Dodd-Frank Act Provisions Concerning Conflict Minerals in the  Democratic Republic of the Congo and Adjoining Countries
Section 1502(a) states that “it is the sense of the 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, warranting the provisions of section  13(p) of the Securities Exchange Act of 1934, as added by  subsection (b).”
Section 1502(b) requires the Securities and Exchange  Commission (SEC), in consultation with the Department of State  (State), to promulgate disclosure and reporting regulations  regarding the use of conflict minerals from the DRC and adjoining  countries. Section 1502(c) requires State and the U.S. Agency for  International Development (USAID) to develop, among other  things, a strategy to address the linkages among human rights  abuses, armed groups, the mining of conflict minerals, and  commercial products. 4. Company Filings in 2014 Indicate Companies Performed Country-of- Origin Inquiry but Provided Limited Insights Regarding Country of Origin of Conflict Minerals Used, Citing Difficulty Obtaining Information From Suppliers

The sample of filings in 2014 that we reviewed indicates that 99 percent  of companies conducted a country-of-origin inquiry and most companies  reported that they were unable to determine the country of origin of  conflict minerals they had used in 2013. Company Filings Indicate Companies Exercised Due Diligence but Most Were Unable to Determine Whether or Not Conflict Minerals Used Came From Covered Countries, or Whether They Financed or Benefited Armed Groups

According to our analysis, the exercise of due diligence on the source and  chain of custody of conflict minerals yielded little or no additional  information, beyond the RCOI, regarding the country of origin of conflict  minerals or whether the conflict minerals used in 2013 in products by  companies benefited or financed armed groups in the Covered  Countries. 2) in their  Conflict Minerals Report (CMR). Figure 5 depicts the SEC conflict minerals  disclosure rule timeline. Companies that disclosed that conflict minerals came from covered  countries indicated they are or will be taking action. Examples include the  following: notify suppliers that the company intends to cease doing business  with suppliers who continue to source conflict minerals from smelters  that are not certified as conflict-free;  include a conflict minerals clause in new or renewed contracts  requiring suppliers to provide conflict minerals information on a  prospective basis and identify alternative sources of conflict minerals  if suppliers are found to be providing the company with minerals that  support conflict in the Covered Countries;  increase the number of surveyed suppliers; reach out earlier in the  year, and direct suppliers to information and training resources; participate in the Conflict-Free Sourcing Initiative, an industry  association effort, to define best practices and induce smelters and  refiners to adopt socially responsible business practices; and address, as appropriate, complaints or concerns expressed through  grievance mechanisms. State and USAID Actions to Implement the U.S. Traceability mechanisms may minimize the risk that minerals that  have been exploited by illegal armed groups will enter the supply  chain and may also support companies’ efforts to identify the source of  the conflict minerals across the supply chain around the world. First, the mining areas in eastern DRC  continue to be plagued by insecurity because of the presence and  activities of illegal armed groups and some corrupt members of the  national military. As we reported in 2010, U.S. government officials and others have  indicated that weak governance and lack of state authority in eastern  DRC constitute a significant challenge. 11 shows a timeline of population-based  surveys for the DRC, Rwanda, Uganda, and Burundi since 2007). Rwanda. DRC. DRC. Burundi. We randomly sampled 147 filings from a population of 1,324 to create  estimates generalizable to the population of all companies that filed. To examine Department of State (State) and U.S. Agency for  International Development (USAID) actions related to the U.S. conflict  minerals strategy in the DRC region, we reviewed the U.S. Strategy to  Address the Linkages between Human Rights Abuses, Armed Groups,  Mining of Conflict Minerals and Commercial Products, developed by State  and USAID in 2011, and State’s and USAID’s websites. We also reviewed the Dodd-Frank Wall  Street Reform and Consumer Protection Act.
Why GAO Did This Study

Armed groups in eastern DRC continue to commit severe human rights abuses and profit from the exploitation of minerals, according to the United Nations. Congress included a provision in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act that, among other things, directed SEC to promulgate disclosure and reporting regulations regarding the use of conflict minerals from the DRC and adjoining countries. The act also directed State and USAID to develop a strategy to address the linkages among human rights abuses, armed groups, the mining of conflict minerals, and commercial products.
This report examines (1) company disclosures filed with SEC for the first time in 2014 in response to the SEC conflict minerals disclosure rule; and (2) State and USAID actions related to the U.S. conflict minerals strategy in the DRC region. This report also includes information on sexual violence in the DRC and three adjoining countries. GAO reviewed and analyzed relevant documents and data and interviewed officials from relevant U.S. agencies and nongovernmental, industry, and international organizations; and analyzed a random sample of company disclosures from the SEC database that was sufficiently large to produce estimates for all companies that filed. GAO also traveled to the DRC, Rwanda, and Burundi to conduct field work.

What GAO Found

According to a generalizable sample GAO reviewed, company disclosures filed with the Securities and Exchange Commission (SEC) for the first time in 2014 in response to the SEC conflict minerals disclosure rule indicated that most companies were unable to determine the source of their conflict minerals. Companies that filed disclosures used one or more of the four “conflict minerals”—tantalum, tin, tungsten, and gold—determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo (DRC) or adjoining countries. Most companies were based in the United States (87 percent). Almost all of the companies (99 percent) reported performing country-of-origin inquiries for conflict minerals used. Companies GAO spoke to cited difficulty obtaining necessary information from suppliers because of delays and other challenges in communication. Most of the companies (94 percent) reported exercising due diligence on the source and chain of custody of conflict minerals used. However, most (67 percent) were unable to determine whether those minerals came from the DRC or adjoining countries (Covered Countries), and none could determine whether the minerals financed or benefited armed groups in those countries. Companies that disclosed that conflict minerals in their products came from covered countries (4 percent) indicated that they are or will be taking action to address the risks associated with the use and source of conflict minerals in their supply chains. For example, one company indicated that it would notify suppliers that it intends to cease doing business with suppliers who continue to source conflict minerals from smelters that are not certified as conflict-free.
a Covered Countries: Angola, Burundi, Central African Republic, the Democratic Republic of the Congo, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia.
Department of State (State) and U.S. Agency for International Development (USAID) officials reported taking actions to implement the U.S. conflict minerals strategy, but a difficult operating environment complicates this implementation. The agencies reported supporting a range of initiatives including validation of conflict-free mine sites and strengthening traceability mechanisms that minimize the risk that minerals that have been exploited by illegal armed groups will enter the supply chain. As a result, according to the agencies, 140 mine sites have been validated and competition within conflict-free traceability systems has benefited artisanal miners and exporters. Implementation of the U.S conflict minerals strategy faces multiple obstacles outside the control of the U.S. government. For example, eastern DRC is plagued by insecurity because of the presence of illegal armed groups and some corrupt members of the national military, weak governance, and poor infrastructure.

What GAO Recommends

GAO is not making any recommendations.