Conflict minerals compliance – New twists for 2024

The next filing under the U.S. Conflict Minerals Rule is due on May 31, 2024. That filing will be for the 2023 calendar year. In early 2024, U.S. public companies will begin soliciting from their supply chains information on the tin, tantalum, tungsten and gold (3TG) in their products as part of their reasonable country of origin inquiry (RCOI) and due diligence under the Rule. This year, there are additional watch-outs that may have compliance and disclosure ramifications beyond the Conflict Minerals Rule.  

The Conflict Minerals Rule is specifically concerned with responsible 3TG sourcing from the Democratic Republic of the Congo region. However, the sourcing information solicited and received as part of the RCOI and due diligence process is global.

Over the last ten years, information reported by suppliers has required companies to consider the applicability of North Korea, Venezuela, Myanmar and Russia sanctions. Companies also have had to consider reports alleging forced and/or child labor in the 3TG supply chain, among other potential concerns, that potentially implicate supply chain and human rights policies and import restrictions.

This year, there is a new NGO report for companies to consider as they review the 2023 smelter and refiner information they receive from supply chains over the next few months. In mid-October, C4ADS published a report alleging linkages between selected Chinese gold mines and refiners and the Xinjiang region of China.

In particular, Xinjiang sourcing has implications under the U.S. Uyghur Forced Labor Prevention Act (the UFLPA is discussed in our earlier Alerts here, here and here). C4ADS describes itself as a non-profit dedicated to data-driven analysis and evidence-based reporting of conflict and security issues worldwide.

In addition, although not a new issue, Russia sanctions have continued to evolve. For example, in 2023, multiple jurisdictions strengthened sanctions relating to Russian gold and tungsten.       

Three quick take-aways

• Consider the broader context of 2023 3TG smelter and refiner and other information reported by supply chains. Is the information potentially relevant to a sanctions or forced labor compliance analysis? Does reported information potentially implicate human rights risk assessments and/or human rights and supply chain policies?  Is the information being appropriately considered in the context of modern slavery transparency and mandatory human rights due diligence legislation and the EU’s new Corporate Sustainability Reporting Directive?
• Be mindful of data limitations. Most suppliers report 3TG sourcing information at the “company level,” i.e., for all their products rather than those supplied to the requesting downstream commercial customer. Therefore, smelters and refiners reported by a supplier may not be in the requesting downstream customer’s supply chain. Reported information also often presents other validation concerns. 
• There isn’t a one-size-fits-all approach to address the watch-outs highlighted in this post. The analysis and appropriate compliance and risk mitigation steps (if any) will depend upon numerous company- and supply chain-specific factors, among other things. However, given the evolving regulatory landscape – both transparency and substantive compliance requirements – it is becoming increasingly important for companies to consider the broader implications of 3TG sourcing and compliance information received from suppliers.

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