When I crossed paths with Dodd-Frank’s conflict minerals compliance rule I found new disrespect for how little Washington understands about business in general and manufacturing in particular. The Democratic Republic of Congo is a long way away, but the people responsible for Dodd-Frank suddenly seemed even more distant.
Do U.S. businesses deserve to be held accountable for what is happening in the DRC because wrongheaded liberal activists like the idea? When Democrats call the shots, the answer is “yes.”
Conflict minerals compliance: holding businesses accountable for what?
How many business owners could point out the Democratic Republic of Congo on a map or discuss the history of the country’s internal strife? Probably not many. I would bet even fewer could articulate what a conflict mineral is and why Democrats consider this a problem U.S. companies need to be held accountable for.
Dodd-Frank was passed when Democrats were foaming at the mouth in their frenzy to show taxpayers that the guilty would be punished for the Great Recession. Anything and everything they could get their hands on that had anything to do with business was going to be held accountable, including companies that might be profiting, albeit unknowingly, from conflict minerals that sneak into their products.
Proof of the naiveté afflicting many Capitol Hill lawmakers is always shocking no matter how many times we see it. Considering the responsibilities we grant them it’s a little scary, too. Washington Democrat Jim McDermott’s press release about conflict minerals compliance made it sound like employers were at fault for the suffering in Africa:
Today, Rep. Jim McDermott celebrated the passage of provisions in the Wall Street reform bill that will hold accountable American companies that use minerals in their products from mines that help fund the devastating war in the Democratic Republic of the Congo (DRC). 1
A letter to the SEC from twelve senators demonstrated just how seriously lawmakers took their obligation to prevent human misery by speeding up implementation of their new regulations:
Allowing any further time to elapse will only prolong the profound human suffering and violence occurring in the Democratic Republic of Congo (DRC) today.2
If members of Congress knew as much about manufacturing as they do about misguided principle they would know that not all manufacturers decide or even know where all of the items that go into their products come from any more than lawmakers can attest that nothing they wear to Capitol Hill is made in a sweatshop. It’s not that simple. International supply chains can be very long, another thing that you would know if you were involved in something worthwhile like manufacturing instead of something damaging and costly, like politics.
Watchdog says businesses don’t know, couldn’t find out about their minerals
An August 2015 GAO report confirmed what a lot of businesses caught in the conflict minerals snare already discovered: they couldn’t figure out whether they were guilty for the violence or not. They had no idea where the minerals in their products come from. Some probably couldn’t even spell “tantalum” or “wolframite.” The GAO found that they gave it a shot anyway:
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.3
It probably never occurred to those who wrote the law that companies in other countries might not share our concerns and might not want to take the time to find out the who, what, where, and why of their products from their suppliers. When you are looking from across the globe, the vagaries of U.S. liberal politics probably don’t seem like something that should occupy hours of your time. A lot of us engaged in business here feel the same way.
It turns out that the government has a few issues with its new regulation, too, starting with the principle it was based on:
Although State and USAID officials have provided some examples of results associated with their actions, the agencies face difficult operating conditions that complicate efforts to address the connection between human rights abuses, armed groups, and the mining of conflict minerals.4
Only 1,321 companies eventually filed under the new regulation in 2014, 4,679 fewer than the SEC had expected5 In the sample examined by the GAO, only 4% reported that the minerals used in their production came from the DRC or another “covered country.”6
Assuming the GAO’s sampling is a reliable indicator, is holding 4% of 1,321 businesses accountable enough to prevent human suffering in a country the size of the DRC?
My run-in with Dodd Frank’s conflict minerals requirement
I don’t know how many businesses have been created to help with conflict minerals compliance requirements. Dodd-Frank created an entirely new niche to help carry out the Democratic Party’s mission to hold America accountable for something we aren’t responsible for, so I suppose we should be thankful that a few new jobs were created in the name of making other’s jobs more complicated.
My own experience with conflict minerals reporting ended more happily than it will for some. After the issue turned up on my desk it took a long time and a lot of reading through very fine print that made as much sense as the instructions for the IRS 1040 to discover that I didn’t have to do anything. My company never had to attest to whether or not we are guilty of an offense like ”sexual- and gender-based violence”7 in the Democratic Republic of Congo.
Thank heavens for that.
If you are ever faced with your own conflict minerals conundrum, the SEC provides a helpful “Flowchart Summary of the Final Rule” to help you decide what to do (click here to view on the Securities and Exchange Commission website).
It probably won’t make much sense to you. It didn’t make much sense to me either, but like so many things that descend on us from Washington, just because it doesn’t make sense doesn’t mean you aren’t one of the guilty.