Dodd Frank law section 1502 contains the rules governing conflicts in the United States. Signed into law in 2010, it is a disclosure requirement that demands publicly traded companies to determine whether their products contain conflict minerals and conduct inquiries into country of origin of those minerals.
A different legislation for conflict minerals is being developed for the European Union, under the guidance of the General Trade Directorate of the European Commission. Aiming to construct a new framework of standards, a formal set of rules is expected to be submitted to the board of European Commissioners for analysis in early 2014.
As it involves thousands of jewellers in the exporting and importing business in both Europe and the United States, meanwhile, their trading ties close to the rest of the wolrd, the issue also gives rise to global concerns on what kind of impact that the new regulations will create to both markets.
At the just closed Vicenzaoro Winter 2014, The World Jewellery Confederation (Cibjo) as one of the organizations that support conflict minerals legislation and social responsibility in the gold supply chain, in collaboration with Fiera di Vicenza (FdV), discussed the issue with industry experts in a seminar. Hong Kong Jewellery interviewed Gaetano Cavalieri, Cibjo president following up with the most concerned questions.
HKJM: Hong Kong Jewellery
GC: Gaetano Cavalieri
HKJM: Currently, Section 1502 of Dodd-Frank Act in the United States is in force and similar legislation is pending in the European Union. What is your comment on the legislation progress in the next two years?
GC: In the United States it is a done deal. The law was passed more than three years ago, and it is now being phased in. In Europe we expect the legislation to come in a few months.
I am hopeful that the European law will address issues that we are not comfortable with in Dodd-Frank, which, while well-intended, has the potential of hurting the very people it is meant to help.
I think that, because the European Commission has been ready to discuss pending law with the industry, including CIBJO’s European Commission as well as with other stakeholders, its law may be more effective in preventing the inflow of mineral involved with conflict, while at the same time allowing for the continued process of non-conflict minerals in the countries where such problems exist.
HKJM: Would you tell us the impact on the community of the Great Lakes region when people buy less from it?
GC: The effect could be devastating. These areas are stricken with severe economic and social situations, which have been exacerbated by years of war and conflict. Their natural resources should provide a means of sustainable economic development, but to some degree Dodd-Frank is preventing this.
At this moment, I do not suggest that all checks and balances should be eliminated, for that clearly would provide the opportunity for unscrupulous individuals or groups to take advantage of the situation. But to create a situation that discourages companies from involving in the Great lakes region could have a crippling effect on the lives of innocent people who have very few alternatives for making a living.
HKJM: Any changes you foresee that the legislation will bring to the domestic jewellery business in EU and the United States?
GC: The greatest impact could be on companies selling gold jewellery to the retail trade in the United States. If their goods are going to land up in the display cases of a publicly listed company — and that includes the large jewellery retail chains but also companies like TJ Maxx and Walmart – it will be difficult to do business without introducing the requisite due diligence systems.
In Europe the legislation seems to be developed differently and concentrating on the supply of materials to the smelters. This will place the due diligence burden on the smelters, and less of a burden on the industry. In other words, you buy your gold from a compliant smelter, you will be considered compliant yourself.
HKJM: How about the impacts on the world market?
GC: The ironic is that there is likely very little effect on the world market, because most gold products are not produced in the Great Lakes areas.
I would note, however, that the European legislation avoids targeting any specific region, and chooses rather to define what is meant by minerals from areas of conflict.
HKJM: In terms of identification, how do jewellers know that the gold they use is conflict free before reaching to end consumers?
GC: There are no specific chemical markers that suggest that gold came from one mine or another. Jewellers need to know that they went their business properly, buying from suppliers or smelters who ascertained that the materials they bought were conflict free. The solution is not scientific; yet it is systemic.
HKJM: Most of the industry players are SMEs who might not be able to invest so much in the costly supply chain assurance. What else can they do?
GC: This is a problem, particularly in the United States. The law dictates what they need to if they are to operate in these countries, and for some smaller operators the financial cost may be too high. What may happen is that such companies will choose to concentrate their efforts in countries where legislation does not exist.
But whether legislation exists or not, we still recommend that companies do incorporate due diligence in their operating systems, so that they can provide assurances to their clients that their products are free of ethical concerns. For example, OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas provides recommendations to help companies set up their own internal system.
HKJM: What is Cibjo’s plan of supporting conflict minerals legislation and social responsibility in the gold supply chain in the near future?
GC: Cibjo has been working, together with others, with the goal of developing systems for defending the integrity of the chain of distribution, which will provide viable solutions for all companies, both large and small. We will present them at the upcoming CIBJO Congress, which will take place in Moscow from 19 to 21 May.
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