Tiffany’s among companies wary of new rules to limit conflict mineral use

Tiffany & Co., high-tech manufacturers and retailers are urging federal regulators to tread carefully as they put into place new rules designed to limit the use of conflict minerals.

In the late stages of the debate over new financial regulations for home loans, credit cards and Wall Street traders, Congress dropped in a provision designed to restrict the trade of minerals that have bankrolled conflict in the Democratic Republic of the Congo (DRC) for the past 15 years.

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Nonprofit activists won support for the provision from a bipartisan group of lawmakers, including Sens. Patrick Leahy (D-Vt.) and Sam Brownback (R-Kan.) and Rep. Jim McDermott (D-Wash.). Human-rights organizations say the provision will bring transparency to the minerals trade and help end genocide and sexual violence in some regions where mining takes place.

The law requires companies to report to the Securities and Exchange Commission (SEC) about their use of tin, tantalum, tungsten and gold that can be traced back to the DRC or neighboring countries. The minerals are used in everything from circuit boards and cell phones to engagement rings. The secretary of State may also determine that additional minerals should be subject to the new requirements.

“For lots of companies, we’re talking about hundreds of products that have to be evaluated throughout global supply chains,” said Catherine Robinson, director of high-tech trade policy at the National Association of Manufacturers (NAM).

By next spring, the SEC must write rules determining which companies must comply, how the use of minerals should be tracked and the level of reporting that is necessary.

The companies would need to report on the due diligence and other steps they have taken to trace the source of the minerals.

The law does not spell out specific penalties.

The legislation is touching off lobbying and advocacy efforts across industries. SEC officials have held a half-dozen meetings with industries so far, and companies are starting to file public comments.

An informal group of manufacturing and social-responsibility organizations, along with non-governmental organizations, is meeting to build consensus and craft a set of guidelines.

“Our focus is on making sure that we’re coming up with standards that are practical and rational and that can be implemented without unduly burdening legitimate trade,” Robinson said.

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During the legislative debate, the World Gold Council, Honda North America Inc., Eastman Kodak Co., Motorola Inc. and Research in Motion, maker of the BlackBerry, lobbied on the issue, according to congressional records.

“Our assumption is that the rules will apply to the bulk of the high-tech industry because of tin and tantalum,” said Rick Goss, vice president at the Information Technology Industry Council, which includes more than 40 industry firms. Goss said the tech industry has already been working on an audit program for smelters.

Tiffany & Co. said in a letter to the SEC that the rules could have “profound and unintended effects on the company” and could “seriously affect” its competitiveness. Patrick Dorsey, senior vice president at Tiffany & Co., said in the letter that it would be “impracticable and extremely costly” to trace the worldwide supply chain of gold from the original mine to a finished product.

“Given the continuous process involved in the refining of gold, the company does not believe that even the smelter could certify as to the countries of origin of any specific gold bullion that it has refined,” Dorsey wrote.

A separate group of jewelry associations — including the Jewelers Vigilance Committee, American Gem Society, Manufacturing Jewelers & Suppliers of America, Jewelers of America and Responsible Jewellry Council — said in a letter that “gold is perhaps the world’s ultimate recycled material.” The groups want the SEC to limit the rules to newly extracted or mined gold and direct customers, exempting stocks of gold held outside the DRC and manufacturers that use recycled gold.

The trade associations, including the National Retail Federation, are looking for the SEC to clarify how far along the supply chain the rules will apply. Tracking the information from retailers to mine is “virtually impossible,” said Erik Autor, vice president at the retail federation.