Conflict minerals comment period delayed under corporate and congressional pressure

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After a powerful committee chairman and several corporate interests wrote to the Securities and Exchange Commission (SEC) requesting an extension of the comment period for the agency’s proposed regulations requiring that companies disclose when they use “conflict minerals,” the agency granted the request.

The new regulations are mandated under a little-noticed provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act calling for companies using conflict minerals to disclose whether they were mined by rebels in the Democratic Republic of Congo (DRC) or neighboring countries, where metals such as gold are mined under inhumane conditions and fund war crimes. The mining provisions in the Dodd Frank bill also require that companies determine and disclose a "chain of custody" for such minerals, to trace where they originated, because they fund rebels in DRC and neighboring countries.

House Financial Services Committee Chairman Spencer Bachus, R., Ala., wrote the agency on January 25, saying that “to provide appropriate responses, issuers must consult with a variety of effected (sic.) parties to determine the impact on their operations.” He asked for a 30-day extension of the comment period, which was scheduled to end on January 31. The new comment period, announced three days after the agency received Bachus' letter, is extended through March 2.

A group of 16 powerful trade associations, including the U.S. Chamber of Commerce, the National Retail Federation, and the National Association of Manufacturers, also asked for an extension in a December letter to the agency. The National Mining Association wrote more recently with a similar request.

The Business Roundtable has also included the new conflict mineral regulations on its list of regulations that are "hindering investment and job creation," and which President Barack Obama should consider reviewing.

Delays in comment periods and rulemakings can be sought by interests when they want to throw up roadblocks on an issue. Many groups, individuals and some corporate interests submitted comments during the original time period, including the New York City American Bar Association's Human Rights Committee and TriQuint Semiconductor, Inc.

One of the most outspoken advocates for conflict-free minerals is Enough, a campaign by the Center for American Progress. In the past two years, Center for American Progress has reported spending $814,000 lobbying Congress on a long list of issues, from extending unemployment insurance benefits to the Child Nutrition Act, in addition to the issue of conflict minerals. Enough ranks companies on their commitment to making their products conflict free. Some companies using minerals in their products such as cell phones and computers are also working with Enough to stop the use of these minerals.

An Enough report lists 29 partners in its conflict mineral campaign, including major players like Amnesty International, Save Darfur and UN Refugee Agency. Corporate participants include HP, Intel, Motorola, Nokia, Microsoft, and Dell. HP vowed to “share our global supply chain best practices in order to promote change across all industries where conflict minerals are used.”

Sasha Lezhnev of the Enough campaign said, “I am surprised, this is the first time people are paying more attention to the regulatory process than the legislation. Companies thought this bill would never pass.”

A major force on the other side is the manufacturing industry conglomerate National Association of Manufactures (NAM). It lobbied both chambers of Congress on the conflict mineral issue during the last half of 2010. Lobbying reports show that NAM reported spending seven million dollars on lobbying in 2010 on conflict minerals along with many other issues.

After the first round of Congressional lobbying, the lobbying focus shifted to the SEC. Between August and December of 2010, when the agency issued the proposed regulations, the agency held 25 meetings about conflict mineral regulations. The SEC met with interests on both sides of the issue. Industry lobbyists sought meetings, but so did the UN Group of Experts for the DRC, the Ministry of Mines of the Democratic Republic of CongoEnough and Global Witness. One meeting included the industry giants: Retail Industry Leaders Association, Costco, Target, Best Buy, J.C. Penney, Wal-Mart, and Lowe’s.

One popular jewelry brand, Tiffany & Co., is an opponent of these reforms. The company does not want gold to be listed as a conflict mineral, and, in its letter to the SEC, attests that it “purchase[s] only recycled gold or gold produced by a single U.S. smelter from ore produced by a single U.S, mine.” Tiffany would be affected by this regulation because it would have to prove the gold the company uses is not from conflict zones in DRC or surrounding countries. The company asserts that it is difficult to trace recycled gold and the use of components, such as spring closures, provided by other manufacturers.

In the letter to the SEC, NAM reiterates Tiffany’s stand and calls for an exemption for recycled or reclaimed minerals because of the difficulty of identifying the source of materials once they are refined. NAM met with officials at the SEC August 30. The group argued that because the rebel groups only profit from raw mineral extraction and recycling minerals reduces demand for raw minerals, recycling is a good way to reduce the Rebel’s mineral trade. Enough and other groups backing this provision insist that there are simple steps companies can take to ensure that exempting recycled minerals does not turn into a loophole.

NAM’s policy wish list includes a flexible standard of “due diligence.” The group wants a minimalistic standard on how much research and tracking companies will be responsible for while Enough contests that there “should be basic steps companies can take to achieve due diligence.” HP and Intel have already proved tracing these minerals is possible.

DRC has been discussing the mining provisions in the Dodd Frank bill a few years now, Foreign Agents Registration Act filing show. In 2008, the Congolese President, hired Livingston Group to lobby Congress on various issues and had several contacts with including Reps. Maxine Waters, D-Calif., Mel Watt, D-N.C., Gene Green, D-Texas, Barney Frank, D-Mass., and Gwen Moore D-Wisc., “Concerning a forthcoming Congressional hearing on transparency in the extractive industries of developing countries.

Companies will start disclosing "conflict mineral" use in 2012 at the earliest.