Conflict Minerals: Chinese Regulatory Advances

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Courtesy of Assent Compliance Inc.

Summary

Chinese companies with conflict minerals in their supply chains, namely Tin, Tungsten, Tantalum and Gold (3TGs), are being asked to comply with a new set of due diligence guidelines developed by the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC).

Introduction

The People’s Republic of China is known to be a major importer of 3TGs from conflict zones in the Democratic Republic of the Congo (DRC). According to a Global Witness report1, companies based in mainland China and Hong Kong imported all tantalum and over 80 percent of tin from Goma, North Kivu (in the eastern DRC), between January and July 2014.

The same report indicates between January and December 2013, 90 percent of Goma’s official exports of tin and tantalum were purchased by six companies based in mainland China and Hong Kong.

Understanding Chinese companies are operating in high-risk regions, and in an attempt to improve China’s reputation in this area2, the CCCMC released a document, Guidelines for Social Responsibility in Outbound Mining Investments on October 24th, 20143, which called for its members to “proactively consider legal, ethical, social, and environmental factors in their decision-making processes and operations4.”

In it, the CCCMC defines eight “Social Responsibility Issues in Outbound Mining Investment5” that Chinese companies should consider in their decision-making processes. Human rights is listed among those, as are labor issues, occupational health and safety and the environment.

Section 2.4.6 of the document specifically instructs Chinese companies to “conduct risk-based supply chain due diligence in order to prevent engagement with materials that may have funded or fuelled conflict.” Later on in the same section, the CCCMC says companies should adapt their existing due diligence measures to the specific needs of conflict-affected and high-risk areas and that measures should be audited by a third-party and reported publicly.

Section 2.5.1 instructs companies not to use child labor, forced or compulsory labor, and to protect the rights of employees.

While the Guielines for Social Responsibility in Outbound Mining Investments set the CCCMC’s expectations, it did not provide Chinese companies the roadmap needed to meet them. What it did accomplish was to lay the groundwork for what could one day be China’s first defined regulations pertaining to conflict mineral sourcing in the Democratic Republic of the Congo (DRC) and other affected areas.

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