Say you're about to purchase a DVD player: would you want the maker of the device to let you know if the product contains minerals whose sale financed fighting and other atrocities in Central Africa? What if the DVD player is a Best Buy brand--does Best Buy have an obligation to tell you?
These are some of the questions cropping up as the Securities and Exchange Commission drafts new rules stemming from July's financial reform law. The idea is to require public companies that use tin, tungsten, tantalum, or gold in the products they manufacture to disclose the minerals' origin to determine whether rebel groups in the Democratic Republic of Congo or nearby countries taxed or otherwise had custody over these minerals. Products that don't contain "conflict minerals" will sport the label "DRC conflict free"; products that do will not be penalized, but will be at the mercy of the market's response.
Yet while they express support for the goal of the regulations, retailers that produce their own products, like Best Buy and Wal-Mart, are claiming they shouldn't be subject to the law; they contract out the manufacture of their "private label" goods and thus say they would have difficulty verifying the origin of minerals. The debate, as the radio show Marketplace pointed out, is fundamentally about who bears responsibility for conflict minerals in global supply chains. The Wire has combed through the letters the SEC's received on the matter to surface the primary arguments on each side:
- Mere Retailers Should Be Exempt, maintains the Retail Industry Leaders Association: "A retailer may provide a design for a private label product and insist that the item be made according to certain specifications that include a certain type/grade of inputs." But this isn't the same as "direct control over the production of the product," because "the retailer would not dictate where the manufacturer would or should obtain its ore or alloys to be used in the product or component."
- Consider Company's Place in the Supply Chain to Avoid Stifling Legitimate Trade, cautions a coalition of industry associations: "The assumption that downstream users are able to trace the metals in their products back to the mine assumes a supply chain is a transparent, linear process, when, in fact, it is a complex, multi-layered network of trading companies and suppliers where products are sourced and consolidated from multiple countries and multiple manufacturers."
- But If Retailers Don't Comply, What Use Is the Law? wonder Senator Dick Durbin (D., Ill.) and Representative Jim McDermott (D., Wash.), who drafted the conflict minerals section of the financial reform bill: "Products that the retailer contracts to be manufactured or for which the retailer issues unique product requirements must be included. If retailers that contract the manufacture of goods or influence product design are exempt from reporting, then a large, non-transparent use of the black market for DRC conflict minerals would remain."
- All Manufacturing Companies Must Comply, demands a petition circulated by The Enough Project and signed by over 2,300 consumers: "Within the legislation passed, Congress intended for all manufacturing companies which use minerals in their products, regardless of how small the percentage or what label they manufacture under to be required to trace and disclose information on their supply chains."