Well intentioned ‘blood mineral’ provision backfires – by Lauren Cook (Medill News Service/UPI.com – May 24, 2013)

http://www.upi.com/

A U.S. law that imposed an embargo on mineral trade used to finance Congolese armed groups has backfired, affecting the region’s poorest artisanal miners.

WASHINGTON, May 24 — A provision in the Dodd-Frank financial reform law aimed at reducing money to militia groups in the Democratic Republic of the Congo by imposing rules on buying minerals from the region has backfired, exacerbating and depriving at least 1 million subsistence miners of their livelihood, several experts told a congressional committee Tuesday.

“Dodd-Frank 1502, the conflict minerals provision … is a case study in how good intentions can go awry,” said David Aronson, panel member and editor of CongoResources.org. “The law imposed a de facto embargo on mineral production that impoverished the region’s million or so artisanal miners; it also drove the trade into the hands of militia and predatory Congolese army units.”

The original intent of the conflict mineral provision, or Section 1502, was to reduce financing opportunities for the militia groups in the Congo’s mineral market by establishing disclosure requirements for companies that use minerals like gold, wolframite, casserite, columbite-tantalite and their derivative metals (tin, tungsten and tantalum) to make their products.

The companies are required to report the particular mineral’s origin. If the material is determined to be from the DRC — or if its source is unknown — they must notify the Securities and Exchange Commission. There is no ban or penalty for using the materials; they must be disclosed. Overall, experts say, nearly half, or 6,000, of publicly traded companies in the United States would have to perform this supply chain inspection to comply with Section 1502.

A few of the affected technology companies — like Intel, HP, Apple, Dell, Motorola, Microsoft and Nokia — were already implementing their own initiatives to develop clean sourcing channels.

“Simply put, the mechanism contained in Section 1502 encourages companies to avoid the region while layering regulatory burdens and costs on those that stay,” said Rick Goss, senior vice president of environment and sustainability for the Information Technology Industry Council. “Even companies that source cleanly from the covered region must submit a full Conflict Minerals Report to the SEC…. Companies that elect to exit the region altogether can avoid these obligations.”

Goss said customers are “demanding metals that are Congo-free, rather than conflict free.”

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