Conflict mineral legislation set to impact distributors

New legislation from the USA that requires companies to disclose their use of ‘conflict minerals’ is set to have a major impact on the world electronics industry with distributors of electronic components particularly hard hit. Howard Venning, Aspen Electronics MD, looks into the ruling.

The US Securities and Exchange Commission (SEC) recently adopted a rule mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act that requires companies to publicly disclose their use of ‘conflict minerals’ that originated in the Democratic Republic of the Congo (DRC) or an adjoining country.

“Conflict minerals” are minerals mined in conditions of armed conflict and human rights abuses – most notably in the eastern D.R. Congo. With its abundance of mineral resources, the Democratic Republic of Congo could be one of the most prosperous countries in Africa. But as is often the case on this continent, valuable natural resources are more of a curse than a blessing. Whilst much has been done to raise awareness of so-called “blood diamonds” or “conflict diamonds” from Sierra Leone, little light is shone on the background of other minerals which are much more fundamental to most of our lives.

This new legislation requires that any company that reports its results to the SEC, must file a “Conflict Minerals disclosure”. In doing so the organisation in question must research the supply chain asking all those parties the following simple questions; “do any of the products supplied contain any ‘conflict minerals’” and if so “can you guarantee they have not come from the DRC or adjoining country.” Whilst this is a reasonable enough request the work required in order to submit a fully researched and therefore accurate answer is far reaching and time consuming. It could mean going through layers upon layers of suppliers, some of whom may be private companies located in third-world countries, and if the metal has been recycled, as gold often is, it could get even trickier to track.

The following is a review of what these conflict minerals are and where and why they are used.

Gold is the biggest source of conflict mineral trade in Congo and is most responsible for the ongoing conflicts. Gold has soared in price on the commodity markets in recent years, and Congo is literally sitting on a gold-mine worth tens, if not hundreds of billions of dollars. Despite promises by President Kabila to clean up the mining industry, corruption remains rife and thousands of small-scale unofficial mines scatter the country. Gold is used to plate contacts to ensure they are corrosion resistant and therefore as reliable as possible. If you sell RF/Microwave components gold is also used to plate circuits and housings where the gold plated surface reduces the ‘skin effect’. In semiconductors, and any microcircuits that use “wire bonded” contacts, gold plating is used to ensure these contacts provide a good base onto which to bond or solder leads.

Coltan/Tantalum. Coltan is short for Columbite-tantalite – a black tar-like mineral. The Congo possesses 80 percent of the world’s coltan, but only mines a fraction of it. When Coltan is refined it becomes a heat resistant powder, called Tantalum, which can hold a high electric charge. When used in capacitors, Tantalum produces some excellent performance characteristics such as high capacitance to mass, low ESR, low leakage and high temperature. As such Tantalum capacitors are found in a wide range of products spanning commercial, professional and high-reliability (military) electronic circuits.

Tin/Cassiterite. Cassiterite is a tin oxide which is mined extensively in Congo and was once mined in Cornwall. Considering the electronics industry has been “Lead Free” for a number of years now, Tin has replaced Lead in the vast majority of the solders used today. As such, any component and/or circuit that has been soldered as part of its production process will contain Tin.

Tungsten is a dense metal used in everything from Formula One cars to bullets. It”s also used in light bulbs, TVs and mobile phones.

If you think about the above, say you are a distributor that supplies a wide range of components from a number of different manufacturers that you represent, the first question to ask is does any of your products contain ‘conflict materials’. The answer is bound to be yes. You then have the task of getting written confirmation from all your suppliers confirming that, for example the tin in the solder they use, or the gold on the contacts or the tantalum in the capacitors, does not come from the DRC.

At this point the electronics industry grinds to a halt as the quantity of emails, letters, faxes etc goes through the roof. The main reason for saying this is that there is no “de minimis” rules within the legislation. Quite the opposite, as a clear and reasoned statement for not having a “de minimis” has been issued by congress stating that such a ruling “…would have created an over generous loop hole in the law”. So no matter how small the quantity of any of these conflict minerals you supply, you will have to comply with the legislation.

The legislation goes on to confirm that if a mineral is “necessary to the functionality” and “necessary to the production” of the product then it must be included. In short it would seem that the legislation has been written to ensure literally everyone in the supply chain must comply. So, if you are a distributor, representative, CEM or anyone else in the supply chain that works with an international prime, be prepared for some serious compliance work.

It’s no coincidence that the mineral mines are situated in the areas home to the bloodiest violence and conflict. Few, if any, of the mines are large-scale industrial ones owned by international companies. They are hand-built artisan mines, with the only tools available being shovels and a lot of hard labour.

Thousands of tonnes of the raw minerals are smuggled across the border into Uganda and Rwanda where they are exported and smelted with minerals from all over the world – making it very hard to trace the origin of the metals and alloys produced.

Hopefully this will be a short term problem as all the major suppliers of, for example tin based solder or gold for plating, recognise this situation and publish a conformance statement that all those in the supply chain can refer to. Even so, everyone in the supply chain will have to produce a formal statement that will satisfy those that request it.

www.aspen-electronics.com

 

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