Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act is an oft-forgotten piece of legislation. It found itself a miniscule minnow codified in the oceanic Dodd-Frank Act, which contained some of the most disruptive, paradigm-shifting rules enacted in recent memory. 1502 regulates the use of “conflict minerals,” or the so-called 3TGs: tin, tantalum, tungsten, and gold.1 The provision’s purpose is noble, but its implementation has led to a wide array of issues surrounding compliance, effectiveness, and even constitutional validity. In this first installment of a multi-part blog series, I will provide a background of the section and its basic mechanics. Later installments will address the variety of complications the section has presented.
The Democratic Republic of the Congo (DRC), while among the richest nations in natural resources, has been found by the Western world to be wanting in the realm of human rights. The country has long been wracked by war between militant groups in what has been called “Africa’s world war,” a war that has claimed millions of lives since its inception in the 1990s.2 These militant groups utilize brutal tactics in their quest for control of the region. A 2013 report published by the United Nations determined that recruitment of child soldiers remains “endemic” to the DRC.3 Violence against women in the region is another concern. As recently as 2007, the incidence of rape and violence against women in the DRC was described by a U.N. emergency relief coordinator as “worse than anywhere else in the world.”4
The militant groups waging war with tactics of child soldiers and sexual violence have found funding from the country’s immense wealth of minerals. The country is among the richest in supply of the 3TG conflict minerals, and these minerals are highly sought after as inputs to the creation of numerous high-tech products. For example, one of the 3TG minerals, tantalum, is widely used in the manufacture of cell phones.5 These conflict minerals provide the means by which militant groups in the DRC are able to wage their wars in defiance of any standard of human rights.
Congress recognized the peril of supporting, indirectly through trade, groups that propagate such atrocities trade in the Dodd-Frank Wall Street Reform Act, wherein they stated their intent thusly:
It is the sense of Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an emergency humanitarian situation therein.6
Thus, Congress enacted Section 1502 in an attempt to kill the snake by starving it of its nutrients: funds raised by the conflict minerals mining industry. The legislation directed the SEC to promulgate regulations requiring issuers (meaning companies that must file financial statements with the SEC, or most public companies) and any company for which conflict minerals are necessary to the functionality or production of a product it manufactures to disclose, on an annual basis, whether those conflict minerals originated in the DRC7 This extremely broad congressional directive led to a final rule made effective by the SEC in 2014. Its implementation has led to numerous challenges in compliance by companies that fall under its purview. These challenges, subsequent litigation, and speculation regarding the future of Section 1502 will be discussed in future installments of this blog series.
Conflict Minerals Consulting Services, Assent Compliance (2016), http://www.assentcompliance.com/conflict-minerals-consulting-services. ↩
Kwei Quartey, Economics by Other Means: War, Poverty, and Conflict Minerals in Africa, Foreign Policy in Focus (Nov. 27, 2013), http://fpif.org/economics-means-war-poverty-conflict-minerals-africa. ↩
Child recruitment remains ‘endemic’ in DR Congo, UN says in new report, United Nations (Oct. 24, 2013), http://www.un.org/apps/news/story.asp?NewsID=46330#.V_fsbJMrKu5. ↩
Stephanie McCrummen, Prevalence of Rape in E. Congo Described as Worst in World, Washington Post (Sept. 9, 2007), http://www.washingtonpost.com/wp-dyn/content/article/2007/09/08/AR2007090801194.html. ↩
Margot Wallström, ‘Conflict minerals’ finance gang rape in Africa, The Guardian (Aug. 14, 2010), https://www.theguardian.com/commentisfree/2010/aug/14/conflict-minerals-finance-gang-rape. ↩
Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 1502(a), 124 Stat. 1376, 2213 (2010) (codified at 15 U.S.C. § 78a NOTE). ↩