To run a highly successful business in any industry, there’s an elaborate list of compliance's that one needs to persistently follow. These compliance's keep getting updated from time to time based on geographical conditions. Let’s take an example of the Automotive Industry. Amongst all others, the Automotive Industry manufactures highly complex products, and correspondingly has a complex supply chain. Each part used in the automobile puts forward a regulatory risk for suppliers as well as Original Equipment Manufacturers (OEM). By understanding the core impact of multiple supply chain layers, companies will be better equipped to combat such regulatory issues.

APA Engineering has proven its expertise in Conflict Minerals Reporting and Cobalt Reporting Template, and many other industry compliance's that are imperative for optimum operational functionality for any ventureThe distinguished and well-experienced team of 70+ engineers in APA Engineering works with thousands of customers to assist them in the due diligence of any and all CMRT and CRT compliance's. This has led to improved compliance metrics for all its customers.

Conflict Minerals Reporting Template - An Extensive Overview

The Conflict Minerals Reporting Template (CMRT) came into existence in the year 2010, and was generated by the Responsible Minerals Initiative (RMI), which later became an industry-standard reporting template. CMRT assists companies in executing their due diligence to disclose information about their supply chains.

CMRT is applicable in a number of industries including Hi-Tech Electronics, Automotive, Construction, Energy, Industrial, and Medical.

What exactly does the CMRT encompass?

Companies traded on the US stock exchange market have to report the following:

● Does the company use conflict minerals (or metals refined from such minerals)?

● If yes: Did any of these materials originate in DRC or any adjoining country?

● If yes: The company has to provide a “conflict minerals report” describing all measures taken to avoid direct or indirect financing of conflict (including independent auditing results)

Listed below are the domain-specific responsibilities of CMRT

Applicability: The Conflict Minerals Reporting Template covers the sourcing information for Tin, Tantalum, Tungsten, and Gold. In accordance with Rule 13p-1 under the Securities Exchange Act of 1934, all companies should follow a 3 step process to determine the applicability. The three steps are mentioned below

○  Step 1 - To determine the applicability of the rule to the Company’s products

Step 2 - The company should conduct “Reasonable Country of Origin Inquiry” (RCOI) to determine whether or not there is reason to believe that tin, tantalum tungsten, or gold (3TG), which are conflict minerals, were sourced from the Democratic Republic of Congo or the neighbor countries (collectively known as DRC or Covered Countries).

Step 3 -The company should conduct due diligence to determine the source and chain of custody of those conflict minerals, unless the Company has no reason to believe its necessary conflict minerals were sourced from a covered country based on the RCOI.

● Question Format: The CMRT is categorized into 5 sections as follows

○ Details about the Company

○ Questions about Policies

○ Questions about Sourcing of Materials

○ Details about the Product

○ Details about the Smelter

The CMRT template can be downloaded from here.

● Standard Followed: The CMRT follows the IPC-1755 Conflict Minerals Data Exchange Standard for compliance with Section 1502 of the Dodd-Frank Act. The IPC-1755 standard is currently being updated to include reporting for Conflict-Affected and High-Risk Areas (CAHRAs) for the new EU Conflict Minerals Regulation coming into force January 1, 2021

Info on Conflict-Affected Areas: The Responsible Minerals Initiative provides a list of conflict-affected and high-risk areas of 3TG extraction, information to make suppliers precautious while sourcing

If you would like to know more about conflict minerals reporting template, you can check out the online training module

Everything about CRT

The Cobalt Reporting Template (CRT) was launched in the year 2018, by the Responsible Business Alliance (RBA), and became a standard reporting template for industries using the mineral Cobalt in their operations. The CRT was created to collect information about the smelters & refiners being used and mineral country of origin.

A large number of manufacturing businesses depend on cobalt. Some of them include Electric Vehicles(EVs). Li-ion battery manufacturers, polyester, tires, Aerospace, Defence, Power Generation, and High-speed steel.

Listed below are the domain-specific responsibilities of CMRT

Applicability: Under the cobalt reporting template, only cobalt is covered

Question/Template Format: The Cobalt Reporting Template is categorized into the below section

Declaration - This section covers providing information regarding the source of cobalt and the suppliers

Checker - This section covers due diligence regarding the suppliers

Product List - In this section, you are required to produce all data about the products outsourced from the supplier. You can download the official CRT template from here

Standard Followed: The standard (IPC-1755) currently does not include any questions related to the cobalt supply chain. But in the future, the Responsible Business Alliance could come up with a standard to be followed for Cobalt Reporting Template.

Conflict-Affected Areas: To date, a clear-cut list for conflict-affected areas is yet to be introduced for Cobalt. To get a comprehensive list of the currently identified cobalt refiners, click here.

Comparative Analysis of CMRT and CRT 

 CMRT-Reporting-Template

Challenges, Applications, and Trends for CMRT and CRT

What are the Challenges?

As per the Securities and Trade Commission of the US, Suppliers provide CMRT conflict minerals responses at their business aggregate level. When a supplier reports the presence of Conflict Minerals from either indeterminate or Not DRC Conflict Free origins while performing its deliveries to customers, the main report frequently doesn’t identify which particular item or items contain Conflict Minerals..

●Further, where the supplier provided components or materials for various customers, it may be for all practical purposes impossible to determine whether the particular components or materials purchased by any single customer are Conflict Free.

●Suppliers have been largely unwilling and/or unable to provide CMRT information on a per-item basis.

●There is no list of verified conflict infected areas for cobalt made available by the RBA. This puts forward a challenge for CRT reporting.

●At present, there are no regulations present for the outsourcing of cobalt. Due to this, there are various negative impacts such as surge in child labor practices, human rights violations, resettlement of the affected population, biodiversity impacts, etc.

Challenges faced by Manufacturers

●Getting all the smelters verified is a big challenge for RMI. Many suppliers tend to neglect this regulation, unaware of its importance

●Getting 100% response from suppliers is a tedious task.

●Smelters are certified for a specific period by RMI. After this period is over, they need to get certified again by RMI. And because of this, it is very difficult for OEM’s with a large supplier database to source minerals from 100% conformant smelters.

What are the Applications?

●Since the release of CMRT and CRT, a large number of organizations worldwide have accepted it as an official Industry standard for conflict minerals reporting and CRT reporting.

●The individual companies publish the CMRT and CRT reports on their websites annually, which can be used the verify the source of minerals used in their manufacturing processes

●The reporting helps in understanding the bottlenecks involved in the due diligence process of the mineral supply chain.

●All kinds of mineral outsourcing and mining activities are accounted for by using the conflict minerals reporting template.

Do we see any future trends?

●With over 50% of cobalt being outsourced from DRC(Democratic Republic of Congo), there exist various issues on the lines of human and nature exploitation. By keeping an account of outsourcing through reporting, we can be positive in the near future that organizations and governments will take adequate measures to combat such radical issues.

●Many researchers are trying to find alternatives to the use of conflict minerals currently used in manufacturing. By putting in more effort and funding into research, we can eliminate the use of conflict minerals which in turn will have large scale positive impacts on planet earth.

●Constant improvements in conflict minerals reporting template reporting will ensure that organizations are accounted for the usage of minerals. Getting deeper insights into the supply chain of minerals will reduce the bureaucracy and corruption involved. This will be of utmost importance for a sustainable growth ahead.

Conclusion

The mineral depletion crisis as well as the need to understand the bottlenecks in the mineral supply chain has made it even more crucial for businesses to incorporate the conflict minerals reporting template into their supply chain. APA Engineering, with 20+ years of experience, has helped thousands of businesses with managed solutions for regulatory compliance reporting. We provide a hybrid solution comprising software (Conflict Minerals Compliance Suite a.k.a. CM-CS) and services for increased coverage, higher data accuracy, faster reporting, and reduced cost of compliance. For more information as to how APA Engineering can help your business, get in touch with us.

If this regulation is applicable to you and you are interested in knowing more about this topic and available solutions, then schedule a free consult with our experts.