Due Diligence within the Conflict Free Smelter Program World Tin Mining Forum, Kunming June 24, 2016

Introduction Leah Butler CFSI Program Director lbutler@eiccoalition.org +1 571.858.5732 10 years of experience in regulatory compliance, stakeholder engagement, and mining governance Worked for government, consulting firms, and the mining industry in the U.S., South America, and Africa MA in International Relations, Yale University Masters of Environmental Management, Yale University Bachelors of Environmental Science, U.C. Berkeley The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

Introduction / 讲员介绍 Finny Tang RCS GLOBAL Asia Manager finny@rcsglobal.com +86 138 2438 2744 11 years of experience in procurement engineering, socially responsible compliance, conflict free sourcing management in electronics and mining supply chains BA in English, Central South University MBA, Hunan University The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

AGENDA 1. Program Overview 2. Due Diligence Requirements 3 AGENDA 1. Program Overview 2. Due Diligence Requirements 3. Market Acceptance 4. Resources 5. Summary

Conflict Free Sourcing Initiative Founded in 2008 by members of the Electronic Industry Citizenship Coalition (EICC) Supports over 330 private companies, representing variety of industries, including: electronic, ICT, auto, retail, aerospace, apparel, to comply with the responsible sourcing laws in US and pending legislation in EU The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

Conflict Minerals Background U.S. Conflict Minerals Law Law requires U.S. manufacturing companies to submit an annual report about their efforts to identify the sources of tantalum, tin, tungsten, and gold and conduct due diligence U.S. companies rely on information from all their supply chain partners for compliance EU The European Union is developing responsible sourcing laws  will likely be global, not limited to DRC China Audit Scheme CCCMC rolled out Chinese Due Diligence Guidelines in December 2015 based on the OECD Guidance AQSIQ leading the development of regulatory requirements

U.S. Dodd-Frank Act European Union China System Alignment Regulatory Alignment China System U.S. Dodd-Frank Act European Union China The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Smelters/Refiners Responsibility for Due Diligence OECD Step 4: Independent Third-Party Audit of Smelter Due Diligence Practices Smelters/Refiners in the best position in the supply-chain to: Understand the country of origin and chain of custody of minerals Identify and mitigate supply-chain risks Downstream requests for smelters to participate in a globally-recognized independent third-party audit program: Conflict Free Smelter Program London Bouillon Market Association – Responsible Gold Guidance Responsible Jewelry Council – Chain of Custody GSM Supply-Chain Sustainability & Regulations

Smelter Audits WHAT: Independent third party audit that validates smelters’ due diligence for 3TG. Who: There are over 260 smelters from over 30 countries currently participating in the program Why: Demonstrate responsible souring of tantalum, tin, tungsten and gold. How: Audit cycle is annual or every 3 years. Results: Compliant smelters are posted to the public: http://www.conflictfreesmelter.org

Compliant Smelters since 2010 The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Identified 3TG Smelters Worldwide The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Participation of Smelters in China The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Program uptake Eligible to apply: ~39 Applied: 21 Enrolled: 15 Risk Based Program Reduction of audit cycle to 3 years Applicable for smelters with low risk sourcing = domestic L1 sources only AND passed two (2) consecutive audits Smelters contact info@conflictfreesourcing.org to apply More info here: http://www.conflictfreesourcing.org/smelter-introduction/ Program uptake Eligible to apply: ~39 Applied: 21 Enrolled: 15 2 tin smelters in China Pending: 3 The Conflict-Free Sourcing Initiative www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

System Linkages Finished Product MINE SMELTER/REFINERY OEMS In-Region Systems (mine site) Note: This highlights the 3 main areas of focus of the EICC and GeSI CM program. Independent Third Party Audit (smelter) Company Assurance (downstream)

AGENDA 1. Program Overview 2. Due Diligence Requirements 3 AGENDA 1. Program Overview 2. Due Diligence Requirements 3. Market Acceptance 4. Resources 5. Summary

Compliance Requirements = Commitment to policy, processes, and systems that support responsible sourcing Management System - Conflict Minerals Policy System of Controls - Mass Balance System of Controls - Material Type and Origin Risk Management - OECD Conformance = Risk identification, assessment, and mitigation. Demonstration of conformance to OECD guidance for high risk sourcing/Level 3 = Demonstration of internal material control and effective management systems = Support and clarify chain of custody and origin of materials The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Documentation Requirements – China Materials Country of Origin is necessary for: Ore (LSM, ASM) Material from non-CFSP compliant smelters (additional due diligence required!) Country of Origin is not necessary for : Legacy Material Assay Material Secondary/Scrap Material from CFSP compliant smelter New China Guidance Available! The Conflict-Free Sourcing Initiative www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

Document Reference List for China The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Documentation Requirements Level 3 – High Risk Country of Origin Incident Monitoring Mine Site Due Diligence Internal Traceability Internal and International Transportation Level 2 – Medium Risk Country and Region of Origin Visit Reports Level 1 – Low Risk Material origin document level determination The Conflict-Free Sourcing Initiative www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

CFSP Auditors SGS UL http://www.sgs.com/ International, based in Switzerland Auditing CFSP since 2011 350 auditors in China UL www.ul.com http://industries.ul.com/responsible-sourcing International, based in the US Auditing CFSP since 2010 171 auditors in China The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

AGENDA 1. Program Overview 2. Due Diligence Requirements 3 AGENDA 1. Program Overview 2. Due Diligence Requirements 3. Market Acceptance 4. Resources 5. Summary

Public Information

Market Trend Participation of China tin smelters in CFSP is key: China is the largest tin producer and consumer in the upstream supply chain: China is a key player in the international tin market Increasing number of large brands are requiring all their tin to be from compliant smelters: Market access is difficult for non-compliant smelters Chinese tin smelters need their suppliers to be validated so they more easily able to pass their own CFSP audit: Knock-on effect within the China tin market The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Working together we can make great progress! Non-Compliant Compliant Smelter A Smelter B Smelter C Smelter Z The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

Benefits of Participating in Independent Third Party Audits Some U.S. companies require suppliers to source from smelters that have been validated through an independent third party audit. These programs process access to international market. Other benefits to smelters: Cross-recognition means that audit suffices for multiple systems; Competitive bid processes; Improve due diligence systems facilitates responsible sourcing practices; Better information about supply chain = gain efficiencies in sourcing and accounting; Satisfy source of origin requirements of customers; Reduce downstream customer requests for information on procurement practices; Gain international recognition by being listed on public websites; The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

AGENDA 1. Program Overview 2. Due Diligence Requirements 3 AGENDA 1. Program Overview 2. Due Diligence Requirements 3. Market Acceptance 4. Resources 5. Summary

Audit Program Components Audit Protocol defines audit requirements Audit Procedure describes how the audit works Audit tools organize information for the audit Training explains the audit to smelters and auditors Oversight body to ensure quality, consistency, and credibility. The Conflict-Free Sourcing Initiative www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

CFSI eLearning Academy https://cfsilearning.litmos.com Free and available to the public Courses and resources in Chinese Improves audit preparation Contains courses for smelters and auditors Please send an email to learning@conflictfreesmelter.org to be set up with credentials. The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Free Technical Assistance Bowen Zhang, Asia Due Diligence Consultant, RCS Global Former CFSP auditor for UL based in China Conducted many CFSP audits in China Professional one-on-one technical advice Finny Tang, Asia Due Diligence Consultant, RCS Global Former IBM Social Responsibility and Conflict Mineral Program Manager in Asia Managed over 100 suppliers a year and experienced in helping companies improve social responsibility and conflict free sourcing performance CFSP pays for the service = FREE for smelter! The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Contacts in China Company Name Email Best Buy Ruby Liu Ruby.Liu@bestbuy.com Intel Victor Fan victor.s.fan@intel.com Plantronics Chilly Mo chilly.mo@plantronics.com Microsoft Michael Zhao Xin-michael.zhao@microsoft.com CFSI members are available to assist smelters throughout the audit process Explain audit requirements and help smelters prepare for the audit Conduct pre-audit visits Audit observations The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Thank you lbutler@eiccoalition.org