Fewer than a quarter of the 6,000 companies suspected of using minerals from the conflict region in and around the Democratic Republic of the Congo are disclosing information about their sources to United States authorities as required by American law, according to the first report on the issue from the investigative arm of the US Congress. The requirement applies to both US and foreign companies.
The Government Accountability Office, which released the report on Aug. 18, based its findings on numerous sources, as well as research conducted on the ground in the Congo region. It drew significantly on United Nations reports and surveys done by nongovernment groups, which linked atrocities in the region, including sexual abuse of women, to the lawlessness that allows illegal mining to continue.
Among the findings, the US office said: “The UN also reported that while there has been progress on traceability and due diligence efforts concerning minerals produced in the DRC, smuggling continues, and that elements of the Congolese army and some armed groups remain involved in the minerals trade.”
The requirement to report grew out of a 2010 law, the Dodd-Frank Wall Street Reform and Consumer Protection Act, which directed the Securities and Exchange Commission, or SEC, to establish regulations for disclosure and reporting on the use of conflict minerals. The SEC issued those regulations in 2012. The investigative report examined disclosures filed with the SEC for the first time in 2014.
In a letter to Congressional committees asking for an update, the Government Accountability Office said: “The number of companies that filed Form SDs in 2014 — 1,321 — was substantially lower than SEC’s estimate of 6,000 companies that could possibly be affected by the rule. . . . Our analysis of a sample of filings indicated that an estimated 87 percent of the companies that filed were domestic [that is, US], while an estimated 13 percent were foreign. Also, while not all of the companies in our sample identified which conflict minerals they used in calendar year 2013, as there was no requirement in the rule to do so, of those companies that did, about 58 percent reported using tin, 43 percent reported using tantalum, 39 percent reported using tungsten, and 44 percent reported using gold.”
These four metals had been singled out for investigation by the US State Department.
The Government Accountability Office said that various manufacturing industries use the metals, which are also found in other parts of the world but are not under the same scrutiny.
“For example,” the report said, “tin is used to solder metal pieces and is also found in food packaging, in steel coatings on automobile parts, and in some plastics. Most tantalum is used to manufacture tantalum capacitors, which enable energy storage in electronic products such as cell phones and computers, and to produce alloy additives, which can be found in turbines in jet engines. Tungsten is used in automobile manufacturing, drill bits and cutting tools, and other industrial manufacturing tools and is the primary component of filaments in light bulbs. Gold is used as reserves and in jewelry and by the electronics industry.”
The US government report said of the companies that filed disclosure statements and relevant details that a “generalized sample” it reviewed found that most of those companies said that they were unable to determine the source of potential conflict metals used in their manufacturing because of difficulty in determining the origins and tracing the supply chains involved.
“Companies that disclosed that conflict minerals in their products came from covered countries (4 percent) indicated that they are or will be taking action to address the risks associated with the use and source of conflict minerals in their supply chains,” the report said. The long, deadly chaos in Congo makes challenges to these efforts formidable.
The Government Accountability Office did not make recommendations for action based on the SEC documents.
On the same day that the Government Accountability Office report was published, a US Court of Appeals for the District of Columbia granted corporations a Constitutional right under the First Amendment to withhold information about whether minerals in their supply chains might have financed conflict. The ruling does not challenge the regulations generally, only the phrase “not been found to be DRC conflict free,” a requirement that the companies must prove that the minerals they are using are not linked to conflict, not merely that they say they don’t know.
Global Witness — a London-based nongovernment organization that investigates and exposes links among what it describes as the demand for natural resources, corruption, armed conflict and environmental destruction — filed a brief before the court supporting the full regulations. The organization said in a statement after the court’s ruling that it “fundamentally disagrees” with the decision, which in its view gives corporations “a constitutional right to conceal information about whether minerals in their supply chains may have funded conflict.”
“This dangerous and damaging ruling could allow corporations to hide information they would prefer their consumers and investors not to know,” Zorka Milin, a senior legal adviser for Global Witness, said in a statement. “Today’s decision affects not only the conflict minerals rule but could also be exploited by companies to bring legal challenges to other corporate transparency laws.”
“The convoluted logic of the decision is a perversion of the First Amendment and intrudes on the mandate of a democratically-elected Congress,” Milin said.