HardAssetsInvestor

Written by Tom Butcher  |

July 31, 2012

‘Conflict Minerals’ Gold, Tin & Tungsten Face New Layer Of Regulation

Details

Supply Chains

It is perhaps surprising to hear mention of the complexity of supply chains as one of the obstacles in tracing the source of conflict minerals, especially if they are used in vanishingly small amounts in the smallest of components.

Do companies now not try to ensure the transparency of their supply chains, not least to plan for situations in which certain materials—for example, rare earths, or components made using them—may become either unavailable or unacceptably expensive? Of course, it is often difficult to know what materials you are using.

Although we have little choice but to accept the likes of the Department of Defense (and can do little as individuals to change it), and opine “typical!” when it has so much difficulty reporting on the extent of its use of rare earths, let alone whence they come, surely we as shareholders can expect a little more from the companies in which we can choose to be shareholders.

Whatever the shortcomings of the DoD may in this respect be, it must be relatively competent at policing its own supply chains: the Berry Amendment has some quite stringent requirements that need policing. (The DoD did have a little trouble back in 2001 under the provision with the matter of some 5 million berets and a $23 million contract to produce them to companies in China, Sri Lanka and Romania instead of American small businesses.)

Therefore, maybe the DoD could be looked to for some direction when it comes to tracking conflict minerals. (Back in 2006, there must have been enough to and fro between the Bush administration and Senate on the one hand, and the House on the other, for a little to have been learned in this area.)

That said, insofar as, back then, the furor arose only after it was disclosed by some defense contractors that they were not in compliance with the provision because of actions by their suppliers, maybe the rules for contractors are actually less stringent than they will be for run-of-the-mill public companies and conflict minerals. Now, that would come as no surprise, would it?