The Conflict Minerals Trade Act

This got Steel Market Update’s attention and we began doing our homework and this is what we found:

The Conflict Minerals Trade Act – Overview

The Conflict Minerals Trade act is designed to stop trade from tin ore, tantalite, tungsten, and gold from the Congo that finances conflict and human rights violations in the region. The bill requires the U.S. to identify commercial goods that could contain the aforementioned conflict minerals, approve a list of independent monitoring groups to audit facilities that process these minerals, and restrict importation of minerals to those who meet the audited requirements.

Importers of these goods have to certify on their customs declaration whether their materials contain, or are free of, conflict minerals. The audits determine the mines of origin for processed materials, verify the chain of custody, and verify information provided by suppliers through investigations in the Congo and other countries.

It also directs the State Department to support multilateral and U.S. government efforts to break the link between trade in minerals and armed conflict in the Congo. Specific measures include:

• Development of a U.S. government strategy to address conflict minerals;
• Support for further investigations by the UN Group of Experts;
• Mapping of which armed groups control key mines in eastern Congo;
• Inclusion of information on the negative impact of mineral exploitation and trade on human rights in Congo in the annual human rights reports;
• Guidance for companies to exercise due diligence;
• Expanded U.S. efforts to improve conditions and livelihoods for communities in eastern Congo who are dependent upon mining; and,
• GAO review to evaluate adherence and effectiveness of policies (Source: Enough Project)

The final rule of the Act was approved on November 13, 2012 and requires companies to comply as of January 1, 2013 with the first reports due May 31, 2014. The rule states that “issuers with conflict minerals that are necessary to the functionality or production of a product manufactured by such person to disclose annually whether any of those minerals originated in the Democratic Republic of the Congo or an adjoining country.” If they are using such minerals a report must be submitted to the Securities and Exchange Commission that describes the due diligence that was taken in following the conflict minerals source and chain of custody.

Tin Ore, Tantalite, Tungsten – Use in Steel

According to notes received from two of our Steel 101 instructors (both metallurgists) – Tantalum is found in ore and is recovered as ferrotantalum-columbium. It may be used as a replacement for ferrocolumbium in high strength steel grades. It is generally more expensive than the less expensive ferrocolumbium.

Tungsten is found in ore as ferrotungsten – added to steel for tool steel applications.

Tin Ore – Tin Ore is refined for the application of Tin to be electro-plated on to a steel substrate. It is not used as an addition for the manufacture of steel (it reduces the formability of steel).

Compliance – Domestic Steel Mills

Each domestic mill is handling the subject of compliance in their own way with their customers. In the case of U.S. Steel they have put a public notice on the subject on their website which states:

 U. S. Steel shares the concerns of Congress and the international business community that profits from the mining of certain minerals in the Democratic Republic of Congo (“DRC”) or adjoining countries (“Conflict Minerals”) may be aiding human rights abuses in portions of the DRC.

In July 2010, the United States Congress passed legislation1 mandating supply chain due diligence and public disclosure related to the sourcing of these Conflict Minerals.

U. S. Steel is committed to legal and ethical compliance in all its business practices and will comply with this legislation, along with all related implementing regulations issued by the SEC or other agencies.

At this time, we are not aware of the use of any Conflict Minerals sourced from listed DRC countries in U. S. Steel products. We will continue to proactively work with industry groups, governmental agencies and our suppliers to verify a conflict free supply chain.

Compliance – Everyone Else

Steel Market Update understands other mills and trading companies are producing written statements regarding the products they manufacture. We understand from one distributor which supplies tinplate that all of the can manufacturers require written statements from their suppliers that the tinplate being supplied meets the requirements of The Conflict Minerals Trade Act.

Service centers, trading companies and manufacturing companies may want to do some investigation with their trade associations (SMU understands the AIIS has an article on the subject coming out in their newsletter on the 15th of this month) and on the internet to see if this act will impact your company. As we mentioned at the beginning of this article, you may be required to provide a letter of compliance in order to sell steel to certain service center groups or manufacturers – no matter what the product. Welcome to the age of Dodd-Frank…