Weekly Compliance Digest – EU Conflict Minerals Framework & CLP Regulation
EU Conflict Minerals Framework
What is it?
On June 16, 2016, the EU announced an agreement on a framework to stop the financing of armed groups through trade in conflict minerals, after negotiations between the Commission, Council and Parliament. The framework aims to make sure that EU companies source tin, tantalum, tungsten and gold responsibly. These minerals are used in everyday products such as mobile phones, cars and jewelry.
Ever since the U.S. passed a conflict minerals regulation in 2010 through Section 1502 of the Dodd-Frank Act, the EU has been under pressure to have a similar regulation. Conflict minerals refer to minerals extracted from conflict zones that may be sold by armed groups to finance and prolong conflicts, and continue human rights violations. The U.S. conflict minerals regulation covers tin, tantalum, tungsten and gold from the Democratic Republic of the Congo and adjoining countries.
The EU had been trying to work on a conflict minerals regulation, but efforts were delayed due to divisions between those advocating a mandatory framework that was as strict as, or stricter than, the U.S. Dodd-Frank regulation, and those advocating a voluntary scheme that limited impacts on manufacturers of final products (e.g. automotive). In March 2014 , the EU Commission proposed a voluntary self-certification scheme, but the proposal was criticized for being too weak. In May 2015, the European Parliament voted to strengthen the Commission’s proposal, thus triggering negotiations between the Commission, Council and Parliament, which led to the agreement announced last week.
Who is affected?
The proposal would affect companies importing tin, tantalum, tungsten and gold into the EU. Specifically, the proposal would impact large EU importers, smelters and refiners. In addition, according to the Wall Street Journal, the rules could affect around 900,000 European companies using the metals in auto parts, electronics, packaging, lighting, aerospace, construction, jewelry and other industries.
What are the requirements?
The proposal includes the following provisions:
- Mandatory due diligence checks, conducted according to OECD due diligence guidelines, for importers of tin, tungsten, tantalum and gold, and their ores, from conflict and high-risk areas. EU member states’ competent authorities will be responsible for ensuring compliance by companies, and also for determining penalties for non compliance, to be monitored by the EU Commission.
- Unlike the U.S. Dodd-Frank regulation, which has a scope limited to the Democratic Republic of the Congo and adjoining countries, the EU proposal’s scope extends to all “conflict-affected and high-risk areas” around the world. The Commission will select experts via a tender procedure to draw up an indicative and non-exhaustive list of areas.
- The smallest importers (e.g. those supplying to the dentistry industry) are exempt from the due diligence obligations.
- Recycled metals, existing EU stocks and by-products are excluded from the regulation.
- Big EU firms that make or sell products containing tin, tungsten, tantalum or gold, i.e. those subject to EU law on “non-financial reporting” (above 500 employees), will be encouraged to report on their sourcing practices based on a new set of performance indicators to be developed by the EU Commission. Moreover, these companies will be able to join a registry to be set up by the Commission and report voluntarily on their due diligence practices.
The press release by the European Parliament includes more details on the provisions of the proposed rules.
What is next?
According to the European Parliament’s press release, the technical details of the legislation agreed in principle last week “still need to be worked out”. The Dutch Presidency of the Council has pledged to conclude the informal legislative negotiations with Members of the European Parliament before its term ends on July 1, 2016. Additional talks between the Commission, Council and Parliament under the Slovak presidency might be needed to finalize the text of the legislation before it is approved by Parliament in plenary session sometime before the end of 2016.
8th ATP to the CLP Regulation
What is it?
On May 19, 2016, the European Commission adopted Commission Regulation (EU) 2016/918 amending the CLP Regulation on the classification, labeling and packaging of chemical substances and mixtures. It is commonly referred to as the “8th ATP to CLP”. The CLP regulation sets rules on the hazard classification of chemicals, how these hazards are communicated through Safety Data Sheets (SDSs) and labels, and how the chemicals are packaged.
Who is affected?
Manufacturers, importers and downstream users of chemicals that have to create SDSs and labels compliant for the EU and non-EU countries that are part of the European Economic Area (EEA) (Norway, Iceland and Liechtenstein).
What are the changes?
The most important provision of the 8th ATP to CLP is the implementation of the 5th revised edition of GHS. The UN’s Globally Harmonized System of Classification and Labelling of Chemicals (GHS) is revised every two years. The 5th revised edition was released in 2013. The latest revised edition is the 6th, which was released in 2015. Most countries are still on the 3rd or 4th revised edition of GHS (released respectively in 2009 and 2011). Only a handful of countries have moved to the 5th edition, such as Argentina, Canada and Mexico, which will now be joined by the EU.
The 5th revision of GHS includes changes related to classification rules, such as a clarification of classification criteria for some hazard classes and a new test method for oxidizing solids, as well as labeling provisions, such as a rationalization of the list of precautionary statements.
What is next?
The 8th ATP to CLP will enter into force on July 4, 2016. The new rules will become mandatory as of February 1, 2018, but they can be adopted voluntarily by companies before that date.
Visit Enablon Insights again next Friday for a brand new Weekly Compliance Digest!