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May 24, 2015

European Parliament Adopts Mandatory Conflict Minerals Regime

Last week, members of the European Parliament voted to adopt a mandatory conflict minerals reporting regime for manufacturers. Europe had initially considered a voluntary system, but human rights groups pressured officials to adopt a plan similar to the one passed in the United States under the Dodd-Frank Wall Street reform bill and implemented last year by the U.S. Securities and Exchange Commission (SEC). Indeed, according to Voice of America, the plan adopted last week by the parliament “is modeled on the United States’ Dodd-Frank Act, under which U.S. companies must inform regulators if they use metals from [the Democratic Republic of Congo] or neighboring countries.” 

European Union Commissioner for International Trade Cecilia Malmstrom opposed the mandatory plan. She said, “We do run a high risk of further disrupting global supply chains and driving them away from Africa altogether. We also risk creating trade diversion resulting in prejudice against individual countries or even the whole continent and that would lead to plummeting prices for minerals from certain origins.” 

The parliament’s plan does not yet have the force of law: as a next step, individual member states will now review it. (The Guardian has more details on what it calls the “rocky road” toward approval.) 

If and when it takes effect, the new regime will affect hundreds of thousands of companies. In a press release the European Parliament said, “[T]he 880,000 potentially affected EU firms that use tin, tungsten, tantalum and gold in manufacturing consumer products will be obliged to provide information on the steps they take to identify and address risks in their supply chains for the minerals and metals concerned.” 

If the U.S.’s experience is instructive, fears about the mandatory regime are well-founded. As Connecting the Dots has noted before, the SEC’s regulation has imposed significant costs on U.S. companies while doing little to help, and possibly even harming, residents of the Democratic Republic of Congo. (Read about the Impact here in a Washington Post article from last November.)