Electronics companies in ‘Section 1502’ rebellion

US regulation on conflict minerals is under threat after companies’ criticisms increased the risk that a six-month delay in finalising the rules will be extended.

Provisions added to the Dodd-Frank act last year binds lawmakers to require companies to disclose their use of tantalum, tin, gold and tungsten from the Democratic Republic of the Congo (DRC) as part of their financial oversight.

Many US companies, and the US Chamber of Commerce, have attacked the Section 1502 ‘track and report’ proposals that will require them to submit audited annual reports to the Securities & Exchange Commission (SEC), outlining due diligence and a breakdown of products containing the minerals.

Company representatives at an SEC roundtable held to resolve the issue said the law is potentially over-reaching, restrictive and expensive to comply with.

General Electric said the law must “recognise the situation” of all companies that must comply as many “won’t get to the bottom of [their] products for a little bit of time”. Others, such as Kraft, said the law should not affect entire operations: “We had no idea this legislation was going to be covering companies like us. We are worldwide. We have 40,000 products.”

Other companies, such as Apple and Hewlett-Packard, say the rule has already prompted them to end sourcing from the DRC entirely.

Tom Quaadman, vice president of the chamber’s Center for Capital Markets Competitiveness, said compliance creates “nightmare, costly scenarios that make it difficult for companies to ensure an adequate supply of raw materials”.

The SEC faces both the threat of legal action – the SEC’s proxy access rule was overturned in a federal court this year – and intense political lobbying. But NGOs insist the SEC sticks to its guns, citing the human cost of the DRC minerals trade, which has funded armed groups in the DRC for a decade.

Global Witness, for example, says Section 1502 “has already had positive impacts, helping to end the Congolese army’s illegal control of the largest tin ore mine in the region and promoting mining sector reform by the Congolese government. While challenges remain, the law presents the best chance in over a decade to establish a clean minerals trade that contributes to development, rather than fuelling instability.”

The rule would make law what many manufacturers, such as Electronic Industry Citizenship Coalition members, are already working towards: tracing whether products contain conflict minerals.

The DRC has suffered a long and bloody civil war. It supplies 5% of the world’s tin and is among four central African countries that produce around 14% of the globe’s tantalum.