CHICAGO Regulations on the sourcing of tantalum, tin and tungsten are creating legal headaches in the U.S. manufacturing supply chain, according to panelists at the recent MetalMiner-sponsored Conflict Minerals Edge conference in Chicago.
And the supply chain is bracing for a deluge of customer inquiries stemming from a final rule approved by the U.S. Securities and Exchange Commission (SEC) last August.
The rule compels U.S. companies filing SEC disclosures to provide information about the origins of certain minerals used in their manufacturing processes. It is intended to prevent armed groups in the Democratic Republic of the Congo (DRC) and surrounding countries from profiting from the minerals trade (amm.com, Aug. 23).
The stainless sector is one area impacted.
Some stainless steel grades contain tantalum, although two of them are uncommon, according to Michael Pfeifer, president of Northbrook, Ill.-based Industrial Metallurgists LLC. Meanwhile, some tool steel grades contain tungsten, he said.
A "tsunami" of information and compliance requests is approaching, according to Jeffrey Friedman, corporate compliance officer for the Americas at Duisburg, Germany-based Kloeckner & Co. SE.
"I feel like the guy standing on the shore looking into the water, and a tsunami is coming," he said. "We are starting to get letters from our customers. People are waking up. I think in the third and fourth quarters, its going to get tougher."
Kloeckners strategy has been to first confirm with each supplier that the material it sells "does not contain any of the three Ts, and if it does (that) it didnt come from the Congo or surrounding area," Friedman said.
The distributor then collects the confirmations, has its legal counsel examine them and uses them as support for its due diligence process, Friedman said. "If someone is buying (materials) from DRC, we cut them off," he added.
"Cut them offthats scary," Rose of Sharon DeVos, sales and marketing director at Chicago-based Stainless Sales Corp., said. She noted that there are responsible mines in the Congo that dont abuse workers and that arent involved in armed conflict.
But the rule has generated emotional responses further down the supply chain as well, DeVos said.
At another recent discussion she attended, one panelist reported receiving a request from a customer asking about conflict minerals and was told that "even though we have been doing business together for 25 years, if we have anything in our material that comes from DRC, then we are out as a supplier," she recalled.
"So there are heated feelings among metals distribution," DeVos said. But the "real issue is the confusion among our customers customers customers, who want us to certify that our material is conflict minerals free."