EU Conflict Minerals Regulation Are You Ready? July 14, 2020 - PowerPoint PPT Presentation

EU Conflict Minerals Regulation – Are You Ready? July 14, 2020 #010-9089-4439

Background  Responsible sourcing -- important in supply chain management  Information required -- original of raw materials and human rights impacts of extraction and supply chains  Goals  Reduce financing of armed conflicts  Reduce human rights abuses  Expectations squirepattonboggs.com 2

Basics  Regulation (EU) 2017/821 of the European Parliament and of the Council of 17 May 2017 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas  Adopted April 2017  Takes full effect January 1, 2021  Requires supply chain due diligence and disclosure about sourcing of 3TG  “Union importers”  Any natural or legal person importing certain minerals or metals for release at minimum levels into the EU. The minerals and metals that are named in Annex 1. squirepattonboggs.com 3

Basics  “Conflict-affected and high-risk areas”  Supply chain due diligence must be based on framework in OECD Guidance  Broader than the US rule  Includes real obligations -- risk mitigation, third-party audits and consultations  Focus on origin of materials provided to SORs squirepattonboggs.com 4

Who is Covered by the Regulation?  Entities that import into the EU goods containing or consisting of tin, tantalum, tungsten, or gold over certain threshold amounts  “Union Importer” defined by reference to EU Customs Code  Annex 1: Part A (Minerals); Part B (Metal) squirepattonboggs.com 5

Who is Covered by the Regulation?  Manufacturers of components and finished products not covered  By-products are covered  Recycled metals are not covered  Existing stocks before 1 February 2013 are not covered  Brexit impact squirepattonboggs.com 6

Conflict-Affected and High-Risk Areas  “Conflict-affected and high-risk areas” (CAHRAs)  Areas in a state of armed conflict or fragile post-conflict as well as areas witnessing weak or non-existent governance and security, such as failed states, and widespread and systemic violations of international law, including human rights abuses  Guidance to come from the Commission • handbook on how to determine what are CAHRAs • indicative / non-exhaustive list  Until guidance is provided, you need to determine the origins of your minerals and metals and determine if you believe, based on your information and experience, such areas are CAHRAs squirepattonboggs.com 7

What Must Union Importers Do?  Design and implement supply chain due diligence processes  Due diligence is not merely sending information requests to suppliers  Due diligence process must be developed in accordance with the “ OECD Due Diligence Guidance on Responsible Supply Chains of Minerals from Conflict- Affected and High-Risk Areas ” • Strong company management systems • Identify and assess risks • Address and mitigate risks • Independent third-party audits • Annual disclosure squirepattonboggs.com 8

What Must Union Importers Do?  Conflict minerals policy  Senior staff responsibility for oversight  Contracts and agreements  Record retention -- 5 years  Grievance mechanism  Identify and assess the risks of adverse human rights impacts squirepattonboggs.com 9

What Must Union Importers Do?  Risk management plan  Adopt  Implement  Monitor and track performance  Report back to senior management  Suspend or discontinue engagement squirepattonboggs.com 10

What Must Union Importers Do?  Assess due diligence practices of SORs  Report findings to senior management to implement a response strategy squirepattonboggs.com 11

Third-Party Audits  Independent third-party audits  Provided by the SORs  Performed by the Union Importer  Importers of metals -- no audits required if importers can show “substantive evidence” that all the smelters and refiners in their supply chains comply with the regulation  “Substantive evidence” is deemed fulfilled -- source only from SORs on the Commission’s list squirepattonboggs.com 12

Third-Party Audits  Established SOR due diligence policies and procedures likely to be recognized:  Responsible Minerals Initiative  Responsible Jewellery Council  London Bullion Market Association  If all SORs in your supply chain are not now “responsible” or “conformant,” you might still have time to make some changes in your supply chain before 1 January 2021 squirepattonboggs.com 13

Annual Disclosures  Due diligence policies and procedures designed and undertaken  Risk management system  Actual risk management steps taken  Third-party audits  Provide to immediate customers -- “all information gained and maintained” by due diligence efforts squirepattonboggs.com 14

Annual Disclosures  As to minerals:  Description of mineral, trade name and type  Name and address of supplier  Country of origin of minerals  Quantities and dates of extraction, if available, expressed in volume or weight  When sourced from conflict-affected and high-risk areas, mine of origin, locations where minerals are consolidated, traded, and processed, and Taxes, fees, and royalties paid for minerals squirepattonboggs.com 15

Disclosures  As to metals:  Description of metal, trade name and type  Name and address of supplier  Name and address of SORs in supply chain  If available, records of third-party audit reports of SORs or evidence of conformity with due diligence scheme, but if those are not available: • Countries of origin of minerals in the supply chain • Where metals based on minerals originating from CAHRAs, additional information according to the supplements for downstream economic operators  As to recycled or scrap materials:  Conclusion and due diligence measures  As to by-products:  Point where by-product is first separated from its primary mineral or metal squirepattonboggs.com 16

Consultations  If identify risks but continues to trade with a supplier with identified risks or temporarily suspends trade with it, the importer must:  Consult with suppliers and stakeholders • Suppliers • Local and central government authorities • International or civil society organizations • Affected 3rd parties  Design risk mitigation strategies  Implement risk management plan  If only “globally responsible smelters and refiners,” no consultation required squirepattonboggs.com 17

Additional Elements  “Delegated Acts” will: • set remaining thresholds in Annex I • list “globally responsible smelters and refiners” • identify smelters and refiners that source any metals or minerals from conflict-affected and high-risk areas • prepare non-binding handbook of guidelines to determine CAHRAs • provide non-exhaustive list of CAHRAs squirepattonboggs.com 18

Enforcement  Effective date -- 1 January 2021  Member states to confirm whether importers comply  Member states responsible for ensuring compliance  By 30 June of each year, member states to submit report to the EU Commission  Implementation  notices of remedial action  Improvement in risk mitigation will be expected squirepattonboggs.com 19

Getting Started  Check EU Customs Codes -- determine which minerals and metals you import, in what volumes and identify suppliers  Inventory existing internal management systems  Name conflict minerals working group and overall lead squirepattonboggs.com 20

Questions? squirepattonboggs.com 21

CLE Script For those of you who require CLE credits please note the following states have been approved or pending CLE in AZ, CA, CT, NJ, NY and OH (pending self- study) Please write down the following affirmation code [CMU714] A couple business days after today’s session you will receive an email with a link to the uniform certificate of attendance and program evaluation to complete and SUBMIT to my colleague, Robin Hallagan at robin.hallagan@squirepb.com. squirepattonboggs.com 22

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