Businesses resist ‘conflict minerals’ law

US manufacturers are mounting a lobbying campaign over a provision slipped into the financial reform legislation requiring companies to declare products containing minerals from the Democratic Republic of Congo.

The Dodd-Frank act includes a clause which effectively classifies resources from Congo as “conflict minerals”, mimicking previous campaigns which targeted so-called “blood diamonds” from countries with poor human rights records.

The mandatory disclosure follows public pressure to extend the curbs on diamonds to the trade in minerals that has helped to fuel conflict in the Congo. “This will affect almost every US manufacturing sector. It covers coltan and ultimately tin, which are used right across industry,” said Rick Goss, a vice president at the Information Technology Industry Council.

Widespread use of minerals from the region in electronics products has triggered headlines attacking companies such as Apple and Microsoft for selling “genocide phones”.

Under the new law, any US-listed company whose products require the affected minerals for their manufacture or “functionality” will have to report annually on whether the metals can be traced back to the Congo region. Manufacturers who cannot declare their products “conflict free” will have to produce an independently audited report on the steps taken to ascertain the source of the minerals.

Companies that breach the new rules will risk fines, court orders and adverse publicity under the normal disclosure sanctions applied by the Securities and Exchange Commission.

Business groups say they support the aim of the new law but remain concerned about its far-reaching nature. They are gearing up to lobby the SEC over the regulation to implement the law. The precise wording of the new rule, to be finalised by April, is seen as crucial in determining the provision’s impact.

“If the law is implemented to require manufacturers whose product components contain conflict minerals to track back the sources of the materials to establish an audit trail, that could be a task of mind-boggling complexity,” said David Levine, of McDermott Will & Emery, the law firm.

The National Association of Manufacturers said it supported “the underlying goal of the provision but we are concerned about the mechanisms designed to achieve that goal”.