EU reaches deal aimed at sustainable mineral, metal supply chains

1 December 2016

Last week, the EU institutions reached an agreement on new legislation directed at ensuring that minerals and metals entering the 28-nation bloc are transparently and responsibly sourced and do not play a role in financing human rights abuses and conflict in high-risk areas.

The regulation establishes due diligence provisions for sustainable sourcing practices as of 1 January 2021, covering 95 percent of EU imports of tin, tungsten, tantalum, and gold, commonly used in electronics, jewellery, packaging, cars, and construction.

Proponents say that the agreement provides a clear example of how trade-related policymaking can help support sustainable development objectives.

“The very idea of conflict minerals undermines most of what we want trade to achieve. Trade should be a tool to spur development, to pull people out of poverty, and to foster prosperity and peace,” European Trade Commissioner Cecilia Malmström said in a blog post.

“We have laid the groundwork for an effective tool to break the link between conflicts, human rights abuses and our consumption of everyday goods,” added Bernd Lange, who chairs the European Parliament’s International Trade Committee.
 

Key elements

political understanding on the key principles of the regulation was first reached on 15 June, from which certain technical elements were clarified in order to develop the final text announced last week. (See Bridges Weekly, 24 June 2016)

The legislation, based on the Organisation for Economic Co-operation and Development’s (OECD) guidelinesfor responsibly sourcing conflict minerals, requires EU importers to carry out due diligence checks on their supply chains.

One of the major debates among the EU institutions had been over the binding nature of the agreement. Though the Commission had initially held that checks should be voluntary based on a certification scheme, mandatory “due diligence” checks, as supported the European Parliament, were eventually chosen. It will fall to authorities at the member state level to ensure company compliance, monitored by the Commission, and determine appropriate penalties. (See BioRes, 14 March 2014)

“If you can be at the beginning and have an effective impact on responsible sourcing at the start of the value chain, that will then have an enormous impact,” said Lilianne Ploumen, Dutch Minister for Foreign Trade and Development Cooperation, during a June press conference at the European Parliament.

The Commission will select experts to create a handbook for operators, listing the country of origin, information on transit, and other due diligence issues which could motivate a background check.

Industry control schemes already in place will continue to be used to avoid double burdens, subject to regular checks to ensure that they comply with OECD guidelines.
 

Exemptions

Some civil society groups have welcomed the overall result as a positive step towards tackling conflicts and protecting human rights, and one that brings the 28-nation bloc closer to rules in place in other countries. This includes the United States’ Dodd-Frank Act, which requires company disclosure and other “due diligence” requirements when using tantalum, tin, tungsten, and gold as an essential part of their production process.

However, several exemptions were included in the EU regulation, some of which have been meet with criticism by those organisations. Amnesty International, for example, referred to “a string of concessions and last-minute loopholes [that] could undermine the Regulation’s impact, as they exempt a large number of companies from the law.”

Downstream companies which import refined forms of the minerals and metals in goods or components, along with having over 500 employees and therefore falling under the EU non-financial reporting law, will be encouraged to report on plans to monitor compliance with the regulation among their sources, bolstered by a transparency database.

The initial proposal on behalf of the European Parliament in May 2015 encouraged extending diligence obligations throughout the supply chain, and was supported by 130 civil society organisations calling for a final deal that would hold all firms responsible for performing such due diligence checks. (See BioRes, 3 June 2015)

Some advocacy groups maintain that mandatory checks imposed on upstream importers alone – as mandated by the final outcome – will not be enough to address the problem. “This new law can only be the very first step forward. Additional measures will be needed to ensure that all companies will and can adequately check their supply chains,” said Nele Meyer of Amnesty International.

In order to avoid incurring a decrease in competitiveness, the smallest importers, including small and medium-sized enterprises, will not be obliged to comply with the scheme, “so as to avoid unreasonable bureaucratic burdens,” according to a European Parliament press release. In addition, products that are especially challenging to trace, including recycled metals and by-products, are also excluded from the regulation, as are final goods that have such minerals as part of their components.

The legislation has also faced some criticism for covering only four minerals, leaving out the imports of a host of other materials linked to conflict, including diamonds, emeralds, coal, copper, jade, or rubies.
 

Coming up

While the technical details have now been sorted, a few final steps still remain. The text must now receive the sign-off by “COREPER” – the main preparatory body of the European Council – on 7 December. It will also need approval in other settings, including the European Parliament’s trade committee. 

The text will later be voted on for formal adoption in the Council and Parliament early next year. Two years from the date the legislation comes into force, and three years thereafter, the European Commission will report to the European Parliament and the Council on its effectiveness, taking into account the impact on the ground and the level of compliance on behalf of EU companies.
 

ICTSD reporting; “EU agrees to compulsory checks on conflict mineral imports,” EURACTIV, 23 November 2016; “EU institutions reach agreement on conflict minerals Regulation,” CHEMICAL WATCH, 23 November 2016.

This article first appeared in Bridges Weekly, 1 December 2016.

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