Section 1502 of the Dodd Frank Act: Combating Conflict Minerals through Regulation

Samantha Poon

The Democratic Republic of Congo (“DRC”) is a vast country with a diverse groups of peoples and an immense wealth of natural resources. However, centuries of colonization, imperialism, and civil strife has scarred what should be a thriving society. Its natural resources, a main source of industry, employment, and income, fund rebel groups instead of fueling a healthy economy and thriving families.

Conflict minerals have been a source of human rights abuses since their inception. True to their name, conflict minerals are valuable natural resources that are mined in conditions that perpetuate civil war and human rights abuses. To combat this issue, the global community is scrambling to find solutions to the complex problem that perpetuates egregious human rights abuses.As global awareness increases about conflict minerals and their devastating consequences, international organizations and states have struggled to come to a collective, effective solution. The DRC government is unable, or unwilling, to take measures to effectively end its conflict mineral crisis. Who then is to blame? More importantly, who is to take responsibility?

As the world hegemon, the United States has attempted to lead the global community in eliminating human rights abuses, albeit at times quite unsuccessfully. In wake of the 2008 Great Recession, Congress passed the Dodd-Frank Act in 2010. It was a broad sweeping law that increased regulation of the financial services industry. Notably, there was also a controversial, and unexpected, provision among the hundreds of pages of regulation: Section 1502 – Conflict Minerals. This section specifically addresses regulation of conflict minerals originating from the DRC.

The goals of the provision are to “enhance transparency” and “help American consumers and investors make more informed decisions.” It only requires companies that trade on the U.S. Stock Exchange to participate, and only focuses on conflict minerals stemming from one region in Africa. This legislation and corresponding regulation have effectuated change in minimizing conflict minerals in supply chains.[1]

Though some companies, such as Intel, Apple, and HP, were already shifting towards due diligence and eliminating conflict minerals from their supply chains, Section 1502 has incentivized other companies to do so as well. It mandates companies to “exercise due diligence” and audit their supply chains to ensure that “products [] do not contain minerals that directly or indirectly finance or benefit armed groups in the Democratic Republic of the Congo or an adjoining country.” If products in their supply chains do contain conflict minerals, then companies must compile reports and these reports must then be made public through the Securities and Exchange Commission (“SEC”). In order to comply with Section 1502 of the Dodd-Frank Act, companies are setting up systems to identify potential conflict minerals in their products and subsequently to clean up their supply chains. According to the SEC, this action has resulted in a decrease the illegal supply of conflict minerals from the DRC that funds rebel groups and conflict. The United Nations Group of Experts on the DRC wrote to the SEC that “since the signing into law of the Dodd-Frank Act, a higher proportion th[a]n before of tin, tungsten and tantalum mined in the DRC is not funding conflict” and production of such minerals was already beginning to shift to non-conflict mines and areas. While Section 1502 of the Dodd-Frank Act has shortcomings, it is a significant step in combating use of conflict minerals in United States consumer products and should be a model that is continually refined and adopted in other states’ domestic legislation.

[1] It is also important to note that there are other factors that have eliminated rebel control of some of the mines in the DRC. For example, the Congolese army and the United Nations Force Intervention Brigade have undertaken military operations to neutralize particularly harmful armed groups. African governments are also beginning to take action and attempt to regulate conflict minerals, though these efforts have not been entirely effective. See Fidel Bafilemba, Timo Mueller, & Sasha Lezhnev, Enough Project, The Impact of Dodd-Frank and Conflict Minerals Reforms on Eastern Congo’s Conflict, 1 (June 2014) http://www.enoughproject.org/files/Enough%20Project%20-%20The%20Impact%20of%20Dodd-Frank%20and%20Conflict%20Minerals%20Reforms%20on%20Eastern%20Congo%E2%80%99s%20Conflict%2010June2014.pdf.