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Blood Phones

July 5, 2010

Nothing we consume lacks an underbelly. In his June 26 NY Times column, Nicholas Kristoff tears open the underbelly of electronic gadgets built using minerals such as gold, tantalum, tungsten, and tin. In the Congo, site of one of the most horrific wars in history, warlords control the extraction and sale of  these minerals to finance their butchery. Kristoff writes about the movement to make consumer electronics companies more accountable for the sourcing of the minerals they use to manufacture their products.

In conference, the Dodd-Frank Wall Street Reform and Consumer Protection Act beefed up considerably provisions in the bill for requiring corporate disclosure in SEC filings of sourcing of minerals from the Congo. See Section 1502, which goes on for 14 pages.

SEC. 1502. CONFLICT MINERALS.
11 (a) SENSE OF CONGRESS ON EXPLOITATIOX AND
12 TRADE OF CONFLICT MINERALS ORIGINATING IN THE
13 DEMOCRATIC REPUBLIC OF THE CONGO.-It is the sense
14 of Congress that the exploitation and trade of conflict min-
15 erals originating in the Democratic Republic of the Congo
16 is helping to finance conflict characterized by extreme lev-
17 els of violence in the eastern Democratic Republic of the
18 Congo, particularly sexual- and gender-based violence, and
19 contributing to an’ emergency humanitarian situation
20 therein, warranting the provisions of section 13(p) of the
21 Securities Exchange Act of 1934, as added by subsection
22 (b).
23 (b) DISCLOSURE RELATING TO CONFLICT MINERALS
24 ORIGINATING IN THE DEMOCRATIC REPUBLIC OF THE
25 CONGo.-Section 13 of the Securities Exchange Act of
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1 1934 (15 U.S.C. 78m), as amended by this Act, is amend-
2 ed by adding at the end the following new subsection:
3 “(p) DISCLOSURES RELATING TO CONFLICT MIN-
4 ERALS ORIGINATING IN THE DEMOCRATIC REPUBLIC OF
5 THE CONGO.-
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“(1) REGULATIONS.-
“(A) IN GENERAL.-Not later than 270
days after the date of the enactment of this
subsection, the Commission shall promulgate
regulations requiring any person described in
paragraph (2) to disclose annually, beginning
with the person’s first full fiscal year that begins
after the date of promulgation of such regulations,
whether conflict minerals that are necessary
as described in paragraph (2) (B), in the
year for which such reporting is required, did
originate in the Democratic Republic of the
Congo or an adjoining country and, in cases in
which such conflict minerals did originate in
any such country, submit to the Commission a
report that includes, with respect to the period
covered by the report-
“(i) a description of the measures
taken by the person to exercise due diligence
on the source and chain of custody
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of such minerals, which measures shall include
an independent private sector audit
of such report submitted through the Commission
that is conducted in accordance
with standards established by the Comptroller
General of the United States, in accordance
with rules promulgated by the
Commission, in consultation with the Secretary
of State; and
“(ii) a description of the products
manufactured or contracted to be manufactured
that are not DRC conflict free
(‘DRC conflict free’ is defined to mean the
products that do not contain minerals that
directly or indirectly finance or benefit
armed groups in the Democratic Republic
of the Congo or an adjoining country), the
entity that conducted the independent private
sector audit in accordance with clause
(i), the facilities used to process the conflict
minerals, the country of origin of the
conflict minerals, and the efforts to determine
the mine or location of origin with
the greatest possible specificity.
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“(B) CERTIFICATIoN.-The person submitting
a report under subparagraph (A) shall
certify the audit described in clause (i) of such
subparagraph that is included in such report.
Such a certified audit shall constitute a critical
component of due diligence in establishing the
source and chain of custody of such minerals.
“(C) UNRELIABLE DETERMINATION.-If a
report required to be submitted by a person
under subparagraph (A) relies on a determination
of an independent private sector audit, as
described under subparagraph (A)(i) , or other
due diligence processes previously determined
by the Commission to be unreliable, the report
shall not satisfy the requirements of the regulations
promulgated under subparagraph (A)(i).
“(D) DRC CONFLICT FREE.-For purposes
of this paragraph, a product may be labeled
as ‘DRC conflict free’ if the product does
not contain conflict minerals that directly or indirectly
finance or benefit armed groups in the
Democratic Republic of the Congo or an adjoining
country.
“(E) INFORMATION AVAILABLE TO THE
PUBLIC.-Each person described under paraO:\
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1 graph (2) shall make available to the public on
2 the Internet website of such person the infor-
3 mation disclosed by such person under subpara-
4 graph (A).
5 “(2) PERSON DESCRIBED.-A person IS de-
6 scribed in this paragraph
7 “(A) the person is required to file reports
8 with the Commission pursuant to paragraph
9 (l)(A); and
10 “(B) conflict minerals are necessary to the
11 functionality or production of a product manu-
12 factured by such person.
13 “(3) REVISIONS At”l’D WAIVERS.-The Commis-
14 sion shall revise or temporarily waive the require-
15 ments described in paragraph (1) if the President
16 transmits to the Commission a determination that-
17 “(A) such revision or waiver is in the na-
18 tional security interest of the United States and
19 the President includes the reasons therefor; and
20 “(B) establishes a date, not later than 2
21 years after the initial publication of such ex-
22 emption, on which such exemption shall expire.
23 “(4) TERMINATION OF DISCLOSURE REQUIRE-
24 MENTs.-The requirements of paragraph (1) shall
25 terminate on the date on which the President deterO:\
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1 mines and certifies to the appropriate congressional
2 committees, but in no case earlier than the date that
3 is one day after the end of the 5-year period begin-
4 ning on the date of the enactment of this subsection,
5 that no armed groups continue to be directly in-
6 volved and benefitting from commercial activity in-
7 volving conflict minerals.
8 “(5) DEFINITIONS.-For purposes of this sub-
9 section, the terms ‘adjoining country’, ‘appropriate
10 congressional committees’, ‘armed group’, and ‘con-
11 flict mineral’ have the meaning given those terms
12 under section 1502 of the Dodd-Frank Wall Street
13 Reform and Consumer Protection Act.”.
14 (c) STRATEGY AND MAP TO ADDRESS LINKAGES BE-
15 TWEEN CONFLICT MINERALS AND ARMED GROUPS.-
16 (1) STRATEGY.-
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(A) IN GENERAL.-Not later than 180
days after the date of the enactment of this
Act, the Secretary of State, in consultation with
the Administrator of the United States Agency
for International Development, shall submit to
the appropriate congressional committees a
strategy to address the linkages between human
rights abuses, armed groups, mining of conflict
minerals, and commercial products.
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(B) CONTENTs.-The strategy required by
subparagraph (A) shall include the following:
(i) A plan to promote peace and security
in the Democratic Republic of the
Congo by supporting’ efforts of the Government
of the Democratic Republic of the
Congo, including the Ministry of Mines
and other relevant agencies, adjoining
countries, and the international community’
in particular the United Nations
Group of Experts on the Democratic Republic
of Congo, to-
(I) monitor and stop commercial
activities involving the natural resources
of the Democratic Republic of
the Congo that contribute to the activities
of armed groups and human
rights violations in the Democratic
Republic of the Congo; and
(II) develop stronger governance
and economic institutions that can facilitate
and improve transparency in
the cross-border trade involving the
natural resources of the Democratic
Republic of the Congo to reduce exO:\
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ploitation by armed groups and promote
local and regional development.
(ii) A plan to provide guidance to
commercial entities seeking to exercise due
diligence on and formalize the origin and
chain of custody of conflict minerals used
in their products and on their suppliers to
ensure that conflict minerals used in the
products of such suppliers do not directly
or indirectly finance armed conflict or result
in labor or human rights violations.
(iii) A description of punitive measures
that could be taken against individuals
or entities whose commercial activities
are supporting armed groups and human
rights violations in the Democratic Republic
of the Congo.
(2) MAP.-
(A) IN GENERAL.-Not later than 180
days after the date of the enactment of this
Act, the Secretary of State shall, in accordance
with the recommendation of the United Nations
Group of Experts on the Democratic Republic
of the Congo in their December 2008 reportO:\
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(i) produce a map of mineral-rich
zones, trade routes, and areas under the
control of armed groups in the Democratic
Republic of the Congo and adjoining countries
based on data from multiple sources,
including-
(I) the United Nations Group of
Experts on the Democratic Republic
of the Congo;
(II) the Government of the
Democratic Republic of the Congo,
the governments of adjoining countries,
and the governments of other
Member States of the United Nations;
and
(III) local and international nongovernmental
organizations;
(ii) make such map available to the
public; and
(iii) provide to the appropriate congressional
committees an explanatory note
describing the sources of information from
which such map is based and the identification,
where possible, of the armed
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groups or other forces In control of the
mines depicted.
(B) DESIGNATION.-The map required
under subparagraph (A) shall be known as the
“Conflict Minerals Map”, and mines located in
areas under the control of armed groups in the
Democratic Republic of the Congo and adjoining
countries, as depicted on such Conflict Minerals
Map, shall be known as “Conflict Zone
Mines”.
(C) UPDATES.-The Secretary of State
shall update the map required under subparagraph
(A) not less frequently than once every
180 days until the date on which the disclosure
requirements under paragraph (1) of section
13(p) of the Securities Exchange Act of 1934,
as added by subsection (b), terminate in accordance
with the provisions of paragraph (4) of
such section 13(p).
(D) PUBLICATION IN FEDERAL REGISTER.-
The Secretary of State shall add minerals
to the list of minerals in the definition of
conflict minerals under section 1502, as appropriate.
The Secretary shall publish in the Federal
Register notice of intent to declare a minO:\
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1 eral as a conflict mineral included in such def’i-
2 nition not later than one year before such dec-
3 laration.
4 (d) REPORTS.-
5 (1) BASELINE REPORT.-Not later than 1 year
6 after the date of the enactment of this Act and an-
7 nually thereafter until the termination of the disclo-
8 sure requirements under section 13(p) of the Securi-
9 ties Exchange Act of 1934, the Comptroller General
10 of the United States shall submit to appropriate con-
11 gressional committees a report that includes an as-
12 sessment of the rate of sexual- and gender-based vio-
13 lence in war-torn areas of the Democratic Republic
14 of the Congo and adjoining countries.
15 (2) REGULAR REPORT ON EFFECTIVENESS.-
16 Not later than 2 years after the date of the enact-
17 ment of this Act and annually thereafter, the Comp-
18 troller General of the United States shall submit to
19 the appropriate congressional committees a report
20 that includes the following:
21 (A) An assessment of the effectiveness of
22 section 13(p) of the Securities Exchange Act of
23 1934, as added by subsection (b), in promoting
24 peace and security in the Democratic Republic
25 of the Congo and adjoining countries.
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1 (B) A description of issues encountered by
2 the Securities and Exchange Commission in
3 carrymg out the provisions of such section
4 13(p).
5 (C) (i) A general reVIew of persons de-
6 scribed in clause (ii) and whether information is
7 publicly available about-
8 (I) the use of conflict minerals by
9 such persons; and
10 (II) whether such conflict minerals
11 originate from the Democratic Republic of
12 the Congo or an adjoining country.
13 (ii) A person is described in this clause
14 if-
15 (I) the person is not required to file
16 reports with the Securities and Exchange
17 Commission pursuant to section
18 13(p)(1)(A) of the Securities Exchange
19 Act of 1934, as added by subsection (b);
20 and
21 (II) conflict minerals are necessary to
22 the functionality or production of a prod-
23 uct manufactured by such person.
24 (3) REPORT ON PRIVATE SECTOR AUDITING.-
25 Not later than 30 months after the date of the enO:\
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1 actment of this Act, and annually thereafter, the
2 Secretary of Commerce shall submit to the appro-
3 priate congressional committees a report that in-
4 cludes the following:
5 (A) An assessment of the accuracy of the
6 independent private sector audits and other due
7 diligence processes described under section
8 13(p) of the Securities Exchange Act of 1934.
9 (B) Recommendations for the processes
lOused to carry out such audits, including ways
11 to-
12 (i) improve the accuracy of such au-
13 dits; and
14 (ii) establish standards of best prac-
15 tices.
16 (0) A listing of all known conflict mineral
17 processing facilities worldwide.
18 (e) DEFINITIONS.-For purposes of this section:
19 (1) ADJOINING COUNTRY.-The term “adjoin-
20 ing country”, with respect to the Democratic Repub-
21 lic of the Congo, means a country that shares an
22 internationally recognized border with the Demo-
23 cratic Republic of the Congo.
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1 (2) APPROPRIATE CONGRESSIONAL COMMIT-
2 TEES.-The term “appropriate congressional com-
3 mittees” means-
4 (A) the Committee on Appropriations, the
5 Committee on Foreign Affairs, the Committee
6 on Ways and Means, and the Committee on Fi-
7 nancial Services of the House of Representa-
8 tives; and
9 (B) the Committee on Appropriations, the
10 Committee on Foreign Relations, the Com-
11 mittee on Finance, and the Committee on
12 Banking, Housing, and Urban Affairs of the
13 Senate.
14 (3) ARMED GRouP.-The term “armed group”
15 means an armed group that is identified as perpetra-
16 tors of serious human rights abuses in the annual
17 Country Reports on Human Rights Practices under
18 sections 116(d) and 502B(b) of the Foreign Assist-
19 ance Act of 1961 (22 U.S.C. 2151n(d) and 2304(b))
20 relating to the Democratic RepUblic of the Congo or
21 an adjoining country.
22 (4) CONFLICT MINERAL.-The term “conflict
23 mineral” means-
24 (A) columbite-tantalite (coltan), cassiterite,
25 gold, wolframite, or their derivatives; or
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1 (B) any other mineral or its derivatives de-
2 termined by the Secretary of State to be financ-
3 ing conflict in the Democratic Republic of the
4 Congo or an adjoining country.
5 (5) UNDER THE CONTROL OF ARMED
6 GRouPs.-The term “under the control of armed
7 groups” means areas within the Democratic Repub-
8 lic of the Congo or adjoining countries in which
9 armed groups-
10 (A) physically control mines or force labor
11 of civilians to mine, transport, or sell conflict
12 minerals;
13 (B) tax, extort, or control any part of
14 trade routes for conflict minerals, including the
15 entire trade route from a Conflict Zone Mine to
16 the point of export from the Democratic Repub-
17 lic of the Congo or an adjoining country; or
18 (C) tax, extort, or control trading facilities,
19 in whole or in part, including the point of ex-
20 port from the Democratic Republic of the
21 Congo or an adjoining country.

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