Questions about the Conflict-Free Sourcing Initiative? Trying to understand the role of industry in the global effort to end conflict in central Africa? Curious about global regulations on conflict minerals? Read our FAQ.
If you have specific questions about our Conflict Minerals Reporting Template (CMRT), please see our CMRT FAQ. If you have additional questions related to implementation of conflict minerals due diligence in relation to regulations from the U.S. government, please see our guidance documents section of this website.
If you have additional inquiries not answered on this website, please contact us.
Founded in 2008 by members of the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI), the Conflict-Free Sourcing Initiative (CFSI) has grown into one of the most utilized and respected resources for companies from a range of industries addressing responsible 3TG challenges in their supply chains.
Our flagship Conflict-Free Smelter Program (CFSP) offers companies and their suppliers an independent, third-party audit of SOR management systems and sourcing practices to validate compliance with CFSP protocols and current global standards. We also offer our Conflict Minerals Reporting Template (CMRT), which helps companies disclose and communicate about smelters in their supply chains, and we produce white papers and guidance documents on responsible 3TG sourcing and reporting on a regular basis.
More than 350 companies and associations from over 10 industries participate in the CFSI today, and we regularly collaborate with other complementary programs and initiatives in this area. We also run an annual Conflict-Free Sourcing Initiative Workshop, which brings together hundreds of representatives from industry, government and civil society for updates, in-depth discussions and guidance on best practices on responsible mineral sourcing. As more companies work on this issue we hope for a future in which businesses can contribute positively to the fostering of peace and stability in the Great Lakes region.
More than 350 companies and associations from multiple industries are part of the CFSI today and take advantage of a range of member benefits. These benefits include:
- Access to Reasonable Country of Origin (RCOI) data and Country of Origin information associated with facilities that are validated through the Conflict-Free Smelter Program.
- Opportunity to shape industry response to 3TG reporting requirements and other expectations from stakeholders.
- Access to cutting-edge insight, tips and a like-minded community of industry professionals and issue experts developing solutions by companies, for companies.
- Latest information and insight about the developments on regional issues, various sourcing initiatives, regulatory schemes and more.
- Discounted attendance fee to the annual members meeting and conference.
- Facilitated engagement with stakeholder groups, including civil society organizations, socially responsible investor groups, governments and multilateral institutions to ensure your company and organization have all the relevant perspectives as you make choices about your supply chain practices.
- Ability to contribute your perspectives to the development of new tools and resources from the CFSI, such as white papers on supply chain due diligence and training on 3TG reporting.
I need assistance with establishing a responsible 3TG supply chain, what resources are available? Where can I get technical assistance?
The Conflict-Free Sourcing Initiative developed a list of firms that are able to assist with the implementation of OECD Due Diligence Guidance compliant sourcing schemes in the Democratic Republic of the Congo (DRC) and adjoining countries. Some of these firms also may be engaged by companies to validate a company’s scheme against the OECD Due Diligence Guidance.
- Note that per the OECD Due Diligence Guidance, any firm a company chooses to validate the company's due diligence scheme against the OECD Guidance cannot be the same firm that helped develop the scheme.
- The list can be found here: http://www.conflictfreesourcing.org/resources-and-training/recommended-service-providers/
“Conflict minerals,” as defined by the US legislation, currently include the metals tantalum, tin, tungsten and gold, which are the derivatives of the minerals cassiterite, columbite-tantalite and wolframite, respectively. Downstream companies often refer to the derivatives of these minerals as 3TG.
- Note: Conflict minerals can be extracted at many different locations around the world including the Democratic Republic of Congo (DRC). The SEC rules define conflict minerals as 3TG metals, wherever extracted. For example, tin extracted in Canada, Russia or Argentina is considered a conflict mineral by definition. In the SEC rule, “DRC conflict-free” is defined as minerals that were extracted and did not directly or indirectly benefit armed groups in the covered countries. Therefore, tin extracted from Canada is considered “DRC conflict-free” under the definitions of the SEC rule.
The internationally recognized OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, has a broader scope and covers all minerals, not only 3TG.
CFSI supports responsible sourcing from conflict-affected and high-risk areas and does not advocate an embargo. Companies are advised to remain cognizant of all actors in their supply chain regardless of those actors’ location and specific relevance to conflict minerals.
The CFSI works with a number of stakeholders in China. These include the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and the China Chamber of Commerce of Metals Minerals and Chemicals Importers and Exporters (CCCMC), the Shanghai Gold Exchange (SGE), ITRI China, numerous smelters and refiners, and many downstream companies. The work consists of activities that include capacity building, smelter audits, awareness training and policy related issues.
This database contains a list of thousands of entities - whether SORs or not - that have been reviewed for eligibility with the CFSP. It contains detailed information including location, company contacts, type of operations, eligibility determination, audit status, and other notes on engagement/communication and due diligence. The Smelter Database is only available to CFSI members.
The producers and traders of minerals provide them to SORs and the SORs provide the resulting metals (or intermediates) to a large number of downstream consumers. Smelting/refining is the conversion point of identifiable types of materials, such as ore concentrates and secondary materials, into a common product for all downstream consumers. Because of this transformation process, SORs are in the position to know the origin of the material before it is commingled and processed for distribution to a wide variety of downstream users. Moreover, SORs are small in number relative to the number of upstream suppliers and downstream users. For these reasons, smelters/refiners are identified as the "pinch point" of the supply chain.
Visually, the supply chain looks like an hour glass timer with SORs at the middle:
CFSI members worked closely with the Organization for Economic Cooperation and Development (OECD) on the development of Due Diligence Guidance for the Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. More information about the OECD’s work on this area can be found on their website: http://www.oecd.org/fr/daf/inv/mne/mining.htm
CFSI is a member of the OECD Forum’s Multi-Stakeholder Steering Group (MSG) established for the Guidance in 2013.
Cross-recognition agreements to support implementation of the OECD Guidance have been developed with related programs and initiatives, including the LBMA, and the Responsible Jewelry Council.
CFSI aims to support outreach and peer learning about the OECD Due Diligence Guidance across our membership. Click here to access CFSI’s eLearning Academy which contains training modules for suppliers, smelters, and auditors on supply chain due diligence and CFSP requirements.
Section 1502 of the Dodd Frank Act was enacted to address the exploitation and trade of 3TG by armed groups, which is partially financing conflict in the Democratic Republic of Congo (DRC) and contributing to a humanitarian crisis.
Section 1502 is a 2010 amendment to the US Exchange Act. It requires that companies it applies to determine whether any of the 3TG used in their products are financing or benefiting illegal armed groups in the DRC or an adjoining country. Companies that are listed with the Securities and Exchange Commission (SEC) and use 3TG in the products they manufacture or contract to manufacture are directly affected and must make specific public disclosures on their due diligence. Companies with products that ultimately are sold to the US market are likely to be indirectly affected by the legislation, whether or not they sell directly to a US‐listed company.
On August 22, 2012 the US Securities and Exchange Commission (SEC) released the final rule for Section 1502 on Conflict Minerals in the Dodd-Frank Act. The final rule endorses the OECD Due Diligence Guidance on Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas as a “nationally or internationally recognized due diligence framework” for fulfilling Dodd-Frank requirements of conflict mineral due diligence.
Mining is not considered to be manufacturing, thus 3TG mining companies are exempt from the SEC reporting obligations. 3TG mining is part of the global supply chain, so reasonable inquiries as to origin and any necessary conflict-sensitive due diligence will continue to apply.
Under the SEC rule, a “reasonable” country of origin inquiry can accept the representations of a supplier of 3TG if those representations are reliable and are believed to be true. A company would have reason to believe a processing facility’s (e.g., a SOR) representations if the facility received a “conflict-free” designation from a recognized industry group that requires an independent private sector audit. CFSP meets the SEC description of a recognized industry group and can thus provide assurance to support a facility’s representations. SORSs are eligible to achieve CFSP validation via an independent third party audit.
The CFSP requires CoC verification for mined material and identify the country of origin of the mined material.
The SEC final rule can be found at: http://www.sec.gov/news/press/2012/2012-163.htm
In June 2013, the SEC published an FAQ document, which can be found here http://www.sec.gov/divisions/corpfin/guidance/conflictminerals-faq.htm
Recycled material: Recycled materials defined by the OECD Guidance, and referenced by the US SEC are ‘reclaimed end-user or post-consumer products, or scrap processed metals created during product manufacturing including: excess, obsolete, defective, and scrap metal materials which contain refined or processed metals that are appropriate to recycle in the production of 3TG. As defined by the OECD Guidance, minerals partially processed, unprocessed, or a by-product from ore (i.e. slags) are not recycled materials. Under the SEC rule, recycled 3TG is deemed to be “DRC conflict free” and is equivalent to other sources of 3TG for SEC reporting purposes. If a reasonable inquiry confirms that material is derived from recyclable material, its use does not trigger an obligation to file a CMR.
Grandfathered 3TG: Existing stocks of 3TG are exempt from application of the rule if they are “outside the supply chain” prior to January 31, 2013. 3TG is “outside the supply chain” if it “has been fully smelted/refined”, or is located outside of the DRC and adjoining countries (even if not yet fully refined), by the date specified. Thus stocks of existing 3TG held in exchanges, banks and vaults as well as manufacturers’ inventories are grandfathered as conflict-free. The CFSP adopts the same cut-off date expressed in the SEC Rule (January 31, 2013).
The CFSI eLearning Academy is a free online training platform for both members and the general public to learn about the CFSP auditing process and how to develop best practices for conflict minerals sourcing. To request an eLearning account, please contact firstname.lastname@example.org. You may access the eLearning Academy here.
The CMRT is a free, standardized reporting template created by the CFSI. The CMRT was designed for downstream companies to disclose information about their supply chains up to but not including the smelter. The CMRT facilitates the transfer of information through the supply chain regarding mineral country of origin and SORs being utilized and supports compliance to legislation. The CMRT also facilitates the identification of new smelters and refiners to potentially undergo an audit via the CFSP.
The CFSI maintains an up-to-date Smelter Reference list. This list contains all SORs that have been validated by the CFSI to meet the definition of a smelter, as outlined in the relevant protocol. There are several reasons why a supplier may provide SORs not recognized in the CMRT. Examples of reasons include: the company does not process 3TG, the company is upstream or downstream of a smelter, the company has yet to be validated as eligible through CFSI’s Smelter Disposition Process or the company is no longer in operation and has been removed from the Smelter Reference List. For a complete list of SORs that have been removed from the Smelter Reference List, check the “revision history” tab in the CMRT. The best way to check on the status of a SOR that is not on the Smelter Reference list is to become a CFSI member, which give you access to the complete smelter database.
By being a member of the CFSI, you have access to country of origin information, including the Reasonable Country of Origin Inquiry (RCOI) data provided by the CFSI. This list provides country of origin information for SORs that are validated through the Conflict-Free Smelter Program. Note that this report is sent to one contact per company, approximately every two months.
This data provides companies with detailed information about the source of 3TG in their supply chains. Country of origin information may be useful to companies as they prepare to demonstrate conformance to the OECD’s Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, or compliance to the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Due to business confidentiality reasons, the RCOI data is provided in an aggregated way. CFSI provides RCOI at the granularity of country levels based on risk (not at mine site level):
- Level 1 – low risk countries know to have plausible active mining activities
- Level 2 – known or plausible countries for smuggling, export out of Level 3 countries, or transit of materials containing 3TG
- Level 3 – CAHRAs including the DRC and adjoining countries
The CFSI does not collect CMRTs. CMRTs should be provided to your customers and as a good practice measure, may be posted on your external web site.
The list of SORs in the CMRT is a partial list of SORs that exist globally. The SORs listed on the Smelter Reference List are identified based on the definitions in the CFSP audit protocols and determinations made by the CFSI’s Smelter Disposition Team. The list is developed and maintained by the CFSI based on information received from suppliers in the various industries participating in the CFSP as well as information from metals industry associations and other experts.
A SOR is a company that processes mineral ore, slag, recycled or scrap materials, or any combination thereof into refined metal or metal containing intermediate products. The output can be pure metals, powders, ingots, bars, grains, oxides or salts. Companies listed must also be in operation.
SORs are listed in the CMRT tab called Smelter Reference List.
This list is not exhaustive and it evolves over time as new information becomes available. The Smelter Reference List is updated approximately every other week and is available here. The Revision History tab in the CMRT lists all Smelter Reference List Updates for each CMRT revision.
“CFSP Compliant” SORs have successfully completed a CFSP audit and maintain good standing in the program, through a continual validation process. These SORs have the systems and processes in place to support responsible sourcing of raw materials and can provide evidence to support their sourcing activities.
Not necessarily. The Smelter Reference List encapsulates all known SORs that are eligible for a CFSP audit. Many may be found on the compliant list or the active list. Others still have not undergone an independent third-party audit, and therefore their sourcing policies and practices have not been validated.
How does the CFSI decide when to add or remove a SOR from the Smelter Reference List on the CMRT? What’s that process?
Information regarding known smelters and refiners of tantalum, tin, tungsten, and gold is submitted to the CFSI via a standard form downloadable here. These submissions are reviewed on a bi-weekly basis by staff and the Smelter Disposition Team (composed of industry experts) and checked for irregularities that require clarification.
The team reviews incoming smelter information to ensure it is as accurate as possible based on the most current, accessible information. The CFSI’s process considers whether the SOR is currently in business, whether it is a member of another program that CFSI recognizes, whether it falls within CFSI’s definition, and any other criteria that would qualify it for inclusion on the Smelter Reference List.
The evolving nature of the industry and the information available means that smelters and refiners are added or removed from the Standard Smelter List frequently. These revisions are noted in the CMRT Revision tab.
The smelter reference list includes all major aliases of each SOR, while the website only refers to SORs by their Standard Smelter Name. As a result, one smelter may be listed numerous times on the Smelter Reference List, but will only be listed once on the website.
If the CFSI releases a new CMRT in April, should companies resurvey their suppliers for using the new CMRT for the upcoming filing?
No. The CFSI updates the CMRT in April for use in the next year’s filing. Companies should use the most recent version available at the time they initiate their annual survey and state specifically what version they used/allowed when collecting information from suppliers.
MRPRO is a free software-based dashboard tool for data gathered via the CMRT and is provided by the CFSI for free. The MRPRO dashboard can aggregate multiple CMRT documents into one, export XML files of CMRT documents to be uploaded into proprietary databases or software solutions, and perform some analysis tasks.
- Please note that MRPRO will work only on computers running Windows XP and higher and with versions of Excel 2003 or later. To update the program, download the zip file and then extract the contents to the proper directory, per instructions on the CMRT Training & Resources page.
To learn more about MRPRO please go to http://www.papros.com/FEUCE_cm.htm
Are companies required to report the identities of the mines of origin in the Conflict Minerals Report (CMR)?
No. Per the SEC final rule, a company that is required to provide a conflict minerals report only is required to report on “the efforts to determine the mine or location of origin with the greatest possible specificity” for only those products/product categories that have not been described as “DRC conflict free.” Furthermore, this effort only is required as part of a company’s due diligence process and is not required as part of the RCOI process. Therefore, it is reasonable to only expect companies to make and subsequently describe such an effort “to determine the mine or location of origin” whose products/product categories are not described as “DRC conflict free.”
Two practical approaches that many companies currently are taking to determine the mines or country of origin are:
- Use of the CFSI Conflict Minerals Reporting Template(CMRT) as a method to query and transmit sourcing information along the supply chain.
- Reliance on and support for the CFSP or similar independent third party audit solution through which mineral sources are identified and independently evaluated.
The CMRT supports the identification of the smelters and refiners within a company’s supply chain and their sources of 3TG. The utility of the CMRT is dependent upon each tier in the supply chain collecting information from their direct suppliers and passing it on to customers. The amount of detail collected by this process continues to improve; however, considering the number of tiers within a complicated supply chain, it may take numerous reporting cycles to close data gaps. This methodology also, by itself relies on self-disclosures and is limited with regard to addressing confidentiality concerns. Due to the dynamic nature of some downstream companies’ supply chains, a company may never obtain a reliable representation of the mine or location of origin for their conflict minerals by relying on the CMRT alone.
With due consideration for the value of the intellectual property of mineral sources for most smelters, an independent third party audit solution such as the CFSP offers an efficient methodology to address both the confidentiality and reliability of this information. Moreover, the OECD DD Guidelines provide that reporting of information may be limited by concerns of business confidentiality. Accordingly, the “greatest possible specificity” that most filers should expect to achieve in “determin[ing] the mines or location of origin,” and therefore the most reasonable effort to do so, is to incorporate reliance on the CFSP as one element of its due diligence process. Through the CFSP smelter validation process, independent auditors review information on the mines of origin for the smelters and refiners. Those smelters and refiners found to be compliant with the CFSP are those that have disclosed the identities of the mines or location of origin to the auditors, and for whom the auditors independently have validated that sufficient evidence exists to support the smelter’s sourcing claims and that those sources meet the requirements of the protocol. Therefore, a company’s reliance on third-party auditors through the CFSP is a reasonable method to exercise efforts to determine the mines or location of origin and meet due diligence expectations.
Members of CFSI also may wish to include in their description of their efforts, their contribution of resources to further support the CFSP. In addition, the CFSI offers a tremendous opportunity for a member to exercise one’s efforts by directly participating in the CFSP activities to engage smelters into the program and support for advancement of the CFSP.
In tracing 3TG in my supply chain, is it appropriate to require suppliers to guarantee that their products are conflict-free and to impose liability for compensation if they are not? If not, how can my company ensure a product is conflict-free?
No, it is not appropriate to impose liability for compensation if a supplier’s products are not conflict‐free. The SEC final rule requires disclosure of information regarding the presence of conflict-supporting materials in products but does not prohibit the use of materials that have been found not to be DRC conflict-free. Given the current lack of transparency in the supply chain, it currently is not recommended to impose strict contractual requirements with regard to guarantees and damages.
Suppliers of fabricated goods are not in a position to make a conflict‐free guarantee at the present time for two reasons:
- First, in the early stages of implementation of supply chain transparency programs, few suppliers will have received sufficient information from their own supply chains to identify all of the SORs of 3TG contained in their products. In order to ensure that a product delivered by a supplier is conflict-free, all smelters or refiners of all of the four covered minerals used in the product must be identified with the cooperation of all suppliers starting with the smelters or refiners themselves.
- Second, even if a supplier were able to identify all SORs in its supply chain, not all of the SORs have yet been validated under an independent third party audit program. Thus, even socially-responsible suppliers of fabricated products with well-designed conflict minerals programs are unlikely to be in a position to give a conflict-free guarantee.
If under present circumstances suppliers are required to provide guarantees and assume liability for damages, suppliers may avoid sourcing 3TG from the DRC and adjoining countries, and some may refuse to conduct inquiries altogether. This is not the intent of supply chain due diligence and is against the mission of the CFSI which is to support responsible sourcing of raw materials from conflict-affected and high-risk areas. To facilitate implementation of conflict minerals inquiries, contractual obligations for suppliers of fabricated products should be limited to cooperating with inquiries and reporting.
The situation is somewhat different with respect to SORs from which a company purchases directly. It is reasonable to require SORs with which a company has a direct commercial relationship to have been subject to an audit conducted in accordance with the CFSP audit or other mutually recognized audit program, or to have made a firm commitment to undergo such an audit as soon as it can be scheduled. It also is reasonable to require SORs with which a company has a direct commercial relationship to pass such an audit, or, having failed the audit, to establish and put into place an aggressive plan to mitigate risks and correct process deficiencies within a reasonable period of time.
When surveying suppliers, is it only acceptable to conduct inquiries using the CMRT or its equivalent, or can a company ask suppliers for a declaration that the products do not contain conflict minerals that originated in the DRC or adjoining countries?
In order to demonstrate that a reasonable country of origin inquiry (RCOI) and proper due diligence has been conducted, it may be necessary to identify SORs of all applicable minerals and the origin of ores and materials used at the SORs. For companies downstream of SORs, such information is hard to obtain, making it difficult to identify materials’ country of origin and this will be required in the Conflict Minerals Report (CMR) if a company’s products are not described as “DRC conflict-free”. Also, requiring non-covered country materials may lead to a de facto embargo of covered countries, which is not in alignment with the mission of CFSI.
To demonstrate that products do not contain 3TG that finance or benefit armed groups, in addition to the above, all identified SORs should be validated by the Conflict‐Free Smelter Program or other mutually recognized auditing programs (see Question 49). In other words, even though companies downstream of SORs obtain a non-use certificate, it may not be considered sufficient due diligence unless SORs have been identified. Furthermore, forcing suppliers to submit documents such as non-use declarations may encourage a de facto boycott of the covered countries, which is not in alignment with the mission of CFSI. Accordingly, it is recommended that companies use the CMRT or its equivalent to identify smelters or refiners.
- Covered minerals are tantalum, tin, tungsten and gold
- Mutually recognized auditing programs include at this time the LBMA Good Delivery program and the RJC Chain-of-Custody Certification
Adjoining countries includes countries that shares an internationally recognized border with the Democratic Republic of the Congo. There are nine of these countries: Angola, Burundi, Central Africa Republic, Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, Zambia.
No. It is up to a company to determine the level of due diligence that is required under the SEC Rule and the OECD Due Diligence Guidance. Both the Rule and Guidance provide flexibility for companies, tailored to their size and position in the supply chain, to determine the level of effort and due diligence. Neither the OECD nor the SEC final rule specifically require that suppliers be audited. The only audits required by the OECD are audits of SORs, and the only audit required by the SEC is the audit of a companies’ conflict minerals report when a company has made a “DRC conflict-free” product determination. The OECD recommends using industry developed programs such as the CFSP, RJC, and LBMA for conducting SOR audits.
Therefore, an organization that participates in the CFSI or equivalent industry-wide program for SOR audits is not required to conduct any further supplier audits. If a company’s due diligence process requires that supplier audits be conducted – which is neither a requirement under Dodd-Frank nor the OECD Guidance – that audit criteria should be defined clearly. While a company can outsource the due diligence services, they still are responsible for their compliance, thus some companies may want to enhance their due diligence process by conducing audits of their suppliers or services that are providing aspects of their due diligence program.
We want to conduct a conflict minerals inquiry using our own format rather than the CMRT. Is it recommended that we do that?
No. The CFSI recommends conducting conflict minerals inquiries using the CMRT. Because an inquiry involves sharing of information across all relevant supply chains and supply chain tiers, adequate time is needed to conduct the survey, and a common set of tools facilitates the process. Furthermore, using a common exchange increases the accuracy and reduces the administrative burden for all companies involved, as well as increasing compatibility between completed forms. If you use a proprietary form, we recommend that it be constructed to allow responses to be submitted via the CMRT. Your company can then translate that information into your proprietary data configuration. More than 80 percent of the filers reference using the CMRT to collect data.
Additional information on the CMRT is available here: http://www.conflictfreesmelter.org/faqs.htm.
We wish to complete a conflict minerals inquiry in a short time period. Can responses be obtained on a short deadline?
It depends on a number of factors. The time required to perform an inquiry will differ depending on the number of layers in the supply chain between your company and the SOR, the number of suppliers in your supply chain, and the maturity of the transparency systems. For example, the CMRT should improve transparency and timing as it is disseminated through multiple layers of multiple industries’ supply chains. The more complex the supply chain, the more time will be needed for responses.
Conducting conflict minerals inquiries takes a lot of effort and money. Is it recommended that my company simply tell suppliers not to purchase raw materials from conflict-affected and high-risk areas in the first place?
No. Terminating legitimate business activities in the covered countries or other conflict-affected and high-risk areas may create potential risks to downstream companies due to increased smuggling activities. Furthermore, such policy decisions are not in line with the OECD Due Diligence Guidance and, CFSI’s mission and may contribute to consequences for local populations in the form of negative economic impacts, loss of livelihoods, etc.
Section 1502 of the U.S. Dodd-Frank Act and the SEC final rule are intended to mandate disclosure of information, not to forbid use of minerals from certain regions. Furthermore, non-governmental organizations working on conflict minerals issues call on the industry to not disengage their businesses from conflict-affected and high-risk areas. The CFSP and the CMRT have been developed to support the responsible sourcing of 3TG from conflict-affected and high-risk areas, one of the pillars of the Conflict-Free Sourcing Initiative.
In order to assess the progress of inquiries on 3TG, is it appropriate to request exactly when suppliers will disclose all of their SOR data?
The CFSI recognizes that supply chain due diligence is a continual, ongoing process to be undertaken by companies. At this stage, it may not be possible to obtain the full cooperation of all suppliers; however, companies should employ reasonable and good faith efforts in their supply chain due diligence and expect their suppliers to improve their due diligence performance over time. In some cases, suppliers may be reluctant to make a commitment on the timing of the process to identify SORs. In order for suppliers to smoothly implement supply chain inquiries, it is recommended that impractical requirements are avoided. To facilitate information collection, the CFSP and the CMRT provide a common platform and standards for all industries. Furthermore, the OECD and SEC both contemplate that information will improve over time. Therefore, companies should feel comfortable sharing relevant information received to date while realizing that data will improve subsequently. Companies should conduct annual inquiries, but the timing of the inquiries are at the discretion of each company.
The SEC final rule applies to issuers that file reports with the United States under the Exchange Act Sections 13(a)28 or 15(d). The OECD Due Diligence Guidance for responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas is a non-binding recommendations document for use by any company potentially sourcing minerals or metals from conflict-affected and high-risk areas. The OECD is global in nature and covers all minerals, not just tin tantalum, tungsten and gold.
Do I need information from all my suppliers to complete my reasonable country of origin inquiry (RCOI)?
The SEC final rule requires that the issuer’s RCOI must be reasonably designed. Company RCOIs may vary based on the issuer’s size, products, relationship with suppliers and other factors. The issuer is not required to receive representations from all of its suppliers as long as the issuer does not ignore warning signs or other circumstances that indicate the remaining amounts of conflict minerals originated or may have originated from the covered countries.
Participation in the Conflict-Free Sourcing Initiative (CFSI) or other equivalent industry initiative is an effective way to contribute to the efforts addressing conflict minerals issues. The CFSI is one of the most utilized and respected resources for companies addressing conflict minerals issues. The CFSI provides information on CFSP-complaint SORs, common tools to gather sourcing information and forums for exchanging best practices on addressing conflict minerals. These resources are key to assisting companies to source minerals responsibly and help companies to comply with the regulatory requirements under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
There are several other programs where companies can be more involved. For more information on these programs please visit the following websites:
Does the SEC require all SORs be listed in the conflict minerals report regardless if a SOR has been identified as conflict free?
No. The filer is not obligated to report the SORs used, the countries of origin and the efforts to determine the mines or locations of origin with the greatest possible specificity if the filer reasonably believes the 3TG are not from the DRC or adjoining countries, or are from the DRC or adjoining countries, but came from a SOR that was validated by CFSP or similar program as compliant.
It would be inconsistent to require filers to report this information for conflict-free minerals that are constituents of products that are not found to be “DRC conflict-free” or “DRC conflict undeterminable.” Furthermore, this kind of sourcing information of customers immediately adjacent to SORs would be considered business confidential for competitive purpose
In determining whether or not to identify SORs of “DRC conflict-free” minerals contained in products that are “DRC conflict undeterminable” or not found to be “DRC conflict-free,” the filer should consider the risk that associating a SOR that is “DRC conflict-free” may lead to confusion and potential reputational damage to those SORs/facilities.
If the filer chooses to report all of the SORs that process 3TG in such products, it is recommended that they clearly delineate between SORs that contribute to the conclusion that a product or product category is “DRC conflict undeterminable” or “not found to be DRC conflict-free” and SORs that have been determined to be “DRC conflict-free” according to the CFSP or a similar independent third party audit program.
The CFSI is closely monitoring the development of the EU regulations and taking the necessary steps to enhance its programs to assure it will support compliance to the new EU law.
The validation process reviews a smelter’s supply-chain due diligence activities of all applicable raw material inputs and assesses their alignment with the five-step framework of the OECD Guidance.
It includes an analysis of the smelter’s:
- Internal Management Systems, including:
- Conflict Minerals Policy
- Management Structure
- Internal Material Control Systems
- Supplier Engagement
- Supply Chain Control and Transparency System, including sourcing traceability and origin determination.
- Identification and assessment of supply-chain risk(s).
- Risk management program and related activities.
- Public reporting on supply-chain due diligence.
All smelters and refiners (SOR) sites within a particular company/organization are required to undergo the CFSP audit process. Compliance determination is unique to each metal a SOR produces and therefore there is a separate CFSP compliant listing for each metal (tantalum, tin, tungsten and gold) and each facility.
Most CFSP participants complete an annual re-audit to verify continued compliance to the protocol and maintain inclusion of their company name on the publically available list of CFSP-compliant SORs. Some SORs are in a risk-based audit program, which reduces the audit frequency to every 3 years for SORs that meet the eligibility and continued reporting requirements. More information about the Risk-Based Audit Program can be found here: http://www.conflictfreesourcing.org/smelter-introduction/
Yes, with the following exception. If a company has a smelter that is participating in the Risk-Based Audit Program, those facilities will be audited once every three years. In all cases, all of a company’s SORs will need to complete the annual requirements for submission of the Line Item Summary (LIS) and completion of training.
The CFSP audit is available to all SORs that meet the following conditions:
- Meet the definition of a SOR.
- Subject applicable individual smelter production site/facility to an individual audit.
- Allow all organizational units involved in the smelter’s supply chain due diligence measures to be assessed during the audit.
- Sign the appropriate agreements (e.g. Non-Disclosure Agreement and Auditee Agreement).
- Agree to fund the audit, or retain other accessible funding to pay for the audit.
- Agree to publish a conflict minerals policy.
- Agree to publish audit summary reports that conforms to the OECD Guidance with due regard taken to business confidentiality and other competitive concerns.
For general questions, a SOR may contact the Audit Program Manager at email@example.com.
A CFSP audit of a smelter or refiner consists of three main phases (typical timeline for each phase is noted):
- Pre-audit activities (14-21 calendar days):
- Sign and return the Auditing Agreement (AA) and the Agreement for the Exchange of Confidential Information (AECI).
- Review the protocol, accompanying documents, new smelter training and other trainings available on the eLearning academy.
- Fill out and send the pre-audit checklist to the Audit Program Manager.
- Begin to fill out the line item summary (LIS).
- Audit activities (15-45 calendar days which includes 1-5 calendar days per SOR facility for onsite third party audit):
- Complete the LIS
- Submit the LIS to the auditor at least 14 days before the on-site audit.
- Begin collecting required documentation for the sampled transactions (50 percent of the transactions to be sampled will be provided to the auditee before the audit. The auditee will be informed of the other 50 percent at the on-site audit).
- On-site audit, including an opening meeting, facility tour, employee interviews, document review, and closing meeting.
- Review the report and send feedback to the auditor.
- Post-audit activities (if needed, up to 90 calendar days):
- Implement any corrective actions identified during the on-site audit. See the Corrective Action Program (CAP) Training available on the eLearning Academy for more information.
The Initial Audit Fund is a voluntary program managed by the CFSI designed to encourage CFSP-eligible smelters to participate. The Fund offers smelters an incentive for participating in the CFSP by fully paying for the costs of their initial audit. Support for the Fund is provided on a voluntary basis by CFSI member companies and is available on a first come, first serve basis until audit funds are depleted.
To be eligible for use of the funds, smelters must first meet the CFSP eligibility requirements. Once determined to be eligible for the audit, the smelter must not have undergone a previous CFSP audit, must have demonstrated its commitment to participating in the CFSP by signing the Auditee Agreement and Agreement for Exchange of Confidential Information, and must have submitted the Pre-Audit Checklist and Line Item Summary to CFSI staff in a timely manner. The Fund can be applied to multiple facilities under a single smelter so long as it is each facility’s first audit. Furthermore, in order to encourage CFSP participation among as many companies as possible, each smelter only is eligible for one incentive for each metal for which it is undergoing the audit.
CFSP occasionally fields request to observe an audit. CFSP will accommodate these requests when they have a rationale that aligns with the program’s goals. CFSP will not facilitate observers from the media. Requests for observers will be made to the auditee and the auditee shall have the right to allow accept or refuse such activity.
Observers may include:
- CFSP staff
- CFSI member companies
- Auditors in training
- External assessors of the CFSP program
- Academic researchers invited by CFSP
- Government representatives
Should the auditee agree, the CFSP program manager will notify the audit firm of the request for observation. The firm should evaluate the impact of an observer and inform CFSP of what those impacts could be. In general, firms are encouraged to accept observers but they shall not be required to accept an observer if there is a significant business or procedural concern that cannot be adequately mitigated. Observers shall sign non-disclosure agreements to protect the business confidential information disclosed during the audit and must agree in advance to not hinder the activities of the audit. The CFSP program manager will provide a briefing of what to expect on site. The auditee shall provide a similar level of supervision and safety protection to the observer as would typically be extended to the audit team.
The observer shall not interfere with the audit in any way, for example:
- Take up a significant amount of the auditor or auditee’s time
- Interfere with the auditor or auditee’s processes
- Attempt to direct instruct the auditor/auditee
- Tamper with the materials being audited
- Coach the auditee’s responses to auditor questions
All SORs are required to be audited annually unless they have applied for and met the criteria for the Risk-Based Audit Program which include a three-year audit cycle. Tungsten facilities that are members of the TI-CMC and are low-risk are audited once every three years. To determine when a SOR can expect to be audited, the CFSI provides information on the last audit date, the valid until date and indicates if a re-audit is in progress.
The focus of the audit is a risk-based validation approach that the smelter has implemented adequate company-level management processes and due diligence to support responsible mineral procurement per the OECD Guidance. The audit is not expected to determine that material at a smelter is conflict-free but rather that the systems for responsible 3TG sourcing are implemented and functioning as designed. The CFSP audit is not a material certification audit.
Conflict-affected and high-risk areas are identified by the presence of armed conflict, widespread violence or other risks of harm to people. Armed conflict may take a variety of forms, such as a conflict of international or non-international character, which may involve two or more states, or may consist of wars of liberation, or insurgencies, civil wars, etc. High-risk areas may include areas of political instability or repression, institutional weakness, insecurity, collapse of civil infrastructure and widespread violence. Such areas are often characterized by widespread human rights abuses and violations of national or international law.
The protection of identifiable and confidential materials is critical to the CFSI and to participating SORs. The CFSP secures confidential information using an array of procedures and agreements, including:
- Non-Disclosure Agreements (NDAs), also known as Agreement for Exchange of Confidential Information (AECIs), are established between the audit firms, CFSI staff, ARC participants, and SORs.
- Auditors are required to protect details of the facility information assessed onsite during the audit (e.g. export certificates, transportation documents). If a facility requires an NDA with the auditor, it must arrange that outside of discussions with the CFSI. Such an NDA cannot conflict with the auditor completing their audit tasks.
- Note that the audit report reflects the results of the onsite documentation analysis and the mass balance summary. The ARC is provided a copy of the LIS created by the SOR for comparison to the mass balance summary.
- Audit reports are the property of the SOR. The auditor provides a copy of the report to the CFSI Staff for distribution to the ARC for the purposes of the audit review and compliance determination.
- During the onsite audit, the SOR should make sufficient effort to obtain the necessary origin and chain of custody documents from traders or other suppliers but may have difficulty in doing so due to business confidentiality concerns. In such cases, the smelter may request that the trader or other supplier provide the necessary documents directly to the CFSP auditor for review. This process should be an interactive process between the smelter, the auditor, and the smelter's supplier. This should be considered an exception process as delays in receiving the required documentation may incur cause higher audit costs for the smelter.
- In the case where origin and chain of custody information is held within a third-party upstream assurance system, the upstream assurance system may send this information to the CFSP auditor directly in order to both address confidentiality issues and increase efficiency.
- All questions regarding SORs that are not on the public CFSI list will be directed back to the SOR as they are best positioned to communicate their participation and status within the CFSP to their customer base.
- Aggregate numerical indicators are maintained on CFSI’s website to publically indicate program participation over time.
To achieve the intended outcomes, the Auditee shall establish, implement, maintain, and continually improve a management system, including the processes needed and their interactions, in accordance with the requirements of the CFSP Protocols. Specific criteria are in the protocols. General criteria are as follows:
- Demonstration of management commitment via a strong conflict minerals policy. The Auditee will have a documented, effective, and communicated conflict mineral policy for procurement of 3TG containing materials. The policy will be integrated into company management processes.
- Development and implementation of processes and systems to demonstrate the ability to support responsible sourcing from conflict-affected and high-risk areas.
- Establishment of an internal material control mechanisms to demonstrate the ability to account for all inputs during the audit period. The Auditee will have a mechanism to document receipts and products sold and/or shipped, and a reconciliation process for receipts, inventories, losses, tolling and sales.
- Appropriate level of document collection and retention to support sourcing traceability and origin determination for all materials received.
The criteria will be evaluated through the examination and evaluation of at least the following:
- Processes and systems used for sourcing.
- Line Item Summary and mass balance analysis.
- Internal material control mechanisms.
- Materials within the audit scope.
Auditing firms may audit the same Auditee facility no more than three (3) times in a row before the Auditee is rotated to another audit firm.
The audit program manager (APM) manages the audit bidding process. The APM solicits bids from the audit firms that includes pricing and man days on-site. Based on the review of the bid and taking into account pricing, auditor availability, auditor quality, timing, and regional considerations, the APM chooses the audit firm. Auditees do not select the audit firm, however auditee feedback from prior audits is taken into consideration.
The cost of the audit is dependent on the type of SOR, location, volume and complexity of sourcing, and number of transactions over the audit period.
Smelters/refiners that voluntarily choose to participate in the CFSP pay for their audits.. The audit fee covers the third-party auditor’s time to conduct the on-site audit, develop draft and final audit reports, and travel expenses to the SOR site(s).
A SOR can minimize their audit costs by properly preparing and ensuring all required documentation is available during the onsite audit. This reduces the time auditors are present at the facility reviewing the sourcing documentation. Additional audit costs may be incurred if the auditor has follow-up questions after the onsite audit, a corrective action plan (CAP) is required, or if an on-site visit is needed to validate CAP implementation.
The pre-audit visit provides a valuable opportunity for a CFSI representative and the facility to have a face-to-face exchange of information regarding conflict minerals. The pre-audit visit activities are intended to:
- Understand the facility’s operations at that company’s site(s)
- Understand generally the facility’s current sources for incoming materials
- Provide an initial review of the facility’s ability to meet the compliance expectations of the CFSP and provide suggestions on ways to close gaps prior to a CFSP audit
- Establish a CFSP contact person for the facility to receive answers to follow-up questions regarding the CFSP
A pre-audit visit typically takes one day to complete. The pre-audit visit is a complimentary service provided by CFSI member company representative(s).
There are three documents that must be completed before a CFS audit takes place:
- Agreement for the Confidential Exchange of Information (AECI) and the Auditee Agreement (AA).
- Pre-Audit Checklist which defines the SOR’s operations’ breadth, products and complexity.
- LIS - includes documentation of the procurement and incoming materials transactions for the full audit period as well as the inventory estimates.
Once the auditor has been identified by the APM, smelters/refiners (SORs) schedule directly with the auditors to agree on the date for the site visit.
Typical onsite audit duration is 1 to 3 business days but ultimately is dependent on the size and complexity of the facility and the size of the audit team. A typical agenda for the onsite audit includes:
- Opening meeting and management review: review the purpose, scope and methodology of the audit with the facility management team; identify key facility personnel who will assist throughout the audit process
- Facility tour: conduct an entire walkthrough to analyze the processes, storage, receiving and shipping including a physical inventory check of onsite and offsite storage warehouses
- Documentation review: review the facility’s conflict minerals policy and its effective implementation within management and procurement procedures; validating that the systems and controls are in place to assure conformance to the protocol; conduct a mass balance review (including total material receipts, current inventory and sales volumes), validating recycled/scrap purchases, ore, concentrate and other non-recycled/scrap material source and transportation documentation.
- Closing meeting and management review: communicate audit results to the facility management including recap of the audit findings and non-compliances found during the assessment
Yes, the CFSP, LBMA and RJC audit programs cross-recognize each other’s audits:
Common Features: 3rd Party Audit, OECD DDG & SEC compliance
London Bullion Market
Jewellry Supply Chain – Mine to Retail
Continued Good Delivery Accreditation
Validated SOR list
RJC CoC and CFS audits = Responsible Gold Requirement
LBMA and CFS = conflict-sensitive requirement only.
RJC and LBMA audits = CFSP Complaint
Disclaimer: Fulfilling CFSP requirements only meets the LBMA & RJC conflict-free audit requirements to avoid duplication. There are additional requirements for refiners to achieve LBMA & RJC certification.
Chain of custody refers to all steps in a supply chain that take possession of the product, including miners, transporters, exporters, processors and manufacturers. It provides record of the sequence of entities that have custody of minerals as they move through a supply chain that allows the ability to trace a material back to its origin. A credible chain-of-custody system supports the truthfulness of mineral origin claims. Chain of custody will include documentation such as mine origin certificate, transport documentation, export and import records and factory receipts.
Traceability means the ability to follow the trail of minerals along the supply chain by monitoring and tracking chain of custody. For example, by using the chain of custody system, auditors can trace material to the mine and country of origin.
Audits are announced. Given the need to complete pre-audit documents, logistical considerations, and to assure the appropriate people are available for the audit, audits are announced.
Line-Item Summary (LIS): A listing of all inventory, receipts and related documents in the audit period as well as a management systems questionnaire.
In addition to the completion of the LIS described in the previous section, the auditee will gather and organize all documents required to complete the audit. These include:
- Documentation to validate the existence and implementation of a responsible sourcing policy, as well as copies of policies and procedures related to the procurement of 3TG materials.
- Documentation to substantiate origin and chain of custody of 3TG containing receipts in scope for the audit period, in particular those transactions selected by the auditor for validation.
- Documentation to demonstrate robust management systems in-place, as well as risk assessment and mitigation, to support responsible mineral sourcing practices
- Completion of the mass balance calculation. Auditees may use different calculation models and work with the auditor to translate their mass balance calculation in the CFSP template.
The auditee will familiarize themselves with the CFSP LIS and integrated Audit Checklist document, the audit protocol and audit procedure.
The CFSP Audit Protocols and Procedures define in and out of scope facilities and materials. The initial audit period typically covers the period from one year to the date the LIS is completed, prior to the on-site audit. All 3TG containing materials delivered to the auditee within the audit period are covered in the audit scope, with some exceptions which are outlined in the relevant protocol. Materials delivered after the end of the audit period will be reviewed during the subsequent audit period.
The CFSI approves audit firms and individual auditors (from the approved firms) to allow them to conduct CFSP audits. The auditor approval process is designed to verify that auditors have appropriate experience and expertise, that they have completed the required CFSP training, and that there are no conflicts of interest when undertaking CFSP audits. The approval process follows the relevant requirements outlined in ISO 17011, the international standard for accrediting certification/assessment bodies. Please review the Audit Firm and Auditor Approval Process for detailed information on CFSI requirements.
The CFSP uses multiple audit firms to create a cost competitive audit program and using regional auditors minimizes auditor travel costs. Using a small number of audit firms currently is seen as a benefit to establishing auditor consistency during the early phases of Program.
Matching level of assurance with level of risk means that the level of detail and information requested increases as the sourcing or supplier risk level increases. In the context of the CFSP, if a SOR only sources from non-conflict-affected or high-risk areas (i.e., Level 1 countries), the level of due diligence conducted, documentation collected/provided, and validation review is reduced compared to those attributes for SORs that identify higher risks in their supply chains due (e.g., sourcing from a conflict-affected and high-risk area).
Risk levels are assigned to a country based on the following criteria.
- Level 1 Country: Countries with known active ore production for tin and/or tantalum that are not identified as Level 2 or Level 3.
- Level 2 Country: A country where tin or tantalum materials from conflict-affected and high-risk areas (CAHRA) are known to transit. This currently includes Kenya, Mozambique and South Africa.
- Level 3 Country: A country where 3TG material is mined in a CAHRA as defined by the mineral origin and/or supplier red flags of the OECD Due Diligence Guide:
- The minerals originate from or have been transported via a CAHRA (as defined by the OECD).
- The minerals are claimed to originate from a country that has limited known reserves, likely resources, or expected production levels of the mineral in question (i.e., the declared volumes of mineral from that country are out of keeping with its known reserves or expected production levels).
- The minerals are claimed to originate from a country where materials from CAHRAs are known to transit, legally or illegally.
- The company’s suppliers or other known upstream companies have shareholder or other interests in companies that supply minerals from or operate in one of the above-mentioned red flag locations of mineral origin and transit.
- The company’s suppliers’ and/or other upstream companies are known to have sourced minerals from a red flag location of mineral origin and transit in the last 12 months.
- Based on the definition provided in the Dodd-Frank Act, Level 3 countries also include: The Democratic Republic of the Congo (DRC) and its nine adjoining countries. These include Angola, Burundi, Central African Republic, DRC, Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia. These are also commonly referred to as "covered countries”.
The time onsite is determined by a number of factors including the size of facility, SOR preparedness and availability of documentation requested and number of issues identified. On average most auditors are onsite for 1-3 days.
At the conclusion of the onsite CFSP audit, the auditor will create an audit summary report and deliver it to the smelter or refiner (SOR) and the CFSP ARC. The ARC reviews the report and the auditor's testimony to the ARC. Together, the auditor and the ARC review the auditor’s work to agree on the compliance determination for the SOR.
The ARC's audit review process consists of the following steps:
- The CFSP Audit Manager (APM) distributes the completed audit report and line item summary (LIS) to ARC members for pre-reading
- ARC members vote on the auditor’s recommendation of the SOR compliance and make a final determination of compliance to the CFSP protocol
- If there are questions about the audit report or auditee’s activities, these will be clarified with the auditor and/or auditee. If needed, the auditee can also join ARC calls to present information or clarify questions.
- If the SOR is found to be compliant with the CFSP protocol, the APM sends a compliance letter and the company will be added to the publically available compliant list.
- If the SOR is found not to be compliant with the CFSP protocol, the APM sends a non-compliance letter. This letter includes findings and if relevant, possible solutions or corrective actions (see post-audit activities).
Post-audit activities are required for those SORs that have not demonstrated effective compliance to the audit protocol. In this situation, the SORs are required to complete corrective actions to be eligible for compliance to the CFSP protocol.
The post-audit activities may require a desk-top or in-person review to confirm that corrective actions have been implemented. Additional auditor charges may be incurred during post-audit activities.
If the auditor determines the gaps are satisfactorily addressed, the ARC will again vote to confirm the auditor’s recommendation and if applicable, the APM will issue the compliance letter.
All post-audit activities must be completed within 90 calendar days from the date of issuance of the non-compliance letter.
If the auditor and ARC determine the SOR has not fully demonstrated compliance to the CFSP protocol, the auditor and ARC will identify items where compliance was not properly demonstrated (gaps) and the non-compliance letter that will include a brief explanation of additional information needed to determine compliance. All findings of non-compliance during the audit will be noted in the non-compliance letter issued to the SOR. If the ARC determines the SOR is not compliant to the CFSP protocol:
- The SOR must provide the necessary supplemental information (in accordance with the non-compliance letter) to the auditor within 60 calendar days of issuance of the non-compliance letter as a means to address the identified gap(s).
- The remaining 30 calendar days of the 90-day gap closure timeline is allocated for the auditor to review and validate the provided supplemental information and subsequent review by the ARC. If necessary, an auditor may be required to complete an additional onsite visit (at the smelter’s/refiner’s expense) to review the supplemental information and resolve the identified gaps.
- If the gaps are resolved and the SOR subsequently meets the requirements of the CFSP protocol per the recommendation of the auditor and determination by the ARC, a Compliance Letter is issued to the SOR.
- If the SOR that has a repeat non-compliance issue identified, or was unable to complete closure on open items within the 90-day post-audit mitigation period, the SOR will be deemed as non-compliant and will be exempted from participating in the CFSP for a period of six months. A SOR may request an audit at the conclusion of the six-month exemption period.
- If at the end of the 90-day post-audit time period the ARC concludes the SOR remains non-compliant to the CFSP protocol but the SOR does not agree with that conclusion, the SOR may challenge the non-compliance conclusion by filing a written appeal to the CFSI. The CFSI’s Appeals and Complaints Procedure can be found here: http://www.conflictfreesourcing.org/conflict-free-smelter-program/cfsp-audit-firm-and-auditor-approval/
In cases where smelters have challenges meeting the compliance requirements of the CFSP protocol, CFSP respects the principles of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. The Guidance states:
Devise and adopt a risk management plan. Devise a strategy for risk management by either i) continuing trade throughout the course of measureable risk mitigation efforts; ii) temporarily suspending trade while pursuing ongoing measurable risk mitigation; or iii) disengaging with a supplier after failed attempts at mitigation or where a company deems risk mitigation not feasible or not acceptable.
In line with this, the CFSP orients its corrective action plan process towards options (i) and (ii) by instituting measures that will encourage smelters to reach compliance. The OECD Guidance encourages development of indicators and transparency to measure improvement, so that downstream companies may identify which of the mitigation steps is the best approach for them.
Some suggested indicators for measuring improvement include:
- Disclosure of information;
- Nature and effectiveness of the chain of custody or supply chain transparency system;
- Nature and form of supply chain risk assessments and management, in particular to verify information from the above step;
- Engagement of the company in capability training and/or industry initiatives for supply chain due diligence.
The Extended CAP provides a concrete and transparent way for the program and downstream companies to engage noncompliant smelters and refiners as they pursue risk mitigation and continual improvement in their processes, as recommended in the OECD Guidance.
The smelters located on the Extended CAP list must have demonstrated a commitment to enter a process that is more transparent than the standard audit process. Transparency is needed to help downstream companies conduct their own risk assessments.
Any smelter which voluntarily exits CFSP or chooses not to engage in the Extended CAP will no longer appear on CFSI’s web site. Those smelters may choose their own method of customer communication and will not have any publicity via the CFSI site.
Smelters and refiners on the Extended CAP list have agreed to the following conditions:
- Regular communication with CFSP
- Senior management commitment to support the CAP
- Publication of the CAP on the company’s website
- Publication of the company’s due diligence process on the company’s website
- Undergoing a full CFSP audit once the CAP has been implemented
What is the Corrective Action Plan (CAP) process and how are corrective actions verified and continuous improvement ensured?
The auditee’s Corrective Action Plan must contain the following elements, depending on the type of non-compliance identified:
- Providing sufficient documentation to the auditor to reasonably determine the origin and demonstrate the chain of custody for each receipt validated as part of the audit if such information is available. The auditee may work with the supplier of the non-compliant material to obtain follow-up documentation.
- Documented changes in the auditee’s policies and procedures. These changes must be implemented within a three-month period following the audit.
- Any material from a Level 3 country that cannot be validated as from a conflict-free source and that still is residing at the auditee during the audit, must be reviewed and approved by the ARC prior to taking any action. This material must remain in the as-received material state as it originally was purchased by or provided in a tolling agreement to the auditee (or in semi- or final-processed state, if applicable), as it is described in the LIS until the ARC and the auditee agree to a disposition plan.
- A re-audit conducted by the auditing company that has conducted the previous audit may be required to ensure the auditee has implemented the corrective actions identified in the Corrective Action Plan. The re-audit may be desktop-based or may require an onsite visit by the auditor, depending on the non-compliances identified. The auditor will determine the type of re-audit required. The re-audit will primarily focus on validation of all non- compliant items identified in the Corrective Action Plan, as well as new materials received since the initial audit to verify that any further receipts from suppliers deemed non-compliant on the prior audit now meet Sn/Ta audit protocol requirements. Depending on the nature of the non-compliances and the auditee’s commitment to implementing an agreed-upon Corrective Action Plan, the auditee may be responsible for paying all auditor costs for a re-audit, at the CFSP Program Director’s discretion.
- After reviewing information from the re-audit, the ARC will determine whether the auditee can be identified as compliant or whether additional actions are required. For example, a more frequent audit schedule may be required for the future.
Any auditee that has a repeat non-compliance issue identified, or was unable to complete closure on open items within the three-month post-audit Corrective Action Plan period will be deemed non-compliant (subject to the final review by the CFSP Audit Review Committee mentioned in step 5) and will be exempted from participating in the CFSP for a period of six months.
Where can I find a smelters or refiners (SOR’s) public report that meets the OECD Due Diligence step 5 reporting requirements?
SORs are required to publish their OECD Step 5 reports and make available to the public. This may be done via their annual sustainability or corporate responsibility report or on their company website.
SORs shall publicly disclose information on their due diligence. Information shall be published directly by the smelter as a mandatory requirement for any smelter participating in the program. Publication of such information shall take due regard to business confidentiality and other competitive concerns.
As a mining company in the DRC, Rwanda, Uganda or Burundi, where can I go for assistance to make sure my material will be accepted by the CFSI?
The CFSI currently recognizes two different organizations that can support artisanal and small scale mining (ASM) and entities exporting ASM material in the African Great Lakes region. They are iTSCi and the Better Sourcing Program (BSP). Both entities assist in management of due diligence and chain of custody activities. Please visit their websites for additional information.
For large scale mining (LSM) entities, contact the CFSI to work with them on establishing an acceptable CoC program that will conform to OECD requirements.
There are a number of programs that a downstream company participate in to support upstream sourcing. For more information on these programs please visit their websites:
3TG: Tungsten, tantalum, tin and gold
AECI: Agreement for Exchange of Confidential Information
APM: Audit Program Manager
ARC: Audit Review Committee
CAHRA: Conflict-affected and high-risk areas
CAP: Corrective Action Plan
CFSI: Conflict-Free Sourcing Initiative
CFSP: Conflict-Free Smelter Program
CMRT: Conflict Minerals Reporting Template
CoC: Chain of Custody
Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act
EICC: Electronics Industry Citizenship Coalition
GeSI: Global e-Sustainability Initiative
LBMA: London Bullion Market Association
LIS: Line-Item Summary
NDA: Non-Disclosure Agreement
OECD Due Diligence Guidance: OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas
RJC: Responsible Jewellery Council
SOR: Smelter or refiner