European Union reaches outline deal to stem flow of conflict minerals

BRUSSELS (Reuters) - The European Union on Wednesday agreed an outline deal on a law to clean up the commodities supply chain, so importers will have to carry out checks to stem the use of gold and other metals from conflict zones, European politicians said.

Human rights campaigners said the agreement was progress after months of argument, although it did not go far enough. Industrial users of the relevant commodities said the compromise struck the right balance.

“This deal is a breakthrough,” said Dutch Green Member of the European Parliament Judith Sargentini, who was involved in the negotiations. She added it was “only a partial response”, but welcomed a commitment for a review to assess progress.

The EU rules will cover conflict minerals from anywhere in the world, meaning they go further in geographic scope than U.S. Dodd-Frank legislation finalised in 2012.

The U.S. law insists on scrutiny of imports of tin, tungsten, tantalum and gold from the Democratic Republic of the Congo and nine neighboring countries as raw materials and when used in products such as mobile phones, electrical goods and cars.

The EU regulation focuses on imports of the commodities used to make them, in line with the European Commission’s original proposal, but not with demands from the European Parliament to cover the “upstream” or finished products.

The European Automobile Manufacturers' Association (ACEA), which represents firms, such as Volkswagen VOWG_p.DE, Peugeot and Ford, said it supported the Commission's aim to increase transparency in minerals trade.

“It (ACEA) considers that the upstream part of the supply chain has the best leverage to achieve transparency in mineral sourcing and to effectively combat the financing of armed conflicts,” it said in a statement.

“Compliance obligations for downstream companies should be avoided as they are extremely burdensome and costly in case of highly complex supply chains.”

In an open letter this week a group of 130 non-governmental organizations urged the European Union to use its leverage as the world’s largest trading block and a significant destination of minerals that fund conflicts.

“As civil society organizations, we have therefore called for a strong and effective regulation that would require all companies bringing these minerals into the EU, in whatever form, to perform some basic checks and due diligence on their supply chains,” the letter said.

Wednesday’s deal is based on guidelines for responsible supply chains established by the Organization for Economic Cooperation and Development.

Tyler Gillard, an OECD legal adviser, said the EU regulation would be “an important step toward ensuring business avoids contributing to conflict and serious human rights impacts linked to the production and trade of minerals”.

The agreement requires months of technical work before it can be implemented as EU law, EU sources said.

Barbara Lewis