RAPAPORT… The Jewelers Vigilance Committee (JVC) hosted a workshop at the JCK Las Vegas show on Thursday to help clarify the impact that new disclosure regulations on tungsten and gold will have on the jewelry industry. JVC’s president Cecilia Gardner hosted the forum titled “Conflict Minerals: Gold, Tungsten and the SEC [Securities and Exchange Commission],” assisted by Brad Brooks-Rubin, the conflict diamond negotiator for the U.S. State Department. The new regulations were signed into law July 21, 2010 as Section 1502 of the Dodd–Frank Wall Street Reform and Consumer Protection Act.
The aim of the new law is to stem the flow of minerals funding civil wars and insurgencies from the Democratic Republic of the Congo (DRC) and other countries in close proximity to the eastern DRC. The law, which has been in the works for some time, represents the culmination of many legal efforts attempting to deter violence in central Africa. “I think we ended up with ‘Dodd-Frank’ because of a feeling that what we were doing wasn’t enough and wasn’t developing quickly enough,” said Brooks-Rubin.
The rules governing the law will be finalized and implemented between August and December 2011. Under the new statute, all gold and tungsten manufacturers that are publicly traded or have to submit reports or other filings with the SEC, as well as those who contract to manufacture, must make efforts “to determine the origin of the gold and tungsten they are supplying,” Gardner explained.
Disclosure requirements include the company demonstrating that it undertook effort to determine the origin of supply, which must be checked by a third party auditor. If a company is unable to determine the origin, it must disclose that its findings were lacking, without facing a penalty. “This law is entirely about reporting. You can report that you don’t know, you can report that you get all of your minerals from rebel groups who are problematic. It’s not illegal to do that,” noted Brooks-Rubin. “This law is an experiment.”
The experimental nature of the law has caused some concerns within the industry. Gardner expressed some qualms with the reporting, noting that “a public company that states it does not know the origin of its supply exposes itself to questions from its shareholders, nongovernmental organizations (NGOs) and other publicly traded companies.” She also noted the difficulty that some companies will have in tracing the origin of their supplies, especially gold. “Forty percent of the gold used in jewelry manufacturing is recycled – recycled originally from where?” she asked.
Gardner, however, said that the JVC and other NGOs and jewelry trade organizations are working with the SEC to clarify the rules before they are finalized later in 2011. “Our basic point to the SEC was, ‘here are the challenges you handed us, now let everyone build on these before these filings take place,’” she said.
Other concerns with the new law included its effect on the U.S. jewelry market. “The ability of American purchases to influence what companies do aboard, while significant, is shrinking. It might be considered complicated for suppliers to send their goods to the U.S. opting rather to supply other countries,” Gardner said.
Brooks-Rubin noted that the new law is not targeting the jewelry industry as it also regulates minerals in the automotive and technology sectors. “The jewelry industry shouldn’t feel singled out,” he added.