Jennifer Guest Project Engineer Tetra Tech P: (734) E:

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1 Union system for supply chain due diligence selfcertification of responsible importers of tin, tantalum and tungsten, their ores, and gold originating in conflict-affected and high-risk areas Jennifer Guest Project Engineer Tetra Tech P: (734) E:

2 Outline 1. What has happened to date 2. EU legislative process 3. Comparison of EU to US conflict minerals requirements

3 What has happened to date: 2014/03/05 Legislative proposal published 2014/03/13 Committee referral announced in Parliament, 1 st reading/single reading 2014/10/20 Committee referral announced in Parliament, 1 st reading/single reading 2015/04/14 Vote in committee, 1 st reading/single reading 2015/04/24 Committee report tabled for plenary, 1 st reading/single reading 2015/05/19 Debate in Parliament 2015/05/20 Decision by Parliament, 1 st reading/single reading 2015/07/14 interinstitutional negotiations with amendments from plenary

4 EU Legislative Process First Reading Committee Stage Plenary Stage Follow-up Procedure Second Reading Committee Stage Plenary Stage Third Reading Conciliation Plenary Stage

5 EU vs US: Scope US Tin, Tantalum, Tungsten and Gold (3TG) DRC and surrounding countries (covered countries) United States SEC filing companies Manufacturers (and manufacturers that contract to manufacture) of products Products that contain 3TG 3TG is necessary to the production and functionality of the product EU Tin, Tantalum, Tungsten and Gold (3TG) Conflict-affected and highrisk areas Union importers of 3TG Union smelters of 3TG

6 EU vs US: Labels US No labelling requirement EU Responsible importers who self-declare can be certified by means of a label Responsible importers shall be granted a European responsible importer label by Member States competent authorities

7 EU vs US: Exemptions US Recycled or scrap sources EU Recycled or scrap sources

8 EU vs US: Requirements US Conduct a reasonable country of origin inquiry (RCOI) in good faith If results from the RCOI show that the 3TG is or may be coming from the covered countries then due diligence must be conducted on your supply chain in accordance to a nationally or internationally recognized frame work e.g. OECD Due Diligence Guidance EU Conduct supply chain due diligence in accordance to Annex II of the OECD Due Diligence Guidance The regulation continues to cite requirements for due diligence that aligns with the OECD Due Diligence Guidance e.g. management system, risk assessment, grievance mechanism, supply chain policy etc.

9 EU vs US: Requirements EU Additionally. Traceability system for minerals to include: Description of mineral including its trade name and type Name and address of supplier to importer Country of origin Quantities and dates of extraction, expressed in volume or weight If from conflict region provide mine of origin, location where minerals are consolidated, traded and processed, and taxes, fees, royalties paid

10 EU vs US: Requirements EU Additionally. Traceability system for metals to include: Description of metal including trade name and type Name and address of the supplier to the importer Name and address of the smelter or refiner Record of smelter or refiner third-party audit Country of origin of the mineral If from conflict region additional info according to the OECD required

11 EU vs US: Requirements EU Additionally. The Commission will make a list of responsible importers of minerals and metals available on the internet. Any smelter in the Union must meet all the requirements of this Reg. If they do not then they will subject to fines The Commission will make a list of responsible smelters or refiners and make it available on the internet. Member States shall carry out ex-post checks to ensure responsible importers comply with Article 4, 5, 6 and 7. They will be conducted by taking a risk-based approach. The ex-posts will include: Examination of the supply chain due diligence obligations including management system, risk management, third-party audit and disclosure Examination of documentation and records that demonstrate compliance with due diligence obligations Examination of audit obligations

12 EU vs US: Smelters US Must trace, identify and report all smelters EU Must trace, identify and report all smelters The EU plans to maintain a list of responsible smelters and refiners

13 EU vs US: Audits US Currently, after the court of appeals decision, an independent private sector audit is required if a filing company claims they are conflict free or are not conflict free EU Certified responsible importers shall be exempted from thirdparty audit provided they submit substantive evidence that all smelters or refiners in their supply chain conform to the provision of this Reg. Importers in scope of this Reg. shall carry out a third-party audit Audit scope to include: Importer s activities, processes and systems for supply chain due diligence Importer s compliance with Articles 4, 5 and 7 of this Reg.

14 EU vs US: Reporting US Reports are due by May 31 st of each calendar year for the previous year Submit to the SEC via EDGAR EU Reports are due by March 31 st of each calendar year for the previous year Submit to the Member State competent authority

15 US Form SD: Commission File Number IRS Employer Identification Number Address and Contact Person Brief description of the RCOI Form to be filed on EDGAR CMR: Detailed description of the due diligence process implemented and the results of the assessment Provide a description of the products and the facilities used to process these products Disclose the location of the mine and the step took to determine this with the greatest possible specificity When applicable a copy of the independent third party audit and who conducted the audit and certification of independence EU vs US: Reporting EU Company contact details and description of its commercial activities Declaration of conformity to Article 4, 5, 6 and 7 Third-party audit Total amount of minerals purchased as confirmed by a third-party audit Name and address of each responsible smelter or refiner in its supply chain Third-party audit of smelter or refiner Proportion of minerals originating from conflict-affected and high-risk areas to the total amount of the minerals purchased by each of those smelter or refiner, as confirmed by a third-party audit Report publicly on an annual basis on due diligence policies and practices and risk management and summary of third-party audit

16 Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains

17 Outline 1. Status 2. Comparison of China to US conflict minerals requirements

18 What has happened to date: In an unprecedented move the Chinese government opened up their Due Diligence Guidelines for Responsible Mineral Supply Chains for public comment. The commenting period closed on November 7, 2015 CFSI submitted and included anonymous comments from member companies Currently awaiting feedback on the comments from China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters (CCCMC)

19 China vs US: Scope US Tin, Tantalum, Tungsten and Gold (3TG) DRC and surrounding countries (covered countries) United States SEC filing companies Manufacturers (and manufacturers that contract to manufacture) of products Products that contain 3TG 3TG is necessary to the production and functionality of the product China Covers all minerals but the CCCMC is prioritizing: Tin, Tantalum, Tungsten and Gold (3TG) Conflict-affected and high-risk areas Voluntary for all Chinese companies which are extracting and/or using mineral resources and their related products and are engaged at any point in the supply chain of minerals

20 China vs US: Requirements US Conduct a reasonable country of origin inquiry (RCOI) in good faith If results from the RCOI show that the 3TG is or may be coming from the covered countries then due diligence must be conducted on your supply chain in accordance to a nationally or internationally recognized frame work e.g. OECD Due Diligence Guidance China Must determine origin Risk based assessment Apply OECD Due Diligence Guidance

21 China vs US: Requirements China Additionally. Risk is broken down into two categories. Type 1 are the risks contributing to conflict and serious human rights abuses, as they are defined in the OECD Due Diligence Guidance Type 2 go beyond the risks outlined in the OECD Due Diligence Guidance. They include those risks relating to serious misconduct, as defined in the Chinese Responsible Mining Guidelines.

22 China vs US: Requirements China Additionally. Warning Signs have been defined to help determine when enhanced due diligence is required:

23 China vs US: Audits US Currently, after the court of appeals decision, an independent private sector audit is required if a filing company claims they are conflict free or are not conflict free EU Audit will assess whether the company has fulfilled core requirements the auditor will check a) whether the company took appropriate steps to actively collect information on risks and to evaluate the information received by third parties b) whether the company has taken effective and adequate action to mitigate the risks identified

24 China Additionally. Companies can apply for certification China vs US: Audits Basic responsible sourcing certification Basic responsible sourcing certification (making progress) Extended responsible-sourcing certification Certified companies and those seeking certification will be made available via list on a website

25 China vs US: Reporting US Reports are due by May 31 st of each calendar year for the previous year Submit to the SEC via EDGAR China Reporting publicly for the step 5 report (OECD Due Diligence) A template and website will be made available

26 What s Next Watch for feed back from the commenting period CCCMC has promised further guidance on how to implement due diligence requirements and audit protocols

27 Overall Comparison Requirement U.S. E.U. China Minerals in scope 3TG 3TG All (3TG priority) Democratic Republic of the Congo (DRC), Angola, Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and All conflict-affected and All conflict-affected and Regions/Areas in scope Zambia high-risk areas high-risk areas Companies in scope All SEC filing companies All importers and smelters All Chinese companies which are extracting and/or using mineral resources and their related products and are engaged at any point in the supply chain of minerals OECD Due Diligence Guidance Yes Yes Yes Audit Pending Court Decision Yes Yes Public Reporting Yes Yes Yes

28 Jennifer Guest Project Engineer Tetra Tech P: (734) E: