, they cannot verify that the minerals they 

are sourcing are conflict-free. 

So, rather than on mitigation strategies or on supply chain tracing, they have chosen instead to just withdraw from the Congo altogether. When Malaysia Smelting Corporation pulled out, they 

had previously been buying 80 percent of Congolese tin exports. 

After their decision to stop buying in April of 2011, 10 exports from 

the Congo dropped by 90 percent. 

So what are the consequences of these issues, in that there is little reason to believe that either the ban or the boycott would have 

happened had it not been for the passage of Section 1502? It provided the impetus to be seen as taking action for good or for bad. 

It has had devastating effects in mining communities in the eastVerDate Nov 24 2008 18:21 Feb 05, 2013 Jkt 075730 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\75730.TXT TERRI
14 

ern Congo. People lost their jobs, people who had been working in 

the mines. 

And I do want to emphasize that the conditions in the mines are 

absolutely horrific. None of us would want to work there. None of 

us would want our children to have to work there. But there are 

no other economic alternatives in the eastern Congo. Subsistence 

level agriculture does not provide a way to earn a living, and the 

only alternative is to join a militia. So for many Congolese miners, 

mining is the least worst choice of very limited, bad options. 

We don’t know exact numbers on how many people have been 

put out of work. I am actually headed to the Congo next month to 

do some research on this and try to get some data. But it certainly 

ranges somewhere from the tens of thousands. Local civil society 

activists in the Congo have estimated that up to 2 million people 

were put out of work by the ban and the de facto boycott. 

This had devastating consequences. Congolese have large families. Most people have five to six dependents. So we are talking, if 

those numbers that the civil society activists have come up with 

are accurate, this could have affected 10 to 12 million people in a 

negative way. 

What else has happened as a consequence of these bans that 

stem from Dodd-Frank’s Section 1502 passage? We have seen many 

miners move into the gold mining sector, which is completely unregulated, and where traceability is not yet possible. We just don’t 

know how to do it in a way that will prevent smuggling. 

And according to the 2011 U.N. Group of Experts Reports, smuggling has increased. Minerals are still getting out. We are still seeing high export numbers from Rwanda, which does not have significant domestic mineral reserves, which is a strong indication 

that smuggling is still going on. 

And contrary to the promises made by those who pushed for the 

passage of Section 1502, violence in Kivu in the absence of this 

mining, and where armed groups are not making as much money 

as they previously were off of the mineral trade, violence is getting 

worse. And we have seen that most recently over the course of the 

past 3 weeks with a mutiny within the ranks of the Congolese 

Army by former members of the CNDP militia who have now rechristened themselves as something called M23. 

Quality of life has diminished. People cannot afford to pay their 

children’s school tuition, to pay for health care, to pay for basic necessities. And in many of the most remote mining areas, basic necessities, even if people had money to buy them, are no longer 

available, as those necessities are not being flown in, because the 

planes would come in with materials and fly out with minerals and 

now they are not able to do that. 

Chairman MILLER OF CALIFORNIA. Could the lady— 

Ms. SEAY. To be fair— 

Chairman MILLER OF CALIFORNIA. Could the lady conclude? Her 

time is— 

Ms. SEAY. Yes, yes. To be fair, there has been positive change, 

though it is not clear that this is a result of what we think it is. 

The DCA mine was demilitarized. The Congolese Army withdrew 

from it, but the DCA mine is almost tapped out. They have just 

15 

about hit the water table, and it is not clear that the Congolese 

Army would have left were that not the case. 

My written testimony contains several remarks on what I think 

went wrong. I agree with Mvemba that the gross oversimplification 

of the story is the major problem here. The mineral trade—the 

militarized mineral trade—is not the cause of conflict in the eastern Congo. It is a symptom of a much deeper disease. It is a problem that we need to clean up, but treating the symptom will not 

cure the disease. And instead, we need to focus on governance, security sector reform, and rebuilding the rule of law. 

[The prepared statement of Dr. Seay can be found on page 187 

of the appendix.] 

Chairman MILLER OF CALIFORNIA. Mr. Vargo, you are recognized 

for 5 minutes. 

STATEMENT OF FRANKLIN VARGO, VICE PRESIDENT, INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF 

MANUFACTURERS (NAM) 

Mr. VARGO. Thank you, Mr. Chairman. 

The National Association of Manufacturers (NAM), is the Nation’s largest industrial association, and it is America’s manufacturers who will be the most affected by Section 1502. Let there be 

no doubt that the NAM and America’s manufacturers support the 

intent of the law to reduce the atrocities that are being committed. 

We believe the SEC’s regulations can implement the law in a manner consistent with the goals, but without unduly burdening American industry, American competitiveness, or American jobs. 

But to do this, we believe modifications are necessary to their 

draft regulations, and we hope this subcommittee will agree and 

will communicate that to the SEC. We are pleased with the care 

with which the SEC has been proceeding, and we hope for rules 

that are consistent with the reality we face. 

First of all, it is vital that there be a phase-in period for the regulations. The currently existing extreme limitation of information 

about the source of metals and minerals makes it impossible for all 

but a very few companies to submit meaningful reports. For example, the Electronic Industry Citizenship Coalition, the EICC, has 

been working at this for years. Their Web site this week says that 

only 11 smelters have been certified as DRC conflict-free, all of 

them in Tampulu. An independent audit of the EICC concluded 

that despite their best efforts, ‘‘companies cannot assert 100 percent sourcing certainty.’’ 

The draft rules unfortunately currently provide only two choices: 

you state with certainty that you are DRC conflict-free; or even if 

you have done a lot of due diligence and you just don’t know, you 

have to say no, they are not DRC conflict-free. That would do terrible damage to company brands and investor relations and would 

do no good whatsoever to advance the humanitarian objectives in 

the DRC. 

During the phase-in period there must be a temporary category 

of indeterminate origin, but to utilize it companies would have to 

meet SEC requirements to demonstrate that they were undertaking a good faith effort, and were not just delaying. 

16 

Second, once the rules are in full effect, there must be flexible 

due diligence provisions recognizing that companies have widely 

differing supply chains. Companies need, for instance, to be able to 

use contract flow-down provisions to comply. In particular, the 

OECD guidelines should be expressly stated by the SEC as a safe 

harbor for companies that implement those guidelines. But that 

should not be the only way to comply. 

I want to stress, this is an extremely costly requirement on American manufacturers. The NAM has estimated the cost at $9 

billion to $16 billion, 100 times larger than estimated by the SEC. 

The cost is not limited to listed companies subject to the SEC regulation, and hundreds of thousands of small, privately owned companies will be affected because they are in the supply chain. 

Our estimate is largely corroborated by the competently done 

Tulane University study called for by Senator Durbin. We are 

aware of a further report done by Claigan Environmental, who is 

testifying today. We have examined their report carefully and believe it is a severe underestimate, for several reasons. 

First, it assumes everyone can use the simple spreadsheet developed by the EICC, when most of our large companies say it is 

much too simple and unusable. The EICC spreadsheet template 

will hopefully work for companies with simpler supply chains, who 

are closer upstream to smelters, but it will not work for large diversified manufacturers. With millions of parts, they need a much 

more sophisticated, and unfortunately, more expensive system. 

Second, it seriously underestimates the number of companies in 

today’s global supply chain, saying there are hundreds in the supply chain, when in fact there are thousands. One of our members 

has 100,000 companies in their supply chain. Mr. Pudles, who is 

going to testify next, has a $40 million company, not one of America’s largest, but he sources from 3,000 different manufacturers. 

The report also mistakenly believes smaller companies are legally bound to comply with Section 1502 so that companies don’t 

have to have contractual obligations. Unfortunately, that is not 

true. They are not bound. The report also believes that once agreements are reached, no further action is necessary—totally overlooking the fact that supply chains are not static; they are dynamic. Suppliers are always being added and dropped as companies seek more efficient supply chains with better prices. 

Finally, the report somehow concludes that analysis of the European Union’s Restriction of Hazardous Substances directive shows 

that conflict materials compliance can be done cheaply. That is 

puzzling, because we use the same report. And we put it into our 

report to the SEC. That report says it costs an average of $2.5 million for companies to comply. So if we apply that to the number of 

companies the SEC says will be affected by Section 1502, that is 

a cost of $16 billion, even higher than our estimate. 

So there is no question this is an extremely important program 

and the SEC needs to get it right. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Vargo can be found on page 193 

of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you. 

Mr. Pudles? 

17 

STATEMENT OF STEVE PUDLES, CHAIRMAN, BOARD OF DIRECTORS, IPC—ASSOCIATION CONNECTING ELECTRONICS 

INDUSTRIES; AND CHIEF EXECUTIVE OFFICER, SPECTRAL 

RESPONSE LLC 

Mr. PUDLES. Chairman Miller, Ranking Member McCarthy, and 

members of the subcommittee, I am pleased to be here today to discuss the SEC’s proposed rule on implementation of Section 1502 of 

the Dodd-Frank Act. 

I am Steve Pudles, CEO of Spectral Response, an employeeowned electronics manufacturing services company located in 

Lawrenceville, Georgia. We employ 135 people, providing services 

ranging from electronics assembly, to product builds, to third-party 

logistics. And our customers range from small startups to large 

publicly traded corporations. 

I am here today as well in my capacity as chairman of the board 

of IPC, the association connecting electronics industries. The IPC 

represents over 3,000 companies, the majority of which are small 

businesses like mine. IPC’s members include companies that design, manufacture, and assemble printed circuit boards, which are 

vital to the operation of all electronics products. 

The subject of this hearing is critically important to IPC members who collectively manufacture products that incorporate all 

four of the key metals refined from conflict minerals. At the outset 

of my testimony, I would definitely like to recognize the good intentions of those Members of Congress who authored Section 1502. 

By all accounts, the human rights situation in the Democratic 

Republic of the Congo is grave. IPC supports the underlying goal 

of Section 1502, but quite frankly, I am concerned that the SEC’s 

draft regulations will have unintended negative consequences. 

I am by no means an expert on the issues that plague the DRC. 

In my testimony today, I will discuss how the draft rule is likely 

to impact my business and the electronics industry. Members of the 

subcommittee, make no mistake, the regulations proposed by the 

SEC will impose a significant cost on my company and companies 

like mine. 

My company is not an SEC issuer. However, the forthcoming regulations will impact us through the due diligence needs of our customers, over a quarter of which are SEC issuers. 

Over the last several months, my customers have asked me 

about auditing my supply base. My company has over 15,000 part 

numbers. Determining and verifying the content and origin of minerals in each part is a Herculean task. I will have to hire additional 

staff, an audit company, lawyers and accountants, and purchase 

software for data management. 

A variety of cost analyses has been conducted on the proposed 

rule. An independent analysis of the costs conducted at Tulane 

University estimated total costs of $7.9 billion, which is over 100 

times the SEC’s estimate. 

An IPC survey of our members indicated median compliance 

costs in excess of $230,000 per year. This is a significant expenditure for companies like mine. As the leader of a small business, I 

work hard to keep my company profitable in difficult economic 

times. 

18 

I am troubled that the SEC’s analysis on the impact of the regulation significantly underestimates the impact and costs to U.S. 

manufacturers and negatively impacts our global competitiveness. 

Given a few key regulatory changes and a reasonable implementation period, we would greatly decrease the burdens associated with 

the regulations without undercutting their effectiveness. 

I would like to use the remainder of my time to highlight a few 

of these key recommendations, which are further detailed in IPC’s 

comments to the SEC. The most valuable change the SEC could 

make is the inclusion of a reasonable phase-in period. This would 

give companies a transition period to understand the final regulations and examine the origin of conflict minerals in our supply 

chains. 

According to a United Nations report, the implementation of 

traceability systems in the DRC is severely lacking. A number of 

companies have sought to avoid conflict-associated minerals by altogether avoiding procurement from the region. A phased implementation of the regulations will better align regulatory requirements with the developing traceability and transparency systems. 

The requirement for each issuer to report on the same schedule 

as their annual SEC report will require my company to constantly 

reply to customer inquiries. The SEC can significantly reduce the 

burden on the supply chain by implementing a single reporting 

date. 

Moreover, many electronics companies use recycled materials in 

order to reduce the amount of virgin materials required in the 

manufacturing process. The final rule should include an alternative 

approach for recycled sources that is practical and does not overburden recycled materials so as to discourage their use. 

Additional suggestions which I do not have time to discuss in detail include reporting exemptions for products outside our control, 

provision of a de minimis level to focus on the significant uses of 

conflict minerals, and provisions of nonbinding examples of due 

diligence are detailed in my written testimony and IPC’s comments 

to the SEC. 

In conclusion, on behalf of my company and IPC’s over 3,000 

members, I urge the SEC to implement the requirements of Section 

1502 in a manner that supports the goals of the statute without 

unduly burdening U.S. manufacturing industries or causing unnecessary disruptions of the legitimate minerals trade, which is vital 

to the livelihood of the people of the DRC. 

Thank you for the opportunity to address you today. 

[The prepared statement of Mr. Pudles can be found on page 179 

of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you. 

Mr. Lamar, you are recognized for 5 minutes. 

STATEMENT OF STEPHEN LAMAR, EXECUTIVE VICE 

PRESIDENT, AMERICAN APPAREL & FOOTWEAR ASSOCIATION 

Mr. LAMAR. Thank you providing us a chance to testify, and 

thank you for holding a hearing on this important issue. 

The American Apparel & Footwear Association is the national 

trade association of the apparel and footwear industries and their 

suppliers. Our members include publicly traded and private compaVerDate Nov 24 2008 18:21 Feb 05, 2013 Jkt 075730 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\75730.TXT TERRI
19 

nies, as well as suppliers to both. Our industry employs about 4 

million U.S. workers, about 3 percent of the U.S. workforce. 

Our industry is among the most globalized in the world. As a result, even the smallest companies have complicated supply chains 

that stretch across continents, countries, and factories. They have 

to manage a diverse array of compliance challenges covering labor, 

health, environment, product safety, and chemical management. 

We strongly support the goals of the conflict minerals provisions in 

the Dodd-Frank Act. 

Collectively and individually, our members have participated in 

similar kinds of initiatives to ensure that our sourcing does not inadvertently support undesirable practices, such as forced child 

labor toiling in the cotton fields in Uzbekistan, leather from cattle 

raised on illegally cleared rainforest land in Brazil, or wool from 

mules sheep in Australia. 

While we support the efforts to prevent conflict minerals from 

entering the global supply chains, we remain deeply concerned over 

several elements of this provision and their impact on our industry. 

Let me explain. First, the impact of Section 1502 on the business 

community is deceptively large. The fact that I am testifying here 

today on a bill that was largely intended to focus on the electronics 

industry is one indicator of that fact. Although the law initially targets about 6,000 publicly traded companies, it also affects those 

companies’ suppliers, in many cases small, privately held businesses, as they are being increasingly notified by their customers 

that they will have to certify that their own supply chain is conflict 

free. 

Many companies in our industry initially thought they were not 

covered, but are only now finding out, in some cases in the past few 

weeks, that they are impacted. Many others still don’t even know. 

Many businesses in our industry probably don’t realize that their 

products may contain one of the four conflict minerals. When you 

think of a garment or a shoe, you think of the fabric, the fit, the 

design, or maybe the price. But you usually don’t think of wearing 

tin unless perhaps you are watching the Wizard of Oz. 

Companies are now learning that tin, for example, can be a filler 

in certain PVC used in soles of shoes, or metal components in buttons, zippers, and heel tips. Other examples are the electronic components that you might see in a light-up shoe. Use of tin has actually increased in recent years to replace metals like lead or cadmium which had been targeted by recent product safety initiatives, 

including the Consumer Product Safety Improvement Act (CPSIA), 

which Congress passed in 2008. 

Second, the provisions have a major effect on those in the business community who are least able to effect change in the conflict 

zones in Africa. In our industry, the use of these minerals are de 

minimis, even after accounting for greater uses in recent years. 

Yet, the smallest apparel or footwear company will be equally liable as a company that is a major consumer of larger quantities of 

these minerals. 

Tin is confined in our industry to very, very small quantities that 

are encountered inconsistently across a great many styles and 

brands. Compounding this is the simple fact that fashion changes 

all the time. In one year, a company may find that four products 

20 

out of thousands trigger Section 1502 reporting. The following year 

may be zero and the year after that may be 20. Compare this to 

an electronics company that sources millions of the same components over several years with no design or input changes. 

Just as important, the electronic or accessory components that 

we might use in the manufacture included in a footwear item—in 

many cases, these will have been purchased off the shelf from a 

supplier which is itself many steps removed from the mines or even 

the smelters where the minerals originate. The bottom line is that 

the pressure to create and promote conflict-free mineral supply 

chains will not come from our industry, even if we could somehow 

declare ourselves to be 100 percent conflict-free. 

While the apparel and footwear industries are leaders in social 

compliance in many areas, we simply don’t have the purchasing 

power or business relationships to effect change in this area. 

Third, the costs associated with Section 1502 are enormous. Here 

again, we believe the costs are far larger than the authors expected. Some estimates put the costs at $8 billion or $9 billion, respectively. We think they can be far higher as we start including 

the impact on other industries like ours in those calculations. 

Fourth, the lack of tracing technology and infrastructure means 

that companies don’t have a clear or affordable path forward for 

compliance. The draft regulations do not allow companies to simply 

declare that they do not know if they have conflict minerals in 

their supply chain because there are insufficient tools to answer 

that question properly. Yet, the reality is affecting most companies 

today. 

Our industry is still struggling to create verifiable and effective 

tracing technologies for materials that make up a central part of 

our supply chains, like wool or cotton, while learning that even 

greater challenges exist in the minerals industry, which account for 

far smaller parts of our sourcing. 

A couple of quick recommendations. We need to make sure the 

infrastructure and technology exists to allow companies to come 

into compliance. We need to make sure there is a comprehensive 

cost-benefit analysis that enables policymakers to understand how 

these regulations work well. We need to make sure these regulations are phased in to those industries where consumption of the 

minerals will have the biggest impact. We need to include things 

like a de minimis provision. 

And once the regulations are in place, we need to make sure 

there is flexible enforcement accompanied by education to make 

sure complicated supply chains have the time and the capability 

and the capacity to come into compliance. 

Thank you very much. I will conclude right here. 

[The prepared statement of Mr. Lamar can be found on page 169 

of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you. 

The Most Reverend Nicolas Djomo Lola, Bishop of Tshumbe, is 

recognized for 5 minutes. 

21 

STATEMENT OF THE MOST REVEREND NICOLAS DJOMO LOLA, 

BISHOP, DIOCESE OF TSHUMBE, DEMOCRATIC REPUBLIC OF 

THE CONGO; AND PRESIDENT, CATHOLIC BISHOPS’ CONFERENCE, DEMOCRATIC REPUBLIC OF THE CONGO 

Bishop DJOMO. I want to thank Chairman Miller and Ranking 

Member McCarthy for the opportunity to testify today. I ask that 

my written testimony be entered into the record. 

I do not come as a businessman, nor a financial expert. I am a 

religious leader, a pastor, who is deeply disturbed by the type of 

violence and suffering that has dominated life in eastern Congo 

since 1996. This violence has destroyed families, villages, and communities. 

One prominent driver of the violence is the illicit mining committed by the many armed groups in the eastern Congo. To protect 

our people from the misery of minerals, the Church in the Congo 

publicly supported the passage of Section 1502 of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act. I traveled to the 

United States last year to bring that message to the Congress, the 

State Department, and the Securities and Exchange Commission. 

Our message was simple. First, establish regulations that are robust enough to correctly show the origin of the minerals. Second, 

finalize the regulations as soon as possible and set specific dates 

by which companies start reporting. Third, include all companies. 

And fourth, ensure that key information provided by the companies 

is made available to the public and to Members of Congress. 

Since colonial times, our nation has fallen prey to the ‘‘resource 

curse.’’ Throughout the Congo’s long history, the Catholic Church 

has stood by the Congolese people. The Church is one of the largest 

and most trusted institutions in the country. Our network of 

schools, health care, and development centers is the largest, and 

frequently works where the government cannot. 

Our people in eastern Congo blame the insecurity fueled by illicit 

mining for their poverty. Eighty percent of people are subsistence 

farmers. The violence has caused massive displacement of people. 

No future development can occur without an end to the fighting. 

In addition, the illicit mines operate under deployable and dangerous conditions. 

Many international institutions are working to end illicit mining. 

These include the Organization for Economic Cooperation and Development (OECD), the European Union, USAID, and a Great Religious Region Group. Section 1502 of that plank places the first offload behind this other effort. 

In March of this year, the Congolese government passed a law 

that requires all mine and mineral trading companies in the Congo 

to carry out due diligence in line with OECD standards. This law 

is fingering various initiatives to educate traders and miners about 

due diligence. Now is the time to strengthen these efforts with regulations that will legalize mining operations. 

First, the business community can and will join us to protect the 

life and human dignity of the Congolese people by conducting legal, 

transparent, and accountable international commerce. We are confident that they do not want to be part of the misery that has 

plagued eastern Congo for years. 

22 

We urge the U.S. business community to account for the gruesome social costs of the illicit mining as they calculate their costs 

for compliance with Section 1502. These calculations are not just 

cost estimates on a spreadsheet. There is a social balance sheet 

that places value on the lives that can be saved. 

We have full confidence in the goodwill of the Congress, the SEC, 

and the business sector to resist watering down SEC regulations 

through half measures that may save money, but cost lives. What 

the people of the Congo need and the U.S. Government and the 

American companies can provide are responsible actions that increase transparency and embody the moral values that made the 

United States a respected world leader. 

Thank you, Mr. Chairman, and Madam Ranking Member, for 

your kind attention. 

[The prepared statement of Bishop Djomo Lola can be found on 

page 174 of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you, sir. 

And Mr. Calder is recognized for 5 minutes. 

STATEMENT OF BRUCE CALDER, GENERAL MANAGER, 

CLAIGAN ENVIRONMENTAL INC. 

Mr. CALDER. Chairman Miller, Ranking Member McCarthy, and 

members of the subcommittee, I am pleased to be invited here 

today to discuss the Securities and Exchange Commission’s proposed rule on implementation of Section 1502 of the Dodd-Frank 

Act. 

My name is Bruce Calder, and I am the general manager of 

Claigan Environmental. I am responsible for Claigan’s conflict minerals program. We work with companies across industries on conflict minerals program management, cost management, and we provide compliance assistance and information to over 200 small, medium, and large companies on conflict minerals. 

I would like to first start off by saying we have never, ever seen 

such widespread early adoption by industry of a transparency law. 

In 10 years of working with restricted materials compliance, including global regulations, such as Europe’s hazardous substance 

law, its restricted chemicals law, and California’s toxins and safe 

drinking water law, I have never, ever seen so many companies 

claim that they are going to be compliant, becoming compliant, and 

declaring they are committed before the final rule is even published. 

If you look at the 100-plus pages of our appendix, it is single 

pages of public declaration by companies committing themselves to 

being conflict free, and committing their suppliers to being conflict 

free. And you can flip from page to page to page and see company 

after company—U.S. companies, Chinese companies, Japanese, Korean, large, small—all committing themselves and their suppliers. 

Their issue right now is that they do not have a single clear rule 

to implement their desires and what they want to do. Being transparent on mineral sourcing not only can be done, it is being done. 

One key element to the success is the success of the conflict-free 

smelter program, a program that is implemented by industry in advance of a final rule making them implement. 

23 

The conflict-free smelter program has completed the certification 

review process, including full country of origin traceability, for 23 

refiners, plus there are another 32 in process. Kester, an Itascabased Illinois company, which provides 60 percent of the solder 

wire in North America—solder wire being the main source of tin 

in electronics, and the solder being the main use of tin—has completed full traceability through the smelters which they moved 

through the certification process all the way back to the mine. 

So when we look at a circuit board, and you look at potentially 

hundreds of different components and many different suppliers 

who are in scope because of the tin solder they use, it only comes 

back to a handful of solder suppliers, of which Kester is one of the 

largest. 

We have previously submitted estimates on the costs of Section 

1502 on the industry and the supply chain. One of the big elements, of course, always a big difference in the conversation, is 

why is ours different than other estimates? One of the most significant reasons is our cost estimates are based on actual industry programs, not projections, not extrapolations. This is what they are 

doing. 

It is also based on conversations with the SEC on what they intend. The SEC has done themselves and industry a disservice by 

not stating anything publicly in terms of rules since way back basically in 2010. The other piece, and it is very, very important, is the 

use of ‘‘intentionally added.’’ ‘‘Intentionally added’’ is a very, very, 

very important piece of this. 

And the reason is over de minimis is steel. Tin exists in most 

common alloys of steel, but it is not supposed to be there, it is not 

intended to be there. It is a by-product. It is a part of the process. 

It is harmless and nobody has cared. If you put a de minimis value 

in, the actual amount of tin in our most common steels is well over 

any standard de minimis level, and it would bring almost all major 

steels in play. 

A lot of small suppliers who make products that have washers 

and screws, etc., suddenly will be in scope, and then we know if 

they have tin. They would have to set up a test lab. I have a test 

lab and it is a wonderful business, but I don’t think that is fair. 

Going for ‘‘intentionally added’’ will keep most common alloys of 

steel, which significantly reduces the cost to industry, and particularly small business. 

The SEC’s staff has indicated that the conflict-free smelter program would meet a lot of the due diligence required, especially 

third-party auditing, which would be excellent. We also assume, 

and in—to the SEC it makes sense, that the auditing will be more 

based on auditing to ensure that companies have done what they 

said they have done. 

And I think it is extremely important that companies who do 

good and wonderful things, who can’t get all the way through to 

their smelter, should be allowed to say clearly and truthfully, they 

have done good and wonderful things. 

So, one of the last pieces on this is not if it will be implemented. 

These industries are implementing it. The biggest burden right 

now, especially on small companies, is they don’t have to comply 

with the SEC’s rules; they have to comply with the rules that each 

24 

one of these companies at how they have extrapolated the law. 

What they really need now for cost containment is a single rule so 

they can meet one standard and the standard of every customer 

they have. 

Thank you. 

[The prepared statement of Mr. Calder can be found on page 52 

of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you. I appreciate your 

testimony. 

I now recognize myself for 5 minutes. Mr. Pudles, you represent 

business interests and you were very much aboveboard on that. 

Mr. Calder, you provide consulting services to companies regarding 

implementation of Section 1502; is that correct? And you are an expert on conflict material minerals? 

Mr. CALDER. Yes. 

Chairman MILLER OF CALIFORNIA. Just so everybody is clear, you 

make a profit on implementation of Section 1502? That is your 

business. 

Mr. CALDER. Yes, that is so. 

Chairman MILLER OF CALIFORNIA. Okay. I just—because we have 

business interests, I want everybody to know who is testifying before us today. And I think that is very important. 

Mr. Lamar, you talked about buttons in suits, so I am probably 

wearing a conflict button on my suit. 

Mr. LAMAR. I don’t know that. 

Chairman MILLER OF CALIFORNIA. But if you don’t know that, 

that means I probably am, because you have to say if I can’t prove 

I am not. 

Mr. LAMAR. That is the concern we have with the way the regulations are coming forward. 

Chairman MILLER OF CALIFORNIA. And that is my concern. 

Mr. Vargo, you talked about if you can’t certify, like I really can’t 

certify and he can’t certify, and Nordstrom’s can’t certify who sold 

me the suit. So what do you have to do if you are going to sell me 

this suit? What do you have to post if you can’t certify that these 

are not conflict-free? 

Mr. VARGO. The way the draft SEC rule is written, you would 

have to say, this is not DRC conflict-free, and you would have to 

bear that on your Web site and the public would look and say, oh, 

this company is bad. It is not DRC conflict-free when there is no 

information and the company does its due diligence. We are not 

saying that you need an indeterminate origin category forever, just 

during the period that the infrastructure is being developed. 

Chairman MILLER OF CALIFORNIA. That is a concern for me. And 

I know my good friends talked earlier about the fact that hearings 

were held, I believe in the Foreign Affairs Committee, but you 

never did anything. But the problem was legislation was enacted 

in this committee and we never heard anything. And that is a real 

problem for me. 

Mr. Dizolele, is life better and going to be better next year and 

the year after for people in the region because of what we are doing 

here? 

Mr. DIZOLELE. Mr. Chairman, my personal view with my extensive experience in the field is that even if this powerful chamber 

25 

were to pass this legislation, implement it, give our friends on the 

other side of the debate a magic wand, the next day when women 

in Tubembe—this is in south Kivu—go back to the field, nothing 

would change for them. 

They will be raped, and they will be abducted, because we will 

not have dealt with the real problem, which is the presence of the 

militias. The militias will not disappear because of Dodd-Frank or 

Section 1502. We are not going after the source of the problem. We 

are putting a veneer on it. 

So the question really is, what difference does it make for the ladies in Tubembe? In my view, not much. In my view, the Panzi 

Hospital will stay open, because rape will continue. Maybe the 

American consumer will assuage his conscience. Maybe the activists will have felt that they have done something, but that is not 

the slam dunk. 

Chairman MILLER OF CALIFORNIA. Ms. Seay, are minerals the 

only commodity used to fuel this conflict over there? 

Ms. SEAY. Absolutely not. And I think that is a key point that 

goes back to the question you just asked Mr. Dizolele, which is, the 

armed groups in the eastern Congo have multiple sources of revenue. They tax every trade that there is: bananas; timber; charcoal; 

and traffic on the road. 

Are these sources as lucrative as the mineral trade? No. Do they 

find ways to make it more lucrative? Yes. They will raise taxes. 

And what we have seen is that militias don’t stop fighting because 

they lose access to one stream of revenue. What they do instead is 

turn to preying on the population even more than they already 

were before. 

Chairman MILLER OF CALIFORNIA. And are more people unemployed than they were before this started? 

Ms. SEAY. I think we can say that more people are unemployed 

in the mining sector, for sure, as well as in sectors in mining communities. So for example, if a miner doesn’t have money he can no 

longer afford to pay the grocer for basic goods. And so, that person 

is also in trouble financially. 

Chairman MILLER OF CALIFORNIA. And Mr. Dizolele, when that 

miner is unemployed, where do they go to get a job? 

Mr. DIZOLELE. Sir, in the DRC, we have a lot of statistics. And 

statistics often do not even reflect the beginning of it. In the DRC, 

we don’t talk about unemployment, we talk about underemployment. The underemployment is about 82 percent. This means people don’t have jobs. They leave every morning, because they have 

to do something to feed their families, but they don’t have any jobs. 

And so, one of the little jobs that is lost is not going to be replaced. 

You cannot just move to move from Katutu neighborhoods and 

say I have lost my job in Katutu and I am going to go to Nguma 

and find a new job. We are talking about the DRC and we are talking about the eastern Congo. This is not Switzerland or America. 

Chairman MILLER OF CALIFORNIA. So their life is worse than it 

was before this implementation in many cases, because they have 

no job now. Women are still getting raped in the fields, which is 

horrible. It is inexcusable. 

And maybe the Foreign Affairs Committee should have done 

something on that, rather than passing the burden onto the busiVerDate Nov 24 2008 18:21 Feb 05, 2013 Jkt 075730 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\75730.TXT TERRI
26 

ness sector in this country about what do we do in a region like 

that that is abusing their people and allowing it to happen. 

My time has expired. 

I yield 5 minutes to Ranking Member McCarthy. 

Mrs. MCCARTHY OF NEW YORK. Thank you, Mr. Chairman. 

I want to thank everybody for their testimony. You have to realize that this committee really has a very daunting task in front of 

us. Obviously, we want to make sure that our businesses are able 

to continue doing business without added costs. But we also have 

a situation for the people who are working in these mines, and the 

children. 

Now, the rules for Section 1502 have not really been implemented yet, so we are not exactly sure where we are going to be 

going on this. I know that when people got together on the blood 

diamonds, there were a lot of outcries that people wouldn’t be able 

to afford the diamonds, diamonds that are used for other things besides wearing on a ring. And yet, they have come through the years 

to be able to make sure that those diamonds are certified now and 

not coming and hurting people. 

That is going to be the problem that we are going to be facing 

here. To come up with a solution, hopefully work with the SEC. 

Obviously, they are having a difficult time with this, because they 

have not come out with the final rules. 

But Mr. Calder, reading your testimony, your cost analysis on 

company compliance with Section 1502 varies from some of the 

other estimates that we have heard and read in the testimonies. 

Please explain some of the cost differences, such as large versus 

small companies, and what factors and methodology are being used 

to compile your cost analysis that are different than the other cost 

estimates that have been done. 

I know a lot of the larger manufacturers are trying to do the 

right thing. They have started going to the smelters to basically get 

it certified. They have already started ahead before Section 1502. 

But it is the small companies that probably will be facing a burden. 

So if you could quickly answer that question for me? 

Mr. CALDER. One of the big things about having a final rule is 

it will allow the small companies to comply to one rule instead of 

many. One of the really big burdens the smaller companies have 

is they have to try to comply to an interpretation to each company. 

And it is already out of the barn. 

Now these companies know their products could have benefited 

from slave or child labor, they are not turning back. It is in place. 

So the best thing to do for small businesses is give them one single 

rule, then give us the GE they can give to any customer they have, 

so they can move forward and move effectively. 

Mrs. MCCARTHY OF NEW YORK. Bishop, in your testimony, and 

I know you weren’t able to read your whole testimony, when you 

talk about the people, obviously that is very heartfelt because you 

are there. You are working with the people who are in the mines. 

But the question came up, if we cut back completely and there 

is no work, you mentioned agriculture, but you also mentioned in 

your testimony that the areas where the mines are has already 

killed the land. So agriculture wouldn’t be possible there. And we 

are probably talking about a very long-term solution. 

27 

But with that being said, if the rule is put in place, what would 

the people do as the adjustment comes through to be able to make 

a living? Are outside groups going to come in and support them? 

Will those that are the gangs, as we call them, terrorists, if you 

want to call them, the armed, how are we going to—that is not 

going to be up to this committee, unfortunately. 

But with that being said, how does that change, and how long 

would it do it? What kind of suffering would come more to your 

people? 

Bishop DJOMO. [The following testimony was delivered through 

an interpreter.] The majority of the population in the Kivus lives 

off of agriculture. The majority of the people in the Kivus do not 

work in the mines and do not live off of their work in the mines. 

The mines, and the militias that run these mines, block the production of agriculture in these areas. 

In the short term, there may be some people who will lose some 

work and some income, but in the long term, if you close the illegal 

illicit mines and cut connection between the mines and the violence, the violence stops. People can go back to their lives and back 

to a better agricultural system. 

The studies and the work of the Church institutions in the area 

show very clearly that the violence follows the same roads as the 

minerals from the mines. Better laws will protect the legalization 

and ensure the legalization of these mines, and thus protect agriculture. 

A much better legalization of the mines will also permit a better, 

more legal, taxation of the citizens in the area. It is impossible to 

understand that illegal, illicit exploitation is a good for the people. 

Chairman MILLER OF CALIFORNIA. The gentlelady’s time has expired. 

Mr. Dold is recognized for 5 minutes. 

Mr. DOLD. Thank you, Mr. Chairman. 

Mr. Dizolele, if I can just start with you for a moment. You have 

complimented the activists for drawing attention to the Congo, but 

have criticized them for oversimplifying the causes of the conflict 

in the Congo, and the solutions to that conflict. 

And after listening to a number of the testimonies here today, I 

think it is clear that we all have similar objectives: to try to reduce 

the violence inflicted on the Congolese people and help them 

achieve better quality of life. But I also think it is clear that the 

problems here are complex and that there is no simple solution. 

With that in mind, how can the following groups better address 

the problems in the Congo, whether it be western activists, the 

NGOs, companies affected by Section 1502, and finally, the SEC 

and the United States Government as a whole? I know that is a 

big question, but if you can be somewhat brief? 

Mr. DIZOLELE. Thank you, Congressman. 

I think we need to start by changing our narrative. I said earlier 

that the narrative that we have has been shaped through a binary 

prism of sexual violence and conflict minerals. If we do that, then 

we set our attention on the one sector of the Congo’s territory, 

which is the size of the eastern United States. 

I submit to you that life is absolutely worse in some areas of the 

Congo that don’t have conflict. Anybody who has been through 

28 

Equateur Province, through the Kasai Province, through Bandundu 

Province, was apt to be shocked that people were still living almost 

like it was still 1920 today. 

So what do we do? I think we need to have the courage to go 

after the real problem. And that courage happens in the very response—opportunity, which amazed me. I was an observer, an election observer, last December in Kinshasa. The international community did not stand with the Congolese people during the election. We chose the easy route. 

This was the chance for the Congolese people to really be supported by everyone, including the activities here so that the election would be accepted. Today, the elections, because they were 

botched, has created a legitimacy crisis. 

So if we tie what is going on in the east with the chaos in 

Kinshasa and the lack of legitimacy of the current government, we 

actually are in a conundrum, meaning we cannot really find a solution, because the people don’t have the legitimacy of their—the people in power don’t have the legitimacy of the country at large, are 

not going to solve the crisis, because they draw the raison d’etre 

in this environment. 

So I think we need to revert to what happened, and I referred 

to King Leopold’s days; there is no instant gratification in the 

Congo. When we approach the Congo, we need to know that as we 

approach the Congo, it is for a long haul, and the long haul may 

take 10 years, building one step on top of the other until we get 

there. 

Mr. DOLD. Thank you so much. 

Mr. DIZOLELE. Thank you, sir. 

Mr. DOLD. Mr. Vargo, a question for you. When a company joins 

an initiative to buy clean minerals from the DRC region, does that 

automatically trigger the expensive reporting requirements in Section 1502? 

Mr. VARGO. We don’t know what the reporting requirements will 

be. We are looking for a flexible standard that industry can work 

with that will be parallel to the way that we enforce export controls, we keep slave labor products out of our supply chains, etc. 

Companies typically work with what is called a flowdown, where 

you turn to your suppliers, and there may be thousands of them, 

and you put into your purchasing contract a requirement that they 

do due diligence to stay free of conflict minerals, as well as other 

things. 

So that is why we are pressing for a very flexible rule. We have estimated $9 billion to $16 billion. If the SEC were to issue a more 

restrictive rule, it could be higher than that. But if the SEC had 

a very workable rule, it could be lower than that, sir. 

Mr. DOLD. Sure. I guess my concern is that when a company like, 

for instance, Motorola, which has a presence in the 10th District 

of Illinois, when they invest in the DRC by setting up a closed pipeline of conflict-free minerals, I believe they will have to file at least 

a very expensive due diligence report. However, if the company 

were to invest, say, in Australia, that is not going to require them 

to invest in what is going to be a very expensive report. 

So the net result is that we are going to have companies making 

a cost-benefit analysis: Do I want to invest in the Congo, or do I 

29 

want to go elsewhere? And I think people are going to take a very 

calculated approach and say, you know what, we are not going to 

invest any in the Congo, and therefore, we are going to see the life 

in the Congo get potentially even worse than what it is now, and 

we are going to go somewhere else. 

So I just wondered if you might be able to comment on that? 

Mr. VARGO. Congressman, that is absolutely correct. And companies are looking and saying if I source out of Canada or Australia 

or Ukraine, I don’t even have to file a report. The report is expensive. It certainly is a disincentive for companies to do business in 

the region; yes, sir. 

Mr. DOLD. Thank you, sir. 

And my time has expired, Mr. Chairman. I yield back. 

Chairman MILLER OF CALIFORNIA. Thank you. 

Ms. Moore is recognized for 5 minutes. 

Ms. MOORE. Thank you so much. 

And I want to thank the witnesses again for appearing. This has 

been very, very informative. 

Let me start out by asking Mr. Dizolele some questions, the distinguished visiting fellow at Stanford University’s Hoover Institution on War, Revolution and Peace. 

I am very curious about your testimony, and I wanted to know 

if you could tell me a little bit more about the Lutundula report 

that the stakeholders in the Congo, some of the many organizations 

people have put together to stop the exploitation—the mineral exploitation—through the examples you give in your testimony are 

with Canada and China, where they changed the contracts. 

I am thinking also of something Mr. Vargo said just a few moments ago, when he said that they wanted to make sure that there 

was no slave labor connected with the supply chain. 

So I am wondering what can you just tell the committee a little 

bit—and I don’t want to use up all my time—the substance of these 

Lutundula contract changes that were made? 

Mr. DIZOLELE. Thank you very much, Congresswoman. 

Lutundula used to be a member of parliament. He was an MP 

in the transitional period between 2003 and 2006. I met him in 

2006, indeed. What happened was with the privatization in 1990, 

the structural adjustment to the World Bank and the IMF, the government of Zaire at the time was forced to privatize its mining industry, which was the bedrock of the economy. 

When they privatized that, it totally collapsed the entire economy. Meaning instead of having strong mining companies, you had 

smaller, private investors, especially westerners, taking ahold of 

the situation and totally destroying the system as it was because 

they needed to maximize their profits. 

Ms. MOORE. Okay, thank you. I just wanted a little bit more information about that. 

So I guess my question is leading to this observation, that without some sort of regulatory framework, and who knows, maybe Section 1502 is not it, but there is potential for exploitation with Canadian companies, Chinese companies, U.S. companies, exploitation of the ‘‘resource curse.’’ Exploitation without some sort of 

monitoring that the Congolese people are not getting their just due, 

that there were to be slave labor, as Mr. Vargo would suggest. 

30 

And so, I guess I appreciate the information that you have given 

us that it is not just the mineral rights, that there are needs to reform the police forces, and to have reforms within government. But 

I was concerned that you were minimizing the potential exploitation that mineral rights inherently bring. 

Mr. DIZOLELE. Congresswoman, if I may, the Lutundula report 

was adopted by the parliament of the DRC. We set out a series of 

hearings, just like what we are having today, and brought in the 

law of the DRC to start investigating and reopening all those contracts. So I have been to the mines. I have been to south Kivus. 

I have seen children in the mine. I have 10-hour footage of this. 

There is a problem, but that problem, the reason there are children in the mines is because there is no state strong enough to assert its authority. Dodd-Frank Section 1502 is not building the 

state. It is a sideshow that is not hooked to the national policymaking. 

Ms. MOORE. Right, I understand that. So I guess what I am saying is that if we were to eliminate the exploitive partners on the 

other end, that would help spawn some changes. 

I can see that I am sort of running out of time on this issue. 

I see Dr. Seay is dying to say something. No? 

Mr. Calder, do you have any comment on this? 

Mr. CALDER. One thing we have definitely seen from the data 

now, it is not the Western countries are pulling out. They pulled 

out back in 2004, 2005, ever since the U.S. operations at Kabot got 

a lot of pressure in the media because of a—buy they did through 

Rwanda. 

All the purchases right now you are seeing are from Chinese, 

Malaysian, and ex-Soviet republics, or that region. In particular, 

when a Chinese entity, which was a nonentity 5 or 6 years ago had 

used the fact that he can get cheaper material from that region 

where the U.S. companies cannot buy, and they are able to take 

away the market share from the other two big players, which are 

U.S.-based during this period. So they have been able to use this 

cheaper price and buy materials that the U.S. companies cannot to 

increase their market share. 

Chairman MILLER OF CALIFORNIA. The gentlelady’s time has expired. 

Ms. MOORE. I am so sorry, because I wanted to figure out what 

the difference was between the Bishop’s testimony and Mr. 

Dizolele’s. 

Chairman MILLER OF CALIFORNIA. I was going to say that was 

my question exactly. 

Ms. MOORE. But I hope that somebody else will ask that, because 

they just don’t seem to coincide. 

Chairman MILLER OF CALIFORNIA. Mr. Manzullo is recognized for 

5 minutes. 

Mr. MANZULLO. Thank you. 

A couple of points. If you take a look at the statements put out 

by a couple of the corporations in the documents furnished by Mr. 

Calder, you will see language to this effect. And I don’t want to 

name the company, because it wouldn’t be fair. But this company 

‘‘does not knowingly use these minerals and by-products as specified in the Conflict Minerals Trade Act.’’ 

31 

That doesn’t comply under the SEC on the Form 10K. If you file, 

there is liability attached to it, as opposed to simply furnishing information to the SEC. And the documents here from several corporations ostensibly are in compliance with Section 1502. Just looking at the face of them, they are not in compliance. 

You can’t say this company does not knowingly use the materials, and another company says that we will not ‘‘knowingly purchase any material from any minefield with social problems.’’ And 

so, it is not a matter of knowing something; it is a matter of being 

responsible, even if you don’t it. The term ‘‘knowingly’’ does not 

take you out of compliance with the SEC. 

The second thing is in our congressional district, we have lost a 

couple of circuit board makers, and Mr. Pudles, you and I talked 

about this. The little guys who have to get in tin for the soldering 

and others of those, if there is a company overseas that makes the 

circuit board that has these materials in them and its exported to 

the United States, and the company in the United States that does 

not have to register with the SEC, then isn’t it a fact that there 

is no violation of the law? 

Mr. Pudles? 

Mr. PUDLES. That is correct. Any company outside of the United 

States that is selling to a non-SEC issuer will have no reporting 

requirements and therefore can buy their tin and their gold anywhere they want to buy it. 

Mr. MANZULLO. And if a completed product is made overseas and 

exported to the United States, does the company that is doing the 

importing in the United States have to certify as to every product 

coming in that it is conflict-free? 

Mr. PUDLES. If their customers and their supply chain are all 

non-SEC issuers, there will be no requirement on any of them to 

report any content in that product; correct. 

Mr. MANZULLO. Okay. And then, as I read the statute, it says— 

the language says that conflict-free is defined to mean ‘‘the products that do not contain minerals that directly or indirectly finance 

or benefit armed groups in the Democratic Republic of the Congo.’’ 

How is somebody supposed to know that? 

Dr. Seay, how many mines are in the Congo? 

Ms. SEAY. I don’t know the exact number, Congressman, I am 

sorry, but it is hundreds. And many of them are informal. So I 

think one of the important things to note is that even if you—I am 

very skeptical of this idea of a closed pipeline coming out of the 

DRC. I think you can have a closed pipeline coming out of other 

countries, but in the DRC, even if you are able to mine outside the 

influence of minerals, you cannot leave an airstrip, you cannot 

cross roads without paying off militias. 

It is just under the circumstances, with the lack of governance, 

with the lack of anybody really being in control, it is going to be 

impossible to verify that those minerals have no association and 

are not tainted by association with armed groups in the Congo. 

Mr. MANZULLO. And that is where the problem starts. If there is 

no way to verify it at the source of the mines, how could a company 

certify under a civil if not possible criminal penalty that they are 

conflict-free? 

32 

Ms. SEAY. It is really going to be difficult. There are these programs that we call bag-and-tag, where you tag the minerals at the 

location and seal them in bags. But even then, the transportation 

becomes an issue and it is going to be very, very difficult to verify 

that. 

You should never underestimate the entrepreneurial creativity of 

the Congolese. They will find a way around these regulations, because it is a matter of survival. It is a matter of survival to smuggle out minerals, to find a way. And so, I think focusing on the government issue is a great idea. 

Mr. MANZULLO. And then, are there ever products from different 

mines that are combined? 

Ms. SEAY. Oh, sure. Absolutely. There are processing in the 

Kivus as well. I think we have the idea that all the minerals are 

flown out as raw, and that is not true. In Bukavu, there is a facility that separates out Kesterite and Coltan, which tend to be found 

in nature together. And they don’t associate what comes from 

where; they just dump it all into their products and send it out as 

one product. 

Mr. MANZULLO. Okay. 

Chairman MILLER OF CALIFORNIA. The gentleman’s time has expired. 

Mr. MANZULLO. Thank you, Mr. Chairman. 

Chairman MILLER OF CALIFORNIA. Mr. Carson returns for 5 minutes. 

Mr. CARSON. Thank you, Mr. Chairman. Thank you for convening this hearing. 

The eastern portion of the Democratic Republic of the Congo has 

long been the site of one of the world’s worst humanitarian crises. 

We know this. Since 1998, an estimated 5 million people have died 

as a result of the conflict. 

Several organizations, including GAO in a September 2010 report, and a U.N. group of experts in several reports, documented 

that illegal armed groups, as well as some corrupt units of the Congolese National Military, are continuing to commit mass killings, 

rapes, and other severe human rights violations. And these groups 

profit from illegal exploitation of the minerals trade in eastern 

DRC. 

Recognizing the continuing urgency of the human rights situation, Congress as we all well know, included in the Dodd-Frank Act 

provisions to reduce violence caused by these groups by targeting 

their illegal trade in conflict minerals. 

Mr. Vargo, do you agree, sir, that cutting the trade in conflict 

minerals could decrease violence in the eastern DRC by limiting 

the funding that is fueling the groups and units involved with 

these human rights violations? 

Mr. VARGO. Mr. Carson, frankly I don’t know. I have heard testimony on both sides, a lot of press articles that say this is not working. I don’t know. I represent America’s manufacturers, and the 

law says that we have to do due diligence to try to reduce—eliminate our purchases from DRC conflict mines and we are going to 

do our best to do that. 

Mr. CARSON. Okay. 

33 

Mr. Lamar, do you think, sir, that companies that source conflict 

material minerals have a responsibility as a part in a real sense 

of their corporate responsibility to avoid funding these groups and 

units that commit horrific human rights violations in the eastern 

DRC? 

Mr. LAMAR. I think in the business community, there are a number of compliance professionals who want to make sure that their 

supply chains are not inadvertently creating or contributing to any 

problems, whether it is the conflicts in Africa or any of the other 

problems around the world. 

And so, I think what you will see is that companies will do their 

best to be in compliance with either regulations or efforts, initiatives, to make sure their supply chains are not inadvertently contributing to or creating problems. And I would sort of echo what 

Mr. Vargo said about the relationship between this and the underlying conflicts. 

Mr. CARSON. Bishop Djomo, do you agree, sir, that cutting the 

trade in conflict minerals could decrease violence in the eastern 

DRC by limiting the funding that is basically fueling those groups 

and units involved in human rights violations? 

Bishop DJOMO. [The following testimony was delivered though an 

interpreter.] Certainly that will diminish the violence, because the 

armed groups persist in their violence because they receive revenue 

from the minerals. Their largest source of revenue is through this 

illegal sale of minerals. If they collect taxes through the anarchy 

of informal taxation, it is because they have first, the financing 

from the minerals, and the arms to do it. 

Mr. CARSON. Thank you, Mr. Chairman, I yield back. 

Thank you. 

Mr. HUIZENGA [presiding]. The gentleman yields back. Thank 

you. 

I actually get an opportunity to recognize myself for 5 minutes. 

And that is unusual, being recognized so. 

But first, Bishop, to you and Mr. Dizolele, as a person who has 

been watching this, I want to tell you personally that for myself, 

many people that I know, we are praying for you and your citizenry. Our hearts go out to you. As a fellow believer, I know the 

work that the Church does. And I commend you for that. And for 

being here. And I just wanted to first convey that. 

I have also asked that we put up a map of the country. It is a 

bit of an unknown for many in the Western world, exactly where 

it is and where it lies. And I was hoping that Mr. Dizolele and Dr. 

Seay, if you could maybe talk a little bit about where those conflicts are and then, Dr. Seay, I would like you to expand on that 

a little bit about what the conflict origination is. 

We are hearing from the Bishop that he believes that all roads 

lead to the mines, or those roads to the violence lead to the mines 

I believe was sort of the phrase that he was talking about. And we 

can maybe explore a little bit about the differences on that. So if 

you could maybe point out what part of the world we are talking 

about? 

Mr. DIZOLELE. Thank you, sir, Congressman, for your prayer for 

the Congolese, and for this opportunity. 

34 

So we see to the left—to the right there—above the big lake, 

which is Lake Tanganyika, which is Bujambura and Bakavu, and 

then just above that where it says Burungungu, that is the area 

we are talking about, which is Lake Albert, so it is just that section 

that we are talking about. 

Mr. HUIZENGA. The Mount Stanley area, and that area up there? 

Mr. DIZOLELE. That is the area up there. 

Mr. HUIZENGA. Yes. 

Mr. DIZOLELE. But the challenge is that the conflict in that area 

is fed by what is not happening in the rest of the country. I think 

it is very dangerous for us to talk about the Kivus in isolation. This 

is not an independent sovereign nation. This is a collection of three 

provinces that are paying the price of a lack of leadership in 

Kinshasa, to the west, to the capital. 

So putting a Band-Aid on the problem in Bukavu is not going to 

lead us to peace. I am afraid to say so. It might allow for temporary 

relief of sorts, but it is just not sustainable. 

Thank you. 

Mr. HUIZENGA. And thank you. 

Ms. SEAY. Thank you, Congressman. 

Mr. HUIZENGA. And if we could very quickly, because I do want 

to hear from the Bishop— 

Ms. SEAY. Sure. 

Mr. HUIZENGA. —as well, and then I actually want to get to my 

real question. So, quickly? 

Ms. SEAY. Sure. So I think it is important to understand, mineral—the militarizing in the mineral trade is a symptom, rather 

than a cause, rather than the disease itself. So it is definitely something that fuels some of the conflict. It is definitely a problem and 

I don’t want to give the impression that it shouldn’t be cleaned up. 

I just don’t think Section 1502 is going to do it. 

But the real issue underlying conflict in this part of the country 

is land rights and citizenship rights. The question of who gets to 

be Congolese and who has the right to own land? In the area, the 

north Kivu area that Mr. Dizolele was describing, is some of the 

most fertile agricultural land in the world. It produces three harvests per year. And it is hotly contested because it is so valuable 

and has been. 

And it is really important to note, these conflicts have been going 

on since before the DRC war started, and before there was high demand for Congolese minerals. But it is not homogenous. The armed 

groups are different; they are not all fighting on minerals. They 

don’t depend on minerals to the same extent. It is really complex. 

Mr. HUIZENGA. So this isn’t just the LRA that we may be seeing 

in the media? This is local? 

Ms. SEAY. They are not even in the area. 

Mr. HUIZENGA. Yes, this is local and— 

Ms. SEAY. And you also have significant mining areas where 

there is no conflict, like the Kasai and the Katanga. 

Mr. HUIZENGA. Bishop, quickly, if you would maybe respond to 

that? 

Bishop DJOMO. [The following testimony was delivered through 

an interpreter.] The Church lives everywhere where the population 

lives as well. We have come to realize that the largest, the most 

35 

important part of the instability are the economic reasons. The ethnic rivalries are manipulated, are used as instruments for this conflict. The Church believes that the international and national regulations, if done gradually over time, will solve these problems. 

I mentioned in my testimony that the Congolese government is 

in the process of passing some of these laws. It is certain that stability in the Congo depends on many factors, but the illegal exploitation of resources is a major factor. That is why the Church asked 

the international community and the national leaders in the Congo 

to regularize these laws and to implement them. 

The tensions, the ethnic tensions that exist are manipulated, are 

instruments of this conflict and are fueled by the minerals and the 

mines. 

Mr. HUIZENGA. I appreciate that testimony. 

And Mr. Lamar, I wanted to briefly get to you, and I don’t know 

that I really have the time. My time has expired. But I am concerned, so I guess to the panel, my concern is whether it is out of 

the apparel and manufacturing, whether it is out of tier one automotive suppliers that are in the 2nd District of Michigan, who are 

dealing with requirements in NAFTA that for them to go through 

a tier one and we see it costs hundreds of thousands of dollars to 

that process, they are looking at it being millions of dollars if they 

are having to go down five tiers. 

And I think the crux of the question is, will this solve the conflict 

in the DRC? Will this solve the issues that we are dealing with in 

that northeastern corner of a very conflicted world? 

And obviously, Rwanda and other areas that are in that area 

have seen violence for so long, and I hope you understand that is 

what the intent is for me personally and I believe the rest of this 

panel is to look at how we are making sure that the problem is 

really truly solved and is not a veneer, I think as Mr. Dizolele 

talked about. 

So with that, my time has expired. I appreciate that. 

With that, the Chair recognizes Mr. Scott for 5 minutes. 

Mr. SCOTT. Thank you. 

As I mentioned in my opening statement, I traveled over there 

into the Congo and I have seen firsthand and I have witnessed a 

lot of this. And it was very disturbing. It is just terrible. 

Let me start with you, Bishop. Is it true, in your opinion, that 

this trade in conflict minerals has funded the cycle of conflict in the 

Congo? You said yes? 

Bishop DJOMO. [The following testimony was delivered through 

an interpreter.] That is exactly what the Bishops of the Congo have 

been saying. 

Mr. SCOTT. All right. 

Now, Mr. Dizolele, has this mineral—conflict mineral—spawned 

this conflict? And I am asking you the same question I asked the 

Bishop. 

Mr. DIZOLELE. To a certain extent, yes, Congressman. I think 

though the way forward, if we can take the example of Sierra 

Leone. Everybody here we heard today information on the Kimberly process, black diamonds, and so on and so forth. What helped 

Sierra Leone and Liberia was a confluence of actions. Black diaVerDate Nov 24 2008 18:21 Feb 05, 2013 Jkt 075730 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 K:\DOCS\75730.TXT TERRI
36 

mond containment was just the topping on the cake. And we don’t 

have that in the Congo. We are putting the cart before the horse. 

Mr. SCOTT. Okay. What I want to do here is, because we have 

a conflict right here with the panel. I want to get at a measure 

here and in the midst of one myself, who was there, and as an African-American, I can’t begin to tell you how much that experience 

touched me. 

And if these minerals are the source of the funding for the conflict, which the end result becomes this dehumanizing mutilation 

of the sexual reproductive system of the women of Africa, then we 

must with all deliberate speed take every step. So if you agree, and 

if there is a consensus that this—that dealing in these minerals is 

causing this, what more important thing can we do than to, as the 

United States, the most powerful country on earth, with the riches 

of our economy, to say to our companies that you cannot do business here. 

It is clearly in conflict with what we stand for. That seems to me 

to right now be the least we could do. It will not solve the problem, 

but it seems to me that it will be a big step going forward. So if 

we got that consensus there, on what grounds would you deny and 

say the United States should not do this? 

Mr. DIZOLELE. Congressman, I think it is an important question. 

It gets to the heart of the matter. This mighty country, for which 

I served as a Marine, has the power to go after the militias. If we 

want to help the poor women, I have seen pictures, I have been to 

Panzi. I have seen pictures of mutilated genitalia. And I have seen 

these women. If we mean to help them—the question they would 

ask this chamber if they were here is, why don’t you come after 

these militias? That is the question they would ask you. 

Mr. SCOTT. No, but the point to me is what I am trying to get 

at is that, no, I don’t think. I think it is a cultural thing. I think 

that once they do that act there is something else at work there. 

But the point of the matter that we have as a country in the 

United States, should we be contributing to that? 

It is not that we could stop it, but cannot—should our companies 

be allowed to contribute to this, if you agree with the Bishop that 

these conflict minerals are in effect getting us to the end line of 

this brutalization of women sexually and violently, physically in 

that country? And I think that is the core of our pushing forward 

Section 1502. Do you see my point? I think that that really gets 

to where we are. 

And I see my time is up. Thank you, Mr. Chairman. 

Chairman MILLER OF CALIFORNIA. Thank you. 

We are probably going to try to do a line of questioning for Members not on the subcommittee, so I will start with myself, then I 

will go to Mr. Miller next. 

Mr. Dizolele, would you say that fewer women are going to be 

violated after the implementation of Section 1502? 

Mr. DIZOLELE. Mr. Chairman, two things. First, I would like to 

say that sexual violence is not part of the culture. There is no religious edict or any tradition of this. This is just as appalling and 

new to most Congolese. 

Then two, I don’t think it is going to reduce the violence on 

women, because as long as those militias are still there and the 

37 

justice system does not work, and there is no military solution to 

go after them, then, as I said early on, the women have to be the 

one to go to the field, they will still be raped. 

So we are not getting—I think we are tepid and timid in our approach with Section 1502. I think this chamber and this Congress 

has the power to enact bolder regulation than this, what I again 

call a veneer. Because this serves to assuage Western consumers, 

but it doesn’t get to really help the victims. 

Thank you. 

Chairman MILLER OF CALIFORNIA. It appears from testimony 

that maybe American companies are moving out of the mines, but 

Chinese companies and others are moving back in. Is that true, 

Ms. Seay? 

Ms. SEAY. Yes, it absolutely is. I mentioned in my testimony that 

10 exports have gone down by about 90 percent from the Kivu 

provinces. That other 10 percent is entirely being bought by China 

through 2 or 3 of the trading houses in the cities. It is essentially 

the main consumer now. 

Chairman MILLER OF CALIFORNIA. So is there any record we 

have that Chinese companies are better on human rights issues 

than American companies? 

Ms. SEAY. I don’t believe—the evidence of which I am aware does 

not suggest that they are. 

Chairman MILLER OF CALIFORNIA. So if we are saying that we 

are pulling American companies out of a region that is heavily impacted, it is like many of our trade issues we face. If goods aren’t 

produced here, they are produced in China. And it seems like other 

countries are going to pick up the shortfall and take advantage of 

the availability that is going to exist in a region if we pull out. Is 

that—what is your opinion on that? 

Ms. SEAY. I think that is a reasonable opinion. And I think it 

mirrors the efforts that the Chinese are making on the political 

side of things. China, as Mvemba mentioned in his testimony, has 

a multi-billion dollar deal with the Congo. And they don’t care 

about human rights violations. They don’t care. 

The Chinese do not put any pressure on the government. And 

losing sources of leverage by our companies pulling out, I think is 

a challenge for things like democracy, for things like having free 

and fair elections that accurately reflect the will of the Congolese, 

which they do not enjoy today. 

Chairman MILLER OF CALIFORNIA. Mr. Dizolele, you heard the 

testimony of the Honorable Bishop. Do you agree with that? 

Mr. DIZOLELE. I am sorry, sir? 

Chairman MILLER OF CALIFORNIA. You heard the testimony of 

the Honorable Bishop. Do you agree with his testimony that this 

is going to have a positive impact on the people in the region, the 

implementation of this? And it is not really a big jobs issue for 

them? 

Mr. DIZOLELE. I think only partly, because I think in the bigger 

picture, this will actually not have a positive. If the goal—early in 

my statement, I said if you are going to assess this, we have to assess this on the claim, the premise of Section 1502. The claim was 

it is going to extensively reduce the violence. I do not think so. 

38 

To buy an AK–47, you don’t need to sell minerals. AK–47s are 

pretty cheap and violence can happen with machetes, as we saw in 

Rwanda. No AK–47s were used in the genocide. If the conflicts are 

not addressed, if we don’t go after the militia, they are still free 

agents to do whatever they will. 

Again, we don’t have an enforcement mechanism on the Congolese side. This law has made the enforcement mechanism on the 

corporations in the United States. But where is the other side of 

the coin? Who enforces this in the Congo? 

Chairman MILLER OF CALIFORNIA. It seems like we have placed 

the burden on American businesses. And I am not minimizing the 

problem over there, but having—we have met with the African Development Bank multilevel development banks who play a significant role in this region. 

Wouldn’t their involvement be much more beneficial to this issue 

to increase stability than the way we are trying to create it, Ms. 

Seay? 

Ms. SEAY. I am a bit skeptical about the African Development 

Bank. Their power is limited. But I think that you do have regional 

and domestic mechanisms that are aware of the conditions and 

have a much more sort of pragmatic approach to the problem than 

the one reflected in Section 1502. 

So you have—there are partnerships going on. These are evolving. Some of them are working with the OECD guidelines. But 

eventually we are going to get a mining code in the DRC maybe. 

And we are going to have these regional initiatives, and I think 

providing support to regional actors who know the terrain, who 

speak the languages, who understand the culture, and who understand the challenges of operating in an environment in which there 

is absolutely no regulation and absolutely no rule of law is really 

important. 

Chairman MILLER OF CALIFORNIA. So we can feel good that we 

have probably turned it over to Chinese companies to deal with the 

mines and the other companies and that is going to probably make 

their situation better in that part of the world, which I highly 

doubt. 

Ms. SEAY. I don’t feel good about that. 

Chairman MILLER OF CALIFORNIA. Mr. Miller, you are recognized 

for 5 minutes. 

I am going by the Ranking Member’s list. It wasn’t my preference, it was— 

Mr. MILLER OF NORTH CAROLINA. All right. Thank you, Mr. 

Chairman. 

Mr. Scott said that the conflict, the violence in the Congo was appalling for African-Americans. It is also appalling for White folks, 

I can tell you. The chairman at the beginning said that the conflict, 

that the violence in the Congo was the result of warlords and 

thugs. That lets the developed world off pretty lightly. 

It is very clear that the conflict in the Congo is largely motivated 

by the opportunity to steal from the people of the Congo, to steal 

the revenue that comes from conflict minerals. And that the revenue from conflict minerals are funding all the sides in the conflict. 

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39 

counts from what he had stolen when he was the head of the 

Congo. 

Kabila said to a local reporter that all it took to put together a rebellion was $10,000 and a satellite thing—$10,000 was enough to 

hire an army in the Congo, given how extreme the poverty was 

there. 

And the satellite thing meant that he could negotiate with all the 

buyers of the minerals to further fund his army. And supposedly 

by the time he reached Kinshasa, he had already contracted—he 

had half a billion in contracts with the buyers of the minerals in 

the Congo. 

There have now been 5.4 million people who have died since 

1998. Rape is a weapon of war there and at least 200,000 women 

have been raped. But what is going on in the Congo is horrific and 

all of humanity should take responsibility for it. 

The Enough Project’s concerns have been kind of dismissed, 

sneered at even, I think, some today. They say they are not urging 

a boycott of Congo minerals. They are urging that there be legitimate supply chains with tracing and auditing to make sure that 

the buyers of those minerals know what they are getting, and they 

are not conflict minerals. And it is not impossible to do. In fact, 

there appear to be some supply chains, legitimate supply chains, 

already. 

Mr. Calder, is it going to be impossible to develop legitimate supply chains? And what now exists? 

Mr. CALDER. A good part of the data we have now is the ConflictFree Smelter Program, and a very key part of their data about 

whether it is possible. One of the also key parts is now it is very 

clear. We have talked about U.S. companies pulling out. They 

pulled out a long time ago. They pulled out in 2004, 2005. 

It has been mostly purchased—everything has been purchased 

up to more recently, the status quo before this law came out, it was 

Chinese, Malaysian, Soviet Republics. I am not talking about the 

Chinese moving in now. They moved in a long time ago and they 

have been able to use this cheaper material to actually gain 

marketshare over the U.S. companies. 

This is before this law. This law finally levels the playing field. 

Is it possible? Now we know this incredible traceability, which companies have been buying, because of these smelter programs. These 

were done before we have a final rule, that they have done on their 

own initiative. 

Is it possible? We have a number of examples in here of companies that say it is possible. One of them being quoted here is also 

Nordstrom. So it is very key. These companies are quoted it is possible. And some companies like Kester, which buys most of the solder, or a majority in the United States, have completed it. 

Mr. MILLER OF NORTH CAROLINA. All right. 

Dr. Seay, you have said that rather than try to trace conflict 

minerals, you are very skeptical about the practicality of doing 

that. But do you say instead say there should be government’s promotion in security sector reform? 

I spent a couple of days in Kinshasa. I don’t claim to be a Congo 

hand as a result of spending a couple of days in Kinshasa. But we 

met with—our delegation met with the—it was in MINOC. I think 

40 

it is now called UNESCO, the United Nations mission in the 

Congo. And they said they were simply overwhelmed. 

They could not begin to govern or to provide security in the 

Congo. They got just shy of 20,000 uniformed personnel, another 

4,000 or 5,000 civilians, and can’t begin to touch the problem. They 

can’t begin to get at real governance or rule of law, because they 

are simply spending all of their resources providing security. And 

that security is massively resource-intensive and long term. 

Dr. Seay, where are you suggesting—how much are you suggesting that it cost to provide the necessary security in this massive ungoverned area? How long are we going to be there, and who 

is going to provide those resources? 

Chairman MILLER OF CALIFORNIA. The gentleman’s time has expired. 

Dr. Seay, you may give a brief answer. 

Ms. SEAY. Thank you, Congressman, for the question. I am not 

suggesting that all the security be provided by UNESCO. Although 

I do agree, it is vastly underresourced. It is absolutely ludicrous to 

think that a peacekeeping force of 17,000 people can protect civilians in a territory the size of the United States east of the Mississippi. That mission was underresourced and underfunded from 

the beginning. And it has never been properly— 

Mr. MILLER OF NORTH CAROLINA. It apparently— 

Chairman MILLER OF CALIFORNIA. The gentleman’s time— 

Mr. MILLER OF NORTH CAROLINA. —has the best resources— 

Chairman MILLER OF CALIFORNIA. The gentleman’s time has expired. 

I will allow the witness to respond, but the gentleman’s time has 

expired. 

Mr. MILLER OF NORTH CAROLINA. Okay. 

Ms. SEAY. Okay. So on your question regarding how much it is 

going to cost and how long, I think the key is not getting more 

peacekeepers in, which is unrealistic by any measure, financial or 

political. But rather, to strengthen the capacity of the Congolese 

military, and to turn it away from being a force that is the largest 

abuser of human rights in the Congo and responsible for more 

rapes and more looting or institution or armed group. 

And instead, to professionalize those soldiers, to punish and remove from the army those who commit human rights abuses, and 

to pay soldiers a living wage so that they do not have an excuse 

to go out and loot and cause other problems. 

Chairman MILLER OF CALIFORNIA. Thank you. 

I ask unanimous consent that the gentlelady from California be 

recognized for 5 minutes. 

Without objection, the gentlelady from California is recognized. 

Ms. WATERS. Thank you very much. I know that this time, Mr. 

Chairman, is reserved for questions. And I want to thank you for 

this hearing. I don’t really have any questions. My mind is made 

up. 

I am a supporter of the continent, the entire continent of Africa. 

I want you to know that I have spent part of my career working 

on getting rid of apartheid in South Africa, and helping Nelson 

Mandela to get out of prison. 

41 

I want you to know that I am applauding the fact that Charles 

Taylor is going to be sentenced to a long time in prison for what 

he did in Sierra Leone. And in Liberia and the diamonds that were 

conflict diamonds there. I want you to know that I have been in 

Angola and I was so glad when we finally got rid of the war that 

was funded with Savimbi coming out of the bush, using conflict 

diamonds. 

I want you to know that I have been to the Democratic Republic 

of the Congo long before Laurent Kabila ever became president, 

and I understand all of this very well. And I want you to know for 

anybody to say whatever we are doing does not help, we should not 

do it, and look what China is doing, does not hold water with me. 

We have a moral responsibility to deal with these issues, and we 

have a moral responsibility to provide that leadership. I don’t care 

if it helps but a little, we keep working, we keep building on the 

idea that the exploitation and the devastation of this wonderful 

continent has to stop. And some of us are committed to that for the 

rest of our lives. 

And so, I am sorry that there are those who think it is going to 

interfere with their business, that they won’t be able to make as 

much money. First of all, give the SEC the opportunity, give them 

the chance. Give them the opportunity to put together the regulations. I worked on Dodd-Frank. I was on the conference committee, 

and I supported Sections 1502 and 1504, and I will continue to do 

that. 

Now, this hearing is fine, because it gives people an opportunity 

to respond to the allegation that we didn’t have a hearing on these 

issues prior to Dodd-Frank. So this is the hearing. But we should 

not reach any conclusions about it being unfair to businesses. It is 

possible. I want to tell you, I am reading abut a supply pipeline 

that is closed. Motorola is doing it. They are able to comply. And 

they lay it all out here. So this business of possible, not able to 

comply, you can’t verify, excuses, excuses, excuses. 

And I wanted you to know that for as long as I am an elected 

official and a Member of Congress who understands what has happened on that continent, not only from those of us in the United 

States who were part of that exploitation, but from other countries 

all over the world. 

I am not worried that somehow China is going to beat us out. 

China is all over the world doing what China does. But some of us 

are even looking at our trade negotiations to see how we can include these kinds of questions in our trade negotiations with China 

and other places. 

So I am very appreciative that you are here. Bishop, I want you 

to go back and I want you to tell the other Bishops that there are 

people here who love the continent, who love Africa, who are going 

to fight for Africa, who understand what is going on with these conflict minerals, and we are not worried about competition, we are 

not worried about loss of dollars. We can have a closed pipeline 

where we can monitor this. And there are some of us who are committed to doing it. 

So I don’t have questions, and perhaps there are some people 

who can say, well, how is it she can say that she knows so much 

that she doesn’t have to answer any questions? 

42 

And again, I am telling you, I am not a stranger to the Democratic Republic of the Congo. I was there. I am not a stranger to 

Angola, I have been there. I am not a stranger to Liberia and Sierra Leone. 

I am not talking from afar. I am not some privileged AfricanAmerican legislator in this country, or a privileged White person in 

this country who can sit back and talk about how we are disadvantaged, because when you say that you don’t understand the rape 

and the murder and the killings and the devastation and the loss 

of lives that has taken place. 

It is easy to speculate or to talk about this is uncomfortable for 

me, this is inconvenient for me, this may interfere with my profits. 

Shame on us. Shame on us. We are better people than that. 

I have one second left? I yield back the balance of my time. I 

have said all I need to say. 

[applause] 

Chairman MILLER OF CALIFORNIA. Mr. McDermott, you are recognized for 5 minutes and 1 second. 

Personal items are not permitted during a congressional hearing. 

I am sorry. 

Mr. McDermott, you are recognized for 5 minutes. 

Mr. MCDERMOTT. Mr. Chairman, I am going to begin with a confession. 

I lived in Kinshasa for 9 months. I worked there for the State 

Department. I have been all over Goma. I know all the people in 

Kivu who are involved in this. And what is necessary here today 

is to decide, are you going to repeal it, or are you going to let the 

SEC go forward and write a rule? 

The problem here is most of the argument is about an imaginary 

rule. We have not seen the rule. People are responding to an imaginary rule. The SEC should move forward. And I will stipulate that 

this decision will not end all the problems in the Congo. I was recently in Brussels and went to the Leopold museum. And when you 

realize this kind of conflict has been going on since 1890, that nothing is going to come in and be the silver bullet that fixes it. 

This question goes to Mr. Scott’s point: Does our continuing to 

put money into the Congo minerals black market feed the war? 

Now, every Member of this Congress knows that the Vietnam War 

ended when Congress cut off the money. And the war in Afghanistan will stop when this Congress cuts off the money. That is what 

we are talking about here is, ‘‘How do you cut off the money?’’ Now, 

it won’t fix everything, but it is going to fix it for a lot of people. 

Let me go to one other point that there has been a lot of confusion here about. And I was pleased to see a map, because most people, if you handed them a map, they couldn’t find the Congo on it, 

first of all. Then they couldn’t find Kivu if their life depended on 

it. But the fact is that those provinces, North and South Kivu, are 

the area right next to Rwanda, from which the genocide moved 

right across the border. 

And all of the problems created by those people back in Berlin 

100 years ago when they drew lines in Central Africa about who 

lived where and who was who, is going on today as it was 100 

years ago. And everyone who talks about that, or who understands 

the place, knows that. The fact is, there are conflict-free mines 

43 

now. In Katanga Province, immediately south and west, which is 

where all the copper and tin comes from, that is what created all 

of the business when we sent in our troops in 1960, all of it was 

about copper in those days. 

Now, there are conflict-free mines. There is a place down on 18th 

and L Streets, I think, called PACT. It is a group of conflict-free 

mining experts working for the tin and tantalum society, who can 

give you the name of 146 conflict-free mines in the DRC and 406 

conflict-free mines in Rwanda today. They put out 500 tons a 

month of conflict-free minerals. And it is all sold. There is no shortage. These companies who talk about, ‘‘Oh God, we won’t know 

where to get our stuff.’’ That is nonsense. The minerals industry 

has already moved to clarify this situation, because they realized 

the justice in it. 

It is so clear that they have already moved. And my belief is that 

the question here is really, is the Congress going to use its power 

of money to change the situation over there, or are they not? We 

can throw up our hands and say, it is hopeless, it is impossible, 

there are all these people, it has been going on forever, and we 

won’t do anything. 

Congo has been free for 50 years, since 1960. I was there in 1987 

and 1988. And the policemen were not paid. People would stop you 

in the street and say, give me money. That is how the policemen 

were paid. That is how the army is paid. There is no civil service. 

There is no organized government. We all know that. 

But the question is, is the Congress going to allow industry, for 

profit, to continue to buy from this source? It is changing, it has 

changed dramatically as we already have testimony from Mr. 

Calder, that because once the companies saw the justice in it, they 

said no, we are going to find a clean place to buy our minerals. 

And I could tell you, I can assure you, Mr. Miller, that Nordstrom, whose name is on this list from my city, will not sell you 

a suit with a button that is filled with conflict minerals. They don’t 

want that reputation, and they will make sure that they are all 

clean. 

I would like to hear from Mr. Calder a little bit about the— 

Chairman MILLER OF CALIFORNIA. The gentleman’s time has already expired before he asked a question. 

Mr. MCDERMOTT. Time flies when you are having a good time. 

Chairman MILLER OF CALIFORNIA. It does. 

Without objection, I would like to submit for the record the following: a letter from the U.S. Chamber of Commerce; a letter from 

the Retail Industry Leaders Association; a statement from 

Kinnemont-Link based in Latrobe, Pennsylvania; a letter from the 

SEC, from the SBA Office of Advocacy; and a letter from the Automotive Industry Action Group signed by executives from Chrysler, 

Ford, GM, Honda, Nissan, and Toyota to their suppliers alerting 

them that they will need to comply with Section 1502, even though 

they are not SEC registrants. 

Ms. WATERS. Mr. Chairman, may I ask unanimous consent? 

Chairman MILLER OF CALIFORNIA. I already did that. 

Ms. WATERS. For the supply chain? 

Chairman MILLER OF CALIFORNIA. Oh, without objection, the 

supplychain letter will be submitted also. 

44 

Ms. WATERS. Thank you. 

Chairman MILLER OF CALIFORNIA. I would like to thank the 

panel for your time, for your expertise, for your patience, and for 

the travel many of you have made to be here. And let us hope that 

the government and the region does something about this problem, 

deals with the human rights. I hate to see the burden placed on 

the back of American businesses. It is not Congress paying; it is 

American businesses paying. 

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 30 days 

for Members to submit written questions to these witnesses and to 

place their responses in the record. 

And with that, this hearing is adjourned. 

[Whereupon, at 12:52 p.m., the hearing was adjourned.] 

(45) 

A P P E N D I X 

May 10, 2012 

46 


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STATEMENT OF THE HONORABLE DONALD A. MANZULLO 

BEFORE THE SUBCOMMITTEE ON INTERNATIONAL MONETARY 

POLICY AND TRADE OF THE HOUSE FINANCIAL SERVICES COMMITTEE 

"The Costs and Consequences of Dodd-Frank Section 1502: Impacts on America 

and the Congo" 

May 10,2012 1O:00AM in Room 2128 Rayburn HOB, Washington, DC 

Mr. Chairman, thank you for holding this important hearing today. 1 only wish 

we had a similar legislative hearing on this topic prior to Section 1502 becoming law. 

As a Member who also serves on the House Foreign Affairs Committee, 1 am well 

aware that there is no doubt that the situation in eastern region of the Democratic 

Republic of the Congo (DRC) is horrendous. Human rights abuses are rampant; militias 

operate with impunity; and the international community seems powerless to affect 

change. 

But I also know that oftentimes, unilateral trade sanctions backfire on the very 

people we are trying to help. In addition, because legislative language wasn't fully vetted 

and included at the last minute into an unrelated bill dealing with preventing another 

2008 financial crisis, Congress passed the buck to the Securities and Exchange 

Commission (SEC) to resolve complex issues through rulemaking. This is unlike the Iran 

sanctions provision we included in the Ex-1m Bank reauthorization bill yesterday in 

which all interested parties were at the table to develop a set of workable provisions that 

accomplishes the goal of the sanctions without harming the global competitiveness of 

U.S. companies. 

This reminds me of two previous examples of flawed policy. First, Congress 

passed comprehensive sanctions against Sudan without realizing that the primary source 

of the world supply of gum arabic is Sudan. Gum arabic is used in a wide variety of 

industrial applications, from soda and candy to pharmaceuticals and newspaper print. So, 

if Congress had done its homework in advance, there could have been some 

modifications made to the sanctions against Sudan. Instead, Congress had to spend 

enormous effort after the fact to enact an exemption for gum arabic. 

Second, in 1990, Congress passed into law the Fastener Quality Act in response a 

collapsed pedestrian walkway in a Kansas City hotel atrium. The blame was initially 

incorrectly placed on fasteners that did not bear the load. Nonetheless, this law was 

quickly passed prior to understanding all the facts about the walkway collapse and 

required the testing of every fastener greater than 1;' of an inch in diameter used in a 

"critical application" at labs certified by the National Institutes of Standard and 

Technology (NlST). When the draft rule came out for public comment, NIST wasn't 

going to say that that certain applications weren't "critical" (because what would you say 
47 


75730.002

if your child became injured on a playground set because of a flawed fastener?), so NlST 

required every fastener greater than V. of an inch to be tested. This proposed rule would 

have devastated the U.S. fastener industry, particularly when imported products that 

included fasteners would not be subject to the same testing requirements. It took several 

years of work but we finally got the law changed that allowed sample batch testing of 

fasteners. 

Just like the Fastener Qualify Act, we need flexibility in this new law so that it 

becomes practical to implement but still maintains the goal of the legislation. It is also in 

the interest of the advocacy groups who pushed for the adoption of this new law because 

U.S. small businesses will have legal standing to challenge the SEC rule, if it does not 

change, in court because the rule violates another U.S. law - the Regulatory Flexibility 

Act. Thc independent Office of Advocacy at the Small Business Administration (SBA) 

informed the SEC last October that their Initial Regulatory Flexibility Analysis (IRFA) 

was flawed because it "underestimated the number of small businesses that would be 

impacted by the proposed rule." A properly researched Regulatory Flexibility Analysis is 

a prerequisite prior to finalizing any proposed rule. The Office of Advocacy 

recommended that the SEC start again and publish a new IRFA that would more 

accurately describe the costs and burdens of the proposed rule. With a more accurate 

IRF A, then the SEC would be able to consider less burdensome alternatives to the 

proposed rule. But if the SEC does not follow this advice, then affected small businesses 

in a wide range of industries would be able to come together to challenge this rule in 

federal court and would most likely prevail. 

We all share the same goal of ending the conflict in the eastern region of the DRC 

and crippling the militias. We all share the goal of the legislation to end the trade in the 

minerals that benefit the militias. The key is how to do it in the most effective manner 

possible that does not penalize Congolese and neighboring African miners who are not 

involved in the conflict. We also must make sure that the rule does not unintentionally 

benefit our foreign competitors, particularly in China, and harm our small businesses. I 

look forward to listening to the statements of the witnesses on how to accomplish thcse 

important goals. 
48 


75730.003

Remarks of Congressman Jim McDermott 

5-10-2012 

Subcommittee on International Monetary Policy and Trade 

Hearing on "The Costs and Consequences of Dodd-Frank Section 1502: 

Impacts on America and the Congo" 

I want to thank Mr. Miller and the Subcommittee for allowing me to be here. It's good to have 

hearings to get the facts and views out there. 

I have seen the big progress by so many companies-they're going conflict free, and these 

companies know it's good for business. 

The majority hearing memo says there were no hearings on 1502. In fact we met regularly with 

dozens of companies and groups in both Ways and Means and Foreign Affairs. This legislation 

was heavily shaped by business. Some companies didn't get everything they wanted-they 

have to report, they have to be honest, and there are penalties. This bill was co-written with 

Republicans and marked up on a bipartisan basis in April 2010. 

Mr. Chairman, I ask for unanimous consent to submit the transcript of the committee markup 

for the record, including the Republican backing of the House bill which is very similar to the 

final law. 

One of the confusing things about the storm over 1502 is that companies already have to follow 

u.S. law that requires them to know where the inputs for their products come from. For years 

companies have had to know if the Gold they use comes from Burkina Faso, if the Diamonds 

they use come from Sierra leone, ifthe textiles they use come from Ethiopia, or if the tin or 

colt an they use comes from the Congo. This is already the law. Companies comply. 1502 is a 

lesser burden -- companies just have to say what they are doing. 

Mr. Chairman, I ask for unanimous consent to submit the text of Executive Order 13126, the 

description of it from the Department of labor, and the list of banned substances from specific 

countries for the record. 

Mr. Chairman, I also ask for unanimous consent to submit a partial list of large investment firms 

who have conflict minerals policies, cities and states that have passed conflict minerals laws, 

and a list of universities with investment policies based on the federal law for the record. 

One set of testimony was particularly troubling. laura Seay's testimony purports to understand 

our motivations in writing Section 1502. Yet her assertions are not true. Her views about the 

impact of the law are out of step with the most respected analysts in the field. The 

recommendations she makes are already what the State Department is doing. 
49 


75730.004

The businesses and associations we have talked to, including the panelists today, wants a rule 

from the SEC. The law has worked-transparency is happening. Conflict Free Mining is 

happening. Over 400 mines in Rwanda are conflict free, over 146 sectors (mines) in Congo are 

conflict free, and they are producing over 500 tons of conflict free minerals right now. 

Now the SEC has to stop doing damage with delay and act. 

Many ofthe things industry and companies want are clear and, I think, smart. If the SEC 

adopted them they would simplify the reporting and reduce its costs without undermining the 

policy. On recycled materials, exempting current inventories, only reporting on products that 

have conflict minerals intentionally added, and having due-diligence standards that are models 

but keeping flexibility-we agree on all of these. 

There are some issues we will not agree on. They would undermine the law and allow for the 

misleading of investors. A de minimis provision will not work. Trace amounts are exactly what's 

in a cellphone and other products. What's important is whether it was intentionally added and 

came from Central Africa's black market. Exempting businesses is not acceptable. Companies 

cannot keep funding the black market. 

The biggest cost-driver to businesses on this issue is not the law, but the SEC's un-ending delay. 

The SEC is so immobilized by being sued that they have forgotten their legal charter--to protect 

investors, keep markets fair and help them grow. 
50 


75730.005

International Monetary Policy Subcommittee 

Hearing on "The Costs and Consequences of Dodd-Frank Section 1502: 

Impacts on America and the Congo" 

Statement by Rep. Maxine Waters 

Submitted for the Record 

May 10,2012 

I would like to thank Chairman Gary Miller and Ranking Member Carolyn McCarthy for 

allowing me to participate in this hearing on, "The Costs and Consequences of Dodd-Frank 

Section 1502: Impacts on America and the Congo." 

The Democratic Republic of Congo (DRC) is one of several countries in Africa that have 

been affected by the so-called "resource curse." The resource curse describes the tendency for 

countries that are rich in oil, gas, and mineral resources to experience slower growth, higher 

levels of poverty, and more civil strife than countries that are not resource-rich. 

Armed conflict in the eastern region of the Democratic Republic of Congo (DRC) 

continues to cause countless deaths and untold suffering among the civilian population. Armed 

groups finance their activities through the exploitation of the DRC's natural resources, 

specifically tin, tantalum, tungsten, and gold. The conflict has given rise to widespread rape, 

sexual violence. and human trafficking, and the parties to the conflict often use these crimes 

deliberately to terrorize and humiliate communities. 

Other countries affected by the resource curse include Sudan, which is rich in oil, yet is 

cursed with a government that has committed genocide against its own people. Liberia is 

endowed with a wealth of diamonds, which came to be known as conflict diamonds because they 

fueled a civil war that lasted fourteen years, took the lives of 270,000 Liberians, and displaced 

almost one million more. Angola is rich in oil, and Sierra Leone is rich in diamonds, and both 

are recovering from civil wars. South Africa is rich in gold, platinum, and coal, and it is 

recovering from decades of oppression under the brutal system of apartheid. 

Section 1502 was included in the Dodd-Frank legislation to address the concerns about 

conflict minerals in the DRC. Section 1502 requires companies registered with the Securities 

and Exchange Commission (SEC) that use tin, tantalum, tungsten, or gold to report publicly 

whether they obtained their supplies from Congo, and if so, what due diligence they exercised to 

ensure that their supply chains did not benefit armed groups. Section 1502 will grant investors 

and members of the public the right to know if and when imports of resources from the DRC 

contributed to armed conflict in that country. 
51 


75730.006

I strongly support Section 1502, and I am deeply concerned about the SEC's delay in 

adopting a final rule. I am also concerned by the apparent efforts of some companies to convince 

the SEC to adopt a weak or unenforceable rule. Section 1502 is not an onerous or burdensome 

regulation. It is a simple reporting requirement, designed to ensure transparency. American 

investors have a right to know if their money is being used to support rape, murder, human 

trafficking, or other gross violations of basic human rights. 

I am also a strong supporter of Dodd-Frank Section 1504, which is known as the 

extractive industries transparency requirement. Section 1504 requires companies registered with 

the SEC to disclose what they pay to foreign governments for extracting oil, natural gas, and 

minerals, not just in the Congo, but in countries throughout the world. The data would have to 

be disclosed on a project-by-project basis and a country-by-country basis so that payments can 

be tracked in a transparent manner. Disclosure of payments to developing country governments 

will allow members of civil society in developing countries to identifY government officials who 

receive payments for resource extraction, and hold them accountable for the use of the money. 

Together, Section 1502 and Section 1504 will help American investors make certain that 

their investments are not being used to support corruption, violence, and violations of human 

rights in Congo and elsewhere around the world. I strongly urge the SEC to adopt strong and 

effective rules on both of these sections as soon as possible. 

2 
52 


75730.007

t:\..Claigan Claigan Environmental 

Before the Subcommittee on International Monetary Policy and Trade U.S. House of 

Representatives 

Hearing on "The Costs and Consequences of Dodd-Frank Section 1502: Impacts on 

America and the Congo" 

May 10, 2012 

Statement of 

Bruce Calder 

General Manager - Claigan Environmental 

Chairrnan Miller, Ranking Member McCarthy and Mernbers of the Subcornmittee, I arn 

pleased to be have been invited here today to discuss the Security and Exchange 

Corn mission's proposed rule on implementation of Section 1502 of the Dodd-Frank Act. 

My name is Bruce Calder. I arn the General Manager for Claigan Environrnental and I 

am responsible for Claigan's conflict minerals program. We work with companies across 

industries on Conflict Minerals program management, cost management, and 

compliance assistance for over two hundred small, medium and large companies. 

I would like to start by saying we have never seen such widespread early adoption of a 

transparency law. In ten years of working in restricted material compliance, including 

global regulations such as Europe's hazardous substance law, its restricted chemicals 

law, and California's toxins and safe drinking water law, I have never seen so many 

companies becoming compliant before the final rules have come out. I think in many 

ways we are far past the issue of can it be done and is it costly - it can be done and at 

lower-than-publicized cost. 

The hundred plus pages of our appendix are a listing of public declarations by 

companies committing themselves and their suppliers to being conflict free. The 

committment by industry has been made. What we do not have is a clear rule from the 

SEC allowing companies to achieve their goals in the least constly manner. 

Being transparent on mineral sourcing not only can be done, it is being done. One key 

element to this is the success of the conflict free smelter program. The conflict free 

smelter program has completed the certification review process (including full country of 

origin traceability) for twenty-three refiners, with another thirty-two in process. Kester, a 

Chicago-based company supplying 60% of the solder wire in North America (solder 

being one of the principal sources of tin in electronics) has completed full traceability of 

their supply chain and certified their respective refineries (see Appendix B of my written 

submission). 
53 


75730.008

t:\.Claigan Claigan Environmental 

We have previously estimated that compliance to Dodd-Frank 1502 will cost companies 

an average of 0.03% of revenue in the first year (reducing by 50% in each of the 

following two subsequent years) with the highest possibleindustry cost of $800M. Since 

that estimate, we have seen more efficiency from industry and our previous numbers 

are now a substantial overestimate. 

The key reasons for differences between Claigan's projections and other projections 

provided to the SEC are: 

a) Claigan's cost estimates are based on real programs being implemented 

b) Contrary to other cost models submitted to the SEC, we assume that only those 

products that have conflict minerals 'intentionally added' will be reported on . This 

will exclude common materials where conflict minerals naturally occur, like steel. 

c) SEC staff has indicated the conflict free smelter program would meet the due 

diligence requirements of Dodd-Frank 1502, and Claigan assumes that also. 

d) Claigan assumes the third-party audit requirements in the SEC rule will not require 

companies to send third party auditors to their suppliers or to the DRC - this was 

Congress's intent. 

So how is 1502 affecting US industry, and in particular, small businesses? It will go a 

long way towards leveling the playing field for all companies. 

The most costly issue for small business in the US is not the implementation of 1502 but 

the lack of consistent rules. Without a final rule from the SEC US businesses need to 

comply to each conflict free standard as interpreted by each of their customers. With a 

final rule from the SEC businesses will be able to provide one set of information to all of 

their customers and a uniform report to the SEC - vastly reducing their costs. 

The key thing to understand now, is not 'if' conflict free is going to be implemented by 

industry, but 'how.' The horse is out of the barn. Hundreds of manufacturers are going 

conflict free because of the law. I think Congress and industry agree on the important 

simplifications that will drive down costs. Companies need the SEC to issue the rule as 

soon as possible-the SEC's delay in getting a rule out is the big problem and now the 

biggest cost driver. 

2 
54 


75730.009

KEMP Policyo'1Confhn MlnerJls 12·05·068:32 PM 

: Summ .. ry of activities to develop a transp .. nmt supply c:hain.,. 

http' / /www.kem€t.com/kemet/web/homepagelketnome.nsf/W€ben!KEMETI620Policy9420on%20ConfHn%20Mlnera!'> Pagelofl 
55 


75730.010

ElecttOl1ics Corporation 

Manufacturing Mission-Critical Printed Circuit Boards Since 19681 

Monday, August 29, 2011 

For immediate release: Calumet Electronics to begin Conflict Minerals Initiative 

CALUMET, MI: PCB Manufacturer - Calumet Electronics Corp. (CEq announces new initiative to address 

pending "due diligence" requirements for Conflict Minerals. 

Consistent with Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 

Calumet is undertaking a number of actions to address the problem of conflict minerals ---or the 

exploitation and trade of gold, columbite-tantalite (coltan), cassiterite (tin), wolframite (tungsten), or 

their derivatives -sourced from the eastern Democratic Republic of the Congo, or ORe, that have helped 

to fuel conflict in the eastern ORe. 

Section 1502 of the Dodd-Frank Act instructs the SEC, in consultation with the Department of State, to 

promulgate regulations requiring, in part, companies required to file reports with the SEC, 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." "This statement has been interpreted by some privately held 

companies as an exemption from reporting requirements, states Stephen J. Marshall, Calumet's 

Materials Declaration Administrator, the reality is that OEM's must exercise due diligence on and 

formalize the origin and chain of custody of conflict minerals used in their products and on their 

suppliers to ensure that conflict minerals used in the products of such suppliers do not directly or 

indirectly finance armed conflict or result in labor or human rights violations." 

Calumet believes that it is critical to begin now to perform meaningful due diligence with respect to 

conflict minerals. Calumet's Conflict Mineral Initiative will facilitate useful disclosures to customers and 

suppliers to meet Section 1502 of the Dodd-Frank Act. The initiative features; 

Establish strong company management systems based on industry standards; 

Identify and assess risk in the interconnect industry supply chain; 

Design and implement a strategy to respond to and report identified risks; 

Report on supply chain due diligence. 

For more information on RoHS, REACH, and Conflict Minerals Material Declarations for printed 

electronic circuit boards contact; 

sourcecompliance@calumetelectronics.com and visit http://www.cec-up.comiprogram.htm 

Confidential 

906.337.5359 i.';2:) WWW.calumetelectroniGS.com (:'Ina'] sales@Calumetelectronics.com 

25830 Depot Street, Calumet MI 49913 USA 

Page 1 of 1 
56 


75730.011

Avago Technologies Manufacturing (Singapore) Pte. Ltd. 

(Company Registration: 2005120102) 

1 Yishun Avenue 7 

Singapore 768923 

www.avagotech.com 

May 6, 2012 

Conflict Free Minerals Self Audit Checklist 

AvaGo 

TECH-NQLOGIES 

Avago Technologies is committed to eradicate atrocities in the Eastem Region of the Democratic Republic of the Congo 

(DRC) and to eliminate ccnflict minerals from our supply chains. 

The ccverage on human rights violations in the Democratic Republic Congo (DRC) and environmental issues resulted from 

the mining of minerals, induding Tantalum (Ta), Tungsten (W), Tin (Sn) and Gold (Au) has caused wide public concerns. In 

July 2010, the United States Congress signed into law the <Dodd-Frank Wall Street Regulation and Consumer Protection 

Act> containing a section that regulates "ccnflict minerals". The legislation requires ccmpanies listed on the U.S stock 

exchange to disclose annually to the Securities and Exchange Commission (SEC) whether products were produced with 

conflict minerals sourced from the Democratic Republic of the Congo (DRC) or adjoining countries. 

Avago Technologies is taking measures on the sources and origins of the mentioned minerals to ensure a conflict-free 

supply chain. Avago Technologies Statement on Conflict Free Minerals can be found in our website http:// 

www.avagotech.comipagesiccrporateiqualityienvironmenU 

We expect our suppliers to comply with the Electronic Industry Code of Conduct and to only source materials from 

environmentally and socially responsible suppliers. 

We ask our suppliers to 

1. Comply with all national and other applicable laws and regulations concerning the sourcing of minerals from 

ccnftict areas 

2. Not use the conflict minerals originating in the Democratic Republic Congo (DRC) and its adjoining ccuntnes 

3. Trace the origins of the specific metals used, fill in this self audit checklist and submit back to Avago Technologies 

4. Make the same requirement to your upstream suppliers 

We seek your cooperation to complete the self audit on time. Thank you for your great support in this activity! 

For more information, please visit the following links: 

www.eicc.info 

www.gesLorg 

www.enoughproject.org 

BC Ooi 

Senior Vice President 

Global Operations 

Avago Technologies 
57 


75730.012

SiTime Declaration of Conflict Metals/Supplies from Conflict·Free Mines 

SiTime is familiar with and fully supports the conflict free metal/mineral regulation. 

The Smart Timing Choice~ 

990 Ahnanor Ave. 

Sunnyvale, CA 94085 

T 408.328.4400 

F 408.3n.4439 

SiTime products contain gold, which is considered a conflict metal. Gold wire is used for the wire 

bonding in SiTime products. SiTime has completed due diligence to verify the source of the gold used 

in our products is not a conflict metal. SiTime depends on our gold wire suppliers to take commercially 

reasonable measures to lawfully supply metals from "conflict-free" mines. 

To that effect, SiTime has assurance from our gold wire supplier, Tanaka Electronics (Malaysia) SON. 

BHD, that all the raw material that the parent company of the supplier (Tanaka Kikinzoku Kogyo) 

purchases for the bonding wire production are all from legitimate sources; which are 'Good Delivery 

Gold Bars' certified, or accredited by the 'London Bullion Market Association' Our supplier certifies the 

following: 

1) Tanaka Electronics Malaysia Sdn Bhd DO NOT and WILL NOT directly mine material from any 

minefield with socia! problems. 

2) Tanaka Electronics Malaysia Sdn Bhd DO NOT and WILL NOT knowingly purchase any 

material from any minefield with social problems. 

Additionally, SiTime has reviewed the London Bullion Market Association list of mining suppliers to 

confirm mines in conflict countries are not accepted. We have reviewed the LBMA policies and are 

satisfied the LBMA has appropriate screening measures for accepting new mining suppliers. 

Yours sincerely, 

Mark Hobaugh 

Director of Operations and Quality 

SiTime Corporation 

990 Almanor Avenue, Sunnyvale, CA 94085 t 408 331 9138 f 408 328 4439 www.sitime.tom 
58 


75730.013

SCHURTERAG 

Werkhofstrasse 8~ 12 

P.O. Box 4168 

CH-6002 Lucerne 

Phone +41413693111 

Fax +41413693333 

WWvV,schurter.com 

Contact 

Dept 

E-Mail 

Rolf Nussbaumer 

QualIty Management 

rolf nussbaumer@schurterch 

l§J0,Sl:HURTER 

ELECTRONIC COMPONENTS 

Phone -1-41 41 369 3443 Reference 

Fax .,.41 41 369 33 33 Cust. No Date October 11, 2011 

Declaration on the Use of Conflict Minerals 

The coverage on human rights violations in the Democratic Republic Congo (DRC) and 

environmental issues resulting from the mining of minerals, including Tantalum (Ta), Tungsten (W), 

Tin (Sn) and Gold (Au) has caused wide public concerns. In July 2010, the United States Congress 

signed into law the Dodd-Frank Wall Street Regulation and Consumer Protection Act containing a 

section that regulates conflict minerals. The legislation requires companies listed on the U.S stock 

exchange to disclose annually to the Securities and Exchange Commission (SEC) whether 

products were produced with conflict minerals sourced from the Democratic Republic of the Congo 

(DRC) or adjoining countries. 

SCHURTER complies with all national and other applicable laws and regulations. As a 

consequence, we are committed to keeping our supply chain free from conflict minerals which are 

covered by laws and regulations concerning the sourcing of minerals from conflict areas. 

Based on currently available information, SCHURTER does not use conflict minerals 

originating in the Democratic Republic Congo (DRC) and its adjoining countries. 

SCHURTER AG is renowned for its commitment to environmental protection - as early as in 1996, 

we were among the first companies to receive the certification for our environmental management 

system according to ISO 14001. We have issued two SCHURTER Sustainability Reports, which 

summarize what we have done and how we have shaped up in the field of economic, social and 

environmental corporate management. The latest report is available on our web site 

www.schurtercom 

Yours sincerely 

SCHURTERAG 

CQ.~ 

Rolf Nussbaumer 

Group Quality Management 

EFOM 
59 


75730.014

HP Global Citllenship' Custom Report 12-05-06826 PM 

f.l!JHP Global Citizenship 2010: Custom Report 

Conflict minerals 

The issue 

HP requires its suppliers to conduct their worldwide operations in a manner that respects labor and human 

rights, including sourcing minerals that do not directly or indirectly finance armed groups. (See the HP 

Supplier Code of Conduct .J We have, therefore, been deeply concerned by human rights violations related to 

the trade in minerals from conflict zones in the Democratic Republic of Congo (DRC). 

The "conflict minerals" of concern are those used to produce tantalum, tin, tungsten, and gold. Global 

supplies of these metals come from many sources, including mines in the DRC, which are estimated to 

provide approximately 18% of global tantalum production, 4% oftin, 3% of tungsten, and 2% of gold1 Some 

of the mines in the DRC are controlled by militias responsible for atrocities that have been committed in that 

country's decades-long civil war. The background of the Congolese conflict is complicated and its resolution 

requires action on multiple fronts-but it's clear that promoting legitimate trade in minerals in the region can 

help. 

HP's engagement with 

nongovernmental organizations 

HP collaborates with stakeholder and nongovernmental organizations (NGOs) to understand their 

perspectives and to work towards ending the link between minerals trade and the funding of armed conflict. 

For example, HP was one of a select group of corporations to join socially responsible investment (SRI) 

organizations and NGOs in providing recommendations to the U.S. Securities and Exchange Commission 

(SEC) regarding rulemaking in this area. (Sec Influencing policy and legislation below.) 

"As one of the key organizers of the multi-stakeholder comments on conflict minerals submitted to the SEC, I 

can say that it was valuable having HP involved in the process. HP was genuine and pragmatic in our 

consensus negotiations, and was realistic about what can actually be implemented by electronics companies 

while striving to do the most possible to ensure arnled groups are not benefiting from mineral sales." 

Patricia Jurewicz 

director, Responsible Sourcing Network (RSN) 

HP also received recognition for its efforts within the industry to address the DRC conflict minerals issue 

from Enough, a campaign project of the NGO, Center for American Progress, to end genocide and crimes 

against humanity. Founded in 2007, Enough focuses on crises in Sudan, eastern Congo, and areas of Africa 

affected by the Lord's Resistance Army. In its 2010 report, Getting to Conflict-Free: Assessing COI;l'orate 

Action on Conflict Minerals Enough credits HP with being the leader in the electronics sector. 

http://www.hp.com/hpinfo!g!obalcltizenshlp/print.html Page lof4 
60 


75730.015

HP Global Cltlzenshtp. Custom Report 12-05-068·26 PM 

Why HP is involved 

Tantalum, tin, tungsten, and gold are used to varying degrees in components commonly found in electronic 

products,l although all are used extensively by other industries as well. Perhaps the most significant is 

tantalum, as more than half of its consumption relates to capacitors for electrical equipment. Tin is also used 

extensively, primarily in solder (which represents about a third oftotal tin use across all industries). 

The minerals supply chain is long, complex, and involves several layers: from mining, through in-country 

traders and exporters, to smelters, refiners/metal exchanges/alloy producers, and finally to component and 

other manufacturers (see graphic). The smeltcr is a critical control point, because it is the stage where 

minerals from many sources are processed to produce a refined metal. 

lIlustration of global tin supply chain * 

1000. 100. 10,000. 1OO.00Il!. 

• • The supply chain varies significantly for each of the minerals/metals discussed in this section. This 

graphic is designed to illustrate the complexity of the tin supply chain and the relativc number of the 

types of organizations involved, but not to provide precise information. Approximately 20% of the 

world's production of tin comcs from recycled and scrap sources. This is not represented in this 

graphic. 

The vast majority of refined metals used in HP products are sourced by companies within our multi-tier 

supply chain, typically sevcral stages removed from HP. We are setting clear expectations with our suppliers 

regarding DRC conflict-free mineral sourcing, as described in our Supply Chain Social and Environmental 

Responsibility Policy. 

HP's leadership 

Our approach to establishing validated DRC conflict-free sources of these metals has four components: 

• Tracing the metal to the source 

• Developing a conflict-free smelter validation program 

http·//www.hp.com/hptnfo/globalcttizenshtp/prinLhtm! Page2of4 
61 


75730.016

HP Global CItiZenship: Custom Report 12-05-06 S"2.5 PM 

• Establishing an in-region mineral certification system 

• Influencing policy and legislation 

Tracing the metal to the source 

HP was instrumental in establishing the Electronic Industry Citizenship Coalition (EICC) -Global eSustainabiJjty Initiative (GeSI) Extractives Work Group in 2007 and has helped to develop the common 

industry supplier survey tool snpplier survey tool as a part of a sub-team of the work group. HP and the 

industry are using the tool to obtain the names of smelters used and information about how this rcquircmcnt 

is communicated to sub-tier suppliers. We have made progress in identifying smelters in our supply chain and 

are working to pinpoint thc mincs that supply each smelter. 

Developing a conflict-free smelter validation program 

Through the EICC-GeSI Extractives Work Group, we havc helpcd to develop stakeholder-approved audit 

protocols for smelters, and have visited smelters to gain a better understanding of their operations. HP was 

one of four companies on the Extractives Work Gronp Execntive Andit Review Committee charged with 

reviewing audit resull,. Throngh March 2011, the audit team has audited 14 facilities for tantalum and is 

currently facilitating an external review of the tin andit protocol. (See www.cicc.info/extractives.htm .) As 

DRC conflict-frec smelters are validated throngh this program, HP plans to direct our suppliers to use these 

smelters. 

Establishing an in-region mineral certification system 

Conflict-free smelters reqnire access to DRC conflict-free minerals. HP has provided leadership in three 

distinct efforts to advance responsible sourcing of minerals from the DRC region. 

• Contributing financial and in-kind snpport to ITRI, formcrly the International Tin Research Institnte, 

and the Tin Supply Chain Initiative (iTSCi), aimed at developing a system to trace minerals between 

the mine and smelter. 

• Participating in the EICC-GeSI In-Region Sourcing panel which engages government, NGOs, and 

industry to advance due-diligence, transparency, and certification initiatives in the DRe. In 20 I 0, this 

body communicated tbc urgent need for an in-rcgion mineral certification system to the International 

Conference on the Great Lakes Region (ICGLR). 

• Developing a concept paper for a public-private partnership convening relevant stakeholders to 

advance a credible, markct-driven, locally and internationally supported mincral dcvelopment program 

in the African Great Lakes region. The mineral development opcration would respect human rights and 

adhere to environmental principles, operate legally, and benefit people and communities as a path to 

peaceful economic development. 

Dodd-Frank Wall Street Reform 

and Consumer Protection Act 

In thc United States, new legislation is calling attention to the issue ofDRC conflict minerals and requiring 

action by corporations to conduct and disclose due diligence on the source of thesc mincrals used in products. 

http//www.hp.comfhpinfo/f]fobalclti:nnshlp!pflnt.hrml Paf]e30f4 
62 


75730.017

HP Global Citizenship. Custom Report 12-05-068,26 PM 

The SEC has responsibility for administering Section 1502 of the Dodd-Frank Wall Street Rcfonn and 

Consumer Protection Act. Thc law requires due diligencc with respect to the sourcing of columbite-tantalite, 

cassiterite, wolframite, gold, or their derivatives, including a detennination as to whether trade in these 

minerals directly or indirectly finances or benefits anned groups in the DRC or adjoining countries. Publicly 

traded companies must conduct due-diligence measures to deteIDlinc the source of these minerals in their 

products, and must disclose a description of their due-diligence measures and findings if they source conflict 

minerals from the DRC or an adjoining country (or if they are unable to detennine the source ofthe minerals 

they use). HP fully supports this legislation. 

Influencing Policy and Legislation 

Progress on addressing the DRC conflict minerals issue also requires appropriate regulatory frameworks, and 

HP has been a leader in this area. We supported the objectives and passing of recent U.S. legislation, the 

Dodd-Frank Wall Street Refonn and Consumer Protection Act (see sidebar). We also contributed to the 

Organisation for Economic Co-operation Development (OECD) Due Diligence Guidance for Responsible 

Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, endorsed by the United Nations and 

ICGLR, and referenced by the SEC's proposed rule. 

1. I Gold usage from http://minerals.usgs.gov/minerals/pubs/commodity/goldlmyb 1-2008-g01d.pdf, tin 

usage from http://minerals.usgs.gov/minerals/pubs/commodity/tin/myb 1-2008-tin.pdf, tantalum usage 

from http://minerals.usgs.gov/minerals/l'ubs/commoditylniobiumlmcs-20 1 O-tanta.pdf , and tungsten 

usage from table 5 in http://minerals.usgs.gov/minerals/pubs/commodity/tungstenlmybl-2008-

tungs.pdf. 

2. 2 HP has taken steps to research and belter understand the locations and quantities of these metals used 

in our products. We estimate that the average HP 2 kg notebook contains approximately 0.6g of 

tantalum, 109 oftin, 0.00009g tungsten, and O.3g of gold. 

© 20 II Hewlett-Packard Development Company, L. P 

http://www.hp.com/hpinfo/globalcitl.7.enshlp/print.html Page 4 of4 
63 


75730.018

FrnesciJla Semiconductoc, Inc. 6501 William Cannon Dnvo West MD: OE58, Austin, TX 7[).73~ www.freescatecom 

freescaie06 January 2012 

Dear Customer: 

Thank you for your recent communication regarding conflict minerals. We are aware of 

the conflict minerals reporting obligations legislated by Section 1501 of the U.S. DoddFrank Wall Street Reform Act. We are diligently working to obtain information regarding 

the source and origin of any conflict minerals that may be present in the product which 

we provide to you, but due to the breadth of this task, it will take time. 

The Securities and Exchange Commission (SEC) has not yet published the regulation 

and as a result, we believe parts of your inquiry may be premature. Our trade 

association IPC - Association Connecting Electronics Industries anticipates the SEC will 

publish the conflict minerals regulation by June 2012. 

While the Dodd-Frank legislation has defined the basic reporting requirements for 

conflict minerals, we believe the forthcoming regulation will provide many important 

details that may affect the reporting of conflict minerals. Based on the proposed rule 

published in December, 2010 and the October 18,2011 SEC roundtable, we expect the 

SEC regulation to address a number of significant issues including minerals whose 

origin is undeterminable, minerals mined before the regulation is implemented, and 

minerals from recycled sources. It is prudent then to wait for the publication of the final 

regulation prior to providing a declaration regarding the sourcing of conflict minerals in 

our products. 

We are, in addition, working with IPC to develop tools to support efficient data sharing 

and compliance for the entire supply chain. Some of these tools will include due 

diligence guidance, a data exchange standard, template communications, and model 

supplier policies. For more information about these projects, please visit IPC's website at 

www.ipc.org/confiict-minerals-resources. 

To prepare for these requirements we have already begun work to determine 

parts/assemblies that incorporate one or more of the identified conflict minerals, 

communicate the information about the forthcoming SEC requirements to our suppliers, 

and develop our company policy on conflict minerals and management systems. 

Please be assured that we understand the importance of this issue to you, our customer, 

and that we will continue our efforts to gather the necessary information from our supply 

chain in preparation for declaring the sourcing of conflict minerals in our products. 

ema' 

EnVironmentally Preferred Products Program 

Freescale Semiconductor, Inc. 
64 


75730.019

moex' r-:'\. " 

'-./ 

Molex and Conflict Mining I Conflict Metals 

As an electronics manufacturer, Molex uses certain metals in the products we produce, 

While Molex requires all our suppliers to comply with our Supplier Code of Conduct, we 

recognize the complex supply chain involved with certain metals and have taken steps to 

ensure that virgin metals we purchase do not originate in conflict mines, 

'Conflict Mining' and 'Conflict Metals' refers to the illegal control of some mines in the 

eastem region of the Democratic Republic of Congo in Africa, The electronics industry 

uses certain types of metals, some of which are potentially refined from minerals 

obtained from these mines. 

The primary minerals and metals that could potentially come from conflict mines are: 

• Cassiterite (tin) 

• Gold 

• Cobalt 

• Coltan (niobium and tantalum) 

• Wolframite (tungsten) 

• Pyrochlore (niobium) 

The metals Molex uses in large quantities are tin and gold. Tin is used in certain copperalloy terminals, some platings, and solder, while gold is used in platings of some 

terminals. Molex does not directly purchase any of the other minerals and metals listed 

(cobalt, niobium, tantalum, and tungsten), so we are focusing our efforts on tin and gold 

suppliers. 

Molex requires all our suppliers to conform to our Supplier Code of Conduct (found at 

www.molex.com). and requires immediate corrective action from suppliers who operate 

in violation of this requirement. Because the supply chain for these metals is complex, 

Molex has taken the initiative to educate our tin and gold suppliers, trace these metals to 

their source, and will take corrective actions if any conflict mines are used. 

Molex and its suppliers do not knowingly use any virgin tin or gold obtained from conflict 

mines and will regularly query suppliers to verify our requirements are being met to help 

ensure the health and safety of all workers in our supply chain. 

QEHS-699000-908 

Revision: A 

Date: 8 December 2009 
65 


75730.020

uiQuint,,* 

SEMICONDUCTOR 

TriQuint Semiconductor, Inc, 

2300 NE Brookwood Pkwy 

Hillsboro, Oregon 97124 

USA 

TriQuint Policy on Conflict Minerals 

Thank you for your request concerning Contlict Minerals in TriQuint products, TriQuint 

shares your concerns about the use of natural resources to fund anned contlict in the 

Democratic Republic of the Congo, and is working to ensure that its activities are not 

funding anned conflict. TriQuint has been working with its supply chain for over a year, 

tracing the origins of the Conflict Minerals derivatives in its products, 

Dodd-Frank Wall Street Regulation and Consumer Protection Act 

It is important to understand the requirements of the Dodd-Frank Wall Street Regulation 

and Consumer Protection Act signed on July 21, 2010, Sec, 1502 of this bill requires 

companies whose manufactured goods contain metals derived from Conflict Minerals or 

any other mineral or its derivatives detennined by the Secretary of State to be directly or 

indirectly financing conflict in the Democratic Republic of the Congo (DRC) or an 

adjoining country to: 

a, Report annually to the Securities and Exchange Commission (SEC) if the 

minerals did originate from the DRC or adjoining countries, 

b, Submit a due diligence plan (audited and certified by an independent 3rd party) 

with the company's annual SEC report that includes: 

L A description of the measures taken by the company to prevent sourcing from 

the DRC; and 

II, A description of the products manufactured or contracted to be manufactured 

that are not conflict free, the facilities used to process the conflict minerals, 

the country of origin of the conflict minerals, and the efforts to detennine the 

mine or location of origin, 

In the original Dodd-Frank Law, the SEC had until April 17, 2011 to promulgate 

regulations to put this law into practice, Although reporting requirements only apply to 

companies required to report to the SEC, it is expected that these requirements will filter 

through the entire supply chain, However, the SEC recently announced that it will take 

longer than expected to develop these regulations, and has postponed promulgation of 

any regulations until the fall of 201 L Companies must issue their first report beginning 

with the companies' first fiscal year that begins after the promulgation of the regulations, 

In the original Dodd-Frank Law, by January 17,2011, the Secretary of State must 

devclop a strategy that includes: 

a, A plan to promote peace and security in the DRC by supporting efforts of the 

Government of the DCR, to---

L monitor and stop commercial activities involving the natural resources of the 

Democratic Republic of the Congo that contribute to the activities of anned 

groups and human rights violations in the Democratic Republic of the Congo; 

and 
66 


75730.021

FLE>~TRONICS Policy 

Flextronics Conflict Minerals Policy 

"Conflict Minerals" refers to minerals or other derivatives mined in the eastern provinces of the 

Democratic Republic of the Congo (DRC) and in the adjoining countries where revenues may 

be directly or indirectly financing armed groups engaged in civil war resulting in serious social 

and environmental abuses. In July 2010, the United States passes HR4173, the Dodd-Frank 

Financial Reform Bill section 1502(b) requiring all US stock listed companies and their 

suppliers to disclose the chain of custody usage of conflict minerals (Tin, Tantalum, Tungsten, 

and Gold ... 3TG). 

Flextronics fully supports Ihis legislation and Ihe Electronic Industry Citizenship Coalilion 

(EICC)fGlobal e-Sustainability Initiative (GeSI) position to avoid the usage of conflict minerals 

mined from the DRC and adjoining countries. Furthermore, Flextronics intends to adopt the 

EICC Due Diligence reporting process and obtain chain of custody declarations from all 

Flextronics sourced and managed suppliers ensuring transparency in OUf supply chain. 

Flextronics expects our suppliers to source materials from socially responsible suppliers. 

Flextronics expects all its suppliers to comply with the Dodd-Frank regulation and 

provide all necessary declarations. 

Suppliers must pass this requirement up the supply chain and determine the source of 

specified minerals. 

Suppliers who are non-compliant 10 these requirements shall be reviewed by Global 

Commodity Management for future business. 

This Conflict Minerals policy is in line with the Global Business Initiatives on Human Rights, of 

which Flextronics is a member, and the framework of the United Nations Principles of Human 

Rights encouraging governments and businesses to respect, protect and remedy human rights. 

GPO-GPO-1-019-00 

Conflict Minerals Policy 

Page2of2 Effective: July 15, 2011 

Author: Bill Ricci 

All printed copies of this Document are considered 'Uncontrolled Copies' and are only considered valid for the dlly itis 

printed. Go to Po1S - Document ~anjl~:m:.~~ ~~~~:!,,~tt!~~i~~=~:~~~~:~~~~~~~~.o~~s!~~fault.aspx 
67 


75730.022

MotDroia - Sou rung of Mt'lJls - Motorola Mobility, Inc U<;A 

• .... H~a.5.M 

CORPORATE RESPONSIBIliTY 

CONSUMERS 

ENViRONMENT 

EMPLOYEES 

COMMUNITY 

Sourcing of Metals 

In~iu$lry Co!l;,bClriWOn. 

S"prllerOrv'Hs't)/ 

.... g;;.mii.!H4 

1.,1;:)jorolastllJpc1sthf'dev(,lollmenl 01 reguial10ns and stand ardS1h~lhelpGOfllp3n.esdetermme 

Mol(Jrol'l 'S ccllabNdl;ng wdn olhnrs m thO' ,<]dustry to tact!e tt,>:: ciluilengB5 of tracC'(lbdltyftr"ckmg 

StJpportlng industry efforts 

http'/IFE'SPOrlsibillty,mutorola,com/index.php/supplier.s!mlningmetal/ 

12-05-0683SPM 

MOBILE PHONES 

~I 

Pagelof3. 
68 


75730.023

Motorola Sourcing of Metals - MotOlold Mobility. Inc. USA 

legitimate mml~g 11duslry In Ihe Df,,, ,s v,tal 10 lile economIc staMty 01 llw leg,on. <'Inti a trackmg 

$V$temlsessentlallfsourcJnqcf me!:Jisfromthef':'gtol1lstOOlrllnUe 

f<1QlOrola co-leads lhe GeSI and liCe e~lrac\lves workgroup, wlllet1 has made progress in dnving 

gr('~tef transparency III th(' <'le"lromcs mdust:y supply cIlam In 2008, th" ex1nKlIV("S WO,jo:gfOUp 

CO,](\ucted a project 10 "nprove VlSlh,illy If) tlH~ mmerals supply CI1,lIr, with particular focus on 

thatth,lVsourceolllyconfilctireem,1tenal Thesmel!erswereaskE'd!odemonstr,lIO,!hesourC€s 

ojthOlrrmlt8nllisand$~wn$llu5wurevls:tedtOlncreaseu"dcr5lar,dlllg of how srnelters !raC€ 

Ihe S0ur(:e ()fthe matel>'lls "sed In (ilell refrn'ngpfOW$S Motorol<lpar\'Clpat"dlnthr~e(')fthese 

Vls,tS, IWOUl Ctl<naand one I~ the U S 

The mformallon gamed t!llOugh the s,te VI5l!S was uselllo develop I hescopeofworkforanaud'l 

program to vahdale the claims made oy the tantalum smellers !hat thf'y source only conr-Jet-Iree 

OlJterial The audlls of tantalum S'J'"ltefs aro l<l progress rtteproc~ss'sn(}wbemgrcpeated 

"'tht,nsmcltcrs,w,lhplansloexpandtogotdandtunqsten 

Motorolasuppor1sthelTRi T,n S'lpplyCI18,n 1'1ltlahve {IISClj process lhat allow5ior 

tr~ckingltracl!1g of mateoals. tro~llhe In'lle to the pOint of expori I he Motorola Foundation 

provided a $30 000 graf1t to 5UP()()rt ITRI $ tracesblilly worK The ITSC, pIOCC.% represents an 

ENGAGING WITH STAKEHOLDERS 

Tim problem of mining and connlet mmersls c"nf1ot be salved by one rompsny or ~ single 

Inoustry 

amitoenC()uragea~stakcholdelstopI8ythewpart In2010we 

• Convp.ned workshops to gain consensu,; aru(md the t<lntalom 81ld (In smelter vaild8t<on 

PLANS AND GOALS 

Over these ,ssuos, and end "sers 

We arework,ng to support lhe foilowmg goals 

U.S. LEGISLATION ON CONFLICT MINERALS 

1r.20iO,aUS law was psssed Illal reqUlf1!s companies to rnport to the Secunllesan d[xchange 

Commlss,on (S~C) a~o dlsc!osn on tile'l wells>le'> whothm any maleflatS In thelr piOducls 

Ifcomoanl(,S8feus;ngmajenaI5frGmlh~fdenhtledcou('ltfles they are required 10 descnbe the 

Motorolil supports the development of IcqlslatlOn that helps GOmpame~ delermme whether or 0101 

Ille sources 01 the m"terials they use are associated Will1 confiJct Together wII11 our Industry 

partn€fs, we are workmg te. develop lh€ syslems 10 c'1able compames to venfy the sources Qj the 

metalslflthe'fprod(jds 

FREQUENTLY ASKED QUESTIONS 

http://reSponSibility.motorola.c{]mfindex.php!suppIIN5! mlningmetal/ 

12~05~06 8:35 PM 

Page2of3 
69 


75730.024

Motorola - Sourung of M(·tal$ Motorola Mobilny, Inc. USA 

Does Motorola produce allyverlfied confllc\·fr<:eprod"c\s.? 

com""",,, ""'"''''P''''''''' 

http://responSibility.motoro1a.com/index.php/suppliers/miningmetall Page30t3 
70 


75730.025

uiQuint .$ SEMICONDUCTOR 

TriQuint Semiconductor, Inc. 

2300 NE Brookwood Pkwy 

Hillsboro, Oregon 97124 

USA 

II. develop stronger governance and economic institutions that can facilitate and 

improve transparency in the cross-border trade involving the natural resources 

of the DRC to reduce exploitation by armed groups and promote local and 

regional development. 

b. A plan to provide guidance to commercial entities seeking to exercise due 

diligence on and formalize the origin and chain of custody of conflict minerals 

used in their products and on their suppliers to ensure that conflict minerals used 

in the products of such suppliers do not directly or indirectly finance armed 

conflict or result in labor or human rights violations. 

c. 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 DRC. 

Also by January 17,2011, the Secretary of State was to produce a map of areas under the 

control of armed groups in the DRC and adjoining countries and make this map available 

to the public. This map must be updated at least every 6 months. TriQuint has pursued a 

copy ofthis map, and was directed by the US Dept of Commerce to the following 

web page for a copy: 

https:llhiu.state.gov/Products/DRC M ineralsArmedGroups (J une 2010). pdf 

This map pre-dates passage of the Dodd-Frank Law, and has not been updated every 6 

months as required. 

What are Conflict Minerals and their derivatives? 

The Dodd-Frank Wall Street Regulation and Consumer Protection Act defines "Conflict 

Minerals" as: 

a. Columbite-tantalum (coHan), cassiterite, gold, wolframite, or their derivatives; or 

b. Any other mineral or its derivatives determined by the Secretary of State to be 

financing conflict in the DRC or an adjoining country. 

It is important to note that this definition of Conflict Minerals means that all coltan, 

cassiterite, gold, and wolframite are Conflict Minerals, regardless of the source of the 

minerals. If the source was determined to be located in the DRC or adjoining countries 

(Angola, Congo, Central African Republic, Sudan, Uganda, Rwanda, Burundi, Tanzania, 

and Zambia), then reporting to the SEC is required, along with the audited and certified 

due diligence report. 

The common derivatives from these minerals are: 

a. Coltan - columbium (niobium) and tantalum 

b. Cassiterite - tin 

c. Gold 

d. Wolframite - tungsten 
71 


75730.026

1tiQuinf.$ 

SEMICONDUCTOR 

TriQuint Semiconductor, Inc. 

2300 NE Brookwood Pkwy 

Hillsboro, Oregon 97124 

USA 

It is possible that cobalt might be considered as a derivative of a Conflict Mineral in the 

future, as most cobalt is produced as a byproduct of the mining oflaterite ores, containing 

copper and nickel. In 2009, the copper deposits in thc Katanga Province of the DRC that 

stretch into Zambia were ovcr 44% of the world cobalt production with over half the 

world's rescrves of cobalt. I As these deposits meet the criteria for Conflict Minerals that 

require reporting to the SEC, TriQuint believes it is probable that cobalt will become 

another metal that requires reporting. 

TriQuint uses all six of these mctals in its products. Not every product contains cvery 

metal, but almost every product contains at least one of these metals. 

What has TriQuint done so far'! 

TriQuint has modified its Banned and Restricted Substances Spccification to ban metals 

derived from the Conflict Region, and have been working with its Suppliers to help them 

begin to understand the issues around Conflict Metals. As mentioned above, TriQuint 

has been surveying its supply chain for the origin of the metals in components and 

materials purchased for ovcr a year. Due to recent industry focus on this issue, TriQuint 

has begun to receive more detailed responses from suppliers regarding the origins of the 

Conflict Minerals supplied. It is estimated that approximately 75% of the Conflict 

Minerals origins have been traced either to the smelter or mines, and sometimes both. 

If there are any questions regarding Conflict Metals or other Product Compliance issues, 

please contact TriQuint at rohs info@tgs.com. 

~$~ John Sharp Date: 19-May-2011 

Corporate Product Compliance Manager 

USGS Links for More Information: 

Cobalt - http://minerals.usgs.gov/minerals/pubs/commodity/cobalt/ 

Gold - http://minerals.usgs.gov/minerals/pubs/commoditv/gold/ 

Niobium (Columbium) - http://mincrals.usgs.gov/minerals/pubs/commodity/niobiuml 

Tantalum (included with Niobium information) _ 

http://minerals.usgs.gov/minerals/pubs/commodity/niobiuml 

Tin _ http://minerals.usgs.gov/minerals/pubs/commodityltinl 

Tungsten - http://minerals.usgs.gov/mincrals/pubs/commodity/tungsten/ 

1 See http://minerals. usgs.gov/minerals/pubs/commodity/cobalt/mcs-20 lO-cobal.pdf. 
72 


75730.027

LITE(')~I® UTE·ON IT CORPORATION 

Rev. B 

p]i~N;~!f7~f~lfml&~l 

E IC C 111 Ill, r~pf)JllJlid lih:iiJlTf U]JJ(,ZtrJnm l~dtl)tH~ I ~ J t fUlliXj it1~1Uf~LI~JB~:2 

n~l:!}~mtiJ)it, J!r~4~~M'IJi~k, @H:{Un:iJ!&If1lm(l'jlf!lJ!ltH[ti'~, ~Uyin;~ 

11k'IY:L~, P411t'1I~!lI~Xl~t;J1Il~,) ill~II~Iti:Y.f! l,WtW~L~, txfi!ljH!l~\W 

!ftM7 'Ft~':;ef'EJIj* n fJij':J~j~;~IM;nl,j~}BJ ; IIUII!], !}j''l!i*m~;J!11'~fJt".i,]1 

( 1 ) ~~1mll1tt fir lJi'!.tfh'lf=f: ; 

(2) ({{tf¥j~U[11~f9.!m * f:] IfilIU *~&Jt 'Iii 11Jl:l1Y1 ~ *:flJJi!! IMi A<]" f!li ~ 

I, 

(Co )¥il ~::(Au) 'S;, 

(\:1' 

Sourcing Policy for Conflict Mineral 

Reported by EICC, that the origin of these minerals has 

become the Democratic Republic of Congo's main revenue 

sources of armed rebel groups, to deal in arms, continued its 

bloody conflict between government forces, devastated the 

local civilian population, thus triggering international 

disputes. LITE-ON IT, as the global citizen, we declare and 

commit to refusing the application of metals from fighting 

region; meanwhile, we request LITE-ON IT's supply chain: 

(1) Conduct your operations in a way of social and 

environmental responsibility; 

(2) Not use the conflict minerals originated from the 

Democratic Republic of the Congo (DRC) and its 

adjoining countries; 
73 


75730.028

LITE-ON IT CORPORATION 

Rev.B 

(3) Trace the origins of the metals used, e.g. Au, Ta, Sn 

and W, and fill in the investigation form /sign declaration 

(Please download Conflict Minerals Reporting Template, 

and no need to reply again if you have completed the 

latest survey form before) 

(4) Make the same requirements to your upstream 

suppliers. 

Conflict metal: The minerals composed of columbite-tantalite, 

cassiterite, wolframite and gold from the fighting region of Democratic 

Republic of the Congo (DRC). These minerals are refined into tantalum 

(Ta), tin (5n), tungsten (W) (referred to as the 31's), cobalt (Co) and gold 

(Au), respectively, and are used in electronics and other products. 

In the near future, the metals produced by some smelters may be 

banned, therefore all of our key suppliers are required to map their 

supply chains for the metals in their components back down to smelter 

and then to source. 
74 


75730.029

Partrlershlp GUldeiine5 

Child labor 

Environment 

hltp"Jlshop.nordstrom.com/tJnordstrom-cares-partnership-guidelines 

12-05-06842 PM 

The Kimberly Process and Conflict Minera!s 

Anti-Bribery 

II Nordstrom 

ulike 1,393,651 

Page2of2 
75 


75730.030

K&L Microwave 

2250 Northwood Drive 

Salisbury, Maryland 21801 

Phone: 410-749-2424 

Fax: 443-260-2268 

CONFLICT MINERALS POLICY FOR CUSTOMERS OF K&L MICROWAVE, INC. 

In July 2010, the United States enacted the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (the "Act") which contained a section that regulated "Conflict 

Minerals .. 1 for the first time. The Act includes provisions that require manufacturers to 

perform due diligence in their supply chains to identify and disclosure the use of any Conflict 

Minerals and whether those Conflict Minerals originated in the "DRC Countries .. 2 The Act is 

new and regulations related to the requirements of the due diligence process have not yet 

been issued by the US Securities and Exchange Commission, which oversees compliance 

with the Conflict Minerals section of the Act. 

K&L Microwave, Inc., as an operating company of Dover Corporation, a NYSE listed 

company, will be compliant with the Act and other regulations concerning the sourcing of our 

raw materials and the requirements for supply chain due diligence. We expect that our 

suppliers will also comply with our requests to provide statements and perform due diligence 

about the source of any Conflict Minerals in their products which are provided to us. 

K&L Microwave, Inc., and Dover Corporation are currently implementing system 

processes and procedures to help us achieve compliance with the Act. We are 

communicating our requirements to our suppliers and vendors. Due to the complexities of 

the mineral supply chain, K&L Microwave, Inc. is currently unable to verify the origin for the 

minerals used in our products. We are working closely with our suppliers and vendors to 

understand the source countries of the metals contained in our products and manufacturing 

processes. 

We do not knowingly source any product containing Conflict Minerals from the DRC 

Countries currently; however we are unable to provide clear supply chain verification at this 

time. We will continue our work on this due diligence process and advise our customers on 

the status of our process. 

1 "Conflict Minerals" include Columbite-Tanta!ite (Tantalum), Cassiterite (Tin), Gold, Wolframite (Tungsten) and any 

derivatives from these minerals. 

2 "ORe Countries" include the Democratic Republic of the Congo, Angola, Burundi, the Central African Republic, The 

Republic of Congo, Uganda, Rwanda, Sudan (South Sudan), Tanzania and Zambia. 

www.klmicrowave.com 

Phone: 410-749-2424 * Fax: 443-260-2268 * sales@klmicrowave.com 
76 


75730.031

STMh:roelvctronies N.V. Amsterdam 

Chemin;:!U Champ.des~Fd!es 39 

Case Pes-ta.1e 21 

CH¥i228 GENEVA, PIa.n·les-Ou;;Ites ~ SWiti'.eiland 

Phone +41 2.2 929 2'9 29 

Fa,: +41 22 929 29 00 

2 March 2011 

STMicroelectronics Statement on Conflict Minerals 

STMicroelectronics has a high level of concern for the issue of 'Conflict Minerals', which involves the 

trade of minerals (and the associated refined metals) originating in the region of the eastern provinces 

of Democratic Republic of the Congo (DRC) and surrounding regions where armed conflict results in 

human rights violations and environmental damage. 

STMicroelectronics is committed to take all the appropriate actions to avoid illegal and unethical metal 

sourcing coming from these areas in its products. The metals in question are Tantalum (Ta), Tungsten 

IYV), Cobalt (Co), Gold (Au) and Tin (Sn). 

As part of this commitment, we have already identified the materials potentially containing at least one 

of the metals of concern. We require our suppliers to respond in writing to confirm that no metals 

provided by them for inclusion in ST products originate in the identified conflict zones. We are also 

leading a deeper investigation with targeted suppliers to map and trace the entire supply chain in 

order to achieve visibility on the complex sourcing of the relevant materials back to the mine of origin. 

As a Full Member of the EICC, ST supports the third-party smelter certification program that will 

provide assurance that the metals they source are totally conflict-free and that their operations fully 

integrate the guidelines of the EICC Extractives workgroup. 

Further to the actions described above, STMicroelectronics will take the appropriate actions to fully 

comply with the rules of the SEC (Security and Exchange Commission) and will support its customers' 

efforts to reach our common goal to build up a socially and environmentally responsible supply 

chain. Our progress on this topic will be reported in our annual Sustainability ~eport. 

,//' 

Alain DENIELlE 

Group Vice-President 

Corporate Sustainable Development 

STM!~<csN\I 

REGJSTER OFFl,(,;E 

TRADEREGIST[I:! AMS.TfPl).\M Hl9-1;-·.'.' 

STh1l'::"C~Ied:"OI'\ICSNV 

WTC S¢l'phoI AllpOrt 

Sd't\j)1'\CJ1 Boulevan:l ZS$ 

/// 

./ 

Jerome RaUX 

"f" . 

Group Vice-President 

Global Purchasing & Outsourcing 

11i-e BH Sc."lpf"lDlA!!'OOf"! 

A.m!>!.ef.o;ism 

Tn" N~'''''''r1~ncts 
77 


75730.032

Conflict ~hnerals Sustawability Report 2010/11 - Ford Motor Company 12-05-06845 PM 

Sustainability Report 2010/11 

Conflict Minerals 

"Conflict minerals" generally refer to those minerals that may have directly or indirectly contributed to the financing of armed groups. 

Such armed groups are responsible for violence - often toward women and children - and human rights violations in the Democratic 

Republic of Congo (DRC). Armed groups may directly manage a given mine or tax the mine and/or the transport routes for the 

minerals. The minerals then typically change hands eight to 12 times before they are incorporated into end products. See the known 

supply chain stages associated with conflict minerals. 

In the U.S., a new federal law passed by Congress and signed by President Obama in 2010 - the Dodd-Frank Wan Street Reform 

and Consumer Protection Act - includes a provision relating to confllct minerals. This provision requires many manufacturers to 

report to the Securities and Exchange Commission (SEC) annually on whether their products contain metals derived from certain 

conflict minerals if those metals are necessary for the functionality and production of their products. The sourcing region subject to 

futl reporting includes the DRC and the nine surrounding countries. 

According to the federal legislation, columbite~tanta!ite, cassiterite, wolframite and gold - which are refined into tantalum, tin, 

tungsten and gold, respectively - are considered to be conflict minerals_ The metals derived from conflict minerals are used in a 

variety of automotive applications, including onboard electronics, metal alloys, lubricity coatings, hot-dip coatings, trim components 

and more. 

In the European Union, similar legislation is being considered, with an EU Commission communication on conflict minerals 

scheduled for the summer of 2011 and reform of the EU's Transparency Directive in the autumn of2011. 

Ford is concerned with the potential connection between the automotive industry and conflict in the DRC region. Initial research and 

engagement has demonstrated that the underlying causes of connict in this region are complex. A mUltilateral approach to solutions 

will be required, and we believe that companies in the downstream supply chain for these minerals have a role to play_ We intend to 

require suppliers to use only metals that have been procured through a validated supply chain, so as to ensure that they have not, at 

any point, financed confHct. The processes to support validation are in development by local governments, industry groups, 

international organizations and NGOs, with support from other governments outside of Central Africa. While these processes are 

being developed and implemented, Ford is taking action to educate ourselves and our suppliers, imtiate automotive industry activity 

and begin the necessary due diligence. 

Policy Engagement 

Ford worked with companies such as Microsoft, GE and Hewlett Packard, as well as NGOs and investors such as the Interfaith 

Center on Corporate Responsibility, to issue mu!ti~stakeholder comments on the SEC rules as they were being developed and 

finalized. Representatives from Ford also separately met with the SEC and the U.S. State Department to discuss issues relating to 

procedures and implementation within the automotive supply chain. In March 2011, we submitted a formal comment letter to the 

SEC stating our position. The intent of this engagement was to inform, to the best of our ability, policy makers and other 

stakeholders on the current status of information available to Ford while the rules for implementing the connict minerals legislation 

were in development. 

In addition, through an international forum provided by the Organization for Economic Cooperation and Development (OECD), the 

United Nations and the governments of the affected African states, Ford has participated in dialogue with multiple stakeholders, 

including NGOs active in the area of concern. We have also provided input to the development and upcoming implementation phase 

of the OECD Framework for Due Diligence regarding confiict minerals. This framework provides practical gUIdance to companies 

throughout the supply chain on a set of actions that can be taken to ensure responsible due ditigence 

http://corporate ford.com/microsites!sustainabllity-report-2QlO-ll!ls$ues-supply-materials-minerals Page1of3 
78 


75730.033

CL-DE-MES-PU-003 

Revision 7 

\..::Jenera, l....,.onaHlons or t-'Ufcnase 

Martinrea Honsel Germany GmbH 

and Selte 4 von 6 Martinrea Honsel Germany Developments GmbH 

Should the Customer dispense with the return of the documents, these must be destroyed 

on completion of the order with due regard to the requirements of confidentiality, 

Material provided by the customer, including tooling, patterns etc, remains the property of 

the Customer without limitation, Such material must be stored separately from other material and must be accessible to the Customer at all times, The Supplier is fully liable for any 

damage or loss of such material. 

Any processing or transformation of material provided by the Customer may be done only 

on behalf of the Customer. The Customer is the manufacturer in accordance with § 950 

BGB. 

9. Spare parts 

The Supplier guarantees a continued supply of spare parts at economically reasonable 

conditions for a period of 15 years after cessation of production by the Customer. 

10, Code of conduct 

The Supplier undertakes to comply with national environmental and labour legislation, labour contracts and other applicable regulations concerning competition, 

The Supplier undertakes to act in accordance with the principles of the UN Global Compact, the ILO Conventions and other international standards. In particular, the Supplier 

undertakes to observe human rights. His employees have the right to form or join labour 

unions and other similar organisations, The Supplier does not permit or make use of child 

labour. In addition, the Supplier does not participate either directly or indirectly in pricing 

agreements, monopolies, corruption or any other activities which may restrict competition 

or are otherwise prohibited by law. 

The supplier undertakes to act in conformance with the rules of the "Wall Street Reform 

and Consumer Protection Act", chapter 1502. This means that the supplier will check the 

usage of so-called "conflict minerals" (e. g. Tantalite, Wolframites, Cassiterites or even 

Gold) throughout his supply chain. 

Detailed specifications of "conflict minerals" can be found under: 

http://www,sec.gov/aboutilaws/wallstreetreform-cpa,pdf 

Some of these minerals are mined under conditions that are highly degrading. This is not 

only limited to the minerals of Eastern Congo. Minerals from other parts of the world can 

also fulfil the criteria of being "conflict minerals". 

Should the supplier use "conflict minerals" in his supply chain he is to inform the customer 

immediately. In this case the supplier is required to introduce actions to substitute these 

minerals and to close these actions at the shortest notice. 
79 


75730.034

(Ol1fllCt Minerals - SU51dmability Report 2010/11 - Ford Motor Company 12-05-06 BAS PM 

Risk Assessment 

Ford intends to utilize an existing automotive industry database that tracks material content at the part level to analyze the presence 

of conflict minerals in our vehicles. The database currentty tracks material content to monitor for the presence of certain regulated 

substances; it does not indicate where materials originated. While the presence of the four conflict minerals may, in some cases, be 

reported to the system by suppliers, reporting of the geographic source of these minerals has not been required to date (as it 

previously had not been regulated). 

In 2011, Ford issued new reporting requirements to suppliers asking forfu!l content reporting of the four conflict minerals so as to 

achieve a more complete assessment of risk in our supply base of 1,400+ companies. This will give us a starting point for further 

supply chain inquiries, which should in turn enable the tracing of metals to the point of processing (i.e., the smelter). 

Supply Chain Management Systems 

Ford is implementing due diligence actions as guided by the OECD and United Nations Frameworks for Due Diligence. Critical to 

these frameworks is the identification of upstream and downstream portions of the supply chain from the central upinch point~ - the 

smelter or processor. In this model, Ford and all downstream companies are responsible for identifying the smelters used in the 

supply chain and ensuring that those smelters are appropriately validated as sourcing minerals that have not financially supported 

conflict. Ford is monitoring closely the development of these validation systems. 

Within our direct control are Company policies and direct supplier relationships. Although Tier 1 suppliers to Ford make independent 

sourcing decisions - as do most companies within the automotive supply chain between Ford and the mines - we include in all of 

our contracts with supp/lers explicit human rights terms (issues-supply-humannghts-expectations). We also engage with our 

suppliers on the topic of policy and management systems through our strategic supplier framework, the Aligned Business 

Framework. Our ongoing work with these suppliers includes the development or enhancement of supply chain sustainabjtjty 

management (issues-supply-relationships). It is important that we fully align with suppliers on the approach to responsible sourcing 

of raw materials so as to avoid, where possible, unintended consequences, such as absolute bans on sourcing from the 10 countries 

listed in the U.S. legislation 

Industry Engagement 

Industry engagement and a coordinated approach to supply chain requirements will greatly enable success and reduce the 

duplication of efforts and cost of implementation of due diligence. Ford is pursuing automotive industry collaboration at the AIAG, 

consistent with our approach to other supply chain sustainability opportunities. Ford chairs the industry workgroup on conflict 

minerals - a group consisting of six global automakers and several global Tier 1 suppliers. Actions taken by the group thus far 

include; 

• Wide distribution of a Conflict Minerals Awareness letter from the six OEM vice presidents of purchasing to the CEOs of Tier 

1 suppliers. The intent of the letter was to demonstrate a unified face to the supply chain on the issue, as weI! as to increase 

awareness to ensure timely action. 

• Participation in a January 2011 industry conference on corporate responsibmty, with a heavy emphasis on raw materials 

transparency in purchasing. 

• Planning of a May 2011 webinar and a SeptemberJOctober 2011 industry event to keep the supply base well informed of 

evolving activity related to regulation, validation programs and customer requirements. 

Future activity for the industry group may include collective action for information management, actual data requests and data 

management. The AIAG conflict minerals workgroup has been actively pursuing collaborative action with the electronics sector as 

well, given that industry's experience with this issue and possible solutions. 

As this complex process unfolds - from mine certification to smelter validation programs to the publication of the SEC rules for 

federal regulatory compliance - Ford wi!! strive to meet all expectations and require compliance and commitment to due diligence 

from our suppliers. 

http://cofporate.ford.com/mluosltes/sustainability-f€port .. 2010-11/issues-supply-materia!s-minerals Page2of3 
80 


75730.035

Conflict Mmerais - Su~taindbillty Report 2010/11 - Ford Motor Company 

Conflict Minerals: Known Supply Chain Stages 

• Mine 

• Negociant 

• Comptoir 

• Trader(s) 

Smelter 

Refiner/processor 

ProducUcomponent manufacturer(s) 

• End product manufacturer 

12-0S-068.45PM 

In addition, illegal channels operate in parallel to this known supply chain, either leveraging these actors, or via smuggling and other 

means. 

Related Links 

• This Report: 

o Human Rights in the Supply Chain: Ford's Global Working Conditions Program Cissues-supply-humanrights) 

External Websites: 

o A!AG (http://www.aiag.org/) 

o U.S. State Department (http://WWoN.state.govf) 

o International Labor Organization (http://wwwjlo.org/) 

o United Nations Global Compact (http://www.unglobalcompact.orgf) 

o Organization for Economic Cooperation and Development (http://www.aecd.org) 

o Interfaith Center for Corporate Responsibility (http://www.iccr.org) 

http://corporate.ford.com/microsites/sustainabi!ity-report-2010-11/!ssues-~upply-materials-minerals Page30f3 
81 


75730.036

lirlks. ROilS. Reach, Conflitt; ISO Fairview Microwave Inc. 12-05-068.47 PM 

~ 

.. ~ ...... Fairview Microwave Inc. @ 

~.~ 

Website l",st Updated; 5/4/2012 

tech_support@fairviewmicrowave.com 

(t 1-

~ 0 11m. 0 m ShareThis New.~ T1 0 " V;ew 

Cart ~~~= S sales@fairviewrnicrowave.com 

4396 

Horne Adapters Attenuators Bias T's Cable Cable Assemblies Custom Cable Assemblies Cal Kits Etc Connectors 

Couplers DC Blocks Dust Caps Fiber Optic Filters Hybrids Imp Match Interface Guide Isolators, Circulators 

Low Pirn Kits Open Shorts Phase Shifters Power Dividers QPL Components Rotary Joints; Switches 

Standard Gain Horns Tappers Terminations Times Microwave Products Tools Links; ROHS; Reach; Conflict; ISO 

Tech Support Customer Feedback Firesale! Order Info/Terms RMA form 

Part Number Search 

CATEGORIES 

GPO vs SMp 

SMA vs 2.92/3.5/2.4 

Torque Wrenches 

Links; ROHSi Reach; Conflict; ISO 

ROHS COMPLIANCE: 

All of our parts are ROHS compliant except for cables which sometimes are & sometimes aren't 

depending upon the cable and the apphcation. Some cables are compliant for some applications 

such as many telecommunication appllcatlons but not for others. Our cable assemblies use lead 

based solder, but we can often bUild 100°/6 cables upon request, See Annex lA of 

WEEE/2002/96/EC, & 2005/747jEC for about your 

"7. Lead In high temperature type solders 

or more lead),- in solders for servers, storage and storage array 

equipment for switching, signaling, transmission as well as 

management for telecommumcatlOns," 

REACH: 

Re EC1907/2006, We do not use any SHVC's in our manufacturing processes as identified in the 

June 2011 update. We require on our Purchase Orders to our vendors that we be notified If any 

SHVC content IS present and as of yet no SHVC's have been Identified. We are not registered as 

we seH articles. 

Fairview Microwave Reach Statement 

Conflict minerals: We do not minerals from Conflict areas & require our suppllers to 

minerals from conflict areas, to date no such matenals have 

ISO 9001:2008 Certification 

International Certification Network Certificate 

OTHER INFORMATION: 

CABLE SPECIFICATIONS INSERTION LOSS, POWER, ZO, DIA, & ETC cablespecs.pdf 

CONNECTOR 2.92/3.5/SMA ETC RF CONNECTORS COMPATIBILITY 

t-1ATlNG VARIOUS CONNECTOR DIMENSIONS & MATING RULES SMA/2.92/3.5/2.4 PROPERnES 

GPOTM Vs, SMP ARE THE GPOt<" & SMP COMPATIBLE? GPot" vs SMP 

TORQUE WRENCHES HOW fV1UCH TORQUE IS ENOUGH? TORQUE 

WRENCHES 

http://www.farrviewmitrowave.(om/mlcrowalle_tech_irlfo.htm Pagelof2 
82 


75730.037

October 20 II 

Where Re$tarch Bec(Jme$ Reality . .. Worldwide 

Advanced Interconnections Corp. 

Conflict Minerals/Metals Statement 

In response to customer inquiries regarding compliance with Section 1502 of the Dodd-Frank 

. Act, relating to conflict minerals (also referred to in the marketplace as "conflict metals") 

originating from the Democratic Republic of Congo (DRC) and neighboring countries, 

Advanced Interconnections Corp. has prepared this statement. The scope of this statement is 

limited to the Conflict minerals currently defined as Tin, Tantalum, Tungsten, and Gold; also 

referred to as "3TG minerals." 

Advanced Interconnections Corp. has contacted our direct suppliers of Gold and Tin, 

and certifies to the best of our knowledge that our supply chain does not contain any 

minerals or materials originating from or processed (smeltered) within the Democratic 

Republic of Congo or adjoining countries. Tantalum and Tungsten are not currently 

used in the manufacture of our products. 

As a privately held company, we are not subject to the SEC disclosure requirement of the 

Dodd-Frank Act, however to support our customers worldwide and our corporate 

commitment to environmental compliance, we are committed to ensuring that our metals 

suppliers are DRC conflict-free. 

John Ross 

Opcrations Manager & Quality Liaison 

Advanced Interconnections Corp. - 5 Energy Way - West WalWick. Rhode Island 02893 USA 

Tel: (800) 424-9850-(401) 823-5200- FAX: (401) 823-8723 

E-mail: info@advanced.com-Web Site: http://www.advanced.com 
83 


75730.038

Supplier ResponSlbli:ty 1205 .. 068,48 PM 

AMD's IS camm,tted to Ihe highest standards of socml, ethical. and enwonmental conduct. <.md we apply 

that comm,tment to the cO'Dpames with whlo'l we do bus!fless Our approach to slJppher responslb!ilty 

ensures allgnrnent with ourcorporale strategy to dehver r.lgh·qu <llltyproductS<lnd5ef\'lceswhlle 

rnalntammg and enhancmg long"term, mutually benefirjal, and ethical suppber relationships We believe 

thai well-managed busmesses also have strong SOCial and enVlronmeFltal parformal1ce We also believe 

that the most effective and efficient way to achieve good performance IS by plaCing respoFlslblltty wlth the 

enlilies that have autllofltyto Instltute and manage robust programs--our s upphers Thlsapproachfs 

evidenlln how AMO hi,ls mtegrated supplter performance into our busmess processes, filther than 

tre8tmg It as an !$olated prograrn 

Our goal is to ensure that workmg condItions m our suppty chain are safe, that workNS ale treated With 

respectal'1ddlgn,ry,amlthatmanufacturmgprocessesareenVifonmentaIlyrespons,b1e 

In add,t!on to the \\'Ofk we are doing With OUf Dwn suppy cham, AMD IS actively engaged 1'1 mdustry·wlde efforts to embed excellent soda!, 

enVifonmenta!, and ethical perfofillanceintolhe eiectronlcs Industry ssupr1y chain practices 

Rev:ew our supplier respmlslbllot)' pollc,es and practices In the 221Q.h.:1ffi!~t~.!i.&w.9.c! 

The Oemocrabc Republic of Congo {DRC) has been the site of one of Ire world's worst humanitarian crises dunng the last decade An 

estimated 5 rrullioo people have dllod as a result of Violent armed confhct1 Illegal Mmed groups and some Congolese national mi\ltary urnts 

IXlmmit human nghts abuses and are Slip-ported by the trade m rnmerals 

In 2010. the United States Congress passed a new law requlrmg US· based publiC companies to diSClOse Ihe measures they have taken to 

elimillate so-called "connlc! mmerals" from their supply chams Th,s new i;]w- ·part of the Dodd·Frank Wall Street Reform Act sfgned by 

PreSident Obama m July 2010----requlres the Secuntles and Exchange Comm,ssion to draft a rule setting out new refXlri,lng requirements. Under 

the new wle. any U S -naScd publicly traded company Will be reqUired to report tile measures II has taken to Idenllfy the SO\lrce of confiict 

mmerals--M, tungsten, tant<:lium, and gold-as we!! as disclose any products that are not ·confllc(.freeVYhile the mining of mlneial ore In Afnca IS several steps removed from Ire manufacture of high-tech electroniCS, our IndUstry has responded 

Even before the passage of lhls new law. members "long the efectronlcs IndUStry value cham had beeFl develoPlng a responsible approach to 

er.able c:or.flict-free mmeral sourcing from the region ThiS Involves three fundamental elements 

1 An "m-reglon" minerai certlflC<lMn system that eFlables the traceability and certlficallon of minerals mmed In the ORC regiDn 

2 A confi'cPree smeller program that enables third-party validation of a smelte(s sourcing practices and a determination of whether ltS 

sources afe confhct./ree 

3 Due QII;gance venfy that the smelters Ihat produced the m~tals m Ilnished products are certIfied confilcl·free 

AMO is appalled by Ihe stories of conflict. human rights Violations. labor. and enVIronmental abuses m the DRC We are rising to the ct1aUenge 

to do oUfpat\throughlhesuppoli and leadership of several keyiFll!lat !V(lS 

• AMO co-chairs a multi-stakeholder policy and diplomacy workmg group wllh the Enough Pro)ect-----a U S. based nOFl-govemmen! 

organization (NGO) ThiS WOr\\I'1g group mcludes represel1tat,ves of NGOs, SOCially responstble mveslment groups, and companies from 

mulbple mdustnal sectors The aim of thiS working grollp IS to create a workable consensus policy for both ImplementatIOn of the U S 

law and tile diplomacy aimed at elimmalmg fT'meral sourcing thai contributes to the human suffermg m the ORC region To date, thiS 

wmkmg group has delivered two sets of consensus policy poSitIOns to the U S Sec,'flbes and Exchange Commission (SEC) To our 

knowledge. these submiSSions are the only multi-stakeholder COnSens.us poSItions received by the SEC for the development of thiS 

ground-breakmgrule 

• Through lIle ElectroniCs Industry CitizenshiP Coalitmn (EICC). AMD IS actively en9aged In the conflict· free smelter program to ensure 

rcsponsi~e SOllfClng Smelters are trle natural choke pam! Ir1 the supply ct1a,n-rneanmg that there are numerous SOurOlS of raw 

materials (ore) that flow Into a smelter <lnd numerous uses Df the refmed metal ihatleave the smelter. The objecllve of thiS effort is to 

audit smellers of lin, tantalum, tungsten and gold,and iden!lfy"con filcHreesmelters" 

• MiD IS also worklllg closely With an EICC worklflg group to develop a standaf(:\i:;::ed process for tracking these mmerals from the smeller 

through the electromcs mdustry's supply ct1am IM"ille the effort IS shll very new, the intent IS to bUild a slrearnHned system that is efficierlt 

and effecllve forlhe enllfe supply chain 

~ To support the development of a rellflole "ill-region" sourcing process, AMD is IlctlVely worl\!ng with stakeholders from Civil society, 

government, and the SOCial Investment community Partnenng With the Enough Project, AMO met with senior offiCials Ir1 the U S State 

Department to emphaSIze the need tor governme;,j leade~hlp of the "m-regloo" sourcing process. "In-regiOn" sourcing .ums to contlnue 

economiC development of the reglon through mmeral saies, while el!mmatmg those sales that support armed militias, confiict. and human 

nghtsabuses 

http://W\.....w.a:md.com!U5!aboutamd/corporate- informatlOn!corporate--responslbility /supp!y-chain-management/Pages/supply-chain.aspx Page lof3 
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$upplie.rRe.spO[lSlbillty 12-05··068:48 PM 

• Wi\hm our own supply chain, we are developmg appropnate processes 10 Identify any conflict minerals The hrst step IS to understand II 

and where these mmerals eXist In our products Once Iderillfied, we will employ the stamlardlzed industry processes (currently being 

developed) to track the minerals back to the smelters of ongin, and push for these smelters to become "con.fhet.free " \Ml1!e mapping our 

supply cham back to the smelter IS very complex. we are commlt1ed to the process and wll) continue to work With our bUSiness partners--

both customers and Sl.lppliers-to deveiop a workable and efflclen.ttr adungsystem 

As we look at the polenliai outcomes of thiS new POliCY, we are mindful that tracking metals through the supply cI1am IS only Just a start \0 a 

solution, a sustainable end to the suffering In the DRC WII! take much more Deeply rooted socia-ecOnOmiC factors must be addressed by 

governmentS,civllsoaety, Pflvatesectormterests, andolhers 

Also, 'f the !mp~mentat!On of the new law IS not har.dled carefully, It may have the unintended consequence of banning or significantly reduclllQ 

mmeral exports from the ORC region, whICh could lead to more suffeflng AMO wdl cO'ltmue to work With al! stakeholders to help ensure thiS 

poliCy results In tangible Improvements in \he ORC Vv"nlle the electroniCs Industry and the pnvate sector m general have a role In thiS discussion 

by prOVIding lobs, fair wages ethical busmess practices, and good working conoltlons, true success musl mvolve all stakeholders 

California Transparency in Supply Chains Act of 2010 

The California Transparency In Supply Chams Act of2010 (SB 657) (the "Act') requires manufacturers and reta!lers dOing bUSiness m the Stale 

of California to disclose mformation regardmg their effol1s to address the issues of slavery and human trafficking m their supply chains In 

accordance wllh the reqUirements of the Act. AMD offers the summary below of our acbVilles to Identify and prevent human trafficking and 

slavery actlVltlesby our vendors 

AMD Policies and Actions 

AMO strongly opposes the practice of slavery or human trafficking. AMD utilizes several approaches detailed be!ow designed to ensure and 

venfy the absence of such practices In our supply chain 

AMD IS an active member of the Electronic Industry Citizenship Coalition (EICC) and has adopted the ElectroniCS Industry Code of Conduct {the 

EICC Code of Conduct) AMO generally reqUIres conformance With thiS cooe from lIS suppliers. The BCC Code of Conduct IS based 01\ 

IntematlOnallabor, environmental and human nghts standardS that clearly prohlb!t slalJery and human trafficking 

Risk-based supplier assessments: As a part of AMD's supplier management process. we assess our suppliers to evaluate their conformance 

to the EICC Code of Conduct. This approach mcludes preliminary risk assessments as well as more deta!led supplier self-assessment 

questIOnnaires The results of each method are scored utlilZH1g the EJCC scoring system to venfy the SUppliers' fisk of non-conformance 

Supplier audits: Based on the results of the nsk assessment, AMD may require a third-party on-Sit;'! audit of supplier prac1lces and 

management systems to evaluate suppl.er compliance wlthlhe EICC standards IncludH1g aVOiding human trafl'ickmg nnd slavery In our suppfy 

cham and WIt\1 applicable laws and regula\JOns These audits may be announced or unannounced depending on the Clfcumstances 

Supplier assurance: EaCh year, AMD commUnicates with suppliers in writing to ensure that our expectatJons are clear and up to date With 

regard to responsible SQClal, ethlcai and envlfonmentalconduct This let1erreqUices suppliers to comply with interna\lonal standards ,applicable 

laws and regulations as well as the EICC Code of Conduct Additionally, AMO's standard terms and conditions for the procurement of goods and 

services require conformance 10 applicable iawsafJd regula\lons, and r elnforceourexpectallonsregardmgresponslbiesocial,;'!thlcaiand 

enwonmentalconduct 

Accountability: In addition to n.sl; assessments and audits, AMD disClJsses conformance to the EICC Code of Conduct as welt as related 

management systems WIth our suppliers dunng regular busmess reviews AMD's supplier bUSiness reviews are the optimal venue for 

accountability With regard to responsible soc!al, ethical and en~lronmerllal conduct because senior management partiCipates In these meetings 

and luture busmess awards are at stake 

Training: AMD suppliers have access to mformatlon and tra,ning regardmg conformance expectatmns through the Electronoc Industry 

CltlzenShlpCoali\lOnlearrllnqandcapabllrtyacllvltles 

AMO Standards of Business Conduct: AMD's VVorldWlde StandardS of Business Conduct establlSh mandatory rules and gUIdelines for AMD's 

employees These standards are subs!anllally equlvalenlto the E1CC Code of Conduct and specifically prohIbIt forced and compulsory labor 

practices These standards apply to all AMD employees [very AMD employee receives a copy and mandatory training on these stan.dards In 

the event an employee Violates these standards. AMO wli! take Immediate and appropnate action, whiCh may Include termlnallon of 

employment 

Conflict Mlnerals: AMD's oommltment to uphold human rights throughout our supply cham IS reflected in the pollc!es and procedures outlined 

above as well as In our actions addreSSing the Issue of confilel minerals AMD is leading policy and Implementation discussions aimed at 

ellminallng human fights abuses stemming from mlnerats mlrllng In tile conflict zones of the Democratic Republrc of Congo (ORC) and adjoliling 

nations 

To learn mOl"!'! about AMD's corporate responSibility programs, please review our latest Corporate Responslb,llty Report 

1 General AGc;ounMg Office The Democratic Republ;c of Ihe Congo. US agelldes should 18k'! fmlher acjjon~ to ron\nou\e to the '!ffecjl~e regulattoll 

and conirol of the m.neral trade .nlh(} Eastern I)emocralic RepubliC of the Congo. GAO 10.1030 repM (Seplernber 2010) 

DRaleThlsPage 

http·//www.amd.com!lIS/aboutamd/CQrporate-lnformation!corporate-responsibility /supp!y-chaln-management/pages/supp!y-challl.aspx Page2ot3 
85 


75730.040

Texas Instruments (WPl World Procurement logistics) 12·"05-06 S-S3PM 

SUPPL£MEN.TAL LABOR 

'-Coowlt!nqMal1ilgementSVstero 

.~ 

SUPPUER INFORMATION 

• MWBP (MIl\QritylWQrr!en Bu~mess) 

,. TeQ]5 !irund1tjorls of Purchase 

.SupplyChaln&\.ooigit} 

.-SuopllerBegl$tratnl!l 

SUPPUER :iNFORMATION 

• 

6'ProotH;tlOOPartMprovaJProcess 

• Scmpllgr!mt;3tMChangf 

.-WfP2IJpober O!@l!tyDay 

DOCUMENTATION 

.. Worldwide bocumeoti!tloo Hgrm 

REGIONS 

6'lMID1 

ENVIRONMENTAL 

.. cofl!$Wd Pwmlcals 'am.! M;rter!a!§ 

.. TlfSliRequlrements 

SUPPLY CHAIN CSR 

,. CgnfUct MIngr!!l!; (Jue Diligence roo! 

CONFLICT MINERALS DUE DILIGENCE TOOL 

DearVa!ued Suppher, 

CREATE NEW fORM !::J.Q!1!; 

GeSI 

GlOBAle·SlISTAlNASIHT'f 

!NtnAifV: 

Oller the past few months, m1lny of you h1lve received written and/or verbal communications from Texas 

with regards to the Conflict Mmerals Issue addressed in the Dodd-Frank Wall Street Reform and 

that was p1lssed by the US Congress 10 July 2010. SectIOn 1502 of the Dodd-Frank Act 

companies to f!le disclosures and reports with the U.s. SecuntlE's and E'xch2lnge Commission 

Conflict Mmerals (tin, tantalum, tungsten and gold) In their products, 

TI has been working diligently with the ElectroniC Industry Citizenship 

Initiative (GeSJ) Extractives Workmg Group to create industry agreed 

toensurepropercontrolofthesourcesofthesemetalsandtheorefrom 

Global e~Sustall1ability 

use With our suppliers 

The EICC/GeSI ExtractIVes Working Group has now released a common templ<lte and dasTlboard for the collection of 

sourcing comp<lny due diligence Information related to Conflict Minerals. In an effort to better understand our supply chain 

and comply With the reqUirements of the new leglSI<ltlOn, TI will use thiS template and we strongly encourage our supplier's 

of it as well, We believe It will be the standard used by the electrOnics Industry to communicate Conflict Mmeral supply 

information. Upon completion of the document, It can be sent out to al! customers needtng thiS informatIOn, not Just 

ThiS approach will reduce redundant efforts and streamline the process to provide the Confilct Minerals !nformatlOn up 

and down the supply chain. 

The ElCC/GeSI ConflICt Minerals Reporttng Template is available In multiple languages and contall1s written instructions 

(also available 111 multIple languages) to help you u'Se the template efficiently. The template d<lshboard IS available In 

English only. 

The template, dashboard and instructIOns are aV1lilable free of charge on the GeSI·EICC Conflict Free Smelter website. 

We need to receive your informatIOn in a timely manner in order to prOVide a timely response to our customers. Please 

revl<~w the schedule below, so that you are fully aware of Tl's reqUirements. 

For audIt purposes, we request submission of your completed Conflict Minerals Due DIligence Report Template to our 

external SharePomt site. To submit your template, ple1lse click on the link below and look next to Supply Chain CSR and 

click the Conflict Minerals Due Diligence !ink. You wi!! then be asked to provide mformatlon as the person submitting the 

temp!ate for your company and att2lch your template. 

Click rurre. to submit your template. 

For assistance With any questions or concerns, please contact the Conflict Miner<lis Compliance Team at ll: 

conflictm'neralstl@lIsUlcom. 

Thank you for your prompt attention to thiS matter. We look forward to our continued partnership. 

Best regards, 

Conflict Minerals: Compliance Team 

Texas Instruments Incorporated 

http_/jwPI.ext.ti.com/conflictminerals(MainPage.htm Pagelofl 
86 


75730.041

Honeywell Electronic Materials 

6760 W. Chicago St. 

Chandler, AZ 85226 

Honeywell 

Honeywell Electronic Materials Conflict Minerals Statement 

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and 

Consumer Protection Act. Section 1502 of that Act relates to certain requirements 

on SEC regulated companies concerning Conflict Mineral procurement practices 

(the "Conflict Minerals Law"). Honeywell takes very seriously the allegations that 

metals mined in the Democratic Republic of the Congo ("DRC") may be fueling 

human rights violations and environmental degradation. 

Honeywell Electronic Materials ("HEM") will comply with the Conflict Minerals Law 

and related government regulations. 

In support of this, HEM actively works with its suppliers to identify the source of the 

minerals defined in the Conflict Minerals Act. If it is determined that a supplier 

provides products that include metal made from ore extracted from a Conflict Zone 

Mine, HEM will review this situation carefully and take all actions required by law. 

February 10,2011 Revision 1 
87 


75730.042

::-orporatc R€'SpOnslbilltY - Supplier RelatH)nshlp~ ff 

TE Statement on Conflict Minerals 

Sincerely 

Key Data & Performance Indicators 

http://www .texom/responSlbility /supplier.aspx 

}} Supplier Portal 

" TE Guide to Supplier Social 

Responsibility 

)} TE SSR Guide Survey 

12··05-068.54 PM 

>~. TE Corporate Responsibility Report 

Page2of3 
88 


75730.043

Sony Glob,,1 - Supply Cham Management 

The EICC has also established a framework for th!rd~party supplier audits based on the EICC Code of Conduct This framework 

encompasses the certification of third-party auditors, as well as the provision of necessary auditing tools, including manuals and 

audit checklists. Up 10 and including 2010, these audits focused on suppliers In regions where member companies consider the risk 

ofvioiationto be high 

Sony's suppliers have also undergone audits based on EICC standards Ihrough the EICC's shared audit progr<!m 

The results of these audits identified a comparatively substantial number of non-conformance Issues in the categories of labor and 

ethical management systems, hea!th and safety, and labor 

'Corporategroupumt(asofJune2011) 

Stakeholder Engagement 

(Updated on September 15, 2011) 

With the aim of developing a framework for promoting effectille supply chain management, the EICC holds discussions periodically 

with NGOs, socially responsible investors and other stakeholders, In which Sony IS also participating. Such discussions were held, 

In Mexico, the United States. SWitzerland, Mainland China and the Netherlands 

Addressing Issues Related to the Environment, Labor, Human Rights and Conflicts in the 

Procurement of Raw Materials 

(Updated on September 15, 2011) 

There has been Increasing stakeholde!1>' concern on such issues as environmental degradation, human rights violation and labors 

issue related to the extraction of metals essential in the manufacture of electronics products. Also, there has been raising concem 

of those metals relating to financing armed group and which IS potentially seen as relatmg to conflict in the Democratic Republic of 

Ihe Congo and its adloining countries To address these concems, In July 2010, the United States passed the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, one section of which required the certain companies to report the status of their use of 

"conflict minerals," that is, minerals sourced from those countries, to the U S. Securities and Exchange Commission 

In 2008, the EICC and the GeSI (Global e-Sustainability Initiative) established a working group to address such issues and are 

explonng options for action by the electronics industry As of the end of 2010, 1M working group had completed a study for the 

current status of use of melals in Ihe eleclronics Industry and measu res to betaken by the industry to support these issues 

effectively. Through thiS study, the working group succeeded In identifying certain metals used in significant quantities in electronics 

products. The working group also conducted a study aimed at tracmg procurement routes for these particular metals up to and 

including the mining process As a member company of EICC, Sony Will continue partiCipating the warlong group and support 

establishing industry framework 

Sony is taking steps In response to the issue of conflict minerals, working first to identify certain minerals used in Sony products, as 

we!! as the respechve supply chains thereof. Utiltx.ing this information, Sony will review a framework and measures to be included in 

Its fundamental pollcy to establish systems and implement measures necessary to eliminate such conHiet minerals· to the greatest 

possible· from its supply chain. Recognizing that such issues aru common across the electronics industry, Sony is utilizing an 

industry-wide tramework, speameaded by the EICCfGeSt in this process. Under ItS conflict free smelter program, EICCfGeSI has 

issued the con/hct mmerals reporting template for the industry-wide supplier survey and several smelters are certilled for conflict 

free smelters. Please refer to below EICC/GeSI press release for the details of the conflict free smelters program, 

t),EICC!GeSllaunched Conflict MU18ral Reporting Template (Press release) 

/) EICC!GeSI Conflict Free Smelter Program Complaint Smelter list 

In August 2011, Sony has started supply cham survey to suppliers for selected categories using EICC/GeSl's "Conflict Mineral 

Reportmg Template " 

As tm has been identified as one of the metals under the scope of the US Dodd·Frank: Act, in March 2010, the ITRI, a tin industry 

http://WWW.sony.net/Sonylnfo!csf_report!quallty!code!tndcx.html Page60f7 
89 


75730.044

1630 McCarthy Boulevard 

Milpitas, CA 95035-7417 AnahJ9 Excellence 

ETHICAL SUPPLY CHAIN I CONFLICT RAW MATERIALS AND SOURCING 

POLICY FOR PRECIOUS METALS PURCHASE ANDIOR PROCUREMENT 

CERTIFICATE 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173) signed into 

U.S. law on 21 July 2010, requires the Securities and Exchange Commission to establish rules 

requiring disclosure and reporting procedures on the purchase and use of materials from 

conflict regions. Linear Technology Corporation has taken steps to back track the supply 

chain and has attained written confirmation from suppliers that products supplied are not raw 

materials from conflict regions. 

Linear Technology Corporation is supportive of the efforts by the EICC of not utilizing raw 

materials from the Democratic Republic ofthe Congo and the adjoining countries. 

Linear Technology Corporation also confirms that it has not, and will not knowingly supply 

any customers with products that are manufactured with raw materials which have been 

sourced from conflict zones or regions where serious ethical and lor environmental concerns 

have been legitimately raised. 

EICC's Conflict Minerals Reporting Template is available upon request. 

Metals of concern are: 

• Cassiterite (tin) • Gold • Cobalt • Coltan (niobium and tantalum) 

• Wolframite (tungsten) • pyrochlore (niobium) 

Paul Chantalat 

Vice President, Quality and Reliability 

LINEAR TECHNOLOGY CORPORATION ACCEPTS NO DUTY TO NOTIFY USERS OF THIS 

DECLARATION OF UPDATES OR CHANGES TO TIllS DECLARATION. 

LTC Revision 7 February 3.2012 

CONTACT INFORMATION: 

Name: 

Title: 

Address: 

Tel: 

Bobbi Bennett / Linear Technology Corporation 

QA Specification Review Manager and Product Environmental Specialist 

1630 McCarthy Blvd. Milpitas, California 95035-7417 USA 

408)432-1900 Fax: (408)434-0507 email: bdbennett@linear.com 

Linear Technology Corporation, 1630 McCarthy Blvd, Milpitas, CA 95035-7417, 408-432-1900 
90 


75730.045

Philips' position on responsible sourcing 

in relation to Conflict Minerals 

As a leading global company in health and well-being, Philips is committed to ensuring the safety, health 

and protection of people and the environment worldwide. We promote these principles in our global 

business practices and our code of conduct - Philips General Business Principles. 

Philips expects its suppliers, as partners in our sustainability ambitions, to share this commitment. Since 

2003, we have required our suppliers to sign up to our Supplier Sustainability Declaration, which 

promotes social, health & safety and environmental standards, followed by extensive training and 

aUditing. Our supplier sustainability program and its results are published each year in our annual 

report (see www.philips.com!annualreport). 

Conflict minerals 

The proceeds from harmful social and environmental practices in mines, especially in the eastern 

provinces of the Democratic Republic of Congo (ORe), have been used to fuel armed conflict in the 

region. This is a major concern to the electronics industry, among others. The recently enacted Dodd 

Frank law in the United States defines conflict minerals as Tin, Tungsten, Tantalum and Gold (3TG) and 

any derivatives thereof'. 

Our commitment to sustainable development compels us to address this concern, even though Philips 

does not directly source minerals from the DRC and the mines are typically seven or more tiers removed 

from our direct suppliers'. Philips has committed not to purchase raw materials, subassemblies, or 

supplies which we know contain conflict minerals that directly or indirectly finance or benefit armed 

groups in the DRC or an adjoining country. 

We have requested our relevant suppliers to confirm that they provide only conflict-free minerals to 

Philips. While those suppliers have stated that indeed, to their knowledge, they have provided us with 

conflict-free minerals, we nevertheless recognize that our suppliers may have too limited insight into 

their supply chains to fully understand the origin of the minerals. Due to the size of our supply chain as 

well as the complexity of the routes by which these conflict minerals are traded, smelted, recycled, and 

sold (including the common practice of mixing ores and recycled scrap from many different sources), 

Philips and its suppliers face a huge challenge to obtain - for all minerals - full traceability to exact origin 

with a high degree of certainty. 

1 Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires certain manufacturers 

to conduct due diligence on the use of conflict minerals in their supply chain and to make annual disclosures to the 

SEC. 

1 The Electronics Industry Citizenship Coalition (EICC), the Global e-Sustainability Initiative (Gesl) and RESOLVE 

jointly conducted a supply chain study in 2010, "Tracing a Path Forward: A Study of the Challenges of the Supply 

Chain for Target Metals Used in Electronics," (See www.eicc-gesLresolv.wikispaces.net). The study found that tin, 

tungsten and tantalum make up a small percentage of the components and subcomponents in electronic products 

and the supply chain for these minerals generally contains seven or more layers. 
91 


75730.046

To further our commitment to sustainability, Philips joined the Electronics Industry Citizenship Coalition 

(EICC) in 2006, and has been an active member of the EICC working group on extractives, which seeks to 

prevent conflict minerals from entering the electronics supply chain. The working group has developed 

tools to increase transparency of the origin of conflict minerals, including an electronic due-diligence 

tool for companies and the Conflict-Free Smelter program to audit smelters, which are a key element in 

the supply chain for determining the origin of the relevant minerals. 

Through a combination of these efforts, and in close cooperation with governments and NGOs, Philips 

works towards achievement of two goals: 

1. Minimizing the trade in conflict minerals from mines that directly or indirectly finance or benefit 

armed groups in the DRC or an adjoining country. 

2. Enabling legitimate minerals from the region to enter global supply chains, thereby supporting 

the Congolese economy and the local communities that depend on these exports. 
92 


75730.047

Proof points 

Philips participates in the EICC-GeSI Extractives Work Group. The EICC and GeSI represent over 80 

companies in the Electronics and Information and Communications Technology industries who have 

come together in the EICC-GeSI Extractives Work Group to positively influence the social and 

environmental conditions in the metals extractives supply chain. Philips is an active member of the EICCGeSI Extractives Work Group. 

Philips, together with several other EICC-GeSI member companies, convened a multi-stakeholder 

workshop in San Francisco in October 2009 to engage other sectors and interested stakeholders. We 

also participate in the organization committee of the first European Extractives workshop planned for 

September 2011. 

In 2010, the research commissioned by the Extractives Work Group to map the supply chain for tin, 

tantalum, and cobalt used in electronics was completed and the report Tracing a Path Forward: A Study 

of the Challenges of the Supply Chain for Target Metals Used in Electronics was published. The research 

used a tracing method, starting with suppliers from electronics companies, including Philips, and 

working up the supply chain toward the mine. Companies at each step in the supply chain were 

contacted (e.g. component manufacturers, refiners, smelters) and were requested to provide contact 

information of their suppliers and their codes of conduct. In a limited number of instances it was 

possible to identify a pathway from an electronics product to the mine; however none of the mapped 

supply chains were traced back to the conflict zones in the Democratic Republic of Congo (DRC). 

Philips financially sponsored the pilot of the tin organization ITRI to improve supply chain transparency 

by tracking minerals and providing verifiable provenance information from individual mine sites in 

eastern DRC. The pilot is called the ITRI Tin Supply Chain Initiative (iTSCi). 

In 2011, Philips contributed to the development of a standardized tool by EICC-GeSI to collect due 

diligence information in the supply chain, and piloted the tool with our suppliers. 

See for more info: http://www.eicc.info!extractives.htm. 

We requested our relevant suppliers to state that they provide conflict-free minerals to Philips. While all 

suppliers stated that indeed, to their knowledge, they provided us conflict-free minerals, we continue 

our efforts to increase transparency and investigate additional ways to determine the origin of the 

minerals used in cooperation with Electronic Industry Citizenship Coalition (EICC) and the Global 

eSustainability Initiative (GeSI) members. 

Philips further is in dialogue with civil society organizations and Dutch and European policymakers to 

discuss the role government and other institutions can play to effectively address the issue of conflict 

minerals. 

Philips participates in a multi-stakeholder OECD-hosted working group on implementation of supply 

chain due diligence. The OECD pilot is intended to test and assist with the implementation of the OECD 

Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk 
93 


75730.048

Areas. In this pilot we aim to identify, discuss and find ways to overcome possible challenges to 

implementing due diligence, to ensure that the DECO Guidance and other related due diligence 

initiatives are implemented effectively. 

About EICC (Electronic Industry Citizenship Coalition) 

The EICC was established in 2004 to improve social, economic, and environmental conditions in the 

global electronic supply chain through use of a standardized code of conduct. The EICC was incorporated 

in 2007 as an association to ensure greater awareness ofthe Code, and to expand its adoption across 

the industry. The EICC includes over 50 global electronics companies. For more information or to view 

the EICC Code of Conduct, see www.eicc.info or the latest EICC annual report. 

About GeSI (Global e-Sustainability Initiative) 

The Global e-Sustainability Initiative (GeSI) is uniquely dedicated to information and communication 

technologies (ICT) sustainability through innovation.GeSI brings together leading ICT companiesincluding telecommunications service providers and manufacturers as well as industry associations -and 

non-governmental organisationscommitted to achieving sustainability objectives through innovative 

technology.ln June 2008, GeSI became a legal independent entity, an international non-profit 

association (AISBl) with an office near the EU institutions in Brussels, Belgium. For more information, 

see www.gesi.org . 
94 


75730.049

Nokia Policy against Illegal Trade of Natural Resources 

Introduction 

Nokia's Code of Conduct defines the company's overall principles and commitment towards legal 

compliance, ethical conduct, human rights, anti-corruption work and environmental protection. These 

high expectations extend to Nokia partners, subcontractors and suppliers, whom we encourage to strive 

beyond merely fulfilling legal compliance. This Policy provides further clarification to the principles of 

the Code of Conduct and Nokia Human Rights Approach regarding illegal trade of natural resources. This 

policy has been approved by Nokia Corporate Responsibility Steering Group, chaired by Nokia's 

Executive Vice President of Corporate Relations and Responsibility. 

We are concerned about the link between the illegal extraction and trade of natural resources, and 

associated human rights violations, conflict and environmental degradation. Currently these issues are 

acute in the Eastern provinces of Democratic Republic of Congo (DRC) in the extraction and trade of ores 

of tantalum, tin, tungsten and gold, which flow to world markets through the DRC and adjoining 

countries. Once refined, these metals are commonly used within electronic products and by many other 

industries. Nokia does not procure metals directly and only a fraction of the world's minerals produce 

originates from the DRC, but we are taking action to increase transparency, ensure responsible 

procurement by our suppliers and sub-suppliers, and drive positive change. 

Our commitment 

Nokia is committed to respect human rights and the environment in accordance with accepted 

international conventions and practices, such as those of the United Nations' Universal Declaration of 

Human Rights, ILO Core Conventions on Labor Standards, UN Global Compact, and OECD Guidelines for 

Multinational Enterprises. We want to ensure that all materials used in our products come from socially 

and environmentally responsible sources. We do not tolerate nor by any means profit from, contribute 

to, assist with or facilitate any activity that fuels conflict, leads to serious environmental degradation or 

violates human rights, as set forth by above mentioned international conventions and Nokia policies. 

Implementation of the Policy with Regards to Conflict Minerals 

We prohibit human rights abuses associated with the extraction, transport or trade of minerals. We also 

prohibit any direct or indirect support to non-state armed groups or security forces that illegally control 

or tax mine sites, transport routes, trade points, or any upstream actors in the supply chain. Similarly, 

Nokia has a no tolerance policy with respect to corruption, money-laundering and bribery. We require 

the parties in our supply chain to agree to follow the same prinCiples. 
95 


75730.050

Nokia activities 

Nokia complies with applicable laws and commits to drive best industry practice. We are participating in 

the Pilot Implementation of the DECO Due Diligence Guidance for Responsible Supply Chains of Minerals 

from Conflict-Affected and High-Risk Areas, and working with our industry peers through the EICC-GeSI 

Extractives work group to improve traceability of minerals and ensure responsible sourcing. 

We have for several years been working with suppliers to trace back mineral flows and ensure 

commitment to sustainable procurement. From 2012 we will take into use the standardized EICC-GeSI 

Conflict Minerals Reporting Template to continue mapping and to monitor our suppliers' commitment 

and activities. More details are requested from suppliers as needed. 

We have incorporated the principles of this policy into our contractually binding Nokia Supplier 

Requirements (NSR) and we work with our suppliers to increase transparency in the supply chain. We 

aim to create awareness and build capacity within our supplier base through training and regular 

supplier meetings. We will communicate our policy to our suppliers and request them to set similar 

policies for their supply chain. 

Nokia supports, contributes to and will rely on industry initiatives, such as the Conflict Free Smelter 

Program (CFS), to validate that the metals used in our products are not contributing to conflict and come 

from sustainable sources. Once smelter lists are available, suppliers will be requested to procure 

materials only through validated smelters. Nokia supports in-region sourcing schemes (e.g. iTSCi), which 

are essential for the success of CFS, through industry initiatives and related partnerships. 

Nokia is participating in the PubliC-Private Alliance for Responsible Minerals Trade (PPA), a joint effort by 

the U.S. State Department, the U.S. Agency for International Development, non-governmental 

organizations, industry associations and companies to support responsible minerals trade from the 

Great Lakes Region of Central Africa. 

Nokia supplier requirements 

Nokia policy requires that our suppliers who manufacture components, parts, or products containing tin, 

tantalum, tungsten, and/or gold must commit to sourcing those materials from environmentally and 

socially responsible sources only. Materials, which either directly or indirectly contribute to conflict, are 

unacceptable. Suppliers shall define, implement and communicate to sub-suppliers their own policy, 

outlining their commitment to responsible sourcing of these materials, legal compliance and measures 

for implementation. Suppliers shall work with sub-suppliers to ensure traceability of these materials at 

least to smelter level, e.g. by using the EICC-GeSI Minerals Reporting Template. Nokia reserves the right 

to request further evidence of the chain down to mine level when necessary. Once mechanisms are 
96 


75730.051

available, suppliers shall ensure that purchased metals originate from smelters validated as being 

conflict mineral free. Traceability data shall be maintained and recorded for 5 years and provided to 

Nokia upon request. 

Suppliers are encouraged to support industry efforts to enhance traceability and responsible practices in 

global minerals supply chains. 

Assessing and responding to the identified risks 

Nokia collects material composition information for all our products which allows us to identify suppliers 

that use tin, tantalum, tungsten and/or gold in their products. Material composition data along with 

information gathered from suppliers (e.g. with the EICC-GeSI Conflict Minerals Reporting Template), 

industry initiatives (e.g. CFS), and other available sources is used to assess risks of non-compliance to 

this Policy. 

Nokia's approach is to establish long-term relationships with suppliers, always seek sustainable 

solutions, and work with suppliers to drive improvements. If we identify a reasonable risk that a supplier 

is violating our commitments set forth in this policy, we require them to commit to and implement a 

corrective action plan within a reasonable timeline. Nokia follows up effectiveness of corrective actions 

and conducts on-site assessments as necessary. Continued non-conformance and refusal to address 

issues of concern will lead to termination of business relationship. 

Grievance mechanism & Reporting 

This Policy will be reviewed regularly and updated as needed. Nokia commits to disclosing the progress 

of the implementation ofthis Policy as part of its annual sustainability reporting and in accordance with 

legal requirements. 

Concerns and violations of this policy can be reported to Nokia's Board of Directors, its non-executive 

members, or its subcommittees through our official grievance channels: 

Online via http://www.nokia.com/global/contact/board/ 

By mail to the following address: 

Nokia Board of Directors / Complaint 

Nokia Corporation 

POBox 226 00045 Nokia Group Finland 

Suppliers and other external parties are encouraged to contact their regular sourcing channel if they 

wish to seek guidance on the application of this approach, or if they wish to report suspected abuse. 

They, and other external stakeholders, may also report problems or concerns to the above Nokia's 

Contact the Board channel. 
97 


75730.052

ToshIba America Corporilte SOCial Responsibility - Confhct Mmera;\5 12-05-06!U5PM 

Social 

"ConfHct minerals" generally refer to tantalum, tin, tungsten, and gold from mines and smelters that have directly 

or indirectly contributed to the financing of armed groups. Many of these anned groups are responsible for human 

nghts violations. Specifically, some of the mines in the Democratic Republic of the Congo (DRC) are controlled by 

mihtias responsible for atrocities that have been committed in that country's decades-long civil war, including acts 

of violence toward women and children. 

For humanitarian reasons, Toshiba supports the use of conflict-free minerals in its products. We have taken due 

diligence steps such as the development of a conflict minerals policy as well as surveying our suppliers to ensure 

sourcing of conflict-free minerals in the region, 

Toshiba Group Conflict Mineral Policy 

We are taking steps to develop and implement a policy prohibiting use of cassiterite (tin are), wolframite 

(tungsten are), coltan (tantalum are) and gold, or their derivatives, whose extraction or trade supports confiict in 

the Democratic Republic of Congo or adjoining countries, and/or contributes to inhumane treatment, including 

human trafficking, slavery, forced labor, child labor, torture and war crimes In the region. 

" In this regard, we will carry out supply chain due diligence with reference to the OECD guidance. We will 

use the EICC- GeSI due diligence tool to communicate up and down our supply chain 

• Once a validated supply chain is established through initiatives such as full-fledged smelter verification 

under EICC- GeSl's Conflict-Free Smelter Program or development of a mineral tracing program, we will 

require our suppliers to procure the minerals through that validated supply chain. 

• Our efforts are not intended at altogether banning procurement of minerals from the DRC and adjoining 

countries but to assure sourcing from responsible sources in the region. 

• We ask our suppliers to cooperate with us in our efforts to assure procurement of non-conflict minerals. 

Please visit the following website to review the Toshiba Group policy on conflict minerals and supply chain 

management hHQjf~Yd.Q§blP~,.@lR19~U~[!lblLm§[L(igt!.t~Li.rr9J~llttn~ 

Toshiba Corporation's Actions Regarding Conflict-Free Minerals 

Toshiba has actively engaged in the following internal and external activities to ensure that its products do not 

contain conflict minerals' 

• In June 2011, Toshiba joined the EICC (Electronic Industry Citizenship Coalition) and attends meetings 

throughout the year. 

• In November 2011, Toshiba developed a Conflict Minerals Policy for all Toshiba Group companies 

• Toshiba Group companies in Japan and North America have formed teams to address conflict minerals. 

• In FY 2010, training about conflict minerals was provided to Toshiba Group companies. 

• In November 2011, Toshiba began to survey the supply chains of its business units that produce 

semiconductors, hard disk drives and liquid crystal displays to determine whether conflict minerals are used 

in these product components. Toshiba plans to survey the supply chains of its other business units In 2012, 

• Toshiba is participatmg in the Public-Private Alliance for Responsible Minerals Trade (PPA), a joint effort by 

the U.S. State Department, U,S. Agency for International Development, non-governmental organizations, 

industry associations and companies to support responsible minerals trade from the Great Lakes Region of 

Centra! Africa. t!11Q:@~§§_Qly,orq/site-Rlli!L 

• To ensure that our suppliers do not engage in inhumane treatment or acts that abuse human rights, we ask 

our first-tier suppliers (and their downstream suppliers) to abide by a code of conduct referred to as Supplier 

http://www.tDshiba.com/csr/phil_confhct_mmera!s.jsp Page lof2 
98 


75730.053

To~hlba Amenca Corporate SOCIal ResponSlbihty ~ Conflict Minerals 

Expectations We also conduct supplier audits to ensure that this poliCY is being followed. If any human 

rights violations are brought to our attention, we ask our suppliers to Investigate the matter and take 

necessary steps to correct the violations 

http://WM.f.toshiba.com!csr!phil_connict_minerals.jsp 

12-05-069-15 PM 

Page2of2 
99 


75730.054

F=AIRCHILC 

SEMICONDUCTOR 

Fairchild Semiconductor Conflict Minerals Policy 

This document contains Fairchild Semiconductor's statement regarding the content of Conflict 

Minerals in our products. This statement is based upon information collected from Fairchild 

Semiconductor's supply chain, manufacturing facilities and affiliates worldwide. 

There has been increased awareness of violence and human rights violations in the mining of 

certain minerals from a location described as the "Conflict Region", which is situated in the 

eastern portion of the Democratic Republic of Congo (DRC) and surrounding countries. The 

Electronic Industry Citizenship Coalition (E1CC) and the Global e-Sustainability Initiative (GeSI) 

have requested that companies undertake reasonable due diligence with their supply chain to 

assure that specified metals are not being sourced from mines in the Conflict Region, which is 

controlled by non-government military groups, or unlawful military factions. 

Fairchild Semiconductor supports the action of the EICC and GeSI and has either obtained, or is 

in the process of obtaining~ infonnation from our current metal suppliers concerning the origin of 

the metals that are used in the manufacture of Fairchild Semiconductor products. Based upon 

information provided by our suppliers, Fairchild does not knowingly use metals derived from the 

Conflict Region in our products. 

Suppliers of metals used in the manufacture of Fairchild products (specifically gold, tin, tantalum, 

tungsten and cobalt) shall demonstrate that they understand and support The Electronic Industry 

Citizenship Coalition (ElCC) and the Global e-Sustainability Initiative (GeSI) and will not 

knowingly procure specified metals that originate from the Conflict Region of Democratic 

Republic of Congo (DCR) or the surrounding area. 

Suppliers shall provide written evidence of due diligence that raw materials used to produce gold, 

tin, tantalum, tungsten and cobalt supplied to Fairchild Semiconductor do not originate from the 

Conflict Region from either mining or smelting operations. Evidence of due diligence from each 

supplier shall include, but not be limited to, the following: 

Evidence of a Corporate Policy supporting EICC and GeSI Initiatives, publicly 

available (such as a link on their public website); 

Annual letter slating activities completed and underway that support these 

initiatives; 

The name and location or the source of the are and/or the smelter(s) from which the 

metal(s) was obtained or a statement explaining why this information cannot be 

provided. 

David Lancaster 

Product Ecology Manager 

Fairchild Semiconductor Corporation 

3333 West 9000 South, West Jordan, Utah 84088 

Office Tel: 1-801-562-7455 

Email: David.Lancaster@fairchildsemi.com 

.... Environmental.Peclaration 

Date: April 15, 2011 

Providing for limitations below, Fairchild Semiconductor certifies that the information provided in this document is correct as of 

the date indicated on this page. 

Fairchild has implemented systems to ensure our products are compliant with environmental regulations and laws worldwide. 

However, not all materials in Fairchild's products may have been independently verified regarding substance content. In the 

event of any issues arising from information in this document, the warranty section of Fairchild's standard terms and conditions 

ofsaJe shall apply, unless alternate contracts have been agreed upon in writing by both parties. 
100 


75730.055

intersn 

Intersil's Conflict :Minerals Policy 

The Dodd-Frank Wall Strcet Regulation and Consumer Protection Act defincs "Conflict 

Minerals" as; 

a. Columbite-tantalum (coitan), cassiterite, gold, wolframite, or their derivatives; Of 

b. Any other mineral or its derivatives detennined by the Secretary of State to be 

financing conflict in the DRC or an adjoining country. 

If the source of the Conflict Mineral is determined to be located in the Democratic Republic of 

the Congo ("ORC") or adjoining countries, including /\ngola, Congo, Central A:nean Republic. 

Sudan, Uganda, Rwanda, Burundi, Tanzania, and Zambia (collectively, the "Conflict Region"), 

then reporting to the SEC is required. 

The common derivatives from these Conflict 1...,1inerals arc; 

a. Tantalum (symbol "Ta") from Coltan 

h. Tin (symbol "Sn") from Cassiterite 

c. Gold (symbol "Au") from gold ore 

d. Tungsten (symbol "W") from Wolframite 

Intersi! supports the position of the Electronic Industry Citizenship Coalition (EICC) and Global 

e-Sustainabi!ity Initiative (GeSI) to avoid the use of Contlict Minerals which directly or 

indirectly finance or benefit armed groups in the Contliet Region, in line with full compliance to 

the EICC's Electronic Industry Code of Conduct Intersil has been working with its suppliers to 

help them begin to understand the issues around Conflict Metals, and has been surve}~ng its 

supply chain for the origin of the metals used in purchased components and materials. 

Inters!l has either obtained. or is in the process of obtaining, information from our current 

suppliers concerning the origin of the mctals that are used in the manufacture of Intersil's 

products. Based upon information provided by our suppliers, Intersil does not knowingly use 

metals derived from the Contlict Region in (JUT products. 

Intersil has implemented systems to ensure our products are compliant with environmental 

regulations and laws worldwide. However, not all materials in Intersil's products may have been 

independently verified regarding substance content In the event of any issues arising from 

information in this document, the warranty section of Intersil's standard tenus and conditions of 

sale shall apply. unless a purchase agreemc'llt has been agreed upon in writing by both parties. 

!ntersil Corporation 

By; 4f\·~ Douglas A Balog 

AssL Corporate Secretary 

,\\\lIl/llJff ,,"\.' s\'- CORpa'll,. 

.;$' ...... <v~7·· ..... ·~/-'...:,; 

§ ~/':J)p.pO~l':"\~ ~ -:- -,,- ~ = :=SE:nl: ::; \ ~1::: ~.. .1'''' ~ ... 1999 .... ,$ ~ 0 .... • ..... ••• " '/"1 -"c,4W"'\'\'<- \\,\ 

.Jll'nHnl' 
101 


75730.056

Declaration Concerning Conflict Metals 

PMC-Sierra Incorporated 

1380 Bordeaux Drive 

Sunnyvale, CA 94089 

USA 

PMC-Sierra strives to be in compliance with all legal, environmental and ethical standards 

globally. 

Regarding the use of metals sourced from the Democratic Republic of Congo (DRC), 

PMC-Sierra has conducted a series of surveys confirming sourcing policies and conflict 

free status. As a result PMC-Sierra has found no evidence that these metals are used in 

our Integrated Circuit or Printed Circuit Board Assembly product lines. We base that 

statement on reports from our suppliers, some of whom are EICC members, in response 

to our requests and surveys regarding conflict metals. 

PMC-Sierra does not purchase or source the raw metals used in our product and as the 

supply chain is complex we do not have direct visibility into the original sources of those 

metals. 

As PMC-Sierra is a company registered in the United States of America, the 2010 

Financial Reform Bill (Dodd-Frank Wall Street Reform and Consumer Protection Act) 

legislation enacted in the USA has a direct effect on us. This legislation requires the 

Securities and Exchange Commission (SEC) to provide reporting requirements in order to 

develop the appropriate due diligence methods needed to identity and confirm all sources 

of the metals throughout the supply chain. PMC-Sierra's efforts with regards to any 

additional survey requirements are still pending as the reporting structure requirement 

from the SEC is in draft at this time. 

Proprietary and Confidential to PMC-Sierra, Inc. 
102 


75730.057

Syfer Technology Limited 

Old Stok.e Road 

Arminghall, Norvvich. Norfolk 

NR14 BSQ England 

Tel +44 (O}16D3 723300 

Fax +44 (0)1603 723301 

Email sales@syfer.co.uk 

Web ......-wv.',syfer.com 

CONFLICT MINERALS POLICY FOR CUSTOMERS OF SYFER TECHNOLOGY L TO 

In July 2010, the United States enacted the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (the "Act") which contained a section that regulated "Conflict 

Minerals,,1 for the first time. The Act includes provisions that require manufacturers to perform 

due diligence in their supply chains to identify and disclosure the use of any Conflict Minerals 

and whether those Conflict Minerals originated in the "DRC Countries"Z The Act is new and 

regulations related to the requirements of the due diligence process have not yet been issued 

by the US Securities and Exchange Commission, which oversees compliance with the Conflict 

Minerals section of the Act. 

Syfer Technology Ltd, as an operating company of Dover Corporation, a NYSE listed 

company, will be compliant with the Act and other regulations concerning the sourcing of our 

raw materials and the requirements for supply chain due diligence. We expect that our 

suppliers will also comply with our requests to provide statements and perform due diligence 

about the source of any Conflict Minerals in their products which are provided to us. 

Syfer Technology Ltd and Dover Corporation are currently implementing system 

processes and procedures to help us achieve compliance with the Act. We are communicating 

our requirements to our suppliers and vendors. Due to the complexities of the mineral supply 

chain, Syfer Technology Ltd is currently unable to verify the origin for the minerals used in our 

products. We are working closely with our suppliers and vendors to understand the source 

countries of the metals contained in our products and manufacturing processes. 

We do not knowingly source any product containing Conflict Minerals from the DRC 

Countries currently; however we are unable to provide clear supply chain verification at this 

time. We will continue our work on this due diligence process and advise our customers on the 

status of our process. 

1 "Conflict Minerals" include Columbite-Tantalite (Tantalum), Cassiterite (Tin), Gold, Wolframite (Tungsten) and any 

derivatives from these minerals. 

2 "DRC Countries" include the Democratic Republic of the Congo, Angola, Burundi, the Centra! African Republic, The Republic 

of Congo, Uganda, Rwanda, Sudan (South Sudan), Tanzania and Zambia. 

Registered Office. Old Stoke Road 

Armlngha!i, Norwich NR14 8SQ England 

Registered In England' No 2092166 (FA41971/1) 
103 


75730.058

MEMS Motion Sensing Accele.rometers Conflict Minerals POliCy 

~KioniX' $ensil'lg the Future 

PROOUcr INFORMATION fOR DEVElOPER$ 

Company Infonnation Management Team News Partnerships Tradeshows Careers Directions 

Sales Office Distributors & Reps 

Product Selector Application Notes Technical Notes Downloads F AQ 

Product Catalog ,Evaluation Kits Order Information Quality System 

Accelerometers Gyroscopes 

;C\' " 

12 05 069.20PM 

ABOUT US 

JilO~IIX QUAI.lTV symM 

KIONIX CONFLICT MINERALS POLICY 

"Conflict Minerals" refers to minerals mined in conditions of armed conflict and human rights abuses, notably in 

the eastern provinces of the Democratic Republic of the Congo, by the Congolese National Army and various 

armed rebel groups, including the Democratic Forces for the Liberation of Rwanda. The profits from the sale of 

these minerals finance continued fighting in the Second Congo War and control of lucrative mines becomes a 

focus of the fighting as well. 

Kionix expects our suppliers to source materials only from environmentally and socially responsible suppliers. 

Our suppliers must pass this requirement up the supply chain and determine the source of specified minerals. 

http·'lwww.klonix com IMEMS~jnertial-se nsor /(QnfljcLhtml Pagelof2 
104 


75730.059

TXC CorporatIOn 12-05-069:23 PM 

on-the JoiJlnstructlonjt'a:rHng IS held to meet VClnous fleeds. 

pThemternalcontrolsystcmand audits are condlltted m accordanc6 with laws arlO regulations. 

V, Re~pectlng Stakeholder Rights and fulflilm!:'nt of Social ResponSlbMy 

To display ourcommltrn('nttoso(lalresponsll)lhly and dee[Jconc ern on grt'en energy and environmental 

protection, our CornparlY has always made a qoa! to S<2t a good example as a corporate citizen arld give back to sOCiety. 

Orl September 17, the Company was awarded the 2009 Olltstimdmg Green Adoption Company from the TaoyuanHs'ncrlu Industrial Park Team. The Company aiso received a Golden 1 orch Award Irl the top ten compalW potential 

categor')' 

In order to conform to International trellds, tile Comp<1ny has worked to receive green product certlflCalions< We have 

recell/E'd Green Partner· (GP) certifICation from Sony and QC080000 certification in 2008. To save energy and reduce 

carbon emissions, the Company no longer used paper cups and vending machines do not sell beverClges In plastiC 

contamers. 1he con tamers used for beverages 50ld by the canteerl are all made ofenvirorlmerltally friend!y, 

biodegradablE' matenalsso personnel C<ln adopt env,ronmentally sound practlvesm the:rdallylife. To strengthen our 

~afet')' and health organizatton, TXC contmues to perfolm Internal anrlOllnCement.s / instruction / tralnmg and strives to 

reach zero accident jm)ury tdrg('t~. In 2009, the Company passed occupational safety clnd health m.,wagemrnt 

performance star.dilrdS In order to make work safer dnd provIde extra aSSurance to personnel. Greenhouse Gas 

Verification (l5014064"1), Carbon I-oolprint Venf,ccltlOrl (PAS2050) and Occupational Health and Safety Management 

System (OH5A5) certlflcallOn was receIved If\ 2010. Moreover, Corporate SOCIal Respons,billty R.eport certification IS 

schedule(1 for the end of the year to fuHy disclose compafl')' Information and do our part to contntJute back sOCiety, our 

country and the Earth. For inf"rmclUon on eflvlronrnental safety and health at the Company, 

se€':htto:UVo'Ww.txccorp.com/en/l eShlOl.html 

TXC published our first Corporate SOOd! ResponSibility Report In 2008. In the 2009 Issue, an English verSion of the 

Corporate SOCial ResponSibility Report was prOVIded to Improve report credIbility and CDmp~ny performance information 

trawsparency,ln2010,theCompanyp:anstoobtall1verrflCatlonfroman outside thin::l party CertificatiOn dgellcy 

1. Legal basIs 

I_eglslation of the term Conflict Minerals was first r,lresented by the US Kansas republican senator Sam Brownback In 

Apnl 2009 as Congo ConflICt 

As proposed rn the Minerals Act of 2009 but It was not passed by the House of Representatives. I ati'r, the 

Democratic Party congressman James McDermott of the Washmgton State and 56 other congressmen JOintly sIgned the 

Act and ilgc.in proposed the draft of the ConflICt Mrnerals Trade Act In November 2009. But It was again shelved by the 

House of Represerltatlves. 

!n December 2009, Congressman Barney Frank of the Democratic Party and senator ChriS Dodd thereby proposed 

the draft of the Dodd-frank Wall Street Reform and Consumer Protectlofl i'\ct In view of relevant shortcomrngs of the 

frnanCtal system as exposed In the. fmdnclill criSIS (hereinafter referred to as the D.F. Act). The Act was reViewed by tile 

House of Representatives and upon pasSing of the offiCial report, US PreSident Barack ODama Signed on July 21,2010 

and became law. rhe section on Conflict Milleral;; was added to sectIOn 1502 I[l Chapter 15 on Miscellaneous PrOVISI(lnS 

set forth unequivocal regulllllons and requiremenls on so-called ConfhrJMlnerals. 

2 Relevant defm,tlOn.'> ofCollflict Minerals 

In the D.F. Act, the US Administration has expressed 501<>mn concern on VIOlence and persecution of humi'!n rights rn 

Congo DemocratIC Repub!1C dnd Its nelghbormg countries related to the mining and tradmg of ConflICt f\1merals. 

rherefore, it reqUired relevi;lnt personnel to expose and audit the Conflict Mmerals corning from COrlgo and Its 

nelghbonng nations. 

To climfy the relevant terms related to ConMlct I'\merais, sectmn 1502 has set forth tlve d('fmltlons of which four ~re 

explained below 

wNelghborlng natmns: 

The RepublIC of Congo H1 Afnca and Its nelghbormQ natiorls, 

;,-Armed groups: 

http:!{w.vw.txccorp.comienjh_csr/02.html Page 40f6 
105 


75730.060

TXC Corporation 12-0$-06923 PM 

lhe RepublIC of Congo ~nd Its neighboring nations tI~vlng such conduct are referred to thiS cdtegory. 

ltConfllCt f>lmerals: 

They refer to mlller('lis ('IS follows: Tantaifte, cassltente, ~jCld, wolfrdmlte or others ('IS defined b\' the US 

Admmlstratloil. 

:.IAreascontroiled by armed groups: 

Refer to minerai areas actually controlled by the armed groups ill the Republic of Congo and ils 

nelghbormg nations, or those areas under taxation oreXlortlOn by op€rators of rTllrHng, transportation 

and sale of conflict mmerals, asweli as ,he sellmg channelsalld prud uctlOn faClIIties for control of conflict 

I1lmerals 

AS explained above, aforementioned minerals milled and sold for ITlIll\ary purpose by people under armed forces 

withill the terrrtory of COrlgo or Its nf'lghboring areas belonging to the scope of conflict minerals (refer to the D.F< Act 

forrelevantlnformdtlOn). 

3. E!CC and GeSI 

The two CIVIC groups EICC (ElectronIC Industry Citizenship Coalition) and GeSI (Global e·Sustalnabllity Initiative) are 

extremeiy concerned about the confltctmmerals and the rclaled is sues. Consequently, starting from 2009,therelatcd 

companies of the industria! cham have remmded manufacturers on performing corporate socml responSibility through 

group diSCUSSions and press release to aVOid uSing aforementioned [onfllct millerals (refer to the ElCe and Ge51 

webSltes for relevant mformatlOn). In February 2011, EICC and GeSl agam Jointly prOVided the Conflict Millerais Due 

Diligence Tool for self-Inspection of parts used by manutacturers to aVOid uSing Conflict Minerals as defined by the D.r. 

4. TIC PolICy and Commitment 

As a member of the electronic Industry supply chain, TXC Will perform Its corporate sOCfal responSIbility. ASide from 

abiding by the (ode of conduct as set forth by EICC and GeSI and related requirements, TIC has carried out supply 

cham survey and formulated Its polICy and commitment for not uSlllg any conflict millerais from the RepubliC of Congo 

and its neighbOring nations. Our No Conflict Minerals Policy IS tlS follows: 

Conflict minerals refer to gold, tantallte, wolfrarrllte and caSSiterite mined and sold by the armed groups In the 

milling areas of the Republrc of Conqo dnd itS nelghbormg natIOns. Srnce mining or cOlltrol of aforementioned fTllnerals 

,nvolved seriolls Issues of human nghts, races dnd Illegal benefits, ,XC tc]E:reby makes the followmg commitment as a 

member of the global village: 

,,,,Not to purchase contllctmlnerals produced m the conflicts areas. 

'" Strive to require the upstream and vanous raw materldls suppliers to refuse to use confl>ct mmcrals from the 

confilct areas and require to produce a ietterofcommltmenL 

To ensure the supply cham m"nufacturers also comply With this POlICY, TXC has reqUired all material suppiJers to fill 

out the CommltlT'ent on Prohibltmg Use of Conflict Millerais for products cOntalnmg ilny of the fol!Qwmg Items of conflict 

mmerals, "nd concomitantly proVide a niJme!tst of the mlncrals proressmQ m"n\lf,l(turers as approv;;-d by EICe and 

GeSI to ensure that their products do not use any conflict minerals from aforementIOned areas. 

TXC suppliers whose parts contalnrng tantalite, casslterrte, goln Glnd wOlframltl" hilVe all Signed thE" Commltme'1t on 

Prohibiting Use of Conllict Minerals as followS. 

~tatlstlcal Chart of TXC Materials Containing Conflict Minerals (03/01/2012) 

Vendor Code Source Comlnltment Countersign Rate 

594 Japan 

1119 Japan 

3175 Japan 

4837 Japan 

Gold 2179 Japan 100% 

2454 USA 

1761 Japan 

http://WYfW.tx((orp.tom/en/h_(sr/02.html Page50f6 
106 


75730.061

TXC Corporilt!on 12 OS 069.23 PM 

NfA 

100% 

tOO% 

5. Related linkS 

Dodd-Frank Wall Street Reform and Consumer Protection Act 

Self-declaration of PRe conflict free (Commitment on ProhlbltmQ Use of ConflICt Mmerals) 

flCC & GeS! Conflict-Free Sme!ter rCFS} Pro~ram CQ!J]oliallt Sme'ter list (Minerai Manufacturers 

Stlltemellt On Use of Minerais m Electronics Producls 

GeSI and ElCe Complete First Tantalum Assessment Focused on Responsible Sourcing of Minerals 

www.€lCc.lnfo 

htto:!lwww.elCc.mfo/PDFrEiCCCode of Conduct English.Ddf 

z Contact Us r;; ~ ::; Lenal NotICe & Trademark InformatIOn 

TXC Corporation TEL: 886-2-2894-1202 FAX: 886-2-2894'12.06 4F, No.16, Sec.}, Chung Yang S. Rd. Peltou 112, Taipei, Taiwan (HQ) 

886"3-469·8121 fAX: 886-,-469-6954 No.4, Kling Yeh 5th Rd .. Pmg ChenQ Industnal Dlstnct. rao Yuart, Ta,wan [Factory 1 

http·//WWW.Or:((Orp.(om/en/n_C$r/02.html Page 6 ofG 
107 


75730.062

tl'l~=RA=T='O:'N 11409 Valley View Road 

Eden Prairie, MN 55344 Conflict Minerals Position 

Conflict Minerals Declaration to NVE Customers 

Notwithstanding any information provided by NVE Corporation on its Website or in this or other 

communications concerning the substance content of its products, this document represents our knowledge 

and belief as of the date that it is provided. 

NVE is committed to ensuring the safety, health, and protection of people and the environment. As 

required by the Conflict Minerals provisions of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act, HR 4173, Section 1502 ("Conflict 

Minerals Act"), NVE will not knowingly purchase raw material supplies that cootain conflict minerals that 

directly or indirectly finance or benefit armed groups in the Democratic Republic of the Congo (DRC) or 

an adjoining country. 

NVE is working with our suppliers to ensure our suppliers of minerals are aware of our policy and have 

urged our suppliers to support this policy. Many of our suppliers have similar policies. 

We will take continuous practical action to seek to ensure that materials from the conflict region do not 

enter our supply chain or products by obtaining certification of origin for materials covered by this 

governance. 

Due to the complexity ofthe routes by which metals, and in particular precious metals, are smelted, 

recycled and sold, including the common practice of commingling ores and scrap from many different 

sources, it is often impossible for any company to obtain full traceability to an exact origin of all of these 

materials. 

If you have specific questions or would like additional information, please contact me at NVE Corporation 

at + 1 952-996-1635 or by email atdexter@nve.com. 

Name: Dexter Hansen 

Title: Quality Manager 

Date: April 28, 20 II 
108 


75730.063

Corporate - CommurlH::atlon to our supplierS - Miranda technologies broadc85t hardware manufacturer 12-05-069"27 I'M 

SearchProdu(\s 

home products! solutions support news! company investors contacts i language 

\~ " ~; ~ "'~'" "'Commumcat!,nlocmrSUpPl1<'rll- ,lII'"~~~L' '" 

Company: Commul1Icatlontooursupphers ,'. Ih 

IntroOllGtlon 

Executlveorric:ers 

8oardofdlrectors 

Theevolvmgworloof 

broadc.astmg 

Our solutions 

Inlernatlonalpresence 

Environmental Management 

System 

EnVironmental. Health and Safety 

Policy 

ComlTlUnicatlon to our suppirers 

CailfofnlaTral1sparenCY!l1 

Supply Chall1S Ac( 

~ Communication to our suppliers )n At Miranda Technologies, product stewardship is an important aspect of our supply chain 

relationships. We maintain an unwavering commitment to the safely of our customers, employees and suppliers. 

Miranda is committed to compliance with applicable enllironmental laws and regulations, namely the EU RoHS 

Directive, and in dOIng so; we halle been working with our suppliers to reduce the number and quantity of 

hazardous substances in our products 

In order to address the numerous environmental compliance requirements which may apply to our suppliers, our 

customers or our own operations, and in accordance with our environmental. health and safety policy, Miranda is 

collecting from al! suppliers 

Fuil material disclosure/content data 

Matenatonginsdala(wilhconftictmineralsandhumanlraffick.ing/slaveryreporting) 

1 Full materia! disclosure 

The aim of this pracbee IS to ensure that each of our suppliers report 10 Miranda a full materiElI composition 

declaration (FMD) for each part they supply to us Those FMD must meet the requirements of the Consumer 

ElectronICs Assocl!ltlon (CEA) and the t\sSOCtation CQ[l!l~91!J.!L..ElectfOnIG Industries (lPC) All CAS (Chemical 

Abstracts Service) numbers for substances should be prOVided 

Receiving full substance content daLa from our suppliers will greatly reduce the need for repeated requests. 

RoHS declarations and laboratory test reports wi!! not meet requirements because they do not provJde us wIth 

information for all reportable substances. Indeed. about every six months, the CEA introduces a new 

controlled substances listln its joint Industry Guide (JIG) 

2 Conflict Minerals reporting 

To answer seC!lOn 1502 of the Dodd-Frank Wall Street Reform and Consumer Protectmn Acl, we are seeking 

confirmation from our suppliers that the 3TG·s (Tantalum (coltan), Tin, Tungsten and Gold) do not originate 

from zones of conflicts (such as the Democratic RepubliC of Congo and adjoining countries) for all of the 

components we purchase 

3. Human trafficking/slavery reporting 

We are requiring that all our direct suppliers certify that materials incorporated into their product comply with 

Ihe laws reQarding slavery and human trafficking, Including the Calif orrllaTranspafenCYIl"lSup~ 

2010 IS 8 6..5ll., In the country or countries in which they are doing business 

Yourdeciaration in 5 steps 

1 If you havejomed illllIL~and uploededyour substances declarations for parts you provide to Miranda, 

please authorize Miranda to access those declarations. Please also advlS€ us by slQnlf1g tne attached let!er 

stalmg If youf company has planned to join BOMcheck 

2 Full material disclosure: for each product that Miranda pun;hases from you, please use Miranda's ~ 

1752 blankfOfIJ]. For full malenal disclosure, we need the IPC1752 classes A & 0 to beflHed in. If you do not 

already have an updated XMllPC 1752 statement. you can use lliJE.C;~R!j.z..M@L to prepare It 

3. Conflict Minerals reporting. you can use the Elee GeSI Confilct Mmerals Reporting Template to make your 

declaration. 

http:/ jWV'{W.miranda.com{<.orporate.php7i",environment_tommunicatlon f'agelof2 
109 


75730.064

Corporate - CommunICation to our suppliers - Miranda technolog!es broadcast hardware manufacturer 

4 Human trafficking/slaveI)' statement: please make a declaration stating whether matenals incorporated mto 

the product that Miranda purcl1ases from you comply with the laws regarding slavery and human trafficking on 

the country or countnes in which you are doing business 

5 Then please send all your forms in attachment in one single email to..[!;.lf.BldQi:co-BIQ......illllllir!lL<.!O.lt!J..-.Qill with 

YoutCompanyName_EnvlronmentaIDlsclosure_DateDDMMYY as a subject 

Note The mass unity of measure for all declarations must be in mg only 

Please cont8ctyourMiranda accounlmanagerlfyou have any disclo sure-relatedqueslions 

Material content and origin of our products is an mtegral part of our compliance process and requires cooperative 

effort from our supphers. Miranda bases Its knowledge of the materia! content of Its products on information 

supplied by third partIes. Therefore, It IS supplier's responsibility to inform Miranda when an updated declaration is 

avaIlable 

Miranda e)(pects amendments to applicable environmental laws and regulations, and therefore, WIll aim to update 

and maintain lIs environmental compliance process accordingly and conlinue to promote environmental 

sustainabl1ity 

home I products I sDiulions I support I news I company I :rwestors I resources I careers I contacts 

CopyrighI1998_2012M,randaTeCf1nologloslllc 

http://www.miranda..com/corporate.php?i .... environmenccommunication 

12-05-069.27 PM 

Page2of2 
110 


75730.065

Sustainability 

Sustainability 

Supplier Statement of Conformity 2012-02-13 

Sheet 2 of 3 

of Hazardous Substances in Products and Packaging (NX3-00119) in excess of the 

applicable quantity limits unless the use of the substance is an exempted application 

according to the same List. 

o Supplier certifies that one or more raw materials, parts or products supplied to NXP do 

contain, on a homogeneous material level, one or more substances of the NXP 

Semiconductors List of Hazardous Substances in Products and Packaging (NX3-00119) in 

excess of the applicable quantity limits. Supplier shall inform NXP, on its own initiative, of 

the non compliances through a full material content declaration using the NXP Material 

Declaration Form (NX3-00124). 

3. Conflict Minerals 

As of January 1,2011 NXP prohibits the use of metals derived from Conflict Minerals in goods 

(any material, part, sub-component, component, or product, which is to be incorporated into an 

NXP product). NXP defines a Conflict Mineral as an ore [columbite-tantalite (coltan), cassiterite, 

gold, wolframite or their derivatives] originating from a Conflict Region that is processed to create 

the following metals: Tantalum, Tungsten, Tin, Gold or Cobalt. 

A Conflict Region being a geographical region involved in armed conflict where mining operations 

and proceeds may contribute to serious human rights violations. Currently, the Democratic 

Republic of Congo and adjoining countries is considered a Conflict Region. 

o Supplier declares that any material, part, sub-component, component, semi-finished or 

finished product supplied to NXP Semiconductors either directly or via third parties do not, 

to the best of its knowledge, contain any metals (Tantalum, Tungsten, Tin, Gold or Cobalt) 

derived from columbite-tantalite (coltan), cassiterite, gold, wolframite or their derivatives 

originating from the Democratic Republic of Congo and its adjoining countries as defined 

in the Section 1502 of the "Dodd-Frank Wall Street Reform and Consumer Protection Act" 

and its affiliated laws or regulations. 

o Supplier will proactively undertake due diligence and continuous monitoring of our supply 

chain to avoid direct or indirect procurement of Conflict Metals. 

o If Supplier becomes aware of the use of metals that have been derived from Conflict 

Minerals in any GOOds supplied to NXP, it shall immediately notify NXP. Such notification 

shall include any tracking information to specify which goods may contain these metals. 

PsuppiierName 

I 

["Name'SuppiierReprese-ri'i;]-tive I Title Supplier Repres'eniaiive" 

[Cori'taciPhone "-."."." !-----------------------~ 

Owner: Eric-Paul Schat 

Author: Eric-Paul Schat 

COMPANY PUBLIC 

© NXP Semiconductors B.V. 

Uncontrolled copy jf printed 
111 


75730.066

Sustain ability Supplier Statement of Conformity F 

~ 

___ -___ -:2"'0_1_2-;--0-;;2c---;1-;;-i31 

Sustainability Sheet30f3. 

Revision sheet 

Document Date Description of Change Document Owner Author 

Eric-Paul Schat 2008-12-03 First issue Eric-Paul Schat 

Eric-Paul Schat 2012-02-13 Added Chapter Conflict Minerals; small Eric-Paul Schat 

adjustments in text 

In case of Questions or chanQe proposals lease contact the latest document author and owner 

Owner: Eric-Paul Schat 

Author: Eric-Paul Schat 

COMPANY PUBLIC 

© NXP Semiconductors B,V. 

Uncontrolled copy if printed 
112 


75730.067

Zhen Ding T~[hnology fioldlng Limited (ZDn 12-05-06 9:28PM 

ZOT Onilile I News! COr'tOlGt Us .. About lOT Product$ and Sen .. k@ InYl':stars CSR Catt"ers Partn@r Ar@a 

Since 2006, ZOT has rooted in China and envIsIOned a global layout for Its rapid deveiopment strategy ofworkmg closely Wlth 

I!S partners and realiZing the objeohve With jUst more than five years, lOT has established five manufacturing sites In 

Shenzhen. Hual'an Yantal. Qmhuangdao and Ylngkou The strategic partners play an Important fote in ZOT development 

lOT always Jove to share expenences with lis strategic partners. learn from each other, do joint researdl and mnov<ltion. ZOT 

PCB bUSiness platform \5 a stage where ZOT and Its suppliers, profeSSional agency and other strajegic partners 10 share the 

gains We look forward to working with strategic partners with mutual-beneficial development strategy through mutual 

development. innovation, research of the core technology (new products, new technology. new eqUipments, new matenals and 

new process) and share the results, and also hope that our high quality CIrcuit board can be widely used In end"user products, 

benefiting the maJonly of consumers and general public. This IS an ImplementatIOn for one of ZDT miSSion' continuous 

technology development for better human life 

Other EMS ODM/OEM 

I Conflict Minoral Declaration: 

ZDr vomlS% r,ot to accept a~d ,,<;Il Il>e "Confi,ct Millcrals" Or 'T1atenai made by ~em 'mm areas under tl1e cortiol of aimed groups In the Demacrahc Repubitc of 

http://www,zdt(:O.(Om/en/csr jcsf_04.asp 

S~fety & environment 

management 

SOCIal C{Jntrlbution 

Strategic partners 

••. Contact us 

8bQutlDl,r;:easefeelff eetoemalllJ5 

fltzdt-contact@zcltcocom'Thankic,,' 

Pagelof2 
113 


75730.068

l.hen Dmg relhnology Holding limited (ZOT) 12-0S-069:28PM 

!oe~,u'(;lh~tgold tantalum tin lungstenaMtl1eJr 

CopyflghtZhen DmgTech aU r,ghts reserved 

http://www.zdtco.com/enf(5r /csr_D4.asp Page2of2 
114 


75730.069

Paye~ (ortflin Mmerals 

~Benchmark 

Horne> Sustamabl1lty • 0> Confltct Mmerals 

Conflic! Minerals 

'Conflict Minerals" refers to minerals or other derivatives mined m the eastern 

provinces of the Democratic Republic;: of the Congo CORe") and In the adjOining 

countries where revenues may be directly or indirectly financing armed groups engaged 

1!1 clv!i W8.r resulting in senous SOCIal and environmental abuses In July 2010, ihe 

United States enacted the Dodd-Frank Financial Reform Bill and Consumer Protection 

Act § 1502(b) lthe "Conflict Minerals Law"). which reqUlfes ail US stock listed 

companies and their s\Jpphers to disclose mformation concerning cham of custody and 

usage of conflict mmerals (Tin. Tantalum, TUngsten. and Gold 3TG") 

It IS Benchmark s poliCY to comply With any applicable obl!gatlons under the Conflict 

Minerals Law and the regulations promulgated thereunder, as amended from time to 

time, relating to Conflict Mmerals Benchmark believes the: Conflict Mmerals Law and 

related efforts to aVOid using Conflict Minerals aligns With Benchmark's corporate policy 

on sustamabllity As may be reqUired by the Conflict Mmerais Law. Benchmark Interlds 

to adopt the EICC-GeSI Due Diligence reporting process or Similar methodologies and 

obtam chain of custody deciaratlorls from all Benchmark sourced and managed 

suppliers,ensufmgtransparencYlnoufsupplycham 

• Benchmark expects OUf supplters 10 source materials from socially 

responSible suppliers 

• Benchmark expects lis suppliers to fully comply with the Conflict Minerals Law 

and proVide all necessary declarations 

• Suppliers must pass Ihese reqWfements through thelf supply chain and 

determine the source of speciDed minerals includlllg 3TG 

• Suppliers that -are non "compliant to these requirements shall be reviewed by 

global proc\Jremenl for future business 

ThlS Conflict Minerals Policy encourages busmesses to respect protect and remedy 

human rights throughout the world 

http://www,bench.(()mjCorporate /Sustainablfily(Pages/Conflict··Minl.'rals.<lSDX 

12-0')-Q6'U9PM 

design develop deliver advanced technology 

! COrltac!Us I Worldw<dclocatKlrlS I 

Pagelofl 
115 


75730.070

Conflict Mlneral~ 

LG 

Ufe'sGood 

III 

Products 

About LG 

Sustainabitity 

IR 

Support 

12-05-069:30 PM 

LG Electronics' Statement on Conflict Mi 

Overview of the Conflict Minerals Issue 

The Democratic Repubtic of the Congo ("DRC") is a Central African country with vast minE 

cassiterite (tin), columbite-tantalite (aka caltan - source of tantalum), wolframite (tungsl 

groups have fought to control mines within the DRC; those armed groups have been cited 

locals, including murder, rape and forced labor. Armed groups controlling mines smuggle 

are used to further flnance conflict and perpetuate criminal behavior; hence, cassiterite, 

considered conflict minerals. 

The elements tantalum, tin. tungsten and gold are metals used in many manufactured gO( 

aerospace, appliances, automotive, electronics, jewelry, medical and toot & die industriE 

B% of the gold supplyl is used in electronic and electrical products. Similarly, about 36% c 

electronic solders3, A smail portion of the world's tungsten supply is used in electronic pr 

vibrator bobs and in the manufacture of integrated circuits. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed into law in July 

companies report to the Securities and Exchange Commission ("SEC") on the origin of can 

show due dHigence if conflict minerals are sourced from the DRC or an adjoining country, 

regulations implementing Dodd-Frank Section 1502 by April 2011, but regulations have bet 

timeframe. The goal of the act is to cut direct and indirect funding of armed groups enga' 

Definitions Related to Conflict Minerals Adopted by LG Electron 

Conflict Mineral 

(A) columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives; or (8) 

determined by the Secretary of State to be financing canflict in the Democratic Republic 

DRC Conflict Mineral Free 

DRC Conflict Mineral Free does not contain conflict minerals that direcHy or indirectly fin 

Democratic Republic of the Congo or an adjoining country5. 

Armed Group 

Armed Group means an armed group that is identified as perpetrators of serious human ri 

on Human Rights Practices under sections 116{d) and 502B(b) of the Foreign Assistance Ac 

2304(b)) relating to the Democratic Republic of the Congo or an adjoining country6 

http://WWW,lg.(om/global/sustainability /csr-management/conflict_rninerals.jsp Pagelof3 
116 


75730.071

Conflict Minerals J2-0$-069.30 PM 

LG Electronics' Approach on Conflict Minerals 

SuppUers to LG Electronics must develop policies toward preventing the use of conflict m 

mines controlled by armed groups in aU items to be supplied to LG Electronics. In additior 

document their efforts to determine the source of any conflict minerals or derivatives an( 

the origin of the metals tantalum, tin, tungsten and gold in products to be supplied to LG 

tantalum, tin, tungsten or gold metals subsequently used in LG Electronics' products are! 

through the EICClGeSI Conflict Free Smelter (CFS) program, 

LG Electronics encourages its suppliers to responsibly source conflict minerals and derivat 

of Congo (ORC) and neighboring countries in order to prevent an embargo and associated 

human suffering. 

Status of LG Electronics' Due Diligence to Prevent Use of Confli 

(Date of last revision: Feb. 27st, 2012) 

LGE entered into simple contracts with major contractors 7 to not supply iIlegaHy mined IT 

(March 2010), the coverage was just focused on tantalum and we have to extend the scop 

place a Global Procurement Policy internally distributed to aU procurement members, Th 

the origin/source information of materials to confirm that they are not obtained through 

tantalum capacitor suppliers in 2010 showed that the origin of minerals was China or Aust 

Join EICC and Extractives Work Group 

In August 2010, LGE joined the Electronic Industry Citizenship Coalition (EICC) in an effort 

policy and improve the company's compliance in this area. Also, LGE actively has been pa 

to adopt the industry consensus approach throughout our supply chain. 

Declare Supplier Code of Conduct 

Based on EICC Code, LGE established and declared its Supplier Code of Conduct published 

of 'Suppliers shaH evaluate the origin or source of their materials throughout their supply 

obtained through any ittegal form of mining (e.g., materials obtained from the Democratil 

distribution will bind supplier.> for not using conflict minerals. 

~ LGE's Supplier Code of Conduct· Download PDF 

Feed into standard contract 

Our standard contract contains a "SeHer's Social Responsibility" provision. This provision 

Etectromcs' requirements for corporate social responsibility and we have applied these pi 

Identify materials in supply chain 

Imp·! !WNW.!g.com/global/sustainability /csr-management/conflict_minerals.jsD Page2:of3 
117 


75730.072

ConflICt Mmerals 12-05-06930 PM 

In October 2011, LGE conducted an analysis of aU manufacturing parts using our internal ~ 

According to the results, about 25,000 parts contain 3TG (Tantalum, Tin, Tungsten, and g 

by over BOO suppliers globally. A due ditigence survey to identify smelters used by supplie 

in progress, using EICC Conflict Minerals Reporting Template. 

1) http://www.webcitation.org/5v1 BooEpq 

2) World Gold Council; Gold Demand Trends, First Quarter 2011 (2010 data) 

3) GHGm; Social and Erwironmental Responsibility in Metals Supply to the Electronic Indu~ 

4) Dodd·Frank WaH Street Reform and Consumer Protection Act, Section 1502 

5) Ibid. 

6) Ibid. 

7) LGE's procurement team received letters from 8 companies, mainly tantalum capacitol 

electro-mechanics, AK information communication, Matsuo Shoji Corp., ROHM semicondu( 

~. Global: English Sitemao I ~ I ~ 

Copyn~ht 2012 lG Electronics. All Rj~hts Reserved. 

http://Vlww.!g.com/global/sustainabilityjcsr-management/conflicCmlnerals.jsp Page 3 of 3 
118 


75730.073

POLICY 

, , " ,', ,', ,>", <,,' Much of theE\QUiPl11enl pr9duced by !he elect(onlcs ~ndtel~col11rnuri(l3tiol)s IndUstry feifes 

on cOl11ponents a\1dlor parts containing milll'lrals sucn aslin, tantaIUll1,tu~gsten and gold. 

The. mirling and trading oHhese miner.qls In easternOemOCflltic R~p?b!ic of ihe Congo and 

nei!lhboUrl!1g countries is crucial to the nl9~on's economY;I1l\1 losomeinstances,l.s helping 

to fio!lllCe anrtedgro'lPS caQslng seriouss.q~i~!a~d environmental. iSsues; Tt,e ~errn 'conflict 

minef!l!s' refEirs to minerals mined andtl'adect ii)conditloos of hUman rights abuses, 

environmental degradation and that are directW or. il1l11rectlyfinanclnt/ ot Qeoefillng these 

armed groups. 

<,-'cater-Lucent en,!on;es !he United Nations a~atn~ 0fljllnizatlon Jor Economic ?o-operatlon 

and Development '!efioitions and v.leWS on confliQt minerals. We a:c/<f1owiedge ttJl)~lstence 

and importancepfhul11anand environmental i~s relatedto.confiictminerals. AS a . 

dOWnstream user.pf products that may contair 'Confli9t minerals, Alcatef-Lucent recognises 

Its r91e to protect human rights and to take steps .10 all'oi!lcontributinglo issues connected t6 

conflict minerals. 

Alcatei-'Lucent is implementing due diligence practices to eliThinate conflict !l1ln.erals from Its 

suppl~ chain. As it. is frequently virtqal/y Impossible to determine the actual origin of minerals 

used in the manufacture of products, many stakeholders must be engaged to develop the 

processes required to improve the ability to trace the origin of products, and thus the 

minerals, throughout the supply chain, AlcatElI·Lucent expects the support of its suppliers to 

determine the 'origin ofllie minerafsused and to not use those identified as conflict minerals. 

To this extent, Alcatef-Lucent Is: 

• Involved in the Global e Sustainability Initiative (GeSI) effort to eliminate the market for 

conflict minerals through the development of tools to impr"ve the traceabi1ity of 

productlminerals in the upstreamsuppfy chain and t6 detect !he presence of conflict 

mineralS; and 

.......................................••.•••.......................... Alcatel ' lucent 
119 


75730.074

• Focused on its sphere of direct influence, the supply chain downstream from the minerals 

smelter, by leveraging existing collaborative initiatives to address the conflict minerals issue 

through: 

o Raising suppliers awareness of conflict minerals and having them identify the 

smelters that process the minerals they purchase; 

a Determining if identified smelters are 'conflict-free' by using reliable information from 

industry associations; and 

o Engaging in dialogue and requiring mitigation actions with suppliers inadvertently 

using conflict minerals or not knowing their origin. 

Alcatel-Lucent will, with the availability and evolution of industry tools, strengthen its due 

diligence program and processes to identify the source of the minerals used in company 

products. 

This policy will be regularly reviewed, updated as necessary, and will be applicable and 

communicated to all impacted stakeholders. 

1AA003100251ASZZA- Revision 1 

............................................................ ·· .... ··· .. Alcatel·lucent 

IVWIII',BtciiteHucent,com 
120 


75730.075

Silicon Labs Statement Regarding the Use of Conflict Minerals 

In July of 2010, the United States Congress passed legislation requiring corporations to report 

the use of "Conflict Minerals" in the manufacture of their products. 

"Conflict Minerals" in this context refers to specific minerals originating from mines 

controlled by armed groups in the Democratic Republic of the Congo or adjoining countries. 

The specific metals in question are: Gold, Tantalum, Niobium, Tin, Iron, Manganese, and 

Tungsten. 

The details of the legislation can be found in Section 1502 of HR 4173, signed into law on July 

21, 2010. The United States State Department is required to provide a "Conflict Minerals 

Map" by the end of January 2011. In addition, the US Securities and Exchange Commission 

will issue regulations in April 2011 detailing the audit requirements necessary to ensure a 

product is "DRC Conflict Free". 

Silicon Labs is committed to complying with this legislation and plans to comply with 

forthcoming regulations to enable designation of all Silicon Labs products as "DRC Conflict 

Free". We are currently working with our suppliers to understand or establish their systems 

for sourcing of raw materials, including any listed metals which may be used in Silicon Labs' 

products. 

At this time, Silicon Labs is not aware of the use of any Conflict Minerals in Silicon Labs' 

products. Should you have additional questions, please contact your Silicon Labs sales 

support team. 

Jon Ivester 

Senior Vice President of Worldwide Operations 

Silicon Laboratories Inc. 
121 


75730.076

FlO'URNS" 

Bourns, Inc. Conflict Minerals Statement 

June 7, 2011 

To whom it may concern: 

During the past few years, worldwide concern regarding the use of certain metals derived from 

certain minerals obtained from the Democratic Republic of the Congo has been increasing 

(hereinafter referred to as "Conflict Minerals"). 

"Conflict Minerals" generally refers to coltan, niobium, tantalum, tin, gold and tungsten, and 

their derivatives, which are mined in areas of armed conflict and human rights abuses, notably 

in the eastern provinces of the Democratic Republic of the Congo. Additional infonnation 

regarding Conflict Minerals is available on the worldwide web. 

Bourns, Inc. ("Bourns") has a corporate policy which states that neither Bourns nor any of its 

subsidiaries will obtain or use Conflict Minerals in its products. Additionally, Bourns has 

researched its supply chain and is pleased to advise that Bourns' suppliers currently do not 

supply any goods to Bourns which either contain or are themselves Conflict Minerals. 

If you have additional questions, please contact your local Bourns customer service or inside 

sales representative. . 

Bourns, Inc. 

Global Purchasing and Lean Initiatives 
122 


75730.077

ItlVECTRON INTERNATIONAL 

.. ? IMJVQI) CQ.-"" 

267 Lowell Rd. Hudson, NH 03051 USA Tel: 603-598-0070 Fax: 603-598-0075 email: vectron@vectron.com 

http:\\wv.,rw.vectron.com 

CONFLICT MINERALS STATEMENT FOR CUSTOMERS OF 

VECTRON INTERNATIONAL 

In July 2010, the United States enacted the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (the "Act") which contained a section (Sec. 1502) that regulated 

"Conflict Minerals'" for the first time. The Act includes provisions that require manufacturers to 

perform due diligence in their supply chains to identify and disclosure the use of any Conflict 

Minerals and whether those Conflict Minerals originated in the "DRC Countries'" The Act is new 

and regulations related to the requirements of the due diligence process have not yet been 

issued by the US Securities and Exchange Commission, which oversees compliance with the 

Conflict Minerals section of the Act. 

Vectron International, as an operating company of Dover Corporation, a NYSE listed 

company, will be compliant with the Act and other regulations concerning the sourcing of our 

raw materials and the requirements for supply chain due diligence. We expect that our 

suppliers will also comply with our requests to provide statements and perform due diligence 

about the source of any Conflict Minerals in their products which are provided to us. 

Vectron International and Dover Corporation are currently implementing system 

processes and procedures to help us achieve compliance with the Act. We are communicating 

our requirements to our suppliers and vendors. Due to the complexities of the mineral supply 

chain, Vectron International is currently unable to verify the origin for the minerals used in our 

products. We are working closely with our suppliers and vendors to understand the source 

countries of the metals contained in our products and manufacturing processes. 

We do not knowingly source any product containing Conflict Minerals from the DRC 

Countries currently; however we are unable to provide clear supply chain verification at this 

time. We will continue our work on this due diligence process and advise our customers on the 

status of our process. 

Ram J. Arvikar 

Dir. Global Quality & Compliance 

Vectron International 

rarvikar@vectron.com Tel.: 603-577-6860 

November 18,2011 

1 "Conflict Minerals" include Columbite-Tantalite (Tantalum), Cassiterite (Tin), Gold, Wolframite (Tungsten) and 

any derivatives from these minerals. 

, "DRC Countries" include the Democratic Republic of the Congo, Angola, Burundi, the Central African Republic, 

The Republic of Congo, Uganda, Rwanda, Sudan (South Sudan), Tanzania and Zambia. 
123 


75730.078

Fair-Rite Products Corp. 

Ferrite Components for the Electronics IndustlY 

March 10,2011 

Conflict Minerals Statement 

One Commercial Row 

Wallkill, NY 12589 

Phone: 845-895-2055 

Fax: 845-895-2629 

www.fair-rite.com 

As an electronic passive component manufacturer, we have required our suppliers to ensure that their 

supplies of metal do not come from the Conflict Regions. 

Our raw materials vendors have established specific supply chain steps and provide certifications that 

their metals are not knowingly sourced from Democratic Republic of the Congo Conflict Regions. These 

metals include: 

- Gold (Au) 

- Tantalum (Ta) 

Tungsten (W) 

-Tin (Sn) 

- Cobalt (Co) 

Fair-Rite conducts periodic reviews with our vendors to ensure that they are in compliance with this 

policy and we obtain certifications from these vendors that their metal supplies do not come from these 

Conflict Regions. 

Fair-Rite's metal raw materials are sourced from all over the world, including reputable global financial 

institutions. Based on our knowledge, we are confident that the materials used in our manufacturing do 

not contain the metals listed above that originate from these Conflict Regions. 

In our vigilant environment, we work meticulously to insure that the metals do not come from unknown 

sources. We continually monitor our supply chain to insure that this policy is strictly adhered. 

Rich Eckmann 

Director of Quality 
124 


75730.079

"'1'1 ~J X 1"'1'1 INNOVATION DELIVERED 

TO: Maxim's Valued Customers 

DATE: January 16, 2012 

SUBJECT: "Conflict Free" Minerals 

The issue of conflict minerals used in the semiconductor, as well as other industries, is complex. 

On July 21, 2010 President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act 

(Wall Street Reform Act). Section 1502 of the Wall Street Reform Act requires publicly traded companies to disclose 

the extent to which their products contain so~called conflict minerals sourced from mines in the Democratic Republic of 

the Congo (ORe) or adjoining countries, in order to prevent the sale and profit of such minerals from fueling human 

right atrocities in the ORe region. Conflict minerals include tantalum, tin, tungsten, gold which are integral to the 

manufacture of semiconductor products. 

Certain products manufactured and sold by Maxim do contain metals listed in the legislation as conflict minerals. The 

minerals listed in the legislation have common uses including: 

Wafer fabrication processes commonly use tantalum, tungsten and gold in the metal interconnect. 

Gold is also commonly used in assembly manufacturing (Le. wire bonding). 

Tin is commonly used in assembly manufacturing for solder bumps and external lead finish to comply with ROHS 

requirements. 

Maxim is committed to ensuring materials used throughout our supply chain are procured in a responsible and ethical 

manner. However, the lack of global mechanisms to support the legislation have not been fully developed and 

deployed. Issues include, but are not limited to: 

Finalization of the SEC regulations, due diligence process and reporting requirements. 

Identification by the US State Department of legitimate mining sources as required by the legislation. The US Dept 

of State was to provide a map of conflicted mines in the ORe. This has not been done. Furthermore, the Dept of 

State and the DRC government(s) acknowledge the problems and difficulties in completing this task. In the 

absence of this task being done, it is not possible to determine jf minerals procured by any company originate from 

conflict mines or not. 

Traceability and certification schemes to track are to legitimate mining sources in the DRC 

Maxim is closely monitoring the status of conflict minerals with the full intent of complying with the legislation and 

supporting our customers when it becomes feasible to do 50. Governmental and non-governmental agencies are 

working in cooperation to address the above and other concerns which have prevented companies for achieving the 

intent of the Conflict Minerals initiative. Maxim believes direction and solutions to the various conflict mineral issues 

will be forthcoming through the involvement and participation of industry, governmental and non-governmental 

agencies. We will continue to monitor these developments, and implement due diligence and compliant processes 

once the required infrastructure and regulations become available. 

Regards, 

Bryan Preeshl 

Vice President, 

Quality and 

Environmental Management 
125 


75730.080

RFMD IImr 

RFMD Statement on Conflict Minerals 

February 27'\ 2012 

Background 

In recent years, the United States Congress and lawmakers around the world have increasingly focused on 

regulation of the mining and trade of minerals originating in the Democratic Republic of the Congo and 

surrounding countries (collectively, the "DRC Countries"), as it is believed that the illicit mining and trade of 

these "conflict minerals" are helping to finance extreme levels of violence, particularly sexual- and genderbased violence, in the eastern Democratic Republic of the Congo and are contributing to an emergency 

humanitarian situation in the region. Section 1502 (the "Conflict Minerals Provision") of The Dodd-Frank Wall 

Street Reform and Consumer Protection Act, which was adopted on July 21, 2010, requires new annual 

disclosures from any company for which the use of conflict minerals is necessary to the functionality or 

production of a product manufactured by that company. 

In December 2010, the United States Securities and Exchange Commission (the "SEC") proposed rules to 

implement the Conflict Minerals Provision. Under the SEC's proposed rules, any company that is subject to 

SEC reporting requirements and for which conflict minerals are necessary to the functionality or production of a 

product manufactured, or contracted to be manufactured, by that company must disclose in its annual report 

whether its conflict minerals originated in a DRC Country. If so, the company would be required to furnish a 

separate report as an exhibit to its annual report that would include, among other things, a description of the 

measures taken by the company to exercise due diligence on the source and chain of custody of its conflict 

minerals and an independent private sector audit of the company's report. Under the proposed rules, "conflict 

minerals" are defined as cassiterite (ore used to produce tin), columbite-tantalite (ore from which tantalum is 

extracted), gold, wolframite (ore used to produce tungsten), or their derivatives, or any other minerals or their 

derivatives determined by the U.S. Secretary of State to be financing conflict in the DRC Countries, regardless 

of the source of the minerals. The SEC has not yet issued final rules to implement the Conflict Minerals 

Provision (as was expected to occur during 2011), although it is currently anticipated that such rules will be 

adopted in the first half of 2012. Companies must provide their initial conflict minerals disclosure and, if 

necessary, their initial conflict minerals reports after their first full fiscal year following adoption of the SEC's 

final rules. 

See the following link for additional details: http://www.sec.gov/rules/proposed/2010/34-63547.pdf 

RFMD and Conflict Minerals 

RFMD supports the goal of ensuring that all minerals used in RFMD products are DRC conflict free. As a 

publicly traded company, RFMD is subject to SEC reporting requirements and will provide disclosure regarding 

the source of its conflict minerals in accordance with the U.S. State Department's guidance and the SEC's final 

rules. RFMD shares in the growing concerns of human rights abuses in the DRC Countries and is actively 

working with its supply chain to certify that metals found in RFMD products are DRC conflict free. Specifically, 

RFMD is using the EICCjGeSI Conflict Minerals reporting template to collect data from its upstream suppliers 

with respect to the geographic sources of conflict minerals in use and the associated smelters involved in its 

extended supply chain. This information will be collected, consolidated and made available to RFMD's 

customers in order to assist them with their own supply chain diligence programs. This effort is ongoing, and 

RFMD will continue to work with its supply chain to update this information and implement other appropriate 

diligence procedures as necessary to verify the source of its conflict minerals. RFMD is committed to ensuring 

that metals used in RFMD products are DRC conflict free and will periodically update this statement as new 

information becomes available from the U.S. State Department, the SEC and RFMD suppliers. 

7628 Thorndike Rd I Greensboro, NC 27409-9421 I 336.664.1233 
126 


75730.081

STATS ChlpPAC Ltd. Policy Statement on ORC Confll(.t-Free Mmerals 

STAT~' STATS ChlpPAC Companies 

EHS Pol,oy" Pro9,sm, 

ORCCo.n/locl.F,ee 

,""ne,.ls Sutement 

8ack to Top 

STATS ChipPAC Ltd. Policy Statement on ORC Conflict·Free Minerals 

Congo. Central Afncan Repubhc) 

STATS Ch,pPAC has established and 'mplemented procedures to comply wIth thts policy STATS ChlpPAC rBqiJlres all 

supphersloundertakereasonableduedlhgBnceWllhlnltlelfsupprychaIntDensurBthatthen'lneralsarenotbelngsource{j 

from mines In conflld areas Supplier.; are reqUired" to source mlllerais from any current published list of ElectronIC Industry 

Cltllenshlp Coalrt!on·Global e·Sustalnabdrty Initiative (EICC-GeSI) audited smelters 

http://1o\1"VvW.statschippac.(om/aboulus/drc~stmt.asp)( 

Addition~IResources 

Pagelofl 
127 


75730.082

i'ennEnglrlf."Nmg Tec:hrll(at Help 8. leM!lmg Centu RoHS General StJtement 12:·05 ·06 9·34 PM 

» TECHNtCAL SUPPORT 

$- PRODUCT LITERATURE 

~ REPRESENTATIVES & 

DISTRIBUTORS 

.. CONTACT US 

& 

CADUBRARY 

1!l.RlI-qUestClltalOg 

diseealilOCatiOns> 

Conflict Minerals Statement 

May20i1 

PennEnglneerinq takes seriously the allegations that metals mined in connid regions around the world may be making their way 

mto the electronic component and/or other channels of supply Of particular concern are the metals Tantalum. Tin, Tungsten and 

Gold coming from the Democratic Republic oflhe Congo (ORC). The Conflict Minerals Law (1) mandates supply chain due 

diligence and public disclosure related to the source of these minerals. With this understanding, we have mvestlgated to the best 

of our ability our current suppher channels and have determined that while some of these metals may be used in our 

manufacturing processes, none of the supply originates in the aforementioned ORe 

We will continue to work with our suppliers to verify that they and their supplie~ use ORC conflict free minerals 

(1) Section 1502 of the Oodd"Frank Wall Street Reform and Consumer Protection Act 

View Printable Sltltement 

Home I Contact Us I Company News I Channel Partners! Suppliers 

http.llwww.pemnet.<;om/deSign .. lrlfo/ConfliC!_MlneraI5.html Pagelofl 
128 


75730.083

Amkor Technology Conflict Minerals 

Policy Statement 

Amkor Technology, Inc. takes very seriously the worldwide concerns that metals 

mined in the Democratic Republic of the Congo ("ORC") may be making their 

way into the electronics supply chain and profits from this mining may be 

financing human rights violations in the eastern region of the ORC. Amkor is 

committed to a policy (i) that our supply chain does not knowingly contribute to 

human rights violations in the ORC and (ii) that the gold, tantalum, tungsten, or 

tin that we procure from our suppliers is not derived from ore sourced from mines 

in the conflict areas of the ORC or illegally taxed on trade routes which are 

controlled by non-government military groups or unlawful military factions. 

In support of this effort, Amkor: 

Has developed and implemented procedures that are designed to 

demonstrate that the metals we procure and sourced in accordance with 

this policy; 

Requires that our suppliers verify in writing that they have procedures in 

place to demonstrate that the metals they procure are sourced in 

accordance with this policy; and 

Requires that our suppliers, to the extent reasonably practicable, 

document the routes taken and the intermediaries involved from mind of 

origin to final product. 

Contact: 

Greg Johnson, Sr. Director, Corporate Communications 

Amkor Technology, Inc. 

480-786-7594 

greg.johnson@amkor.com 
129 


75730.084

IC-Haus Homepolge - Company. Stdtement on Conflict Minerals 

IC-HAUS STATEMENT ON CONFLICT MINERALS 

In the electrica! industry, "conflict minerals" such as gold (Au), tantalum (fa), tungsten (IN). tin (Sn) and 

cobalt (Co) are roquired. The mining of these materials also takes place in certain states where rebel 

groups, mi!ltias and army unJts are contro!lng the mining and trade while the the civilian population are 

VIctims of massacres. forced labour, and recruitment of child soldiers. These materials can find their way 

into the supply chain of the electronics industry. 

It is the ambition of iC·Haus GmbH not to contribute knowingly to human rights violations. We will 

therefore give priority to suppliers who support either as a member of the Electronic Industry Citizenship 

Coalition (EICC) the Code of Conduct (CoC), or bring transparency into the supply chain (according to 

CoC) to reproduce the origin of the minerals. 

htlp:! /www.!chaus.de/ConflictMlnerals 

12-05-069:35 PM 

Page 1 of 1 
130 


75730.085

St"tement on Conflln Matenals: Supplier 

Statement on Conflict Materials 

Air Products takes very seriously concerns that profits from metals mining ("conflict 

materials") may be fueling human rights atrOCIties in the Eastern Region of the 

Democratic Republic of the Congo (DRC). 

In July 2010 in the United States, President Obama signed into law the Dodd-Frank Wall 

Street Reform and Consumer Protection Act (Wall Street Reform Act) cOrltaining a 

section that regulates "conflict minerals" for the first time. The legislation requires 

companies like Air Products to disclose annually to the Securities and Exchange 

CommiSSIOri (SEC) whether products were produced with conflict minerals sourced from 

the Democratic Republic of the Congo (ORC) or adjoining countries. This legislation is 

new and implementing regulations have not yet been issued by the SEC, but it will 

initially apply to tin, tantalum, tungsten and gold. These regulatIOns become effective 

April 17, 2011, and the reporting reqUirement starts in the first full fiscal year after the 

regulations are issued. The yet-to-be issued regulations may alter the reporting 

requirements. 

Air Products wli! be compliant with this act and other regulations concerning the sourcing 

of our raw materials from conflict areas. We expect our suppliers to comply with our 

Code of COrlduct and have obtained statements from them that there are no conflict 

mirlerals sourced from the ORC or adjoining countries in our supply chain. 

We also understand this is an important concern worldwJde, although forma! guidelines 

may vary between countries. The Electronics irldustry has been proactive via the 

Electronic Industry Citizenship Coalition (EICC), and we will continue to follow EICe's 

actions and recommendations as they apply to this issue. We also will continue to work 

with our suppliers, other industry trade groups and government regulators to verify that 

our suppliers and sub-suppliers use ORC conflict free minerals. 

Copyright © 1996 2012 Air Products and Chemicals, Inc. 

http'! Iv.ww.airproducts.com/company 15uPp!ier-informationI5tatement-on-conflict~materials,,,spx 

12-05·069:36 PM 

Pagelofl 
131 


75730.086

SPANSION ~ 

".. 

flASH 

Statement on Conflict Minerals 

Spanslon is committed to ensuring that "conflict minerals" are not utilized in our products. 

We have conducted preliminary surveys of our direct material suppliers and aU have 

reported they do not utilize conflict minerals originating from the Democratic Republic of 

Congo (ORe) or its adjoining countries. We are now evaluating and validating the 

responses. 

Spanslon is a full member of the Electronics Industry Citizenship Coalition (EICC) and we 

are aligning efforts with those of the EICC-GeSI Extractives Work Group. This work 

group, representing over 80 companies in the electronics and information and 

communications technology industries, has come together to improve the transparency 

and traceability of metals in our collective supply chain. 

The Extractives Work Group has developed: (1) a standardized supplier survey and 

reporting tool, (2) a Conflict-Free Smelter third-party assessment program, and (3) a 

regional sourcing program intended to improve the traceability of materials from mine to 

smelter, and Spansion is utilizing all of them. We are confident that these EICC-GeSI 

initiatives will help ensure that conflict minerals are not incorporated into Spansion 

products. 

We will comply with the requirements of Title XV of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act, and we will continue to pursue supply chain partnership 

evaluations to ensure that materials incorporated into Spansion products are sourced 

from socially responsible companies. 

Spansion 

February 23,2012 
132 


75730.087

.::t., . ...,. \'l,.~ Chip Glasgow, G411HH. Scotland. U.K. 

Tel.: +44 (a) 1414292777 Fax.: + 44 (a) 1414292758 

E-Mail: sales1@ftdichip.com Web: http://www.ftdichip.com 

FTDI Document No.: FT _000541 

14th November, 2011 

FTDI 'Conflict Minerals' Statement 

FTDI has a high level of concern for the issue of 'Conflict Minerals', which involves 

the trade of minerals and associated metals - Gold(Au), Tantalum(Ta), Cobalt(Co), 

Tungsten(W) and Tin(Sn) originating in the region of the Democratic Republic of the 

Congo (DRC) and surrounding regions where armed conflict results in human rights 

violations and environmental damage. 

FTDI have contacted all their supplies with respect to this issue and their suppliers 

have confirmed that they do not, and will not, knowing purchase any material from 

the conflict region. 

At this time FTDI is not aware of the use of any 'Conflict Minerals' in FTDI products. 

On behalf of Future Technology Devices International Ltd, 

= Fred Dart, Managing Director 

Future Technology Devices International Ltd. 

Unit 1, 2 Seaward Place, Glasgow G41 1HH, Scotland, United Kingdom 

Tel.: +44(0)1414292777 Fax:+44(0)1414292458 

Registered in Scotland: SC136640 © Copyright 2011 Future Technology Devices International Ltd 
133 


75730.088

hliptek I ConfiKtMlncr.lls 

I Conflict Minerals Sourcing Statement 

Commitment to Ethical Practices 

These minerals include tm, tungsten, t2rntaium and gold, 

anglo to final product. 

Minerals In our supply cham. 

about our program. 

)anuary9,2012 

http·llwww.ec!iplek.(om/Conflict_Mi·lcrals.aspx 

12-05-05937 PM 

eECUPTEK 

Ccnfhct MtfleraisfJlQs 

RoHSCompllan{('TooiSilnd 

Re~our(es 

REA0-1 COmphMl(eT()ols~nd 

ReSOl!rfe~ 

E'nvlronmefltaIStewards]H) 

Pagelofl 
134 


75730.089

SMIC I [itmmatHlg Conflict Minerals (Conflict Metal) 12-05-069:38 PM 

SMIC SMjtJMetalfrttiustryCo,Ud SENJU METAL INDUSTRY CO., LTD. 

Eliminating Conflict Minerals (Conflict Metal) 

EICC (~I~C~~nic Ind~t~, C~,ti~~!1ship ,~~,~n~i~n) C0n:tmitment an~ ,~h~, EIi~ina~~!1 of 

,OteS"O.ri91ri.t~.d i1\~JIle D"'1l~~~ ~pulillb 0 R<::l,~l).<I~ilJ!!~1j6~~n!l R~!~~,~ ';' . \§;;~~;~;(" ' '.>1' 

Senju Metal Industry Co" Ltd. and Its related companies (Senju Meta! Group) fully support the vision and 

goals of the EICC ("1) and are committed to fuml!lng Ihe following responsibiHlies 

1. SenJu Meta! Group recognizes and respects the standards outlined by Ihe EICC code of conducts. 

2 To comply with tile EICC statement ("2) and completely eliminate the use of conflict minerals, Senju Metal 

Group confirmed with an of its tin (Sn) base metal sourcing companies and its smelters in writing that their 

minerals are conflict-free 

3. In addition to obtaining a wriHen cerhfication, Senju Metal Group conducted on-site audits of lin (Sn) 

sourcing compames and smelters 

4. As a result, it was venfied that none of raw materials used by Senju Metal Group for its products nave 

Originated IOlne DRe and ItS surrounding conflict regions 

5. If raw materials were ever found to be originajed in the ORC or its surrounding conflict regions, Senju Metal 

Group wi!! immediately discontinue the purchase 

6. SenJu Melal Group accepts the Independent third-party audit designated by EICC 

7. SenJu Meta! Group Wlil provide the names of the above lin (Sn) base metal smelters to EICC. 

8. Senju Metal Group Will provide information on the traceability of tin (Sn) base metal to EICC 

httpffwwweicc.info! 

(*2) EICC Statement 

http: f fwww,se.nju~m (O.jpje.n/csr /procurement/confhct/index.html 

January, 2011 

Senju Metal Industry Co., Ltd. 

CSR Office General Manager 

Kazuhisa Ishida 

Page.lof2 
135 


75730.090

QUARTZOYNE ~ 

~-

Quartzdyne, Inc. 

4334 West Links Drive 

Salt Lake City, UT 84120 

USA 

Quartzdyne's Statement on Conflict Minerals 

In July 2010, the United States passed for the first time the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act), which contains a section that regulates "conflict minerals." 

The legislation requires companies such as Quartzdyne to disclose annually to the Securities and 

Exchange Commission (SEC) whether manufactured products were produced with conflict minerals 

sourced from the Democratic Republic of the Congo (DRC) or adjoining countries. Implementing 

regulations for this new piece of legislation have not yet been issued by the SEC, but will initially apply to 

tin, tantalum, tungsten, and gold. These regulations became effective April 17, 2011, and the reporting 

requirement starts the first full fiscal year after the regulations are issued. The yet-to-be issued 

regulations could alter the reporting requirements. 

Quartzdyne, as an operating company of Dover Corporation, a NYSE listed company, complies with this 

act and other regulations concerning the sourcing of our raw materials from conflict areas. We expect 

that our suppliers will also comply with our requests to provide statements and perform due diligence 

regarding the sources of any conflict minerals in the products they provided to us. 

As more information becomes available regarding due diligence criteria, Quartzdyne will contact our 

vendors and manufacturers to provide documentation stating that the raw materials do not originate 

from the DRC or its neighboring countries, thus ensuring Quartzdyne's compliance with the Dodd-Frank 

Act. 

If you have additional questions, please contact your Quartzdyne sales representative for additional 

information. 

Quartzdyne, Inc. 
136 


75730.091

'2 Tech Drive, Suite 201 

MOO .... 

MKS "Conflict Minerals" 

Position Statement 

Revision B - February 2012 MA01810 

I 

main: 978.845.5500 

tax: 978.557.5100 

www.mkainsLcom 

Background on U.S. Conflict Minerals Legislation: 

On July 21, 2010, the Dodd-Frank Wall Street Refonn and Consumer Protection Act was signed into law (the Act). 

Though the vast majority of the Act is dedicated to improving accountability and transparency in the financial system, 

Section 1502 of the Act imposes new audit and disclosure requirements on companies required to report to the U.S. 

Securities and Exchange Commission (SEC) regarding their use of "conflict minerals" in products they manufacture. 

The "conflict minerals" designation was established in response to violence in the Democratic Republic of the Congo 

(DRC) perpetrated by anned groups thought to be tlnanced in part by the exploitation and trade of these minerals. 

The SEC is still in the process of finalizing rules implementing Section 1502's reporting requirements, but the basic 

framework is known. Under the Act "conflict minerals" are columbite-tantalite (coItan), cassiterite, gold, wolframite 

and any of their respective derivatives as well as any other mineral determined by the Secretary of State to be financing 

conflict and procured from the following countries: tbe ORC, Angola, Burundi, the Central African Republic, the 

Republic of the Congo, Rwanda, Sudan, Tanzania, Uganda, and Zambia. 

Section 1502 applies to all SEC reporting companies (both domestic and foreign private issuers) for whom conflict 

minerals "are necessary to the functionality or production" of a product manufactured or contracted to be manufactured 

by such entities. Determining whether and how much disclosure is required under Section 1502 is a three-step 

analysis: 

First, an SEC reporting company must make annual disclosures as to whether conflict minerals are necessary 

for the functionality or production of a product that it manufactures or contracts to manufacture. 

Second, if conflict minerals are used, the company must then make a reasonable inquiry as to whether the 

necessary conflict mineral originated in the covered countries. Companies marking a determination that no 

such minerals are used would need to state this conclusion, briefly describe the reasonable inquiry they 

undertook and maintain reasonable business records to support their conclusions. 

Finally, if the company cannot verifY that the minerals did not originate in a conflict country, the company 

must then disclose additional information to the SEC in a Conflict Minerals Report·~--including measures 

taken to exercise due diligence about the source and chain of custody of the minerals; a description of the 

products that are not conflict-free or cannot be so verified; and a description of the facilities used to process 

the conflict minerals, the country of origin of the conflict minerals, and efforts taken to determine the mine or 

location of origin with greatest possible specificity. 

MKS Compliance Position: 

With the SEC rules not yet finalized, there is no compliance obligation currently in effect for MKS. Reporting will not 

be required until a company's first full fiscal year after enactment. Assuming the SEC promulgates fmal rules in 2012, 

MKS would need to make any necessary disclosures in early 2014 for our fiscal year ending December 31, 20 13. If we 

become subject to the requirement'i, our disclosures may have to be verified by an independent auditor in accordance 

with a standard to be established by the U.S. Comptroller General. 
137 


75730.092

2 Tech Drive, Suite 201 

Andover 

MA01810 

I 

main: 978.&45.5500 

fmc 978.557.5100 

www.mkainst.com 

Risks Beyond MKS' Control: 

1. Even where MKS or its products are not subject to direct obligations pursuant to Section l502, certain of its 

customers or business partners may be, depending on their specific operations and products. This position statement is 

not intended to be an exhaustive discussion of Section) 502, docs not address all of the Section 1502 considerations 

that may be relevant to MKS's customers or business partners in light of their particular circumstances, and is not 

intended as compliance advice. 

2. This position statement is based on current provisions of Section 1502 and the SEC's implementing rules proposed 

in December 2010, all o[which are subject to change. The SEC or any other regulatory or enforcement authority may 

disagree with our assessments. Because Section 1502's disclosure rules are still in the process of being finalized and 

arc subject to revision, it is impossible to predict with certainty all requirements under Section 1502. 

3. It is possible that certain process materials, parts. or components may become unavailable or more difficult to 

procure due to Section 1502. IfMKS needs to make process or design changes due to such unavailability, then there 

may be an impact on our products and/or delays in shipment. We intend to continue to bring our products to market in 

full compliance with applicable laws and expect our suppliers and customers to be partners in that effort. 

Disclaimer: 

THIS POSITION STATEMENT IS FOR INFORMATIONAL PURPOSES ONLY, DOES NOT CONSTITUTE A 

LEGAL REPRESENTATION AND DOES NOT CREATE OR CONFIRM THE EXISTENCE OF ANY RIGHTS, 

LIABILITIES OR OBLIGATIONS OF MKS, ITS AFFILIATES, ANY OF THEIR RESPECTIVE CUSTOMERS OR 

ANY OTHER PERSON. THE SALE OF MKS PRODUCTS SHALL BE GOVERNED EXCLUSIVELY BY THE 

TERMS AND CONDITIONS SET FORTH IN THE APPLICABLE MKS SALE AGREEMENT. 

MKS' assessments contained in this position statement are solely MKS' opinion. MKS does not guarantee the 

accuracy or completeness of its evaluation and neither MKS' customers nor any other party may rely on this position 

statement. The information contained herein is based on information MKS has obtained as of the date indicated at the 

top of this position statement. MKS does not have any obligation to update this position statement. Any MKS 

customer or other person needing information or guidance about Section 1502 should seek advice of legal counsel. 
138 


75730.093

"Conflict Minerals" and "Conflict Mining" Statement 

"Conflict Minerals" and "Conflict Mining" refcr to the illcgal extraction and control of minerals from within thc 

DRC (Democratic Republic of Congo). Venkel Ltd. uscs particular minerals in our products and we require all 

of our suppliers to conform to our position regarding "Conflict Minerals" and "Conflict Mining." Venke! Ltd. 

undcrstands the complexity ofthc supply chain of our materials and cnsures that the products we sell do not 

contain "Conflict Minerals." 

Based on our own investigations and information obtained from our suppliers, we are confidcnt that the 

matelials us cd in the manufacturing of our SMT passive components, do not contain these minerals. Venke]'s 

raw materials suppliers assurc that their products comply with our policy regarding "Conflict Minerals" and 

"Conflict Mining" These minerals include: 

Cobalt (Co) 

Gold (Au) 

Tin (Sn) 

Tungstcn (W) 

Tantalum (Ta) 

The minerals of concern uscd in the SMT passive componcnts that Venkel Ltd. provides, are limited to 

Tantalum (Ta), Tin (Sn), and in rare cases, Gold (Au). Gold is occasionally used in the termination for special 

applications likc wire bonding. 

These raw materials listed above are not sourced from within thc DRC and Venkel Ltd. conducts periodic 

reviews with our suppliers to ensure that the supply chain remains free of "Conflict Minerals." We continually 

monitor our supply chain to ensure that this policy is adhered to and that no changes are made without written 

notification. Venkel Ltd. is committed to supplying our customers with products that are of the highest quality 

while maintaining awareness of these "Conflict Minerals." 

Nclson Johnson 

Materials Manager 

'.:Kll. LTD. 

PH()~ 

W\vw,venkel.com 
139 


75730.094

Conflict Minerals Policy Statement. 

Many industries utilize the metals derived from minerals that are mined 

throughout the world, including The Democratic Republic of Congo (DRC). 

Known to operate in the DRC are mines under the rule of non-government 

military groups or unlawful military factions. 

"Conflict minerals," as defined in Section 1502 of the DOdd-Frank Wall Street 

Reform and Consumer Protection Act, are Columbite-tanta/ite (caftan), 

cassiterite, gold, wolframite, or their derivatives; or any other mineral or its 

derivatives detel7Tlined by the Secretary of State fo be financing conflict in the 

Democratic Republic of the Congo or an adjoining country. Metals derived from 

these minerals are tin, tantalum, tungsten, and gold. 

It is Selective Plating's policy to be in full compliance with the Dodd-Frank Wall 

Street Reform and Consumer Protection Act and explicitly prohibits purchasing 

anode products or other chemicals and substances from suppliers sourcing 

metals either known to be derived from conflict regions or designated as NOT 

DRC Conflict-Free. 

Brian 

(3~~ Snodgrass 

President 

An ISO 9001 :2008 Registered Company 

Selective Plating, Inc. 240 South Lombard Road Addison IL 60101 Tel 630-.543-1380 Fax 630-543-1392 

www.SelectivePlatinglnc.eom 
140 


75730.095

Intern"tlonal Rectifier Corpora.te SO(la.l Responsibility 

~ ~~!;lllQI'!U!it~l:l;jr - ~ ~ ...... ~~~ 

-"'" -- -- -- ~ --~ ~~ -=~--~~~ - - -- -

IR's Policy Statement on Conflict Minerals 

International Rectifier ("IR") uses vanous metals in our products tin, tantalum, tungsten 

and Many of these metals are derived from minerals including ("coltan"), 

gold, wolframite, and their derivatives, which are mined In global locations, including 

the eastern portion of the Democratic RepubliC of Congo and surrounding countries (the "Conflict 

Region"). 

with applicable US law, and in concert with the efforts of Electromc Industry 

CoalitIOn ("EICC"), IR IS committed to responsible sourcing of metals. IR does and will 

conduct reasonable our supply chain and will take appropriate steps to 

ensure that metals are not mines in the Conflict RegIOn. IR's suppliers are requested 

to provide written evidence that minerals used to produce gold, tin, tantalum, and tungsten 

supplied to IR are not from mines or smelters in the ConflICt RegIOn. 

COMPANYINFO 

About IR Careers 

Cont(lct Us Investor Relations 

Press Room Site Index 

Corporate Social Responsibility 

CtlRPORATE SOCiAl R£S?ONS1BlllTV CSR Pollcy 

What is CSR? 

IR's CSR Program 

Conflict Mmerals 

Business Values 

Corporate Governance 

IR Code of Ethics 

California Transparency 

in Supply Chams Act 

EnVironmental Health & Safety 

Vendor Not!fication 

EICC Committment Letter 

IR's CSR FAQs 

About InternatlOna! Rectifier I Cont(lct Us I Privacy 

@1995-2012Internatlona!Rectifwr 

http://www.irf.COm/llboutir .. info/csrjconflictminerals.html Pagelofl 
141 


75730.096

Nlkon! ResponsibIlity I C$R-onenled Procurement 12-05-069:43 PM 

NIkDn 

-ft. ,\bout Nikon Rcspnnsibtlity CSR-oricnted Pwcllrcment 

CSR-oriented Procurement 

To ensure the soundness of its business activities, the Nikon Group cooperates with its procurement partners to undertake CSR-oriented procurement 

and green procurement. 

Global Implementation of CSR-Oriented Procurement 

Promoting CSR-oriented Procurement 

In the year ended March 2011, the Nikon Group began holding discussions with its procurement partners in Japan for the purpose of understanding 

our CSR-oriented approach to them. In the first year, our personnel visited 37 partners and successfully learned the details of each company's CSR 

initiatives. in addition, we participated in the Supply Chain Subcommittee of the UN Global Compact to discuss optimal methods of CSR~oriented 

procurement with participating companies. 

In the year ending March 2012, we will update the Nikon Procurement Partncrs'CSR Guidelines and undertake additional CSR-oriented procurement 

measurcs such as consideration of creating internal systems for on~site inspections ofCSR activities by procurement partners. In addition, a 

procurement procedures manua! that ineludes CSR perspectives will be prepared and distributed throughout the Group as an operational manual for 

penetrating CSR-oriented procurement activities. A group-wide basic transaction agreement will be used and Nikon Group companies in Japan are 

encouraged to have procurement partners sign the agreement. Systems are being put in place to ensure that appropriate transactions are conducted in 

accordance with signen basic transaction agreements, and prompt reports to management and appropriate responses are made if any instances of noncompliance arc discovered. 

Handling of the "conflict minerals issues" 

Minerals (tantalum, tin, tungsten and gold: hereinafter "conflict minerals") mined in the Democratic Republic of the Congo and neighboring countries 

are becoming sources of funding for armed groups, creating grave issues such as facilitating conflicts, human rights violations and environmental 

destruction; and international efforts are being made to resolve this issue. The Nikon Group, with cooperation from our procurement partners, will 

investigate the status of usage of these eontlict minerals, and will make efforts to reduce the use of conflict minerals as much as possible. 

Based on the Nikon Basic Procurement Policy and the Nikon Procuremcnt Partners' CSR Guidelines, the Nikon Gronp aims to fulfill its social 

responsibillties in the entire supply chain. 

http //www.nikon.com/about/csr/csr-procurement/inde)(.htm Pagelof4 
142 


75730.097

HAMBURG INDUSTRIES CO., LTD. 

Declaration of Conflict Minerals Free 

Hamburg Corp. and its supply chain shall bear social responsibility and environmental 

protection. 

We do not purchase conflict minerals in the conflict regions. 

Request our suppliers to refuse to use Conflict Minerals from conflict regions and present a 

signed letter of commitment to Hamburg Corp. 

Request our suppliers to notify their upstream suppliers of such requirements. 

Remark: 

The Conflict Minerals are including cobalt (Co), gold(Au),paliadium (Pd),tantalum (Ta) ,tin 

(Sn) and tungsten(W) that are not drifted from the mines of Democratic Republic of Congo 

(DRC) and its neighboring countries controlled by armed groups. 

ORC (IWJU~~:±;t:l;;fD~) 

Central Africa Republic (cjJ3F~;fD~) 

Sudan (~f:fj) 

Zambia (r5ltb52:) 

• Angola (~~tn) 

• Congo Republic (ItlU~ji;;fqlm) 

Tanzania (!Q[iijJbQ) 

Burundi (51flr~~) 

Rwanda (~~~) 

Uganda 

* * I 

I * 

* * * I * 

* * * * I * 

* * * I 

* i 

* i * 

* * I 

i * 

I * 

* * * * * * • * 
143 


75730.098

Oligomers • Adhesives. Coatings. Dispensing. Ught-Curing Systems 

April 16, 2012 

RE: Conflict Minerals 

To whom it may concem: 

This letter is to assure you that Dymax Corporation does not intentionally add any conflict minerals 

(tin, gold, tantalum (collan) and tungsten), to its ultraviolet (UV) and visible light curing products, 

oligomers or coatings and activator curing metal bonding adhesives. Furthermore, we have asked 

our suppliers not to ship products that contain conflict mineralslmetals that come from the 

Democratic Republic of Congo (DRC). 

If you have any questions, please feel free to contact me al 860-626-6341 or e-mail me at 

sthompson@dymax.com. 

Sincerely, 

DYMAX CORPORATION 

Susan R. Thompson 

EHS Manager 

TlICfrlbj_p'~lotla~_-.r<I"ba>ocIoo\IIbIIrII<fJIo:4~~Ilo.-<»l __ itoo_~lntl,lo"""""""~~.I'> ..... ~1lo.~.....t_io~!lonl.odlDlIIol ........ lnt<l",o",..,.""_d 

~<JlSo/;o.o,.....""""!'<I! ......... _~r.rlMllJl~-..Ilo.obIoInooIbJ' ...... HlJ1""u..n~biiIl'bl_"'lN"'~III'II:I-","JlI'II1.IoI~""~_"'~""""'''IMWlO!·'-.;Ioo:l'''''''''~ 

aPP'"".!Ie:I_~ll>e"""'_-"'''-'<1\~ • ....,_~ ....... ''''~too_yorM:.otoolJlr-r''''I/IO""""",Ibn<Jl~y_~I'IOIl'IO-q'''ttOo~ .... oeI .... '~.''''''_Iho~ltSOOf~ 

.... 

~ 

,...~."".p;$nI:_Il!' __ u-O""""'1Id. ... a~Q/!l.:.orneI,1l\N''"''l'~Ccol<n'"'''_o,.-_lIGt_..--.....oIt .. II::I~_~!Ola~ __ rtIpOIl_''"''-~Jloo!lotol"1!>oI 

... ~~.., 

D)'mUCorpDnltloIl 

860-.482.1010 

jofo@dymsx.com 

www.dymi':t.c9..!!l 

Dymu OIi\JDme~ &. CoaOOga 

860.52$.7006 

ohgomalS&toatlllg$@dyma:.::.com 

www.dynp:t-occom 

D1'I1M EuroptJ GmbH 

+49(0)611.962.71100 

!r'lfo_de@dylTl:u.a>m 

www.O'yma:t.dl! 

Dymu: UV AdtJmI:lvus & 

Equlpmam (Sheruhen) Co Uti 

+a6.155.B.3465159 

djrmII~a@dyma)(.CtI!!I 

www.dymll:t.com.cn 

Oyrru .... AIioJa {Hong Kong) Ltd 

+652.2460.7038 

dymaJ<8s1a@d~x.com 

w .... "qfyma:t.com en 

Oymu. Korea. LLC 1.12,2.764.3434 

Jnfo@dymalO:.kr 

www.rlymll11Q.M 
144 


75730.099

June 11'h 2011 

~fY; 

logitech 

Subject: Logitech Supplier Communication on "Conflict" Mineral Extraction 

Dear Supplier, 

Logitech wishes to bring to your attention the issue of mineral extraction and its connection to 

areas of the globe such as the Eastern region of the Democratic Republic of Congo (DRC). This 

region has been termed a "conflict region" because illegal mining profits by local military groups 

in the Eastern DRC are contributing to human rights abuses. 

Logitech does not source or buy metals directly, however, we are concerned by the allegations 

that metals illegally mined in the Democratic Republic of the Congo may be making their way into 

the electronics supply chain. The minerals of interest are: gold (Au), tantalum (Ta), tungsten (W) 

and tin (Sn). 

There are many challenges in tracking the origins of minerals, not least of which are the lack of a 

direct contractual relationship with mineral suppliers and no current infrastructure to track 

minerals through a multi-layered supply chain. However, Logitechis committed to source only 

materials from environmentally and socially responsible suppliers and in support of this, we will 

continue to survey our supply chain on an ongoing basis to better understand the source of 

minerals used in our component supply and attempt to trace the origin of the metals used. 

Logitech supports the work of the Electronic Industry Citizenship Coalition (EICC) and the Global 

e-Sustainability Initiative (GeSI) to understand how prevalent conflict minerals 

(http://enwikipedia.org/wiki/Conflict minerals) are in the electronics supply chain and how 

members of EICC and GeSI can effectively influence social and environmental issues associated 

with the mining of metals used in electronic products and establish a certification program for 

minerals used in our industry. 

We believe it is our responsibility to raise awareness on the issue of conflict minerals and 

encourage accountability in our supply chain until a recognizeed certification program is in place. 

Below are links to the EICC and GeSI statement on the issue of conflict minerals: 

http://www.eicc.info/PDF/EICC%20Statement%200n%20Minerals.pdf 

Logitech is committed to the highest standards of integrity and responsibility and requests our 

supply chain to share this work ethic. In support of this, we expect your commitment to work in 

partnership with Logitech to ensure that our respective supply chains do not source conflict 

minerals. 

This is an industry-wide challenge and a collaborative approach is required to yield an effective 

outcome. We ask that you and your extended sources of supply positively support the process of 

bringing greater transparency to the supply chain by cooperating with our inquiries and 

proactively monitoring this issue. 

If you have questions or need additional information, please contact the Logitech Social and 

Environmental Responsibility team on e-mail atww_compliance@logitech.com. 

j)~ t~ JpiepR ~,~ ivan 

/S'(/VP, rordwide Operations 
145 


75730.100

W I M A QUALITY 

ASSURANCE 

DECLARATION OF COMPLIANCE 

Components: WIMA Capacitors 

WIMA Type: all ranges 

Ref: The "Conflict Minerals Law" included as "Section 1502 of the Dodd-Frank 

Wallstreet Reform and Customer Protection Act" of the United States 

of America, requests to identify products which contain "Conflict Minerals" 

Based on our suppliers' information this is to declare that raw and semi-finished materials 

delivered to us needed for production of capacitors of all WIMA ranges, i. e. 

- Plastic Film Capacitors 

- Metallized Paper Capacitors (WIMA MP EMI Suppression Capacitors) 

- Double Layer Capacitors (WIMA SuperCap) 

do not contain any substances referred to as "conflict minerals". 

Department: Technical Support Date: October 2011 

WIMA Spezialvertrieb elektronischer Bauelemente GmbH & Co. KG 

Pfingstweidstr. 13 • 0-68199 Mannheim I GERMANY 

Tel: + 49 621 86295-0 • Fax: + 49 621 86295-96 

E-mail: sales@wima.delnternet: http://www.wima.com 
146 


75730.101

Supp!yChain 

I member of the General Motors Corporat1an Board of 

Directors., at th€ llfging of Kofi Annan, f'OrmefSecretary 

General of the United Nation',;. Furthermore, we increasingly global m,vllet for the auto industry. !n the 

next two years. the team wH! extend lt~ program scope 

to indude 60 top strategic local sUDpliers. As a direct 

as the European Principles of Socjal Responsibility and (esult, 14 Australian suppUers have secured increased 

the European Employee Forum. local manufacturing work worth A$Z6 mlUion per year in 

additlOnal revenue frDm Holden and, in some cases, have 

secured oooorhmities to oUbte for !'leW global supply 

BUILD SELL REINVEST GRI ABOUT 

quality and SQve:d large sums of money. 

In addilion. ~he u.s, Congl'css passed in 2010 legislatio,'i 

requiring reporting to the S€curlties and Exchange 

Commission on the content <l.nd SOlJrces of fOllr rneta\s in 

companies' prod,lcts: gold, tin. tantalum and tungsten. 

These raw materials <lfe of concern because certain 

mines in the Democratic Republic of the Congo (DRe) 

and J:ertain ",ines in countries that border ORe are 

important sources of minerals used to produce these 

metals. These particular mines are controlled by armed 

groups that finance thelf armed conflicts through mining 

actwities. The goat of the legislation is to identify and 

eliminate any content in compaflles' products that has 

been \nadverte~t!y derived from these mines, Gener<ll 

Motors S\IPPOrts this goo! <lfld is preparing for the 

sigflifkant task of idefltifylng and eliminating conflict 

minerals t"at may inadvertently have found their way 

lnto 01.lr supply chain. 

Localization 

Our polky is to generally build where we sell a'1d buy 

where we buHd. This practice malte$ commercial sense, 

not only for our company. but also for the markets and 

commumties in which we operate. A loca\lzed supply 

chain provides: 

It Commercia! benefits .. Localizatioll not only helps 

make our vehide~ competitIve, but also enables us 

to build vehicles that are adapted to SUlt unique 

local requirements and conditions that drive 

customecr enthusiasm and brand loyalty, increasing 

the potential for success in the marketplace. 

ical tomponentofthe 

in (hina, we contitlue to promote the Green Supply 

Chain Initiatw0. This initiative is aimed at improving the 

oerfQrf'rlance of our jojnt ventures' suppliers In support of 

the Chif'€-se gO~'ernment'5 goals of prornotmg energy 

efficiency and sustainable devdopment. It was initiated 

j" 2005 as 11 collaborative project between the World 

Environment Center, GM's 50/50 joint ventllre with 

Shanghai A>.)tomotivc industry Cooperation (SAIC)'~ 

Shanghai General Motors {SGM) -. and eight suppHers. 

Since its inceptlol1, this initiative has made significaf'lt 

measurable strides in sustainabJlity. Terry f. Yos!e, 

president and CEO, World Environment Center, observes, 

implementing 5ustainabie-deveiopment creates value 

for business and SOCiety. Through the Green Supply 

Chain inWative, the first undertaken by any joint 

venture auto manufacturing initiative in China. 

Shanghai General Motor:; has demotlStrated a forreaching commitment to advancing sustainable 

development across its manufacturing operations. Thl! 

results have strengthened the performance of GMs 

suppliers on a variety of indicators. Through thfs 

initiative, SGM and its suppliers have saved energy, 

impraved environmental quality and sovl!d large sums of 

money" 

The Green Supply InitiativE: has si(lce expanded to 

another GM joint veilt>.)re in China, and the rlI1m:,er of 

participating suppliers has growrl to 1<;15. To date, 750 

projects have been implemented. of which 383 

addresS<:d cleaner production and 367 addreSSed energy 

efficiency. The average payback period for the projects 

is approximately one year. The sUDpliers have invested 

over RMB196,000,OOO (equivalent to US:D $30,72:1,000 at 

an exchange rate of $f - RMB6.38) and achieved the 

foHowingannual savings: 

.. 1,187,OOOmetrictons/yearofwateru5e 

.. 74,000.,000. kW hours/yearof energy tise 

.. 2,OOO,OOOCUQ1C metersfyearof natural gas use 

.. 3,600 metric tonsfyearof coal use 

.. 3,7fJO metnc tons(year of die~el fuel use 

In addition, the suppliers have reduced their annual 

waste generation by: 

http://www.~msu$tajnab!Hry.com/SUPPL Y_CHAIN.html 

12-0S~06 9:48 PM 

f'age2of3 
147 


75730.102

SUpply Chain Responsibility - EMC Statement on Conflict Minerals - EMC 

"SupplyCl1aul 

Slavery am! Human Trafficl:mg 

Supply Chain EmisslOrls 

SuppjierD'Ye!'sity 

Supply Chain Security 

Supply Chain Goals and Performance 

\'Vorllplace 

Engage<lPeople 

Gollernan<:e and Integnty 

TransformativelT 

EMC Statement on Conflict Minerals 

http://WWN.emc.com/aboutlsustainabiHty/supply-chain/statement-on-confllct-minerats.htm 

12-05-069:4& PM 

'" Un<rodSiates A fAyAxour(t 

~ EMC Supplier Code of Conduct 

EMC Human Rlghts and Global 

LabofPlinciples 

EMC 8usiness Conduct 

Guidehnes 

Page 1 of 1 
148 


75730.103

fiAT Spa - ConfHct minerals 

fI~1 

Productsafa\y 

Customers 

,Oni,w:ngd,alOque.wlltl 

supph(!rs 

The Group recogrnzes value 10 woliling with peers to address global challenges across the 

automotive supply chain In particular, Chrysler Group in 2011 worked through the AlltoMotlve 

Industry Action Group (AIAG) to develop training on global working co!\drtions and formulate 

strategies to address the Dodd-Frank legislation aimed at tracmg the sources of certain mInerals that 

may onginate from the Democratic RepublIC of Congo and surroundmg countries Snould the 

regula nons implementing this legl'slatton be fn'\allzed, in 2012, Fiat Group plans to develop a template 

for 11s suppliers to report their soun;:e(s) lor these minerals, The Group will aiM begin to promote the 

sourcl!1g of pans and components utilizing conflict-free minerals 

Supplrer 

Center Media Center 

http://wwwJlatspa.com/en-UStsu5tainabiHtv/sodaCresponsibilitY/fornitori/Sllpplier_profUejPages{ctmflicCminera!s.aspX 

12-05-06 9;SO PM 

Page lef1 
149 


75730.104

Addressing Conflict Minerals. Leading CoUective Action Across Our industry I Dell 

S~Chain 

Addressing Conflict Minerals: Leading Collective Action Across Our Industry 

**** 

Many mdustries rely an certain minerals that are mmed in Africa to produce their products. These minerals Include 

cassitente, wolframite and coltan, which are ores that oontain tin, tantalum and tungsten, respectively. Because such 

metals are used in many products - electronics, vehicle airbag systems. airplanes, Jewelry and X-ray film - the 

demand for them is great 

The Democratic Republic of Conga (ORC) in Centra! Afnca is one of the places in the world where these natural 

resources can be found and mined in abundance, The ORC has been mired in a brutal conflict since 1998 and the 

resulting hosttlitles and human nghts abuses are largely fueled by the lJade of these "conflict minerals" 

Our Approach to Responsible Sourcing and Supplier Accountability 

As a manufacturer of products that contain gold, tantalum, tin and tungsten, 

Dell is committed to operating in a soclatly responSible way tt's Dell policy to 

refrain from purchasing from any known conflict sources, and we expect that 

our suppliers adhere to the same standards. We have nob"tied aU our 

suppliers of our policy on conflict minerals and have asked each supplier to 

provide us With a confirmation of their conflict-free status Dell also works 

diligently to educate suppliers, Invostors and customers on this issue 

through speaking engagements, workshops and stakeholder engagements 

The complexities of the metal supply chain pose many challenges. The 

mining of these minerals takes place long before a final product IS 

assembled, making it difficult, if not impOSSible, to trace the mln.erals' origins 

In addition, many of the minerals are smelted together with recyded melals, 

and at that point it is virtuaUy impoSSible to trace the minerals to their source 

Another challenge )S the Informal nature of the DRC's minerals economy 

Tracing the source of these minerals - from mine through smelter to final 

product - IS a complex challenge that we cannot address alone 

We're engaged with the Electronics Industry Citizenship Coalition (EICC), an orgamzalion devoted to improving 

social and environmental oondltions In electrOniCS supply chains. to develop a process that companies can use to 

track the ongln of these minerals regardless of the industry they WIll be used In. In 2011, the EICC launched the 

world's first confhct_free smelter (CFS) program, which tracks documentation from the smeller back to the mine of 

ongln 

Dell has been involved in many other efforts to bring us doser to a conflict-free supply dlam, We first noted OUf 

commitment to act on this issue in our 2010 Corporate ResponSibility Report. Our current report continues to report 

on our commitment and recent efforts. In fa1i2009, we reached out to our competitors artd inVited them to Join us in 

ISSUing a call to acf!on to other Industnes that use these minerals in their final products 

In October 2010, we hosted un Internationel multistakeholder event on conflict minerals. The conference, which was 

tied to the Corporete ResponSibility Officers (eRG) Summit in Paris. convened leaders from the IT Industry, NGOs 

and the Orgamzat!on for Economic Co-operal!On and Development (OECD) to dnve other Industries to take action on 

responsib!esourcing 

Dell conbnues to calla borate within our industry and with others on thiS Important issue, Industry researcn indicates 

that the e!ec1ronics industry is responsible for only about 30 percent oflhe global usage oflhese minerals. The more 

mdustries that agree changes are needed 10 address conflict minerats, the greater the potential for marketplace 

incentives to drive those changes 

Beyond Our Supply Chain; A Timeline of Steady Progress in Promoting Collective Action 

http://content.deU,com/us!en/gen/d/corp~commfconmct-mineraI5.a5Dx 

12-05-069'51 PM 

Page10fZ 
150 


75730.105

Addressing Confli<t Minerals" leading Collective Action Across Our Industry I Dell 

i 

H Explore I"lllated timlliine content 

• Learn more about Deli's mUlti-industry forum 

• Learn more about RESOLVE and their traceability study of the electronics supply cham 

• Learn more about the EICC and Global e-Sustainability Initiative (GeSI)'s two pIlot programs tn the DRC 

• learn more about the Frank-Dodd bIll and Dell partiCIpated In a committee to Inform recommendations of the 

bill 

• learn more about the Corporate ResponSibility Officers (eRO) 

• Dell joined a multlstakeholder working group to offer input into the rule making process of the new leg!slation 

and more 

• Learn more about the EICC and its launch of the world"s first ronfhct-free smelter (CFS) program and list of 

compliant tantalum smeiters 

Del! is working toward the goal of responsible sourcing globally, mdudmg from the ORe, through a conlllct-free 

supply chain, confirmed by a robust verificatton system 

Dell is committed to working Wlth other industnes, the government and NGOs to reach an agreement on a solution to 

purchase conflicHree minerals and to help implement thiS solution" Del! WIll continue to par1!cipate In the industry 

conversation, proactively seek soluttons and encourage eVel)'One who has a final product that contains these 

minerals tO]D1n us in these efforts Beyond responsible sourcing, we think about the big picture when it comes to 

suppher standards and accountabtlity 

http://content.de!tcom/us/en/genjd/corp-comm/confllct-minerals.aspx 

12-0S-069"SlPM 

Page20f2 
151 


75730.106

ProdottiOisidratantl 

a News Archive 

a Conflict-Free Minerals Products 

AU levosi!'s products are DRC Conflict Free. 

LevosiJ's shares the concern of the semiconductor and automotive 

industy about Conflict Minerals. Feel fre to ask us further 

information on this topic and/or a Conflict-Free Minerals 

declaratIOn on our products. 

Congo Conflict Minerals Act of 2009 

Dodd-Frank Wal! Street Reform and Consumer Protection Act 

http://www.levosil.com!enghsh {legg i _news.phpJid= 76 

12-05-069:54 PM 

news 

NewsArchive a 

3-5-2011 

Conflict-Free 

:;:~~:~~ Ctr~'<M AU Levosil's 

products are 

Conflict Mmera!s Free. 

Read 

2-3-2011 

Interpack 

12-18 Mav 

2011 •" 

, . Levosil wi!! be 

in Interpack 

2011. Our booth win be Hal! 

11 A13 ... » Read 

Page10fl 
152 


75730.107

Congo Conflict Minerals 12-0$-079:36AM 

Congo Conflict Minerals 

As a result, clarification IS still needed regarding when the final conflict minerals rule will be Issued, and when companies will have to Ilnp!ement the rule. 

Copynght © 1995-2012 A!tera Corpor~t,on. AI! Rights Reserved. 

http· f /www.altera.com/support/devices/rellabilityfenvironmental/metals/rel-congo-confHct.html Page 1 of 1 
153 


75730.108

Conflict Minerals - SustalnabHity·· About Samsung - Samsung 12-05-079"42 AM 

PRODUCTS BUSINESS APPS SUPPORT MY ACCOUNT 

Conflict Minerals 

Corporate profile 

Investor relations 

, Sustainable Management 

, Talent Managemerlt 

, lntegntyManagement 

, Environment 

, SoclaiContnbutlOn 

, Product & SeNlces 

, PartnerColiaboralion 

> Sustamablltty Reports 

ConnictMinerals 

Human Trafficking Policy 

Citizenship 

Our businesses 

Global Procurement 

Management 

Careers 

Eeo Vision & Plans 

OIJI'SlJstainabi!it.Y .•. ~ . Af90rt:l ~""': 

Sourcing Minerals Responsibly 

gold soufced from the DRC have become commonly known as "conflict minerals" 

min!Uals In the mBnllfacluo[lg of c<mSl.lrner eleGlrolllcs prodt.fcts 10 enS\lre responsIble mineral sourclJlg practices 

Overview of Conflict·free Mineral Sourcing Initiatives 

validatIOn, cerllfylOg that they sourt:e only conflict-free material. At present, the CFS has published a list of CFS certified tantalum smelters 

S'm'larhsts!ortln,lungsIBnandgoldareexpectedin\h~nearfuture 

The EICC/GaSI also designed and distributed a due dihgence tool. the Confltcl Mlflefals Repor1ing Templa!e and Dashboard for companies 10 

use when conducting supply cham audits The 1001 mcorporales the Organization for EGilrlOmlC Co,opBratlon and Developmeflt's (O£:CD) 

gu,dellne5andmayb~u$edtorulfi!istatutoryduedillgencerBqulremerits 

Samsung's Progress Toward Conflict-free Mineral Sourcing 

Samsung Electrt;)mcs tllk~s the I~sue of =nfhd mmerals very senously \No are seeking ways to elimEnate the USe of conrllct mmerals, including 

issu~sassoqatedw,lh ourmdustry 

Recent progress 

http://www,samsung.(om Ius! aboutsamSUng/sustainablHty/conflictminera!s/conflictminerals.html Pagelof2 
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Conflict Minerals - SustainJbllity - About Silmsung - Sam sung 

http"/fwww.samsung.comfus/aboutsamsung/sustalnability/conflictminerals/conflictmin€fals.html Page2of2 
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Raw Material Procurement Statement - H,C. Starck 12-05-079:45 AM 

H.CStarck 

Raw Material Procurement Statement 

H.C. Starck is one of the leading global producers of technology metals and advanced ceramics 

as powder or fabricated product. We are committed to ensuring the safety, health and protection 

of people who come in contact with our products and the environment. As responsible corporate 

citizens, we meet and are continually striving to exceed governmental, industry and 

environmental standards worldwide. 

H.C. Starck fully supports the position of the Electronic Industry Citizenship Coalition (EICC) and 

the Organization for Economic Co-operation and Development (OECD) to avoid the use of 

metallic ores which finance or benefit armed groups in the Democratic Republic of the Congo 

(DRC) or adjoining countries. H.C. Starck also is aware of section 1502 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act pertaining to "Conflict Minerals". We are committed 

to actively supporting our customers with their diligence and disclosure requirements as required 

by the United States Securities and Exchange Commission's final regulations, which are 

expected to be issued in the first half of 2012. In support of government and private initiatives to 

develop Conflict-Free supply chain systems, H.C. Starck is a founding member of the PublicPrivate Alliance for Responsible Minerals Trade (PPA). 

H.C. Starck condemns all activities in connection with the illegal or unlawful exploitation of 

mineral resources, no matter where such activities take place. We only purchase raw materials 

that are Conflict-Free and that meet the requirements of the OECD Due Diligence Guidance for 

Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. The EICC has declared 

H.C. Starck's tantalum supply chain free of conflict materials and lists H.C. Starck as a ConflictFree Smelter. 

We have implemented a certified Responsible Supply Chain Management System (RSCM) as a 

core control system to guarantee that we purchase only conflict-free raw materials. The RSCM 

system ensures efficient and competitive purchasing as well as supports sourcing from suppliers 

that act in accordance with environmental and social sustainabilily - be it miners, traders, or slag 

and scrap metal providers such as smelters or manufacturers. With a variety of control 

mechanisms, we perform thorough due diligence on all raw material offers based on current 

OECD and EICC guidelines before we sign any contract or accept any material. The RSCM 

fulfils all requirements of a management system standard required by ISO. The successful 

implementation of the system within H.C. Starck has been confirmed by the ex1ernal auditor 

Bureau Veritas. 

Document: 

Pagelof2 
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!\f<.jjJ~~AlI~-tri 

Declaration of Metal Conflict-Free 

.~H~f~~~#~*~ffl~ •• »$P~~~fA!\f<.jjJ~~AlI~~~: 

Yageo Corporation herein declare the metal Conflict-Free on products supplied to customers 

• U\t{jf~ r&0 6] iJl;iE.~Mlth ¥'-'!fJrm ~.~Oithjif%~(Au) , i!!(Ta) 'MJ,(W) , ~(Co) , ~(Sn) 

~.~AlI~4.~!\f<.4M.OO~#*.OO'~~*~~#~.jjJ~~~~.~~.~~.#*~ 

~~._~·~~'TW.~~o~~AlIf~~~r!\f<.jjJ~~.J :~*~~#~.~Rq,. 

~:i!(Rwanda)' ,w"f-:i!(Uganda) , nilI'HtIz.(Burundi)' t!!i.\JJb§.(Tanzania)' 1j-§.(Kenya) (~*~ 

.~~ •••• ~~~.~fA~* •• ~.~) • 

Yageo Corporation is taking and will take due diligence within our supply chain to assure 

"ORC Conflict-Free" for the metals of gold (Au), tantalum (Ta), tungsten (W), cobalt(Co) 

and tin (Sn) are not derived from or sourced from mines in conflict areas of the Democratic 

Republic of Congo (ORC), or illegally taxed on trade routes, either of which are controlled by 

non-governmental military groups, or unlawful military factions. Trade routes not confirmed to 

be "Conflict Free" include direct exports from the ORC, as well as exports through Rwanda, 

Uganda, Burundi, Tanzania and Kenya (countries of whom the U.N. Security Council note are 

global export routes for ORC-mined minerals). 

*-i:' iiJ1%,f1£1or ~ ~~$P ~~ .i'affl-i--i-All * ·H~!\f<.1jj'~~j[ (ORC Conflict-Free) • 

We would like to confirm metals used in Products sold to Yageo Corporation are "ORC 

Conflict-Free" . 

Supplier Company (0-iiJ.£ ~): • ~H1Ji~ r&0-iiJ Yageo Corporation 

Authorized Signature C;.:'iiJ i'! '\t!l;.!.#t{li.A.1fct): &tii.;t J.F. Lue 

Title (.1ft): w,n'. Director GQM 

Date U\\~ 8 }!Jl) : October 22,2010 

COfDOT'lItion JE, 233-1, Saoqiao Rd., Xlrtdian, Taipei 231, Taiwan l +800.2.2917.7555 f. +886_2.2917.507a YAGEO 
157 


75730.112

.. ~ .. •• 'J 

kester!'·· .. Conflict-Free Supply Chain Due Diligence 

February 2012 

Several metals commonly used in the electronics industry: gold (Au), tantalum (Ta), tungsten (W) and tin (Sn) have a 

variety of sources, including what has been termed as a "Conflict Region H• Most recently, the eastern region afthe 

Democratic Republic of Congo (DRC) has been detenmined to be a "Conflict Region". The following are statements 

describing our policy on procurement of metals from mines in "Conflict Regions~ for all Kester Global Operations. 

Kester only sells tin (Sn) alloy as a component of OUf soldering paste and soldering bar or wire products. 

Kester will undertake reasonable due diligence within our supply chain to assure that tin {Sn} alloy is not 

procured as a "Conflict Meta!." A ~Conflict Metar is a metal derived from ore sourced from mines in conflict 

areas of the Democratic Republic of Congo (ORC), or illegally taxed on trade routes, either of which are 

controlled by non~government military groups, or unlawful military factions. Trade routes not confirmed to be 

~Conflict Free" include direct exports from the ORC, as well as exports through Rwanda, Uganda, Burundi, 

Tanzania and Kenya (countries of whom the U.N. Security Council note are global export routes for DRe-mined 

minerals). 

Since 2009 Kester has participated in the research project conducted by RESOLVE (www.resolv.org)forthe 

Electronics Industry Citizenship Coalition (EICC, www.eicc.info) and Global e-Sustainability Initiative 

(GeSI, www.gesLorg) to positively influence the social and environmentaf conditions in the metals supply chain. 

Kester sources tin from smelters validated as DRe Conflict-Free using the EICC-GeSI Conflict-Free Smelter 

(CFS) list. Kester maintains the EICC-GeSI Conflict Minerals Reporting Template software for sources of tin from 

smelters validated as ORC Conflict-Free. 

Sincerely, 

Carrnelle Giblin 

Vice President and General Manager 

For additional information on this subject contact: 

Tony DiDomenico 

Environmental, Health and Safety Manager 

_ 800 West Thomdale Avenue _ Itasca, illinOIS 60143-1341 

cgiblin@kester.com 

630-616-<i855 - Phone 

tdidomenico@kester.com 

630.616.6844 - Phone 

• Telephone: 80Q.2,KESTER _ www.kester com 
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75730.113

The Costs and Consequences of Dodd-Frank Section 1502: Impacts on 

America and the Congo 

The United States House of Representatives 

Committee on Financial Services 

Subcommittee on International Monetary Policy and Trade 

Testimony by Mvemba Phezo Dizolele 

Visiting Fellow, Hoover Institution on War, Revolution and Peace 

Thursday, May 10, 2012 

Chairman Miller, Ranking Member McCarthy and Members of the 

Subcommittee on International Monetary Policy and Trade: 

Thank you for the invitation and honor to testify before your committee 

today. This hearing is the most important and pertinent discussion yet on 

Section 1502 of the Dodd-Frank Act and its consequences for the people of 

the Democratic Republic of Congo. 

My name is Mvemba Phezo Dizolele, a writer, foreign policy analyst and 

visiting fellow at Stanford University's Hoover Institution on War, 

Revolution and Peace. I am currently an adjunct professor at Johns 

Hopkins University's School of Advanced International Studies where I 

teach a course aptly named Conflict and the African Great Lakes. Still, the 

views expressed in this statement are mine, and mine alone. 

Today, I speak before you as a Congolese, and a concerned US citizen and 

consumer. I own two laptops, a smart phone and several other electronics, 

which mayor may not contain minerals from Congo. 

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I would like to thank our friends in the many organizations that promoted 

Section 1502. I know that they galvanized thousands of people in a 

campaign to raise awareness on the continued conflict in Congo. Thanks to 

their work, many more people know about Congo today. 

The best way to assess the cost and consequences of Section 1502 is to look 

at its premise, claims and impact on institution-building and the lives of 

Congolese. 

In essence, Section 1502 seeks to bring peace to eastern Congo by 

regulating mineral trade through US law, cleaning up the supply chain and 

reducing militias' access to financial means. Such a regulation would de 

facto curb the violence and human rights abuses. This approach to conflict 

resolution, however, is not grounded in the sound fundamentals of 

political economy and public policy. Section 1502 may work in the shortrun, but it is not sustainable. 

Mineral trade in eastern Congo is part of a wider war economy, which can 

only be regulated either by the most powerful armed groups working in 

collusion, the biggest armed group imposing its way on the smaller ones or 

by their backers seeking to maximize profits and preserve their own 

interests. As such, Section 1502 builds on a weak foundation and requires 

the buy-in of the very negative actors it seeks to tame. This approach 

perverts basic peacemaking models and rewards criminals and would-be 

spoilers. 

Proponents of Section 1502 build their case on the most widely accepted 

narrative of U.s. Congo policy, which defines the predicament as a 

humanitarian crisis through the binary prism of sexual violence and the socalled conflict minerals. This narrative has now become the standard 

perspective through which Americans view Congo, and many NGOs, 

activists, academics and policymakers shape their work around this prism. 

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Not only is this narrative wrong, it has led to several ineffective initiatives, 

which have effectively turned U.S. Congo policy into a Kivu policy. The 

Kivus represent no more than one fifteenth of Congo. Their problems stem 

from the failure of the state to discharge its duties and should be treated 

only as a part of a comprehensive national policymaking. 

This binary prism also reflects the bleakest image of Congo and 

disenfranchises the Congolese people before the world, casting them as 

incompetent and incapable to solve their own problems. It then becomes 

imperative that they be rescued from their hopeless situation by the good 

peoples of the world. 

As a result, the Congolese have been excluded from the policy discussion 

around Section 1502. Their exclusion is such an accepted norm that no 

Congolese was invited to speak at the Securities Exchange Commission 

Public Roundtable on Dodd-Frank 1502 on October 18, 2011 here in 

Washington, DC. The Congolese experts who had traveled for the event 

were confined to their seats in the auditorium, listening to Western 

activists and corporations debate the fate of Congo's resources. As it was at 

the Berlin Conference in 1885 when Western powers divided Africa, the 

primary stakeholders were simply excluded. 

This exclusion, however, has a cost. No one understands mining in Congo 

better than the Congolese. They have managed their country's mining 

sector for four decades. By failing to engage the Congolese in an honest 

dialogue on the relationship between conflict and mining, proponents of 

Section 1502 failed to spur a national ownership of the initiative through a 

true partnership with the Congolese. 

Congo may be a dysfunctional state, but the Congolese are among the 

world's most resourceful peoples. Over the past several years, they have 

quietly and effectively undertaken landmark initiatives that are positively 

changing the mining landscape in their country. These initiatives include 

the Lutundula Report, which exposed the opaque exploitation of mineral 

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resources and led to a comprehensive revision of mining contracts. As a 

result, several companies, including Canada's First Quantum, lost their 

exploitation titles. 

Pressured by local civil society groups, the Parliament pushed for the 

restructuring of the Chinese barter investment deal, revisiting its terms and 

downgrading its value from $9 billion to $6 billion. The Senate published a 

report by the Mutamba Commission, which audited the mining sector and 

documented millions of dollars of financial loss that the Congolese State 

incurs due to mismanagement and bad governance. 

Today, as we discuss Section 1502, the Parliament, the Federation des 

Entreprises Congolaise, which is the equivalent of the US Chamber of 

Commerce, and civil society organizations supported by international 

groups, such as the Open Society Foundations, are engaged in discussions 

setting the guidelines for the new mining code that would be enacted in the 

near future. 

The current mining code, which was written over a decade ago as part of a 

World Bank project, disproportionately favors foreign investors at the 

expense of the Congolese State and the Congolese people. So far, 

proponents of Section 1502 have marched to their own beat, antagonizing 

corporations, inculpating consumers and ignoring Congolese initiatives. 

If they really want to affect positive change in Congo's mining sector, here 

is an opportunity for them to join the debate and policymaking in Kinshasa 

to ensure that the new mining code addresses their concerns. This is the 

best way to empower the Congolese, strengthen local institutions and 

induce national ownership of the transparency they seek. 

The current 1502 narrative oversimplifies the problem and makes 

American taxpayers believe that if only the challenges of sexual violence 

and conflict minerals were solved, then Congo will get back on track and 

peace will follow. 

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Supporters of 1502 claim that minerals, such as gold, wolframite, coltan 

and tin, which are extracted from areas under the control of armed groups, 

drive the conflict, and therefore, curbing the trade would bring peace to the 

region. 

Nothing, however, is farther from the truth. The Congo crisis is first and 

foremost political and requires political solutions. Sexual violence and the 

looting of natural resources are ramifications and symptoms, not the causes 

of the political crisis. The current violence flare-up in North Kivu, which 

has displaced thousands of civilians, underscores the political nature of the 

crisis. 

Thus, the activists have reversed the cause-to-effect sequence of 

developments. In the Kivus, the local economy rested primarily on 

agriculture and commodity trading, which suffered severe setbacks at the 

onset of the war in the late 90's as the conflict ushered a rapid destruction 

of farms, fields and road infrastructure. The ensuing proliferation of 

militias, which exacted (and still do) a heavy toll on the peasants and 

commodity traders, drove the populations off the fields into the emerging 

artisanal mining. 

In eastern Congo, from Butembo in North Kivu to Nzibira in the hills of 

South Kivu, thousands of families now live off this informal mineral trade, 

which generates between $300 million and $1.4 billion a year. The long 

supply chain ensures that people who would otherwise be unemployed 

and starve have a minimal income. These people, however, are likely to 

pay a high price for the legislation and lose their livelihood. 

Back in September 2010, they experienced the effects of a mmmg 

moratorium for the first time. In an attempt to pre-empt the US legislation 

and its proponents, Congolese President Joseph Kabila suspended artisanal 

mining operations in the region. Expectedly, the outcome was devastating 

for the population, as the thousands of Congolese who depend on this 

trade could not find work in a country with 8.9 percent and 81.7 percent 

unemployment and underemployment rates, respectively. Army units 

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deployed to protect the mmmg areas turned their assignment into a 

business opportunity and joined the black market trade. Six months later, 

unable to enforce his decision, Kabila lifted the ban. 

Currently, it is nearly impossible to separate clean ore from bloody 

minerals imported from the region. Today, while the concerned industries 

figure out a credible certification process, anticipated compliance with the 

legislation increases transaction cost in one of the world's most corrupt 

countries. In order to protect their reputation, the electronics and high 

technology industries contemplate boycotting minerals from the region. 

The decision by US companies to either scale back or stop sourcing ore 

from eastern Congo means that the people of the Kivus are likely to 

experience the same devastating blow that hurt the local economy when 

President Kabila imposed the mining moratorium in September 2010. 

My first experience with the so-called conflict minerals dates from July 

2006. I spent several weeks in Congo as a journalist, covering the conflict in 

the east and the historic presidential and legislative elections. 

In lturi, I was embedded with Moroccan Blue Helmets keeping the peace 

between Hemas and Lendus in and around Bunia. On Lake Mobutu, on the 

border with Uganda, I spent days with Uruguayan naval forces struggling 

to intercept weapon transfers from Uganda to armed groups. In South 

Kivu, I went on patrols with Pakistani soldiers seeking out the elusive, but 

deadly Rwandan FDLR and Interahamwe militiamen. 

I visited coltan mine pits in Nzibira in South Kivu, where I witnessed firsthand the substandard work conditions of underage miners. At the Panzi 

Hospital in Bukavu, I came face-to-face with the ugliness of sexual violence 

by armed groups. 

During that trip it became clear to me that the Kinshasa government's 

inability to assert state authority is the real cause of the insecurity that set 

off the emergence of militias and sustains the plunder of natural resources. 

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With the collapse of the state, old, latent community grievances stemming 

from land disputes, demographic pressures, ethnic tensions, and control of 

resources and trading routes has turned eastern Congo into a tinderbox. 

Ambitious demagogues only need to embrace a cause and find a sponsor 

- a community, business or political elite or a state - to start a militia. The 

three main militias, FOLR, CNOP and P ARECO, have exploited these 

dormant grievances and benefitted from either community or state 

support. The pattern remains the same for the three dozen smaller militias 

that operate in the area. 

Mineral exploitation, however, is but one source of revenue for these 

armed groups. They literally rule over the territories they control, taxing 

every economic activity and terrorizing the civilians into submission. 

Losing access to the mines will marginally affect their capacity to generate 

funds, considering that weapons and ammunitions are relatively 

inexpensive. In other words, if there were no minerals, the conflict would 

still rage on as armed groups would find other sources of revenue. As long 

as the government is incapable to impose its authority and address the 

various grievances, the region will not know peace. 

The government has failed to build a professional army, perhaps the single 

most important element in ensuring Congo's territorial integrity and the 

security of its citizens and coveted natural resources. 

Without such a competent professional military, the ORC is unable to stop 

the proliferation of militias. Instead, the government of ORC has chosen to 

compromise with militiamen and co-opt them into the national army with 

no disruption of their ranks and files. The lack of an adequate national 

integration program has resulted in the establishment of parallel 

commands and structures within the national army. This means that the 

militias who join the national army remain in their areas of control and 

keep their command nearly intact. This arrangement allows the "former" 

militiamen to perpetrate abuses on the civilian populations and keep their 

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access to local resources all under the protection of a Congolese military 

uniform. 

The predatory designs of neighboring Rwanda and Uganda also fuel the 

volatile situation. Both Rwanda and Uganda have invaded Congo twice, 

with continued incursions into eastern Congo where they still support 

militias. Several UN reports have linked both countries to Congolese 

militias and the looting of resources. 

Furthermore, Uganda, Rwanda, Burundi and Tanzania benefit from the 

illicit mineral trade in eastern Congo as they serve as primary export 

routes. And while Uganda, Rwanda and Burundi have no gold, diamond 

or tantalum deposits of significance, they have become important exporters 

of these minerals. In the past, high level government officials and senior 

army officers were implicated in this trade. 

Whether this is still the case today is unclear. Nevertheless, it seems highly 

unlikely that these countries could export such large amounts of minerals 

without the collusion of government officials. Whether these leaders are 

actively sourcing these goods or simply turning a blind eye to the trade 

matters little to the bottom line: the result is still the same. 

Oversimplification of issues often produces inadequate, counterproductive 

policies. Section 1502 and its proponents who seek to curb US companies 

penalize the people of eastern Congo, but do little to curtail the militias and 

their backers. We know the primary supporters of militias, whether in 

Congo, in neighboring countries or overseas. We also know the primary 

export routes and which neighbors profit from this trade. It is troubling 

that the legislation uses a shotgun approach to the illicit mineral trade 

quandary and inculpates all of Congo's nine neighbors. 

For instance, the legislation treats Zambia, a mineral rich country that is not 

involved with militias in eastern Congo, but borders DRC to the south, 

with the same suspicion as Rwanda, Uganda, Burundi and Tanzania, 

which are the primary export routes. 

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This conflict, which has indirectly caused the death of over 6 million 

Congolese, has gone on for too long, and is now a scourge on the face of 

the planet. As we struggle to solve this calamity we would be better served 

by looking into Congo's early history. 

Between 1885 and 1924, Congo, then known as Congo Free State or the 

private estate of Belgium's King Leopold II, was the theater of yet another 

holocaust driven not by mineral exploitation, but by the world's hunger for 

a commodity. The industrial revolution demanded rubber and more of it. 

Business' insatiable need for rubber and King Leopold's immeasurable 

greed pushed the Belgians to design one of the world's most repressive 

forced-labor structures. 

The King's agents established a quota system, which required that each 

village produce a specific amount of rubber over a time period. Force 

Publique troops were then used to enforce the quota and demand taxes of 

the population. Failure to meet the quota or tax requirements led soldiers 

to chop off limbs of the unlucky Congolese who fell below the mark. 

Villages were torched, women raped and the people left to starve to death 

or die of diseases. By 1924, nearly 10 million Congolese had perished under 

the yoke of the Leopoldian regime. 

The similarity to the current situation is eerie. Like the conflict minerals, 

which are primarily exploited in the east, rubber was only exploited in 

some areas of the Congo Free State. Both problems were symptoms of 

larger systemic and regime perversions that subjugated an entire country. 

But there is a big difference between the approach the activists took to 

expose and denounce King Leopold's crimes and the way we choose to 

deal with the calamity today. 

At a time when there was no computer, no internet, no fax and the 

telephone was still a curious invention, a shipping clerk in Liverpool 

decided to expose the mighty king and launched a campaign that would 

9 
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75730.122

not end until Leopold relinquished possession of the colony and the regime 

and the system changed. 

Working under great stress, those activists could have easily chosen the 

easy route to fund raising on behalf of the victims, and send them medicine 

and physicians to mend their wounds. They could have also elected to set 

up a blood-free certification scheme to ensure that the rubber that reached 

Europe and America was clean. 

No. they knew that such a timid campaign would make them Leopold's 

tacit accomplices and enablers, and prolong the suffering of the Congolese. 

Instead, they set out to destroy and change the repressive system and took 

the necessary time to accomplish their goal. 

Today, at a time of instant satellite imagery, internet, instant messaging 

and other technological advances, our activism is lackluster, and devoid of 

moral courage in the face of the unnecessary suffering of the Congolese. 

We hedge our action and refuse to see the reality before us by covering our 

faces like little children, hoping it would go away. Instead, we search for 

enemies where they do not exist. 

Last month, over 300 Congolese civil society organizations and their 

international counterparts showed great courage and published a report on 

security sector reform in Congo. This report calls for an end to the conflict 

through a comprehensive reform of security institutions, which include the 

military, law enforcement institutions such as the police and the courts, as 

well as customs and revenue agencies. 

Mr. Chairman, with your permission, I would like to submit a copy of that 

report for the record. 

In Congo, businesses are not the enemies; armed groups and their 

international and local backers are. If we are serious we should go after 

them and help restore state authority so that the Congolese government 

10 
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75730.123

can finally meet its obligations toward the people. This means that together 

we need to work on ending impunity at all levels of the polity. Only then 

can the Congolese know real peace. 

The Congolese people want and deserve peace. We should empower them 

to that end. The Congolese government's inability to protect its people or 

control its territory undermines progress on everything else. A competent, 

professional military - organized, resourced, trained and vetted - is 

essential to solving problems from displacement, recruitment of child 

soldiers and gender-based violence, to economic growth or the trade in 

conflict minerals. 

In the absence of a strong Congolese state to protect its interests, Section 

1502 will effectively certify the looting of Congo's minerals. 

Thank you. 

11 
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75730.129

we wear" compliance 

Statement 

of 

Stephen Lamar 

Executive Vice President 

American Apparel & Footwear Association 

TIle Costs and Con..equences of Dodd-Frank Section 1502: Impacts on 

America and the Congo 

Subcommittee on International Monetary Policy and Trade 

HOlL."ie Financial Services Committee 

Thursday, May 10, 2012 

Thank you for providing us a chance to testify before the Subcommittee this morning on 

the Costs and Consequences of Dodd Frank Section 1502. 

The American Apparel & Footwear Association (MFA) is the national trade association 

of the apparel and footwear industries, and their suppliers. Our members include 

companies that design, manufacture, transport, distribute, and sell apparel and 

footwear in and throughout the United States and globally. AAFA has about 350 

member companies who own, produce for, or market more than 900 brands of clothing, 

footwear, and other fashion products. Nearly all stakeholders in tbe industry supply 

chain are represented in our membership, including large, medium, smaU, and micro 

businesses; retailers of all sizes; designers; manufacturers; importers; wholesalers; 

private label; brand owners; and suppliers of inputs and services. OUf members include 

publicly traded and private companies, as well as suppliers to both. Our industry 

employs about 4 million U.S. workers, about 3 percent of the U.S. workforce. 

AB you can imagine, OUT industries are among the most globalized in the world. OUT 

members make and sell product in virtually every country in the world. AB a result, 

even the smallest companies often have complicated supply chains that stretch across 

continents, countries, and factories. Working Vvith multiple partners in multiple time 

zones and facing multiple regulatory environments, they have to manage a diverse array 

of compliance challenges covering labor, health, environment, product safety, 

intellectual property, cbemical management, product quality, security, 

labeling, and customs. So wby am I here? Because the impact of Dodd 

Frank Section 1502 is reverberating through industries across the 

spectrum, including ours in a significant way. 

It is with this background in mind tbat we offer tbese comments. 

160lNorthKentStreet 

Arlington, VA 11209 

(703)514-1864 

(E!OO)S:I.O-2l62 

I?03) 5l2-674l fax 

w...w,w€wear,Qrg 
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75730.130

21Page 

We strongly support the goals of the Conflict Minerals provision in the Dodd Frank Act. 

Collectively and individually, our members have participated in similar kinds of 

initiatives to ensure that our sourcing does not inadvertently support undesirable 

practices, such as forced child labor toiling in the cotton fields in Uzbekistan, leather 

from cattle raised on illegally cleared rainforest land in Brazil, or wool from mulesed 

sheep in Australia. 

While we support efforts to prevent Conflict Minerals from entering into global supply 

chains, we remain deeply concerned over several elements of this provision on our 

industry. Let me explain. 

First, the impact of Section 1502 on the business community is deceptively 

large - much larger than we believe was intended. Thefact that I am 

testifying here today - on a bill that was largely intended to focus on the 

electronics industry - is one indicator ofthatfact. 

Although the law initially targets about 6000 publicly traded companies, it also affects 

those companies' suppliers - in many cases small privately held businesses - as they are 

being increasingly notified by their customers that they will have to certify that their 

own supply chains are conflict free. Many companies in our industry initially thought 

they were not covered but are only now finding out - in some cases in the past few 

weeks that they are impacted. Many others still don't even know. We have yet to 

locate an apparel or footwear company who can tell us with certainty that they are not 

affected. 

Why? Many businesses in our industry probably do not realize that their products may 

contain one of the four conflict minerals. When you think of a garment or a shoe, you 

think of the fabric, the fit, the design, or maybe the price. But you usually don't think of 

wearing tin unless perhaps you are watching The Wizard ojOz. Indeed, initial reviews 

suggested these minerals could be present only in some accessories and certain 

electronic components, such as the "light-up" assemblies in certain kids' shoes. But 

companies are now learning that tin, for example, is a commonly used filler in certain 

PVC used in soles of shoes or in metal components in buttons, zippers, and heel tips. In 

fact, several of our member labs suggest that the use of tin has actually increased in 

recent years to replace metals like lead or cadmium, which have been targeted by recent 

product safety initiatives, including the Consumer Product Safety Improvement Act 

(CPSIA) passed by Congress in 2008. 

In our industry, but I suspect in many others, there is still an incredible lack of 

awareness of this provision, much less the breadth of companies this law will affect. 

Second, the provision has a major effect on those in the business 

community who are least able to affect change in the conflict zones in 

Africa. 

In our industry, the uses of these minerals are de minimis even after accounting for 

greater uses in recent years. Yet the smallest apparel or footwear company will be 
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31PJEe 

equally liable as a company that is a major consumer' oflarge quantities of these 

minerals. Although we are now learning that tin is more commonly used than we 

thought, its use is confined in our industry to very, very small quantities that are 

encountered inconsistently across a great many styles and brands. 

Compounding this is the simple fact that fashion changes all the time. Except in rare 

circumstances, design houses are constantly varying component pieces and suppliers to 

accommodate ever changing styles and consumer demands. In one year, a company 

may find that four products, or styles, out of thousands trigger Section 1502 reporting. 

The following year may be zero and the year after that may be 20. Compare this to an 

electronics company that sources millions of the same components over several years 

with no design or input changes. Just as important, the electronic or accessory 

components containing the subject minerals in a garment or shoe are often secondary to 

the manufacturing of the clothing or footwear item. In most cases they will have been 

purchased off the shelf from a supplier who is itself many steps removed from the 

mines, or even the smelters, where these minerals originate. 

Moreover, only about four percent of the world's production of tin - which is the 

mineral that is probably of the biggest concern to our industry - comes from the Congo 

and surrounding areas. This means that we are expending extraordinary resources to 

trace the origin of a mineral that sometimes is encountered at de minimis levels in a few 

of our products, depending on the season and style, to make sure they do not originate 

in mines that are found in a region that accounts for four percent of global production of 

that mineral. 

The bottom line is that pressure to create and promote conflict free mineral supply 

chains will not come from our industry, even if we could somehow declare ourselves to 

be 100 percent conflict free. While the apparel and footwear industries are leaders in 

social compliance in many areas, we simply don't have the purchasing power or the 

business relationships to affect change in this area. However, if other industries, such as 

the major users of these minerals, are successful in affecting change, our industries will 

naturally follow suit and absorb that change as well. 

Third, the costs associated with Section 1502 are enormous. 

Here again, we believe the costs are far larger than the authors expected. Some 

estimates by Tulane University and the National Association of Manufacturers (NAM) 

put the cost at $8 or $9 billion, respectively. The costs could be far higher, especially as 

the impact on other industries like ours is factored into the equation. In the apparel and 

footwear industry alone it could be in the hundreds of millions of dollars. Consider this: 

Unless a company is not publicly traded and sells to non-publicly traded customers. it 

will have to incur costs to determine if any of the four conflict minerals are found in any 

quantity in its supply chain in a manner that is necessary to the functionality or 

production of the product. If such determinations find minerals, conflict free or not, 

'Unless of course that company is not publicly traded and does not sell to non-publicly traded customers 

in which case it won't be affected at all. 
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41Page 

further regulatory costs are incurred in the form of audits and due diligence. Additional 

costs on top of that come in the form of supply chain training, compliance and legal 

reviews, and the like. In our industry, such costs would be incurred each season as the 

thousands of new styles of product introduced must be scrubbed to determine if they 

contain these minerals and, if so, the source of those minerals. 

Absorbing such costs at this point in our economic recovery would be extraordinarily 

difficult, especially in our price competitive industry where margins are always tight. 

Moreover, such cost pressures would come as our supply chains are still working to 

incorporate other more established regulatory requirements, such as recently enacted 

product safety laws. 

Fourth, the lack of tracing technology and infrastructure means that 

companies do not have a clear and affordable path for compliance. 

The draft regulations do not allow companies to simply declare that they do not know if 

they have conflict minerals in their supply chain because there are insufficient tools to 

answer the question properly. Yet this reality is affecting most companies today. Our 

industry is still struggling to create verifiable and effective tracing technologies for 

materials that make up a central part of our supply chains, such as wool or cotton. We 

are learning that even greater challenges exist in the minerals industry, which account 

for far smaller parts of our sourcing. 

Going forward, I'd like to make a few recommendations: 

First - The regulations need to put on hold until the infrastructure and technology exist 

to allow companies to come into compliance. Forcing companies to make public 

disclosures without the proper tools to verify those disclosures is costly, damaging to the 

underlying goal, and erodes public confidence in the corporate disclosure requirements. 

Second - Likewise, the regulations should be put on hold until there is a comprehensive 

cost/benefit analysis in place that enables policy makers to understand if the regulations 

can work as intended. Such an approach is a basic element of good government and is 

consistent with a recent Executive Order directing agencies to conduct such cost benefit 

reviews. 

Third Once the tools are in place, the regulations need to be phased-in to focus on 

those industries whose consumption of these minerals will have a major impact in 

achieving the underlying goal of 1502. 

Fourth - The final regulations need to address several critical threshold issues, in 

addition to the above point about focusing the application of this rule to the industries, 

products, and components that have the most impact so that the rule would have most 

effectively achieve its underlying goal. In our comments to the SEC, we detailed a 

number of these, including: 
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SIPage 

Clear definition of the phrase "necessary to the functionality or production" to 

permit exemptions where the primary function ofthe product does not involve 

conflict minerals. 

• The designation of a de minimis provision. 

Clarification that recycled material is not treated as originating in the DRC or 

adjoining countries, and therefore does not trigger further reporting or audit 

requirements. 

Clarifications that the primary obligations should rest with those in the supply 

chain who are closest to the manufacturing and component purchases vis-a.-vis 

retailers and licensors. 

Flexible, but not prescriptive, guidance on what constitutes "due diligence" and 

"reasonable inquiries" to accommodate widely varying supply chains in different 

industries. 

Fifth - Once regulations are in place, there needs to be flexible enforcement 

accompanied by education. This is particularly since SEC penalties can involve heavy 

fines and jail time. New regulations take time to understand and absorb, especially 

given to day's complicated global supply chains. 

* * * * 

Thank you again for providing this opportunity to testify on this important issue. As you 

can imagine, this rule has caused considerable confusion in our industry and in others, 

particularly since Section 1502 was included in Dodd Frank legislation during 

Conference without any hearings or opportunities for prior stakeholder input. 

Although we support the goals of the Section 1502 Dodd Frank Act to help ensure that 

such minerals not be used to fuel African conflicts, we are concerned that the regulation 

may result in significant compliance costs and burdens to achieve a stated goal that is 

difficult, if not impossible to meet. We are also concerned that many companies may 

still be unaware of the potential compliance requirements they may face. 

We believe the best approach forward is to first answer key questions about the 

regulations and then define a clear, predictable, and phased in regulatory and 

enforcement regime that focuses on those products and processes with the greatest 

opportunity to make a difference. 
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COJ€FERSNCE EPISCO?ALENI;.TIONALE DU G01'!GQ 

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325.8 Kinsllas.;<l ,'(}umb~ 

Tel, : 011243 991124 869C 

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RcpubHque : )~rnocrllt;que du Congo 

WRrlTEN TESTIMONY FOR THE RECORD 

TO THE 

SUBCOMMITTEE ON INTERNATIONAL MONETARY POLICY AND TRADE 

GIVEN BY 

BISHOP NICOLAS DJOMO LOLA 

PRESIDENT OF THE CATHOLIC BISHOPS' CONFERENCE OF THE CONGO 

MAY 10,20J2 I •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 

I am Bishop Nicolas Djomo Lola, Bishop of the Diocese ofTshumbe in the Democratic Republic 

ofthe Congo (DRC) and President of the Catholic Bishops' Conference of the Congo (CENCO 

in French). I would like to thank the Honorable Representative Gary Miller, Chairman of the 

Subcommittee, and the Honorable Representative Carolyn McCarthy, Ranking Member, for the 

opportunity to testify before you today. 

I do not come to you as a businessman, nor as a financial expert. J am a religious leader, a 

pastor, who is deeply disturbed by the terrible violence, misery and su fiering that has dominated 

life in Eastern DRC since J 996. 

You have heard the horrific stories of death and destruction. You know of the millions of deaths 

due to violence and the ghastly number of our women who have been brutally beaten and raped. 

In addition to the victims who have been maimed, tortured and raped, the violence has led to the 

loss of health centers to treat common, curable diseases. There has been a disintegration of 

families, villages and communities. One prominent driver of this violence is the illicit mining 

and trade in connict minerals conducted by the many armed groups in Eastern DRe. 

In order to protect human life and dignity, the Church in the Democratic Republic of the Congo 

(DRC) publicly supported the passage of Section 1502 of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act. In October 2011, I came to the United SLates Lo defend the 

Congolese people and to argue for strong and effective regulations that would respect the intent 

of Section 1502 of the Dodd-Frank Act. I met with State Department officials, Members of 

Congress, and Chairman Mary Schapiro of the Securities and Exchange Commission. Today, in 

the name of our Conference of Bishopsand the thousands of people we serve, I urge Congress to 

encourage the Securities and Exchange Commission (SEC) to: 

• establish regulations that are robust and rigorous enough to accurately show the origin of 

the minerals that will be used to produce products that we use every day; 

• finalize the regulations as soon as possible and to set specific dates by which companies 

start reporting; 

• include all companies as proposed by the SEC; and 

• ensure that key information provided by the companies to the SEC ismade availabie to 

the public and the Congolese people to verify. 
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This situation is the largest humanitarian tragedy of our time, but it is only the latest chapter 

in a long history of armed pillage of our country. Our beloved nation fell prey to what is now 

called the "resource curse" long before the term was coined. In colonial times our land was 

devastated for its wood, ivory and precious metals, using slave labor to extract resources. 

Only a few years after our country's independence, a civil war broke out in the province of 

Katanga, fueled in large part by the industrial-level exploitation of copper. Today, a year 

after celebrating our 50th anniversary of independence, our natural resources continue to be a 

source of misery and suffering, instead of being a resource for peace and prosperity. Even if 

mining is a major source of national income, this wealth has not significantly benefited the 

people of the Congo. They live under social and human development conditions that place 

them near the bottom of the poorest countries ofthe world. Sadly, this same fate has befallen 

many other African countries, whether it be the "resource curse" of oil in Nigeria and Chad, 

or "blood diamonds" in Sierra Leone. 

Throughout DRC's long and bitter history, the Catholic Church has stood by the Congolese 

people. The Church is one of the largest and most trusted institutions in the Congo. The 

Church's nationwide network of schools and health institutions have educated and cared for 

millions of Congolese. Our institutional presence reaches the remotest, and often the most 

dangerous, regions of the country. This network is second only to that of the national 

government, and frequently works where the government cannot. 

The Church also has established many diocesan-level human development institutions that 

work with international NGOs such as Catholic Relief Services (CRS). We empower people 

to produce better crops, set up small businesses and give hope to women who are victims of 

rape used as a weapon of war. One excellent example of a development project addresses a 

disease that is devastating one of the country's staple crops, cassava. Working with CRS and 

funding from the Bill and Melinda Gates Foundation, we are producing a new variety of 

cassava that is resistant to the disease and thus restoring production to a level that can feed 

whole families and even villages. 

To counter the decades of war and bad governance, the Church created a network of Peace 

and Justice Commissions aimed at empowering civil society to defend the life and dignity of 

all Congolese and to protect people from the effects of war. For example, during the last 

national elections, the Church fielded 30,000 electoral monitors, more than any other 

institution, national or international. The Church monitors brought a degree of transparency 

and accountability to a new and still struggling democracy. The final Church report on the 

elections was widely acknowledged and quoted by a number of international observers and 

institutions. Through funding from the State Department's Bureau of Population, Refugees, 

and Migration (BPRM) and USAID, communities are forming protection committees and 

developing community protection plans. These protection plans include the installation of 

high-frequency (HF) radios that are used as part of an early warning system to send and 

receive timely information on security threats and incidents, as well as to communicate more 

efficiently about the evolving humanitarian situation in these remote areas. 

Church staff members, with our development partners, work with communities in the mining 

areas to protect them from violence. Our staff has even met with militia leaders in an attempt to 

2 
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75730.126

end the violence and the illicit mining in order to rebuild the communities that have been 

devastated. We know that most people in Eastern Congo believe that their poverty is linked to 

the violence and civil war that surround them. They also realize that this violence is directly 

connected to,and fueled by,illicit mining. 

Observers in Eastern Congo have seen a clear geographical overlap between the mining areas 

and the areas where the incidence of rape is high. Once a militia group gains access to a mine's 

resources, they use the revenue from the sale of the minerals to buy arms and recruit new militia 

and mine workers, thereby militarizing the connict and furthering the cycle of violence. 

Illicit mines and minerals also fuel other cnuses of violence and suffering. Many local and 

regional sources of conflictstem fi'om questions of identity, who is perceived to be an indigenous 

Congolese.lndigenous Congolese have the right to own land. Those who are not Congolese, even 

if they have resided in Congo for years, can be denied ownership of land. The mines and the 

revenue from the sale of the minerals militarize the contlict over identity and land by injecting 

deadly firearms that sustain the conllict and make it more intractable. Militias use the firearms 

purchased from the sale of connict minerals to extort money in the lorm of "illicit taxes" from 

citizens. The Church maintainsthat if the illicit, unregulated and unoJ'ficialmincs were removed 

from militia control and transformed to legal, transparent and official operations, these mines 

would then serve the common good of the Congolese people. 

Church staff has gone to mining operations. We have seen the unsafe, dangerous and deplorable 

conditions under which many people, including children, work. With armed guards standing over 

them, these people are like slave laboLWe have also seen the terrible environmental damage 

caused by these mines, leeching toxins into the soil and water so that villagers have no safe 

drinking water and their farmlands are destroyed. 

The Church has learned that there is some controversy over the impact of the Dodd-Frank law. 

We are aware that the de facio embargo instituted by some companies is leading to the loss of 

work in the mines. From our work and extensive network on the ground, we know that most 

people in Eastern Congo earn their living, meager as it may be, through subsistence agriculture. 

The mines "employ" a much smaller portion or the population and their working conditions often 

violate their basic, God-given human dignity. Many more people have been displaced and 

damaged by the violence than have reccived"income" frol11 illicit mines. 

The Church also knows that in the long term, people's livelihoods and futures cannot truly 

improve while armed groups control the illcgal economy that the mines provide. If we can sever 

the link between the mines and the militias,we believe that we can curtail the violence and allow 

people to rebuild their communities and resolve the underlying causes of their conflicts. The 

hundreds of thousands of people who are currently displaced and dependent on emergency 

assistance could return to their homes. The women who have been traumatized by rape 

could receive healing care. Health clinics and schools couldbe rebuilt. Development assistance 

couldbe expanded so people can move from their meager dependence 011 subsistence agriculture 

to better crops. Better crops mean families will have more food, can send their surpluses to 

market, can educate their children and may be able to seek employment off the fmm. All of 
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75730.127

these gains in the medium and long term will greatly surpa~s the loss of demeaning work in the 

mines. 

The passage of the Dodd-Frank law has already had a positive impact. In our informal 

talks,small-scale mineral buyers (comptoirs) tell liS that they are willing to work with civil 

society and international businesses to establish legal and transparent supply chains that would 

re-establish termal, regulated and safe mines. We hear that international businesses have arrived 

in Eastern Congo to explore how such legal and transparent supply chains can be built. USAID 

has started to invest in this effort to facilitate its progress. 

Again I am not an expert on the mechanisms needed to implcment the legislation; however, I 

would note, according to an April 20 II International Crisis Group (lCG) report,that since 2009 

two Organiz.ation for Economic Cooperation and Development (OECD) initiatives by European 

institutions have attempted to establish traceability and certitication initiatives. In addition, four 

trading centers set up in North and South Kivu work in accordance with the provisions of UN 

Security Council Resolution 1906 of 2009 that improve transparency. The two OECD efforts 

had no legal authority, whereas the Dodd-Frank Act has added U.S. Government legal status. 

The Ell is now preparing regulations similar to the Dodd-Frank Act. On March 1,2011 the 

Congolese Mining Authorities introduced traceability procedures and began to formalize the 

informal sector in eastern Congo. Thc ICG says thai these efferts sti II require improving the 

administrative capacity of the DRC and surrounding countries, addressing corruption in the 

DRC, and strengthening security sector reform. 

A recent UN Experts Report to the Security Council said that mil1eral ore production in NOlth 

and South Kivu fell in 20 II as the number of buyers ler untagged minerals from eastern DRC 

declined. Conflict financing also fell. By contrast, non-conflict areas have seen greater 

implementation of due diligence and traceability systems, improved governance and rising 

expo ItS. Although large amounts of conflict minerals still leave the country, if international 

businesses favor non-conflict mines, they and international donors can partncr with the 

International Conference on the Great Lakes to strengthen its efforts to stopthe remaining illicit 

trade in minerals. This would complement the efterts in the DRe to do the same in Eastern 

Congo. 

These are still daunting tasks, andthey require the unqualitied SUppOit of the international 

business community to do its palt. 

For too many decades Africa's export of oil, diamonds. precious metals, and minerols hasbeen 

more of a curse than a blessing, but this situation is beginning to take a turn tor the better. The 

international movement to ban "blood diamonds" that created the Kimberly process was a great 

global success story. The "Publish What You Pay" initiative is another globa! movemel1l to 

empower people in developing countries to hold thcir governments accountable for the income 

that they rcceivefrom natural resource extraction. 

Section 1502 of the Dodd-Frank Act opens yet another chapter in the effort to del ink conflict, 

violence and the resultant suffering from the international trade in minerals. It was a bold move 

that showed United States global leadership at its best. This act was duly noted by other 

4 
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countries of the world. and by international business and businesses in OUf own country. It 

displayed Ihe willingness of the U.S. government 10 place the moral values thaI Americans hold 

dear over a blind search for prornable commerce, no matter what the social costs in foreign 

countries. The people of the Congo saw this legislation as a true expression of solidarity with the 

women, families and \liIlages who have suffered at the hands of those who destroy our 

communities to mine our resources. Improvements in transparency of Ihe minerals trade in the 

Eastern Congo are happening largely because of the legislation that you passed in these hallowed 

halls. Jt is our hope that the rules that the SEC will establish will live up to the laudable goals of 

this provision in the Dodd-Frank. Act. 

The Church in the Congo trusts that the inlemational business community can and will join us to 

protect the life and human dignity of the Congolese people by conducting legal. transparent and 

accountable international commerce. We are confident that theydo not want to be part of the 

violence and suffering thaI has plagued Eastern Congo over the last fifteen years. We ask the 

powerful and resource-rich companies of the United States to consider the heavy and gruesome 

social cOSts of the illicit mining sector in Eastern Congo as theycalculate theircosts and actions 10 

comply with Section 1502 of the Dodd-Frank Act. Thesecalculalions are not just simple cost 

estimates on a spreadsheet. Inslead. thiswork must be seen in terms of a global social balance 

sheet that places greatest priority on the value of the lives that can be saved by the simple act of 

conducting due diligence to determine whether legitimate business transactions are tainted by Ihe 

violence and suffering. 

We have full confidence in the good wifl of the Congress. the SEC and business sectorto realize 

that this is not the time to water down SEC regulations to half measures that may save money. 

but cost lives. What the people of the Congo need and the U.S. Government and American 

companies can provide aresimple and responsible actions that increase transparency and reflect 

the moral values that made the United States a respected world leader. 

{' 

1/, .....,..~'.-

.1Jj Nicolas OJOMO LOLA 

Bishop of the Diocese ofTshumbe and 

President of the Catholic Bishops' Conference 

of the Congo (CENCO) 

5 
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75730.134

Before the Subcommittee on International Monetary Policy and Trade 

U.S. House of Representatives 

Hearing on 

"The Costs and Consequences of Dodd-Frank Section 1502: Impacts on America and the 

Congo" 

Statement of 

Steve Pudles 

Chief Executive Officer of Spectral Response LLC 

Chairman of the Board of IPC - Association Connecting Electronics Industries 

May 10,2011 

Chairman Miller, Ranking Member McCarthy and Members of the Subcommittee, I am pleased 

to be here today to discuss the Security and Exchange Commission's proposed rule on 

implementation of Section 1502 of the Dodd-Frank Act. 

I am Steve Pudles, CEO of Spectral Response LLC, an employee-owned electronics 

manufacturing services (EMS) company located in Lawrenceville, Georgia. We employ 135 

people at our 72,000 square feet facility and I'm proud to say that in 2008 we were Georgia's 

manufacturer of the year in the medium company category. We provide a wide range of services 

for our customers from electronics assembly to product build to third party logistics. And our 

customers range from small start-ups to large publicly traded corporations. 

I am here today as well in my capacity as the Chairman of the Board of IPC -Association 

Connecting Electronics Industries. The IPC is a U.S. headquartered global trade association, 

representing all facets of the electronic industry, including but not limited to companies that 

design, manufacture and assemble printed circuit boards. Contrary to common perception of 

electronics manufacturing, the majority ofIPC's members are small businesses. Printed circuit 

boards and electronic assemblies are vital to the operation of electronics products ranging from 

computers, cell phones, pacemakers, to sophisticated missile defense systems. IPC has more than 

3,000 member companies of which 1,900 are located in the U.S. 

The subject of this hearing is critically important to IPC members who collectively manufacture 

products that incorporate all four of the key metals refined from conflict minerals. Both Original 

Equipment Manufacturers (OEMs) and electronic manufacturing service (EMS) providers, such 

as my own company, use tin-based solder to attach components to printed circuit boards through 

soldering. These components inelude integrated circuits (chips), connectors, capacitors, 

batteries, etc., all of which contain one or more conflict minerals. Many printed circuit boards 

are finished with tin surface finishes. A number of printed circuit boards also contain gold 

plating for specific electrical connections. 

Steve Pudles, Spectral Response LLC, May 10, 2012 Page 1 
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75730.135

At the outset of my testimony, I would like to recognize the good intentions of those members of 

Congress who authored Section 1502. By all accounts, the human rights situation in the 

Democratic Republic of Congo is grave. While Section 1502 has come under very legitimate 

scrutiny, I am grateful that my government struggles with the complexities of international 

conflict resolution and human rights crises. 

IPC has been engaged in the conflict minerals issue for the last several years. IPC has worked 

with its members that supply electronic solder to encourage their suppliers --- the smelters --- to 

engage in conflict free sourcing. !PC is actively participating, along with its members, in the 

pilot implementation of the OECD due diligence guidance. IPC members are working to develop 

a due diligence guide for small businesses in the electronics manufacturing sector and are 

developing supply chain communication standards as well. 

IPC supports the underlying goal of Section 1502; but quite frankly, I am concerned that the 

SEC's draft implementing regulations places great burdens on the private sector without having 

the intended positive effect on people in the ORC. In fact, there is mounting evidence of 

unintended negative consequences associated with companies' efforts to prepare for compliance 

with anticipated regulations. 

I do not purport to be a subject matter expert on the issues that plague the DRC, but I can speak 

to the effects of the proposed regulations on companies like my own. In my testimony today, I 

would like to share with the Subcommittee how the draft rule is likely to impact my business and 

the electronics industry. Understanding the true costs and challenges of this regulation is an 

important aspect of finalizing reasonable requirements on the private sector. 

Finally, I would like to encourage the SEC to implement the requirements of Section 1502 in a 

manner that supports the goals of the statute without unduly burdening U.S. manufacturing 

industries or causing unnecessary disruptions ofthe minerals trade, which is vital to the 

livelihood of the people ofthe DRC. To this end, I would like to offer my industry's views about 

sensible changes or additions to the proposed rule that could dramatically mitigate the costs 

while maintaining the spirit of Section 1502. 

I. Costs of Implementation 

Members ofthe committee make no mistake, the regulations proposed by the SEC will impose a 

significant cost on my company and companies like mine. The irony, of course, is that my company 

is not an SEC issuer and so, in theory, we are not the subject ofthe regulations. In practice, however, 

the forthcoming regulations will impact us through the due diligence needs of our customers, over a 

quarter of which are SEC issuers. 

Briefly, I would like to talk about these costs in the context of my company. Over the last several 

months my customers have asked me to begin auditing my supply base. Each of my customers 

has had a different due date for information and when I talk to peers at other companies; they are 

experiencing the same thing. Audit requests from customers are sweeping through the industry 

and the regulation has not even been released. 

Steve Pudles, Spectral Response LLC, May 10, 2012 Page 2 
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75730.136

My company has 15,000 part numbers growing to 20,000 by the end of year. Determining the 

mineral content in all these parts is a herculean task not to mention the extensive auditing of my 

supply base with the hope they will be able to trace the raw material in their parts to a supplier 

and then to a smelter and then to the mine. 

I expect that I will have to hire an audit company to perform the audit and I will have to hire 

additional staff to manage the audits. I will also have to buy a software program to collect the 

data ensuring that the data is compatible with both my suppliers and my customers. 

A variety of cost analyses have been conducted on the proposed rule i

,2,3,4, An independent 

analysis ofthe costs, conducted at the Payson Center for International Development at Tulane 

University Law SchoolS at the request of Senator Durbin, estimated total costs of $7.9 billion, 

over \00 times the estimate by the SEC. 

More specifically, in the electronics industry, an IPC survel of our members in the electronic 

interconnection portion ofthe electronics supply chain indicated median costs in excess of 

$230,000 per year to comply with Dodd-Frank. This is a significant expenditure for companies 

in my industry which operate on very slim profit margins - industry average of 6,6% in 20 117. 

PCB and EMS companies and their direct suppliers make up a small part of the entire electronics 

industry. In this group of industry segments alone, the estimated cost impact of due diligence is 

estimated at roughly 279 million dollars in the first year, with ongoing annual costs expected to 

be around 165 million dollars. 

As a chief executive working hard to keep my company profitable in difficult economic times, I 

am troubled that the SEC's analysis on the impact of the regulation significantly underestimates 

the impact and cost to U.S, manufacturers. The SEC has underestimated the cost number of 

issuers affected by the rule, failed to account for all of the derivatives regulated under the 

proposed rule, underestimated the cost of compliance for affected issuers, and failed to consider 

the enormous burden on the supply chain. Just as we should not ignore the human rights 

violations in the DRC, we should not remain blind to the real costs of these regulations. By 

appreciating the burden to companies like mine, sensible changes can be made to the draft 

regulation, 

1 Chris Bayer, Tulane University, "A Critical Analysis of the SEC and NAM Economic Impact Models and the 

Proposal ofa 3" Model in view of the Implementation of Section 15020fthe Dodd-Frank Wall Street Reform and 

Consumer Protection Act, October 17, 20 I L 

2 IPe, "Results of an IPC Survey on the Impact ofU .S, Conflict Minerals Reporting Requirements." February 20 II. 

3 75 Ref. Reg. 80966, 

'National Association of Manufacturers (NAM), Comments submitted to the SEC. March 2, 201 L 

, Chris Bayer, Tulane University, "A Critical Analysis ofthe SEC and NAM Economic Impact Models and the 

Proposal of a 3'd Model in view of the Implementation of Section 15020fthe Dodd-Frank Wall Street Reform and 

Consumer Protection Act, October 17,201 L 

"IPe, "Results of an IPC Survey on the Impact ofU,S. Conflict Minerals Reporting Requirements." February 201 L 

7 IPC Global Quarterly EMS Statistical Program, 

Steve Pudles, Spectral Response LLC, May 10, 2012 Page 3 
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75730.137

n. Comments on the Proposed Regulations 

The SEC has faced a challenging task in drafting regulations to implement Section 1502 of 

Dodd-Frank. At IPC, we do appreciate the extra time the SEC has taken to finalize a rule, and we 

are hopeful that this final rule will take into account the concerns the electronics industry has 

articulated since passage of Dodd-Frank. 

The anticipated compliance burdens stemming from the draft regulations are, in a large part, 

related to a small number of provisions exacerbated by very short deadlines on the private sector. 

Accordingly, a few key regulatory provisions, when paired with sufficient implementation time, 

could greatly decrease the burdens associated with the regulations, while still meeting the 

underlying goals of Section 1502 of the Dodd-Frank legislation. 

I'd like to use the remainder of my time to highlight a few of these key recommendations, which 

arc further detailed in fPC's comments to the SEC. 8 

A. Phase-in Implementation 

The anticipation of the regulations has already resulted in a de-facto embargo on minerals from 

the DRC. Due to the absence of broad-scale tracking and traceability for minerals from the 

DRC, a number of companies have sought to avoid conflict associated minerals by altogether 

avoiding procurement of minerals from the region. 

Congo's share of world tin sales dropped to 2 percent last year from about 4 percent in 2008, 

when it was the fifth-largest supplier, according to an article9

. In North Kivu, home to the 

country's biggest tin mines, mineral sales have fallen more than 80 percent in the past three 

years, according to the mines' ministry statistics. 10 This has caused disruption in the minerals 

trade and is causing significant financial hardship to thousands that depend on the legitimate 

minerals trade for their livelihoods. 

The most valuable change the SEC could make to its draft rule is the inclusion of a reasonable 

phase-in provision giving companies, like my own, a transition period to understand the final 

regulations and query our supply chains accordingly. Doing so would ensure that compliance 

with regulatory and customer requirements would be done effectively and efficiently. 

Additionally, a phased implementation of conflict minerals regulations will also better align 

regulatory requirements with developing traceability and transparency systems, thus reducing the 

unintended negative consequences of the regulations. 

, IPC Comments on SEC Proposed Rule on Conflict Minerals, 17 CFR Parts 229 and 249, [Release no. 34-63547; 

File No. S7-40-10]. RJN 3235-AK48, IPC-Association Connecting Electronics Industries, March 2, 2011 

9 Bloomberg News. Congo Clashes Thwart Plans to Export Conflict-Free Minerals. May 2, 2012. 

10 Congo Clashes Thwart Plans to Export Conflict-Free Minerals, By Michael J. Kavanagh, Bloomberg, May 2, 

2012 

Steve Pudles, Spectral Response LLC. May 10,2012 Page 4 
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According to a United Nations report II the implementation of due diligence programs, 

specifically traceability systems in the ORC is severely lacking. For many mines and smelters 

the desire to implement due diligence measures is present but the necessary infrastructure to do 

so is non-existent. Certain non-conflict areas have been able to implement due diligence 

programs and as a result, these areas have seen improved governance, mineral production, and 

export of minerals. In addition, buyers for minerals that are not "bagged and tagged" have 

decreased, except for three smelters in China. According to a recent GECO reportl2, areas that 

have yet to implement due diligence measures continue to struggle. The UN report states: 

"In areas where no traceability systems have been introduced, particularly the 

Kivus and Maniema, mineral production and exports have fallen. This has not 

only decreased conflict financing, but also weakened mining sector governance, 

with a greater proportion of trade becoming criminalized and with continued 

strong involvement by military andlor armed groups." 

IPC members are actively working to improve transparency and accountability within their 

supply chains. I want to commend our sister trade associations, !TRI, Electronic Industry 

Citizenship Coalition (EICC), Global e-Sustainability Initiative (GeSI) for their tireless efforts 

over the past several years in the ORC to certify legitimate minerals trade and establish smelter 

audit programs. At best, these programs could take another 1-2 years to be fully functionaL 

Failure to establish a realistic, implementable time-line for required supply chain transparency 

will result in continuing significant, negative unintended consequences for those engaged in 

legitimate minerals trade. It is highly unlikely that a full scale-up ofthese programs will be 

possible in time to allow issuers to rely upon them in the year immediately following 

implementation of the regulations. 

A phase-in of the regulations will allow industry and local governments to continue to make 

progress on due diligence measures that will benefit the region. During the phase-in period, IPC 

recommends that issuers be required to disclose to the SEC: I) that specific conflict minerals are 

necessary to the functionality of a product manufactured by the issuer; 2) the company's conflict 

minerals policy; 3) the company's efforts to exercise due diligence on the conflict minerals used 

in their product. IPC recommends that during this phase-in period, companies that are unable to 

determine the source of their conflict minerals would not be required to complete a CMR, as the 

legislation requires such a measure only for companies whose conflict minerals did originate in 

the ORC or adjacent countries. 

Implementation of this phase-in would provide for an orderly, cost-efficient transition that 

promotes the goals of the legislation without inflicting undue burdens and harm upon U.S. 

11 United Nations Security CounciL Letter dated 29 November 2011 from the Chair of the Security Council 

Committee established pursuant to resolution 1533 (2004) concerning the Democratic Republic ofthe Congo 

addressed to the President of the Security CounciL December 2, 2011. 

http://www.un.org/gaisearch/view doe.asp?symbol=S/201I!738. 

12 Upstream Implementation of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals 

from Conflict-Affected and High-Risk Areas. May 2012. 

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issuers, their suppliers, and those engaged in the legitimate trade of conflict minerals from the 

ORC. 

B. Indeterminate Category 

The SEC can also help mitigate the unintended consequence of a de facto ban by establishing a 

transitional category of conflict minerals of indeterminate source. This third category is 

envisioned to be of a short and temporary nature according to a schedule that will allow enough 

time for implementation of supply chain traceability in the DRC and adjacent countries. By 

providing a third category of conflict minerals for a transitional period approach, companies will not 

be encouraged to impose a de-facto ban on legitimate trade from the DRC in order to avoid 

identifYing their products as supporting conflict in the DRC. 

C. De-Minimis 

Manufacturers, including myself, will find it difficult to determine not only the presence of each 

mineral but the specific amount contained in each product. In my opinion, an effective regulation 

would focus on economically significant uses of conf1ict minerals. The SEC can accomplish this 

by instituting a de-minimis threshold. Establishing a de-minimis threshold would allow the SEC 

to focus on products containing a significant amount of conf1ict minerals in a manner that will 

change supply chain behavior. Should the SEC not wish to implement permanent de minimis 

standards, IPC recommends the use of de minimis standards for phasing-in the regulation. By 

focusing only on significant uses of conflict minerals first, the SEC would improve the efficiency 

of implementation and ease the compliance burden on some of the less significant users of 

conflict minerals, while maintaining consistency with the intent and goals of the rules. 

D. Synchronized Reporting Schedule 

Although my company is not a SEC tiler, many of my customers are. Therefore, in order to keep 

their business, [ must comply with customer requests to provide the necessary information on the 

presence and source of conflict minerals in the products. [ am not alone. Many electronics 

manufacturing companies are not SEC filers, leaving them in the same situation as me. The SEC 

can significantly reduce the substantial burden on the supply chain by implementing a single 

reporting date for all issuers. Requiring reports throughout the year, in concert with each issuer's 

annual report will require my company to constantly be replying to conflict minerals inquiries, 

posing a significant burden. Because my customers are likely to be on different reporting 

schedules, I will likely have to conduct due diligence and support third party audits repeatedly 

throughout the year. A single reporting date will allow for increased efficiency and thus lower 

costs, without reducing the effectiveness of the regulations. 

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E. Exemption for Uecycled and Scrap Materials 

The electronics industry is committed to environmentally sensible practices and has been 

involved in a variety of efforts to further that objective. Many companies, including my 

suppliers, use recycled metals in order to reduce the amount of virgin materials required in the 

manufacturing process. It is imperative that the SEC does not diminish these efforts by adding 

significant regulatory burdens to the use of recycled or reclaimed conflict minerals. The final rule 

should include an alternative approach for recycled or scrap sources that is practical and does not 

overly burden recycled materials so as to discourage their use. 

An issuer, or the supplier of an issuer, using a recycled material containing conflict minerals will 

not be able to provide any of the details required in a CMR. The traceability of the reclaimed 

metals is impossible to track due to the various forms of recycling and thousands of 

consolidators, reclaimers, and scrap dealers both foreign and domestic. Instead, issuers should 

have a reasonable basis for believing the material is recycled and maintain auditable records to 

support the determination. IPC believes that due diligence is the appropriate requirement for 

verifying recycled or reclaimed conflict minerals. 

Use of recycled materials is a significant part of the metals trade and needed to decrease the demand 

for minerals from the conflict regions in the DRC or adjoining countries. 

F. The SEC Should Provide Non-Binding Examples of Appropriate 

Due Diligence 

Given the varying circumstances affecting the broad range of companies impacted by this rule, 

the SEC should not prescribe specific due diligence requirements as it would impose significant 

burdens, especially to companies that are small businesses. The SEC should, however, provide 

assistance to companies by identifying examples of acceptable due diligence such as industry 

developed smelter validation audits, the bag and tag scheme being developed by ITRI, 

information or standards provided by the Department of State or other federal agencies, the 

OECD standards, and others. Provision of a list of acceptable standards and guidance will 

provide important assistance to companies without hampering their ability to comply in a manner 

that is both efficient and appropriate for their circumstances. 

G. The SEC Should Clearly Define Covered Products. 

The electronics sector I represent typically assembles electronics for Original Equipment 

Manufacturers (OEMs) or name brands. Although many of these items contain conflict minerals, 

my company typically does not control selection of suppliers or material sources for the majority 

of products we manufacture. Further, this may put my company in the position where I do not 

have sufficient leverage over a supplier selected by an OEM, placing an excessive burden on my 

company. Issuers who purchase or assemble products from an approved supplier list controlled 

by their customers should be exempted from the proposed reporting requirements for those items 

they do not specify. 

Steve Pudles, Spectral Response LLC, May 10, 2012 Page 7 
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The SEC should not consider conflict minerals necessary to the production ofa product if they 

are not contained in the product. The SEC should not consider conflict minerals necessary to the 

production of a product even if the tool or machine containing conflict minerals was 

manufactured for the purpose of producing the product. Such an approach would be much 

broader than intended by the legislation. Additionally, such an approach would be very difficult 

for the SEC to implement or enforce, given the difficulty of determining and verifying which 

equipment is designed for what production process. Finally, this reporting may be unnecessarily 

duplicative, as any issuer manufacturing tools or machinery would be required to comply with 

the proposal if conflict minerals arc necessary for the functionality of the tool or machine. 

III. Conclusion 

In conclusion, on behalf of my company and IPC's over 3,000 members, I urge the SEC to 

implement the requirements of Section 1502 in a manner that supports the goals of the statute 

without unduly burdening U.S. manufacturing industries or causing unnecessary disruptions of 

the legitimate minerals trade, which is vital to the livelihood ofthe people of the DRe. 

Thank you for the opportunity to address you today. 

Steve Pudles, Spectral Response LLC, May 10, 2012 Page 8 
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Laura E. Seay 

May 10,2012 

United States House of Representatives Committee on Financial Services 

Subcommittee on International Monetary Policy & Trade 

Hearing on "The Costs and Consequences of Dodd-Frank Section 1502: Impacts on America and 

the Congo." 

Chairman Miller, Ranking Member McCarthy, and members of the subcommittee, thank-you for 

the opportunity to appear before you today. My name is Laura Seay, of Atlanta, Georgia. I am 

an assistant professor of political science at Morehouse College, where I research community 

and international responses to state fragility and conflict in central and eastern Africa. My 

testimony does not reflect any official views or policies of Morehouse College; they are my 

personal opinions as a scholar who studies the Democratic Republic of Congo. 1 appreciate this 

opportunity and will focus my remarks on the effects of Dodd-Frank Section 1502 in the eastern 

Democratic Republic of Congo. 

Background 

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act contained a provision 

intended to help mitigate the effects of armed conflict in the eastern Democratic Republic of 

Congo (DRC). Section 1502 of the Dodd-Frank Act requires corporations registered with the 

U.S. Securities and Exchange Commission (SEC) to disclose whether any materials in their 

products contain "conflict minerals" from the DRC. Conflict minerals are defined as mineral 

resources that are mined by, sold by, or otherwise associated with armed groups operating in the 

ORe. The DRC is mineral-rich; in the conflict-affected areas, gold, tin, tungsten, and tantalum 

are particularly abundant, and approximately 80% of the DRC's overall exports are in the 

mineral sector. Not all minerals sourced in the DRC's conflict-affected provinces are conflict 

minerals, and not all Congolese conflicts involve the mineral trade. 

There are well-documented links between some Congolese armed groups (including rebel 

militias and some members of the DRC national army, the FARDC) and the mineral trade in the 

region; some mines are or have been controlled by armed groups, who use the profits they earn 

from mining for a wide variety of purposes, including paying soldiers' salaries, purchasing 

weapons and arrununition, and general expenses. Many of these groups have also engaged in 

serious human rights abuses, ranging from rape and torture to enslavement and conscription of 

child soldiers. However, it is important to note that not all armed groups in the DRC are 

involved in the mineral trade, nor are most of the region's conflicts related to fights tor control of 

mining sites. The causes of the DRC's conflicts range widely, but most involve longstanding 

disputes over property and citizenship rights. 

Section 1502 was included in the Dodd-Frank Act after a concerted cffort by a coalition of 

advocacy organizations to push for greater transparency in the conflict minerals section. These 

advocates conceived of the conflict minerals trade as a root cause of conflict in the DRC, and 

view a demand-side approach to stemming the conflict mineral trade as the most realistic means 
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of reducing arnled groups' ability to profit from the DRC mineral trade. Implicit in this 

understanding was the idea that Congolese armed groups would be less likely to engage in 

violence if they no longer had access to revenue earned from the conflict minerals trade. 

Consequences 

Dodd-Frank Section 1502 requires the SEC to promulgate a series of rules for implementation of 

the act's requirements. The legislation required that these rules be released no later than 270 

days following the act's passage in July 2010. However, as of May 2012, the regulations have 

yet to be released, meaning that Section 1502 has yet to be implemented in any meaningful way. 

Regardless, the Act has had significant and serious unintended consequences in the Democratic 

Republic of Congo. The first of these was a six-month ban on all mining and mineral exports in 

the North Kivu, South Kivu, and Maniema provinces implemented by the Congolese government 

from September 2010 to March 2011. Ostensibly enacted for the purpose of disarming militias 

and removing them from control of the mines, the ban instead provided an opportunity for the 

FARDC to take control of some previously non-militarized mines, such as the one at Kamituga, 

South Kivu. There is also evidence that human rights abuses increased a~ a result of the ban. 

There is little question that this ban would not have been enacted were it not for Dodd-Frank 

Section 1502; there was little to no incentive for the Congolese government to act on the issue 

prior to mid-20l O. Likewise, industry began responding to the perceived impact that Section 

1502 would have shortly thereafter. In April 2011, a de facto boycott of minerals from the 

Congo's conflict-affected provinces developed as smelters and other buyers began refusing to 

buy any Congolese minerals because proving whether those minerals are conflict-free or not is 

virtually impossible in most cases. Most significantly, the Malaysia Smelting Corporation 

(MSC), which had previously purchased up to 80% of eastern Congolese tin, stopped buying 

from the Congo. Mineral exports from the eastern Congo have plummeted; tin exports, for 

example, are down by 90%. 

The effects of the government ban and the subsequent de facto boycott on eastern Congolese 

minerals have been devastating in mining communities and for the regional economy. A large, 

but unknown, number of miners are out of work; some estimates place that number as high as 1-

2 million, while others count tens of thousands, which is probably more realistic. Not counted in 

those numbers are the traders, market sellers, and transporters whose ability to eam money 

depends on miners' ability to spend money. Many miners have moved to gold mines in lturi and 

other areas, from which it is easy to smuggle the product for which global demand is currently 

very high. The 2011 Report of the United Nations Group of Experts on the Democratic Republic 

of Congo noted that smuggling increa~ed in 2011. 

Meanwhile, the Congolese people have experieneed very few of the promised benefits of a 

reduction in the conflict minerals trade. While the Congolese army did withdraw from the Bisie 

cassiterite mine in Walikale, North Kivu, most of the mines that were previously under control of 

armed groups are still under the control of one armed group or another. Violence in the region is 

getting worse, not better; over the course of the last three weeks, the United Nations High 

Commissioner for Refugees fighting between dissident F ARDC mutineers and the army has 

displaced at least 500,000 people in North Kivu alone. \Vhile dissident Congolese army officer 

Bosco Ntaganda has clearly benefitted from the contlict mineral trade to the tune of millions of 
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dollars, there is little evidence that the de facto boycott on export of those minerals has 

negatively impacted his ability to tight. 

Quality oflife for many Congolese mining communities, however, has significantly declined. 

To be clear, to be a Congolese miner or living in a Congolese mining community in conflictaffected areas is to live a terrible and dangerous life. The United States government should 

absolutely support efforts to address real issues in the mines such as enslavement, rape, 

dangerous conditions, and other abuses of miners and their families. But for many Congolese 

citizens, mining represents thc least worst of very limited and terriblc opportunities for economic 

gain. In most mining communities, mining is the only paid employment available. The 

alternatives are to engage in subsistence-level agriculture or to join a militia. The latter option is 

obviously problematic; the former leaves parents with no way to pay their children's school fees. 

doctor bills, or to provide other necessities. Tens of thousands of Congolese thus choose mining 

despite its many risks and horrors. Without being able to sell minerals under the defacto ban, 

mining families who were once able to scrape by Oll next-to-nothing are now unable to pay for 

even the most basic goods. Their children are out of school and they are suffering terribly with 

little assistance. 

What Went WrQM 

The unintended consequences of Dodd-Frank Section 1502 are real and significant. Where did 

lawmakers and the advocates who pushed for the provision - go wrong? 

The first mistake was in the understanding of the militarization of the mineral trade as a root 

cause of conflict in the Congo. Virtually no academic experts on the DRC identifY the mineral 

trade as a cause of any of the country's recent wars. Rather, we understand the militarized 

mineral trade as a symptom of the country's more basic problem: a lack of governance. There is 

no rule oflaw in most ofDRC; justice in most courts is for sale to the highest bidder, criminals 

go unpunished or can bribe their way out of jail, and the central state in Kinshasa is not capable 

of maintaining the DRC's territorial integrity. Given this context, there is no question that 

anyone who can engage in human rights abuses, illicit mineral exploitation, and other bad 

behavior will almost certainly do so - including armed groups. The militarized mineral trade is 

one of many manifestations and consequences of a lack of governance, rule oflaw, and the DRC 

government's ahility to impose basic law and order throughout its territory. 

We know that minerals themselves are not a cause of violence in the Congo; by such logic, the 

diamond-rich areas of Kasai in central Congo and the southeastern Katanga province should be 

at all-out war. Yet they are not. Minerals playa role in fueling Congolese conflicts, but they did 

not cause them. Other dynamics - namely fights over land and citizenship rights are the causes 

of eastern Congo's violence. Just as attacking the synlptoms of a disease will not lead to a cure, 

going after the conflict mineral trade in the DRC is unlikely to work so long as the underlying 

problem persists. 

Another mistake underlying the rationale for passing Dodd-Frank Section 1502 is the idea that 

attacking the mineral trade is a means of mitigating violence in the DRC. As previously noted, 

advocates and policy makers involved in Section 1502's passage believe that Congolese armed 
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groups will be less likely to engage violence if they lack access to revenue earned from the 

conniet minerals trade. 

This sounds like a reasonable claim, but there is little evidence to show that it is true. There has 

never been a time when a targeted effort to reduce access to revenue from one sector for a group 

engaged in human rights violations slowed or ended violence. 1be divestment movement 

towards apartheid-era South Africa was largely successful, but that targeted an entire economy, 

not just one sector. Congolese armed groups are not cntirely dependent on the connict mineral 

tradc; some rely quite heavily on it while others have diverse revenue streams. These armed 

groups have access to - and use - a wide range of other, lucrative income-generating strategies, 

including extorting the popUlations in territories wlder their command, taxing road traffic, the 

timber and charcoal trade, the banana trade, and, increasingly, trade in cannabis. While there are 

anecdotal accounts to the contrary hcre and there, most fighters arc highly unlikely to stop 

fighting simply because they lose access to one revenue stream, a fact that is evidence in the 

continuing violence in North Kivu today. Thugs do not stop fighting simply because they lose 

access to one revenue stream. Indeed, many analysts fear that if Dodd-Frank Section 1502 does 

make it more difficult to trade in connict minerals, some armed groups will prey on local 

populations even more than they already do. 

Some advocates point to the efforts to end the blood diamond trade in Sierra Leone, Liberia, and 

Angola as examples that focusing on a particular commodity can end connic!. 'This is 

misleading; the Kimberley Process did not go into effect until after peace was restored in Sierra 

Leone, and the connict cnded after a UN -managed security restoration process. In Liberia, civil 

war ended because the LURD rebels attained battlefield victories over the national army, and 

international diplomatic pressure forced President Charles Taylor to leave the country. In 

Angola, war also ended after a battlefield victory in which rebel leader Jonas Savimbi was killed. 

The Kimberley Process was far less important in consolidating peace in any of these cases than 

were efforts at grassroots peace building, infrastructure reconstruction, and re-establishing state 

authority. 

A third mistake leading to the passage of Dodd-Frank Section 1502 was the assumption that 

traceability schemes can be successfully or partially successfully implemented in a state that 

lacks effective governance mechanisms. This is a naIve claim that does not renect the reality of 

the situation on the ground in the eastern Congo. While developing traceability schemes to clean 

up the Congolese mineral trade are important and while there are several simultaneous efforts 

to do so are underway using the OECD due diligence guidance, the World Bank's PROMINES 

project, and the ITRI Tin Supply Chain Initiative CiTSCD and Conflict Free Smelter programs -

it will still be exceptionally difficult to verify that all Congolese minerals labeled as "connictfree" actually are free from association with armed groups. This is due to the DRC's governance 

issue. It is not an exaggeration to say that almost every public official in the Congo can be 

bribed. While accurate tagging at mineral extraction sitcs by non-corrupt watchdogs or 

community representatives may be possible and should be encouraged - the length and 

complexity of the Congo's mineral supply chains mean that thcre are ample opportwJities to 

falsely label minerals as connict-free, to payoff officials charged with ensuring clean supply 

chains, and to otherwise interfere with the traceability process. The idea that a corporation can 

completely verify that its DRC-sourced minerals are entirely conflict-free is, for the moment, a 
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pipe dream. This is, not coincidentally, the reason MSC and other buyers stopped purchasing 

from Congo. 

Recommendations 

Since the passage of the Dodd-Frank Act, several pieces of peer-reviewed academic research 

have concluded that Section 1502 is highly problematic for a number of reasons. Writing in 

African Affairs, Barnard College professor Severine Autesserre argues that the overwhelming 

Western focus on conflict minerals actually allowed more human rights abuses to occur by 

drawing attention away from the rcal causes of Congolese conflict. In Resources Policy, Sara 

Geenen agrees, finding that the 2010 DRC government ban on mining "compound[ ed] but does 

not address different problems associated with ASM [artisanal and small-scale mining]: conflict, 

informality, poverty, illegality, [and] state control." 

Celia Taylor argues in the Harvard Business Law Review that, while disclosure regulations can 

be useful for improving responsible supply chain sourcing, Section 1502's requirements "go far 

beyond disclosure and may impede issuers' ability to conduct business in the DRC rehrion." 

Carol Jean Gallo argues in St. Antony's International Review that poor specification of what 

constitutes legal and illicit in the Congolese context makes the implementation of Section 1502 

difficult when considering "elements ofthe militias who ... now have access to official channels 

of exploitation." In a working paper for the Center on Global Development, I have argued that 

Section 1502 was based on a poor understanding of the complexities of the Congolese situation 

on the part of some advocates heavily involved in its passage. 

Thus far, there is a strong consensus in the scholarly community that Dodd-Frank Section 1502 

is a misguided policy that has had negative unintended consequences for the people of the 

eastern Democratic Republic of Congo. While there is certainly need for more study and the 

systematic collection of data, it is important to note that there is not a single peer-reviewed 

article of which I am aware arguing the opposite. Instead, scholars who work on the DRC 

emphasize the need to take a more comprehensive, community-based approach to peace 

building, economic development, and infrastructure reconstruction in order to mitigate the 

effects of the conflict mineral trade. 

What should Congress and the Executive Branch do in order to support those who suffer from 

violence in the eastern Democratic Republic of Congo? Using diplomatic leverage to push the 

Congolese government to reform its security sector, prosecute and punish those who commit 

rape and other heinous crimes, and to provide real security that protects civilian populations is an 

essential step to eliminating the conditions under which the conflict mineral trade thrives. The 

Department of Defense should continue and expand its efforts to train and professionalize 

FARDC soldiers through AFRICOM. The US should also work in conjunction with our donor 

partners to more closely tie requirements for respect for human rights and democracy to the 

budgetary assistance we provide to the Congolese government each year. 

Second, the US should support efforts to build respect for the rule of law and to re-establish the 

Congolese criminal justice and legal systems into reliable, legitimate institutions that act in the 

interest of the Congolese people and under the country's laws. Expanding initiatives such as the 

Mobile Courts program, which currently serves victims of sexual and gender-based violence, 
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would help considerably in this regard. The Congolese people need legitimate, peaceful 

institutions through which they can resolve disputes and grievances over property, contract 

enforcement, and criminal activities. 

Finally, the US government should engage more deeply in support for assisting mining 

communities and other Congolese with developing viable economic livelihoods. Cleaning up and 

professionalizing the mineral trade is a necessary task that will produce positive benefits, but it 

will also put tens of thousands of Congolese miners out of work as mechanization requires fewer 

laborers. Miners and other Congolese workers need to have opportunities for meaningful work 

beyond subsistence-level agriculture - or joining a militia -- that enable parents to provide for 

and raise children in healthy and safe environments. Providing training and educational 

opportunities and access to small business loans are two ways that USAID and other US 

government agencies could help to improve the Congolese economy in a sustainable way that 

rewards work and supports those who want nothing more than an opportunity to improve their 

lives. Economic development is intimately tied to improved security in the eastern Congo; as 

Koen Vlassenroot and Hans Romkema noted a decade ago, peace deals in the Congo will not be 

sustainable if they do not involve provisions for economic security. 

There are no easy answers to solving the DRC crisis, and doing so will take a sustained effort 

working in partnership with local leaders over the course of several decades and working 

simultaneously in multiple sectors. While Dodd-Frank Section 1502 was designed to be a partial 

effort to bring about peace, its consequences for the people of the Congo have instead been 

largely devastating thus far, and its fuII implementation is unlikely to significantly improve their 

lives so long as they do not have the privilege ofliving under basic, effective governance and the 

rule oflaw. The Congolese mineral trade needs to be professionalized and demilitarized, but the 

method proposed by Section 1502 is unlikely to have such results so long as smuggling is easy 

and global demand for Congolese minerals is high. For the reasons outlined above, Section 1502 

is unlikely to significantly reduce violence in the region or to improve quality of life for most 

Congolese. Instead, our time and efforts would be better spent working in conjunction with 

Congolese partners from a wide variety of perspectives to improve security, build the rule oflaw, 

and provide viable employment alternatives to mining and armed violence. 
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Nt Manufacturers 

Testimony 

of Franklin Vargo 

Vice President 

International Economic Affairs 

National Association of Manufacturers 

before the House Committee on Financial Services 

Subcommittee on International Monetary Policy and Trade 

on 'The Costs and Consequences of Dodd-Frank Section 1502: 

Impacts on America and the Congo" 

May 10, 2012 
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COMMENTS OF FRANKLIN VARGO 

BEFORE THE 

House Committee on Financial Services 

Subcommittee on International Monetary Policy and Trade 

MAY 10, 2012 

Mr. Chairman, Members of the Committee: Good morning. I am Frank Vargo, 

Vice President for International Economic Affairs at the National Association of 

Manufacturers (NAM). I am pleased to appear before this subcommittee to discuss the 

Securities and Exchange Commission's (SEC) implementation of Section 1502 of the 

Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), and 

its implications for America's manufacturers. 

The NAM is the nation's largest industrial trade association, representing small 

and large manufacturers in every industrial sector and in all 50 states. Its membership 

includes both large multinational corporations and small and medium-sized 

manufacturers. 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. 

Let me emphasize that the NAM supports the underlying goal of Sec. 1502 to 

address the atrocities occurring in the Democratic Republic of Congo (DRC) and 

adjoining countries and is working with other stakeholders to address the problem. We 

need, however, practical implementation rules that will achieve the objectives of the act 

while not unduly burdening the manufacturing process in the United States. 

Generally speaking, Section 1502 requires companies subject to SEC reporting 

whose manufactured goods contain any gold, tantalum, tin, or tungsten to report 

annually to the SEC as to whether those minerals "did originate" from the DRC or 

adjoining countries. In cases in which such conflict minerals did originate in those 

countries, SEC registrants must submit a report that includes a description of the 

measures they took to exercise due diligence on the source and "chain of custody" of 

such minerals. Such a report must include an independent private-sector audit. In 

addition, the report must include a description of the products manufactured or 

contracted to be manufactured that are not DRC-conflict free, the facilities used to 

process the conflict minerals, the country of origin of the conflict minerals, and the efforts 

to determine the mine or location of origin with the greatest possible specificity. 
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These requirements pose a potentially huge financial and reporting burden on 

America's manufacturers, given the breadth of use of these four metals throughout the 

manufacturing process and the depth, complexity, and constantly evolving nature of 

modern supply chains. The requirements also potentially affect many tens of thousands 

of small and medium-sized companies not subject to SEC reporting because they will, in 

turn, be asked by their large customers to provide the due diligence that will be required 

by the rule. 

The NAM and our members recognize the importance of preventing the use of 

conflict minerals from the DRC and adjoining countries. We believe, though, that the 

SEC's regulations can implement the law in a manner consistent with the goals of the 

legislation without unduly burdening industry and harming American competitiveness. 

The final SEC rule that would implement Sec. 1502 needs to be consistent with 

the realities of global supply chains, and acknowledge the practical limitations that 

issuers face in attempting to influence the behavior of other parties in supply chains that 

stretch from downstream users across multiple tiers of suppliers to refiners/smelters and 

mines. 

We believe that modifications to the Proposed Rule are needed to accomplish 

that end. I would like to note that we appreciate the care with which the SEC has been 

proceeding, evincing an understanding of the consequences of getting the rule wrong. 

We have availed ourselves of the various opportunities for input that the SEC has 

provided the NAM and individual member companies, and deeply hope the final rule is 

one that provides the practical flexibility we believe is necessary. 

In my statement today, I would like to call the Subcommittee's attention to three 

key points: (1) the need for a phase-in period that includes a category of "indeterminate 

origin," (2) the need for flexibility in determining due diligence, and (3) the huge cost of 

complying with this rule, particularly if sufficient flexibility is not provided. 

1. The Need for A Phase-in Period with an "Indeterminate Category" 

The SEC acknowledged in its draft proposal that standards of reasonableness for 

origin inquiries and due diligence will evolve over time as reporting and monitoring 

infrastructure becomes more robust. However, the Proposed Rule does not take 

adequate account of the extreme limitations that currently exist on the ability to submit 

meaningful reports and to exercise effective due diligence. 

The reporting requirements in the Proposed Rule would become effective 

immediately, though such important elements of due diligence as the conflict-free 

smelter program are still evolving, and available information about each of the four 

metals varies widely. These limitations make it impossible for most manufacturers -

especially large companies with diversified product lines - to file meaningful and 

informative information with the SEC. This disconnect between the proposed effective 

date of the new requirements and creation of the necessary infrastructure to facilitate 

compliance with the requirements necessitates a phase-in period. 

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The NAM and our member companies are grateful that Chairman Schapiro's 

most recent testimony expressly acknowledged the need for a transition period to allow 

the many industry, national, and international compliance initiatives that are getting 

under way to mature to the point where they can assist companies to make meaningful 

disclosure and to have a real and positive impact on the humanitarian crisis in Central 

Africa. 

Industry and company efforts are underway to attempt to identify and reduce or 

eliminate DRC conflict minerals in their products. Some companies with very short 

supply chains are having some success, but they are few in number. Industry groups 

also have efforts underway. NAM members are participating in numerous international, 

public-private, and industry-led initiatives to drive change abroad and stop the trade in 

conflict minerals from the DRC and adjoining countries, including industry-wide smelter 

certification programs and working to create the needed infrastructure on the ground and 

around the world to facilitate compliance with the Proposed Rule. 

The NAM is working closely with our member companies to increase pressure on 

conflicted-affected suppliers. In addition, NAM staff have participated in many forums 

sponsored by sector-specific efforts and international organizations in order to support 

efforts designed to influence a positive outcome for the region. 

Determined efforts are underway, but they have not yet matured. Perhaps 

furthest along is the Electronic Industry Citizenship Coalition - Global e-Sustainability 

Initiative (EICC-GeSI). Considerable effort is going into the initiative, with many 

companies and industries looking it to see if its methodologies can be adapted to their 

needs. A major part of the EICC-GeSI effort is the smelter certification program to 

identify smelters that are free of DRC conflict minerals. However, to date, it appears they 

have been able to certify only 11 of the hundreds of smelters and gold refiners in the 

world supply chain - all of them tantalum smelters. 

EICC-GeSI asked Resolve, an independent non-profit organization, to attempt to 

"trace" a small sample of electronics supply chains back to the mine and, in a smaller 

number of cases, to conduct a parallel effort to "track" a subset of these supply chains 

from the mine downstream. The results of their research -less than a 25 percent 

response rate from suppliers after six months of intensive effort, despite a limited 

number of supply chains in a single industry with many common suppliers - attests to 

the challenges confronting registrants attempting to establish a full map of their supply 

chain. In its report, Resolve concluded, "This means that today, while end-use 

companies have the potential to establish and have confidence in sources for some 

percentage of the metals in their products, they cannot assert 100 percent sourcing 

certainty about individual metals .... Movement is likely to come in a step-wise manner." 

Similarly, the State Department conflict minerals map called for by Section 1502 

was so heavily conditioned by its authors as to be virtually useless for due diligence. In its 

report, the State Department said, "Given the ... limitations on the data available, this 

map does not provide sufficient information to serve as a SUbstitute for information 

gathered by companies in order to exercise effective due diligence on their supply 

chains." 

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The Public-Private Alliance for Responsible Minerals Trade (PPA) is a new, joint 

initiative with U.S. State Department, the Agency for Intemational Development, nongovemmental organizations, and companies and industry organizations to support 

supply chain solutions to conflict minerals challenges in the DRC. However, it is just 

getting started, and has not yet let contracts seeking efforts to develop validated, 

certified, and traceable mines and supply chain routes in the DRC and adjoining 

countries in order to encourage legitimate mining in the region. 

The Organization for Economic Cooperation and Development (DECO) Due 

Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected 

and High Risk Areas (the "DECO Guidelines") published last year is being tested for 

feasibility in two pilot projects (which include the participation of NAM members from 

diverse industry sectors), one of which is just being completed and one of which is just 

getting underway. 

All these efforts are laudable and to be encouraged, but their lack of results so 

far should not be a reason to penalize companies that, despite their best efforts with 

what information exists, cannot know the origin of the metals in their products. 

Moreover, it must be emphasized that even when fully mature these various compliance 

resources will not enable large manufacturers of complex end products to trace or track 

the conflict minerals in their supply chains back to the smelter or refiner of origin, much 

less back to the mine. Modern supply chains are simply too deep, complex, and variable 

to permit such an exercise in the vast majority of cases. What they can do, when mature, 

is to enable companies to develop reasonable confidence that they are not sourcing 

from conflict-affected mines, and collectively to mobilize sufficient pressure across 

multiple industry segments to dramatically constrict conflict funding. 

Accordingly, a phased-in approach is needed. The phased-in approach does not 

exempt or delay an issuer's requirements to report under the statute. In our proposal to 

the SEC, every issuer subject to the regulation would undertake, within the imperfect 

information infrastructure, to disclose to the SEC what information they have been able 

to develop regarding the use of conflict minerals and the efforts each is taking to 

increase transparency and stop the use of conflict minerals from the region for the first 

full fiscal year the regulation is in effect. 

During the phase-in period, companies would adopt and clearly communicate to firsttier suppliers the company policy or similar corporate statement for the supply chain of the 

minerals originating from conflict-affected and high-risk areas. The policy or similar 

corporate statement should incorporate the standards against which due diligence is to be 

conducted, consistent with appropriate standards and/or common industry approaches, 

adapted to company and industry sector circumstances. 

Where practicable, companies would begin a process to develop reasonable 

assurance that they are not sourcing tin, tantalum, tungsten and gold from conflict mines 

by contacting first-tier suppliers. This process may be implemented through participation 

in industry-driven programs, national or international standards organizations, and/or 

through contract flow-down provisions or other written commitments. 

5 
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As part of this, companies would ask first-tier suppliers to 1) push the new policies 

upstream to their suppliers, and 2) adopt contract provisions, purchase orders, 

specifications or use other means to encourage their suppliers to transmit information 

downstream from smelters/refiners. Thus even within the phase-in period the objectives 

of the Act would be substantially advanced, without penalizing companies. 

For the phase-in period, the SEC should create a temporary third category, 

"indeterminate origin," for products manufactured or produced with minerals for which 

issuers, despite their best efforts, are unable in the first years of their programs to 

determine origin. At least for the first years, issuers should not be required to file a 

Conflict Minerals Report (CMR) for such minerals. Requiring issuers to submit a CMR 

and/or identify their products as "not ORC conflict free" when the issuer has not been 

able to determine the origin after making reasonable inquiry would significantly harm 

global brands, place U.S. companies at a competitive disadvantage, and damage 

investor relations even though the issuer has in a place a policy prohibiting the use of 

conflict minerals from the ORC or adjoining countries in its supply chain that are not 

otherwise validated as conflict-free. Users of the indeterminate origin category would 

have to follow SEC-mandated steps in the phase-in period along the lines discussed 

above. 

We recognize there is a concern that an indeterminate category could provide an 

excuse to ignore obligations under the law. However, the vast majority of issuers subject 

to the new reqUirements place a high value on corporate compliance, and will not be 

"bad actors." Providing false information and knowingly misleading the SEC will have 

significant negative repercussions for issuers and subject them to penalties under the 

law. Plenty of checks exist to prevent a company from making reckless inquiries to 

determine if conflict minerals originated in the ORC or adjoining countries. Given today's 

regulatory environment, the threat of an SEC enforcement action is a strong deterrent to 

companies that do not comply with the requirements. 

2. The Need for Flexible Due Diligence 

The SEC's Final Rule needs to create a flexible due diligence standard that 

recognizes no two supply chains are identical. The SEC should provide guidance to 

issuers on what would constitute reliable due diligence, but not mandate a specific set of 

requirements. Given the diversity of issuers and products affected, issuers should be 

permitted to develop due diligence plans that are consistent with their supply chains and 

information available from recognized government sources. 

This is consistent with work with the international community to develop global 

supply chain solutions. Such flexibility is also consistent with other areas of law 

regarding supply chains and human rights issues. An issuer should be able to create a 

due diligence program aligned with reliance on reasonable representations from 

suppliers or a supplier declaration approach and smelter compliance to determine the 

origin of conflict minerals. 

6 
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The Commission's Final Rule needs to have a "reasonable country of origin" 

threshold determination. It is important to understand that perfect certainty with respect 

to the origin of all conflict minerals in a modern supply chain is unattainable at virtually 

any price. Rather, the rule needs to reflect the understanding that registrants can 

comply with the letter and spirit of the Act by making a reasonable, risk-based, goodfaith determination based on the totality of their circumstances. Such a determination 

could rest on such factors as the existence of flow-down clauses in the company's 

supplier contracts, company policies and use of consensus best practices, and 

participation in industry-wide, public-private, or international initiatives. 

Such approaches are routinely used to achieve other vital government and 

social objectives, including protection of customer safety and health, quality assurance, 

enVironmental protection, and protection of national security and classified technology. 

Equally important, due diligence over the source and chain of custody should 

not be defined to require: (1) that an issuer identify all parties between the mine (or 

even the smelter or refiner) and its 1 st tier suppliers, or (2) that the issuer determine 

all the materials used in every manufactured item. While some manufacturers with 

short supply chains, small numbers of product types, and comparatively simple 

products may ultimately be able to trace metals in their products back to the 

smelter/refiner or perhaps even the mine of origin, the reality is that no manufacturer of 

complex end-products can map conflict minerals through the thousands of suppliers in 

its supply chain back to the smelter/refiner, much less the mine, or achieve a "chain of 

custody" that would enable it to know with certainty the origin of the conflict minerals 

in each of the millions of piece parts in its end-products. 

Such companies have many tiers of suppliers, with thousands of companies in 

their supply chains. The Global Research Center for Strategic Supply Management at 

Arizona State University reports that the average large company has 7,000 suppliers. 

Many NAM members have 15,000 or more companies in their supply chains, and one 

company reported that through all its tiers its supply chain has 100,000 companies. 

Moreover, NAM member companies' supply chains are not static. They are 

constantly changing as companies continuously seek new suppliers with better products 

or more competitive prices or delivery terms. Companies also seek multiple suppliers so 

as to avoid a situation in which a supply interruption from a single supplier can force a 

plant shut-down. 

The OECD Guidelines recognize the complexity and fluidity of supply chains and 

the limited leverage end-product manufacturers have on remote tiers of their supply 

chains. The Guidelines state, "Control mechanisms based on tracing minerals in a 

company's possession are generally unfeasible after smelting, with refined metals 

entering the consumer market as small parts of various components in end products. 

By virtue of these practical difficulties, downstream companies should establish 

internal controls over their immediate suppliers and may coordinate efforts through 

industry-wide initiatives to build leverage over sub-suppliers, overcome practical 

challenges and effectively discharge the due diligence recommendations contained in 

this Guidance." 

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As noted, some manufacturers may be able to achieve such visibility due to the 

nature of their supply chains and products, but requiring such tracing or tracking for all 

manufacturers is not necessary to accomplish the humanitarian purposes of the Act and 

would impose needless and extraordinary costs on many industry segments. Issuers 

should have the flexibility to work with direct suppliers to push requirements to use 

conflict free minerals/metals upstream. The SEC should acknowledge that a risk-based 

program or use of a risk-based supply chain approach for entities in the supply chain is 

acceptable in place of a product-based or materials declaration approach. 

Compliance with internationally recognized standards or guidance should be 

considered as a key factor in determining whether an issuer has exercised reasonable 

due diligence. In particular, compliance with the OECD Due Diligence Guidance for 

Responsible Supply Chains of Minerals from Conflict-affected and High-Risk Areas (the 

"OECD Guidelines") should be stipulated as a "safe harbor," and be sufficient to meet 

the requirements of Section 1502. 

It is important that the Commission ensure its compliance regime is consistent 

with the OECD Guidelines. Nothing in the Guidelines is inconsistent with any requirement 

of Section 1502. The Department of State in seeking to provide guidance to commercial 

entities seeking to exercise due diligence has endorsed the Guidelines, as have the 

affected governments in the region and dozens of other countries. Although important 

aspects of their implementation are a work in progress, they clearly now represent and 

will continue to represent consensus best practices agreed by the stakeholders. 

However, although we believe that adherence to the OECD Guidelines should be 

evidence of reliability, this framework is newly entering an implementation phase and 

subject to changes based upon initial implementation efforts. Moreover, the Guidelines 

may not be appropriate for all issuers. Accordingly, the SEC should treat all accepted 

international, national, or industry compliance schemes as acceptable means of 

complying with Section 1502.and should not be the only international standard that is 

acceptable. Moreover, the Guidelines may not be appropriate for all issuers. 

Audits of conflict mineral reports could be the single largest component of 

ongoing compliance expenses under the Proposed Rule. Clarity and flexibility are both 

needed as to the appropriate standard and the type of audit required. Any required audit 

(after the initial phase-in period) should examine a company's due diligence compliance 

program and procedures, rather than a materials-based outcome approach verifying 

whether the company was able to trace the minerals in its products back to the smelter. 

3. The rule is expected to cost the U.S. industry $9-16 Billion to Implement 

The NAM believes that the Proposed Rule is a significant rulemaking and will 

cost U.S. industry between $9-16 billion to implement. This is a far higher cost than the 

SEC's estimate of $71 million - more than 100 times higher. As such, we believe the 

SEC's analysis of the impact of the regulation greatly underestimates the impact on and 

cost to U.S. manufacturers. 

8 
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The NAM's detailed estimate is available on our website and on the SEC's as 

well. Without going into too much detail in my statement today, some of the difficulties 

with the SEC estimate are that it estimated only 20 percent of the 5,994 issuers would 

be affected (evidently because the ORC supplies only 20 percent of global tantalum), 

underestimated the cost of CMR audits by a factor of four, and applied its estimates only 

to issuers, making no estimate of the cost of compliance for the thousands of companies 

in the supply chain - most of whom are not issuers. 

The NAM estimated that the average large company has 2,000 companies in its 

supply chain a conservative estimate, given that the Global Research Center for 

Strategic Supply Management at Arizona State University concluded the average large 

company has 7,000 suppliers. 

While the new reporting mandate only applies to companies required to report to 

the SEC, we expect these requirements will flow through the entire supply chain. The 

regulation, if insufficiently flexible, could effectively force suppliers not subject to SEC 

reporting to maintain extensive records of their source materials, costing them 

thousands of dollars to establish and maintain these records. In its October 25, 2011, 

letter to the SEC, the Small Business Administration's Office of Advocacy said, "Because 

the SEC does not take into account the complexity of supply chains and the number of 

small businesses that are part of those supply chains, the SEC has underestimated the 

number of small businesses that would be impacted by the Proposed Rule." 

The NAM's estimate is corroborated by an October 2011 Tulane University study, 

which using an independent model in conjunction with the consulting, IT and auditing 

communities, concluded the cost would be $7.9 billion. 

A further report, done by Claigan Environmental, estimated the cost at $800 

million. However, as related to the SEC by the NAM's and IPC's analysis of that report, it 

appears seriously understated. The principal reason for the underestimate is their belief 

that virtually all companies can use the EICC-GeSI template to comply with the Final 

Rule. The template is being developed by and for electronics firms that have simpler 

supply chains and are closer to the smelters than diversified manufacturers. In 

discussion with NAM member companies, most large companies say they would be 

unable to use the simple EICC-GeSI template, which is based on an Excel spreadsheet. 

Companies with thousands of suppliers through many tiers, and hundreds of thousands, 

if not millions, of parts would need a much more robust system to trace and track 

minerals, should the SEC require them to do so. Anecdotal evidence supplied by NAM 

member companies based on their own discussions with external auditors and 

consultants suggest that audit costs alone for a large company could exceed Claigan's 

estimates by orders of magnitude. 

This, according to Claigan, is the biggest difference between its estimate and the 

much larger estimates of the NAM and Tulane University. Claigan has not discussed 

with a range of NAM members whether they can use the EICC-GeSI template. Had they 

done so they would have found that most large companies would have told them no. 

9 
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Second, the Claigan estimates are based on an assumption of an average 

supply chain of hundreds of companies (apparently based on discussions with two 

companies). As noted in my statement above, the actual number appears to be 7,000, 

and the NAM's economic estimate was conservatively based on an estimate of 2,000. 

The costs and complexities of compliance with such larger supply chains are much more 

formidable than estimated by Claigan. 

Additionally, much of Claigan's cost estimate is based on estimates of the cost of 

complying with the European Union's Reduction of Hazardous Substances (RoHS) 

regulations. RoHS, prohibits the uses of lead, mercury, cadmium, and three other 

substances, and it is not an overwhelming problem to conduct physical or chemical tests 

to determine whether those substances are present. Determining not only what is in the 

product, but also where the metals and ores came from is hugely more expensive -

metals don't have a fingerprint identifying their origin. 

Nevertheless, the NAM also cited the RoHS costs in our submission to the SEC, 

noting an average cost per company for initial compliance being $2,640,000. Were that 

to be the cost for complying with the Final Rule, that implies $16 billion for all nearly 

6000 affected issuers. 

The Claigan report also assumes static supply chains, claiming that once a 

supplier chain is validated, that validation is good forever. In truth, NAM member 

company supply chains are dynamic, always changing as companies seek more efficient 

suppliers or suppliers with better components. 

Another difficulty with the Claigan report is that it states that contractual changes 

will not be needed as companies ask their suppliers to comport with the SEC's Final 

Rule, since most supply contracts already state that the supplier must be in conformity 

with all its legal obligations. The problem here is that since most suppliers are not listed 

companies, they have no obligation to the Final Rule, and contracts will have to be 

renegotiated. As contracts tend to be multi-year, and come up for renewal at different 

periods, this is a major problem. 

Additional comments appear in the attachments to my statement. But the bottom 

line, is that based on discussions with actual manufacturers, the Claigan report severely 

underestimates the likely cost. 

Conclusion 

My testimony today has highlighted three aspects of the SEC's Proposed Rule 

that are of compelling importance, but there are additional issues as well. These include: 

Recycled Material -- Recycled material, both industrial as well as postconsumer scrap, should not be treated as if it originated from the DRC or adjoining 

countries. Doing so would ignore the very nature of recycled materials and undermine a 

growing trend to use recycled materials to reduce manufacturers' footprint on the 

environment. Information available to us indicates that recycling accounts for 30-40 

percent of U.S. demand for the four metals at issue when including industrial and postconsumer sources. 

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We believe use of recycled metals should be encouraged, to reduce the demand 

for minerals that would support armed groups in the ORC and adjoining countries. This 

could be accomplished by providing that after a manufacturer conducts a reasonable 

inquiry into the source of its conflict minerals no further action is required if the metals 

originated from a scrap or recycled source. The burdens of carrying out extensive due 

diligence to determine that the materials are indeed recycled, the burden of filing a 

"Conflict Minerals Report," and the burden of providing for expensive third party audits 

should not be imposed on recycled materials because there is no discernible benefit 

from doing so. To encourage recycling, it is imperative that products produced from 

recycled materials be classified as "ORC Conflict Free" in the same manner as products 

produced from newly mined minerals known to be from areas other than the ORC and 

surrounding countries. 

De Minimis - A de minimis standard is important to balance the costs and 

benefits of the rule and to prevent manufacturers from having the impossible task of 

tracking trace amounts of minerals. For most products, a quantity of a material must 

reach a certain threshold before it is possible to identify its actual presence in a part or 

component. 

10-K - The legislation does not specify that issuers should disclose their use of 

conflict minerals in their annual reports filed on Form 10-K. Rather the legislation only 

requires that issuers "to disclose annually whether the conflict minerals did originate in 

the ORC or adjoining countries." Issuers whose conflict minerals did originate from the 

ORC or adjoining countries must "submit to the Commission a report." Given the 

already-formidable time requirements and size of most companies' 10-K forms, issuers 

should be allowed to disclose to the SEC by furnishing a separate disclosure to the SEC. 

Thus, in conclusion, we believe that the impact and cost of the regulation 

necessitate narrowly tailoring the requirements, acknowledging the current lack of 

infrastructure, taking a practical and rational approach to the requirements, 

differentiating between issuers who "don't know" the origin after reasonable inquiry from 

those that do nothing to establish origin, and supporting a phased-in approach to the 

disclosure requirements that requires increasingly more detailed disclosure as 

infrastructure comes online and supply chains become more transparent. 

Thank you, Mr. Chairman. 

Attachments 

11 
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75730.159

Stephen Jacobs 

Senior Director 

Manufacturers 

Intemational Economic Affairs 

The Honorable Mary L. Schapiro 

Chairman 

U,S, Securities and Exchange Commission 

100 F Street, NE 

Washington, DC 20549 

February 10, 2012 

RE: Cost Estimates for Section 1502 of the Dodd-Frank Act (Conflict Minerals) 

Dear Chairman Shapiro: 

I am writing in response to the January 17, 2012 and other submissions made by an 

environmental consulting company, Claigan Environmental of Ontario, Canada, concerning the 

expected costs of implementation of the "Conflict Minerals" rule pursuant to section 1502 of the 

Dodd-Frank Act The National Association of Manufacturers' (NAM) member companies with 

experience in many different markets believe the Claigan submission is misleading on several 

levels, Since it suggests that the cost estimates provided by the NAM and Tulane University 

"should be disregarded," we offer aUf views on some of those criticisms, 

To support its assertions, Claigan cites eight conflict minerals policy statements issued 

by leading electronics or information technology firms, Claigan extrapolates from those limited 

statements to conclude the "vast majority" of reporting issuers are following the Electronics 

Industry Citizenship Coalition/Global e-Sustainability Initiative (EICC/GeSI) process, That is 

simply not correct, as the vast majority of NAM members are awaiting the final SEC regulation 

before developing full compliance programs - as one would expect when the SEC requirements 

remain unknown, NAM members have pointed out that: 

1. The EICC/GeSI format was designed by and for electronic industry supply chains, While we 

admire and appreciate the leadership shown by EICC/GeSI, electronics industry supply 

chains - as opposed to other industries - generally have fewer suppliers and tiers. 

Electronic industry product lines also tend to be more focused, making it somewhat easier 

to identify relevant suppliers and ultimately product origin. The same cannot be said of 

other industrial and consumer markets, many of which have complex supply chains with 

more suppliers and numerous tiers, Many NAM members have parts numbers that are 

counted in the millions, The EICC/GeSI approach can be cumbersome and difficult to apply 

outside relatively concentrated electronic industry supply chains, 

For that reason firms in other sectors have not yet endorsed the EICC/GeSI protocol and 

process. In some cases, those firms require different industry-specific supply chain 

verification, Accordingly some NAM member firms will follow the EICC/GeSI protocol for 

their electronics industry customers but will be developing different protocols for other 

sectors based on the unique conditions of those supply chains, 

Leading Innovation. Creating opportunity. Pursuing Progress. 

1331 Pennsylvania Ave, NW, Suite 600, Washington, DC 20004 P 202-637·3142 f 202-637·3182 wv.w.MI1'I,org 
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The Honorable Mary L. Schapiro 

February 9, 2012 

Page 2 

2. The EICC/GeSI conflict-free smelter certification program is still very much a work in 

progress. Only 11 tantalum smelters are listed in the EICC database; no other conflict 

minerals smelters have been certified as conflict-free to our knowledge. 

3. Further, the NAM estimate was driven by information provided by its membership and 

therefore does indeed reflect "actual processes implemented by companies" from industries 

as varied as aircraft, machine tools, and chemicals. Conflict mineral due diligence costs 

incurred by some member firms are already substantial, even prior to full implementation of 

a due diligence program that takes into account the final SEC rule once issued. One NAM 

member firm reported it faces a significant IT investment for supplier communication and 

record keeping and annual due diligence costs in over 40 business units and 65 countries. 

4. The argument that the Tulane Study does not mention "country of origin" is circular. What 

constitutes a "reasonable country of origin" inquiry is central to the underlying cost/benefit 

analysis. The Tulane Study pointed out that previous SEC and NGO cost estimates failed to 

consider the expensive steps many firms - especially those outside the electronics industry 

- face in trying to satisfy such a standard. Moreover, Claigan does not address costs that 

may occur if the SEC does not provide an exception for trace levels of these minerals - or at 

least an intentionally added standard - in the final rule. The cost of tracking and reporting 

trace levels of these minerals for many thousands of products could be considerable. 

5. NAM believes Claigan is understating the compliance cost burden for small businesses in 

reporting issuer supply chains. Claigan states it has quoted small business compliance cost 

programs "at - 3% of the cost. .. they have publicly reported". That raises several questions: 

(a) Are those firms exclusively or primarily in the electronics industry with its more focused 

supply chains? (b) Is this based on a representative sampling of all small businesses 

potentially affected by the rule? (c) How could these quotes meet all compliance 

requirements in the absence of a final SEC rule? Where supply chains include millions of 

parts and numerous supply tiers, small businesses in tiers closer to the finished product will 

incur considerable cost tracking the origin of 3T or gold used in their components through 

numerous upstream tiers. As the Small Business Administration Office of Advocacy noted in 

its October 25, 2011 letter to the SEC, "Because the SEC does not take into account the 

complexity of supply chains and the number of small businesses that are part of those 

supply chains, the SEC has underestimated the number of small businesses that would be 

impacted by the proposed rule." 

6. Claigan's seven-step process is unrealistic for many manufacturers, especially large 

manufacturers with complex supply chains. The seven-step process overlooks a number of 

issues and necessary tasks, and consequently Claigan's quotes are unrealistically low (at 

least for larger manufacturers). An Excel spreadsheet (such as the EICC-GeSI Conflict Free 

Reporting Template) to collect information for a supply chain with millions of part numbers is 

unrealistic. Nor has the spreadsheet offered by EICC-GeSI been proved or validated for 

conflict minerals data collection in other than the electronics industry. 
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The Honorable Mary L. Schapiro 

February 9,2012 

Page 3 

7. No standard audit protocol is currently available for validating supplier information in terms 

of conflict minerals (this internal "audit" appears to be required under the OECD Guidelines, 

which are not even mentioned in Claigan's process). It is unrealistic to believe that corporate 

officers would provide the SEC with a report based merely on suppliers information derived 

from a software template like the EICC/GeSI template. 

8. Employee training costs, outside legal counsel, and contract modification also seem not to 

have been considered by Claigan. Elsewhere, Claigan states, "[T]he legal notices that go 

out in year one will not need to be sent in successive years," but fails to account for the 

frequent changes in suppliers and product composition that many companies implement to 

remain competitive. Supplier contracts do not all begin and end at once, and may extend for 

three to five years or more. 

Thank you for the opportunity to provide these additional views. 

Sincerely, 

Stephen P. Jacobs 
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75730.162

AssocintiDn Camwcfing Electronics Industries 

The Honorable Mary 1. Schapiro 

Chairman 

U.S. Securities and Exchange Commission 

100 F Street, NE 

Washington, DC 20549 

Govcrnme-nt He-lations l03,S22-·!J22!l ttl! 

N. ~.l1oQre Street, Suite 600 ]03~S1:2·0S46 tux 

VA 21209 www.ipc Dfg 

February 14,2012 

RE: Cost Estimates for Section 1502 of the Dodd-Frank Act (conflict minerals) 

Dear Chairman Shapiro: 

IPC - Association Connecting Electronics Industries is writing in response to the January 17, 

2012 and previous submissions made by Claigan Environmental of Ontario, Canada (Claigan), 

concerning the expected costs of implementation of the "Conflict Minerals" rule pursuant to 

section 1502 of the Dodd-Frank Act. IPC believes Claigan's submission is misleading and 

inaccurate. We believe Claigan's cost estimates are based on a number of erroneous 

assumptions and are not representative of costs likely to be experienced by companies affected 

by the aforementioned regulations. 

IPC apologizes for the late nature of this letter but is nevertheless providing these comments in 

the hopes that you will not base any part of your rulemaking decisions on the misleading and 

inaccurate Claigan submissions. 

October 28, 2011 Claigan Report 

This initial submission is the basis for all future Claigan submissions. The number of errors in 

this initial submission cast doubt on the usefulness of this and future Claigan submissions. 

Claigan wrongly assumes a direct cost comparison between electronics companie( burden in 

complying with the European Union Restriction on Hazardous Substances (RoHS) Directive and 

affected industries' burden in complying with the proposed conflict minerals regulations. 

Although conflict minerals regulations do not include the technical challenges of materials: 

substitutions, the challenges related to compliance with the proposed conflict minerals 

regulations will likely exceed those of compliance with the EU RoHS Directive. While the EU 

RoHS Directive compliance requires knowledge about the presence/absence of substances in 

products, conflict minerals legislation requires companies to trace the source of the minerals in 

their products all the way back to the smelter. Many of the easiest and simplest ways of assuring 

compliance with the EU RoHS Directive involve non-invasive scanning of a product by X-ray 
208 


75730.163

The Honorable Mary L. Schapiro 

February 14, 2012 

Page 2 

fluorescence (XRF).l There is no corresponding simple "check" for conflict minerals compliance 

- thus necessitating supplier audits which Claigan Environmental has omitted from their 

estimate. Although supplier audits are not required by the SEC, they would likely be conducted 

by any company required to report to the SEC due to the penalties associated with incorrect 

statements on SEC filings. It is highly unlikely that a CEO/President of a company would sign 

off on an SEC filing where the information was taken from a supplicr letter or form without any 

verification of its completeness. 

Further Claigan's citation of RoHS compliance costs of 0.8% of revenue is factually incorrect 

and misleading. The EU study referenced by Claigan estimates compliance costs to be between I 

and 2% of "tumover.,,2 A second study, conducted by the Consumer Electronics Association 

(CEA), which was also referenced by Claigan, cites RoBS compliance cost of 1.1 % of industry 

revenue. 3 This average also neglects the significantly higher impact on Small and Medium 

Enterprises (SMEs), estimated at 5.2% oftumover4 in the EU study and approximately 5.5% by 

CEA for $5M-$IOM companies. 

Claigan makes several additional incorrect assumptions in this study that are carried over to 

future studies, tainting all subsequent conclusions: 

J. Claigan grossly understates the breadth of industry sectors impacted. The statement, "an 

argument can be put forward that 3TG reporting will be required by more than just the 

electronics supply chain" is an understatement. Also, they cite the CEA study on RoHS 

for an estimate of90,000 electronic OEM, component suppliers and EMS. This estimate 

is an incomplete assessment of the impacts of the RoHS Directive as it omits PCBs, wire 

and cable, raw materials, and a number of other sectors that were affected by RoHS. 

2. Claigan goes on to reduce its erroneous estimate of impacted companies by an additional 

50 percent. This reduction is based on the completely unsupported assumption about the 

number of suppliers impacted by the regulations. In their estimate Claigan states, "But for 

conservative purposes it seems fair to reduce this number by at least 50%." It is entirely 

unclear what is fair or conservative and why or how they chose to reduce the estimate of 

affected companies by 50 percent. 

3. The proposed rules would require issuers to file and have audited a conflict minerals 

report for all recycled materials in their supply chain, yet Claigan assumes this is not the 

case by stating, "The [cost estimates 1 would also change drastically ifthe final rules 

issued by the SEC .... brings 3TGs in recycled material into scope." 

'European Commission, Study on RoHS and WEEE Directives N° 30-CE-0095296/00-09. March 2008, p. 107. 

'Consumer Electronics Industry, Economic Impact of the European Union RoHS Directive on the Electronics 

Industry, 21 January 2008, Executive summary p. Ill. 

'Study on RoHS and WEEE Directives W 30-CE-0095296/00-09. March 2008. 

'Consumer Electronics Industry, Economic Impact oflhe European Union RoHS Directive on the Electronics 

Industry. 21 January 2008 p. 123. 
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The Honorable Mary 1. Schapiro 

February 14, 2012 

Page 3 

4. Claigan makes the erroneous assumption that no legal changes are needed as existing, 

standard supplier contracts contain standard provisions requiring suppliers to comply 

with relevant laws. Claigan overlooks the fact that these provisions would not cover 

conflict minerals as the suppliers (unless they are also SEC issuers) have no legal 

compliance obligation. Supplying their customers (the issuers) with information may be 

necessary to the issuer's compliance, but the law places no legal obligation on the 

supplier and therefore would not be covered by existing contract clauses. 

5. Claigan states, 'There is no reasonable basis for the cost of the software for conflict 

mincrals to be more expcnsive." Tracing the source of minerals as opposed to 

presence/absence of a metal (as in the EU RoBS Directive) may indeed require more 

sophisticated software, especially as this virtual supply chain must be auditable, another 

requirement that RoHS does not have. 

6. Claigan' s faulty assumption that, "the legal notices that go out in year one will not need 

to be sent in successive years," fails to account for the frequent changes in suppliers that 

many companies experience in order to maintain competitive pricing. Supplier contracts 

do not all begin and end at once, and may cxtend for three to five years or more. 

Employee training costs, outsidc legal counsel, and contract modification also appear to 

not be considered by Claigan. 

7. Claigan's assumption that training will be minimal fails to account for employee 

turnover. 

December 1, 2011 Claigan Report 

This submission is vague and entirely non-transparent regarding its infonnation sources. Claigan 

states that the basis for their reduced cost estimates was derived, "during budgeting discussions 

with affected corporations." Claigan does not specify what types of companies (what industry, 

size, etc.) were queried, how many companies were queried or what size the companies were. 

Additionally, indication of the size, representativeness or a statistical significance of the sample 

population is not provided, raising significant doubts regarding the validity of the submission. 

Significant errors in this submission include the following: 

I. Regarding estimated audit costs, Claigan states, "This section is not our area of primary 

expertise and we welcome costing input from yd party auditors," and then reduces 

previous third party audit costs by 113. 

2. Claigan reduces the ridiculously low $100 per supplier data gathering costs even further 

to $40 based on "entry into the market of professional data providers." No providers are 

identified or referenced, nor is IPC aware of any. Again, Claigan fails to mention 

supplier audit needs. 
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The Honorable Mary L. Schapiro 

February 14,2012 

Page 4 

3. Claigan again naively claims that companies have only hundreds, not thousands of 

affected suppliers. This assessment is based on supplier lists from a mere 2 companies 

a statistically insignificant number which cannot begin to represent the breadth of 

affected companies. 

December 16,2011 Claigan Report 

Significant errors in this submission include the following: 

I. Claigan states that their cost to quote of $228,000 is worst case, stating, "228K is higher 

than most service quotations being issued for complete conflict minerals program." No 

further information on these quotes is provided (i.e. who made them or what they 

include). Furthermore, since final regulations have yet to be issued, one must regard 

skeptically any service quotes for a "completc program." 

2. Claigan further reduces the estimate of affected suppliers again, stating that companies 

have overestimated the number of affected suppliers by a factor of 5 to 10. They base 

this reduction on, "Careful inspection of actual bills of materials from a cross sample of 

companies." No information about the number, size or type of this "cross sample" is 

provided. Furthermore, bills of material are usually for individual products, not all the 

products a company may make. 

3. Claigan incorrectly states that the Tulane Studi heavily references the NAM Studl 

when in actuality; the Tulane Study cites IPC numbers, uses their own cost model, and 

compares their costs to NAM. 

January 17, 2012 Claigan Report! NAM's Recent Comments 

I. Claigan makes the outlandish and unsupported claim that their previous estimate of 

supply chain costs should be reduced because, "vast majority" of reporting issuers are 

using the EICC/GeSI template. This claim of "vast majority" of reporting issuers appears 

to be based on examination of conflict minerals policy statements issued by eight 

electronics firms. This assumption is simply not correct, as the vast majority of affected 

companies are awaiting the final SEC regulations before developing full compliance 

programs. Claigan' s submission further misrepresents the EICC/GeSI template by 

calling it a "standard," when in fact it was created, reviewed, and approved by a small 

group of consumer electronics companies and thcir suppliers and in no way represents an 

industry standard. While some companies have chosen to use the EICC/GeSI template, 

5Tulane University Law School Payson Center for International Studies, A Critical Analysis of the SEC and NM"I 

Economic Impact Models and the Proposal of a 3rd Model in view ofthe Implementation of Section 1502 of the 

2010 Dodd-Frank Wall Street Reform and Consumer Protection Act 

'National Association of Manufacturers (NAM). Comments submilled 10 the SEC March 2, 2011. 

http://www.sec.gov/comments/s7-40-10/874010-212.pdf 
211 


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The Honorable Mary L. Schapiro 

February 14,2012 

Page 5 

the majority of companies are displeased with the fonnat and have not committed to 

using it, 

2. The EICCIGeSI conflict free smelter (CFS) certification program does not yet constitute 

a reliable source of conflict-free conflict minerals. Only II smelters - all tantalum 

smelters have been certified as conflict free smelters - no smelters of the other three 

conflict minerals have been certified as conflict free to our knowledge. Furthennore, the 

11 smelters identified as conflict-free are outside the ORC region, thus forcing those 

relying on the CFS program to enforce a "de-facto" embargo on the ORe. 

3. The argument that the Tulane Study does not mention "country of origin" is circular. 

What constitutes a "reasonable country of origin" inquiry is central to the underlying 

cost/benefit analysis. The Tulane Study pointed out that previous SEC and NGO cost 

estimates failed to consider the expensive steps many finns - especially those outside the 

electronics industry - face in trying to satisfy such a standard. Moreover, Claigan does 

not address costs that may occur if SEC does not provide an exception for trace levels of 

these minerals - or at least an intentionally added standard in the final rules. The cost of 

tracking and reporting trace levels of these minerals for many thousands of products 

could be considerable. 

4. By focusing on statements from large electronics industry finns, Claigan completely 

ignored the burden and compliance costs that small businesses in reporting issuer supply 

chains will incur. 

5. Claigan's seven-step process is unrealistic for many manufacturers, especially large 

manufacturers with complex supply chains. The seven-step process overlooks a number 

of issues and necessary tasks, and consequently Claigan's quotes are unrealistically low 

(at least for larger manufacturers). As noted above, the idea that large manufacturers of 

complex parts with millions of part numbers, could rely upon an excel spreadsheet (such 

as the EICC-GeSI Conflict Free Reporting Template) to collect, organize, and store 

infonnation for a large supply chain of is unrealistic. Nor has the spreadsheet offered by 

EICC-GeSI been proven or validated for conflict minerals data colleetion except by a 

small subset of electronics manufacturers. 

6. There is no standard audit protocol currently available for validating supplier infonnation 

in tenns of contlict minerals (this internal "audit" appears to be required under the OECO 

Guidelines, which are not even mentioned in Claigan's process). It is unrealistie to 

believe that corporate officers would provide the SEC with a report based merely on 

suppliers infonnation from a fonn derived from a software template like EICCIGeSI. 

Finally, it would be instructive to know who or what organization "asked [Claigan] to make a 

further detailed submission .... " While of course the IPC is not a disinterested party in this matter 

as it will affect the vast majority ofIPC members, neither is Claigan. It stands to receive business 
212 


75730.167

The Honorable Mary L. Schapiro 

February 14,2012 

Page 6 

as a result of SEC regulations through its consulting services designing company compliance 

programs. 

If you have any questions or wish to discuss this further please do not hesitate to contact me. 

Sincerely, 

Fern Abrams 

Director, Government Relations and Environmental Policy 
213 


75730.168

AlAG::lJII. 26200 Lahser Road. SUite 200 

Southfield, M! 48033 

Tel. 248.358.3570 

Automotive Industry Action Group Fax, 2-48.358.3253 

www.aiag.org 

HONDA 

April 19, 2011 

Dear Supplier, 

The intent of this letter is to inform you of recent federal legislation impacting the automotive industry 

and other industries to which you may supply product. 

In July 2010, President Obama signed into law HR 4173, the Wall Street Reform and Consumer 

Protection Act. In addition to the financial market regulatory reforms that constitute the primary focus of 

the legislation, the new law imposes requirements relating to "Conflict Minerals." Specifically, Section 

1502 imposes Securities and Exchange Commission (SEC) reporting requirements upon manufacturers 

if their products contain metals derived from minerals defined as "Conflict Minerals H which include 

columbite-tantalite (co~an, niobium, tantalum), cassiterite (tin), gold, and wolframite (tungsten),their 

derivatives, or other minerals designated by the Secretary of State. 

These new reporting requirements ref/ect heightened concerns regarding the role that revenues 

obtained from the mining and transport of certain minerals play in financing the ongoing conflict in the 

Democratic Republic of Congo (DRC). As stated in the Act, "It is the sense of Congress that the 

exploitation and trade of conflict minerals originating in the ORC is helping to finance conflict 

characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, 

particularly sexual- and gender-based violence, and contributing to an emergency humanitarian 

situation therein." The law aims to use the market power of "downstreamn manufacturers (i.e., the postsmelting supply chain) to begin to help address some of these longstanding issues. 

The new legislation will require all publically traded manufacturing companies to report annually to the 

Securities and Exchange Commission whether they use Uconflict minerals" that are "necessary to the 

functionality or production" of a product that they either manufacture, or contract to be manufactured, 

that originate from the DRC or an adjoining country. Publically traded companies will likely be required 

to conduct due diligence inquiries of their supply chains. This will necessitate supplier cooperation to 

determine whether products contain Conflict Minerals from the DRC or an adjoining country. 

Requirements would apply equally to domestic and foreign manufacturers. 

You are receiving this letter because your company has been identified as a supplier to an OEM that is 

likely to be subject to the new requirements. After the final rule is issued in August 2011, the OEMs will 

likely require information from each of their identified suppliers regardless of whether those suppliers 

are subject to the SEC reqUirements directly. Your company may also be subject to the requirements 

directly. Annual submissions to the SEC may require an independent, third party audit, and thus proper 

documentation of information related to your supply chain is critical. 

To prepare for requests from your customers there are some activities that ALL suppliers can undertake 

NISSAN now, including: 

TOYOTA 

Determine which of your parts/assemblies incorporate one or more of the identified Conflict 

Minerals or their derivatives. 

Map your supply chains associated with those parts/assemblies. 

Engage with your suppliers to identify the smelters used in your supply chain to process the 

Conflict Minerals OR validate the origin of Conflict Minerals as recycled/scrap. 

It may be required that smelters determine the origin of the Conflict Minerals and obtain validation that 

any of the identified Conflict Minerals coming in to their facilities are not financing conflict in their 

original extraction or via illegal taxation on mines and transportation routes. It is hoped that this 
214 


75730.169

AlAG~ 26200 Lahser Road. SUite 200 

Southfield. M! 48033 

Tel. 248.358.3570 

Automotive Industry Action Group Fax, 248.358.3253 

www.aiag.org 

.,. 

HONDA 

NISSAN 

TOYOTA 

validation process can be achieved through cross-Industry collaboration. We are monitorjng & 

benchmarking some smelter validation pilot programs already in progress. 

In closing, we recognize that it may be difficult for your company to identify the country or mine of origin 

for the minerals that you use. For this reason, we want to make you aware of this issue in advance of 

the effective date of the requirements and reporting. It is our intention to do what we can to ensure that 

the parts and assemblies in our vehicles and products, regardless of where they are assembled or sold, 

do not contain Conflict Minerals which have contributed to the armed conflict in the DRC. 

In order to learn more about the new US legislation and about the subject of conflict minerals, please 

consult the SEC website: http://www.sec.govlnewslpressI201012010-245.htm. You may also want to 

visit AIAG's Corporate Responsibility webpage www.aiag.org for additional information and updates 

regarding industry collaboration in this space . 

Sincerely, 

;;?:L-r~/7 t'o~ ~;j;:r Dan Knott Tony Brown Robert Socia 

Head of Purchasing & Interim Senior Vice President Global Vice President Global Purchasing 

Global Sourcing Purchasing &Supply Chain 

Chrysler Group LLC Ford Motor Company General Motors Company 

f~f 

Robert D. 

A·~b 

Nelson Rebecca Barker 

6 1/f4!i:-

Vest 

~ Robert Young 

Vice President Vice President Purchasing Vice President Purchasing 

North America Purchasing Renault Nissan Purchasing Vehicle Parts and Materials 

Honda of America Mfg. Inc. Organization Toyota Motor Engineering & 

Nissan North America Manufacturing North America, Inc 
215 


75730.170

House Committee on Financial Services 

Subcommittee on International Monetary Policy & Trade 

The Costs and Consequences of Dodd-Frank Section 1502: Impacts on America and the Congo 

Hearing - May 10,201210:00 AM 

2128 Rayburn HOB 

Kennametal Inc. - Statement for the Record 

Dodd-Frank's audit and reporting requirements for the DRC's "conflict minerals" are 

well meaning, but have dramatic unintended consequences. 

For a majority of the country's manufacturing base, Dodd-Frank's section 1502 

increases costs, limits productivity and discourages environmentally friendly recycling 

practices while not meeting the intention of the law. 

The DRC yields scant amounts of manufacturing's critical raw material- tungsten. 

Most of the largest tungsten consumers do not consider the DRC as a viable source. 

Exempting the recycled materials from the audit partially mitigates the onerous 

reporting requirements. 

Kennametal Inc. ("Kennametal"), based in Latrobe, Pennsylvania, is a global company 

employing more than ]3,000 people. It is the nation's last large publicly traded company in its 

industry still headquartered in the United States. Kennametal's products are used in the 

manufacturing process of countless metal products, affecting any industry that uses metals or 

products made of metal. Direct customers include companies in the aerospace, defense, 

agriculture, automotive, construction, forestry, machining, tooling, mining, energy and 

transportation industries. 

Nearly a!! of Kennametal's products begin as powders, and through material science 

processing, surface modification and application and engineering the powders are transformed 

into customer solutions. The critical raw material for Kennametal is the mineral tungsten. 

Although tungsten is not classified as a rare earth mineral, it has similar qualities. Additiona!!y, 

China is home to nearly 70% - 80% of the world's tungsten supply. The price of tungsten has 

- I -
216 


75730.171

nearly doubled in price since a year ago, making the price and access to this critical 

manufacturing material a challenge. 

The larger tungsten deposits outside of China are South American and Canadian, but both 

pale in comparison to China's resource. Therefore, it is important to assure a diverse supply base 

which should include the use of scrap material. Also, there is a scant amount of tungsten in the 

Democratic Republic of Congo (DRC) and it is not considered a viable tungsten source for 

Kennametal. Kennametal does not purchase tungsten from the DRC, and we have no intention 

to purchase from the DRC, especially as it is now listed as a conflict mineral. 

China's dominance in the market forces Kennametal to find other sources oftungsten. 

One productive source is scrap metal. Although purchasing, smelting and extracting tungsten 

from random scrap metal shipments is expensive, it is quickly becoming a more reliable option 

as it can be less expensive than purchasing virgin materials. More importantly, by embracing a 

materials recycling process, it is possible to reduce the need to rely on countries with unethical 

market practices. 

The Dodd-Frank Act adds a costly administrative burden to externally sourced scrap 

material without significantly improving compliance to meet the true intent ofthe Dodd-Frank 

Act. Dodd-Frank's audit and reporting requirements for the DRC's "conflict minerals" are well 

meaning, but have dramatic unintended consequences. Furthermore, the Securities and 

Exchange Commission's (SEC) pending regulations exacerbate the law's unanticipated impacts, 

specifically as they pertain to recycled materials. 

The law never considers recycled materials. Therefore, the SEC's promulgation of 

regulations addressing recycled materials would be considered administrative over-reach. 

However, beyond that possibility, the real concern is enforcement. Recycled materials' nature 

- 2 -
217 


75730.172

(i.e. collected scrap from numerous and scattered sources) makes it impossible to determine if 

any of it, let alone the diminimis possibly derived from the ORC, actually came from the ORC. 

Proposed regulations allow (tungsten) importers to immediately consider their recycled 

shipments "conflict free" in reports to the SEC. However, the proposed regulations go on to 

require detailed information about the recycled shipments without defining key provisions such 

as what an importer would have to do (what due diligence) to demonstrate that its (tungsten) was 

recycled or scrap. 

The SEC should not be in the position of addressing recycled/scrap materials and 

processing. These types of regulatory issues are not within its traditional purview. Nevertheless, 

its proposal is confusing at best (allowing "conflict free" designations, then requiring due 

diligence without defining the due diligence measures) and debilitating at worst, not taking into 

account the numerous and complicated supply chains of manufacturers such as Kennametal. 

Unknown liabilities in the face of this law and its regulations put U.S. manufacturers at a 

disadvantage in the global economy by increasing costs, limiting productivity and possibly 

sending jobs overseas as end users may be forced to consider suppliers not in the U.S. to meet 

their supply chain needs due to cost increases from audit implementation. 

To go beyond the law and regulate recycled tungsten assures continued confusion and 

extended unintended consequences by forcing manufacturers to comply with requirements that 

do not meet the true intent of the law. Manufacturers or businesses that use recycled materials 

classified as "conflict free" should be exempt from the proposed audit materials as it is an 

onerous burden which does not materially affect the ORe. 

- 3 -
218 


75730.173

!!!Tulane 

V University 

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 Dodd-Frank Wall Street Reform and Consumer Protection Act 

Prepared by Chris Bayer with contributions from Dr. Elke de Buhr (Payson CenterfTulane 

University), in consultation with experts from the consulting, IT and auditing community. 

Contact information: 

Chris Bayer 

Tulane University 

cell: + 001 504 428 9062 

email: cbayer@tulane.edu 

October 17, 2011 
219 


75730.174

Table of Contents 

I. Executive Summary ......................................................................... . . ................. 3 

II. Background ............................................................................................................................. 3 

III. Objective of White Paper ........................................................................................................ 6 

IV. Analysis ofthe 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 Model ........................................................................ 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 
220 


75730.175

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 2010 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 15t 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 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. 

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. 

II. 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,' a 

1 Robinson, Simon. The Deadliest War In The World. Time Magazine. May 28, 2006. 

3 
221 


75730.176

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 Reform 

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 1S02(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://www.time.eom/time/magazine/articie/091711198921aO.html 

2 Commonly referred to as "eoltan," a colloquial shorthand for eolumbite-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://www.enoughproject.orglfilesipublicationsIComprehensive%2OApproach%20to%20Congo's%20Confli 

ct%20Minerals.pdf 

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does not ban or prohibit the purchase/use of conflict minerals, nor are there any legal 

penalties for purchasing/using conflict minerals.s 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."g 

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.1O 

5 Section 1502(c) requires the Secretary of State, in conjunction with USAID, 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 information has been made available 

concerning the punitive measures. 

6 National Association of Manufacturers (NAM). Comments submitted to the SEC. March 2,2011. 

httD:/lwww.sec.gov/commentsis7-40-10/s7401 0-212.pdf 

I General Electric. Conflict Minerals and the Democratic Republic of Congo: Expanding Supply Chain 

Efforts. August 24,2011. http://www.gecitizenship.com/conflict-minerals-and-the-democratic-republic-of-

~ongo/ 

Enough Project. Getting to Conflict Free. December 201 O. 

http://www.enoughproiect.orgifilesipublicationsicorporate action-1.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-gu idance-forconflict-mineral-rules.html 

5 
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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 issuer -

theoretically 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. 

III. 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 3rd 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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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 ORC 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 ORC, therefore only 20% of 

companies - 1,199 - would be affected by the new rules, the SEC committed a nonsequitur. 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 

ORC 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.'7 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) 

'475 Fed. Reg. 80966 

15 1PC is an industry association within the electronics industry. IPC 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. 

17 See NAM comments, p. 25 and 75 Fed. Reg. 80958. 

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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 ORC-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 cosUbenefit. 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. April 27, 2011. 

http://www.lexoJogy.comllibrarv/detail. aspx?g=688bf426-82b4-43a9-b45e-292de61 d554a 

i9 IPC Comments on SEC Proposed Rule on Conflict Minerals, March 2, 2011, p. 20 

http://www.sec.gov/commentsls7-40-10/s74010-131.pdf 

20 NAM Comments. p. 20 

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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 ORC 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. 

O. 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 3,d party audit to 

21 75 Fed. Reg. 80963. 

22 NAM Comments. p. 22 

23 Results of an IPC Survey on the Impact of U.S. Conflict Minerals Reporting Requirements, February 

2011 

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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 that 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 IPC 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 rule making 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.,,3o 

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/diamondsldocsl168632.htm 

28 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://elmconsultinggroup.wordpress.com/2011/07107/oecd-to-sec-make-us-the-conflict-minerals-duediligenceaudit-standard-for-the-usl 

2/ IPC. IPC Invited to Participate in Pilot Evaluation of OECD Conflict Minerals Due Diligence Guide - Six 

Member Companies Join Pilot Implementation. September 2, 2011. 

http://www.ipc.org/ContentPage.aspx?pageid=IPC-lnvited-to-Participate-in-Pilot-Evaluation-of-OECDConflict-Minerals-Due-Diligence-Guide 

29 The Elm Consulting Group International LLC, OECD Backs Up A Step on Conflict Minerals Guidance. 

September 8,2011. http://elmconsultinggroup.wordpress.com/2011/09/08/0ecd-backs-up-a-stepl 

29 The first meeting by OECD to discuss the status of the pilot is scheduled for late November 2011. 

30 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 sales), 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 1 st 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 5t 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 1 st tier 

suppliers furnishing 5,994 issuers with 3T and gold? 

NAM's attempt at developing 1st tier supplier estimates is laudable, but misses three 

critical factors: 

1. Suppler overlaP!mutualttv: 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 100% 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 eM materials, parts or components: 

NAM's estimates assume that 100% of an issuer's 1 st 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 1 st 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, DECO 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 i~acts as an integral part of business decision-making and risk 

management systems: DECO'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 GECD. GECD Guidelines for Multinational Enterpnses. 25 May 2011. 

http://www.oecd.org/dataoecd/43/29/48004323.pdf 

35 GECD. 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.orglinstrumentsIShowlnstrumentView.aspx?InstrumentlD=268&lnstrumentPID=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 eM 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 10-K, 20-F and 40-F forms.39 

2. Supplier overlap / mutuality: NAM did not address the concept of supplier overlap / 

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 illustrate where customers have relationships with multiple suppliers, 

therefore creating supplier overlap/mutuality. 

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. 

40 This has been proven over the past 20 years for management systems developed by companies under 

international 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 ORC-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:' 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 all 1st tier suppliers reguire 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 2,000 151 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 IPC study,43 summarized in Table 1 

below: 

Table l' 

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 ORC-source materials, we combined the percentages in the last two columns to 

41 The most recent update of the CFS list (May 31, 2011) indicates only 3 companies (limited to tantalum) 

have been cleared as "compliant" by EICC. The CFS Program Status Update 

(http://www.conflictfreesmelter.orglCFSandDueDiligenceProgramStatusUpdate.htm) 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.orglCFSandDueDiligenceProgramStatusUpdate.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 1 sl 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. Manv issuers have fewer 1st tier suppliers: NAM's estimate of 2,000 1 st 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 1 sl 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 srnall 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 (srnall cornpanies): 

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 (100 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://'MVW.sec.gov/commentsls7-40-10/s74010-131.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 IPC 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 1 st 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 "overtap" 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 1-to-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.5o NAM goes 

on to posit that suppliers will "be asked to use the same diligence as issuers," which 

includes audits,51 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)(8). 

5Il Page 25 of the NAM reports states: "We conservatively estimate that 75 percent, or4,500, 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 audiUauditor standards54 and focus on the existence, 

functionality and controls of the issuers' CM management processes that are included in 

the CMR (Le., 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 will 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 ORC 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 is possible 

for the status to change subsequent to the due diligence/CMR activities;56 

• 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 (GAO-07-731 G), commonly referred to as 

the "Yellow Book." This publication is referenced in SEC's proposal as the appropriate standard 

recommended by the GAO (~Footnote 101 at 75 Fed. Reg 80958). The Yellow Book incorporates 

many audiVauditor 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 

auditing processes and certification systems such as IS09001, IS014001 and OHSAS18001. 

56 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. e Yes/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 

58 This assumption is supported by our analysis of IT systems and costs in Issue #6. 

59 IHS is a global information company in the pivotal areas such as energy, economics, geopolitical risk, 

sustainabilily and supply chain management (http://www.ihs.com) 

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understand and be useful to engineers, procurement personnel, auditors and 

regulators.6o 

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 on'gins. 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 functionalities. 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 million 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 billion).,,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 industry of about $5/part 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 skewed 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 IPC: 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 EICC & GeSI. GeSI and the EICC® Launch Conflict Minerals Reporting Template and Dashboard. 

August 3, 2011. 

http://eicc.info/PDF/GeSI%20and%2othe%20EICC%20Launch%20Conflict%20Minerals%20Reporting%20 

Template%20and%20Dashboard.pdf 

64 IPC Comments on SEC Proposed Rule on Conflict Minerals, March 2, 2011, p. 21 

65 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 15t 

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 1st tier, but generalized estimates can be made by using 

industry association data and basic inquiries to points within the supply chain B6 

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."9 

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 / 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 (8.) denotes tiers not considered by 

this paper's economic impact model.7o 

66 For instance, Figure 1 of Comments on SEC Regulatory Initiatives Under the Dodd-Frank Act Title XV: 

Miscellaneous Provisions- Section 1502 Conflict Minerals (PL 111-203), IPC-Association Connecting 

Electronics Industries, November 22, 2010. 

67 More details on this matter are provided in Issue #fj 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 (PL 111-203), IPC-Association Connecting Electronics 

Industries, November 22, 2010. http://\\WW.sec.gov/commentsldf-title-xv/specializeddisclosu resispeciaJizeddisclosu res-7 8. 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 ,t tier suppliers. 

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Figure 2: Width and depth illustration of mineral/metal supply chain 

A ,+---- Original product manufacturers 

r---"--"--o--"---\ 

1+--_ Component manufacturers (1" tier suppliers) 

~'~~~-7~~~~-- --------... ------.; \-.i __ L..,;.J..L_~-I'+--- Direct suppliers to 1" tier suppliers (20d tier suppliers) 

+=""",...- additional supplier tiers (3" tier, 4'h tier, etc.) 

........ v--:;-r.;=-------- Mineral smelters I refineries 

+--- Concentrate Traders & Mineral Re·processors 

+-- Local Mineral Exporters 

+--Intermediaries and Consolidators (may include 

minimal processing) 

+-___ Mineral Producers: 

y Artisanal & Small Scale Mining (ASM) 

'Conf!ict mineral flow 

Source: supply chain sequence adapted from GECD 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= L (ST * 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 (Le., depth) back to mine of 

origin 

ST = Estimated number of suppliers in each tier n (Le., 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. 

71 OECD (2011), OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from ConflictAffected and High-Risk Areas, OECD Publishing. http://www.oecd.orgldataoecdI62130146740847.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. Exporlers: 

• 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: The Conflict Minerals Supply Chain. Nov 10, 2009. 

hltp:IIWNW.enoughproiecl.orglfiles/publications/minelomobile.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.74 

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 1 st 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. ITRl'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.strqualitv.com 

7'lbid. 

75 International Tin Research Institute. iTSCi 5-Year Plan: DRC & Rwanda. February 2011. 

http://www.sec.gov/commentsls7-40-10/s7 401 0-326.pdfhttp://www.sec.gov/commentsls7 -40-1 O/s 7 4010-

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 ORC and certain 

neighboring countries.76 

B. Efficiencies, overlap and synergies in the implementation of Section 1502 

i. Mutuality / 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 ("ONV") of their supply chain. Due to the overlap in supplier 

relationships, per-company program costs may increase to some extent as ONV 

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, intemal 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 govemed 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 / 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.strgualitv.com 

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2. Non-CM mineral suppliers: based on findings from the IPC survey, only 53% of 

1 st 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 / 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 ope rationalizes 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 

services 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 IPC 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 "8ag and Tag", and the recently announced Public-Private Alliance for 

Responsible Minerals Trade (PPA).77 

• Internal information management systems: 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 Chemicals (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.gov/pressrelease 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 1 st 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 1 st 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" 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 for issuers 

necessary IT systems 5,994) who are small 

(to collect infonnation 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 $61 million for issuers 

wide audit of sized companies: $1.39 who are small 

approximately billion (276,000 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 ryve believe task 4 and 

implementation of risk- $50= $50,000; $50,000 5 are embedded in the 

based programs that X 5,994) first activity scope and 

use company control cost within 

processes to verify that management system 

suppliers are providing modifications. 

credible infonnation Therefore we are not 

costing out these 

5. cost of filing SEC $24,766,000 elements individually.) 

fonns 

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 miliion.7B 

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") 

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Economic impact analysis - third model 

$ (in millions) 

81 1)6 26 

D. Internal versus external company costs 

iii strenthening management 

systems 5,994 issuers 

Ulstrenthening management 

systems 1st tier suppliers 

issuers (large companies) 

miT issuers (small companies) 

!!!II CMR Audit issuers (small 

companies) 

t@ 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." 

T. a bl e 3 I h n- ouse resource cos s VS. money au tfl ows 

Task Internal human resource costs Money outflows 

1. Strengthening Issuers: (internal costs) 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 

performing due 

diligence Suppliers: (internal costs) Suppliers' (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 the (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 perscnnel time would $207,000,000 

CMRaudit be required for working with the 

auditors) 

Total $3,438,945,960 $4,502, 154,400 

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75730.206

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 / issuer breakdown of economic cost. Simply 

re-arranging the organization of costs as presented in Tab/e 3 above, Table 4 below 

tabulates the issuers / suppliers costs. 

T I 4 E ab e conomlc cos t t . s 0 Issuers versus suppliers r 

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 conforming with the issuer IT 

parameters) 

3. Commissioning $207,000,000 - CMR audit 

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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75730.207

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 "extemal" 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 intemal 

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 15t 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 

Term Definition 

1" tier supplier Companies that supply materials/products to original product 

manufacturers. retailers and issuers. 

2nd 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',ao 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. OECD Guidelines for Multinational Enterprises. 25 May 2011. 

http://www.oecd.org/dataoecd/43/29/48004323.pdf 

aD Farlex Financial Dictionary. 2009. 

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~RILA RETAIL INDUSTRY LEADERS ASSOOAnON 

Educate-lnnovate.Advocate. 

May 10,2012 

The Honorable Gary Miller 

Chairman 

Subcommittee on fnternational Monetary Policy 

and Trade 

Committee on Financial Services 

2129 Rayburn Flouse Oftice Duilding 

Washington. DC 20515 

1700 NORTH f.lQORf'. STREET 

SV!H,2:2S0 

ARLINGTON, IIA 2;2:>'09 

T (703) t!41-230(1 F(70:nS4H184 

The Honorable Carolyn McCarthy 

Ranking Member 

Subcommittee on International Monetary Policy 

and Trade 

Committee on Financial Services 

2129 Rayburn House Office Building 

Washington, DC 20515 

Re: The Costs and Consequences ofDodd~Frank Section 1502: Impacts on 

America and the Congo 

Dear Chairman Miller and Ranking Member McCarthy: 

On behalf of the Retail IndU"c;try Leaders Association (RILA), I write to you today to provide our comments 

on the consequences of requiring Securities and Exchange Commission (SEC) registrants to provide 

disclosures about the use of minerals from the Democratic Republic of Congo and adjoining regions, and 

the SEC's proposed rule to implement this new disclosure requirement (Proposed Rule).l 

By way of background, RILA members include the largest and fastest growing companies in the retail 

industry, which together account for more than $1.5 trillion in annual sales. RILA members provide 

millions of jobs and operate more than 100,000 stores and distribution centers domestically and abroad. 

RItA members greatly sympathize with the people of the Congo and fully support ending the unlawful 

activities of armed groups controJling mines in the region. RILA also fully supports the intent of Section 

1502 of the Dodd~Frank Regulatory Reform and Consumer Protection Act of2010 (Dodd-Frank/ to protect 

the Congolese citizenry. 

Nonetheless, a<; an overall policy matter, we do not believe that imposing a reporting burden on certain U.S. 

companies regulated by the SEC is an effective or efficient tool for ending human rights abuses. Our policy 

concerns are heightened by the SEes impermissibly expansive Proposed Rule that would extend the scope 

of covered issuers beyond those who manufacture to include those who "contract to manufacture," 

SEC's Proposal Exceeds Scope of Statutory Authority 

A. The Law Places A Reporting Obligation Only On Those Engaged In Value~Added 

AfanuJacturing Processes 

75 Fed. Reg. 80948 (Dec. 23, 2010). The Proposed Rule would set forth the new conflict~minerals disclosure 

requirements.by amending Regulation S~K for domestic registrants - publicly traded CQmpanies required to file annual 

reports with the SEC on Form 10·K - as well as certain foreign issuers. 17 CFR § 229.104. 

2 Pub. L. No. 111-203 (Jul. 21, 2010). The statute adds new § 13(p) to the Securities Exchange Act of1934 

(Exchangc Act). References to the new conflict-minerals disclosure requirement in this letter are to § 13{p). 
255 


75730.210

The SEC's Proposed Rule impermissibly extends the scope of issuers that would be covered beyond the 

boundaries established by the statute. Specifically, Section 1502 expressly applies the disclosure 

requirement to "any person described in paragraph (2)." A person is "described in [paragraph 2]" if "the 

person is required to file reports with the Commission pursuant to paragraph (I)(A) [the operative 

disclosure provision]" and "conflict minerals are necessary to the functionality or production of a product 

manufactured by such person." § 13(p)(2) (emphasis added). The foregoing definition does not include 

"contract to manufacture." The only reference to the "contract to manufacture" concept is in the 

information that a covered issuer must include in its disclosure report. See § 13(p)(1)(A)(ii) ("a description 

of the products manufactured or contracted to be manufactured that are not DRC conflict free"). 

In the preamble to the Proposed Rule, the SEC recognizes that the statute was "intended to apply only to 

issuers that manufacture products." 75 Fed. Reg. at 80952. The Commission further states that "[tlhe 

absence of the phrase 'contract to manufacture' from the 'person described' definition raises some question 

as to whether the requirements apply equally to those who manufacture products themselves and those who 

contract to have their products manufactured by others." Id. 

Nevertheless and without further analysis or justification, the SEC concludes that "[b lased on the totality of 

the provision, however, it appears that the legislative intent was for the provision to apply both to issuers 

that directly manufacture products and to issuers that contract the manufacturing of their products .... " Id. 

The SEC further elaborates on the meaning of "contract to manufacture" in this context and states that the 

Proposed Rule is intended to apply to issuers that contraet to manufacture products "over which they have 

any influence regarding the manufacturing ," as well as issuers selling generic products "under their own 

brand name or separate brand name that they have established, regardless of whether those issuers have any 

influence over the manufacturing of those products, as long as an issuer has contracted with another party to 

have the product manufactured specifically for that issuer." Id. 

Thus, the SEC takes the "contract to manufacture" concept out of the statutory description of the type of 

information that must be included in a report, inserts it into the scope of parties covered, and further 

expands the concept to include anyone who might have even the most tenuous connection to the production 

design or specifications ofa product manufactured by a stand-alone manufacturing entity. 

The statutory "contracted to manufacture" language in paragraph (p)(J)(A)(ii) obviously and directly 

pertains to arrangements among those in the value-added process; that is, to those that are proximately 

upstream (e.g., minerals, materials, processing) or proximately downstream (e.g., an integrator of materials 

or component parts) from a manufacturer. Nothing in the text of the statute, its reasonable interpretation, 

nor its legislative history lends any support to the notion advanced by the SEC and others after the passage 

of the law that the language in § 13(p)(l)(A)(ii) referring to "contracted to manufacture" itself imposes a 

reporting obligation on anyone that is not already a proximate part of the value-added manufacturing 

process.' 

In suggesting a reading contrary to the clear statutory language and context, the SEC takes note of a 

letter dated October 4, 2010 from Sen. Richard Durbin and Rep. Jim McDermott. However, the Supreme 

Court has specifically stated that post-enactment statements by legislators are "generally viewed as the least 

reliable source of authority for asccrtaining the intent of any provision's drafters," and they are "entitled to 

2 
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B. Retailing Lv Not Manufacturing 

As there is no basis for extending the statutory language beyond the value-added manufacturing process, the 

SEC would appear to have an obligation to spell out, through a definition of "manufacture," what is 

included in that process. RlLA supports the recommendation of the National Association of Manufacturers 

("NAM") that the SEC rely upon the generally accepted government definition of "manufacturing" as 

developed by the U.S. Census Bureau and North American Industry Classification System ("NAICS") and 

widely relied upon by both government and industry: 

Manufacturing as establishments engaged in the mechanical, physical, or chemical transformation 

of materials, substances, or components into new products.4 

The definition of "manufacturer" should only include original equipment manufacturers and those 

businesses that design and specify bills of materials for products with control over the procurement or 

fabrication of the same products' bill of materials and specification of the constituent materials of the 

components. Although retailers in their private label programs may contract to have goods produced 

espccially for them, this alone should not sweep retailers into the definition of a "manufacturer" within the 

meaning of the statute. An issuer should not fall within the definition of "manufacturer" by merely 

attaching a brand label to a generic good. contracting for the exclusivc distribution of goods, or specifying 

the fonn, tit or function of a product. 

II. SEC Cost Estimate 

RILA and its members remain highly concerned that the cost estimate included in the Proposed Rule 

remarkably understates the true cost of the program that the SEC has proposed. In the Proposed Rule, and 

again at the roundtable hosted by the SEC on October 18,2011, the SEC staff asked for comments on the 

accuracy of its costs estimates. As we noted in discussions with the staff, the tools necessary to perfonn the 

due diligence that would be required of retailers by the Proposed Rule do not currently exist and would 

have to be built. Based on their knowledge of their businesses and supply chains, and from discussions 

with potential independent auditors and consultants, the SEC's estimate of$35,898 for each of the 1,199 

issuers the agency estimates would be required to file reports is woefully inadequate. RILA's view is 

shared by the National Association of Manufacturers, by researchers at Tulane University in a study (Chris 

Bayer, Dr. Elke de Buhr, Tulane University Law School's Payson Center for International Development, A 

Critical Analysis of the SEC and NAM Economic Impact Models and the Proposal of a Third Model in view 

of the Implementation of Section 1502 of the 2010 Dodd-Frank Wall Street Reform and Consumer 

Protection Act, October 17, 20 11) at the request of one of the sponsors of Section 1502, and by the Small 

Business Administration in a letter in 2011 (Winslow Sargeant, PH.D., Chief Counsel for Advocacy, Dillon 

Taylor, Assistant Chief Counsel for Advocacy, Conflict Minerals, File Number S7-40-10, October 25, 

2011). 

no more weight than the views of ajudge concerning a statute not yet passed." District of Columbia v. 

Heller, 554 U.S. 570, 662 n.28 (2008). 

Letter from the National Association of Manufacturers and other industry groups to Mary L. 

Shapiro, Chainnan, Securities and Exchange Commission regarding SEC initiatives under the Dodd-Frank 

Act - Special Disclosures Section 1502 (Conflict Minerals), at 4 (Nov. 12.2010). 

3 
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III. Conclusion 

In conclusion, RILA members are committed to identifying solutions to ease the suffering in the Congo and 

are prepared to work with stakeholders towards this eventual goal. However, even human rights abuses do 

not grant the Securities and Exchange Commission the license to exceed the bounds of the authority granted 

to it by Congress. In this regard, the final rule should reflect the statutory requirements that define the 

scope of issuers covered by the Section 1502 disclosure requirements. 

Please do not hesitate to contact me if you have any questions at (703) 600-2046 or by email at 

stephanie.lester@rila.org. 

Sincerely, 

Stephanie Lester 

Vice President, International Trade 

Retail Industry Leaders Association 

4 
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Advocacy: the voice of small business in government 

VIA ELECTRONIC SUBMISSION 

U.S. Securities and Exchange Commission 

Attn: Eli71lbeth M. Murphy, Secretary 

100 F Street, NE 

Washington, DC 20549 

Electronic Address: rule-comments@sec.goY 

October 25, 2011 

Re: Conflict Minerals, File Number S7--4IJ.--IO 

To Whom It May Concern: 

The Office of Advocacy (Advocacy) offers the following comment to the Securities and Exchange Commission 

(SEC) in response to the above-referenced proposed rule.' Advocacy understands the underlying purpose of the 

proposed rule, which is to prevent atrocities occurring in the Democratic Republic of Congo. However. 

Advocacy has concerns that the proposed rule fails to comply with the Regulatory Flexibility Act (RFA). 

Specifically, the proposed rule appears to underestimate both the costs that the proposed rule will impose and 

the number of small businesses that will be impacted by the proposal. Advocacy recommends that the SEC 

publish in the Federal Register an amended initial regulatory flexibility analysis (IRFA) for the proposed rule to 

morc accurately reflect the costs of the proposed rule and the number of small businesses that it will affect. 

Office of Advocacy 

Advocacy was established pursuant to Pub. L. 94-305 to represent the views of small entities before federal 

agencies and Congress. Advocacy is an independent office within SBA, so the views expressed by Advocacy do 

not necessarily reflect the views of the SBA or the Administration. The RF A,2 as amended by the Small 

Business Regulatory Enforcement Fairness Act (SBREFA),3 gives small entities a voice in the rulemaking 

process. For all rules that are expected to have a significant economic impact on a substantial number of small 

entities, federal agencies are required by the RFA to assess the impact of the proposed rule on small business 

and to consider less burdensome alternatives. 

The Small Business Jobs Act of2010 requires agencies to give every appropriate consideration to comments 

provided by Advocacy.4 The agency must include, in any explanation or discussion accompanying the final 

rule's publication in the Federal Register, the agency's response to these written comments submitted by 

Advocacy on the proposed rule, unless the agency certifies that the public interest is not served by doing SO.5 

I 75 Fed. Reg. 80948 (Dec. 23,2010), available ~1 http://www.sec.gov/rules/proposed/2010/34-63547fr.pdf 

25 U.S.c. § 601 et seq. 

J Pub. L. 104-121, Title II, 110 Stat. 857 (1996)(oodified in various sections of 5 U.s.C. § 601 et seq.). 

'Small Business Jobs Act of2010 (pL 111-240) § 1601. 

'llh 
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Background 

On July 21, 2010, Congress enacted section 1502 ofthe Dodd-Frank Act to require SEC filers to provide certain 

disclosures about the use of specified conflict minerals originating in the Democratic Republic of Congo 

(DRC).' Congress intended this provision of the Dodd-Frank act to bring transparency to the financial interests 

that support mining in the ORe. 

On December 23, 2010, the SEC issued the proposed rule to implement section 1502 of the Dodd-Frank Act.' 

The proposed rule would require businesses that file with the SEC and manufacture products that require tin, 

tantalum, tungsten, and gold to report whether the minerals originated in the DRC or a neighboring country. 

Under the proposed rule, if a business discovers that its minerals do originate in the DRC or one of its 

neighbors, more reporting would be required. The businesses would be required to report on the measures they 

took to exercise "due diligence" on the source and chain of custody of the minerals. The proposed rule would 

also require businesses to provide independent verification of these steps through an independent private sector 

audit of the reporting. 

On October 6,2011, the SEC issued a notice to announce a roundtable regarding tbe proposed rule.' In the 

notice, the SEC extended the period to submit comments for the proposed rule until November 1, 2011 9 

The IRFA Underestimates the Cost and the Number of Small Businesses Affected by the Proposed Rule 

Under the RFA, an initial regulatory flexibility analysis (IRFA) must contain: (J) a description of the reasons 

why the regulatory action is being taken; (2) the objectives and legal basis for the proposed regulation; (3) a 

description and estimated number of regulated small entities; (4) a description and estimate of compliance 

requirements, including any differential for different categories of small entities; (5) identification of 

duplication, overlap, and conflict with other rules and regulations; and (6) a description of significant 

alternatives to the rule. lo 

In the proposed rule's IRFA, the SEC estimated that approximately 793 small entities would be subject to the 

proposal. The IRFA provided that the proposed rule would add to the annual disclosure requirements of 

companies with necessary conflict minerals, including small entities, by requiring them to comply with the 

disclosure and reporting obligations. The proposed rule stated that the costs of compliance are "difficult to 

assess but are likely insignificant." 

Small business stakeholders have been in contact with Advocacy to express concern with the proposed rule. 

Small businesses contend that the SEC underestimates both the costs that the proposed rule will impose and the 

number of small businesses that will be impacted by the proposal. 

As an example, one small business representative who met with Advocacy commented that the SEC proposed 

rule would impose a median due diligence burden in excess of$65,000 per company in the electronics industry 

supply chain to comply with the rule during the first year alone. I I This same small business representative 

stated that the proposed rule would impose additional estimated costs for tracking software, additional staff, 

training, legal expenses, and third party audits with a median total of $170,000 per company in the electronics 

6 Public Law 111-203. 

7 75 Fed. Reg. 80948 (Dec. 23, 2010), available at http://www.sec.gov/rules/proposed/2010/34-63547fr.pdf. 

, SEC Release No. 34-65508; File No. S7-40-10 available at http://www.sec.gov/rules/otherl2011/34·65508.pdf. 

'Id 

1°5 USC § 603. 

11 IPC _ Association Connecting Electronics Industries comment letter to the SEC, dated March 2, 2011. 

2 
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industry supply chain." These high compliance costs stem from the fact that supply chains in the electronics 

industry are an extremely complex, multi-layered network of global trading companies and suppliers. 

Similar to the electronics industry, small businesses in most industries that would be subject to the proposed 

rule participate in a complex supply chain that is comprised of numerous other businesses. The proposed rule 

would affect most manufacturers of electronics, aerospace, automotive, jewelry, health care devices, and 

industrial machinery. Even businesses that don't necessarily file with the SEC may be impacted if they are part 

of the supply chain for these metals to SEC filing companies. Because the SEC does not take into account the 

complexity of supply chains and the number of small businesses that are part of those supply chains, the SEC 

has underestimated the number of small businesses that would be impacted by the proposed rule. 

Advocacy recommends that the SEC publish in the Federal Register an amended IRFA for the proposed rule. 

The amended IRF A should more accurately describe the costs and burdens of the proposed rule, and should also 

more accurately detail the number of small entities that would be impacted by the proposed rule. Amending the 

IRFA will help the SEC gain valuable insight into the effects of the proposed rule on small entities, and will 

require that the SEC consider less burdensome alternatives to the proposed rule. 

Conclusion 

Advocacy is committed to helping the SEC comply with the RFA in the development of its rule on conflict 

minerals. Accordingly, Advocacy stands ready to assist the SEC in amending the proposed rule's IRFA. If you 

have any questions or require additional information please contact me or Assistant Chief Counsel Dillon 

Taylor at (202) 401-9787 or by email at Dillon.Taylor@sba.gov. 

Sincerely, 

Winslow Sargeant, Ph.D. 

Chief Counsel for Advocacy 

Dillon Taylor 

Assistant Chief Counsel for Advocacy 

3 
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CHAMBER OF COMMERCE 

OfllfE 

UNITED STATES OF AMERICA 

R. BRUCE JOSTEN 16}5 H STREET> N W, 

EXEOITIVE VICE PRESIDEN r 

GO\lT"oRNMENT AFFAIRS 

WASHINGTON, D_C 20062-2000 

The Honorable Gary Miller 

Chainnan 

Subcommittee on International 

Monetary Policy and Trade 

Committee on Financial Services 

U.S. House of Representatives 

Washington, DC 20515 

May 9, 2012 

The Honorable Carolyn McCarthy 

Ranking Member 

Subcommittee on International 

Monetary Policy and Trade 

Committee on Financial Services 

U.S. House of Representatives 

Washington, DC 20515 

Dear Chainnan Miller and Ranking Member McCarthy: 

202/463~5310 

The U.S. Chamber of Commerce, the world's largest business federation representing the 

interests of more than three million businesses and organizations of every size, sector and region, 

believes that an effective and coherent regulatory structure is needed to ensure the safety and 

soundness of the capital markets. 

The Chamber supports the fundamental goal, as embodied in Section 1502 of the DoddFrank Wall Street Refonn and Consumer Protection Act (Dodd-Frank Act), of preventing the 

exploitation of conflict minerals for the purpose of financing human rights violations within the 

Democratic Republic of Congo (DRC). However, Section 1502 was never subject to public 

debate and Congress could not evaluate serious flaws, particularly that the Securities and 

Exchange Commission (SEC) disclosure regime is not designed to solve societal woes. 

In proposing the rule to implement Section 1502, the SEC estimates that issuers would be 

burdened with $71,243,0001 in compliance costs and that the disclosures may impact between 

1,199 and 5,551 companies, even if they never use conflict minerals. The cost-benefit analysis 

fails to show any benefits to investors, increased efficiencies for the marketplace or capital 

fonnation. Under Section 23(a) (2) the Exchange Act, in promUlgating rules the Commission 

must consider the impact that any rule may have on competition and it is prohibited from 

adopting any rule that would impose a burden on competition not necessary or appropriate in 

furtherance ofthe Act's purposes. 

Shareholders may also be hanned when some companies would be forced to make 

difficult j udgments concerning how to report inconclusive data. Because ofthe inherent 

problems many companies would face in tracking their supply chain, they may not be able to 

reach a definitive conclusion as to whether their minerals were derived from a tainted source. 

I The National Association of Manufacturers has stated that compliance costs may be as high as $16 billion. 
262 


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Unable to provide unequivocal proof of the negative, many companies would have to report 

potentially damaging infonnation that may not be accurate. 

Furthennore, Section 1502 would place additional costs and burdens upon hundreds of 

thousands of small non-public companies. 

Manufacturers, or other companies subject to these disclosures, may, individually, have 

tens of thousands of vendors, many of whom may be private companies that are involved in their 

supply chain. Some have already begun to have their vendors certify compliance with the 

proposed rule before it has been finalized. This has started to spread the compliance costs and 

burdens throughout the economy, upon hundreds of thousands of businesses that are not subject 

to the jurisdiction of the SEC. Therefore, billions of dollars of costs would be imposed upon 

businesses not even contemplated by the SEC. 

We would like to thank the Subcommittee for holding this hearing to explore the 

difficulties of Section 1502. Imposing billions of dollars in additional regulatory costs on public 

companies and small businesses would hann the ability offinns to expand and create jobs. We 

look forward to working with the Subcommittee to address these issues and assist the capital 

fonnation needed for economic growth and job creation. 

Sincerely, 

R. Bruce Josten 

Cc: The Members of the Subcommittee on International 

Monetary Policy and Trade 
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May 9, 2012 

Statement of Mr. Ntama Byalira Bahati (Jacques) 

Africa Faith and Justice Network Policy Analyst 

Dear Members of the House Financial Services Subcommittee on International 

Monetary Policy and Trade: 

My name is Ntama Byalira Bahati (Jacques), a Congolese citizen, and Africa Faith and 

Justice Network Policy Analyst since 2007. I am grateful for the opportunity to submit 

this statement for the record on behalf of the Congolese people and the Africa Faith and 

Justice Network. 

As a person who witnessed the 1996 and 1998 wars against the Democratic Republic of 

the Congo (DRC), took part in the relief work in the City of Bukavu days after foreign 

troops had taken over the area and has seen the loss of relatives and friends, I write to 

urge the US Congress to stand with the Congolese people instead of the U.S. Chamber of 

Commerce and National Association of Manufacturers by asking the US Securities and 

Exchange Commission (SEC) to issue strong regulations and uphold the original intent 

of Congress enshrined in section 1502 of Dodd-Frank Wall Street Financial Reform and 

Consumer Protection Act of 2010. Disclosure is overdue. 

On February 13, my colleague and I returned from a three week research trip in DRC on 

the effect of Dodd-Frank 1502, specifically on artisanal miners. We visited the Mukera 

gold mine located in Fizi Territory/South Kivu province and held a town hall meeting 

with artisanal miners and leaders of the community. We also met with civil society 

leaders and artisanal miners in Goma, the capital of North Kivu province. They asked 

us to deliver their message to US Congress and others who have been vocal on their 

behalf. 

There are obvious signs of poverty in the Mukera mining community. There are no 

visible signs that living conditions in Mukera are better than they were under the three 

decades of dictatorial rule by late President Mobutu Sese Seko. Rather, the situation has 

worsened since the invasion by Rwanda, Uganda and Burundi in 1996. Upon hearing 

about the conflict mineral law for the first time, the people of Mukera wanted to know 

more. They wanted to know when they would benefit from it. AFJN, in collaboration 

with Pax Christi Uvira, has already delivered translated copies of the law to government 

authorities and miners who expressed interest. However, more awareness and 

empowerment is needed. 

The ongoing financial link between artisanal mining and armed groups (a network in 

which the Congolese army and high-level Congolese government authorities are deeply 

involved) ensures that the economic livelihood ofthe people of Mukera will stay 

depressed, at least until mining sector reform is implemented. While DRC does have a 

mining code, it is not enforced, and strong new policy is crucial to improve the living 

conditions of mining communities. DRC has plenty oflaws, but it lacks the leadership to 

enforce them. 
264 


75730.219

Like the artisanal mining cooperative in Mukera, Mpama Bisiye Artisanal Miners' 

Cooperative (COMIMPA) in North Kivu aims not only to organize artisanal miners and 

defend their rights, but also to help improve their skills and tools, professionalize their 

work, and fight the plundering of their resources. They endeavor to combat all illegal 

and unethical practices in artisanal mining, and to stop efforts to eliminate artisanal 

mining while advocating for industrialization. COMIMPA understands the need for 

economic diversification and development of mining areas; minerals are a finite 

resource that will be depleted. 

One of the ways COMIMPA is working to stop the illegal sale of minerals is by asking all 

traders to buy only from miners whose membership in the cooperative is proven. This 

way, if minerals are stolen or taken by force, particularly by armed groups, they would 

not be able to sell them. This is a step in the right direction towards reform and price 

control. 

In a very lucrative business such as mining, the people doing the digging do not receive 

even the minimum value of what their minerals are worth. Since the conflict minerals 

law was enacted, one of the strategies to maintain the status quo has been to accuse the 

United States of imposing an embargo on minerals from the DRC. Even if there was a 

US embargo, which there is not, the current system is not an option. The level of 

plundering of DRC's resources is not acceptable and must end. 

Congolese leadership, at the national and provincial levels, is most responsible for the 

lack of accountability in the mining sector. Any reform is an inconvenience to many of 

them. Their names have consistently appeared in UN experts' reports on DRC. 

Time and time again the DRC government has been the first offender of any reform. 

Since high ranking army officers and members of the government at state and provincial 

level are also involved in the illicit mining trade, the affected people must prepare for a 

long journey to meaningful and effective implementation of any reform. 

The International Conference on Great Lake Region (ICGLR) member states, although 

engaged in due diligence negotiations, have yet to fully commit to end DRC conflict 

mineral sales in their countries. For example, on November 3, 2011 the Rwandan 

government made headlines by returning about 82 tons of smuggled minerals to DRC. 

However, according to a statement by Nasson Kubuya Ndoole, the North Kivu Mining 

Minister in charge of overseeing the return of those minerals, the minerals were sold in 

Rwanda shortly after by DRC officials without any investigation to find out who was 

responsible for smuggling the minerals back into Rwanda. 

Similarly, the delay in releasing the rules of Dodd-Frank 1502 is due in part to efforts by 

those who are opposed to the law and want to water it down, make it ineffective and 

completely take away the intent of Congress when it passed the law. 

While all involved in the conflict mineral trade are making a lot of money, 

unfortunately, the Congolese people are paying the highest price. They suffer loss oflife, 
265 


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rape, displacement, impoverishment, instability, the plundering of their resources and 

much more. Likewise, US tax payers are paying the bills for peacekeeping, relief and 

other kinds of programs, both directly and through the UN. 

The US Congress understood that cutting mineral revenue for armed groups will lessen 

the conflict, that's why they passed the law. For this reason, the rules must be strong and 

released without delay. If the rules are weak, the law is useless. 

There is evidence that since Dodd-Frank 1502 passed, the loss of income has been felt by 

not only the armed groups, but also people and businesses which benefited from the 

illicit trade cash flow in the conflict zone. These are artisanal miners, stores, restaurants 

and many other businesses at mining sites and cities within Congo and outside Congo. 

However, "What good to eat and be satisfied today just to die tomorrow knowing that 

there is no happiness in the plight of the dead?" asks the Bureau of Study, Observation, 

and Coordination ofthe Regional Development ofWalikale (BEDEWA). This is why we 

must focus on Dodd-Frank 1502'S main goals which are to eliminate the financial power 

of armed groups in DRC, promote peace, prosperity, democracy and progress. 

Dodd-Frank 1502 is not a solution to the social, historical, political, and economic 

problems of the DRC and no single law, particularly foreign, can solve these issues. 

Dodd-Frank is the second US law regarding the DRC after US Public law 109-456, 

focused on democracy, human rights, good governance, humanitarian relief, 

development aid and regional forces destabilizing the DRC. If both laws were 

implemented, provided the Congolese Government is willing to accept the help, they 

could make a difference for the people of Congo. 

Colonel Emma K. Coulson, a military fellow researcher at the Joint Center for Political 

and Economic Studies says, in her paper entitled: "Impact of gender based violence on 

stability and security," that: "It benefits the US to partner with the DRC in settling their 

conflict and gain positive control of their natural resources." Furthermore, she argues: 

"The US is the largest consumer of coltan, which it uses to produce electronic products 

and high-end electronics critical to defense weapons systems. The DRC possesses 80 

percent of coltan reserves-guaranteeing a role for the DRC in the international mineral 

trade as consumption increases. This is considering when the US begins to strategically 

evaluate where its vulnerabilities lie in procuring critical minerals for tomorrow's 

defense technology." 

What can corporations do while we are waiting for the Dodd-Frank 1502 rules? They 

should be using the Organization for Economic Cooperation and Development's (OECD) 

Due Diligence Guidance for Responsible Supply Chains of Minerals from ConflictAffected and High-Risk Areas. There are also UN due diligence guidelines, which differ 

regarding application, enforcement, thematic and geographical coverage. The UN due 

diligence guidelines are for importers, processing industries and consumers of 

Congolese mineral products in all 192 States Members ofthe United Nations, not just 

the 34 OECD member States. 
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75730.221

The people of Congo would like to know who would benefit from a prolonged phase-in 

period, suggested by opponents of Dodd-Frank 1502, before the full disclosure 

mandated by Dodd-Frank 1502 law comes into effect? Iflocal people had a vote, would 

they choose to allow armed groups to continue having easy access to cash and wage wars 

against them? Why should we believe that if the SEC released tougher rules it would 

drive companies to other countries? If tougher rules can bring peace, which is the intent 

of the law, why should we accept anything less? Finally, for the last 16 years of war in 

Congo, mineral trade has been profitable to multinational corporations and armed 

groups. Currently US tax payers contribute a large portion of the UN peacekeeping 

mission in DRC, in addition to USAID relief and other programs financed by the US 

government. Tougher rules can save US tax payers money, force profitable companies 

to pay for compliance and allow Congolese people to get what their resources are worth. 

Thank you 

Ntama Byalira Bahati Jacques 
267 


75730.222

Statement of Bennett Freeman 

Senior Vice President, Sustainability Research and Policy 

Calvert Investments 

Subcommittee on International Monetary Policy and Trade Hearing on 

The Costs and Consequences of Dodd-Frank Section 1502: 

Impacts on America and the Congo 

May 10, 2012 

Calvert is pleased to have the opportunity to make a very brief statement at this hearing on 

Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding 

conflict minerals. Calvert Investments is one of the nation's largest families of sustainable and 

responsible mutual funds based in Bethesda MD, with over $12 billion in current assets under 

management and nearly half a million investor accounts in the U.S. 

As a sustainable and responsible investor, Calvert values companies which manage different 

forms of risk in their global supply chains. We have longstanding experience both in assessing 

human rights-related risk and the management of that risk across global supply chains-and 

expertise in evaluating appropriate and credible disclosure of such risk assessment and 

management. We have been especially concerned in recent years by the use of certain 

minerals-gold, tin, tungsten and tantalum-to fund the continuing bloody conflict in the 

Democratic Republic of the Congo (DRC) which has claimed more lives than any other since 

the end of World War II. 

That is why we have joined other investors and shareholder advocates in a multi-stakeholder 

group which also includes major companies and human rights non-governmental organizations 

(NGOs) to promote responsible sourcing in the DRC. Together we have supported the 

legislation that was enacted as Section 1502 to curb the use of such minerals which prolong the 

conflict-and we have worked together since then to support the development of a rule that will 

ensure its full and swift yet effective and reasonable implementation. 

We understand the complex issues at stake in the rulemaking process and the painstaking work 

undertaken by the SEC in order to reconcile that legislative intent with the interests of investors 

and issuers alike. We have brought to this process not only our expertise in evaluating human 

rights-related risk in global supply chains, but also our objective of making conflict mineralrelated disclosures consistent and accessible to all investors. We are encouraged by recent 

indications that the rule may be finalized in the coming weeks, especially given the urgent 

legislative intent to address the situation in the DRC. 

We welcome the examination of key issues at this hearing and we oppose any efforts 

by Congress to water down or weaken this provision that is critical for protecting human rights 

and providing important information for investors. We reiterate our hope and expectation that 

the final rule will be completed and released within the next several weeks given both the 

humanitarian urgency of the situation on the ground and our need to gain assurance that 

companies in which we invest are addressing these grave risks in their supply chains, 

consistent with this vital law. 
268 


75730.223

COLUMBIA UNIVERSITY 

IN THE CITY or NEW Y()RK 

Statement of Peter Rosenblum 

Columbia Law School 

Subcommittee on International Monetary Policy and Trade Hearing on 

The Costs and Consequences ofOodd-Frank Section 1502: 

Impacts on America and the Congo 

May 10, 2012 

Re: Section 1502 of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act 

I respectfully submit this statement in support of Section 1502 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act ("Section 1502"), which mandates certain 

disclosures concerning conflict minerals that originate in the Democratic Republic of the 

Congo ("DRC") or an adjoining country. 

I am a Professor at Columbia Law School and the faculty director of its Human Rights 

Institute. For more than 20 years I have been working on issues of human rights and 

development in the Democratic Republic of Congo. Beginning in 1989, I reported on 

human rights conditions for major human rights organizations including Human Rights 

Watch and the Lawyers Committee for Human Rights (now Human Rights First). Since 

then, 1 have continued to travel to the ORC and collaborate on projects with a variety of 

organizations including the UN, USAID and The Carter Center. Since 1998, I have 

increasingly focused my attention on the interconnections of natural resource extraction, 

human rights and development. Since 2006, I have been collaborating closely with The 

Carter Center on a project concerning industrial mining there. 

The long-term development ofthe ORC hinges on success in channeling potentially vast 

mining revenues into development. At this moment, the mineral wealth ofthe Eastern 

Congo feeds conflict and corruption, with a few crumbs falling to the local population; 

almost nothing goes to government or long-term development. This is the local 

manifestation of the 'resource curse.' It is due to many factors, but it has been 

exacerbated by 15 years of sustained conflict that has created perverse incentives, 

reduced livelihood options and driven much of the population into unsustainable choices 

for survival. 

Jerome L Greene Hall 435 West 11 6th Street New York, NY 10027 
269 


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Section 1502 will not single handedly reverse this process and tum natural resources into 

the engine of development. Without it, however, the prospects are considerably more 

bleak. Section 1502 incorporates some of the best thinking of the past 20 years in regard 

to the effort to overcome the 'resource curse' with market forces. Transparency, public 

disclosure, supply chain due diligence and incentives for corporate responsibility - as 

incorporated in Section 1502 - are the core components of the most promising and 

respected initiatives in the field. It is impossible to picture a path beyond the 'curse' 

without them. 

Moreover, Section 1502 does not exist in a vacuum. It comes at a time when 

international organizations, regional bodies, industry associations and advocacy groups 

are converging on mining in the region and the tools for its repair. Section 1502 gives 

impetus to those efforts and pushes outliers to the margins. It has helped to spur 

legislative efforts by the government ofthe DRC to regulate the sector and reinforce 

requirements of due diligence; and it has triggered other initiatives to educate diggers and 

traders. 

This is not to deny the potentially dislocative effects of 1502. But these should be 

carefully documented, scrutinized and understood in context. Throughout history, 

important social reform has had significant short term, negative impacts on labor and 

livelihoods. To cite the most extreme example, the end of slavery and labor indenture 

had dramatic and negative consequences for the plantation sector and its workers. Well 

intentioned commentators continued to defend labor servitude on a mixture of economic 

and humanitarian grounds for more than a decade after the formal end of slavery. More 

recently, efforts to end labor trafficking have faced similar arguments. Yet no one 

seriously argues against these historic reforms. 

In sum, we should be attentive to the negative impacts of Section 1502, but wary of the 

arguments for weakening it. The evidence of negative effects has been largely 

impressionistic and over-inclusive - relying on anecdote and ignoring other causal factors. 

As a frequent visitor and long-term observer of the region, I am skeptical. The local 

dependency on mining, despite the deplorable conditions for workers and the corrosive 

effect on the society, is itself a product of the war that has undermined legitimate 

alternatives. Weakening Section 1502 would be a statement in support of this intolerable 

status quo. 

Respectfully Submitted, 

Peter Rosenblum 

Lieff Cabraser Clinical Professor of Human Rights 

And Faculty Co-Director, Human Rights Institute 

Columbia Law School 

prosen@law.columbia.edu 

Office: 1-212-854-5709 

Mobile: 1-617-233-6198 
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EARTHWORKS]" • 

May 8,2012 

Dear Members of the House Financial Services Subcommittee on International Monetary Policy and 

Trade, 

Earthworks submits this letter to the hearing record to express our support for Section 1502 of the 

Dodd-Frank Act. We are concerned about the documented link between the minerals trade and 

violence in the region, and believe Section 1502 is a critical driver to help reduce violence on the ground 

and ensure that clean supply chains are developed. We therefore urge Congress and your 

Subcommittee to support this provision and to ensure that the Securities and Exchange Commission 

(SEC) works to produce a final rule that will help break the link between minerals and conflict and 

reduce violence on the ground. 

Congress intended for this law to immediately address the urgent humanitarian situation in the eastern 

Democratic Republic of Congo (DRC) by curbing the trade in conflict minerals. For over a decade, since 

the UN Group of Experts exposed the problem, minerals have fuelled conflict and human rights abuses, 

including sexual and gender-based violence. For U.S. taxpayers, the deadly trade in conflict minerals 

means continuing to pay US $500-600 million per year in aid and peacekeeping costs aimed at making 

Congo a more stable place. For companies, delays create uncertainty in the market and about the 

standards to which they will be held. Delays also impede the effectiveness of programs already 

underway on the ground. For investors, the reasonable right to know which activities their investments 

or purchases may be directly or indirectly supporting is compromised. Most importantly, for the 

Congolese people, further delays mean armed groups can continue to prey upon the minerals sector, 

fuel instability and commit human rights abuses against civilian populations. This is not what Congress 

intended by enacting Section 1502. 

Since passage of Dodd-Frank, significant steps are being taken to ensure conflict minerals no longer line 

the pockets of armed groups including Congolese government actions to demilitarize mining areas and 

to require companies to carry out due diligence measures to avoid sourcing by armed groups. Industry 

groups are also developing initiatives to comply with the provision. However the delay of the SEC 

rulemaking and the possibility of weak rules threaten this progress. It has been nearly two years since 

President Obama signed the law and the statute is clear that the 5EC should have produced final rules by 

April 2011. It is time to put this law into action. We ask that you use this opportunity to highlight the 
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benefits of this provision, and to consider using your offices to pressure the SEC to issue a strong rule 

that meets to Congressional intent and works to break the link between conflict and minerals in eastern 

Congo. 

Sincerely, 

PayaJ Sampat 

International Program Director 
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Testimony for House Financial Services 

Subcommittee on International Monetary Policy and Trade 

Hearing on 

"The Costs and Consequences of Dodd-Frank Section 1502: Impacts on America and the 

Congo" 

By The Enough Project 

May 9, 2012 

The Enough Project's ("Enough") mission is to end genocide and crimes against humanity in Africa. 

Since 2007, Enough has been working to build a permanent constituency to prevent genocide and crimes 

against humanity in Africa. Too often, the international community, including the United States, has 

seemed helpless in the face of such crimes occurring in the Democratic Republic of Congo (DRC) and 

surrounding countries. Enough conducts intensive field research on the conflicts in Sudan and the 

Democratic Republic of Congo, as well as regions affected by the Lord's Resistance Army. Enough 

develops practical policies to address the crises in these areas, and shares sensible tools to help empower 

businesses, citizens, and groups working to end serious human rights abuses and crimes against humanity. 

The instability in the eastern region of the Democratic Republic of Congo (DRC) continues to cause 

countless deaths and has given rise to widespread sexual violence and rape, often used as tools of warfare 

to terrorize and humiliate communities. The exploitation of natural resources is an underlying driver of 

this instability. 

In December 2008, the UN Security Council adopted Resolution 1857, encouraging Member States "to 

ensure (hat companies handling minerals from (he DRC exercise due diligence on their suppliers." In 

2009, the U.N. Group of Experts on the Democratic Republic of Congo, released a report stating that 

"The Group investigated FDLR's ongoing exploitation of natural resources in the Kivus, notably gold and 

cassiterite reserves, which the Group calculates continues to deliver millions of dollars in direct financing 

into the FDLR coffers." 12 

Similar to conflict diamonds in Sierra Leone, the war today in eastern Congo is being facilitated by a 

trade in conflict minerals that is worth hundreds of millions of dollars per year. Derivatives oftin, 

tungsten, tantalum and gold are critical to industrial and technology products worldwide, including 

mobile telephones, laptop computers, aerospace products, industrial machinery, and digital video 

recorders. According Margo Wallstrom, the former Special Representative on Sexual and Gender Based 

Violence: 

"More than 200,000 rapes have been reported since war began in the Democratic 

Republic of the Congo more than a decade ago. The eastern part of the country has been 

1 http://daccess-dds-ny.un.org!doc!UNDOC!GEN!N09!601!43!PDF!N0960143.pdf?OpenElement p. 3 

2 http://www.un.org!apps!news!story.asp?NewslD=33173&Cr=&Crl= (7 December 2009 - Minerals and arms 

smuggling worth millions of dollars persists in eastern Democratic Republic of the Congo (DRC) despite 

international sanctions, fuelling rebel strength despite national army operations, and army and rebel soldiers 

continue to kill civilians, according to a new United Nations report that calls on the Security Council to take action 

to plug the gaps). 
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labeled the rape capital of the world. Control of Congo's natural resources and minerals 

has always been contested, and these vast riches have fuelled the country's conflicts. 

They have helped enrich militant groups, who have employed sexual violence as a tactic 

of war. One such resource, coltan, is so widely used in mobile phones that it has been 

said that we are all carrying a piece of the Congo in our pockets. But conflict minerals 

cannot be allowed to continue fuelling conflict and the consequent sexual violence. 

Although it is complicated to track conflict minerals, this cannot become an excuse for 

not trying. After all, neither American nor European consumers want their MP3 players 

and mobile phones to be funding gang rape in Africa.,,3 

The trade in conflict minerals is not controlled by loose "factions" just buying weapons. It is used by 

high-level political and military actors to line their pockets, perpetuate state-level conflict that affects a 

massive geo-political region, and oppress communities tied to mining areas. The conflict in eastern 

Congo is one of the world's most complex. No one issue will solve it. The U.S. should, however, work 

where it has leverage to enact change and reduce violence-a huge piece of that leverage comes through 

consumer and private sector pressure that can be applied to markets that affect the conflict in eastern 

Congo. 

The purpose of Section 1502 of the Dodd-Frank Wall Street Reform Act, as expressed by Congress, is to 

address "the exploitation and trade of conflict minerals originating in the Democratic Republic of the 

Congo [which is 1 helping to finance conflict characterized by extreme levels of violence in the eastern 

Democratic Republic of the Congo." 

Section 1502 was designed to help reduce a major source offunding fueling ongoing violence in eastern 

DRC by requiring companies that have access to American markets to disclose certain details about their 

supply chain. Specifically, the legislation requires those companies that file annual reports with the 

Securities and Exchange Commission (SEC) to exercise due diligence on the source and chain of custody 

of the conflict minerals (tin, tungsten, tantalum and gold) in their products. 

Given the well documented link between the instability in the rastern DRC and natural resources, one 

component of the NGO advocacy strategy has been, and continues to be, an international push to be 

reform the corrupt and often illegal mining system that armed belligerents extort and control to buy 

weapons and expand their ranks.456 According to Free the Slaves, in a report it released entitled "Slavery 

in the Democratic Republic of Congo", 

3 http://www.guardian.co.uk{commentisfree(201O{aug{14( co nfl ict-mi n er als-Ii nan ce-ga ng-rape 

, http://sec.gov{comments{s7-40-10{s74010-352.pdf (ASSODIP is a non-profit-making organisation for human 

rights in the Democratic Republic olthe Congo (DRC) with a rural farming community vocation that works to 

promote human rights in rural districts of North Kivu. It has been working for some years now on the problems of 

the connection between natural resources and recurring armed conflicts in the territories of the southern part of 

the province. It is clear that minerals are one, if not the main, reason for insecurity among population groups, 

mainly in Walikale and Masisi. Armed forces and groups operating in this part of the country regularly fight for 

control of mineral-rich sites. The most recent case is the open conflict since June this year between the forces of 

the Alliance of Patriots for a Free and Sovereign Congo (APCLS) and those of the Nduma Defense of 

Congo (NDC), all as associated with the FDLR.) 

5 http://sec.gov{comments{s7-40-10(s74010-285.pdf (Ju5tine Masika Bihamba, Coordinator, North Kivu Women's 

Synergy for Sexual Violence Victims; Fidel Bafilemba, Board Members President, SOS Africa; Lwayer Gautier 

Misonia, Coordinator, Research Center on Environment, Democracy and Human Rights; Janvier Murairi, President 

Small Farmers' Development Initiatives) 
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"The militarization of mining is exacerbating the anned conflict and despite the 

perception that mining will bring relative prosperity, conditions at the mines are harsh. 

Forced labor is endemic in the mining zones, especially those controlled by armed 

groups. The (Congolese citizens) quickly find that extortion and fraud in mining zones 

make the cost of living prohibitive, driving them to desperate measures and widespread 

corruption means that any fonn of economic activity is tolerated in these areas, no matter 

the cost to human safety or dignity. There is not even minimal enforcement of Congo's 

mining code. Children are particularly vulnerable in mining sites, and this is true even 

when they have not been recruited into anned groups. Justice for Congo's slaves requires 

development of appropriate industry standards, including a robust, independently 

monitored and audited tracing and certification scheme for minerals sourced from eastern 

Congo. [1502's] goal is to ensure that the minerals trade does not illegally benefit armed 

groups or lead to widespread labor and human rights abuses in Congo. What is certain is 

that the motivation and momentum for businesses and governments to address the 

'conflict minerals' problem in eastern Congo has never been stronger-largely as a result 

of the Dodd-Frank Act. If that momentum is leveraged to ensure that severe abuses, 

including slavery and sexual violence, are rooted out through due diligence, support for 

community development, and other processes, then the law will have served its 

purpose.'" 

Section 1502 is already having an impact. According to the U.N. Group of Experts on the DRC 

"requiring companies to exercise due diligence is effective. The Group's investigations in the DRC have 

shown that private sector purchasing power and due diligence implementation is reducing conflict 

financing, promoting good governance in the DRC mining sector, and preserving access to international 

markets for impoverished artisanal miners. It is worth recalling here that artisanal miners are among the 

prime sources of recruitment for anned groups in the DRe. .. The second point is that since the signing 

into law of the Dodd Frank act, a higher proportion than before of tin, tungsten and tantalum mined in the 

DRC is not funding conflict.'" 

The Electronics industry's conflict free smelter program is auditing smelters that process tin, tungsten, 

tantalum and gold. The purpose of the audit program is to create a list of conflict free smelters. That list 

can be used by issuers affected by Section 1502. The Congolese Ministry of Mines released a 

communique stating that "all mining operators, be they companies or individuals, are obliged to exercise, 

at allleve1 of supply, operating, transport, marketing, treatment and export chains, the specific Due 

Diligence recommendations of the OECD and those contained in Resolution 1952 (2010) of the UN 

Security Council". Additionally, Congo's army has pulled out of many mines in a drive to demilitarize 

the sector. Congo and Rwanda have begun arresting officers and suspending companies for conflict 

minerals trading and the first-ever validation of mines occurred in eastern Congo in 2011 to check for 

armed groups and child labor. 

Last August, US AID announced a $20 million dollar livelihood project in the Kivus9

• Additionally, 

companies like Intel, Motorola, Hewlett-Packard, and KEMET have established closed-pipe supply 

chains to source clean minerals from eastern DRe.J011l2 Finally, the U.S. government launched the public 

6 http://financialservices.house.gov!UploadedFiles!HHRG-112-BA20-WState-NDjomo-20120510.pdf (Testimony by 

Bishop Djomo, President of the Catholic Bishops of Congo) 

7 http://www.freetheslaves.netlDocument.Doc?id=243 p. 6, 7, 12, 21, 24, 27 

'http://sec.gov!comments!s7-40·10!s74010-346.pdf (UNGOE submission to the SEC) 

9 http://www.enoughproject.org!blogs!us-fund-livelihoods-proiect-worth-20-million-eastern-congo 

10 http://solutions-network.org!site-solutionsforhope! 
275 


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private alliance to "to help the Democratic Republic of the Congo and other governments in the region 

break the link between the illicit minerals trade and the ongoing violence and human rights abuses. The 

U.S. government is working with Congolese partners, the private sector and civil society to help ensure 

responsible trade in minerals that does not benefit rebel groups or abusive army units."" 

Dodd-Frank is one element of the United States' comprehensive approach to achieving positive change in 

Congo. In addition to conflict minerals, the U.S. is working on a number of initiatives to support security 

sector reform through leadership and civilian-military relations training. Additionally, the U.S. is 

supporting justice sector reform through funding implementing organizations on the ground working to 

build capacity within existing legal structures, bolster the mobile courts system, and working with civil 

society and state level partners to improve the state's ability to try war crimes and crimes against 

humanity through the Specialized Mixed Courts system. 

The U.S. is also contributing upwards of $17 million dollars to support programs aimed at preventing and 

treating sexual and gender based violence in eastern Congo. Furthermore, the U.S. is providing 

significant funding through USAlD to support a myriad of health and education initiatives, resources for 

road construction and infrastructure development as a means to build access to markets for clean minerals 

traders, agricultural output, and local and interstate commerce. Finally, the U.S. is funding voter 

education and capacity building programs through USAlD to groups like the National Democratic 

Institute and the International Foundation for Electoral Systems. 

Section 1502 was not meant to solve all of Congo's ills but the link between minerals, human rights, and 

the conflict in the east is clear. The situation in the east is an immediate human rights crisis that deserves 

immediate and continued international attention. It is Enough's view that the situation in the east is a 

reflection of the systemic challenges that face the country as a whole, and represent the most difficult 

issues the country has to face. Find solutions in the east and they will translate nationwide. Lack of 

infrastructure, insecurity, endemic corruption, lawlessness, and failed institutions remain the primary 

obstacles to durable solutions in Congo. 1502 seeks to use U.S. leverage where it exists and where there 

is demand from U.S. citizens to address a piece of the larger problem with the aim of reducing violence 

and oppression to create a space for additional reform. 

" http://www.kemet.com/kemet/web/homepage/kechome.nsf/weben/KEMET"A>20Policy%20on%20Conflict%20Mi 

nerals 

11 http://www.enoughproject.org/blogs/intel-publicly-sets-goal-make-conflict-free-chip-2013 

13 http://www.state.gov/r/pa/prs/ps/2011/11/177214.htm 
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House Financial Services Committee 

Subcommittee on International Monetary Policy and Trade 

Via E-mail 

Dear Subcommittee Members: 

May 8, 2012 

Free the Slaves submits this letter to the hearing record to express our support for strong 

implementation of Section 1S02 of the Dodd-Frank Act. We are concerned about the documented link 

between the minerals trade and violence in the Democratic Republic of the Congo (DRC), including 

modern forms of slavery, which we have documented in DRe's eastern conflict zone. We believe 

Section 1S02 is a critical driver to help reduce human rights abuses on the ground and ensure that clean 

supply chains are developed. We therefore urge Congress and your Subcommittee to support this 

provision and to ensure that the Securities and Exchange Commission (SEC) works to produce a final rule 

that will help break the link between minerals and conflict and reduce violence on the ground. 

Congress intended for this law to immediately address the urgent humanitarian situation in the eastern 

Democratic Republic of Congo (DRC) by curbing the trade in conflict minerals. For over a decade, since 

the UN Group of Experts exposed the problem, minerals have fuelled conflict and severe human rights 

abuses, including sexual slavery, forced labor and gender-based violence. For U.S. taxpayers, the deadly 

trade in conflict minerals means continuing to pay US $SOO-600 million per year in aid and peacekeeping 

costs aimed at making Congo a more stable place. For companies, delays create uncertainty in the 

market and about the standards to which they will be held. Delays also impede the effectiveness of 

supply chain transparency programs already underway on the ground. For investors, the reasonable 

need to know what activities their investments or purchases may be directly or indirectly supporting is 

compromised. Most importantly, for the Congolese people, further delays mean armed groups can 

continue to prey upon the minerals sector, fuel instability and commit human rights abuses against 

civilian populations. This is not what Congress intended by enacting Section 1S02. 

Since passage of Dodd-Frank, significant steps are being taken to ensure conflict minerals no longer line 

the pockets of armed groups, including Congolese government actions to demilitarize mining areas and 

to require companies to carry out due diligence measures to avoid sourcing by armed groups. Industry 

groups are also developing initiatives to comply with the provision. However, the delay in the SEC 

rulemaking and the possibility of weak rules threaten this progress. It has been nearly two years since 

President Obama signed the law and the statute is clear that the SEC should have produced final rules by 

April 2011. It is time to put this law into action. We ask that you use this opportunity to highlight the 
277 


75730.232

benefits of this provision, and to consider using your offices to pressure the SEC to issue a strong rule 

that meets the Congressional intent and works to break the link between conflict, human right abuse 

and minerals in eastern Congo. 

Yours sincerely, 

Karen Stauss 

Director of Programs 

Free the Slaves 
278 


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May 10, 2012 global witness 

Statement of Global Witness 

House Financial Services Subcommittee on International Monetary Policy and Trade 

For Hearing on '7he Costs and Consequences of Dodd-Frank Section 1502: Impacts on America and 

the Congo" 

To Chairman Miller 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 

(DRC). Our work is directly informed by regular, in-depth field investigations in eastern DRC where 

research is done by experienced staff, most of whom have previously lived in the region. We also 

consult with a range of Congolese partners including local civil society organizations, mineral traders, 

provincial mining authorities and other government representatives. 

Since 2005, Global Witness has carried out investigations in the eastern Congo documenting how the 

trade in these minerals has fueled human rights abuses and promoted insecurity in the region. In a 

conflict that has lasted for over a decade, rebel groups and senior commanders of the Congolese 

national army fight over and illegally profit from eastern DRC's vast mineral wealth. These groups, 

responsible for mass rape and murder, enrich themselves through the trade in tin, tantalum, tungsten 

and gold. 

While, the minerals trade is not the sole driver of conflict in eastern DRC, it is one of the most lucrative 

sources of financing for all warring parties. The UN Group of Experts and numerous local Congolese 

NGOs have documented the links between the minerals trade and armed violence in the region, and the 

problem has also been publicly acknowledged by the Congolese government. 

The passage of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act is a 

significant step in addressing this urgent humanitarian crisis. This provision is aimed at stopping the 

national army and rebel groups in the DRC from illegally using profits from the minerals trade to fund 

their operations and to take away incentives for them to fight over mineral-rich areas. Section 1502 is a 

disclosure requirement that calls on companies to determine whether their products contain conflict 

minerals by carrying out supply chain due diligence, and to report this to the Securities & Exchange 

Commission (SEC). The implementation of the Conflict Minerals Provision alone will not automatically 

end the conflict in the DRC, but Global Witness believes that the law has the potential to make a 

significant positive impact in reducing the violence on the ground in eastern Congo. 
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Section 1502, however, has not yet been fully implemented as the SEC is over a year late in issuing the 

final rules. In the eastern DRC, there has been a downturn in the minerals trade, due in part to a sixmonth mining ban imposed by the Congolese government and an overly restrictive interpretation of the 

Dodd Frank requirements by certain industry associations. The holdup in the publication of the final 

rules has led some companies to delay engaging in the region, thus unnecessarily prolonging the 

disruption in trade from the Kivus. This has caused economic hardship in certain areas in eastern ORe. 

Seven recent assessments of poverty in artisanal mining communities in eastern Democratic Republic of 

Congo (ORe) undertaken between August 2011 and January 2012 reveal that local communities rate 

insecurity, rather than a decline in mining activity, as the main reason for sustained or increased 

poverty. The studies are based on fieldwork, comprising quantitative data and interviews with local 

people. They were authored by three international non-governmental humanitarian organizations, 

Catholic Relief Services (CRS), Catholic Committee Against Hunger and for Development (CCFD), and 

Solidarites International and one Congolese organization, the Commission on Natural Resources of the 

DRC Bishops' Conference (CERN). The studies also found that mining communities surveyed are isolated 

and economically disadvantaged because of the presence of armed groups, including those present in 

mining sites, and a lack of basic infrastructure. If implemented effectivelY, Section 1502 offers the 

opportunity to create a clean minerals trade that will benefit the people of Congo. 

Despite the delay of the final rules, the passage of Section 1502 has catalyzed noteworthy progress in 

the region to address the trade in conflict minerals. We are seeing initial efforts by the government of 

the DRC to demilitarize certain mining areas, and in February 2012 the government passed a law 

requiring all mining and mineral trading companies operating in the DRC to carry out due diligence in 

line with the standards set by the Organization for Economic Cooperation and Development (DECO). 

These standards, issued in 2010, were developed in close consultation with companies and have been 

endorsed by the United Nations and the US government. Section 1502 has also spurred action by 

companies to ensure their supply chains do not contribute to conflict. Industry groups are developing 

initiatives to comply with the legislation; some of which involve actively sourcing from the region via socalled 'closed pipe' supply chains. 

When the US Congress passed Section 1502 in July of 2010, they sent a strong statement that the United 

States was not willing to turn a blind eye to the plight of the people in the Democratic Republic of Congo 

and that the urgent humanitarian crisis in the east ofthe country needed to be immediately addressed. 

The SEC is over a year late in issuing the final rules and stand in direct contradiction to the will of 

Congress. Global Witness asks the committee to use this opportunity to highlight the positive 

developments on the ground in the DRC and the emerging opportunities for the development of a clean 

minerals trade. We also encourage the committee to use its offices to pressure the SEC to immediately 

issue a strong rule, in line with Congressional intent, to help break the link between violence and the 

conflict minerals trade in eastern Congo. 
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Statement of David Schatsky 

Principal Analyst/Founder 

Green Research 

Submitted to the House Financial Services Subcommittee on International 

Monetary Policy and Trade 

For Hearing on "The Costs and Consequences of Dodd-Frank Section 1S02: Impacts 

on America and the Congo" 

May 10, 2012 

Following is an excerpt of the report "The Costs and Benefits of Dodd~Frank Section 1502: A CompanyLevel Perspective," published in January 2012. The report was researched and written by Green 

Research, a New York-based research and advisory fjrm that focuses on corporate responsibility and 

sustainability. This study was sponsored by Global Witness, an international NGO established in 1993 

that works to break the links between natural resource exploitation, conf!ict, poverty, corruption and 

human rights abuses worldwide. 

Purpose of this Study 

The purpose ofthe study is to gather and share information that may be useful to the SEC's rulemaking 

process and to industry. It aims to paint a picture of the costs and benefits of compliance with DoddFrank Section 1502 at the level of individual firms. This information is designed to provide some insight 

that will help companies follow best practices, minimize the costs of compliance, and take advantage of 

the business benefits that the process of compliance may present. The questions the research sought to 

answer include: 

... What changes in company systems and processes will be required to comply with Section 1502? 

• What are the costs, if any, of making the necessary changes, in terms of staff time, professional 

services fees, systems and technology? 

What are the benefits of compliance with Section 1502? 

How do conflict minerals fit into companies' overall responsible supply chain strategy? How are 

the requirements set out by 1502 similar to and different from other responsible supply chain 

processes implemented? 

What are the perceived advantages and disadvantages of continuing to source minerals of 

Congolese origin? 

Study Methodology 

This report benefited from interviews with executives at more than 20 global companies affected by 

Dodd-Frank Section 1502. The companies interviewed ranged in size from about a half billion dollars to 

over $120 billion in annual revenues and represent a variety of industries including electronic 

components, computers, consumer health care, automotive and retail. We also spoke with several 

industry associations, consulting firms and software providers. Despite multiple attempts, we were not 

Copyright © 2011 Green Research 
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able to secure interviews with representatives of the jewelry industry. A full statement of the 

methodology of this study can be found at the end of the report. The research was independently 

conducted by Green Research. The findings are our own. 

This study was sponsored by Global Witness, an international NGQ established in 1993 that works to 

break the links between natural resource exploitation, conflict, poverty, corruption and human rights 

abuses worldwide. 

Key Findings 

A common theme across our interviews was uncertainty, Participants had many questions. What would 

the final rules from the SEC be? What will this really cost us? Will the law produce the desired outcome 

in the ORe? On this last point we heard various blends of hope and skepticism. A number of participants 

voiced concern about facing new regulations. Some had the perception that the approach followed by 

Section 1502 was not devised in cooperation with industry. Beside all this, though, we found that the 

better informed the executive, the more likely he or she was to feel that the costs of compliance would 

be manageable. And many, but not all, executives could envision some business benefits arising from 

the compliance process. Some of the questions raised by the executives we interviewed wi!! be swiftly 

answered after the SEC issues its final rules. Others will unfold as compliance measures are 

implemented and capacity building on the ground in the ORC and along companies' supply chains 

continues. 

The following are the key findings of the study: 

1. As companies become familiar with the legislation and its impacts on them} the perceived costs of 

compliance tend to decline. Across industry there are differing levels understanding of the 

requirements and implications of Section 1502. Our interviews revealed that the more companies know 

about these costs and implications, the more manageable they believe the compliance process and 

associated costs will be, 

2. Section IS02 compliance costs will vary widely with the size and complexity of companies' supply 

chains but seem to be manageable for all company sizes. The largest companies (with annual revenues 

over $50 billion) are facing one-time costs ranging from $500,000 to $2 million; companies with well 

developed responsible sourcing systems may need to spend only halfas much. Many smaller companies 

should be able to meet their obligations for less than the cost of a full-time employee in the first year, 

with costs declining over time. 

3. Companies have an opportunity to reap a wide range of business benefits associated with Section 

1502 compliance. Executives interviewed cited better risk management, improved supply chain 

performance, new innovation opportunities and the ability to prepare to meet a new generation of 

expectations for greater supply chain transparency and accountability as potentia! benefits of the new 

compliance regime. Companies should look for opportunities to seize these benefits as they review and 

update their supply chain processes and practices. 

4. The impacts of the regulations on competition are likely to be benign, Many companies interviewed 

believe there will a negligible to positive impact on competition, as the regulations will tend to "level the 

playing field," With incremental costs modest compared to the overall costs of being a publicly traded 

company, the competitive position of public companies versus their counterparts should not 

significantly change. Indeed, Green Research believes that offering conflict-free products will become a 

competitive advantage. 

S. Firms should exploit opportunities to collaborate with industry and cross-industry groups to set 

standards and share costs as they define and implement their responses. Where possible, companies 

and industry organizations should build on the work of groups like EICC and GeSI and others and 

Copyright © 2011 Green Research 
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centralize the design of industry-wide processes with industry groups. One company expects to save 80 

percent on consulting fees by working through an industry organization rather than going it alone. 

6. The days of selling products containing substances of indeterminate origin produced under 

unknown conditions are coming to an end. The trend toward greater supply chain visibility and 

accountability, driven by rising expectations of responsible corporate behavior on the part of customers, 

investors, employees, NGOs and regulators, is set. Section 1502 presents an opportunity for companies 

to move towards greater supply chain transparency and accountability in their businesses, and design 

their processes and systems forthe long term. 

7. Executives' attitudes about the pros and cons of sourcing minerals of Congolese origin range widely 

from indifference, to acknowledgement of the difficulties of developing conflict-free Congolese sources, 

to an appreciation of benefits, ranging from supporting the legitimate Congo minerals sector and the 

workers who depend on it to expanding the global supply of these minerals. 

Copyright © 2011 Green Research 
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May 9th! 2012 

By E-mail 

House Financial Services Committee 

international 

corporate 

accountability 

roundtable 

Subcommittee on International Monetary Policy and Trade 

Dear Subcommittee Members, 

The International Corporate Accountability Roundtable (ICAR) is a coalition of leading civil 

society organizations working at the nexus of business and human rights. Our members include 

Amnesty International, EarthRights International, Global Witness, Human Rights First and 

Human Rights Watch. ICAR submits this letter to the hearing record to express our support for 

Section 1502 of the Dodd-Frank Act. We are concerned about the documented link between 

the minerals trade and violence in the region, and believe Section 1502 is a critical driver to 

help reduce violence on the ground and ensure that clean supply chains are developed. We 

therefore urge Congress and your Subcommittee to support this provision and to ensure that 

the Securities and Exchange Commission (SEC) works to produce a final rule that will help break 

the link between minerals and conflict and reduce violence on the ground. 

Congress intended for this law to immediately address the urgent humanitarian situation in the 

eastern Democratic Republic of Congo (DRe) by curbing the trade in conflict minerals. For over 

a decade, since the UN Group of Experts exposed the problem, minerals have fuelled conflict 

and human rights abuses, including sexual and gender-based violence. For U.S. taxpayers, the 

deadly trade in conflict minerals means continuing to pay US $500-600 million per year in aid 

and peacekeeping costs aimed at making Congo a more stable place. For companies, delays 

create uncertainty in the market and about the standards to which they will be held. Delays 

also impede the effectiveness of programs already underway on the ground. For investors, the 

reasonable right to know which activities their investments or purchases may be directly or 

indirectly supporting is compromised. Most importantly, for the Congolese people, further 

delays mean armed groups can continue to prey upon the minerals sector, fuel instability and 

commit human rights abuses against civilian populations. This is not what Congress intended 

by enacting Section 1502. 

Since passage of Dodd-Frank, significant steps are being taken to ensure conflict minerals no 

longer line the pockets of armed groups including Congolese government actions to 
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demilitarize mining areas and to require companies to carry out due diligence measures to 

avoid sourcing by armed groups. Industry groups are also developing initiatives to comply with 

the provision. However the delay of the SEC rulemaking and the possibility of weak rules 

threaten this progress. It has been nearly two years since President Obama Signed the law and 

the statute is clear that the SEC should have produced final rules by April 2011. It is time to put 

this law into action. We ask that you use this opportunity to highlight the benefits of this 

provision, and to consider using your offices to pressure the SEC to issue a strong rule that 

meets to Congressional intent and works to break the link between conflict and minerals in 

eastern Congo. 

Sincerely, 

Amol Mehra 

Coordinator 

International Corporate Accountability Roundtable 

T: (202) 466-5188 ext. 110 

E: amol@accountabilityroundtable.org 

www.accountabilityroundtable.org 
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The International Corporate Accountability Roundtable (ICAR) harnesses the power of the human rights 

community to identify and promote robust frameworks for corporate accountability, strengthen current 

measures and defend existing laws, policies and legal precedents.Our members include: 

Accountability Counsel 

Amnesty International 

Business Ethics Network 

Conflict Risk Network 

EarthRights International 

Earthworks 

Free the Slaves 

Global Witness 

Greenpeace USA 

Human Rights First 

Human Rights Watch 

Oxfam America 

Revenue Watch Institute 

United to End Genocide 

For more information, please visit us online at www.accountabilityroundtable.org 
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March 2, 2011 

Ms. Elizabeth M. Murphy 

Secretary 

Securities and Exchange Commission (SEC) 

100 F Street, NE 

Washington, DC 20549-1090 

RE: Comments Regarding File Number 57-40-10 on Conflict Minerals Disclosure 

Dear Ms. Murphy, 

We are writing on behalf of various communities of investors. Included in the signatories of this letter 

are members of the Social Investment Forum (SIF), the U.S. membership association of investors and 

professionals engaged in the practice of socially responsible and sustainable investing or "SRI", and the 

Interfaith Center on Corporate Responsibility (ICCR), a membership association of 275 faith- based 

institutional investors, including national denominations, religious communities, pension funds, 

foundations, hospital corporations, asset management companies, colleges, and unions. As SIF's recent 

Report on Sacially Responsible Investing Trends in the United States points out, SRI assets in the United 

States topped $3 trillion at the end of 2009, representing one in every nine dollars under professional 

management in the United States and up 34 percent since 2005, during a period when all U.S. assets 

under professional management only increased 3 percent.' As such, We represent a key and growing 

constituency for the SEe. 

In addition to responses to several of the questions posed by SEC staff in the draft rule on Section 1502 

of the Dodd-Frank Wall Street Reform and Consumer Protection Act on Conflict Minerals (File Number 

57-40-10), we would like to underscore three broader points. First, conflict minerals disclosures are 

material to investors and will inform and improve an investor's ability to assess social (Le., human rights) 

and reputational risks in an issuer's supply chain. Electronic manufacturers were the first exposed to the 

reputational risks associated with sourcing from the Democratic Republic of the Congo (DRC). As such, 

these companies were the first to address the demand for greater transparency and traceability in the 

sourcing of conflict minerals. The Extractives Work Group, a subcommittee of the Electronics Industry 

Citizenship Coalition (EICC) and Global e-Sustainability Initiative (GeSI)-two industry associations made 

up of electronic, communications and industrial manufacturers)-is in the process of completing a full 

smelter audit of tantalum ore processed from the conflict mineral columbite-tantalite and expects to 

release the results at the close of the first quarter of 2011. Information on the Extractives Work Group 

can be found at http://www.eicc.info/extractives.htm. We hope more companies will follow the lead of 

EICC and GeSI and give investors further insight into how management decisions are potentially aiding 

the direct Or indirect flow of funds to armed groups in the DRe. 

Next, this rulemaking process offers the unique opportunity to make conflict mineral related disclosures 

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. 

1 See http:Uwww.sodalinvest.org/news!releases!pressrelease.cfm7id-168. 
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Finally, during the SEC open meeting on December 15, 2010, Chairman Schapiro and SEC staff noted the 

lack of expertise within the SEC to grapple with these conflict minerals and other sustainability-related 

disclosures required by the Dodd-Frank Act and thanked organizations for offering comments and 

guidance on implementation. We feel that once the SEC is adequately funded, it should immediately 

investigate staffing an Office on Sustainability Issues. We believe this will establish the internal 

expertise necessary for future rulemaking in this area and aid in the enforcement on the conflict 

minerals and other specialized disclosures recently issued. 

Below are direct responses to the questions posed by SEC staff with question numbers corresponding to 

the requests for comment in the SEC proposed rule on conflict minerals disclosures. This letter is meant 

to supplement the investor letter submitted by Lauren Compere of Boston Common Asset Management 

and signed by over 50 investors representing over $230 billion in assets under management on 

N ovem be r 16, 2010 (http://sec.gov I co m m entsl df -title-xv Is pecia lized-d isclos u resl speci a lizedd isclosu res54.htm); a submission by the Social Investment Forum dated November 18, 2010 

( http://sec.gov I comm e ntsl df -title-xv I sp ecial ized-dis clos u resl s pecia I ize dd i sci os u res-59. pdf); and in p ut 

given during a meeting with the Division of Corporate Finance staff including Felicia Kung, Lillian Brown, 

Steven Hearne, and John Fieldsend on November 17, 2010 (http://sec.gov/comments/df-titlexv /speda lize d-disclos u res/s pee ia Ii zedd iscl os u res-7 5.pdf). 

Responses to requests for comment: 

1. Investors believe reporting standards should maintain consistency with the statutory language and 

apply disclosure rules equally to all conflict minerals. Gold for example, is a high-value contributor to 

conflict financing in the DRC. To provide special conditions or exemptions for gold or any other mineral 

weakens the intent of the disclosure rules. Greater transparency in the gold supply chain is critical to an 

investor's ability to evaluate company sourcing practices in the DRC and adjoining regions. 

2,4,8. All issuers including foreign private issuers that file reports under Sections 13(a) and 15(d) of the 

Securities Exchange Act of 1934 ("Exchange Act") should be required to file a "Conflict Minerals 

Disclosure" report as part of its annual report if it meets the requirement of "person described" in 2(B). 

As proposed, wholly-owned subsidiaries and asset-backed issuers should not be omitted under the 

definition. We also recommend that entities with Over-The-Counter American Depository Receipts 

(OTC ADRs) that file an annual report with the SEC using the form Annual Report to Security Holders 

(ARSs) or any other annual report pursuant to Section 12g3-2(b) of the Exchange Act also be required to 

file a "Conflict Minerals Disclosure" report. 

5. We do not believe smaller issuers should be exempt from the disclosure rules. The rules will be 

credible only if all companies filing reports under Sections 13(a) and 15(d) are included in the definition. 

As investors in both large and small cap companies that have exposure to these minerals, it is critical for 

us to be able to properly assess consistent conflict minerals disclosures from all of our holdings, 

regardless of size. Congressional action directed at stemming the flow of funds to armed groups in the 

DRC and adjoining countries had been initiated well ahead of the passage of Section 1502, thereby 

affording companies the time to begin inquiries into the country of origin of conflict minerals necessary 

to the functionality of their products. Companies beginning an inquiry process can look to industrywide smelter verification processes or other industry initiatives to minimize costs. 

9. We believe the proposed rules should define the term "manufacture" to limit subjective 

interpretation and ambiguity. "Manufactured" should be defined as the "production, preparation, 

2 
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assembling, combination, compounding, or processing of ingredients, materials, and/or processes such 

that the final product has a name, character, and use, distinct from the original ingredients, materials, 

and/or processes," This should specifically include the mining (all types, including initial ore extraction 

and production of concentrate), processing, refining, alloying, fabricating, importing, exporting, or sale 

of conflict minerals because sales supporting conflict could occur at various parts of the metals supply 

chain, 

10. The rules should, as proposed, apply to both issuers that manufacture and issuers that contract to 

manufacture products in which conflict minerals are necessary to the functionality or production of 

those products, 

12, The conflict minerals rules should apply to issuers who sell generic products under their own labels 

or labels that they establish to be contracting the manufacture of those products, as long as those 

issuers have contracted with other parties to have the products manufactured specifically for them, 

13, Reporting issuers that are mining companies should be considered as "persons described" under 

Section 1502, The extraction of conflict minerals from a mine constitutes "manufacturing" or 

"contracting to manufacture" a "product" Further, we support the definition of "manufacture" from 

the United States Controlled Substances Act, which defines "manufacture" as the production, 

preparation, propagation, compounding, or processing of a drug or other substance, either directly or 

indirectly or by extraction from substances of natural origin', 

14. Investors will benefit from less ambiguity, Therefore we believe no distinctions should be made 

between an issuer who solely produces minerals from a mining reserve, and an issuer that produces, 

concentrates and refines conflict minerals, Both types of mining issuers should be subject to the 

disclosure requirements under the proposed rules, 

16. The rules should define the phrase "necessary to the functionality or production of a product," 

Absent a definition in the rules, issuers will be uncertain in important aspects as to the scope of their 

reporting obligations, Investors will find it difficult to compare the reports of issuers that may use 

differing definitions, We support the definition of necessary as suggested in the "Multi-Stakeholder 

Group Letter" submitted by Patricia Jurewicz on November 18,2010: 

A conflict mineral is considered necessary when: 

a, The conflict mineral is intentionally added to the product; or 

b, The conflict mineral is used by the Person for the production of a product and such mineral is 

purchased in mineral form by the Person and used by the Person in the production of the final 

product but does not appear in the final product; and 

L The conflict mineral is essential to the product's use or purpose; or 

d, The conflict mineral is required for the marketability of the product 

19. We agree a conflict mineral should be considered necessary when "[t]he conflict mineral is 

intentionally added to the product; or [t]he conflict mineral is used by the [issuer] for the production of 

a product and such mineral is purchased in mineral form by the [issuerJand used by the [issuerJin the 

221 U.s,CA, 802(15), the United States Controlled Substances Act, 
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production of the final product; and[t]he conflict mineral is essential to the product's use or purpose; 

or[tJhe conflict mineral is required for the marketability of the product.,,3 

20. When conflict minerals are present in tooling and production machinery used to produce a product, 

they should not be considered to be 'necessary to production' of the product. Tooling and production 

machinery often have long useful lives. Therefore the conflict minerals in the tooling or production 

machinery was in most cases mined many years ago prior to the development of any process to identify 

their origin. Identifying minerals contained in the tooling and production machinery as 'necessary' to 

production of an issuer's product would result in large categories of products being designated to 

contain minerals of unknown origin for many years. This would dilute the usefulness of conflict minerals 

report to investors without advancing the objectives of the statute. 

23. As proposed, there should be a brief conflict minerals disclosure in the body of the annual report, 

which would provide an easily accessible location for gathering this material information. 

24. In recognition of the materiality of the data, all required information as outlined in the proposed 

rule should be filed in the body of the annual report rather than furnished as an exhibit. 

25, 26, 27 and 30. A separate captioned section offers investors access to conflict minerals disclosure 

filed in the body of the annual report. This captioned section should include all information as 

proposed. 

Additionally, we note in the proposed rules that issuers who have determined conflict minerals in their 

products did not originate in the ORC or adjoining countries must file a description of the reasonable 

country of origin inquiry it undertook to make its determination. We concur with this proposed 

language and also encourage the SEC to require issuers who source conflict minerals from ORC 

countries, or cannot determine if they source conflict minerals from ORC countries, to file this 

information in the Conflict Minerals separately captioned section of the annual report. 

Issuers that have determined that their conflict minerals did not originate in ORC countries should be 

required to file the countries of origin for their conflict minerals. The essence of the conflict minerals 

provision is to provide for full disclosure of the steps taken by issuers to avoid practices that contribute 

to financing the conflict in the ORe. In turn, these disclosures will be evaluated by investors that wish to 

make investment decisions based on the degree of care taken by the issuer to avoid contributing 

indirectly to the conflict. The rule should make clear that such reporting must be sufficiently detailed to 

provide investors an understanding of the steps an issuer has taken to determine whether the minerals 

in their supply chain are sourced from the ORC or adjoining countries. Further, investors would be able 

to analyze the various countries issuers claim that their conflict minerals have originated from. This 

information could be compared to country reports regarding their production of conflict minerals to 

determine whether issuers were accurately gathering country of origin information. 

We understand there may be several reasonable approaches for country of origin inquiries and due 

diligence processes dependent on the circumstances ofthe registrant with such inquiries and processes 

improving year over year. The ability for investors to determine whether a company's particular inquiry 

and due diligence approach is improVing depends on an investor's access to a series of filed reports. 

Therefore, we request that the SEC require issuers who source conflict minerals from the ORC or 

adjoining countries, or cannot determine if they source conflict minerals originating from the ORC or 

, http:Useegov!comments!df-title-xv Ispecia lized-disclosureslspecia lizeddisclosures-67 .pdf. 

4 
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adjoining countries, to file a description of their reasonable country of origin inquiry and detail what 

steps they took to exercise due diligence on the source and chain of custody of the conflict minerals in 

the conflict minerals disclosure section of the annual report. This information can also be provided as 

part of the "Conflict Minerals Report". 

28. The final rule should require an issuer to maintain reviewable business records if it determines that 

its conflict minerals did not originate in DRC countries. This would be useful for investors if instances 

arose where there was evidence (even years later) that contradicted a company's claim that its conflict 

minerals did not originate in the ORe. Moreover, the rule should require that those business records be 

maintained for five years consistent with the recommendations of record keeping from the OECD Due 

Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk 

Areas.' 

29. We prefer the disclosure in an issuer's annual report to be provided in an interactive format, such as 

XBRL, to facilitate analysis of the data. 

31. An issuer should be required to post its audit report on its Internet website, as proposed. 

32. An issuer should be required to keep posted its Conflict Minerals Report and audit reports on its 

Internet website for five years. This will give investors easy access to this important information and will 

allow investors to understand and evaluate whether the issuer is making progress in improving its due 

diligence processes. 

33. The "reasonable country of origin inquiry standard" is appropriate. To be considered reasonable, 

the inquiry must include processes that allow an issuer to make a determination of the country of origin 

for the conflict minerals in its products. This is particularly important because failing to undertake a 

thorough inquiry to determine an issuer's country of origin could cause issuers not to file a conflict 

minerals report, when indeed they should, thereby thwarting the intent of the law to create a 

transparent supply chain for conflict minerals sourced from the DRC and adjoining countries. 

For example, it is widely recognized that the processing facility (smelter) is the key choke point in the 

minerals supply chain. As such, companies could review information, from its processing facilities, such 

as purchasing documentation and bills of lading that will allow them to determine the country of origin 

for the minerals in their products. 

Additionally, reasonable country of origin inquiry could include instances where issuers rely on an 

industry wide process that deems smelters "conflict free" provided this industry-wide process is 

comparable to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from 

Conflict-Affected and High-Risk Areas. Such standards and transparency requirements should be 

described in its annual disclosure or conflict minerals report as applicable. In this instance, reasonable 

country of origin inquiry would be the disclosure of the smelters for the conflict minerals in its products, 

in an issuer's annual disclosure or conflict minerals reports. Therefore investors and other interested 

stakeholders would be able to compare the smelter to a list of approved conflict free smelters from an 

industry-wide process or smelters identified by the Department of Commerce as sourcing conflict 

minerals from the DRC or adjoining countries . 

.4 DECO, Due Diligence Guidance, page 24/ 2010. 
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As processing facilities are deemed conflict free based on OECO (or comparable) due diligence guidance, 

issuers can contractually obligate their suppliers to source from processing facilities deemed conflict 

free. In this instance, an issuer should include in its disclosure to the SEC the processing facilities it has 

driven its suppliers to and a description of the steps it has taken to ensure compliance, such as spot 

checks or supply chain audits. If a processing facility is deemed conflict free and the processing facility 

sources from the ORC or adjoining countries, issuers should be required to disclose, in addition to the 

processing facility, the country of origin and mine of origin with greatest specificity for the minerals in its 

products, and a detailed summary of the audit report (described in our response to Question 50). 

Therefore, investors and other stakeholders can assess how the determination was made that the 

conflict minerals sourced from the ORC or adjoining countries did not directly or indirectly finance or 

benefit armed groups in the ORC countries. 

34. We do not think it would be appropriate to permit an issuer to make no inquiry attempt, as this 

would provide a loophole for issuers to circumvent the intent behind the Conflict Minerals Provision. 

35. Issuers should be able to rely on reasonable representation from their suppliers. As referenced in 

the "Multi-Stakeholder letter" submitted by Patricia Jurewicz on November 18,2010; 

"A supplier declaration approach is preferable in place of a product-based or materials declarations 

approach. The supplier declaration approach would consist of having direct and component suppliers 

and others in the supply chain take reasonable means to assure that all the tin, tantalum, tungsten, 

and/or gold in their materials/products are sourced from a compliant smelter." 

"Compliant smelter" is one that has a process in place that allows an independent third party auditor to; 

1) verify the origin of its input streams (i.e. including but not limited to raw materials recycled material, 

k-salts, tin slag etc.); 2) verify whether any of its input streams directly or indirectly financed or 

benefited armed groups in the ORC; 3) discloses the due diligence processes it uses in conformance to 

the OECO Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and 

High-Risk Areas. 

36. The essence of the statute is to provide for the disclosure of efforts by issuers to identify and 

eliminate from their products, minerals from conflict mines. Issuers' disclosures under the regulations 

should be sufficiently complete to allow investors to clearly understand the basis on which the issuer 

has determined the origin of conflict minerals, regardless of how the declaration is characterized. If they 

state that no conflict minerals originated in the ORC or adjoining countries, the due diligence process 

has to clearly define and demonstrate what led them to this statement. 

37. As the proposed rules acknowledge, the effectiveness of efforts to determine country of origin will 

evolve over time as issuers and groups of issuers continue to work with governments and NGO's to 

develop infrastructure to trace origin of metal from mine to smelter, and as issuers improve the 

robustness of programs for tracing minerals from smelter to product. During the initial period after the 

rules are finalized, we expect that some reportable conflict minerals will be of unknown origin. In such 

case, issuers should provide disclosures in the Conflict Minerals Report describing the conflict minerals 

of unknown origin and any progress made in the reporting year toward determination of origin. 

To avoid confusion, the rule should make clear that issuers are not required by anything in the statute or 

the rule to physically label their products in any way with regard to the presence or absence of conflict 

minerals. 

6 
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However, if companies wish to label their products, we request that the Commission expressly reserve 

the use of a "DRC conflict free" label as an advertising claim for sourcing within the DRC region to 

provide incentive for those companies that conduct the extra effort to source conflict free and reward 

those that encourage legitimate minerals trade that does not directly or indirectly finance or benefit 

armed groups in the DRC or an adjoining country. We also request that any such claims or labels are 

subject to Federal Trade Commission (FTC) regulations and guidance in regards to substantiation and to 

guard against deceptive claims that a product is "DRC conflict free" under Section 5 of the Federal Trade 

Commission Act (FTCA). 

The language of this provision, on its face, appears to permit a company to label a product "DRC conflict 

free" if the product contains conflict minerals sourced only from areas outside of the DRC or its 

adjoining countries. Companies that currently source conflict minerals from outside of the DRC region 

would have no incentive to begin sourcing responsibly from the DRC region, since presumably they 

could benefit from use of the "DRC conflict free" label even without changing their sourcing patterns or 

behavior. Allowing companies to use the "DRC conflict free" label in these circumstances might reduce 

benefits in the DRC, since companies could reap the benefits of the "DRC conflict free" label while 

completely avoiding the region. 

We believe that for companies to label products as "DRC conflict free," more substantiation is required 

beyond the due diligence contemplated by the Act. Those companies wishing to use a "DRC conflict 

free" label should include in their reporting to the SEC information on the actual mine of origin and 

transport routes of their source minerals, along with any other information that is part of the basis of 

their claim that the minerals did not directly or indirectly finance or benefit armed groups in the DRC or 

an adjoining country. This information should be made available to the public in the same way that 

issuers make public other information related their use of conflict minerals (through the SEC and on the 

company's website). A claim such as 'DRC free' should be reserved for companies who can substantiate 

they source conflict minerals from countries outside of the DRC and adjoining countries. 

Labeling a product as "DRC conflict free" is an advertising claim subject to FTC regulations and guidance 

pursuant to Section 5 of the FTCA.s Although the Dodd-Frank Act refers permissively to the ability of 

companies to apply a DRC conflict free label, there is nothing in that statute to suggest that Congress 

intended to modify the basic requirements of the FTCA for such claims. Like all advertising claims, those 

declaring a product is "DRC conflict free" must be properly qualified and substantiated and must not be 

misleading or deceptive. 

Investors accordingly request that the Commission (1) clarify in its rule that products may not be labeled 

"DRC conflict free" if the minerals were sourced from outside of the DRC or adjoining countries, (2) 

reserve "DRC conflict free" labels for companies sourcing from the region, (3) recognize that the FTC has 

enforcement jurisdiction over DRC conflict free labeling claims, and (4) make substantiation a 

requirement if products are labeled "DRC conflict free". 

39. We support the alternative rule as proposed for this question. Country of origin should be disclosed 

for all conflict minerals that originate in the DRC countries. Conflict minerals that do not originate in the 

DRC countries should be subject to the reporting required under the reasonable country of origin inquiry 

process (see response to Question 33). All conflict minerals identified as originating in the DRC countries 

S 15 U.S.c. § 41. 

7 
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should also disclose information to identify mine or location of origin of ores with greatest specificity, 

country of origin and facilities. When possible, issuer should directly correlate disclosed locations with 

the map of the region maintained by the U.S. government. 

SO. The rule should provide gUidance to issuers of steps that presumptively would constitute a reliable 

due diligence process. We recommend the types of information delineated below are disclosed to the 

SEC. Please note that the elements listed below vary slightly from the original elements recommended 

in the November 16th investor letter6 so they align with the recently approved DECD Due Diligence 

Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (DECD 

Guidance, Annex 1, p. 10). 

Whether independently or through an industry wide process, a due diligence process for minerals 

sourced in the DRC and/or adjoining countries containing the following elements and demonstrating 

good faith and a reasonable standard of care, should be presumed to be reliable if the issuer's disclosure 

includes: 

a. A conflict minerals policy; 

b. A supply chain risk assessment procedure that includes "upstream" and "downstream" due diligence, 

which includes a description of efforts made and the result of efforts to obtain information outlined in 

[its upstream and downstream due diligence process] (which includes everything (in points a and b) 

below); 

c. A description of the policies and procedures to remediate instances of non-conformance with the 

policy; 

d. An independent third party audit of the Person's due diligence report, which includes a review of the 

management systems and processes; and 

e. The results of the independent 3rd party smelter audit detailing items (b)i-x [see below]; or the 

inclusion of a link to the published smelter audit reports made available via the Person's website or 

publicly available website detailing items (b)i-x [see below]; with due regard taken of [designated] 

business confidentiality and other competitiveness concerns. 7 

Per the "Reporting" section of the investor letter submitted on November 16th, 2010', when it is 

determined that tin, tungsten, tantalum and/or gold mineral ore originates in the DRC and/or adjoining 

countries, the third party audit, made available via a publicly available website and which issuers must 

disclose in their conflict minerals report, should additionally include: 

a. Smelter auditing protocol performed by an independent 3rd party. 

b. When it is determined that incoming minerals originate from DRC or neighboring countries, the 3rd 

party audit in (a) would additionally include the following information (which is aligned with the 

DECD Guidance, p. 22, 26 & 37): 

i. an on-the-ground risk assessment that addresses the points outlined in the DECD's Guidance 

Step 2 and Appendix; 

ii. all taxes, fees or royalties paid to government for the purposes of extraction, trade, transport 

and export of minerals; 

6 See: http://sec.gov/comments/df-title-xv/specialized-disclosures/specializeddisclosures-S4.htm 

7 Business confidentiality and other competitive concerns means price information and supplier relationships 

subject to evolving interpretation. 

8 See: http://sec.gov/comments/df-title-xv/specialized-disc1osures/specializeddisclosures-S4.htm 
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iii. any other payments made to governmental officials for the purposes of extraction, trade, 

transport and export of minerals; 

iv. all taxes and any other payments made to public or private security forces or other armed 

groups at all points in the supply chain from extraction onwards; 

v. the ownership (including beneficial ownership) and corporate structure of the exporter, 

including the names of corporate officers and directors; the business, government, political or 

military affiliations of the company and officers. 

vi. the mine of mineral origin; 

vii. quantity, dates and method of extraction (artisanal and small-scale or large-scale mining); 

viii. locations where minerals are consolidated, traded, processed or upgraded; 

ix. the identification of all upstream intermediaries, consolidators or other actors in the upstream 

supply chain; 

x. transportation routes. 

51. We do not believe there should be different due diligence measures prescribed for gold. 

54. We recommend the rules make reference to specific due diligence standards that are aligned with 

international initiatives such as the DECO Guidance. They should be, as described above, in the context 

of describing steps that would give rise to a presumption that the due diligence process was reliable. 

61. Gold stockpiles (e.g., bars and coins) existing outside of ORC and adjoining countries before July 15, 

2010, should be considered "ORC conflict free" after due diligence as part of the Conflict Minerals 

Report. This will help to avoid the risk of encouraging new gold mining rather than use of existing gold 

stocks should those stockpiles, where already outside of ORC countries, be pre-existing. 

62. The rules should not allow a de minimis threshold, since the conflict mineral content in products is 

for intentional use only and that content can represent significant value to conflict groups even if it is a 

small portion of a product. 

63. Recycled metal that is reclaimed from end-user or post-consumer products or scrap metals should 

be exempt from this rule where the issuer has a reliable process for determining the metals are from 

recycled sources. The proposed rule acknowledges that issuers purchasing conflict minerals from 

recycled or scrap sources would not implicate the concerns of the provision: This is consistent with the 

DECO Guidance, which says, "Metals reasonably assumed to be recycled are excluded from the scope of 

this Guidance".lD The final rule should adopt the provision of the proposal that recycled and scrap 

material may be designated as ORe Conflict Free. As the SEC notes, issuers could misbrand their 

products as recycled, therefore we agree with the SEC's proposal that issuers claiming that their 

products are recycled exercise due diligence to ascertain how that determination was made and disclose 

in a Conflict Minerals Report which is subject to an independent audit. 

64. The rule should require that issuers with recycled or scrapped conflict minerals undertake 

reasonable inquiry and due diligence to determine that conflict minerals were derived from recycled or 

scrap material. This should include reasonable processes to verify claims that the metals were acquired 

from recycled or scrap material. It is acceptable for recycled conflict minerals to be described, through a 

Conflict Minerals Report, as ORC conflict free, but the Commission must precisely define "recycled" and 

9 Securities and Exchange Commission, Confiict Minerals proposed rule, page 63 and footnote 157. 

10 DECO Due Diligence Guidance, page 6, footnote 2. 

9 
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require thorough due diligence and audits of statements of provenance for recycled content 

determinations. This is of critical importance because definitions of "recycled" vary. and irresponsible 

elements of the supply chain could falsely claim for example that newly mined gold is actually recycled 

(as described further in our response to Question 65). 

65. See response to Question 63. We believe the Commission should adopt the following definition of 

recycled to be included in the final rule: 

Recycled metals are reclaimed end-user or post-consumer products, or scrap processed metals 

created during product manufacturing. Recycled metal includes excess, obsolete, defective, and 

scrap metal materials which contain refined or processed metals that are appropriate to recycle 

in the production of tin, tantalum, and/or tungsten. Minerals partially processed, unprocessed 

or a bi-product from another ore are not recycled metals. 

Given the intricacies and additional uses of gold, we support a specific definition of recycled gold from 

the non-profit organization, Earthworks: For gold, this should be defined as gold that is independently 

verified with statements of provenance to contain 100% gold from post-consumer products, such as 

post-consumer jewelry, electronics, or dental gold. The definition of post-consumer recycled gold must 

exclude scrap from jewelry (bench waste, etc.) and other manufacturing, and any jewelry or other 

product not previously individually owned ("unwanted" jewelry). This is necessary because there are 

cases elsewhere of companies turning newly-mined gold into apparent manufacturing scrap (to avoid 

taxes), and in other cases operations have made and subsequently "recycled" rough jewelry to gain a 

government pre-export manufacturing incentive. Gold coins and bars, or financial gold, should not be 

included in the definition as they do not represent a consumer product and resemble newly-mined gold. 

Bars and coins must be considered separate from recycled gold, in part also because companies or 

indiViduals could launder DRC conflict gold by making uncertified claims that gold bars are recycled 

when they may be newly mined gold bars, or an un-quantified mix of recycled and newly mined gold. 

Thank you for the opportunity to comment on this important rule making process. We are available to 

meet in person or on the phone to clarify any questions you might have. Please contact Aditi 

Mohapatra at aditLmohapatra@calvert.com or (301) 961- 4715. 

Sincerely, 

Lauren Compere 

Managing Director 

Boston Common Asset Management 

Patricia Jurewicz 

Director, Responsible Sourcing Network 

a Project of As You Sow 

UsaWolI 

CEO 

Social Investment Forum 

Susan Baker 

Portfolio Manager & ESG Research Analyst 

Trillium Asset Management Co. 

Aditi Mohapatra 

Sustainability Analyst 

Calvert Asset Management Co. Inc. 

Laura Berry 

Executive Director 

Interfaith Center on Corporate Responsibility 

10 
296 


75730.251

Additional Signatories: 

Name 

Dr. Aidsand F. WrightRiggins 

Aidsand F. WrightRiggins III 

Francois Meloche 

Edward Gerardo 

Brother Roger Croteau, 

CSC 

Sister Kathleen ColI,SSJ 

Susan Vickers, RSM 

Julie Tanner 

Steve Mason 

Mary Patricia Flattery 

Joellen Sbrissa 

Dr. Ruth Rosenbaum 

Eileen Gannon 

loana Doicos, 

Mark Regier 

Victor I. Jarvis 

Ben Tambwe 

Sanford Lewis 

Michael Jantzi 

Christina MAdams 

Marie J. Gaillac 

Rev. Seamus P. Finn 

OMI 

Bro. Steven O'Neil, SM 

Rev. Joseph P. La Mar, 

M.M. 

Susan Smith Makos 

Barbara Jennings, CSJ 

Title 

Executive Director 

Executive Director 

Extra Financial Risk Manager 

Director, Community Commitment 

and Social Investments 

Provincial Council Member 

Administrator, Shareholder Advocacy 

VP Community Health 

Assistant Director of Socially 

Responsible Investing 

Coordinator of Socially Responsible 

Investing Activities 

Provincial Treasurer 

'CSJ 

Executive Director 

Member Executive Team 

Communications and Policy Officer 

Director of Stewardship Investing 

President 

President 

Counsel 

CEO 

Vice President-Finance and 

Administration 

Corporate Responsibility Coordinator 

Director 

shareholder adovocate. 

Assistant CFO 

Director of Social Responsibility 

Coordinator 

Organization 

American Baptist Home 

Mission Societies 

American Baptist Home 

Mission Society 

Batirente inc. 

Bon Secours Health System, 

Inc. 

Brothers of Holy Cross 

Eastern Province 

Catholic Health East 

Catholic Healthcare West 

Christian Brothers 

Investment Services, Inc. 

Church of the Brethren 

Benefit Trust 

Congregation de Notre Dame 

Congregation of St. Joseph 

CREA 

Dominican Sisters of Sparkill, 

NY 

Eurosif 

Everence Financial 

Firstborn Advisors L.L.c. 

Global hands 

Investor Environmental 

Health Network 

J a ntzi-5 u sta i na Iyti cs 

John E Fetzer Institute 

JOLT, CRI 

JPIC Ministry Missionary 

Oblates 

Marianist Province of the US 

Maryknoll Fathers and 

Brothers 

Mercy Investment Services, 

Inc. 

Midwest Coalition for 

Responsible Investment 

11 
297 


75730.252

Name 

Mark Potter 

Michael Kramer, AIF 

Judy Byron, OP 

Dan Apfel 

Ethel Howley, SSND 

Joy Facos 

Sr. Jean Anne Panisko 

Sister Barbara Aires 

Sr. Pamela Marie 

Buganski, SND 

Sr. Judy Boisvert 

Carole Lombard csj 

Roberta Mulcahy, ssj 

Ann Oestreich IHM 

Lars M. Lewander 

Patricia A. Daly, OP 

Patricia Farrar-Rivas 

Sonia Kowal 

Title 

Chair 

Managing Partner & Director of Social 

Research 

Director 

Executive Director 

Senior Sustainable Investing Research 

Analyst 

Treasurer 

Coordinator of Corporate 

Responsibility 

Provincial Treasurer 

Office of Justice and Peace 

Socially Responsible Investing 

Coordinator 

Congregation Justice Coordinator 

President 

Executive Director 

CEO 

Director of Socially Responsible 

Investing 

Organization 

National Jesuit Committee on 

Investment Responsibility 

Natural Investments, LLC 

Northwest Coalition for 

Responsible Investment 

Responsible Endowments 

Coalition 

School Sisters of Notre Dame 

Cooperative Investment Fund 

Sentinel Financial Services 

Company 

Sisters of Charity of 

Leavenworth 

Sisters of Charity of Saint 

Elizabeth 

Sisters of Notre Dame of 

Toledo,OH 

Sisters of St. Joseph of Peace 

Sisters of st. Joseph 

Sisters of St. Joseph of 

Springfield, Massachusetts 

Sisters of the Holy Cross -

Congregation Justice 

Committee 

Spring Water Asset 

Management, LLC 

Tri-State Coalition for 

Responsible Investment 

Veris Wealth Partners 

Zevin Asset Management, 

LLC 

12 
298 


75730.253

May R. 2012 

The Hon, Gar} Miller. Chairman 

Subcommittee 011 I nlcrnalional Monetary Policy and Trade 

Cummillce on Financial SCTyiccs 

U.S, I louse ,)f Representatives 

Washington. DC 20515 

Dear Chairman Miller and Members onhe Subcommittee. 

national association of 

Evangelicals 

As you meet to revic" implementation of Section 1502 of the Dodd· Frank Wall Street 

Reform and Consumer Protection Au. please press the Securities and Exchange 

Commission to issue tinal rules gmcrning disclosure requirements j()r companies that 

purchase conlliet minerals, 

American cvangelil:als h3\'c a long record of generous support t()r missionary work and 

humanitarian aid to Congo. We arc aware ofLht:' tragic history "fthis country. with 

ongoing conflicts fueled by child soldiers. slave labor. sexual violence and the illicit trade 

in rarc natural resources that arc commonly known as conllict minerals. That is why we 

were hearte,wd when Congress included the Section 1501 coniliCl mineral disclosure 

requirements in the tinancial reConn bilL We arc confident that American consumers. 

when presented with accurate information. will choose to purchase technology products 

that do not indirectly subsidize rape and killing in the Congo. 

We arc concerned that the SEC has delayed issuing tinal rules. and even lllon: that some 

in the Congress want to "ater down or eliminate these important provisions, We urge 

that any discussion of the regulations consider their many bene tits. including the moral 

value of protecting human life and dignity. the economic hend;t of creating a level 

playing fidd that protects businesses from unethical competition. and the improved 

security that will come ti'om hringing stahility to a troubled area in the heart of Africa, 

We respectfully request lhal this letter ht:' included in the record of your deliberations. 

SinccrGiy. 

Galen Carey 

Vice President. Government Relations 

PO Box 23269 Washington DC 20026 Ph 202,789.1011 Fax 202.842.0392 Web www.nae.net 
299 


75730.254

"The Costs and Consequences of Dodd-Frank Section 1502: 

Impacts on America and the Congo" 

Rep. Howard L. Berman 

Statement for the Record 

May 10,2012 

The Democratic Republic of the Congo has been plagued for decades by civil war and violence. 

The hallmarks of this instability are well known: child soldiers, sexual and gender-based 

violence, indiscriminate mass killings, and other serious human rights abuses. Despite the fact 

that civil war formally ended in 2003, violence continues today and it is fuelled in part by the 

availability of valuable minerals to warlords and criminal elements ofthe Congolese army. They 

sell gold, tungsten, tin, and tantalum for millions of dollars, and these "conflict minerals" 

eventually end up in products such as cell phones and laptops that are purchased by American 

consumers. 

Section 1502 of the Dodd-Frank Wall Street Reform Act, which I was proud to work on with 

Ranking Member Barney Frank (D-MA) and Jim McDermott (D-WA), is intended to sever the 

ties between violent groups in the Congo and the minerals that finance their activities, and create 

greater transparency with regard to international supply chains. It aims to raise awareness 

among Americans that our spending habits have a real impact on the lives of innocent people 

half a world away. 

Some critics of the law say that it will result in a total ban on sourcing minerals from the Congo, 

thus hurting the very people we are trying to help. This is simply not true. The law would not 

prevent companies from importing any minerals from this region ofthe world. Rather, its 

purpose is to help both consumers and investors make informed decisions about the products 

they buy and the companies in which they invest. 

This is not a new approach. For decades, Americans have demanded more information about 

the origin of the products they buy to help ensure that they were not produced with the use of 

child labor, inhumane working conditions, or environmentally destructive procedures. 

I believe that companies looking to be good corporate citizens and to burnish their reputations 

should support this legislation. Indeed, many companies are already moving in this direction. 

Motorola, Apple, and Intel have all made efforts to procure conflict-free minerals from the 

Congo. For example, Motorola Solutions for Hope and KEMET are both establishing closed 

supply chains so that they can control every stage of sourcing and prevent rebels or corrupt 

government officials from profiting from their activities. I commend these companies and 

encourage their efforts. 

However, other companies have said that implementing this law would simply be too difficult 

and too expensive. They are telling us that, sophisticated as they are, they have no idea where 

their materials corne from. They are saying that if we ask them to be responsible, they cannot 
300 


75730.255

make a profit. I take issue with all of those statements. If this is the case, what makes them so 

different from companies already complying with the law? I would also be interested to know, 

based on the massive cost estimates they have calculated, what is the additional per-unit cost of a 

cell phone or other product, given the hundreds ifnot thousands of products that utilize the 

conflict minerals cited in section 1502? 

The Congolese government has responded to this legislation by requiring companies to comply 

with DECD guidance on supply chain due diligence. The government has also reiterated that the 

military is prohibited from being involved in mining. With this legislation, we have started an 

important dialogue about how consumers, companies, and the Congolese Government can all 

play an important role in reducing violence and conflict in Central Africa. I recognize that 

conflict minerals are only a part ofthis puzzle, and that better, more accountable governance 

from the Government of the Congo is the only long term solution to insecurity and poverty in the 

country. 

Finally, it is important to respond to critics who claim that Section 1502 was written without the 

support or input from the Congolese themselves. In fact, the legislation was supported by over 

30 groups from the ReCongo, including the Catholic Bishops' Conference in the DRC, 

represented today by Bishop Nicolas Djomo. Furthermore, the groups who have been working to 

promote this provision, such as Global Witness and Enough, have done significant research on 

the ground to examine the impact of conflict minerals in the Congo. They have Congolese 

staffers, but also utilize outside experts who travel regularly to the region. I have found them to 

be a reliable source of information, and I thank them for their work. 

In closing, I think it is very important that we use this hearing not just to discuss the costs of 

implementing Section 1502, but also to examine the human costs of not implementing the 

provision, and the real-world impact that would have on the people of Eastern Congo, who have 

already endured unthinkable violence and deprivation. As we evaluate Section 1502, we must 

not forget about or ignore the human rights basis behind the law. 
301 


75730.256

ti SYNERGIE 

DES 

DES 

VIOLENCES 

FEMMES 

SEXUELLES 

POUR LES VICTIMES a 

«S.F.V.S» 

E·mail: synergie_slvs@yahoo.fr 

Tel:(+243) 813179957 

~i:'!~~!~~~;\~~~~ (+ 243) ,9954,84965 H!JHSCC\~f);l:HlV. B.P 2~7 GlsenYl1 Rwanda ~~~Rl~I~~~!:~~~;~ 

ProvInce du Nord Kivu VlOL[~CES SE.\un.u:s 

Republique Democratique du Congo 

March 7th, 2011 

The Honorable Hillary Clinton 

U.S. Department of State 

2201 C Street, N.W. 

Washington, D.C. 20520 

cc: -The Honorable Mary Schapiro, Chairman, U.S. Securities and Exchange 

Commission 

-Ambassador Johnnie Carson, Assistant Secretary of State for African Affairs, 

U.S. Department of State 

-Susan Page, Deputy Assistant Secretary for African Affairs, U.S. Department 

of State -Robert Hormats, Under Secretary for Energy, Economic, and Business Affairs, 

U.S. Department of State -Maria Otero, Under Secretary for Democracy and Global Affairs, U.S. 

Department of State 

Dear Secretary Clinton: 

As representatives of 35 Congolese women's rights organizations 

working in eastern Democratic Republic of the Congo, we write to you 

to urge the U.s. State Department to oppose a delay and fully support 

the swift and effective implementation of Section 1502 of the DoddFrank Wall Street Reform and Consumer Protection Act. Breaking the 

link between minerals and violence is a crucial step toward bringing 

peace to our region, eastern Congo. The U.S. law can help bring peace 

to eastern Congo, and delaying its implementation will fuel increased 

sexual violence on the ground. 

We have been informed of lobby efforts by local and international 

mining operators to postpone implementation of the Dodd-Frank Act, but we would like to remind you that their initiative is only business 

motivated. 

You have been on the ground and seen for yourself the heavy toll of 

minerals-fueled conflicts on innocent women, girls and children in DR 

Congo, and the US legislation is for us the leverage needed to instill 

and impose ethical minerals business practices in the Great Lakes 

Region. We therefore strongly oppose a delay or a phase in of the 

reporting requirements of the legislation. 

Sincerely, 
302 


75730.257

Justine Masika Bihamba 

Coordinator 

SYNERGIE - A Platform of35 Women's Rights Groups Standing up for Victims of Sexual 

Violence 
303 


75730.258

• STAND CONFLICT-FREE 

CAMPUS 

INITIATIVE H~;Pt j>$t--

STAND Statement for the Record 

Subcommittee on International Monetary Policy and Trade Hearing on 

The Costs and Consequences of Dodd-Frank Section 1502: 

Impacts on America and the Congo 

May 10, 2012 

To Chairman Miller and Members of the Subcommittee: 

We currently serve as the National Student Director and Conflict-Free Campus Initiative 

coordinator of STAND, a student political constituency organization focused on atrocities 

prevention and civilian protection in U.s. foreign policy. The Conflict-Free Campus 

Initiative (CFCI) is a project of STAND and the Enough Project, and seeks to mobilize 

student communities across the United States to advocate for more responsible, 

transparent mineral supply chains from the Democratic Republic of the Congo (DRC). 

Throughout the country, over one hundred CFCI chapters are working to change university 

procurement and investment policies, in order to disentangle the link between our 

consumer electronics and violence in the ORCs eastern Kivu provinces. 

To date, eight schools have passed resolutions on mineral extraction and violence in the 

DRC: the University of Colorado at Boulder, Clark University, Duke University, Stanford 

University, the Ohio University Honors Tutorial College, Pomona College, the University of 

Pennsylvania, and Westminster College. In tandem with the university campaigns, a 

growing constituency of informed youth activists has voiced its support for Section 1502 of 

the Dodd-Frank Act, and recognizes its essential role in civilian protection, conflict 

resolution, and human rights in the Democratic Republic of the Congo. 

As representatives of this national student constituency, we implore you to continue your 

support for the Dodd-Frank legislation, as well as your commitment to human rights in the 

ORCs Kivu provinces. The creation of a legitimate, transparent, and accountable Congolese 

mining sector is a challenging process, and requires the firm cooperation and leadership of 

American corporations, the U.s. government, and grassroots activists. Unfortunately, the 

delayed implementation of the Securities and Exchange Commission's legally-mandated 

regulations on mineral extraction and due diligence is having a chilling effect to progress 

on the ground. As Congolese civilians cope with displacement, atrocities, and political 

corruption, the implementation of the SECs regulations will play an important role in 

ensuring that US companies are not inadvertently financing conflict in the ORe. 
304 


75730.259

Moving forward, we urge the expedient, comprehensive implementation of SEC regulations 

on mineral extraction in the DRC. Thank you again for the committee's consideration, and 

for the continued leadership of the United States Congress on this important human rights 

issue. 

In peace, 

Daniel Solomon 

National Student Director 

STAND 

director@standnow.org 

Carly Oboth 

Conflict-Free Campus Initiative Coordinator 

STAND 

coboth@standnow.org 
305 


75730.260

Excellency, 

I have the honour to write to you in my capacity as Coordinator of the Group of Experts on the 

Democratic Republic of Congo (DRC) which was extended pursuant to Security Council resolution 2021 

(20 11) of29 November 2011. The UN Group of EXperts on the Democratic Republic of Congo (DRC) 

understands that the United States House Committce on Financial Serviccs has solicited written inputs 

ahead of its hearing on "The Costs and Consequences of Dodd-Frank Section 1502: Impacts on America 

and the Congo," on Thursday, 10 May, 

In this regard the Group would like to reiterate some of its comments which it included in a letter to the 

Securities and Exchange Commission (SEC) dated 21 October 2011 in anticipation to the publication of 

its regulations: 

First, the Group remains convinced that requiring companies to exercise due diligcnce is effective and 

that Dodd-Frank has been a critical catalyst for refonn. The Group's investigations in the DRC havc 

shown that private sector purchasing powcr and due diligence implementation - inter alia through 

establishing traceability schemes - help to put pressure on the military to disengage from mining and 

promote good govemance in the DRC mining sector, thereby preserving intemational markets access for 

impoverished artisanal miners. In addition there is growing interest among refiners and smelters to 

assume responsibility "upstream" by acquiring mining permits and investing in semi-industrial production 

and processing, so to establish "closed-pipe" supply chains in which the company has custody of minerals 

from production to export. 

Moreover, since the Dodd -Frank law has been passed, a higher proportion then before of tin, tungsten 

and tantalum mined in the DRC is not funding conflict. This is because: 

Production of these minerals has shifted to an extent to (largely) non-conflict areas, such as North 

Katanga and Maniema. 

The anned group Front Democratique pour la Liberation du Rwanda (FDLR) has less control 

over tin, tungsten and tantalum mines in the ORCs Kivu provinces then previously. 

Tin, tungsten and tantalum production levels have fallen in the Kivus, because companies 

aspiring to Dodd-Frank compliance are not purchasing from there. So while criminal networks 

within the Congolese anned forces (FAROC) continue to infiltrate mineral supply chains in the 

Kivus, the overall amount of profit they receive from this has fallen. 

However, there are important challenges regarding Dodd-Frank. Market uncertainty resulting from the 

lengthy delay in the publication ofthe SEC rules coupled with the fear of potential 100% "conflict free" 

demands in their reporting obligations has led most industry actors to pull out of the market rather than 

conduct due diligence on their supply chains. This has led many purchasers to boycott all Kivu mineral 

products, reducing the total export levels to about a third of its original (pre-suspension) level. 

The effect of this in the Kivus, unsurprisingly, has been the loss of a percentage of precarious jobs in 

certain mining zones, increased smuggling and general criminalisation of the minerals trade. It has also 

had a severely negative impact on provincial government revenues, weakening governance capacity. 

Critics of due diligence efforts have argued that such measures will only hurt economic development in 

eastern Congo. However, evidence from the Group's countless visits to mining zones throughout the Kivu 

provinces point to a reality which has been lost in this debate: Militarized mining has not led to true 

economic development for miners and their communities. 

Scrapping or weakening Dodd Frank is not the solution. The solution is for SEC regulations to 

incorporate the UN Group of Experts and OECD due diligence guidelines' concept of mitigation. 
306 


75730.261

Mitigation allows companies purchasing from mines where F ARDC criminal networks are in operation 

to continue purchasing provided they have put in place time-bound and publically-available strategies to 

progrcssively decrease the involvement and benefit of military actors. 

Mineral supply chain tagging can bc implemented in the Kivus, as it already has been in Katanga and 

Rwanda. This would enable legitimate, traceable trade to flow from the Kivus, which would reduce the 

negative consequences of the current slowdown of cconomic activity to civilian populations, and increase 

revenues to legitimate state agencies. And, as we have seen in Katanga, governance relating to minerals 

would be likely to improve too. 

Another major challenge is that conflict financing from gold in the Kivus is continuing. The FDLR, other 

armed groups and F ARDC criminal networks continue to dcrive considerable profit from the gold trade, 

increasing the risk of worsening conflict. This is happening, in part, because due diligence 

implementation in the gold sector has barely begun, and gold from the zones controlled by armed groups 

continues to have little difficulty reaching international markets. 

Again, the solution is not to weaken or abandon Dodd Frank. The solution is to continue efforts to 

implement due diligence in the gold sector. Progress has been made with the major industrial gold 

producers, but important international markets for gold still pay too little attention to where their product 

is coming from. 

An additional challenge is that criminal networks in the FARDC in eastern DRC are powerful and hard to 

dislodge. And thus far, it seems, the Government of the DRC has been unable to take them on. 

Due diligence is not going to solve this problem, which, first and foremost, requires action by the DRC 

authorities. However, company due diligence will shed more light on the activities of these networks, thus 

increasing pressure on the government to take action. 

In conclusion, Dodd Frank has had a massive and welcome impact so far, requiring chain participants all 

over the world to take due diligence and conflict financing seriously. This should not and must not be 

thrown away or weakened. 

What is required now is a correct calibration of the SEC regulations concerning disclosure so that trade 

can keep flowing from the Kivus, but in ways that lead to improvements in the situation, not a 

deterioration. The SEC should use as its reference the UNfOECD due diligence guidelines, as previously 

urged by ICGLR member states, the OECD, companies and NGOs. Gold supply chains must urgently 

begin to implement due diligence. 

Pressure must be maintained on DRC authorities to prosecute and punish F ARDC criminal nctworks 

involved in the minerals trade. 

Dodd Frank and due diligence is working. Retreat now will confuse all players in the market, unfairly 

diminishing the efforts of those who are implementing due diligence, and playing into the hands of the 

cynical and those with other agendas who have thus far refused to implement due diligence in the hope 

that it will simply go away. 

Yours sincerely, 
307 


75730.262

Slew liege, 

Coorrll"at", 

Qroop ofE.,pcru 00 the ORC 

,«,slllblishl!d pul'Su;mt \0 "",,11>11011 2021 (201 ! f 
308 


75730.263

May 7, 2012 

UNITED TOWlJ.] 

(BI~[aIBU]1 

Dear Members of the House Financial Services Subcommittee on International Monetary Policy and 

Trade, 

United to End Genocide submits this letter to the hearing record to express our support for Section 1502 

of the Dodd-Frank Act. We are concerned about the documented link between the minerals trade and 

violence in the region, and believe Section 1502 is a critical driver to help reduce violence on the ground 

and ensure that clean supply chains are developed. We therefore urge Congress and your 

Subcommittee to support this provision and to ensure that the Securities and Exchange Commission 

(SEC) works to produce a final rule that will help break the link between minerals and conflict and 

reduce violence on the ground. 

Congress intended for this law to immediately address the urgent humanitarian situation in the eastern 

Democratic Republic of Congo (DRC) by curbing the trade in conflict minerals. For over a decade, since 

the UN Group of Experts exposed the problem, minerals have fuelled conflict and human rights abuses, 

including sexual and gender-based violence. For U.S. taxpayers, the deadly trade in conflict minerals 

means continuing to pay US $500-600 million per year in aid and peacekeeping costs aimed at making 

Congo a more stable place. For companies, delays create uncertainty in the market and about the 

standards to which they will be held. Delays also impede the effectiveness of programs already 

underway on the ground. For investors, the reasonable right to know which activities their investments 

or purchases may be directly or indirectly supporting is compromised. Most importantly, for the 

Congolese people, further delays mean armed groups can continue to prey upon the minerals sector, 

fuel instability and commit human rights abuses against civilian populations. This is not what Congress 

intended by enacting Section 1502. 

Since passage of Dodd-Frank, significant steps are being taken to ensure conflict minerals no longer line 

the pockets of armed groups including Congolese government actions to demilitarize mining areas and 

to require companies to carry out due diligence measures to avoid sourcing by armed groups. Industry 

groups are also developing initiatives to comply with the provision. However the delay of the SEC 

rulemaking and the possibility of weak rules threaten this progress. It has been nearly two years since 

President Obama signed the law and the statute is clear that the SEC should have produced final rules by 

April 2011. It is time to put this law into action. We ask that you use this opportunity to highlight the 

benefits of this provision, and to consider using your offices to pressure the SEC to issue a strong rule 
309 


75730.264

that meets to Congressional intent and works to break the link between conflict and minerals in eastern 

Congo 

Yours sincerely, 

Barna Athreya 

Executive Director 
310 


75730.265

From Mr. McDermott for the Record 

U.S. House of Representatives 

Subcommittee on International Monetary Policy and Trade 

Hearing on "The Costs and Consequences of Dodd-Frank Section 1502: 

Impacts on America and the Congo" 

5-10-2012 

Partial List of Investment Companies with Conflict Minerals Policies 

Company Location Phone Comments < 

1. AMP Capital Sydney, Australia +61 2 9257 5000 Encourages ethical behavior for the sourcing of minerals from 

the ORe. Recommends that companies take decisive action to 

make a public statement condemning the use of minerals that 

fuel ongoing conflict in the ORe. 

2. Boston Boston, MA 617-720-5557 Over the last few years, we have seen supply chain traceability 

Common Asset 02109 move from a 'nice to know' to a necessity as more companies 

Management become aware of their exposure to egregious human rights 

violations taking place at the bottom of their supply chain. 

3. Calvert Bethesda, MD 800-368-2748 It is critical that companies responsibly source minerals from 

Investments 20814 regions where conflict will not threaten their supply chain 

access ... Further, these companies must publicly condemn 

conflict mineral use and work with their suppliers to ensure 

that sourcing policies are being adhered to. 

~. F&C Boston, MA 617-426-9050 F&Cwelcomes the US Government's commitment to tackle 

Investments 02110 the issue of so~called 'conflict minerals.' 

5. Interfaith New York, NW 212-870-2938 Its 300 member organizations with over $100 billion in AUM 

Center on 10115 have an enduring record of corporate engagement that has 

Corporate demonstrated influence on policies promoting justice and 

Responsibility sustalnability In the world. 

6. Krull & Asheville, NC 877-235-3684 Also partnered with Calvert Investments 

Company 28815 

7. Praxis Mutual Goshen, IN 46527 574-533-9511 Working with investors to encourage companies to find ways 

Funds/Everence to use conf!ict~free minerals in the production of electronics 

and other goods. 

~. Tri-State Montclair, NJ 973-509-8800 Signatory to statement by group of investors calling on 

Coalition 07042 companies to make more of an effort to ensure that minerals 

used in electronics components are not contributing to the 

conflict in the ORe. 

1 
311 


75730.266

9. Trillium Asset Boston, MA 617-423-6655 Trillium Asset Management Corporation has joined a coalition 

Management 02111 of investors in calling on major electronics, medical device and 

automobile component manufacturers, to ensure that the 

companies are not aiding conflict and human rights abuses by 

purchasing supplies from the ORe. The investors, who 

represent almost $200 billion in assets, have issued a 

statement calling on companies to condemn the use of 

minerals whose trade promotes the conflict in the DRe and 

take immediate steps to ensure that these minerals are not 

used in their products. 

10. Walden Asset Boston, MA 617-726-7250 Firm has been actively working to promote social responsibility 

Management 02108 in regards to conflict minerals and the company is keeping a 

close eye on action coming from Washington. 

2 
312 


75730.267

From Mr. McDermott for the Record 

U.S. House of Representatives 

Subcommittee on International Monetary Policy and Trade 

Hearing on "The Costs and Consequences of Dodd-Frank Section 1502: 

Impacts on America and the Congo" 

5-10-2012 

Partial list of Companies, and their U.S. locations, already going Conflict Free 
313 


75730.268

Hampshire 

Honel'!':ell United States ~orristown New Jersey 

TDK USA Corporation (TUC) United States Garden City New York 

Kionix United States Ithaca New York 

Fair-Rite United States Wallkill New'C~ 

RF Micro Devices United States Greensboro North Carolina 

Triquint United States Hillsboro Oregon 

Lattice Semiconductor United States Hillsboro Oregon 

PEM PennEnqineerinq United States Danboro Pennsylvania 

Air Products United States Allentown Pennsylvania 

Advanced Interconnections United States West Warwick Rhode Island 

Kemet United States Greenville South Carolina 

Freescale United States Austin Texas 

Fairview Microwave United States Allen Texas 

Texas Instruments United States Dallas Texas 

Silicon Labs United States Austin Texas 

Venkel United States Austin Texas 

Quartzdyne United States Salt Lake City Utah 

Nordstrom United States Seattle Washington 

Future Technology Devices International 

Chip United Kingdom Glasgow Hillsboro Oregon 

Syfer United Kingdom Norfolk 

Bench United Kingdom Manchester 

Lite-On Taiwan Taipei 

TXC Taiwan Taipei 

Tyco Switzerland Schaffhausen Princeton New Jersey 

ST Microelectronics Switzerland Geneva Coppell Texas 

LG Electronics South Korea Seoul San Diego California 

STATS ChipPAC Singapore Singapore Freemont California 

Flextronics Singapore Singapore Milpitas California 

Tanaka Electronics Singapore Singapore 

NXP Netherlands Eindhoven San Jose California 

Phillips Netherlands Amsterdam Andover Massachusetts 

Nikon JajJ8n Tokyo Belmont California 

Panasonic Japan Osaka Secaucus New Jersey 

Senju Metal Group Japan Tokyo Great Neck New York 

Sony Japan Tokyo New York New York 

Toshiba Japan Tokyo 

NSC Corporation Japan Osaka 

New 

iC-Haus Germany Bodenheim Rindge Hampshire 

Martinrea Honsel Germany Meschede 

Alcatel-Lucent France Paris Murray Hill New Jersey 

Nokia Finland Espoo Sunnyvale California 

Zhen Ding Technologies (ZDT) China Shenzen 

Grass 

Miranda Canada Montreal Valley California 

2 
314 


75730.269

From Mr. McDermott for the Record 

U.S. House of Representatives 

Subcommittee on International Monetary Policy and Trade 

Hearing on "The Costs and Consequences of Dodd-Frank Section 1502: 

Impacts on America and the Congo" 

5-10-2012 

Executive Order 13126 and the list of Forbidden Products for Federal Acquisition starting in 

2001 

Text below is from: http://www.dol.gov/lLAB/regs/eo13126/main.htm 

Executive Order 13126 

Executive Order 13126 ID29J [PDF] on the "Prohibition of Acquisition of Products Produced by Forced or 

Indentured Child Labor," was signed on June 12, 1999. The EO is intended to ensure that federal agencies 

enforce laws relating to forced or indentured child labor in the procurement process. It requires the 

Department of Labor, in consultation with the Departments of State and Homeland Security, to publish and 

maintain a list of products, by country of origin, which the three Departments have a reasonable basis to 

believe, might have been mined, produced or manufactured by forced or indentured child labor. Under the 

procurement regulations implementing the Executive Order, federal contractors who supply products on a list 

published by the Department of Labor must certify that they have made a good faith effort to determine 

whether forced or indentured child labor was used to produce the items listed. 

On January 1B, 2001, the Department of Labor published in the Federal Registerthe initial EO 13126 List 

comprised of 11 products from two countries, as well as the Procedural Guidelines for the "Maintenance of 

the List of Products Requiring Federal Contractor Certification as to Forced or Indentured Child Labor" [Text] 

[PDF]. Also published in the January 1B Federal Register was the GSA's Federal Acquisition Regulation 

Final Rule ID29J [PDF] to implement the Executive Order. 

Revisions to the EO 13126 List 

On April 3, 2012 DOL released a Notice of Final Determination ~ [PDF] in the Federal Registerrevising 

the list of products to add bricks from Afghanistan and coltan and cassiterite from the Democratic Republic of 

Congo. With this final determination, the list is comprised of 31 products from 23 countries. 

View the bibliography for each product listed in the April 3, 2012 final determination (PDF) 

On October 4, 2011 DOL published a Notice of Initial Determination ITm] [EQE] in the Federal Register 

proposing to add Bricks from Afghanistan and Cassiterite and Coltan from the Democratic Republic of the 

Congo to the list. Until publication of the final determination, the current May 31, 2011 list remains valid. The 

notice officially requests public comment on the initial determination through December 3, 2011. 
315 


75730.270

On May 31, 2011 DOL released a Notice of Final Determination [Iext] [PDF] in the Federal Register 

updating the EO 13126 list in accordance with the Procedural Guidelines. The final determination sets forth an 

updated list of products, by country of origin, which DOL, DOS and DHS believe might have been mined, 

produced, Or manufactured by forced or indentured child labor. The final determination contains a list of 21 

countries and 29 products. 

View the bibliography for each product listed in the May 31. 2011 final determination (PDF) 

On December 16, 2010 DOL published a Notice of Initial Determination ffil9J [PDF] proposing to add 

Hand-Woven Textiles from Ethiopia to the list and to remove Charcoal from Brazil from the list where, 

preliminarily, DOL had reason to believe that the use of forced or indentured child labor had been significantly 

reduced. On December 23, 2010 DOL published a correction to the December 16 initial determination. 

On July 20, 2010 DOL released a Notice of Final Determination [Iext] [PDF] in the Federal Register 

updating the EO 13126 list in accordance with the Procedural Guidelines. The final determination sets forth an 

updated list of products, by country of origin, which DOL, DOS and DHS believe might have been mined, 

produced, or manufactured by forced or indentured child labor. The final determination contains a list of 21 

countries and 29 products. Additionally, the final determination provides responses to the most commonly 

received public comments. 

View the bibliographies for each product listed in the July 20, 2010 final determination (PDF) 

On September 11, 2009 DOL published a Notice of Initial Determination ffil9J [PDF] in the Federal 

Register announcing a proposed revision to the EO 13126 List and requesting public comment. All public 

comments received are available for viewing at www.regulations.gov (reference Docket ID No. DOL-2009-

0002). 

Current List of Products and Countries on EO 13126 List 

The current list of products was published in the April 3, 2012 Federal Register and includes the following: 

2 
316 


75730.271

Garments Argentina, India, Thailand 

Burkina Faso 

Nigeria 

Nigeria 

Mali ~-~~~---~---~--~---~--l------------~-~------~~~-------~',----,-------~.,--j 

Rubber 

Shrimp 

Stones 

Sugarcane 

Textiles (hand-woven) 

·-illapia (fish)~ ""~'~"-'-'~~-"" 

3 
317 


75730.272

CONFlICf MINERAlS TRADE ACf; INTERNATIONAL MEGAN'S 

LAW OF 2010; EXTENDING IMMUNITIF.S TO THE ornCE OF 

THE HIGH REPRFSENTATlVE AND THE INTERNATIONAL CIVILIAN ornCE IN KOSOVO ACT OF 2010; LORD'S RFSISTANCE 

ARMY DISARMAMENT AND NORTHERN UGANDA RECOVERY 

ACT OF 2009; AND GLOBAL SCIENCE PROGRAM FOR SECU· 

RlTY, COMPETITIVENF.SS, AND DIPLOMACY ACT OF 2010 

MARKUP 

REPORE THE 

COMMITTEE ON FOREIGN AF"B'AIRS 

HOUSE O"Bl REPRESE)JrrATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

ON 

H.R. 4128, H.R. 5138, H.R. 5139, S. 1067 

and H.R. 4801 

APRIL 28, 2010 

Serial No. 111-92 

Printed for the use of the Committee on Foreign Affairs 

Available via the World Wide Web: http://www,foreignalfairs.house.gov/ 

5E'r199PDF 

u.s. GOVERNMENT PRINTING OFFICE 

WASHINGTON: 201Q 

F{l-r sale by the Superintendent of Documeats, U.S. Government Printing Office 

Internet: bookstore.gpo,g(Jv Phone: toll free (B66J 512-1ROO; nc llrell (202) 512-1800 

Fax: (2D2) 512· 2104 Mail: Stop IDee, Washington, DC 20402--QOOI 
318 


75730.273

COMMITTEE ON FOREIGN AFFAIRS 

HOWARD L. BERMA.c'\', California, Chairman 

GARY L. ACKERMA.c'<, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

DONALD M. PAYNE, New Jersey 

BRAD SHERMAN, California 

ELIOT L. ENGEL, New York 

BILL DELAHUNT, Massachusetts 

GREGORY W. MEEKS, New York 

DIANE E. WATSON, California 

RUSS CARNAHAN, Missouri 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

MICHAEL E. McMAHON, New York 

JOHN S. TANNER, Tennessee 

GENE GREEN, Texas 

LYNN WOOLSEY, California 

SHEILA JACKSON LEI':, Texas 

BARBARA LEE, California 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

MIKE ROSS, Arkansas 

BRAD MILLER, North Carolina 

DAVID SCOTT, Ge.orgia 

JIM COSTA, California 

KEITH ELLISON, Minnesota 

GABRIELLE GlFFORDS, Arizona 

RON KLEIN, Florida 

VACANT 

ILEANA ROS-LEHTINEN, Florida 

CHRISTOPHER H. SMITH, New Jersey 

DAN BURTON, Indiana 

ELTON GALLEGLY, California 

DANA ROHRABACHER, California 

DONALD A. M.b,NZULLO, Illinoi.' 

EDWARD R. ROYCE, California 

RON PAUL, Texas 

JEFF FLAKE, Arizona 

MIKE Pt<:NCt<:, Indian. 

JOE WILSON, South Carolina 

JOHN B()()ZMAN, Arkansas 

.J. GRl<:SHAM BARRETT, South Carolina 

CONNIE MACK, Florida 

JEFF FORTENllERRY, Nebraska 

MICHAEL T. McCAUL. Texas 

TED POE, Texas 

BOB INGLIS, South Carolina 

GUS BILIRAKIS. Florida 

HICHARD J. KESSLER, Staff Director 

YLEEM POBLETE, Republican Staff Director 

SHANNA WINTERS, General Counsel and Senior Pulicy Advisor 

LAURA Rl'SH, Professional Staff Member/Security Officer 

G·f,NEU .. BRO~, Senior Staff Associate /llearing Coordinator 

(Ii) 
319 


75730.274

CONTENTS 

Page 

MARKUP OF 

H.R. 4128, To improve transparency and reduce trade -in conflict minerals, and for other purposes ......................................................................................... 2 

Amendment in the Nature of a Substitute to H.R. 4128 .......... 108 H.R. 5138, To protect children from sexual exploitation by mandating reporting requirements fOT convided sex traffickers and other registered sex offenders against minors intending to engage in international travel, pTO~ 

viding advance notice of intended travel by high interest registered sex offenders outside the United States to the government of the country of destination, requesting foreign governments to notify the United States when a known child sex offender is seeking to enter the United States, 

and for other purposes ......................................................................................... 31 H.R. 5139, To provide for the International Organizations Immunities Act to be extended to the Office of the High Representative in Bosnia and Herzegovina and the J ntemational Ci,,;lian Office in Kosovo .......................... 90 S. 1067, To support stabilization and lasting peace in northern Uganda and areas affected by the Lord's Resistance Army through development of a regional strategy to support multilateral efforts to successfully protect civil- ians and eliminate the threat posed by the Lord's Resistance Army and 

to authorize funds for humanitarian relief and reconstruction, reconcili- ation, and transitional justice, and for other purposes ..................................... 92 

H.R. 4801, To establish the Global Science Program for Security, Competitive- ness, and Diplomacy, and for other purposes .................................................... 150 Amendment in the Nature of a Substitute to H.R. 4801 offered by the Honorable Howard L. Berman ...................................................................... 170 

APPENDIX 

~:~~~~ :~~~~~ .. :.:~::::::::~:::::::::::::.~::: ............ ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: The Honorable Howard L. Berman, a Representative in Congress from the Stat.e of Califomia~ and Chainnan, Committee on Foreign Affairs: Prepared statement ............................................................................................................. . The Honorable Eni F.H. Faleomavaega, a RepreRentat;ve in Congress from American Sam.oa: Prepared statement , ................... " ................. , ...................... . 

The Honorable Russ Carnahan, a Representative in Congress from the State of Missouri: Prepared statements ...................................................................... . 

The Honorable Sheila Jackson Lee. a Representative in Congress from the State of Texas: Prepared statement .................................................................. . 

(III) 

196 

197 

200 

202 

206 

208 
320 


75730.275

CONFLICT MINERALS TRADE ACT; INTERNATIONAL MEGAN'S 

LAW OF 2010; EXTENDING IMMUNITIES TO THE OFFICE OF 

THE HIGH REPRESENTATIVE AND THE INTERNATIONAL 

CIVILIAN OFFICE IN KOSOVO ACT OF 2010; LORD'S RESISTANCE ARMY DISARMAMENT AND NORTHERN UGANDA RECOVERY ACT OF 2009; AND GLOBAL SCIENCE PROGRAM 

FOR SECURITY, COMPETITIVENESS, AND DIPLOMACY ACT 

OF 2010 

WEDNESDAY, APRIL 28,2010 

HOUSE OF REPRESENTATIVES, 

COMMT'ITEE ON FOREIGN AFFAIRS, 

Washington, DC. 

The committee met, pursuant to notice, at 10:22 a.m. in room 

2172, Rayburn House Office Building, Hon. Howard L. Berman 

(chainnan of the committee) presiding. 

Chainnan BERMAN. The committee shall come to order. I think 

a quorum is present. Today we have five bills listed on the agenda. 

I understand that the committee has a consensus on four of the 

bills, and the Minority has requested we move en bloc. 

The fifth bill, H.R. 4801, has pending amendments. I will just 

call up the four bills all at once and then call up H.R. 4801 separately. 

Pursuant to notice, J ask unanimous consent to call up en bloc 

H.R. 4128, the Conflict Minerals Trade Act; H.R. 5138, the International Megan's Law of 2010; H.R. 5139, Extending Immunities to 

the Office of the High Representative and the International Civilian Office in Kosovo Act of 2010; and S. 1067, the Lord's Resistance 

Army Disarmament and Northern Uganda Recovery Act of 2009. 

LThe information referred to follows:1 

(1) 
321 


75730.276

138 

31 

1 foreign elements from being engaged in illegal trade 

2 acthities in the Democratic Republic of the Congo. 

Chairman BERMAN. Without objection, I may recess the com- mittee from time to time. I now recognize myself for as much time 

as I may consume to make an opening statement. 

For more than a decade, we have been hearing about the tragic 

situation in the Democratic Republic of the Congo: Mass killings of 

civilians. Rape used as a weapon of war. Child soldiers forced to 

the front lines. 

H.R. 4128, the Conflict Minerals Act, is one important step toward ending a conflict in Congo that by some estimates has killed more than 5 million people. 

The bill establishes a mechanism to track minerals mined in the 

DRC that end up in products like cell phones and laptops, and will 

help us cut off finanL"ing to some of the planet's most brutal armed 

groups. I am now supposed to hold up Marissa's cell phone and say 

in this cell phone is tin and eoltan, both conflict minerals coming 

from the Congo. 

In many respects, this legislation builds on the work already 

begun by some American companies. H.R. 4128 will make those efforts more effective by creating a level playing field for all companies that do business in the United States. 

The American people don't want to put money in the hands of 

brutal thugs in the DRC, and neither do American companies. For 

less than 1 cent per cell phone, this bill will allow American con- sumers to make responsible choices, and help put the warlords out 

of business. I thank the author of the bill, Mr. McDermott, and my 

colleague Don Payne, chairman of the Africa Subcommittee, for all 

their hard work on these issues, and I encourage my colleagues to 

support the bill. 

I would like to also commend Chris Smith for his hard work on H.R. 5138, the International Megan's Law of 2010, and I mean hard work. Many child sex ofIenders are traveling internationally or reside abroad because the laws against sex acts with minors are weaker or rarely enforced in particular countries. 

International Megan's Law would establish a system for providing advance notice to foreign countries when a convicted child sex offender travels to that count.ry and imposes a registration re- quirement for child sex offenders from the United States who re- side abroad. 

Worldwide, over 2 million children are sexually exploited each 

year through trafficking, prostitution and child-sex tourism. We all 

know the devastating emotional, physical and psYchological effects on these child victims. We need to do all we can to prevent these 

predators from circumventing U.S. laws to prey on children in foreign countries. I encourage my colleagues to support this bill. 
322 


75730.277

139 

H.R. 5139, Extending Immunities to the Office of the High Representative and the International Civilian Office in Kosovo Act of 

2010, is a technical fix to ensure legal protection for employees of 

both the Office of the High Representative (OHR) in Bosnia and 

Herzegovina, and the International Civilian Office (lCO) in Kosovo. 

The bill, which adds the OHR and the ICO to the International 

Organization Immunities Act, will ensure that Americans serving 

in these important Balkans-based organizations will be protected 

from politically motivated litigation in the United States arising 

from their official duties and only their official duties. 

The United States must protect its diplomats who serve in international organizations, often at great personal risk and sacrifice, 

from financially and personally ruinous litigation while also preserving its ability to use informal institutions in the conduct of foreign policy. Finally, we have S. 1067, the Lord's Resistance Army 

Disaonament and Northern Uganda Recovery Act of 2009. I would 

like to thank the gentleman from Massachusetts, Mr. McGovern, 

fur his work on the House version of this bill. 

This legislation affions the policy of the United States to work 

with regional governments toward a comprehensive and lasting 

resolution to the conflict in northern Uganda. 

It further requires a strategy to support the disarmament of the 

Lord's Resistance Army, and support for humanitarian efforts and 

recovery and reconstruction in areas of the Democratic Republic of 

Congo, Southern Sudan and the Central African Republic affected 

by Lord's Resistance AnDy activity. 

And it calls on the President to support efforts by the people of 

northern Uganda and the Government of Uganda to prumote transitional justice and reconciliation on both local and national levels. 

It should be noted that this bill does not include any eaonarks. 

I now yield back my time, and I turn to the ranking Republican 

member, Ileana Ros-Lehtinen, for her opening statement. 

Ms. ROB-LEHTINEN. Thank you so much, Mr. Chaionan. It is a pleasure to work with you and for our staff to work together in a bipartisan manner in a very open process to bring these bills to our committee again, so I thank you, Mr. Chairman, and I thank your 

most excellent staff. 

I support the en bloc consideration of the legislative items before us. Let me begin by applauding the years of work by our colleague, 

Congressman Chris Smith uf New Jersey, in making the International Megan's Law a reality. Chris is a tenacious fighter for and a defender of the most vulnerable of our population, and I am so very proud of the work that he has done. It has taken a long time, 

and this is a happy day. 

I was proud to be an original co-sponsor of its predecessor, H.R. 

1623, and also of this new text, which was the result of months of 

bipartisan negotiation that Mr. Smith had with the Judiciary Committee, with input from relevant Executive Branch agencies. 

The International Megan's Law is an important and long overdue 

instrument to help protect children from dangerous sexual offend- ers who use the anonymity afforded by international travel to hide 

their dangerous and dehumanizing exploitation. By requiring con- victed sexual offenders to report upcoming international travel and 

creating a nexus for communication between local, national and 
323 


75730.278

140 

international authorities, the International Megan's Law ",ill help 

curb international sex tourism by convicted predators. So thank 

you, Mr. Smith, for your work on this bill. 

I am also proud, Mr. Chairman, to be adding my name as a co- sponsor of the revised text of H.R. 4128, the Conflict Minerals 

Trade Act, which is being considered today. This important human 

rights legislation will help disrupt the illegal mineral trade that 

funds and fuels the bloody conflict in the Democratic Republic of 

the Congo. 

There are other measures being considered en bloc that, while 

not perfect, advance issues of great importance to our members and our Nation. I remain committed to seeing Senate bill S. 1067 en- acted into law as quickly as p08sible to help end the Lord's Resist- ance Anny's 23-year legacy of death and despondency in northern 

Uganda and the surruunding region. 

While I regret that the Senate failed to consider the earmark 

moraturium adopted by House Republicans despite repeated attempts to highlight this issue, I appreciate the cooperative efforts 

to make clear that the bill before us today does not contain an ear- mark in order to help facilitate the progress of this important 

human rights measure as well. 

Another bill, H.R. 5139, considered en bloc will allow the President to extend International Organizations Immunity Act protection to the Office of High Representative, the High Representative 

in Bosnia and the International Civilian Office in Kosovo. American personnel who work for those offices deserve the same protection against politically motivated nuisance lawsuits that are en- joyed by more than 80 other international organizations covered by 

the Act. 

While we support the agreed upon text, Mr. Chairman, I would 

like to underscore our concerns about the State Department's rush 

to secure the authorities in this bill while failing to respond in a timely manner to inquiries made on specific provisions, background 

and the need for this legislation. The Department needs to be 

placed on notice that the Congress, and specifically this committee, 

will not continue to come to the Department's rescue at the last 

minute, when approached by the Department with a request for a fix on a particular issue or authority. 

This committee expects the Dcpartment to come into compliance 

with its statutory obligations under a number of U.S. laws, including the Iran, North Korea and Syria Nonproliferation Act 

(INKSNA) before any further requests such as H.R. 5189 are made 

of this committee. So please come forward with the repeated re- quest that we have made for information about INKSNA before 

coming up for further requests. 

With that, Mr. Chairman, I thank you for the time and look forward to the continued markup. 

Chairman BERMA-'J. The gentlelady yields back the balance of her 

time, and before I recognize the gentleman from New Jersey, I just 

will yield to myself to express the same concern expressed by the 

ranking member regarding the difficulty of getting the State Departmcnt to respond. 

The need for this legislation is coming not from the State Department, but from the people who work in those organizations. They 
324 


75730.279

141 

have a clear and compelling case, and the State Department was very slow to respond on a variety of the legal issues. In fact, it 

wasn't until very recently that we got the responses we had been 

tr};ng to get for a long time. 

At this point I am pleased to recognize the chairman of the Afri- ca Subcommittee, the gentleman from New Jersey, Mr. Payne, who 

has spent a great deal of time on at least two of these measures that are before us in this en bloc motion. 

Mr. PAYNE. Thank you very much, Mr. Chainnan and ranking 

member. Let me begin by offering an amendment in the nature of a substitute to H.R. 4128. 

Chairman BERMAt'f. Would the gentleman yield? 

Mr. PAYNE. Yes. 

Chairman BERMA.'f. We have already put that in as the base text 

for this. 

Mr. PAYNE. Oh, great. 

Chairman BERMAN. So it is the bill with that amendment in the 

nature of a substitute that is now before us. Mr. PAYNE. Thank you very much. Thanks for that clarification. 

J certainly would like, as I mentioned, to thank the chairman 

and the ranking member and the full committee staff on both sides 

of the aisle for working ",,;th me and my staff on this measure, the 

conflict minerals bill. I would also especially like to thank Mr. 

McDermott from the Ways and Means Committee for a strong interest and in the work of his staff as we work together on this bill. 

The Democratic Republic of Congo, the DRC, has been in political 

turmoil for decades. In the early 1900s, the region was King 

Leopold's playground. In the 1960s, a nationalist movement led by 

Patrice Lumumba won Parliamentary elections in the Congo. 

Lumumba was considered a threat as a new leader in Africa and was later assassinated by Belgium troops, at that time supported 

by the United States Government. 

In May 1997, the Alliance of the Democratic Forces for the Liberation of Congo Zaire, the AFDL, with the support of Rwanda and 

Uganda, marched into Kinshasa and ousted long-time dictator 

Mobutu Sese Seko. By August 1998, conflict erupted between 

Kabila and the Congolese forces supported by Rwanda. Angola, Namibia and Zimbabwe joined the fighting in support of Kabila. The 

Second Congolese War, often referred to as the African World War, 

contributed to displacement of many civilians, the destruction of 

towns and the death of millions. 

Much progress has been made over the past. several years in 

moving the DRC from political instability and ch;l war to relative 

stability and democratic rule. However, Eastern Congo remains 

marrcd by civil strife, and conflict minerals have been the source of much of the devastating violence in the region. 

Although the government in Kinshasa has attempted to control 

the region, there is, for example, no direct road from the capital of 

Kinshasa to the eastern region of the country, therefore creating 

very, very difficult transportation problems and therefore making 

governance much more difficult. 

The Conflict Minerals Trade Act promotes peace and security in 

the eastern region of the Democratic Republic of Congo by requiring the following: One, that the State Department create a map of 
325 


75730.280

142 

the DRC showing mines and areas that are under the control of 

militant groups involved in human rights violations; 

That the Department of Commerce publishes a potential conflict 

goods list, products that may contain conflict minerals, and a list 

of international auditors who are approved to do audits of processing facilities to determine if conflict materials have been processed there in tha t area; 

Three, that products containing conflict material from facilities 

that have not been audited may not be imported into the United 

States of America; and, four, the U.S. and other partner nations 

help build capacity or the Congolese Government. 

The bill, while it will not change the situation in the DRC over- night, is a strong effort to build transparency in the mining sector. 

Our aim is to help bring about an end to the suffering of the people 

of Eastern Congo. As has been mentioned, T am offering this 

amendment in the nature of a substitute today to deal with some of the finer details of the bill. 

Let me just say that I have been to the Eastern Congo on at 

least five occasions, have during the conflict time met with some of the warlords when they were head of militias, Bimba and 

Robetta. We have seen much progress made from those days to the 

present. However, there are still problems. 

We have this bill, which follows a similar bill that I urged and 

pushed and we introduced years ago on conflict diamonds where 

the Kimberley Process now processes diamonds, and if they are not 

certified then those diamonds may not be sold on the marketplace 

and so we are expecting this particular bill to have the same result as it relates to tin and coltan and other valuable minerals that go 

into the processing. 

And so I would like to once again appreciate the support of 

Chairman Berman and Ranking Member Ros-Lehtinen. They con- tributed to the provisions in the bill. We worked closely with them, 

and the bill will ensure that we provide a framework to assist the 

GtJvernment of the DRC. 

On a number of occasions I have discussed this with President 

Kabila, my five or six meetings with him during the past 7 or 8 

years, and we hope that this will help him in trying to bring under 

control that eastern region of this country. So I urge the members 

to support this amendment, H.R. 4128, and look forward to moving 

this bill to the Floor. 

Secondly, I would just like to briefly urge members to support S. 

1067, the Lord's Resistance Army's Disarmament in Northern 

Uganda Recovery Act of 2009. This bill seeks to bring an end to 

the more than 20 years of terror propagated by the Lord's Resist- ance Army, known as the LRA, in northern Uganda. 

The bill calls for an interagency strategy to stop the LRA's reign 

of terror which has spread to neighboring DRC, South Sudan and 

the Central African Republic and to provide critical support to the 

innocent people, particularly the children whose lives have been 

devastated by Joseph Kony and those who support him. 

Mr. Chairman, as you know, I had reservations about one section 

of the bill which says we should restriet assistance to the Government of Uganda if certain steps are not taken. I would like to say 

for the record the Government of Uganda has made significant ef-
326 


75730.281

143 

forts to address the havoc wrecked by the LRA, and they have done a tremendous amount in trying to bring this under control. 

But in the interest of moving the bill forward I agree to go ahead 

with the Senate version, but I would like to thank the chairman 

and Representative McGovern for working with me on alternative 

language to the House bilL I do support the Senate bill. 

However, as I have mentioned, to hold punitive measures against 

a government who is trying to also deal with this situation. They 

have even, as you may recall, had the U.N. agree to have amnesty 

for Kony, which many of us thought was a horrible thing to do for 

such a terrible criminal. 

However, if it would end the problem we went along with it, but 

Kony refused to go along with that and the ICC still has the indictment out for him. So I would be reluctant to penalize the Government of Uganda because of Kony, and that is what it says in the 

bill, but hopefully we can work on that to have that provision altered. 

Finally, I just want to commend my colleague from New ,Jersey, 

Mr. Smith, and strongly urge the support of H.R. 5138, the International Megan's Law of 2010, which protects children from sexual 

exploitation by establishing an advance reporting requirement for 

registered sex offenders traveling internationally and provides a 

mechanism for notification and destination countries for traveling 

sex offenders who pose a risk to children. I certainly commend Congressman Smith for his leadership on the bill and Mr. Berman and 

Ms. Ros-Lehtinen for moving this forward. 

As you know, Megan's Law, which was first passed in our home 

state of New Jersey in 1994 and later adopted by Congress in 1996, 

protects children from sex exploitation through community notification by identifying the whereabouts of sex offenders. International 

Megan's Law will protect children by preventing in some circumstances and monitoring in other cases, sex offenders who pose a risk of committing a sex offense against a minor while traveling 

abroad. 

The United States has a moral obligation to strengthen international cooperation against sexual exploitation of a minor and 

must lead the global community in an effort to save potential children, child victims, by notifying other countries of U.S. sex offend- ers who pose a high risk of exploiting children. I strongly urge my 

colleagues to support this legislation. It will protect all children, 

both nationally and internationally, from sex offenders and sexual 

exploitation. 

With that, Mr. Chairman, thank you for the time. I yield back. 

Chairman BERMAN. The gentleman yields back, and now to the 

other gentleman from New Jersey, Mr. Smith, for 5 minutes. 

Mr. SMITH. Mr. Chairman, I move to strike the last word, and 

I want to thank you--

Chairman BERM.""N. The gentleman is recognized for 5 minutes. 

Mr. SMITH [continuing]. For bringing before this committee all of 

these bills, but in particular the International Megan's Law, H.R. 

5138, which as you and others have pointed out, establishes a 

model framework for intergovernmental notifications when a dangerous child sex offender travels internationally. 
327 


75730.282

144 

International Megan's Law works synergistically with our efforts 

to combat buman trafficking, in this case by providing information 

about high risk sex offenders, child sex offenders. These are peoplc 

who have been convicted, who unfortunately, today, we have every reason to believe as thc evidence is overwhelming, travel abroad in 

order to exploit children. This legislation will work in a hand and 

glove manner with our already enacted Trafficking Victims Protection Act and other similar pieces of legislation. 

I do want to thank you, Mr. Chairman, and Ileana Ros-Lehtinen 

for your leadership on this bill. I want to thank Don Payne, the 

prime co-sponsor, for his work on this. I deeply appreciate it. As 

he correctly pointed out, the Intenlational Megan's Law follows the 

Megan's Law, which passed in New ,Jersey back in the early 1990s. 

Megan Kanka was a little girl, a 7-year-old girl, who actually 

lived in my home town. She was severely sexually assaulted and 

then brutally murdered by a convicted pedophile who had already 

spent time, more than a dozen years, in prison. He lived across the 

street. Nobody knew his background. 

He invited her into his home. He said, "Come in and see my 

puppy." He had a little dog. And then he brutally raped and mur- dered her and nobody knew. Nobody knew who this person was. That led to enactment in New ,Jersey and then throughout all 50 

states of the Megan's Law, which has had the ability to deter. 

Knowledgfl is power to deter, and now we are trying to extend that 

internationally when people go on these sex tourism efforts to ex- ploit children. 

I especially want to thank Maureen and Richard Kanka, who 

founded the Kanka Foundation, Megan's legacy. They have taken a horrific tragedy and have become national and now international 

proponents of Megan's Law as a way of trying to mitigate these 

horrific crimes. 

Mr. Chairman, despite the fad that 137 countries are party to 

tile optional protocol to the Convention on the Rights of the Child on the sale of children, child prostitution and child pornography 

abound, including in the United States. Little is being done internationally to comply with the obligation to prevent these acts in 

the context of tile horrific phenomena of child sex tourism. 

As evidenced by the troubling information in the State Department's Annual Trafficking in Persons Report, child sex tourism is a serious and widespread problem. Congress has passed legislation 

to bring to justice those Americans who are caught sexually exploiting children abroad, but we have yet to institute measures that will 

protect children from suffering this exploitation in the first place 

and its lifelong consequences. 

H.R. 5138 would implement one measure that is readily apparent: To identify and notifY foreign governments of international 

travel by known dangerous sex child offenders. The move to such a formalized agreement is exemplified in a case in April 2008. A 

lifetime registered sex offender from the U.K. traveled to the U.S. 

with the intention of living with a woman he had communicated 

with on the internet and her young daughter. It was only after an alert of Interpol London that U.S. officials learned about the criminal history of this man and refused to allow him to enter the coun- try. 
328 


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145 

There have been instances where ICE officials most recently in 

California learned of a group of men who were going to travel to 

South Korea, all of them sex offenders, all of them with grave MOs as to what they probably intended to do in South Korea. We noti· 

fied South Korea. They didn't grant a visa and they were not allowed to commit what we believe would have been crimes in South 

Korea against children. 

U.S. Immigration and Customs Enforcement, together with other 

U.S. and foreign law enforcement agencies, are making a sincere, 

but occasional, effort to share information. Ii is all being done on 

an ad hoc basis through Interpol and other available means regarding traveling child sex offenders. A legal structure is needed to systematize and coordinate these detection and notification efforts. 

The International Megan's Law would provide this legal siructure. It establishes a mechanism for U.S. law enforcement agencies 

to identify child sex offenders who pose a danger to children in a 

destination country and to notify that country about this child sex 

offender's iravel intentions. It also includes a sense of the Congress 

that the President can negotiate agreements--

Chairman BERMAN. The time of the gentleman has expired. 

Without objection, the gentleman has 2 additional minutes. 

Mr. SMITH. I appreciate that. Thank you, Mr. Chairman. 

It also includes a sense of Congress that the President, as you 

know, can negotiate agreements .... iih other governments to establish bilateral systems to receive and transmit notices about dangerous child sex offenders so that children in our own country will 

be better protected from known predators. 

The bill also establishes a registration requirement for U.S. child 

sex offenders when they are residing abroad. Currently there is no 

legal mechanism to identifY and track Americans convicted of child sex offenses overseas or to continue tracking the location and activities of a child sex offender if they leave the United States for 

more than 30 days. H.R. 5138 .... ill enable the U.S. diplomatic missions to notify U.S. law enforcement when a child sex offender who 

is required to register enters or re-enters the United States. 

I would ask that my full statement be made a part of the record. 

Chairman BERMAN. Without objection. 

Mr. SMITH. I would like to thank the many very dedicated staff on both sides of the aisle who worked so hard on this, beginning 

with Sheri Rickert. I would also like to thank Kristin Wells, who 

used to be with the committee who did yeoman's work on this, Janice Kaguyutan, Doug Anderson, Shanna Winters, Rick Kessler, who 

has been working with us very closely, Stephanie Gidigbi and a 

large group of people on the Judiciary Committee as well because we have been engaging in negotiations there as welL Thank you, 

Mr. Chairman. 

Chairman BERMAN. Will the gentleman yield? 

Mr. SMlTH. I will be happy to yield. 

Chairman BERMAN. I just want my colleagues on the (.'Ommittee 

to understand what you have done. You have gotten a bill like this 

through and with the approval and sign otT and the waiving of jurisdiction of the staff of the House Judiciary Committee. Not a minor achievement. 
329 


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146 

Mr. SMITH. Thank you very much, and I do appreciate it very 

much. 

Chairman BERMAN. The time of the gentleman has expired. Any 

member wish to be recognized to strike the last word or offer an amendment? The gentleman from Texas, Mr. Poe? 

Mr. POK Mr Chairman, I move to strike the last word. 

Chairman BERMAN. The gentleman is recognized for 5 minutes. 

Mr. POE. Thank you very much, Mr. Chairman. The International Megan's Law, H.R. 5138, is very important to our country. 

As founder and co-chair of the Victim's Rights Caucus, along with 

my friend, Mr. Costa, [rom California, I strongly urge support of 

H.R. 5138. 

Unfortunately, unlawful sex tourism is big international busi- ness. One million children enter the multi-billion-dollar commercial sex every year. One million kids. Overall there are 2 million children that are enslaved in the global commercial sex trade. 

These children are not statistics. They are real people. They are boys and girls who most often grow up in very poor families and 

broken homes from countries all over the world. They are lured 

away by recruiters who promise them jobs in another city. They are falsely imprisoned under the belief that they are going to go to some other country, have a job and send money back home to their 

families. 

I recently was in the Ukraine and Bulgaria discussing this issue, 

and in some ways it is almost epidemic in the former eastern European bloc how young women primarily are lured away and then 

many of them never seen again because they are put into the sex 

trade. 

When they leave home they are forced into prostitution, and 

studies show that child prostitutes serve between 2 and 30 clients a week, which means they serve anywhere between 100 and 1,500 

clients per year. I don't like calling them clients. I like calling them 

criminals, but that is what they are under the terminology. 

Those who resist or fail to earn enough money, the people who 

have procured them beat these children until they go back to work, 

bringing in this filthy lucre. If they don't die from an STD many 

of them fall into drug use, and without any hope or any other way 

many of them commit suicide. 

The most startling statistic, Mr. Chairman, is the fact that 

Americans make up 25 percent of the world's sex trade tourists. In 

other words, all of these going on in foreign countries, 25 percent 

of the clients are Americans. Many of them have gone abroad so that they can exploit children. That is to our shame. We need to 

deal with that issue. 

The International Megan's Law of 2010 is another tool to help 

free children and stop the child sex tourism. It makes it harder for 

Americans with a known history of the sex oiIEmder to sexually 

abuse children in another country because our laws have gotten 

stringent enough, these sex offenders who go to prison, and most 

of them statistically repeat once they leave the penitentiary. They 

decide to go to a foreign country where laws are different and they are less likely to be apprehended. 

It says that if you abuse children here in the United States, you 

have to tell the U.S. Government when and where you are going 
330 


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147 

so we can warn other countries this criminal is coming to your 

country and he is a known child molester. It also says that if a 

country knows of a sex offender in their country we want to know 

what their plans are if they corne to the United States. 

The point of this law is to shine light on an industry that thrives 

in the darkness, in the depths of depravity. If you have a known 

history of sexually abusing children in our Nation, no longer can 

you just get on an airplane, go abuse other children in another 

country and come back home. I hope that means that a sex offender will think twice before exploiting other kids in foreign nations. 

I hope this law puts the slimy pimps that prey on helpless children out of business, and this will help do that. They make profits 

by exploiting kids in the international sex tourism business. Hopefully children around the world, less of them will be caught in the 

sex trade and slavery. Children are victims of crime. Their freedom 

is stolen, their dignity, and their voices must be heard here in the 

United States and we must do what we can to help other kids 

throughout the world. 

Lastly, I want to point out that once a person, a child, usually 

young women, are put into this atmosphere they never recover. 

They never get out of it, and those that do have tremendous physical, emotional and mental problems because of the sex trade tourism that they have been kidnapped and put into. 

So I congratulate my friend from New Jersey for sponsoring this, 

and I totally support it. I yield back the remainder of my time. 

Chairman BERMAN. The time of the gentleman has expired. Who 

else seeks recognition? The gentlelady from Texas. For what purpose do you seek recognition? 

Ms. JACKSON LEE. To ask unanimous consent to speak for 5 minutes. 

Chairman BERMAN. Without objection. The gentlelady moves to 

strike the last word and is recognized for 5 minutes. 

Ms. JACKSON LEE. Mr. Chairman, I want to thank you for your 

leadership and that of the ranking member for collecting these very 

important initiatives going forward. I will speak briefly about each 

of the initiatives that I am supporting. 

The Conflict Minerals Trade Act has just really been galvanized 

by recent media stories about a high proftle model that may have 

been either the victim or engaged or associated with allegations of 

conflict diamonds as it relates to the trial of Charles Taylor. It goes on and on and on. And so I think this legislation is long overdue, 

and I am very glad that businesses such as LG Electronics and Motorola and advocacy groups such as Oxam and Genocide Intervention Network, Global Witness are in support of this. 

I received a letter from Corinna Gilfillan, who is with Global Witness, who indicated that the trade in conflict minerals by armed 

groups in the Eastern DRC has fueled horrific human rights 

abuses, including widespread killings of unarmed civilians, rape, 

torture, looting and Federal displacement of hundreds of thousands 

of people. 

Might I just say that I wish that we were as forceful, though I 

know that there was much opposition, during the Liberian War 
331 


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148 

where these conflict minerals are clearly in play. So I support this 

legislation and look forward to its passage. 

In addition, as the co-chair of the Congressional Caucus I am enthusiastically supporting H.R. 5138 and thank the co-sponsors and 

authors for the wisdom. I was a strong supporter and advocate of 

Megan's Law, and I believe that this is key in saving the lives of 

children. 

I am reminded of visits early on in my congressional career to 

Bangladesh and to several other countries. I don't want to in essence call the roll, but countries who hopefully have made great 

strides in meeting with some of the Bangladesh leaders. I know 

that they have. Thailand, for example, with the horrific story of a year or 2 ago of individuals, men, who have left their country to 

abuse children. 

This is intolerable and unacceptable, and if tbe Congress cannot 

stand before the major components of this bill, whicb is the establishment of a system for providing advance notice to foreign countries when a sex offender who poses a high risk is traveling and 

the imposition of a registration requirement for child of lenders 

from the United States who reside abroad, what can we do? 

So I am very grateful that we have put that legislation forward, 

and I do support it to avoid the result of HIV AIDS and other 

abuses, psychological trauma, disease, unwanted pregnancy that 

comes about through this horrific, horrible crime. 

H.R. 5139, extending immunities to the Office of the High Representative Act, is a technical fix of which I support, and then in 

listening to my colleague from New Jersey, Chairman Payne, I want to associate myself on S. 1067 with his comments, his broad 

comments, the Lord's Resistance Army Disarmament in Northern 

Uganda Recovery Act. 

We have spent time in Uganda, and certainly its President has 

had a long tenure. The rebel guerrilla army operating in Uganda 

and parts of Sudan, the LRA, has come to be knovln for its mass 

atrocities, and this seeking of disarmament to finally bring peace 

to this area is important. 

I do think we should take into consideration who is to blame, but 

it should be noted that in this battle injuries targeted government 

troops, more than 200,000 lives have been taken, and millions of 

civilians have been displaced from their homes. Twenty thousand 

children have been abducted, raped, maimed and killed. This is 

long overdue. This legislation authorizes the President to provide 

additional assistance to respond to the humanitarian needs. 

Let me also say that I support the Global Science Program for 

Security, Competitiveness and Diplomacy Act, H.R. 4801. Having 

been a 12-year member of the Science Committee, this is an excellent idea. 

And I thank you for accepting my amendment, which expands it to Subsaharan countries that may have been a little bit more economically able because, for example, South Mrica is a country that 

has an enormous range in science. Many of those individuals would 

be left out if they were not able to engage in this process of a scientific exchange. Science I believe is the work of the twenty-first 

century. We are in the twenty-first century, and we should leave 

no one out. 
332 


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149 

Mr. Chairman, I would like to ask for approval and passage of 

the bills that I have just commented on, and I thank the committee 

for yielding. I yield back. 

Chairman BERMAN. The time of the gentlelady has expired. 

Hearing no further amendments, I ask unanimous consent that 

the amendment in the nature of a substitute to H.R. 4128, the Conflict Minerals Trade Act, is considered adopted, and without objection I further ask unanimous consent to report en bloc the four 

bills favorably to the House, but as separate bills. 

H.R. 5138, International Megan's Law of 2010; H.R. 5139, Extending Immunities to the Office of the High Representative Act of 

2010; S. 1067, the Lord's Resistance Army Disarmament and 

Northern Uganda Recovery Act of 2009 will each be ordered reported without amendment. H.R. 4128, the Conflict Minerals Trade 

Act, will be ordered reported with an amendment in the nature of 

a substitute just adopted. 

I move that these four bills as described be reported favorably to 

the House. All those in favor say aye. 

[Chorus of ayes.l 

Chairman BERMAN. All opposed say uo. 

[Chorus of noes.] 

Chairman BERMAN. In the opinion of the chair, the ayes have it 

and the motion is agreed to without objection. The staff is authorized to make any technical and conforming changes. That takes 

care of four of the five bills. I thank the members for being here, 

and I ask you to stay for one more bill, which I really like because 

it is my bill. 

Pursuant to notice I call up the final bill, H.R. 4801, the Global 

Science Program for Security, Competitiveness and Diplomacy Act 

of 2010. 

[H.R. 4801 follows:] 
333 


75730.288

APPENDIX 

MATERIAL SUBMl'ITED FOR TilE HEARING RECORD 

(195) 
334 


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196 

Fl'LL COMMITTEE MARKUP NOTICE 

COMMITTEE ON FOREIGN AFFAIRS 

CS HOUSE OF REPRESENTATIVES 

WASHlNGTOI\, D.C. 20515-0128 

Howard L. Rennan (D~C<\), Chairman 

April 27, 2010 

TO: MEMBERS OF THE COMMITTEE ON FOIUnGN AFFAIRS 

You are respectfully requested to artend an OPE!\ markup of the Committee on ForeJ.b'll 

Affalrs, to be held in Room 2172 ortbe Rayburn House Office- Building (and availabltlivej via 

thf' WEBCAST link on the Committee wehll'ite at hrtp:/Iw\\--w .hcfa.bouse.gov) for the purpose of 

markup of the following legh.laticn: 

DATE: Wedncsda~, April 2R, 2010 

10:00 a.m. 

MARKOI' Of: HR. 4128, Conflict Minerals Trade Act: 

H.R. 4801, Global Science Program for Security, Competitiveness, and Diplomacy 

Act of201O, 

H R 5138, Internationol Megan's Law of 2010, 

HR. ) 139, Ex'~IIl1i[Jg uflmunitles 10 the Oflice of the High Representative and the 

InternationaJ Civilian Office in Kosovo Act 0[2010; and 

S. 1067, Lord's Resistance Army Disarmament and Northern Uganda Recovery Act 

01'2009 

By Direction of the Chairm~tn 

1h' (' .... " .... tt.. ... OI.FOfCl$'" ,·rjj,,,,~,oNt.r!'Q """'" 11]..»:!!JtN~ .... ~y ..... !>I,' rr> J"I~""" ~ rlh,]",d-<l""'J ~r:."'~ "n '" """d<1'p"' •. ~ <},,;;,"',""""",""" pl......, .. ,,}} JI»:::;:.<-'i·'1;!l ,>/, 

,~"" Ir>.n'I>J:.n,..,~< jq'< '" aoJ,',mMrJ'''''' ~\!' ... ,,,,,,"OJ''''''''' "'''~6~IG (iUbrrf""'J< "'FI, ~Jrd '" 'T"',",<7I """",,,,,,,,,,,I..,,.,.,, '" ~m!:J'"j I,"~;"ji,~ tAmJ.m,I!ry ~'.l>mlfffm~ 

,,""U"";~ f~ "1~'r"af"",./v,,,p·J mw ,I».,,,,.r 1;"""''''''11 dt'." ... J """, 1'<, d<,~cr,;J '" rl .. , c,,,,,,,,·!t,,'. 
335 


75730.290

197 

COMMITTEE ON FOREIGN AFFAIRS 

MINUTES OF FULL CO\1MITTEE HEARING 

Day __ -"W"c"dn",e"sd",.",y __ Date _ 04128119, ____ Room 2172 RJIOI3 

Sta.rtingTime ~1",O:",2,-1 ",A",.M".~ __ ~Ending Time ~1,-,1:-"142.A""".M,,,.~ _____ _ 

PTesidiOf! Member{s} 

Howard L. Bcnnan (CA). Chainnan 

CHECK ALL OF THE FOllOWING THAT APPU': 

Open Sesllion oJ 

i:ncutive (dosed) Session 

Televised " 

EledronicaUy Recorded (toped) 

Stenograpbic Rel:ord 

TITLE OF HEARING ur Bn.LS FOR MARKUP: (IncludE:: bill flumber(s) and tit/eM (1legi.'tlGllOll.) 

H.R. 4128, Conflict Minerals Trade Act; 

H.R. 4801, Global Science Program for Security, Competitiveness, and Diplomacy Act 0[2010; 

H.R. 5138, International Megan's law of 201 0; 

H.R. 5139, Extending lmmunities to the Office of tbe High Representative nnd the International 

Civilian Office ill Kosovo Act 0[2010; and 

S. 1067, Lord's Resistlillce Army Disarmament and Northern Uganda Recovery Act 0[2009. 

COMMITTEE MEI\IDERS PRESENT: 

See- attached 

NON-COMMfITEE MEMBERS PRESENT: 

mARING "\\~ESSES: Same as meeting notice ottached? Yes. No 

(If "no", please list belohl and include fIt/e, agency, departmenr, Dr organization) 

STATEMENTS FOR TIlE RECORD: (Ll" any statement< suhmittedJor the record.) 

nla 

ACTIONS TAKEN DURlNGTHE MARKUP: (AI",en copies of/egistation and amendmen«) 

'lhe following bins were reported favorably, by voice vote: 

U.R. 412K, Omt]ict Mineral, Trade Ac~ as amended (amendment in the nature of a substitute); 

n.R. 4801, Global Science Program fur Se<ourity, Campclitivcn=, and Diplomacy Act of201O, as 

amended (amendment in the nature ora substitute); 

H.R, 5138, Intemational Megan's Law onOIO; 

H.R. 5139, Extending ImmWlities to the Office of the High Repre,entative and the International 

Civilian Office in Ko,ovo Act onOIO; and 

S.1067, Lord's Resistance Army Disarmament and North.", Uganda Recovery Act of2009. 
336 


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198 

RECORDED YOTES TAKEN (FOR MARKUP): (Attach finai vole tally sheer listing each member.) 

Subject Yeas ~ rre~ent Not Voting 

T1~E SCnEDULIID TO RECO~VENE 

or 

TIMEADJOIJRNED 11:14 A.M. 
337 


75730.292

199 

Attendance - HCFA Full Committee MARKUP: 

Wednesday, April 28, 2010 @ lO:O() a.m. ,2172 RHOB 

Howard L. Bennan (CA) 

Gary Ackerman (NY) 

Donald Payne (NJ) 

Brad Sherman (CA) 

Eliot L. Engel (NY) 

Diane E. Watson (CA) 

Albio Sires (NJ) 

Gerald E. Connolly (VA) 

Michael E. McMahon ( NY) 

Gene Green (TX) 

Sheila Jackson-Lee (TX) 

Barbara Lee (CA) 

Shelley Berkley (NV) 

Joseph Crowley (NY) 

Brad Miller (NC) 

David Scott (GA) 

Jim Costa (CAl 

Keith Ellison lMN) 

Ileana Ros-Lehtinel1, (FL) 

Christopher H Smith (NI) 

Elton Gallegly (CA) 

Edward R. Royce (CA) 

Ioc Wilson eSC) 

Connie Ma(;k (FL) 

Jeff Fortenbeny (NE) 

Ted Poe (TX) 

Bob Inglis eSC) 

Gus Bilirakis (FL) 
338 


75730.293

200 

Wednesday. April 28. 2010 

Chairman Berman's opening remarks at markup of Conflict Minerals Trade 

Act, H.R. 4128; International Megan's law of 2010, H.R. 5138; Global 

Science Program for Security, Competitiveness, and Diplomacy Act of 

2010, H.R. 4801; among other bills 

For more than a decade. we have been hearing aboulthe lragic situalion in the Democratic 

Republic of the Congo: Mass killings 01 civ~ians. Rape used as a weapon 01 war. Child soldiem 

forced to the front lines. 

HR 412B. The Conflict Minerals Ael. IS one Important step towards ending a conflict in Congo that 

by some estimates tlas killed more than five million people. 

The bill establishes a mechanism 10 track. mlflerals rrined in the DRe that end up in products like 

cell phones anc laptops, and will help us cut off financing to some of planet's most brutal armed 

groups. 

In many respeels. this legislation builds on the work already begun by some American 

companies. H R. 4128 will make those efforts more effective by creating a level playing field for 

all companies that do business in the United States. 

The American people don't want to put money in the hands 01 brutal thugs in the DRC. and 

neither do American companies. For less than one cent per cell phone, this bill will allow 

American consumers to make responsible choices, and help put the waoords out of business. 

thank the author oftha bill. Me. McDermott, and my colleague Don Payne for all their hard work 

on these issues. and I encourage my colleagues to support it. 

I'd like to first commend Chris Smith for his hard work on H.R. 5136. the International Megan's 

Law of 2010, Many child sex offenders are travelfing intemationally or reside abroad because 

laws against sex acts with minors are weaker or rarely enforced in particular countries. 

International Megan's law would establish a system for providing advance notice to foreign 

countries when a convicted child sex offender travels to that country and imposes a registration 

requirement for Child sex offenders from the United States who reside abroad. 

WOIldwide, overlwo million children are sexually explOited each year through trafficking, 

prestrtutlon and child-sex tourism. We ell know the devastating emotional, physical and 

psychological effects on these child victims. We need to do atl we can to prevent these predators 

from circumventing U.S. laws to prey on children in foreign countries I encourage my coDeagues 

to support this bill. 

HR 5139, Extending Immun~ies to the Office of the High Representative and the Internalional 

Civilian Office In Kosovo Act of 2010, Is a technical fix to ensure legal protection for employees of 

both the Office of the High RepresentatiIJB (OHR) In Bosnia and Herzegovina and the 

Intemational Civilian Office (ICO) in Kosovo. 

The bi~, which adds the OHR and Ihe ICO to the International Organization Immun~ies Act, will 

ensure that Americans serving in these important Balkans-based organizations will be protected 

fro m politically motivated I~igation in the United States arising from their official activities. 

The United States must pretect its diplomats who seflle in intemational organizations, often al 

great pemonal nsk and sacrifice. from financially and personally ruinous litigation While also 

preserving ~s ability to use informal institutions in the conduct of foreign poliCY 
339 


75730.294

201 

Finally, we have S, 1067, the Lord's Resistance Army Disarmament and Northern Uganda 

Recovery Ad, of 2009, t'd like to thank the gentleman from Massachusetts, Me McGovem, for his 

hard worll on the House version of this bill. 

This legislation affirms the peliey of the United states to work with regional governments toward a 

comprehensive and lasting resolution to the confllc1 in northern Uganda 

It further requires a ,trategy to support the disarma'll.nl of the Lord's Resistance Army, and 

support (or humanitarian efforts and recovery and reconstruction in areas of the Democratic 

Republic of Congo, South ern Sudan, and the Central African Republic affected by LRA activity. 

And IT calls on the President to support efforts by the people of northem Uganda and the 

government of Uganda 10 promote transitional justice and reconciliation on both local and r.ational 

levels. 

It should be noted that this bill does not Include any earmarks. 

H.R.4801 bolsters U.S. science diplomacy programs by establishing a global science program to 

provide grants to U.S. and foreign scientists. The bill also authorizes the science envoys program 

in:roduced by President Obama in his Cairo speech lasl June. 

Science diplomacy -the use of scientists. engineers. and researchers to engage w~h their 

foreign counterparts is a proven means of engaging foreign populations, improving the image of 

the Uniled States, and fostenng cooperation with international partners. 

The amendment in the nature of a substitute addresses the concerns ofthe National Science 

Foundation and ctarifies the management strud,ure althe Global Science Progr~m. 
340 


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202 

COMMITTEE ON fOREIGN AFfAIRS 

U.S. HOUSE OF REPRESENT A TTVES 

WASHINGTON,D.C. 20515 

STATEMENT Of 

TUE UONORABLE EN! F.H. FALEOMAVAEGA 

CHAIRMAN 

before the 

COMMITTEE ON FOREIGN AFFAIRS 

Markup ofH.R. 4128, H.R. 4801, H.R. 5138, H.R. 5139 and S.1067 

MARCH 28, 2010 
341 


75730.296

203 

Mr. Chainnan, H.R. 4128, the Conflict Minerals Trade Act; H,R. 

4801, the Global Science Prob'Tam for Security, Competitiveness, and 

Diplomacy Act of201 0; H.R.5139, Extending Immunities to the Office of 

the High Representative and the International Civilian Oflice ill Kosovo Act 

of2010; H.R. 5138, the International Mcgan's Law onOIO; and S.1067, the 

Lord's Resistance Anny Disannament and Northern Uganda Rccovery Act 

of 2009 are all importarll pieces of legislation I support each of these bills 

and urge my colleagues to do so as well. 

The Conflict Minerals Trade Act is particularly important, and 

Congressman Payne, Chainnan of the Subcommittee on Africa and Global 

Health, deserves special thanks and commendation for his hard work Oil the 

bill. The Act will go a long way toward cutting funding to warring factions 

in the Democratic Republic of Congo. That conflict, which has ravaged 

Congo and lcd to more than five million deaths, is the most deadly since 

World War II. Despite this stark fact, the fighting in Congo remains largely 

unknown in this country. Mr. Chairman, it is time for the United States to 

take concrete action, and ILR. 4128 is an important step in this regard. 

2 
342 


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208 

CONGRESSWOMAN SHEILA JACKSON LEE 

Of TEXAS 

C{lInmiUee on Foreign Affairs 

Statement for Full Committee Markup of 

• RR. 4128, Contlicl Minerals Trade Act, as amended (amendment in the nature of 

a substitute), 

H R 4801, Global Science Program for Security, Competitiveness, and 

Diplomacy Act of 20 I 0, as amended (amendment j:1 the nature of a substitute); 

RR. 5138, [nlemational Megan's Law of 2010; 

H.R. 5139, Extending Immunities to the Office of the High Representative and 

the International Civilia1l Office in Kosovo Act of 2010, and 

S. 1057, Lord's Resistance Anny Disarmament and Northern Uganda Recovery 

Actof2009. 

10:00 am Wednesday, April 28, 2010 

2172 Rayburn House Omce Building 

Mr. Chairman, I ask for unanimous consent to strike the last word and to extend 

my remarks for tile record. Thank you Chairman Berman and ranking member RosLehtinen for YOUT leadership in convening us for today's important mark up of these five 

bills: HR. 4128-the Conflict Minerals Trade Act, H.R. 480 I - ·the Global Science 

Program for Security, CompetitivCrless, and Diplomacy Act of 201 0, H.R. 5138-the 

International Megan's Law of 2010, H.R. 5139 me Extending Immunities to the Office 

ofthc High Rcpresentative and the International Civilian Office in Kosovo Act 0[2010, 

HR 5 I 39-Extending Immunities to the Office of the High Representative Act of 2010, 

and S 1067. Lord's Resistance Army Disannamcnt and "lorthcrn Uganda Recovery Act 

of 2009. Each ofmese bills will make critical changes to our foreil,," policy. Colleeti,'ely, 
343 


75730.298

209 

they ",II change the lives ofmil1ions of people throughout the world I am proud to 

support ea~h ofthese bills. 

I espedally want to thank Chairman Berman for lncorporatlng my suggestion lnto 

the Global Science Program for Security, Competitiveness, and Diplomacy Act 00010. 

My language will expand the list of eligible eOllntries to include South Africa, Botswana, 

Gabon, 3..'1d other African countries that climb above the low-middle income rung as 

defined by the World Bank. This change is significant because it sends a message to the 

wealthier African countries that their relative success wilt not exclude them from 

American support 

These scientific exchanges will be vital to countries such as South Africa-a 

nation that serves as an economic, political, and academic anchor for the Southern Africa 

region, On February 1,2010, two South African scientists won the African Union's 

inaugural awards for excellence in science. Professor Diane Hildebrandt, co-director at 

the centre for optimization modeling and process synthesis at Johannesburg's University 

of Witwatersrand, was the winner in the basic science and innovation category. Patrick 

Eriksson, head of the geology department at the University or Pretoria, was the "inner in 

the earth and life sci enees category, 

As South Africa's President Jacob Zuma noted, "Science, technology and 

innovation fOlm indispensable tools for driving socio-eeonomic progress, . and is 

sustained by adequate and e[)mpetent human capitaL" Zumns comments were 

emblematic of the great promise of scientific innovation on the African eootinent, and 

this legislation will ensure that the United States remains an engaged partner in science 

and technology 

2 
344 


75730.299

210 

On a broader level, I support this Icgi~[alion because It rcaches out, in a concrete 

way, to vulnerable allies throughout the world As co-Chair of the Congressional Pakistan 

Callcus, I note ,hat this legislation Wll! greatly faCIlitate lhe science and technology 

exchanges between the Lnited States and Pakistan. Specifically, Pakistan has indicated to 

me that they have a strong working relationship wllh the National Science Foundation 

and are excited to work \\~th the National Science Foundation to implement thest:! 

exehanges belween our countries. When builcing partnerships with our friends and allies 

in the Middle East it is important to work through mutually-trusted institutions. This bill 

takes these concerns into consideration, and I am excited about the impact that it will 

have on my dis-tIlel, America, and countries throughout the world 

In regards to the ConOicl Minerals Trade Act, I am encouraged to see the wide 

array of organizations that support leveraging our mineral investments and interests to 

stop human rights abuses in the Democratic Republic of the Congo. These groups include 

businesses such as LG Ele.ctronic, and Motorola, and advocacy groups such as Oxfam, 

Genocide Intervention Network, and Global Witness, Yesterday, I received a letter of 

support from Corinna Gilfillan, the head of Global Witness' US, olliee. In her letter, Ms, 

Gilfil1an WTote: "The Irade ill connicl minerals by armed groups in the eastern 

Democratic Republic of Congo (DRC) has fuelled hcnific human rights abuses, 

including widespread killings ofunanncd civilians, rape, torture, looting and forced 

displacement of hundreds of thousands of people. The best way to eliminate fWlding for 

these anned groups is to cut orfthe market for the conflict minerals they control. Passage 

ofH.R. 4128 would be an import.nt step toward bringing this abollt 
345 


75730.300

211 

Ms. Gilfillan continues, "Leg;,lal;on in the US. alone will not end the conflict in 

eastern Congo, but this bill would provide a crucial step toward the creation of a practical 

and enforceable mcans to ensure that the trade in Congolese minerals contributes to peace 

rather than war." I agree wholeheart.edly with Ms. Gilfillan that this legislation is not a 

silver bullet However, there are few, if any, places on this earth where human sutTering 

is more acute than in the warzones of the ORe. Jf\ve can make even a modest dent in this 

suffer~ng, this legislation will be an overwhelming success. 

Regarding II.R. ~13g, International Megan's Law or 2010. 

As co-Chair "fthe Con~,,-essional Children's Caucus, I am in strong support of 

extending Meghan' s Law overseas to protect children throughout the world from child 

:;.ex offenders. This legislation "rill be an imponant 1001 in protecting children from 

l\.merican registered child sex offenders who pose a high risk of sexually ",,,plaiting 

children while trave1ing or residing o\'crseas. 

Since J994, Congress has taken bold steps to protect our children from sex 

offenders. Th""e efforts have resulted in a national registry and alert system. To date, 

however, information about sex offenders in the United States is llOt s~ared with other 

countries. H.R. 513S will improve our capacity to ~barc this infonnation with foreign 

countries information that tbese countries can use to pTut~ct their children. 

The bill consists of two major conlponcnts: (I) (he establishment of. system for 

providing advance notice to foreign countries when a child sex offender who poses a high 

risk to children is traveling to that country; and (2) the imposition of a registration 

requirement for child sex offenders from the United States who reside abroad 

4 
346 


75730.301

212 

The bill also provides additional discrctiOlltlry ULthOrity to the Secretary of Srace 

Lo restrict passports of dangerous child s.ex offenders~ a sense of Congress that foreign 

governments should nOli~v the United States when a U.S. citizen has committed a sex 

offense against a minor overseas, and a mandate for a speciaJ rep011 to Congress on 

intemationat mechanisms to protect children every"where from traveling !lex offenders. 

According to LNICEF, as many as two million children are subjected to 

prostitution in the global commercial sex trade. As the State Department" s 2009 

Trafficking in Persons Reprort notes "There can bc no exceptions and no cultural or 

socioeconomic rationalizations that prevent the rescue of cbildren from sexual servitude. 

Sex trafficking has devas.tating consequences for minors, 1nc1uding long-lasting physical 

and psychological trauma, disease (including HIVI AIDS), drug addiction, unwanted 

pregnancy~ malnulritjon~ social ostracism, and possible death," 

It is vital that we use every tool at our disposal to protect children abroad. This 

legislation will improve the capacity of countries to combat the sexual exploitation of 

minors_ 

Regarding H.R. 5139-"Extellding Immunities to the Office of the lligh 

Representative Act of 20 IO"-T welcome (his overdue technical fix to extend lega! 

protection to our diplomats serving in the Office ofthe High Repre,entative (OHR) in 

Bosnia and Herzegovina. Although our diplomats arc currently protected. they may be 

vulnerable to litigation once the mandate of the OHR ends, and there is n. This protection 

is the same protection provided to other CS diplomats working in international 

organizations, under the International Organizations and Immunities Act 
347 


75730.302

213 

Mr Chairman, I am also in support of S. l067-"The Lord's Resist.nce Army 

Disarmament and Northern Uganda Recovery Act of 2009." The Lord's Resistance 

Army, formed in 1987 is presently being led by Joseph Kony. As a rebel guerrilla army 

operating in Uganda and parts of Sudan, the LRA bas come to be known for its mass 

atrocities and brutality. Currently engaged in one of Africa's longest~running confiiet, 

the LRA continues to fight the Ugaml.n Government for over 18 year>. 

In the midst of this battle wl1h injuries targdcd Ilt govcmment Iroop5. more than 

200,000 lives have been taken and millions of civilians have been displaced from their 

homes. 20,000 children have been abducted, raped. maimed. and killed. Unimaginable 

me~ns have been llsed to alienate children from their families. Some children have been 

fOiced t.o kill their pa.rents and rela.tives to ensure their own SLrrviva1. 

This two decade of battle between the Lord's Resistance Army and the Ugandan 

government must L'fld nle people of Uganda, as human beings, deserve both peace and 

justice. The international community must work with the people of Uganda, the 

International Criminal CouJ1, and the Ugandan judiciary to ensure that peace and justice 

are guaranteed 

This legislation authorizes the President to provide addition.1 .ssistane<: to 

respond to the humanitari an needs of populations the Democratic Republic of Congo. 

soutlJern Sudan, and Central African Republic affected by LRA activity. The legislation 

also authorizes the President to support efrons by the people of northern Uganda Iilld the 

government or Uganda to promote transitional justice and reconciliation. 

6 
348 


75730.303

214 

Expresses the sense of Congress that rhe Secretary of State and the Admin; srrator 

of USAlD should work with Congress to increase future assistance to Uganda if the 

government of Uganda demonstrates a commitment to reconstruction in war-affected 

areas of north em Uganda: and Expresses the sense of C'Alngre.ss that the Secretary sho'..lld 

withhold non-humanitarian assistance to Uganda if the government of Uganda is not 

committed 10 reconstruction and reconciliation 111 the war-affected areas of northern 

Uganda and is not taking steps to ensure lhis process IIlOVl.:S fOIward in a transparent and 

accountable manner. 

Once again IvIL Chainnan, thank you for bringing these importmt bills up for 

vote in committee. 1 yield back the balance of my time 

o 7 
349 


75730.304

From Mr. McDermott for the Record 

U.S. House of Representatives 

Subcommittee on International Monetary Policy and Trade 

Hearing on "The Costs and Consequences of Dodd-Frank Section 1502: 

Impacts on America and the Congo" 

States that have passed Conflict Minerals laws based on 1502: 

• California 

• Maryland 

Cities with Passed Resolutions: 

• Pittsburgh, PA 

• St. Petersburg. FL 

Schools with Passed Resolutions on Investment Policy based on 1502: 

• University of Colorado-Boulder 

• Clark University 

• Duke University 

• Stanford University 

• Ohio University Honors Tutorial College 

• Pomona College 

• University of Pennsylvania 

• Westminster College 
350 


75730.305

Shipping now: conflict-free parts 

AYX Corp and Motorola Solutions Inc have announced the first 

shipment of tantalum products that the companies have 

validated as ~conflict-free," 

AVX is using tantaLie ore from 

US -9 overnment-8pprovod 

sources in the ORe {Democratic Republic of the Congo) 

In its components. 

The components are the 

result of SFH (Solutions for 

Hope), a cocperative effort between 

AVX and Motorola, wh;ch enables 

companies to 

meet the impending requirsr.lents 

from the Dodd· 

Frank Act, The 

act, signed into 

law in 2010, stipu!ates that US 

companies must 

disclose the USB 

o~ certain mineralS, Including tantalum, in their products and 

ensure that the ''Tlinorais do 

not 1ur.d illegally armed groups 

operating in the DRC. 

The supply-chain process, 

which A'v'X controls, is a closedpipe system, in vvtlich the ore, 

mined from governmentapproved sources, is traced 

from the mine to the customer, 

According to SFH, the minerais come from the Mal Sarid!, 

Klsengo, and Luba mines in the 

north8rnarea olthe ORe. MMR 

(Mining Mlnera!s Resources) 

SPRL has the mining rights 

and has Qontracted with a local 

52 EDN I APRIL 19, 2012 

mining CO-OPt which mines the 

minerals using a semimechanizeo process, 

After collecting the minerals, 

MMR weighs and logs them 

for traceability. The company 

then transfers them to an M MR 

depot in Katemle, ORC, for 

export. AVX takes ownership 

of the minorals at this point and 

transports them to a sme!ter, 

which turns them Into tantalum powder and ships them 

to NIX's facility in the Czech 

Republic for use in tantaium 

capacitors. 

To ensure validation of each 

step in the process, the compa-

~ies condUcted dLe dlHgence 

before launching the operationj 

including a review of the mine 

to determine its conflict-free 

status. After this status was 

confirmed, t~e mine bogan the 

traceability process Of bagging and tagging. Gregory 

Mthembu-Saltor, a consultant 

to the United Nations Group of 

Experts, conductod an independent audit of the operation 

to evaluate its conformance 

w,th guidoiines of the Office 

of EnVironmental Comphance 

and Duo Diligence. The findings Indicated that the mine 

and trade routes are conmctfree but highlighted areas for 

improvement to the minlngoperatlons systems, 

The mIning operations rave 

hired a consultant to help 

address the iSSues that the 

rsport identified, and AVX uses 

Alfred H Knight, 

an lndepcmdent 

organization, 

to conduct a 

number of analytical checks 

to validate the 

traceabilily 

mechanisms. 

Alfred H Knight 

takes samples 

at the mine; the 

depot at the 

point of export; 

the warehouse in 

Johannesburg, 

South Africa; and again at the 

smolter, 

AVX also aud·ts the smelte~ 

for compliance. The sfT1el1er 

can HSemibatch" treated materiais so that t.he company can 

track these materials through 

the smelting process to ensure 

that the ORe sends the con-

·met-free materials to AVX, 

Intel, Hewlett-Packard, Foxconn, and Nokia have Joined 

the SFH effort. 

- by Barbara Jorgensen, 

EBN Community Editor 

ThIs story was on'ginally posted 

by FBN: hffp:!lbiUylHemblY. 

Q 

HARD-DISK- ~ 

DRIVE-INDUSTRY g 

GROWTH HITS " 

RESET BUDON 

After suffering a year-c\er-

'yea' decline 014E':1, i': 2011, 

brgc!y due to floooinG if: 

:'actonec cau~erl by natut.:,1 

rJisas;errs, ll)e hard·dl~;'~ (l,we 

n;ustry Sh~),jid rec;o:ll 

yeol-Gw,r-year iJfl1t ~nipnxmt 

QrO'Nt:) of 7, r:v" if) 20:/ ar'i(] 

\1 CAGH {CGmpou'id ,snnual 

g-c:v.rth rate) c/ 0,6D10 lor 

20; 1 tr,r,x;gh 20W, accordinC] to n)~e3eh fln'n 

IDC t10~eG that, dt.8 :0 

the imbai,mce if1 sClpply 

?,(j(j demAf\(] that leSL,ited 

fror:-l :1'18 ft)'Jds in Tn(l 13'1(1. 

!',8rd ·disk -drivo rlri,::e~ hav8 

,ncreaeeo In rcrpr~ mOi~t! IS 

ID8 exouClS ve,lf ovcr·y~~~<f 

'13rd -drNO revenu(-,; g;ov,1h 

'0 OXC000 SP'pni1Jf)t orowth 

in 201?, a r;ltXed&ln1 for UIeild: ,stry, If the i:1Ch~:jtry It; S,!~;­

c8-:.;sful W,111 hyt>l'id sdd-stata 

hard dr\!8S, mVBnue covid 

ujJpro2,ch Sb-O b'\ll)n b'l 2016, 

t! '8 cOIY)piJn~' es>r !'i2IE.'S 

"h many re;:;::;ects. ~hc 

har(l-rjlG;';-df!V~ naustry has 

collsct'Vf/y hit :he 'reset' 

:;,)110;1, ,)oln Rydning, 

(f,{,>c:(uch vic~) pn:,qdBnt for 

h:'lr(j..{ilsk ::irvo:;; at HJC 

N0vetthH!eS~;, Rydnino 

[)BlievOs ~I '<.it tr'e j'~dustfY can 

rB[llt;:e inng tcr n revenue 

::r('.V'Jth orlty if :',0 !'emaininf) 

particir<';!"l.ts tm(1s~onn 

,'nto s\'Jrc:qe-deVJc9 diO 

stcrage·sc.,ltflIW S\Jpf:")iiers 

With c, rrniJG of products for 

;3 vi:ldety of m·a:kets 

-by Suz.anne Deffree 

[www.edn.com] 
351 


75730.306

ASADHQ 

Groupe Lotus 
352 


75730.307

CONTENTS 

EXECUTIVE SUMMARY 

RECOMMENDATIONS 

Intl'rnationnJ {~ommunity: 

Inadpquat.{' and Inrolwn'nt 

Th" Imperntivr of ;:.iSH 

on 

Co{)rdim\tf; "lnd Communicalt' 

Contldem'E,·Bllitding 

ANNEX I -OEeD statistics on spending in the DRC 

ACRONYMS 

ENDNOTES 

This report is produced 

by the following organizations: 

INTERNATIONAL ORGANIZATIONS 

JnternntionalFl'dcr<:ltion ±'or lIumlln Rights (FlUH) 

OE:~Z: lknmenical Ketwork for Ct'nt.ral At'riCD 

OpE'n Society T nitiaLiw for SonLlwrn /\frican (OSrSA) 

ACKNOWLEDGEMENTS 

4-5 

6-7 

14 

18 

20 

20-22 

CONGOLESE ORGANIZATIONS 

. G-ronrw Lo\ n', 

Takmg a Stand On Secunty Sector Reform 
353 


75730.308

EXECUTIVE SUMMARY 

1. The 2006 elections were a moment of great hope for the DRC, as the country and its people 

moved out of the shadow of one of the most destructive conflicts the world has known. The 

inrernational community has invested heavily in the years since. Official development assistance 

since the end of the post-war transition totals more than 814 billionl

, Exte.rnaJ funding makes 

up nearly half of the DRC's annunl budget2

• The UN peacekeupingmission, MONUSCO, costs 

more thEm $1 billion a year. The inwrnational financial institutions have buttressed the DRC's 

8uonomy, most importantly through writing off 1 812.3 billion debt and granting access to IMF 

loans. Trade deals, notably the one struck with China5

, push the aggregate figure up still further. 

2. Taking stock of progress as the DRC moves through its second post-war electoral cycle is 

sobering. Investmenthas not resulted in meaningful change in the lives of ordinary Congolese. 

The (Jountry is now in last place in the annual UNDP development rankings. l87th out of 187 

countries{i. Despite slight improvements, life €xpf'ctancy and child mortality are below average 

for the region. National income per capita is less than 50 cents a day:. The DRC ·will miss all of it.s 

Millennium Development Goals. 1.7 million Congolese are displaced~, a further 500.000 reJugees 

outside the country". There are worrying signs of renevt'ed conflict in the East. The investment of 

billions of dollars has had little impact on the avcrage Congolese citizen. 

3. The central cause of this suffering is continued insecurity. The Congolese government '$ inability 

to protect its people or control its tet'ritory undermines progress on everything else. An effective 

security sector - organized, resourced, trained and vetted - is essential to solving problems 

from displacement, recruitment of ehild soldiers and gender-based violenee, to economic 

gro,vth or the trade in conflict minerals. This is nota new finding. The imperative of developing 

effective military, police and judicial structures has i:>€'f'U repeah?dly 8mphasized. Yet, far from 

showing $ustained improvement, Congolese securityfol'ces continue posing a conside.rable 

threat to the civilian population rather than protecting themw• Thf' recent allegations of an 

army Colonel leading his t,roops to engage in widespI'ead rape and looting of villages neal' Fizi 

in 2011 underscores the fact that failed milit.arYrE'form can lead to human right." violationsl1 • 

The milit.ary - the Forces Armees de la Republique Democratique du Congo (FARDC) - has 

been aecused of widespI'€ad involvement in the most sf'rious human rights violations. Police 

corrupt,ion is endemic, and almost any form of judicial protection out of reaeh for the vast 

majori1.yl:~ _ 

4. The root of the failure to implement security sector rE'form (SSR) is a lack of polit:ic.al will at t.he 

highest. levels of the Congolese Government. Rat.her than articulating a vision for Congolese 

security and marshaling assistance to achieve it, the Government has instead encouraged 

divisions among t.he international community and allowed corrupt networks within the security 

services to flourish, stealing the resources intended to pay basic salaries or profiting from 

exploit.ation of natural resources. Unless this is changed, sustainable reform will be impossible. 

The investment made by Congo's partners could be wasted. and Congo's people will continue to 

suffer. 

5. The international communit.y also bears significant responsibility. The DRCg international 

partners have been polit.ically incoherent and poorly coordinated. Little has been spent on 

security sector reform, des-piu. its paramount, strategic importance - official development aid 

disbursed for conflict, peace rmd security totaled just S530 million between 2006 and 2010, 

roughly 6% ot't.otal aid excluding d~~bt relief. Spending directly on security system management 

and reform is even lower, 884.79 million over the same period, just over 1%1.1. A lack of political 

cohesion after 2006 undermined effective joint pressure on the Congolese governmentl1• Poor 

coordination resulted in piecen1eaI interventions driven by compet.ing short-term imperatives. 

The resulting failures have led many 1,0 give up on systemic reform altogether. 

Taking a Stand On Security Sector RelonT] 
354 


75730.309

6. This is unsustainable and unacceptable. The DRC's external partners, old and new, must take a 

stand on SSR. As the dust settles after the 2011 presidential elections, many of the DRC's partners 

are reassessing their programsl.,. The international community must take this opportunity W be 

more forceful in pressing the DRC government. w engage in reform. If international donors acted 

in concert, and f'ffectiwly capitalized on their political and economic in\'E'stJUent in the DRC, they 

could positively influence DRC government behavior. Their full wuight neL>ds to be brought to bear. 

7. The international comn1llnity therefore needs to create a new PDct with the Congolese 

government, one that puts in place clear conditions and benchmarks for progress on achieving 

army reform and minimizing harm tv the populat,ion in return for continued aSsiSh'1nCe and 

recognition. Thpse benchmarks must be based on positive efforts to achieve change. A strategic 

plan for military reform must be implemented, and a high·level body to coordinate on-going 

programs ,;et up. And steps must be taken to improve the protection of Congolese civilians, 

through minimizing human rights abuses carried out by the security forces, and prosecuting 

the worst offenders. 

8. This new pact must transcend traditional donors. China will need peace in the DRC for 

future genr.rations t.o reap the rewards from its investmp.nt. Sout,h Africa also has huge and 

growing economic intere;;ts in diP DRC. Angola has pressing issups of natioIk.1 security at 

stake. All need the stability that ('En only come from effective SSR. The internDt.ional financial 

institutions UFI) have rewarded t,he st.abilizaLion of Congo's macro-flconomic sit,uation with 

significant support"). 'They must recognize that continued growth will be dependent on new 

investment, which in turn demands security. Regional organizations, most importantly the 

Afri('.an Union (AU) and Soutllero Afri('.;:ln Development Community (SADC), need to play 

an active role in marshaling effectivf' preSSU1'e, and providing a framework for discussion. 

Critically, this pact must also include thf' Congolese population. Congolese civil socif'ty must 

have a key voice in defining a global vision for Congo's security, and connecting high·level 

reform processes with those that matter most, Congo's people. 

9. And the new pact must happen now. Flawed presidential elections have been complet.ed. The 

DRC's relations with its neighbors have improved significantly in recent years. Though security 

in the DRC is precarious, and there are worrying signs of a resurgence ot'violence in the East, 

challenges to the Congolese government from non-state armed actors have receded. In fact, the 

biggest threats perhaps now come from within the army itself. The government needs effective 

SSR. particularly of the military, to rebuild its reputation at home and abroad, an imperative 

reflected by President Kabila in his speech to the UN General Assembly in November 20111;. 

Since the elections there have been some promising signs of great€r receptivity on the part 

of the Congolese government'B. The opportunity to engage in an honest dialogue with the 

Government must not be missed. 

lO. Though the picture painted above is bleak, it is leavened with hope. TItere are signs that, with 

the right will and appropriate support, change is possible. Increased numbers of prosecutions 

for sexual violence (including of a senior officer1'l) and the reintegration of child soldiers show 

that justice can be done. FARDC formations trained by tll€ US, South Africa and Belgium 

have performed well in int€rvening in delicate domestic environmf'nts. A census of military 

personnel is neady complete. If these glimmers of hope are to be sust.ained and magnified, 

robust action is necessary. With the right political will in Kinshasa, endemic corruption can be 

tackled, salaries paid, and the worst abusers removed. Once the right conditions are in place, 

the long term and large scale work so clearly neces,;ary - reducing the size of bot.h police and 

military through retirement or new demobilization programs, vetting. reinforcing capacity and 

increasing the combat effectiveness of troops - can begin in earnest. 

Taklllg a Stand On Socunly 86,,10< RelOim 4 
355 


75730.310

RECOMMENDATIONS 

To the Congolese Covernment 

Recognize the urgent need for serious reform to create an effective, professional security 

,,;ector. especially the military. Overcome previous suspicions and engage positively with the 

intRrnational community in building a new coalition to assist with SSR efforts. Ensure that tile 

voices of the Congolese people are h£'ard in elaborating a new vision for security in the DRC. 

1. Renew political commitment to security sectOl" reform at the highest levels. Make military 

reform a top political priority of the new government. Remove from office those individuals 

that are obstructing SSR and take all necessary steps to achieve effective reform. 

2. Urgently develop and implement a global vision for security and defense in the DRC in 

collaboration with Parliament and Congolese civil society, and implement a strai:€gic action 

plan for achieving the vision of the FAROe set out in legislation, Request international 

expertise or assistance as appropriate, 

3. Positively engage with international partners, notably in a high·level international forum 

on security sector reform, including though allocating a senior co-Chair, and agree on 

t.ransparent. measurable benchmarks for progress, 

4. Collaborate with int.ernational partners in re-Iaunching a working-level cooperation body for 

militaxy reform, based in Kinshasa, including through nominating a high-level co-Chair, 

Agree on an international partner to provide appropriate technical and administrative 

support. 

5, Take urgent action to address the most pressing short.-term requirements for Ilmeliorating 

the performance of the s€(',urity sector, notably t.he progressive demilitarization of the East. 

effective action to end corruption in the security serrices, and bringing the worst military 

human rights abusers to justice, including through l'equesting appropl'iate international 

support to meet short-t.erm resource gaps. 

To till nRC's internatinnal 

Overcome the legacy offrustrat,ion and failure built up since 2006, and use political sp<lce 

opening up in Kinslwsa and the new government's need for support to generat.e new political 

will on security sector refonn. Provide high-level political commitment and coordination, 

including the appointment of sufficiently senior officials to provide momentum and leadership. 

Robust benchmarks and nuanced conditionality will be essential. Assistance must be sustained 

for the long term. and founded on a realistic understanding of what is possible. 

6. Re-energize efforts and coope.ration on security sector reform in the DRC through concerted 

pressure at the highest level for Congolese Government commitment to effective security 

sector reform. 

7. Collaborate in a broad-based coalition of international and regional actors engaged in the 

DRC, notably through the launch of a high·level forum on security sector reform in the DRC. 

8. Agree benchmarks for progress with the Congolese government, to include; progress on the 

human rights record of UtE' securit.y services, development of a global vision for seeurity and 

a strategic. reform plan for the milit.ary; and the establishment of an effer.tive coordinaLion 

body on militaryrefOl'm. Put in place a binding series of conditions for on-going political and 

programmatic support. 

\), Ensure that tho imperative of effective SSR. and the benchmarks and conditioml agreed at the 

high·level forum. are reflected in any new programming decisions or bilateral agreements. 

1O.Assist with short-term quick-win projects t.o rai~e confidence and open space for hroadl:"r 

reform, not.1bly progressive demilitarization of conflict·affected areas, anti-corruption 

activities and effective judicial action ag<linst human rights abusE'S committ.ed by the 

security forres, as requested by the Congole.se Government, and urge for long·term, 

sustained reform I:"fforts. 

T11krllg aStal<d 01< SecU!lty Sector Reform 
356 


75730.311

To the FK, Eli, UN, 

FrancC'. Belgium and the 

11. Catalyze diplomatic efforts to build a Dew coalition on SSR, though pro-active high lewl 

diplomat.ic contacts with kE?Y partners, notably Angola. South Africa, China, the AU and 

SADe, and t,heir inclusion in an e:xpanded Great Lakes Contact Group. 

To the L:N Council DndMONt:SCO 

12. Generat.e rf:'newed engagement on security sector reform thl'ough an urgent debate on the 

issue. Encourage, in parallel with the AU, the organization of a high-level forum on security 

sector reform in the DRC. 

13. Amend the mandate of MONUSCO to include assisting the DRC government on all aspects of 

SSR, including military reform. 

14. Increase the resources allocated to the MONUSCO SSR unit, notably in fulfilling its 

mandated task of collating information on existing and planned SSR programs. Remind all 

member states of their responsibility to share information. 

15. Extend the UN sanctions regime to include political and military leaders impeding effective 

SSR and dir€'Ct the group of experts t,o provide information about the identity of these 

individuals. 

16. Ensure that the UN ~)'stem has sufficient in-country resolll'ces to make a comprehensive 

assessment of the human rights performance of the Congolese s{)curity services. 

To the Ell 

17. Renew the mandates of EUSEC and EUPOL. and reflect the imperative for progress on SSR 

in the planned 2012 program review. Stand ready to offer t-l"chnical assist.1nce to the DRC in 

elaborating a strategic reform plan for the army. 

18. Extend targeted sanctions to individuals hindering effective SSR. 

To the Ali 

19. Encourage, in parallel with the UN, the organization of a high-level forum on security sector 

reform in the DRC 

20. Participaoo actively in the high-level forum and technical cooperation mechanism, including 

through agreE'ment of benchmarks and conditions. 

To the World Bunk and 1MF 

21. Expand the assessment critR.ria for on-going support to the DRC, notably access to the IMF 

loans, to include progress on security sector r",form and budget allocations to key priority 

mens, especially justice. 

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lni'ecurity: Achilles Hi'el 

1. Taking st,ork ofprogTeiOs in the ORC since 2006 is sob(~ring. 

The war has been over for a decDde. An elected government has 

served a full t.erm. Between 2006 and 2010, the ORC receIved 

place in UN development rankings. 187h ont of 187 countdes22 • 

Public discontentment it1 rife, and t,here are conceming signs 

of renewed violence in the East. A d€cade on from the end of a 

dPvastating war, and all that ha::;. been invested in the ORC risks 

going to wasre. The Congolesf' people desf'rve better. 

2. The proximare cause of this failure is simple. Congo's 

population continues to suffer, directly and indirectly, at the 

hands of men with guns. There are an estimated 1.7 million2l 

internally ditlplaced people in the DRC. mOiOt in the conflictaffecred Eastern provinces, driven from their homes by fear of 

a variety of armed groups - from the Lord'iO Resistancf' Army 

(LRA) in the North East, to 1'1ai Mal groups, bandits and Front 

Democratiqlle pour la Libention de Rwanda (FOLR) rebels 

further South - and at the mercy of malnutrition, ill-health and 

pervusiYf' fear. 

Neal'ly half a million are refugeE'S outside the country24, 

UNICEF estimates that thousands of children are still being 

used in various capacities by armed groups in ORC, including by 

thp. Congolese Arrnf<'. 

3. This failure is not just indicative of the inability of the 

'1. Abuse hy Congolf'se security forces extend:; beyond 

immediately conflict-affected zones. The abuse has been most 

visible in the brutal suppression of political protest or internal 

unrest, notably in the suppression of the Bundu dia Kongo 

group, the crushing ofMLC forces loyal to Jean-Pierre Bemba 

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in Kinshasa, and h()[lvy-handed responses to political protests 

around the 2011 elections. It has also been felt in the arbil:.rary 

arrest or killing of regime opponents, human rights activists 

and journalists, as well as day-to-day predation and lack of 

access to even-handed justice. 

G. This is not a new insight. The establishment of an effective 

security sector I'; the fundamental step to meeting all other 

objectives, from ending the humanitarian crisis, preventing 

human rights abuses, encouraging investment and growth, 

stopping the i:.rade in conflict minerals and preYenting 

regional tensions from escalating, Adequate security is widely 

acknowledged to be a development, economic and geostrategic 

imperative. The Congolese Government recognized its 

pivotal importance in the 'Governance Compact' it produced 

immediately after the 2006 electionsoo, repeated again by 

President Kabila in his address to the UN in November 201 )'11. 

All major bilateral and multilateral actors have engaged in a 

\vide variety of security sector reform programs, from capacity 

building in the justice system, to rebuilding key infrastructure, 

or training military and police. The UN considers SSR to be 

the process of enhancing effective and accountable security in 

a country and the transformation of ~se('urity institutions to 

make them more professional and more accountable"<!.". Secuxity 

institutions can include the armed forces, police, judiciary and 

others2,1. 

S. Yet despite this consensus. military reform efforts have failed, 

both during the transition and afterwards. They htwe failed for 

two primary reasons. The first is the lack of political will on the 

part of the Congolese government; the second inadequate and 

poorly coordinated assistance from the donor community. 

7. The Congolese Government has lacked the will to follow 

through with reforms of the security sector, notably 

the military. A brief look at the record of reform failure 

demonstr[ltes the government has not ·wanted a professional 

and effective military, as it would constitute a threat to the 

those around the Congolese President. The 

Congolese government stalled on senior appointments to key 

bodies, failed to agree a workable strategic blue-print for ref01'm 

or effectively follow up plans that were agreed'\ enabled or 

turned a blind eye to corruption, delayed the passing of essential 

legislation, and consistently undermined donor coordination. 

8. This was in part due to a lack of capacity and a very low 

baseline for reform. The integration of former belligerents 

into unified military and police structures dUl'ing the 

transition, a process known as 'brasssage', was partial and 

ineifective:'o. Parallel chains of command survived within the 

army and other security si:.ructures, and tens of thousands of 

combatants remained in non-state armed groups. Government 

administrative control was v.'"€ak, notably in the East.. The 

post-2006 administration immediately faced a variety of 

armed opponents:!';. Additionally, sensitivity to international 

interference on security issues was acute -the close supervision 

that the international community had exercised during the 

transition, embodied in CIAT37 and MONtIC, had been a source 

of considerable frustration, even humiliation, Memories of 

wartime occupation were vivid, by powers widely perceived 

- rightly or wrongly - to be acting on behalf of elements of 

the international community1~. The government is defensive 

of its autonomy, and wary of dealing collectively with the 

international community. 

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9. But thei:le i~su!?s are as much a result of continued fuilures of 

SSR as they are the cause - and they do not present a compelling 

reason io ignore the need for SSR. The fact remains thai the 

Congolese government coru;;istently failed to give sufficient 

political backing for serious change. Most importantly, it did not 

take swps to end corruption. ill-discipline and weak command 

structures undermining reform efforls in the security i:lector. 

Despite President Kabila's high-profile declaration of 'zero 

tolerance' for sexuRI violence and corruption in July 2009, 

not enough has changed on the ground. Support to just.ice, 

investigation and anti-corruption efforts are minimal and 

inadequate - the Justic!? Ministry was allocated just 0_1% of 

government-spending in 2011~0, and iti:l budget reportedly fell by 

47% betwe1?n 2007 and 2009·1D• Many in senior positions in the 

government and military continue to pmfit from corruption, 

either in raking off snlari!?i:l, taking kickbacks, or involvement in 

illegal mining, trade or protection rackets. 

10. No comprehensive national vision exists for defense and 

security policies, despite UN Security Council insistence and the 

emphasis placf'fl on SSR in the government iti:le1f. A bluepl'int 

for the Congolese military has been developed, after many false 

starts'!, and has finally be!?n given legal foundation with Lhe 

promulgation, in 2011, of much delayed legislation'u_ 

Ajoint committee on justice reform was formed in 2005, the 

'Comite Mb::te de la Justice', co-chaired by the Minister of 

Jm;tice and a senior diplomat, and a three year 'priority action 

plan' for the justice sector was launched in 2007. A coordination 

body for police reform, Uie 'Comit.€ de Suivi de la Reforme de 1a 

Police' was launched by the Minisu-y of Interior in 2008'w. 

11. Though thl?)' represent-positive steps forward, these bodies 

are reportedly of mixed effectiveness'l], suffer from poorlydefined roles and tensions between stakeholders. and are not 

part of a comprehensive strategy for security. The army reform 

plan has not been followed up with pradical planning for 

implementation'l;', remains theoretical and is routinely bypasspd 

or undermined in day-to-day decision-making. Changes to 

military st.ructurf'S such as the 'regimentation' pror..BBS of20n!", 

for instance, bear no relation to the vision enshrined in official 

military planning. The Presidential Guard and intelligence 

services have been systematically excluded from reform, and 

remain completely unaccountabl(\ Salaries for police and 

soldiers, despiw some limitf1d increllSes, remain inadequate and 

frequently unpaid4:. An ICC indid:ee. Bosco NLagunda. holds 

high rank in the militarylS. Senior positions remain unfilled. 

and formal command structures are routinely bypa:>sed. 

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International Com.mu n ity: 

Inadequate and Incohct'ent 

12, The second aspect key to understanding SSR efforts since 

2006 is the attitudes and actions of the international community. 

The international community has been frequently criticized for 

sustained improvements, let alone the transformation in 

attitudes and effectiveness required. 

1:3, The international community had been remarkably unifted 

up to 2006. Under the leadership of an activist UN mission and 

heavy-hitting SRSG, and coordinated through a body, CIAT, 

with legal standing unde.!' the transitional arrangements, 

the widely agreed goal of elections drove policy. But once the 

tl'ansition was completed, divisions began to appear. Some of 

the signatories to this report urged the creation of a successor 

organization to CIAT, but the Congolese government rejecred 

it as unacceptable. In the absence of a 'lead nation '[,1, and with 

the UN looking towards managing its departure, there was 

no overarching authority to harmonize police and, following 

elections, no single goal to work towards. International forums, 

notably the Great Lakes Contact Group, which had a broad 

membership;'2 during the transition, swiftly devolved to include 

only traditional donors, and policy coherence even within 

multilateral organizations such as the EU fractul'edoo. Pressure 

on the Congolese Government to sustain reform faltered. 

14. The suc.cess of the 2006 elections resulted in attention 

across much of the international community turning away 

fl'om the ORC. With the DRC redefined in many capitals as a 

'post-conflict' state, resources were reallocated to concentrate 

to long-term d€velopment. Despite. manifest needs. official 

development spending on security-related programs between 

2006 and 2010 was just 8530 million, roughly 6% of the totalM 

-this drops to just 1% for projects working on security system 

management and l'eform. This figure is alarmingly low given 

the fundamental importance of an effective security sector in 

protecting civilians, and in achieving all other development 

objectives. 

IS. And, far from being 'post-conflict', the ORC continued to 

sufff'..r from extremely serious bout.s of violence. Through the 

post-2006 period, successive spikes of conflict or regional tension 

left. Ule international community scrambling to address acute 

short-term political crises or humanitarian emergencies. There 

were demands for immediate action against armed groups such 

as tbe CNDP, FDLR or LRA - necessitating the mass deployment 

of ineffective and poorly trained FAROC units"". 

Political settlements with Congolese armed groups, notably the 

CNDp, resulted in the unplanned, ad hoc integration of tens of 

thousands of former rebels and indicted ·war criminals into the ranks 

of the Congolese army'o. Demobilization programs have unwittingly 

encouraged a churn of individuals from disal'mament to recruitment. 

All of these facrorn are incompatible with strategic reform. 

lG. Int.€rnational incoherence has perhaps been most acutely felt in 

relation to SSR, particul.,rly military reform. despite consistent caUs 

for harmonization"'. Technir.al coordination on the ground has been 

mixed. As seen above, committees bringing together donors, agencies 

and the Congolese government have been established on police and 

justice. TIley are functional, albeit with uncertain effectiveness. But 

no coordination body exists between the Congolese government 

and donors in relation to the military. worsened by the Congolese 

Government's infamous refusal to coordinate SSR attempts with its 

different partners. 

17. This is reflecl:€d by a failure of coordination between members of 

the int.€rnational community themselves. There haVE' been attempts 

at harmonization, including informal consultations betWl'8I1 

Defense Attaches in Kinshasa agreeing a local division oflabor, 

an Ambassadors Forum on SSR chaired by the UN. llnd regular 

diplomatic frameworks such as regular meetings ofEl! Heads of 

Mission. But while ad hoc communication may have avoided the nlO$t 

egregious duplication of effort, it ,,"'Us insufficient to generate fE'al 

coherence, or political momentum for reform. Many resist sharing the 

detail. or even the fact, of their programs. There is no consolidat.ed list 

of SSR-reluted interventions'''~, or a comprellensiw record ofbilat.€ral 

military programs and financing. Given the weakness of Congolese 

administrative capacity, it is likely that not even the Congolelle 

government had a coherent picture of SSR activities at anyone time. 

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18. The result has been a range of disconnected bilateral 

init.iatives on training, SE:'nsitization. infrast.ructure 

rehabilij,aj,ion or capacity building. There have been S0111(\ 

successes, notably in relation to justice and police:'~, and in the 

performance of some military units, though many were 8hortlived, due to a subsequent lack of support - accommodation, 

equipment and salaries - or the break-up of units. Some offers 

of training have not been taken up, with centers and inst.ructors 

standing idle. Thexe have been at,tempL,> to engage with 

struct.ural issues within the F'ARDC undertaken by MONUSCO"n 

and EUSEC, a mission of the European Union launched in 

2005. Involving small numbers of embedded Europesn officers, 

EUSEC has had some success in relat,ion to the 'chain of 

payments' _. ensuring salaries reach individual soldiers -Hnd 

in conducting a Cf'nsus of FARDC personnel, as \\'ell as in 

administrative reform('j. But while these initiatives have been 

valuable, they are not $ufficif'nt to bring about systemic change. 

19. This is by no means the exdusive responsibility of donors. 

As argued above, all coordination atwmpt.'> suffered from 

patchy or inadequate engagement and political obst.ruction by 

the Congolese authorities. This has been most acutely felt by 

the UN. The mo~t obvious crmdidate to carry out. the rolf' of 

in-country coordination is MONUSCO. But whilp it has a unit 

devoted to SSR, and has been mandated by the Security Council 

to act as coordinator and information hub since 2008. iihas 

not been sufficiently well resourced, and was syswmatically 

underminf'd by a Congolese government reluctant for t.he UN 

to play such a prominent role. MONUSCO essentially stopped 

facilitating collective discussion on SSR following the demise of 

the Ambassadors Forum, which has been moribund since 2010. It 

currently has no mandate to engage in military reform. 

Tho Shared Imperative of SSR 

20. In combinat.ion, these fadors have re"mlted in t.he view that 

the CongolesE:' security sector, and particularly it.s military, are 

simply 1,00 dysfunctional for reform to be achieved, The result 

has been an increasing detachment. on SSR. Support, for milit-'lry 

reform is now frequently subsumed under wider stabilization 

efforts\)~, or framed as a response to a specific threat, sueh as the 

US project to train units to tackle the LRA"J. Though numerous 

project,s are on-going to improve the justice syswm and build 

police capacity"!, and <lome progress ha$ bepn made, Hte most 

important challenge facing the country, namely systemic 

transformation of t.he military, has largely bef'n abandoned. 

Initiatives on large-scale FARDC training reduced to the point 

that only two bilateral pt'ograms were reported to be operational 

in January 2011')3. 

21. This is compounded by the vie,,,, that pushing the DRC 

government to lake serious action is too dangerous to attanptthat effective sanctions would generaoo a political backlash, disrupt 

bilateral rek"ltionships, and risk defections, mutiny or insurrection. 

This is cert-'linly the case in relation to entrenched corrupt. 

net,works and the impunity of t.he most. infamous 'war criminals. 

22. But this view must no longer be allowed to dominate. The 

status quo, of failed reform and popular discontent, presents 

far greater dangers. The most. significant risk of renewed 

conflict comes from within the Congolese security services itself, 

particularly the FARDC"'" and from the inability of the Congolese 

government to control it,s territory or protect its people01

• Reform 

of the security sector would no doubt bring short-term pain. but 

the long-term risk of inaction is far great.er. The human, political 

and financial cost, of the DRC again collapsing buck into war is 

difficult to fathom. 

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2;-( Yet these costs would be felt by all of the DRC's external 

partners. China struck a landmark deal with the DRC 

government in 2007, pxchanging a S6 billion invpstment in 

infrastructure - building roads, hospitals and universities 

- in return for long·term access to Congolese mineral 

resources, ex-tending decadesti~. Internal and rpgional 

stability will be vital for this deal to come to fruition, 

demanding an effective security sector. South African 

companies have invested heavily in th .. ORC, and peace in the 

ORC and across Central Africa will be vital for its long term 

reform and retraining. 

24. Regional organizations. most importantly the African 

Union (AU) and the Southern Africa Development Committe .. 

(SADC) have a pressing and legitimate intel'est in regional 

prosperity and stability. And t.he international financial 

institutions - frequently citro as the actors with the most 

significant. leverage and access in Kinshasa 11 - are committed 

to helping the DRC achieve sustained economic growth. 

The IMF is the only actor currently providing direct budget 

support to the ORC governmentO!. 

constraints on the possibilities for reform"s. 

reputation at home and abroad, and to improve the lot of the 

population, would be to undertake meaningful reform of the 

security apparatus. There have been some promising signs 

recently. For example, the Commissioner G-eneral of the National 

Police in March 2012 publicly asked the international community 

for assistance in completing the police reform process':!). 

27. The overriding need for meaningful SSR cannot be 

questioned. There is a broad synergy of interests across the 

international community and the DRC's neighbors, economic 

partners and population. The- timing is right. It will be a long 

and difficult road. but the first step to unlocking a more hopeful 

future for the populat.ion is simple. The Congolese government 

must take responsibility for serious, sustained and strategic 

reform, particularly of t.he military. backed by political 

commitment at the very highest levels. 

stand on serious security sector reform, both to engender 

political will and to support resulting Congolese reform 

processes. The Congolese government has received significant 

financial and diplomatic support. since the end of the war. The 

w-eight of these commitments must be brought. to hear. 

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A New Dca I on SSR 

Government on SSR. This need not involve the immediate 

allocation of significant new resources. In the absence of political 

will and t.he establishment of aversight structures, ::;ignificant IU'W 

programs could be cQunter-productiw, replacing functions that, 

need to be carried out. by government. Though investment, ",'ill 

certainly be necpssary. a new push on SSR need not, bE' expensive 

intheshortrt.erm. 

;30. Such a pact would see politkal backing and coordinatRd, 

targeted programmatic support e."{changro for Congolese 

leadership and robust benchmarks on progress t{lwards 

mutually agreed goals. It, would need to involvp all international 

actors engaged in the DRC, including the traditional donor 

community. ne\'/t'r internati{lnal actors including ChinA. and 

South Africa, the ORCs neighbors either bilaterally or through 

regional organizations (AU and SAOC), and the international 

financial inst,itutions. It would demand renewed commitment, 

coordination and communication, robust benchmarks, and 

quick-win confidence raising projects. 

confrontational attitude on the part of the international 

community could cause an unhelpful political backlash 

_. managing tensions will require astute and fleet-footed 

diplomacy, and a leading role to be played by Africanactors, But 

equally, no one should be under any illusion as to difficulties that 

will need to be faced - there is no magic bullet to security sector 

reform in the DRC. It needs sustained political commitment 

above all, There will be disagreements. with Congolese 

Government. and bet\VE'en elements of the international 

community. Such a push wlll need sustained, high-level political 

commitment, and must be backed by real conditions, 

Coordinatr and Commllnica{,,' 

;"32. Renewed coordination among all partners at both political 

and t.€chnicallevels is an essential pre·requisite, A oroad-based 

coalition of international partners will be vik'll, including 

African bilateral actors, regional organizations notably SADC 

and the African Union - the ORe's key economic partners, and 

traditional donors, This would eMble on-going information 

sharing and ensure complementarity of i::\Upport, as well as 

ensuring coherent and concerted messaging, This could 

initially be genel'3tOO by an expanded Great Lakes 'Contact 

Group', bringing together all players to agree to parameters of 

benchmarks and follow-up, This would need t,o be backed with 

active diplomacy by key donorH - the US, EU. UK, Francf' and 

Belgium - to bring in the most important African bilateral 

actors, China and multilateral organizations essential to 

managing political fall-out, in Kinshasa. 

Such a fID'um should launch a high-level political follow-up 

mechanism on SSR in the DRC, under the auspices of the AU 

and UN, and the joint leadership of the Congolese Gavernment, 

that would bring together all parties, including donors and 

multilateral actors. It is also -vit.al that it include representativE's 

of Congolese civil society, Successful reform will depend on till> 

input of the Congolese population, atallievels. and their views 

must be heard. The forum should meet quarterly, and provide 

for on-going oversight and a meclwnism for the resolution 

of disputf's or disagreement. It should also seek to address 

problems of policy incoherence, linking an on-going assessment 

of political conditions to decision making in multilateral bodies 

such as the IMF and World Bank. 

~14. Finally, a new working level cooperatioo mechanism 

on military reform should be launched in Kinshasa, again 

ro-charred by the Congolese gOV€l'nment. with support or a 

permanf'nt secretariat provided by MONUSCO, EUSEC or a 

mutually acceptable alt.ernative. It would ensure harmonization, 

communication and effective burden-sharing, It would also map 

on-going and planned programs and int€rventions, maintain 

comprehensive project database, and act as a communication 

hub bett\leen donors, government and civil society. 

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Jjpl1ClltxU1rking 

binding benchmarks. These would need to be discu:'ised and 

calibrated against a realistic assessment of what is achievable. 

They ",hould cen-rer on two key at·eas. The first key benchmark 

should be root.ed in the human rights performaru'e of the 

Congolese security services. This is a metric that would reflect 

whether soldiers or police are violating human rights, whether 

war criminals in the military have been arresred or removed 

(through vetting and effective military justice), and 1'1'Duld act. 

as a proxy for improved inreI'Ik11 discipline and the cohere nee of 

formal command su'uctures. Information is already collared by 

the UN JointHuman Rights Office, and could be complimenred 

by Congolese human rights. organizations, international NGOs 

or ad hoc bodies such as those authorized by UN sanctions 

bodies. Progress should be reported on a quarterly basis to the 

political follow-up mechanism. The MONUSCO mandat€ should 

provide for increased resources to monitor progress on SSR. 

36. The second should be the deve.lopmentand implementation 

of a practical path for FARDC reform. Legislation passed in 

2010 and promulgated by the Congolese President in 2011 

provides a framework, enshrining in law a long term vi",ion 

for the security sector. A practical plan for its achievement is 

urgently necessary. Appropriat€ t€chnical support should be 

made available via MONUSCO. EUSEC or an alternative. 

:37. These conditions must be backed by real consequences in 

the event of continued failure or obstruction. This would not 

m:-cessarily need to include hard conditionality on development 

spending or humanitarian aid, which would endanger the 

poorest and most vulnerable, and would ri$k a political backlash 

from Congolese actors that reduced rather than expanded the 

space available for reform. But there are many other avenues 

for international leverage, starting with sustained political and 

diplomatic pressure at the highest levels. These could include; 

- Explicit linkage of progressive MONUSCO draw-down with 

successful SSR, as measured by agreed Cfireria; 

, A sliding-scale of suspension of financing, projects, grants 

and aid disbursements, with excess funding transferred to 

supporting civil society, Parliamentary- oversight, humanitsrian 

needs or governance mechanisms; 

, A moratorium on non-essent.ial inward and out'ward visits by 

senior officials and ministers. and the hosting of large-scale 

conferences and events in the DRC-;; and 

. Extension of UN and EU targeted sanctions to military and 

political figures blocking security sector reform. 

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Confidence· Building 

3R Rather than looking immediately to long-term objectives, the 

high-level forum should, in the first, instance, seek to elaborat.(' 

achievable, realistic and high-impact short-term projects, to 

raise confidence and open space for reform. The first steps would 

need ro be focused on minimizing the harm done by elements of 

the Congolese security apparatus to Lhe civilians in their areas 

of deployment. and beginning to tackle the corruption and illdiscipline tlmt undermine all other efforts. These would again 

need to be discussed and agreed, but could take three initial 

forms - the progressive demilitarization of the East., action on 

corruption, and prosecution of those guilty of the most. serious 

human rights abuses. 

:19. Denlilitarization would bring mult.iple benefits. The East of the 

DRC, particularly the Kivus, has seen large-scale deployments of 

Congolese military-~. By moving t.roops to barracks. away from 

contact with civilians, it would remove one of the key sources 

of insecurity for the population. Having the majority of troops 

in barracks would allow salaries and support to be monitored, 

removing the need for income from illegal trade, predation or 

corruption. And it would allow structures to be mapped, training 

needs to be assessed, and dil:\cipline rebuilt. It, would thu:; both 

protect civilians and simultaneously open space for reform. It 

\vould need to be progressive and car('fully coru:;.idered, so that the 

most vulnerable wen;> not Jpft open to attack by non-staw armed 

groups, and MONUSCO would need to fill any resulting security 

vacuums. Necessary int.ernational support t.o the process would 

include provision of sufficient barracks, support to redeployed 

troops and dependents, and logistics. Such support eould be 

coordinared by the UN though MONUSCO and the ISSSS, ah-eady 

engaged in similar projects in conflict affected regions. 

<1. O. The second would be to take on the entrenched corrupt 

networks U18.t have undermined refonn. This would be a 

necessary step in punming demilitarization - without the 

expectation of support, soldier:; might refuse t,o deploy away 

from resource-rich areas, or simply prey on tlle population 

around barracki:i. It would also bring enormous long-term 

benefits in building formal command structures, discipline and 

capacity. TIlis would be the key litmus test of high-level political 

will in Kinshasa .- it is a truism in anti-corruption initiatives 

that enforcement mechanisms are ineffective in the absence 

of commitment at the highest levels. It would demand 

the clarification of senior command structures. 

the strengthening of central administrative control. 

and the appointment of capable personnel. 

'11. Third, significant steps should be taken to bring to justice 

those members of the security forces accused of t.he most serious 

human right;:; abuses, including those in the most :;enior ranks. 

Not only would this be of clear benefit in its own right, it would 

send a message that criminality on tile part of members of the 

military or police would no longer be tolerated, and be a vital 

step to changing Ule ethos of the security sen'ices. This would 

demand significant support t.o the capacity of Congolese military 

and civilian justice systems. 

42. These thI'f'E! goals interlock, and would constitute 11 

significant. test of Congolese political wilL Once they were 

achieved, and the steps outlined above taken, longer-Lerm 

necessities· such as reducing the number of personnel in both 

police and military, and conduding a thorough vetting of all 

personnel - could begin to be planned and implemented. 

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Learn from SUC("(~SR0S and failure's 

.j:). Finally. the international community should learn the 

lessons of the past.. The implementation of MONUSCO's 

conditionality policy -whereby peaCf'keepers do not work with 

Congolese personnel guilty of human rights abuses -shows that 

perpetrators can be identified and held to account~~ if made 

a priority. Improved rates of arrest and trial for sexillll and 

gf'nder·based violence (SGBV) in the Kivu provinces, notably 

thf' prosecution ofa Lieutenant Colonel for rape in 20118

<" show 

that justice is possible with the right combination of training, 

material support and political attention. That this landmark 

judgment was d€live.red by a ·mobile gender court' - a longstanding Congolese solution to delivedng just.ice in remote 

areas - df'IDonstralRs the importance of working tlexibly within 

Cong·olese realitif's. The court was suppol'ted by the Amf'rican 

Bar Association, using funding from an int.ernatiOIk'l.l NGO, and 

worked with the Congolf'se judicial system, local government, 

and civil society<'l. 

government, UN agenc.if's and 10(,,8,1 Congolese organizations. 

Children and adolescents who join armed groups whether 

through force or ignorance havE' a difficult time returning 

to their homes and communities if they are demobilized. 

Disarmflment, demobilization and reintegration programs 

supportE'd by UNICEF make a difference by reuniting some 

·with their families and communities and supporting ot.hers in 

vocational training programs~2. 

,15, The EUSEC project on reform of the Congolese military 

demonstrates that st.ructuralreform need not be expensiw if 

support is correct.ly targeted. EUSEC was launched in 2005 and 

f'mbpdded small numbers of EuropE'-8n officel's at senior levels 

in both headquarters and with individual units. Designed to 

offer strategic advice and tal'geIRd support, il:$ most sig-nificant 

initiatives have been working on the 'clmin of payments' -

ensuring salarieti reached individual ~oldiers - undertaking a 

census of !<"ARDC personnel, developing a 'logist.ics doctrine' 

for the FARDC, and conducting administrative t.raining. Thf' 

census started in 2006, and has been able to offer a far more 

rf'liable idea of numbf'I'S of serving soldiers than was previously 

avai1able~'), The strategic purpose of interventions matters more 

tlll1n theil' cost 

-16. The positive performance of military units trained by the 

US, Belgium and South Africa demonstrate that improvements in 

conduct and discipline are possible. Many police units trained for 

the 2006 elections were reported to have functioned welL But once 

elections were past, support dropped away. and Ul€' trained unil';. 

swiftly dE'.gmded, \Vitil equipment going missing, unit structures 

being broken up and discipline slipping'~!, Training and equipment 

are vital. but attention also needs to be sustained. 

TOki11g a Stond On Secunty Sector Reform 
367 


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ANNEX I -OECD statistics on spending in the DRC 

Fig L OEeD Development spending 2006-20JO'~') 

200G 2007 2008 2009 2010 

2175.442 

This gives a headline total ofmor€' than $13 billion in official 

development commitments to the DRC between 2006 and 2010, 

and more than $14 billion in di:,;bursements. This translaws to 

an overall financial commitment of $2.8 billion a year between 

2006 and 20lO. 

Totn.l 

14.132.0G4 

J3,19~}J 

However. debt relief for past projects causes a sharp spike 

in total disbursements in 2010 (see below for more detail on 

debt relief). Thus, though indicative of the level of financial 

support received by the DRC, it does not necessarily retled 

actual year-an-year resource flows. 

GEeD devdoprnent spenthng 2000~201O (excluding debt)'''' 

2007 2008 2009 21)10 

Disbursed 

Committed 

1156,323 2388.246 211.6.9~j 8,56439:~ 

118>3.808 :W99.'!,18 S939J4 2282.966 1.0,254.1351 

Non-debt. related development commitments t.ot.aled roughly 

S10.2 billion behveen 2006 and 2010, with disbursements at 

$8.5 billion, andan ave1'3ge commitment of just over S2 billion 

a year. This spending was overwhelmingly on project aid. 

Official disbursed budget support was just S474 million. 

Fig :1. OEeD development spending on 'ConnictJ 

2006 2007 2008 

99.99 B9,4 

L05 8.02 19.64 

Thus disbursed development spending on conflict peace and 

security between 2006 and 2010 is equivalent to :3.75% of the 

headline financial commitment to the DRC of S14 billion and on 

security syst€m management makes up 0.6%. If compared to 

total development spending excluding debt relief over the same 

budget~(' 

or 5.5%, largely from the IMF and EU in 2009 and 2010, as 

well as some 'emergen<..'Y· budget support to assist the DRC to 

achieve RIPe completion point, and pay t€achers' salaries, 

which was not necessarily included in OECD statistics~;. 

and Security' (disbursement onlyr'i 

ZOO~) 2010 

21.48 3D,GO 

period, t.he equivalent figures are 6.19% and 1% respectively. 

By comparison. disbursements on humanitarian aid Wf're 

$1.875 billion Ove,l' the same period, or 21.89% of total 

dewJopment spending, t'~'{cluding debt. 

20D6~~::O07 

1Om.242 

2007-2008 

1112.739 

2008-i1008 

.1187.G-7H 

2009·20[0 

L34G.5B4 

2010-2011 

6099 

Thf' tot.al operat.ing budget for the UN peacekeeping miBsion 

totaled S6.099 billion between July 2006 and July 2011. 

Tht' US paid 27.14% oip('accke€ping cost.s, or S1.47billiou, 

over the same period, the UK paid 8.15%, or $499 million, 

and France paid 7.55%, or $463 million. 

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368 


75730.323

Fig Top (t'n OEeD bilateral donors to DRC 2010 (disbursement, excluding debt}'!)) 

Toj,al 

UK l87.77 

164.60 

,Japan 80 

Sweden 

8p31n ;12 

28.:30 

Ctmada 

These figures do not include peacekeeping (see above), bilateral 

military assistance or contributions via multilateral agencies. 

They do not include assistance provided by non-OECD members. such as China, Angola, and South Africa, for which no 

comprehensive set of spending i1ata exists. 

The largest multilateral agencies in the DRC over this period 

were the EU and International Development Agency (World 

Bank). The IDA disbursed a total of S1.47 billion between 2006 

and 2010 (excluding debt relief), and the EU disbursed $1.2 

billion in the same period. 

Contact Group core nH'mh(~rs, 200f)~2010 

US 

970,544 

UK 

849.058 

France Belgium 

758.833 

Again, these figures do not include contributions to multilateral 

agencies, to peaceke<>ping. or to bilateral military programs. 

7 DEC debt relief 

Nominal debt 2010 

(SUS millions) 

Under 

enlutl1Ccd 

HlPe 

Undpl'MDRI 

Toh\l 

889.5 

:!.on 2012 

14.8 

Taking a Stand On Security Sector Reform 

18.9 

1330.1 

The Net.herland,"- Total 

t9H.155 2908.047 

Ut.S 
369 


75730.324

ACRONYMS 

AU: Afrkan Union (AU) 

CAR: C<>utrul Africflll R~pubJif'tCAR) 

DAC: D,'vPlopmf'ut A~giF;talle,' Committ()(, (DAC) 

ORC: Dnrnoeralie J{cputJlk of th,.. ConI''' (DHC) 

Eel<'; r;~t('mhl Crdit F(l,cility(t~CF) 

EU: EUl'0p"~n Unioll (EU) 

EUPOL: EU Polic(' 1E~~i()n in nRC (E(lPOL) 

F:-.iL: FOH'('S for :-.Iationall.ihHalion (Bur\llHliun F:-.lL) 

r.~l: Gr(lR~ ~a(i()nallnt'(lm,,(G~1) 

Jl!l'C, lbwily Ill1M)jed Poor C(Junhi,'s (HlPC) 

ICC: lnl('l'n(ltional Criminal Court (lCC) 

IDA: lnt"l'na!ic>llal O('vdopmont ASR()('illtion (IDA) 

!F!: Inu'rnali(>nal Fillllnd"l Instituti(>m (IF!) 

!FlU: Frpnch Instilujpo! InjPI'lJution<l] H('lntions ([FRl) 

1M!": 11lt(~rnatj()na! ]\'\om>tal'Y Fund (IMV) 

LRA: Lo)'d's Hosis(illW'! Army(LRA) 

MOR]: Th(' Mullilakl'al Ddl[ Rf'Udlnitilljiv(' (MORn 

MLC: :Mow'm()ut I'or th" Lilwratinn nftneCong,,(MLC) 

).IGO, ).I"n-Gowrnnwn.lld Orgilni'lntion ()!GO) 

ODA: Ofjkial D,'vf\lopUlent Aid (ODA) 

SADe: Southo\'n Mri,'Bn Dpv<'!iopm('nt Commllnity (."lADe) 

S(~llV: Sexual and Gemjpr-oasod Violpn('(> (SGBV) 

:-;}{S(;: Sp()(,lal j{"presontativ()of th" S"('l"et;ny·(1"llurnl (SHSG) 

SHR: S,"cllrity Sedor Reform(SSR) 

UK; lIn;t('(] Kingdom (UR) 

U!'l: linitl'd Nat;o]Js(lJ:'l) 

U:;o.;<:f)P; UnitlJd XationB O(>vek>pmpnf Programme (U)lnp) 

tJ).Ifl(;Jt tfnited Nations lligh C()rnmi~~i()n(']' foJ' H('fug<'()~ (UNH(;fi) 

U~lCEF, Unit I,d >latiun!l Childt'PH's Fund (UNICEF) 

liS: United Sblh'~{US) 

ENDNOTES 

l~ Thf'. DRC t<,~dwd N>mpldlOn pgini 'mdcr Ih W(>rl~ Ihnk Hll'C pr(>gtHIll '" .hm(' 21110 It 

1"'8 Iwd Mt, % t(>un J:l.W K~t<'))dc~l Cr~dH l'nciht.l's,nce 11)1)!). 

Taking ;1 Stand On seClinty Sector Reform 
370 


75730.325

A -\ojJ"1shc$ ]J1~n' wHsd,'v, lop<'d m oonjllncl\on wilh th~ V.I; 1':CSEC mls~ion m "'Iriy 

~()J1.h,t bs not bH'h impl,mm>t,'d 

60 Th,- .\jO:-:iUiC\) g:';1{ unlt W~~ hUnrh,.J ,n 2()(18 It haril,,,t \l.t"rrasofOdobH 20ll 

(htjp'/Jn>on\l~N n"lJ)lR~;bn~ orgi1)(-faul( ~"l\,,?tab,d -.'fl.!Jf<) 

Takll1g a SlaM 011 Security Sector Reform 
371 


75730.326

Taking <1 St.md On Security Deetor Reform 
372 


75730.327