1. Union system for supply chain due diligence self-certification of responsible importers of tin, tantalum and tungsten, their ores, and gold originating in conflict-affected and high-risk areas
Jennifer Guest
Project Engineer
Tetra Tech
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2. What has happened to date EU legislative process
Outline
What has happened to date
EU legislative process
Comparison of EU to US conflict minerals requirements

3. What has happened to date:
2014/03/05 Legislative proposal published 2014/03/13 Committee referral announced in Parliament, 1st reading/single reading 2014/10/20 Committee referral announced in Parliament, 1st reading/single reading 2015/04/14 Vote in committee, 1st reading/single reading 2015/04/24 Committee report tabled for plenary, 1st reading/single reading 2015/05/19 Debate in Parliament 2015/05/20 Decision by Parliament, 1st reading/single reading 2015/07/14 interinstitutional negotiations with amendments from plenary
by 402 votes to 118 with 171 abstentions, adopted amendments to the proposal for a regulation of the European Parliament and of the Council setting up a Union system for supply chain due diligence self-certification of responsible importers of tin, tantalum and tungsten, their ores, and gold originating in conflict-affected and high-risk areas. The question was referred back to the competent committee for re-consideration and the vote was deferred to a later session.
The committee originally had the Regulation as a voluntary program and the Parliament amended it to a mandatory program with a broader scope.
There are three basic types of EU legislation: regulations, directives and decisions. A regulation is similar to a national law with the difference that it is applicable in all EU countries. Directives set out general rules to be transferred into national law by each country as they deem appropriate. A decision only deals with a particular issue and specifically mentioned persons or organisations.

4. EU Legislative Process
First Reading
Committee Stage
Plenary Stage
Follow-up Procedure
Second Reading
Third Reading
Conciliation
First Reading
Committee Stage
Modifies proposal
Before final vote committee shall ask the Commission to state its position on all amendments to the proposal adopted by the committee and the Council to comment
If the Commission is not able to make a statement the committee may postpone the final vote. If they are able then it is to be included in the report for vote
Plenary Stage
Parliament shall examine the proposal
Parliament shall first vote on the amendments and then on the proposed as a whole
a statement as to whether Parliament approves, rejects or proposes amendments to the proposal for a legislative act and any procedural requests
first reading is concluded if draft legislation is adopted; if not approved then proposal shall be referred back to the committee
If rejected; the Commission can withdraw it, if not withdrawn the Parliament shall refer the matter back to the committee. The committee shall decide on next steps within two months.
If adopted; where all amendments are approved the vote will be postponed until the Commission can provide its position on each of Parliaments amendments. If the Commission does not intend to adopt all of Parliaments, the Committee will advise if the vote should proceed. Parliament can decide to postpone the vote and refer back to the committee for reconsideration
Follow-up Procedure
Parliament, the Commission, the Committee can request review of the proposal again
Second Reading
Communication of the council’s position
The committee responsible shall submit a recommendation for second reading proposing the approval, amendment or rejection of the position adopted by the Council. The recommendation shall include a short justification for the decision proposed.
If council rejects the legislative procedure is closed
Amendments can be made and proposed, and will be adopted if it secures the majority vote of MEPs
Third Reading
Conciliation
Where the Council informs Parliament that it is unable to approve all Parliament's amendments to the Council's position, the President shall, together with the Council, agree to a time and place for a first meeting of the Conciliation Committee. This is to take 6-8 weeks upon first meeting of committee
Where agreement on a joint text is reached within the Conciliation Committee, the matter shall be placed on the agenda of a sitting of Parliament to be held within six or, if extended, eight weeks of the date of approval of the joint text by the Conciliation Committee.
The joint text as a whole shall be the subject of a single vote. The joint text shall be approved if it secures a majority of the votes cast.

5. EU vs US: Scope US EU Tin, Tantalum, Tungsten and Gold (3TG)
DRC and surrounding countries (covered countries)
United States SEC filing companies
Manufacturers (and manufacturers that contract to manufacture) of products
Products that contain 3TG
3TG is necessary to the production and functionality of the product
Tin, Tantalum, Tungsten and Gold (3TG)
Conflict-affected and high-risk areas
Union importers of 3TG
Union smelters of 3TG

6. EU vs US: Labels US EU No labelling requirement
Responsible importers who self-declare can be certified by means of a label
Responsible importers shall be granted a ‘European responsible importer’ label by Member States’ competent authorities
2. In case of non-compliance with this Regulation, the Member States’ competent authorities may withdraw or suspend the ‘European responsible importer’ label.
3. The graphic elements of the ‘European responsible importer’ label shall be laid down by the Commission.

7. EU vs US: Exemptions US EU Recycled or scrap sources

8. EU vs US: Requirements US EU
Conduct a reasonable country of origin inquiry (RCOI) in good faith
If results from the RCOI show that the 3TG is or may be coming from the covered countries then due diligence must be conducted on your supply chain in accordance to a nationally or internationally recognized frame work e.g. OECD Due Diligence Guidance
Conduct supply chain due diligence in accordance to Annex II of the OECD Due Diligence Guidance
The regulation continues to cite requirements for due diligence that aligns with the OECD Due Diligence Guidance e.g. management system, risk assessment, grievance mechanism, supply chain policy etc.

9. EU vs US: Requirements EU Additionally ….
Traceability system for minerals to include:
Description of mineral including its trade name and type
Name and address of supplier to importer
Country of origin
Quantities and dates of extraction, expressed in volume or weight
If from conflict region provide mine of origin, location where minerals are consolidated, traded and processed, and taxes, fees, royalties paid
US - RCOI done in good faith
EU – much more prescriptive

10. EU vs US: Requirements EU Additionally ….
Traceability system for metals to include:
Description of metal including trade name and type
Name and address of the supplier to the importer
Name and address of the smelter or refiner
Record of smelter or refiner third-party audit
Country of origin of the mineral
If from conflict region additional info according to the OECD required
US - RCOI done in good faith
EU – much more prescriptive

11. EU vs US: Requirements EU Additionally ….
The Commission will make a list of responsible importers of minerals and metals available on the internet.
Any smelter in the Union must meet all the requirements of this Reg. If they do not then they will subject to fines
The Commission will make a list of responsible smelters or refiners and make it available on the internet.
Member States shall carry out ex-post checks to ensure responsible importers comply with Article 4, 5, 6 and 7. They will be conducted by taking a risk-based approach. The ex-posts will include:
Examination of the supply chain due diligence obligations including management system, risk management, third-party audit and disclosure
Examination of documentation and records that demonstrate compliance with due diligence obligations
Examination of audit obligations
Ex-post can include field visits as well

12. EU vs US: Smelters US EU Must trace, identify and report all smelters
The EU plans to maintain a list of responsible smelters and refiners

13. EU vs US: Audits US EU
Currently, after the court of appeals decision, an independent private sector audit is required if a filing company claims they are conflict free or are not conflict free
Certified responsible importers shall be exempted from third-party audit provided they submit substantive evidence that all smelters or refiners in their supply chain conform to the provision of this Reg.
Importers in scope of this Reg. shall carry out a third-party audit
Audit scope to include:
Importer’s activities, processes and systems for supply chain due diligence
Importer’s compliance with Articles 4, 5 and 7 of this Reg.

14. EU vs US: Reporting US EU
Reports are due by May 31st of each calendar year for the previous year
Submit to the SEC via EDGAR
Reports are due by March 31st of each calendar year for the previous year
Submit to the Member State competent authority
Electronic Data-Gathering, Analysis, and Retrieval system

15. EU vs US: Reporting US EU Form SD: CMR:
Commission File Number
IRS Employer Identification Number
Address and Contact Person
Brief description of the RCOI
Form to be filed on EDGAR
CMR:
Detailed description of the due diligence process implemented and the results of the assessment
Provide a description of the products and the facilities used to process these products
Disclose the location of the mine and the step took to determine this with the greatest possible specificity
When applicable a copy of the independent third party audit and who conducted the audit and certification of independence
Company contact details and description of its commercial activities
Declaration of conformity to Article 4, 5, 6 and 7
Third-party audit
Total amount of minerals purchased as confirmed by a third-party audit
Name and address of each responsible smelter or refiner in its supply chain
Third-party audit of smelter or refiner
Proportion of minerals originating from conflict-affected and high-risk areas to the total amount of the minerals purchased by each of those smelter or refiner, as confirmed by a third-party audit
Report publicly on an annual basis on due diligence policies and practices and risk management and summary of third-party audit

16. Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains

17. Comparison of China to US conflict minerals requirements
Outline
Status
Comparison of China to US conflict minerals requirements

18. What has happened to date:
In an unprecedented move the Chinese government opened up their Due Diligence Guidelines for Responsible Mineral Supply Chains for public comment.
The commenting period closed on November 7, 2015
CFSI submitted and included anonymous comments from member companies
Currently awaiting feedback on the comments from China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters (CCCMC)

19. China vs US: Scope US China Tin, Tantalum, Tungsten and Gold (3TG)
DRC and surrounding countries (covered countries)
United States SEC filing companies
Manufacturers (and manufacturers that contract to manufacture) of products
Products that contain 3TG
3TG is necessary to the production and functionality of the product
Covers all minerals but the CCCMC is prioritizing: Tin, Tantalum, Tungsten and Gold (3TG)
Conflict-affected and high-risk areas
Voluntary for “all Chinese companies which are extracting and/or using mineral resources and their related products and are engaged at any point in the supply chain of minerals”
“Chinese company” in this regard means any legal entity whose beneficial ownership fully or partially rests with a Chinese individual, or that is operating in China (including trading or mining), or is listed on a Chinese stock exchange, or is registered in China.
For the purposes of these Guidelines, conflict-affected and high-risk areas can be defined as
any area where the occurrence of Type 1 or Type 2 risks is well known and documented (see
supplementary information below). Such areas are often characterized by political instability
or repression, institutional weakness, insecurity, collapse of civil infrastructure, widespread
violence and violations of national or international law, as well as a high prevalence of
corruption, severe impacts on the environment, as well as land rights infringements.

20. China vs US: Requirements
Conduct a reasonable country of origin inquiry (RCOI) in good faith
If results from the RCOI show that the 3TG is or may be coming from the covered countries then due diligence must be conducted on your supply chain in accordance to a nationally or internationally recognized frame work e.g. OECD Due Diligence Guidance
Must determine origin
Risk based assessment
Apply OECD Due Diligence Guidance

21. China vs US: Requirements
Additionally ….
Risk is broken down into two categories.
Type 1 are the risks contributing to conflict and serious human rights abuses, as they are defined in the OECD Due Diligence Guidance
Type 2 go beyond the risks outlined in the OECD Due Diligence Guidance. They include those risks relating to serious misconduct, as defined in the Chinese Responsible Mining Guidelines.
The occurrence of Type 1 Risks requires enhanced due diligence to be in conformance with
the OECD Due Diligence Guidance. The occurrence of Type 2 Risks equally requires
enhanced due diligence in line with the Chinese Responsible Mining Guidelines. Risk
mitigation strategies for each risk are contained in the relevant clauses of the Chinese
Responsible Mining Guidelines which are defined in the guidance…

22. China vs US: Requirements
Additionally ….
Warning Signs have been defined to help determine when enhanced due diligence is required:

23. China vs US: Audits US EU
Currently, after the court of appeals decision, an independent private sector audit is required if a filing company claims they are conflict free or are not conflict free
Audit will assess whether the company has fulfilled core requirements
the auditor will check
whether the company took appropriate steps to actively collect information on risks and to evaluate the information received by third parties
whether the company has taken effective and adequate action to mitigate the risks identified

24. China vs US: Audits China Additionally ….
Companies can apply for certification
Basic responsible sourcing certification
Basic responsible sourcing certification (making progress)
Extended responsible-sourcing certification
Certified companies and those seeking certification will be made available via list on a website
Option 1: Companies choose to get only certified for “Basic responsible sourcing”, which
assures conformance with the 5 STEPS of due diligence requirements regarding Type 1
risks. The third-party audit and certification process must be renewed every year.
Option 2: Companies get certified for “Basic responsible sourcing” and seek assurance
for progress with due diligence policies and practices with regard to selected Type 2 risks.
The progress will be formally acknowledged, but no additional certificate will be issued
until full conformance with the Guidelines is achieved (see Option 3)
Option 3: Companies choose to get certified for “Extended responsible sourcing”, which
and Type 2 risks. Companies which receive both certifications must renew the full third party
audit and certification process every year.

25. China vs US: Reporting US China
Reports are due by May 31st of each calendar year for the previous year
Submit to the SEC via EDGAR
Reporting publicly for the step 5 report (OECD Due Diligence)
A template and website will be made available
Electronic Data-Gathering, Analysis, and Retrieval system

26. What’s Next Watch for feed back from the commenting period
CCCMC has promised further guidance on how to implement due diligence requirements and audit protocols

27. Overall Comparison Requirement U.S. E.U. China Minerals in scope 3TG
All (3TG priority)
Regions/Areas in scope
Democratic Republic of the Congo (DRC), Angola, Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia
All conflict-affected and high-risk areas
Companies in scope
All SEC filing companies
All importers and smelters
All Chinese companies which are extracting and/or using mineral resources and their related products and are engaged at any point in the supply chain of minerals
OECD Due Diligence Guidance
Yes
Audit
Pending Court Decision
Public Reporting

28. Jennifer Guest
Project Engineer
Tetra Tech
P: (734) E: