Sen. Flake Expects Modifications to SEC Conflict Minerals Reporting Rule
Securities and Exchange Commission (SEC) conflict minerals reporting requirements set in 2014 have had overall mixed results, witnesses told a Senate Foreign Relations Committee panel on April 5. Subcommittee Chairman Jeff Flake, R-Ariz., during a brief interview after the hearing, said his panel will consider whether any legislative action is needed to amend the legislation that created the reporting requirements. “The SEC is limited in scope in what they can do, and all the witnesses agree that a more comprehensive approach that involves governance by the [Democratic Republic of the Congo] is going to be necessary, but we realize the limitations of the current government in the DRC,” he said. “But we’ll consider” whether legislation is needed, he said.
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Flake said he doubted the possibility that Section 1502 of the Dodd-Frank Act -- which contains the conflict minerals reporting language -- would be repealed. “My guess is it’ll be somehow modified or built upon.” SEC Acting Chairman Michael Piwowar announced in January that the commission is reconsidering whether to continue advancement of the reporting requirements (see 1702030035). The SEC didn't comment.
While the rule brought transparency to supply chains of tungsten, tin, and tantalum originating in the DRC, it's had only limited effects on disrupting the gold smuggling and violence of armed groups in the region, Information Technology Industry Council Senior Vice President for Environment and Sustainability Rick Goss said. The U.S. government should reconsider elements of the SEC’s conflict minerals reporting requirement and instead build off the.conflict minerals due diligence guidance by the Organization for Economic Cooperation and Development (here), said Goss. That's the most effective way to drive companies’ conflict minerals supply chain transparency, he said in his testimony (here).
Johns Hopkins University School of Advanced International Studies professor Mvemba Dizolele Section 1502 to be “folded and discontinued.” Speaking for himself and not the university, Dizolele said the legislation would’ve worked better as part of a “comprehensive political process.” He noted in his testimony (here) that adjoining Rwanda has manipulated Section 1502 to “launder and certify” resources originating from the illicit trade in the DRC, subsequently exporting them as Rwandan products. “Despite insignificant mineral deposits, Rwanda has become the world’s largest exporter of coltan,” Dizolele said. “In other words, Section 1502 legalized the looting of Congolese mineral resources.”
But Human Rights Watch Business and Human Rights Division Director Arvind Ganesan urged for the SEC requirements to stay in place, and said in testimony (here) the eastern portion of the country registered record high conflict-free exports of tin and tantalum in 2016. He said companies have been slow to comply with the reporting requirements, and that his organization would be receptive to proposals to make compliance easier, but added that it hasn’t received any such proposals yet. He recommended tweaking the rule, instead of canceling or significantly modifying it, perhaps through “safe harbor” provisions which could reduce or eliminate reporting companies’ legal liability in various situations if certain conditions are met.