The Facts Behind the Dodd-Frank Conflict Minerals Requirement

By August 11, 2011Regulations, Trade

There has been a lot of chatter in the blogosphere recently about David Aronson’s op-ed “How Congress Devastated Congo,” in the New York Times on Monday concerning the impact that the Dodd-Frank legislation provision (Section 1502) on conflict minerals is having on the economy and workers of the Democratic Republic of the Congo (DRC).  

Many activists claim that the Dodd-Frank requirement that companies disclose their use of conflict minerals (tin, tungsten, tantalum and gold) in their products is essential to ending the horrific violence taking place there, even though there is relatively little evidence that will be the case.  What is of concern to many stakeholders across the spectrum is the potential for the provision creating an embargo on minerals from the DRC and surrounding countries, causing further economic devastation. 

Paul Kavanaugh, writing for Bloomberg BusinessWeek, reported July 28, “The new rules left tens of thousands of people out of work, according Paul Yenga Mabolia, head of Promines, a World Bank program assisting Congo’s mining industry. ‘Nobody was prepared and there was no program to alleviate the impact of the law,’ he said by phone from Kinshasa, Congo’s capital, yesterday. ‘Almost everything came to a standstill.’”

Meanwhile, relatively little attention has been paid to the July 15 letter from the Congolese Minister of Mines Martin Kabwelulu to the Securities and Exchange Commission pleading with the SEC to craft a regulation implementing Dodd-Frank that does not result in a de facto embargo on minerals from the DRC.  In that letter, the Minister states that companies “should not describe a product as ‘DRC with conflict” when [they] have taken reasonable steps and made good faith efforts to conduct due diligence on ores in accordance with the recommendations on due diligence of the Organization for Economic Cooperation and Development and United Nations resolutions.”   

He further states that his proposal “will ensure that section 1502 of the Dodd Frank reform is implemented in accordance with its end, thus avoiding the consequences of a de facto embargo on minerals from the Democratic Republic of Congo.”

The National Association of Manufacturers has encouraged the SEC to take a pragmatic approach, and adopt an interim “indeterminate” category for companies’ reports on the origin of their conflict minerals while undertaking good faith efforts to conduct due diligence–much like Minister Kabwelulu proposes–while the necessary tracing infrastructure is developed. A phased in approach that builds off programs closest to the source of minerals, such as a smelter verification process, is the best way forward in achieving the law’s objectives without requiring pointless expensive reports from companies that can only say, “I don’t know”.

One can hope that the SEC will pay some attention to the views of the representatives of the DRC government who are responsible for their country’s welfare as least as much as self-appointed activists.

Stephen Jacobs is senior director international business policy.

Join the discussion 2 Comments

  • Our company, which is not a mining company, works with Congolese tribes to help them export without a dime going to conflict groups. Dodd-Frank has been disastrous for them.

    Supporters are quoting the UN, large NGOs and other organizations who support the bill, but we are quoting chiefs, tribes and hundreds of thousands of locals on the ground who have been devastated by it. Doesn’t this say something very powerful to us?

    I challenge the supporters to take a poll of those they are supposedly trying to protect. Of course they won’t, because the response would tell them that, while Dodd-Frank was well-meaning, it is an unmitigated disaster in practice. COCABI, COMIMPA and COMIDER represent 20,000 miners in the conflict area and 100,000 people affected by this legislation. They all say they’ve never even been contacted to see how this might affect them.

    There are six regions from which Dodd-Frank minerals are mined, and only one of them has ever had anything to do with conflict. Dodd-Frank has put them all out of business before it is even enacted. The World Bank says it has negatively affected 10 million people in the Congo.

    I’m was in Tanzania last week to help a chief export his coltan using a visible, well-documented process that ensures not a dime goes to conflict. That chief and his people will go hungry because the smelters, citing Dodd-Frank, have vanished. The chief is devastated, as are the nearly 1 million honest people who find their meager livelihoods destroyed by this over-reaching act.

    The issue with Dodd-Frank is that it is a nuclear option that demonizes minerals instead of criminals. It’s no different than burning down every house in town to stop a burglar from stealing, who will simply steal from somewhere else. Ludicrous.

    Dodd-Frank has burned down the entire mining industry in the Congo in hopes that their scorched earth policy will catch a militia group in its path. They are willing to take down every innocent man, woman, and child in the Congo who live off mining. Such massive collateral damage is not acceptable under any circumstance.

    Remove mining from the equation and the militia will exact its pound of flesh from the locals by other means. This should be handled by targeting militias, not mining. Dodd-Frank takes the route of universal collateral damage, which, before the bill is enacted, has already destroyed the livelihoods of the innocents who depend on it.


  • Anonymous says:

    Yes, thanks for this voice reason. IF the Congress had consulted with the DRC before writing the bill, perhaps it would be much more effective.

Leave a Reply