March 20, 2017

European Parliament Moves Forward On Conflict Minerals Law As United States Considers Scaling Back

The European Parliament last week approved a law that will require most companies that import to prove that they do not use conflict minerals in their products. The final vote in the Parliament was 558-17. 

As MSCI’s partners at the National Association of Manufacturers have explained, the law would:

  • Require all but the smallest of EU importers of tin, tantalum, tungsten, and gold to conduct mandatory due diligence on their suppliers. The Commission estimates that more than 95 percent of all EU imports of the four minerals will be covered by the regulation, though an import exemption threshold has not yet been announced.
  • Will not require downstream companies, such as manufacturers, importers, and sellers of finished products, to conduct due diligence, though large EU firms will be encouraged to make voluntary disclosures and report on due diligence practices via a so-called transparency registry.
  • Apply to all conflict-affected and high-risk regions in the world, including, but not limited to, the Democratic Republic of the Congo.
  • Allow companies to become a “responsible importer” by declaring in writing to member state authorities that it follows the due diligence obligations. The Commission will publish a list of these importers.
  • Make EU member state authorities responsible for ensuring compliance by companies and determining penalties for noncompliance. The Commission will monitor member state oversight activities.

The European Commission will prepare a handbook with a non-exhaustive and non-binding set of guidelines. 

The final step for this new law is for it to be approved by the European Council. The European Commission said it expects that action to happen “shortly.” After that, the provision will be published and will take effect in January 2021. 

As MSCI members know, the United States currently has a similar law in place, but acting U.S. Securities and Exchange Commission (SEC) Chairman Michael Piwowar in February directed his staff to consider whether the SEC’s 2014 guidance on the provision is still appropriate, and whether relief is appropriate. The Trump administration also has indicated that it is open to getting rid of the conflict minerals rule, which was part of the 2010 Dodd Frank Wall Street reform bill. Click here to read more about MSCI’s efforts to eliminate this burdensome rule.