the planned eu conflict mineral regulation & its implications for your business

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The Planned EU Conflict Mineral Regulation & Its Implications for Your Business

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Today’s Moderator

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Jonathan HughesAssent ComplianceDirector, Strategic Relationships







Agenda

Introduction

Who, What, When, Why?

Importers

Conflict Mineral Landscape

Q&A

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INTRODUCTION

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Overview

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Today’s Panelists

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James Calder Assent ComplianceVice President, Compliance & Regulatory Programs







Feature PresentationPRESENTER, TITLE & COMPANY Feature Presentation

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Prevent the financing of armed groups and security forces in resource-rich areas responsible for human rights abuses which may include:

■ Child labor■ Sexual violence■ Disappearance of people■ Forced resettlement ■ Destruction of ritually or culturally significant sites

At the highest international level, UN Security Council Resolution 1952 (2010) specifically targeted the Democratic Republic of Congo (the DRC) and its neighbors in Central Africa calling for supply chain due diligence to be conducted.

Why the Law?







This Regulation, by controlling trade in minerals from conflict areas, is one of the ways of eliminating the financing of armed groups.

Why the Law?







History of the Law’s Creation

2014 June 2016 November 2016 December 2016 January 2017 March 16, 2017

The European Commission

issues the first proposed

regulation

Political agreement

and the first nine points

Trilogue negotiations completed

The Council of the EU

approves text

The European Parliament’s International

Trade Committee approves the text

European Parliament

overwhelmingly approves the

legislation

Next Step: Final approval and publication in the Official Journal of the European Union (ie. the law becomes official)

In its resolutions of October 7, 2010; of March 8, 2011; of July 5, 2011; and of February 26, 2014, the European Parliament called for the Union to legislate along the lines of the U.S. law on conflict minerals, Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.







An EU Regulation does not require national transposition to enter into force unlike an EU Directive

BUT

EU Member States will be responsible for enforcement within their national boundaries

Note: Think of the REACH Regulation for context

Important Note: It’s a Regulation







■ Enters into force 20 days after its publication, but the “compliance” date is January 1st, 2021

■ Many other activities to occur before the above date

When?

JANUARY

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List of Minerals (Part A) and Metals (Part B) in Annex I containing:■ Tin■ Tantalum■ Tungsten■ Gold

Includes byproducts of the above

What Is Covered by the Law?

■ Recycled metals out of scope ■ Does not apply to stocks where a

Union importer demonstrates that those stocks were created in the current form on a verifiable date prior to February 2013







In the form of a handbook, the Commission shall call upon external expertise that will provide an indicative, non-exhaustive, regularly updated list of conflict-affected and high-risk areas.

What Regions Are Covered?







All importers into the EU of minerals or metals containing or consisting of tin, tantalum, tungsten, or gold.

An importer is defined by reference to the EU Customs Code and includes any metals or minerals that are declared for free circulation in the EU.

The regulation does not apply to importers whose annual import volumes are below a certain threshold amount. The volume thresholds are set so that at least 95% of the total imported volumes into the EU of each metal and mineral will be subject to the regulation.

Who Is Covered?







Importers of minerals or metals shall comply with the supply chain due diligence obligations set out in this Regulation and shall keep documentation demonstrating their respective compliance with those obligations, including the results of the independent third-party audits.

Supply chain due diligence steps must be consistent with the OECD Guidance or another diligence scheme that may be approved by the Commission.

Will be able to leverage schemes which facilitate the due diligence obligations.

Importers & Due Diligence







a. adopt, and clearly communicate up-to-date policies to suppliers aligned with Annex II of OECD Due Diligence Guidance

b. assign responsibility to senior management and retain records for up to five years

c. include policies as legal mandates within supplier contracts

d. establish a grievance mechanisme. as regards minerals, operate a chain of custody or supply

chain traceability system with:i. description of the mineral, including its trade name

and type; ii. name and address of the supplier to the Union

importer; iii. country of origin of the minerals; iv. quantities and dates of extraction, if available,

expressed in volume or weight; v. detailed information for where minerals originate

from conflict-affected and high-risk areas

Importers & Management Systems

f. as regards metals, operate a chain of custody or supply chain traceability system with:

i. description of the metal, including its trade name and type; ii. name and address of the supplier to the Union importer; iii. name and address of the smelters and refiners in the supply

chain of the Union importer; iv. if available, records of the third-party audit reports of the

smelters and refinersv. if the records referred to in point (iv) are not available:

◆ countries of origin of the minerals in the supply chain of the smelters and refiners;

◆ where metals are based on minerals originating from conflict-affected and high-risk areas, additional information in accordance with the specific recommendations for downstream economic operators set out in that Guidance;

g. as regards byproducts, provide information supported by documentation as from the point of origin of those byproducts, namely the point where the byproduct is first separated from its primary mineral or metal falling outside the scope of this Regulation.

Importers of minerals or metals shall:







Must perform risk assessment based on the information acquired in the supply chain.

If an EU importer of minerals pursues risk mitigation efforts while continuing trade or temporarily suspending trade, it shall consult with suppliers and with the stakeholders concerned, including local and central government authorities, international or civil society organizations and affected third parties, and agree on a strategy for measurable risk mitigation in the risk management plan.

Importers & Risk Management

RISK MANAGEMEN

T







Importers must carry out audits by an independent third-party to capture the importers’ activities and systems to determine if they comply with the requirements of the regulation, and to provide recommendations for improvement.

The audit will not be required if all the smelters and refiners in their supply chains are recognized as “responsible” smelters and refiners by the Commission.

Importers & Audits







■ Must disclose third-party audits to the Member State Competent Authorities

■ Provide customers access to their due diligence efforts taking into consideration business confidentiality

■ Public statements/summaries of the above on internet updated on an annual basis

Importers & Disclosures

Disclosure







The Commission, with consultation to the OECD, will be able to recognize third-party due diligence schemes.

The Commission shall establish and keep up-to-date a register of recognized supply chain due diligence schemes. That register shall be made publicly available on the internet.

Schemes being evaluated:■ CFSI■ DMCC■ LBMA■ iTSCI■ RJC

Schemes







A list shall be drawn up taking into account global responsible smelters and refiners covered by supply chain due diligence schemes recognized by the Commission.

List of Responsible Smelters & Refiners







EU Rules Are One Prong of a Larger Initiative

U.S. Conflict Minerals

EU Conflict Minerals

EU Non-Financial Disclosure

Scope U.S. Public Companies

Importers of 3TGs EU Public Companies

Due Diligence OECD OECD OECD

Disclosure Annual RCOI and SEC Filing

Continuous Monitoring

Annual RCOI & Filing

Risk SEC Audit & NGO Review

National Regulator Enforcement

Annual Filing of Non-Financial Documents







Companies are very familiar with the OECD Due Diligence Guidance due to Dodd-Frank Section 1502.

Industries have been adopting the respective due diligence protocols with various levels of success and alignment.

OECD Guidelines Will Continue to Drive Diligence







Q&A Discussion

Questions?

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