Conflict mineral EU Regulation approved, what now?

Camillo Giovannini

Last time I wrote it was back in November, with the draft of the regulation not even public, so that we had to discuss based on official statements and information that were leaked.

Today we are in a very different position, as we have the text of the regulation that went through adoption and approval after the final amendments the 16th of March, giving us the opportunity to make a deeper analysis.

The approval went quite smooth, even though some amendments proposed by minor parliament groups, that would have improved (from my point of view) the regulation, have been “smitten” during the session.

Short background

For those who did not follow the path of the approval, this started back in the 2014 when the Commission submitted to the Council a proposal for a Regulation of the European Parliament and of the Council setting up a Union system for supply chain due diligence self-certification of responsible importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas.

The next year, during 2015, after multiples discussion and negotiations between the Working

Parties, the European Parliament adopted the amended regulation proposed by the Commission.

Five political trilogue meetings took place in the course of the year 2016, and the 22 of November a compromise was reached on the text of the draft Regulation.

The INTA Committee (Committee on International Trade) approved the draft during January 2017 and the past 16th of March the EP voted in favour of the Regulation.

Are we finally done?

The answer is NO, the regulation as approved by the EP must be approved by the Council, which was done the last 3 of April, and now we are awaiting the publication in the official Journal of the European Union. This last step should occur in two weeks top from now.

Structure and points of interest of the new regulation.

To resume the information of the regulation, I will try to follow the same structure, with the objective to keep, for future follow-up, a familiarity and for a better and easier understanding.

The key points of the regulation and obligations are:

  1. Who is covered by the regulation
  2. Obligations of the regulation
  3. Geographical area covered by the regulation
  4. Date of enforcement

    Who is covered by the regulation?


The easier way is to quote the regulation:

“Importers of minerals or metals containing or consisting of tin, tantalum, tungsten or gold.”

Of course, not all the importers are included, there are some exemptions, depending on the quantities imported.

The quantities at interest are the ones over the thresholds presented in the first annex of the regulation, where we can find the quantities of minerals or metals that are materials and subject to the regulation.

Therefore it’s not applicable to the Union importers of minerals or metals, where their annual import volume of each of the minerals or metals concerned is below the volume thresholds set out in first annex for the regulation.

The thresholds in the annex, are set at a level that should ensure that the vast majority, but no less than 95 %, of the total volumes imported into the Union of each mineral and metal are covered by the regulation.

The 95% coverage will be maintained under observation, to be sure that the threshold is at the right level, not to go above or below that percentage.

Obligations of the regulation

The obligations can be resumed in four points:

  1. Management system obligations
  2. Risk management obligations
  3. Disclosure obligations
  4. Third-party audit obligations

Management system obligations

This paragraph is aimed to describe and explain the creation of a “Supply chain policy”, which must be done in accordance of this same regulation and the OECD due diligence guidance for supply chain.

The new policy within the management system must also provide:

  1. Details of the minerals and metals, which can potentially originate from conflict-affected and high-risk areas.
  2. Establish and operate a chain of custody or supply chain traceability system for metals and mineral.

The implementation of a Supply Chain Policy could be challenging, so I thought it could be useful to present five steps that could be used as guidance:

  1. Adopt and commit to a supply chain policy for minerals originating from conflict-affected and high-risk areas.
  2.  Structure internal management systems to support supply chain due diligence.
  3.  Establish a system of controls and transparency over the mineral supply chain.
  4.  Strengthen company engagement with suppliers.
  5.  Establish a company level grievance mechanism.

These are of course the basic, extracted from the regulation and the OECD Guidance. It is important to remember that the details required in the policy are not something that should be taken easily.

For example if we take a look at chain of custody/supply chain traceability system for metals and mineral, the following information must be provided:

  1. description of the mineral, including its trade name and type;
  2. name and address of the supplier to the Union importer;
  3. country of origin of the minerals;
  4. quantities and dates of extraction
  5. where minerals originate from conflict-affected and high-risk areas
  6. records of the third-party audit reports of the smelters and refiners (for metals)

Risk management obligations

The risk management obligations are identified within the obligation regarding the implementation of a strategy of response to the identified risks, with reporting, countermeasures, monitoring and subsequent risks mitigation.

As made for the management system obligation, I have prepared four suggested steps to approach the issue:

  1. Identify the scope of the risk assessment of the mineral supply chain. For example a red flag system for locations of mineral origin/transit and supplier.


  2. Map the factual circumstances of the company’s supply chain, both under way and planned. Assess the context of conflict-affected and high-risk areas; clarify the chain of custody, the activities and relationships of all upstream suppliers; identify the locations and qualitative conditions of the extraction, trade, handling and export of the mineral


  3.  Assess risks in the supply chain, in particulars regarding:


    1. The principles and standards of the company supply chain policy,
    2. National laws of the countries where the company is domiciled or publicly-traded
    3. Legal instruments governing company operations and business relations, such as financing agreements, contractor agreements, and supplier agreements.


  4.  Assess different approaches for upstream and downstream companies. The differentiation is important as the upstream companies must clarify chain from extractors, at the opposite the downstream companies the supplier chain custody solely.

The approach above is suggested, but it is important that the risk management will be  able, for example to enable the company to:

  1. To continue trade while simultaneously implementing measurable risk mitigation efforts;
  2. Diligently suspend trade temporarily while pursuing on-going measurable risk mitigation efforts;
  3. Safely disengage with a supplier after failed attempts at risk mitigation;

Disclosure obligations

The disclosure obligation includes of course the necessity to make the report public as widely as possible.

This must include also being available to the company “downstream” purchaser and presented on the internet and on an annual basis.

The report should comment on the supply chain due diligence policies and practices for responsible sourcing. The report shall contain the steps taken by the responsible importer to implement the obligations as regards its management system and risk management (points 1 and 2 above described), as well as include a summary report of third-party audits performed (more information right below).

Third-party audit obligations

The third-party audit obligations are probably the most looked up and the one that are subject to most questions.

Is subject to the Third-party audit obligation, the importer within the scope of the regulation, and must audit the whole activities, processes and systems used to implement supply chain due diligence regarding minerals or metals, including the management system, risk management, and disclosure of information in accordance with the regulation.

Exemption to third party audit can be obtained if the importer makes available substantive evidence, including third-party audit reports, demonstrating that all smelters and refiners in their supply chain comply with the Regulation, being included in the “List of global responsible smelters and refiners”.

Geographical area covered by the regulation

This is one of the major differences with the US Dodd-Frank, which cover Democratic Republic of Congo (DRC) and adjoining countries.

The EU regulation states that all “conflict-affected and high-risk areas” are covered.

As up today, we don’t have an exhaustive list, but is clear that the Commission will provide an indicative, non-exhaustive and regularly updated list of conflict-affected and high-risk areas. 

Date of enforcement

The real compliance and reporting obligations on companies do not take effect until January 1, 2021.

The date of enforcement has been discussed during the approval of the EP, with some parties that tried to anticipate the final date, but with no success.

The EU regulation states that an early application is strongly suggested, and we are going to see further why it could be a very good idea.

Why we (and our client) should move right now

The time is right to start advising our client on an early move to get in compliance with the new regulation, as the procedures are extensive and time-consuming.

Also, early compliance to the regulation disclosures, will enable the application of exemptions schemes, in order to avoid third party audits, in the case that all the smelters and refineries in the client supply chain get included in the “List of global responsible smelters and refiners” before the mandatory enforcing period.

I hope this article clarified the current state of the art, and for further information about the Conflict Minerals Rule, don’t hesitate to contact me and to visit Crowe Horwath’s Conflict Minerals Resource Center at

Crowe Horwath – Bucharest Office

Camillo Giovannini

Partner - [email protected]