Financial Reform Bill Targets ‘Blood Diamonds’

July 21st, 2010 - by admin

Mary Beth Sheridan / Washington Post – 2010-07-21 22:54:41

US Financial Reform Bill
Also Targets ‘Conflict Minerals’ from Congo

WASHINGTON (July 21, 2010) — The financial regulation bill that President Obama will sign into law on Wednesday is supposed to clean up Wall Street. But an obscure passage buried deep in the 2,300-page legislation aims to transform a very different place — eastern Congo, labeled the “rape capital of the world.”

The passage, tucked into the bill’s “Miscellaneous Provisions,” will require thousands of US companies to disclose what steps they are taking to ensure that their products, including laptops, cellphones and medical devices, don’t contain “conflict minerals” from the Democratic Republic of the Congo. The sale of such minerals has fueled a nearly 15-year war that has been marked by a horrific epidemic of sexual violence.

The issue of “conflict minerals” was barely mentioned during congressional debate on the Wall Street bill. But it has attracted growing concern from an unlikely alliance of conservatives and liberals — from Sen. Sam Brownback ((R-Kan.) to feminist Eve Ensler, author of “The Vagina Monologues.” Activists hope to ultimately see an international system for curbing the trade, such as the one that has slowed the sale of “blood diamonds” from West Africa.

“This is one of those issues that is below the radar for about 99.9 percent of Americans…. Everyone has their cellphone up against their ear, nobody is thinking of Congo or conflict minerals. But everybody’s got some, potentially, right next to their ear,” said Rep. Jim McDermott (D-Wash.), speaking recently at the Center for American Progress.

Although little noticed by the public, the provision in the regulatory bill could have a broad impact. It applies not only to electronics companies, which are major users of Congolese tantalum, but also to all publicly traded US firms that use tin and gold.

“This is a law that is going to affect virtually the entire US manufacturing sector,” said Rick Goss, vice president of environment at the Information Technology Industry Council.
Charting new territory

Congo “conflict minerals” law is the first of its kind in the world, Goss said. European governments are pondering similar steps, even as US officials and industry experts caution that the murky nature of the conflict makes it difficult to trace the minerals.

The war in Congo began after the 1994 genocide in neighboring Rwanda, which sent streams of militiamen across the border. An estimated 5 million people have died since in mineral-rich eastern Congo, in one of the bloodiest conflicts since World War II. Hundreds of thousands of women have been sexually assaulted in what U.N. envoy Margot Wallstrom referred to in April as the world’s “rape capital.”

Congolese activists, UN experts and nongovernmental groups have become increasingly concerned that armed Congolese groups are financing themselves with minerals such as gold and the “three T’s” — tin, tungsten and tantalum. The minerals are extracted from remote Congolese mines and smuggled to neighboring countries.

Congo is the source for an estimated one-fifth of the world’s tantalum, as well as smaller percentages of the other three minerals.

During her trip to Congo last year, in which she held an emotional meeting with rape victims, Secretary of State Hillary Rodham Clinton called for greater international action to stem the flow of the minerals.

The issue got tied to the financial reform bill largely because of Brownback, who had previously introduced legislation on “conflict minerals.” He sought to attach an amendment to the bill, and Sen. Christopher J. Dodd (D-Conn), chairman of the banking committee, supported it, congressional staff said. In the end, Brownback voted against the overall bill, but his amendment survived.

The new law requires American companies to submit an annual report to the Securities and Exchange Commission disclosing whether their products contain gold, tin, tungsten or tantalum from Congo or adjacent countries. If so, they have to describe what measures they are taking to trace the minerals’ origin.

The law does not impose any penalty on companies who report taking no action. But the disclosures must be made publicly on firms’ Web sites.

“The consequence is a market-driven one. Consumers can make their choices. Do they want their electronic products to be funding gang rape in central Africa? I don’t think most Americans would want that,” said Rory Anderson of the World Vision humanitarian group, which has been pushing for the legislation.
‘We need to toughen up’

U.S. executives say it can be exceedingly difficult to figure out whether there are “conflict minerals” in their products. Such minerals may, for example, be smuggled from Congo through Rwanda, mixed with ore from other countries in a smelter in Kazakhstan and then sold to a company in Southeast Asia that supplies a parts manufacturer in China.

Many firms in the high-tech sector have been trying to ensure their suppliers don’t use “conflict minerals,” jointly running a pilot program at smelters to identify where minerals come from.

Robert Hormats, the undersecretary of state for economic affairs, said in an interview that tracing the source of minerals is much more complicated than tracing the source of diamonds. For one thing, he said, diamonds “aren’t melted down.” In addition, the rebels sometimes gain or lose control over mines.

Still, the State and Treasury departments are examining possible sanctions against US companies that use “conflict minerals.”

“We need to toughen up. Sanctions is one way,” said Hormats, who has been working with industry to improve accountability.

Some companies said they welcomed the law. Michael Holston, the general counsel of HP, the Palo Alto, Calif.-based computer maker, applauded the measure, saying it would “help reduce some of the factors that have contributed to the civil war” in Congo.

Both industry experts and advocates said the law is one step in solving a much larger conflict.

“What really needs to happen is the international community needs to redouble its efforts to bring an overall diplomatic [solution] to what’s going on in Congo,” Goss said.

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