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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

July 2013: 

SEC Conflict Minerals Rule: 

Information on Responsible Sourcing and Companies Affected: 

GAO-13-689: 

GAO Highlights: 

Highlights of GAO-13-689, a report to congressional committees. 

Why GAO Did This Study: 

The eastern part of the DRC has experienced recurring conflicts 
involving armed groups that have resulted in severe human rights 
abuses. In addition, armed groups have profited from the exploitation 
of minerals. In 2010, Congress enacted Section 1502(b) of the Dodd-
Frank Wall Street Reform and Consumer Protection Act to address the 
exploitation of conflict minerals, which include tin, tantalum, 
tungsten, and gold, and the extreme levels of violence in the DRC. As 
required by Section 1502(b), the SEC issued a rule in August 2012 that 
requires companies to disclose their use of conflict minerals and the 
origin of those minerals. The act requires GAO to report on the rule’s 
effectiveness, among other issues, beginning in 2012 and annually 
thereafter. 
Initial company disclosure reports to SEC that would enable GAO to 
assess the effectiveness of the rule will not be due until May 2014. 
This report describes, among other issues, (1) factors that may impact 
whether SEC’s rule denies armed groups in the DRC benefits from 
conflict minerals and (2) information about companies that use 
conflict minerals and are not required to report to SEC under the rule. 
GAO reviewed and analyzed documents and interviewed representatives 
from SEC, the Department of State, the U.S. Agency for International 
Development, industry associations, NGOs, consulting firms, and 
international organizations. GAO also analyzed smelter and refiner 
information. 

What GAO Found: 

Stakeholder-developed initiatives may facilitate companies’ compliance 
with the Securities and Exchange Commission’s (SEC) final conflict 
minerals rule, but other factors may affect the rule’s impact on 
reducing benefits to armed groups in the Democratic Republic of the 
Congo (DRC) and neighboring countries. Agency and industry officials 
as well as representatives from international organizations and 
nongovernmental organizations (NGO) stated that adoption of the rule 
as well as stakeholder-developed initiatives—-which include the 
development of guidance documents, audit protocols, and in-region 
sourcing of conflict minerals—-can support companies’ efforts to 
conduct due diligence and to identify and responsibly source conflict 
minerals. For example, officials GAO interviewed explained that the 
Conflict-Free Smelter Program enables suppliers to source conflict 
minerals from smelters (companies that refine the ore of the conflict 
minerals into metals) that have been certified by an independent third-
party auditor as obtaining their minerals from sources that did not 
benefit armed groups. However, officials GAO interviewed cited 
constraining factors such as lack of security, lack of infrastructure, 
and lack of capacity in the DRC that could affect the ability to 
expand on efforts to achieve conflict-free sourcing of minerals from 
eastern DRC and thereby potentially contribute to armed groups’ 
benefiting from the conflict minerals trade. For example, officials 
GAO interviewed noted that there is a lack of infrastructure in place 
that would enable companies to set up or expand operations in the DRC. 
Limited transportation and poor roads in eastern DRC also make it 
difficult to get to mine sites. Moreover, according to officials, the 
remoteness of mines also makes it difficult for DRC officials to 
validate mines and ensure that the mines have not been compromised by 
illegal armed groups. 

Companies that are not required to file disclosures under SEC’s 
conflict minerals rule may be affected by the rule. These companies 
may supply components or parts that contain conflict minerals to 
companies that report to SEC under the rule, many of which could be 
original equipment manufacturers and component parts manufacturers. 
Estimates provided by public commentators responding to the rule 
indicate that roughly 280,000 suppliers could provide products to 
roughly 6,000 companies that report to the SEC under the rule and may 
be asked to provide information on their use of conflict minerals and 
the origin of the minerals as part of the rule’s due diligence 
requirements. GAO found little available aggregated information about 
companies that do not report to SEC under the rule. However, GAO found 
that for smelters and refiners there is some aggregated information, 
such as the types of conflict minerals they use and their location. 
For example, GAO found that over half of the 278 smelters and refiners 
of conflict minerals it identified were located in Asia, many 
processed tin, and most did not have a conflict minerals policy 
publicly available. 

What GAO Recommends: 

This report does not contain recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-13-689]. For more 
information, contact Lawrance L. Evans, Jr. at (202) 512-4802 or 
evansl@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Stakeholder-Developed Initiatives May Facilitate Compliance with 
Conflict Minerals Rule, but Other Factors May Affect the Rule's Impact 
on Reducing Benefits to Armed Groups: 

Many Companies Not Required to Report to SEC under the Conflict 
Minerals Rule Will Likely Be Affected; Limited Aggregated Information 
about Them Exists: 

Little Additional Information on the Rate of Sexual Violence in 
Eastern DRC and Neighboring Countries Has Become Available since GAO's 
2012 Report: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: SEC's Flowchart Summary of the Disclosure Process for the 
Final Conflict Minerals Rule: 

Appendix III: Updates of Global and In-Region Sourcing Initiatives: 

Global Sourcing Initiatives: 

In-Region Sourcing Initiatives: 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

Figures: 

Figure 1: Map of DRC with Provinces and Neighboring Countries: 

Figure 2: Timeline for SEC-Reporting Companies to Submit Conflict 
Minerals Disclosures to SEC: 

Figure 3: Simplified Conflict Minerals Supply Chain: 

Figure 4: Simplified Conflict Minerals Supply Chain Showing Supplier 
Tiers: 

Figure 5: Flow of Supply Chain Inquiries from the Original Equipment 
Manufacturers to the Mine: 

Figure 6: Number of Smelters and Refiners of Conflict Minerals We 
Identified, by Country: 

Figure 7: Population-Based Surveys That Estimate the Rate of Sexual 
Violence in Eastern DRC, Rwanda, and Uganda: 

Figure 8: SEC's Flowchart Summary of the Final Conflict Minerals Rule: 

Abbreviations: 

DHS: Demographic and Health Survey: 

Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection 
Act: 

DRC: Democratic Republic of the Congo: 

EICC: Electronic Industry Citizenship Coalition: 

GeSI: Global e-Sustainability Initiative: 

ICGLR: International Conference of the Great Lakes Region: 

iTSCi: ITRI Tin Supply Chain Initiative: 

LBMA: London Bullion Market Association: 

M23: March 23 Movement: 

MONUSCO: United Nations Organization Stabilization Mission in the 
Democratic Republic of the Congo: 

NGO: nongovernmental organization: 

OECD: Organisation for Economic Co-operation and Development: 

PPA: Public-Private Alliance for Responsible Minerals Trade: 

SEC: Securities and Exchange Commission: 

State: United States Department of State: 

UN: United Nations: 

UNGoE: United Nations Group of Experts: 

USAID: United States Agency for International Development: 

[End of section] 

GAO:
United States Government Accountability Office: 
441 G St. N.W. 
Washington, DC 20548: 

July 18, 2013: 

Congressional Committees: 

The Democratic Republic of the Congo (DRC) has long been the site of 
one of the world's worst humanitarian crises. Since 1998, over 5.4 
million people have died as a result of the conflict which has also 
destabilized the eastern part of the country, created insecurity, 
displaced people, and perpetuated the cycle of poverty, according to 
estimates by the International Rescue Committee. In 2010 we reported 
that illegal armed groups, as well as some units of the Congolese 
national military, had continued to commit severe human rights abuses, 
including mass killings.[Footnote 1] In 2013 the United Nations (UN) 
reported continuing violence by illegal armed groups, including 
violence by the group known as M23.[Footnote 2] Sexual violence has 
also been a feature of the conflict in the DRC at least since the 
Congolese civil war of the mid-1990s. The illegal armed groups and 
units of the Congolese national military committing these atrocities 
also profit from the illegal mining of minerals. In response to the 
humanitarian situation in the DRC, Congress included in the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (hereafter referred to 
as the Dodd-Frank Act, or the Act) provisions pertaining to the trade 
of DRC conflict minerals--tantalum, tin, tungsten, and gold.[Footnote 
3] Specifically, section 1502(a) of the Act states that "It is the 
sense of the Congress that the exploitation and trade of conflict 
minerals originating in the [DRC] is helping to finance conflict 
characterized by extreme levels of violence in the eastern [DRC], 
particularly sexual-and gender-based violence, and contributing to an 
emergency humanitarian situation therein." Section 1502(b) of the Act 
required the Securities and Exchange Commission (SEC) to issue a 
conflict minerals disclosure rule that requires issuers with conflict 
minerals that are necessary to the functionality or production of a 
product manufactured by such persons to file reports annually with SEC 
to disclose whether any of those minerals originated in the DRC or an 
adjoining country, and if so, to provide an additional report. 
[Footnote 4] In response to section 1502 of the Act, SEC adopted the 
final conflict minerals rule on August 22, 2012.[Footnote 5] The Act 
also required us to report, beginning in 2012 and annually thereafter, 
on the effectiveness of the rule in promoting peace and security in 
the DRC and adjoining countries; to describe information that may be 
publicly available about entities that use conflict minerals but are 
not required to report to SEC under the rule; and report, annually 
beginning in 2011, on the rate of sexual violence in war-torn areas of 
the DRC and neighboring countries. To address the mandate, in July 
2011 we issued our first report on sexual violence[Footnote 6] and in 
July 2012 we issued our second report, which focused on SEC's actions 
and stakeholder-developed initiatives involving conflict minerals and 
updated information on the rate of sexual violence.[Footnote 7] 

As in our 2012 report, we did not address the effectiveness of SEC's 
conflict minerals disclosure rule, as required under the legislation, 
because the first disclosures of companies' use of conflict minerals 
will not be due to SEC until May 2014 and sufficient time must elapse 
to allow the full impact of the rule to materialize. However, the 
effectiveness of the rule in promoting peace and security in the DRC 
will depend in part on its ability to limit funding by restricting the 
use of conflict minerals to illegal armed groups in the region to 
which those groups have access. As a result, this report describes (1) 
factors that may impact whether SEC's conflict minerals rule denies 
armed groups in the DRC and adjoining countries benefits from conflict 
minerals; (2) available information about entities that use conflict 
minerals and are not required to report to SEC under the rule; 
[Footnote 8] and (3) any additional information available on the rate 
of sexual violence in eastern DRC and neighboring countries since our 
2012 report.[Footnote 9] 

To address these objectives, we reviewed and analyzed reports and 
other documents from relevant U.S. agencies; multilateral 
organizations, such as the Organisation for Economic Co-operation and 
Development (OECD); nongovernmental organizations (NGO); and industry 
associations. We also analyzed information on tin, tantalum, tungsten, 
and gold smelters and refiners to ascertain the location of these 
entities as well as whether they had posted any conflict-free sourcing 
policies on their companies' websites. We interviewed officials, who 
are cognizant of conflict minerals issues, from SEC, the Department of 
State (State), and the United States Agency for International 
Development (USAID), as well as representatives from international 
organizations, NGOs, industry associations, consulting firms, and 
smelters and refiners of tin, tantalum, tungsten, and gold.[Footnote 
10] We chose the experts and stakeholders we interviewed to capture a 
range of perspectives about the types of minerals traded and because 
we had established contacts with these entities on our last review. 
These experts and stakeholders constitute a nongeneralizable sample. 
The information gathered cannot be generalized and cannot be used to 
infer views of other experts or stakeholders cognizant of conflict 
minerals issues. In the interviews, we asked the experts and 
stakeholders to provide factors that they believe may impact whether 
SEC's conflict minerals rule denies armed groups in the DRC benefits 
from conflict minerals. We identified 278 smelters and refiners of 
tin, tantalum, tungsten, and gold, and analyzed publicly available 
information on their practices and policies for sourcing conflict 
minerals, including any due diligence guidance the smelters or 
refiners reportedly followed for sourcing conflict minerals. We 
identified 278 smelters and refiners in our analysis; the total number 
of smelters and refiners is believed to be nearly 500, worldwide. The 
number of gold refiners could potentially be larger, considering that 
little equipment and space is required to refine gold, and it can be 
refined at the mine site. The 278 smelters and refiners we were able 
to identify may not be representative of others, and the information 
we report about these 278 cannot be generalized to other smelters and 
refiners of tin, tantalum, tungsten, and gold. See appendix I for a 
complete description of our scope and methodology. 

We conducted this performance audit from November 2012 to July 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

History of the DRC: Conflict and Instability: 

The mineral-rich DRC, Africa's second-largest country, has been 
plagued by cycles of violence and instability. Since 1998, violent 
conflicts, poverty, and disease have killed more than 5.4 million 
people in the country, according to estimates by the International 
Rescue Committee. The DRC was colonized as a personal possession of 
Belgian King Leopold II in 1885 and administered by the Belgian 
government starting in 1907. It achieved independence from Belgium in 
1960. For almost 30 years of the post-independence period, the DRC, 
then known as Zaire, was ruled by an authoritarian regime under Mobutu 
Sese Seko. Following the 1994 genocide in Rwanda and the establishment 
of a new government there, some perpetrators of the genocide and 
refugees fled to the neighboring Kivu provinces of eastern DRC. A 
rebellion began there in 1996, pitting the forces led by Laurent 
Kabila against the army of President Mobutu Sese Seko. Kabila's 
forces, aided by Rwanda and Uganda, took the capital city of Kinshasa 
in 1997 and renamed the country the Democratic Republic of the Congo. 
See figure 1 for a map of the DRC's provinces and neighboring 
countries. 

Figure 1: Map of DRC with Provinces and Neighboring Countries: 

[Refer to PDF for image: map of DRC and surrounding areas of Central 
Africa] 

Source: GAO; United Nations (map). 

[End of figure] 

A period of civil war among rival rebel groups ensued. In 2001 Laurent 
Kabila was assassinated and leadership shifted to his son Joseph 
Kabila, while the civil war continued. Starting in 1999 the UN 
Security Council authorized peacekeeping operations in the DRC which 
have been operating as the United Nations Organization Stabilization 
Mission in the Democratic Republic of the Congo (MONUSCO).[Footnote 
11] Initially, the operation's focus was on the ceasefire and 
disengagement of forces and maintenance of liaison with all parties 
involved with the civil war but then expanded to include the effective 
protection of civilians, humanitarian personnel and human rights 
defenders under imminent threat of physical violence. The presence of 
illegal armed groups, such as M23, has continued to be an issue that 
MONUSCO has monitored in recent years. In November 2012, M23 occupied 
the city of Goma, a provincial capital in eastern DRC in the North 
Kivu province, and other cities in eastern DRC and clashed with the 
Congolese national army. During this time, the UN reported cases of 
sexual violence perpetrated by armed groups and members of the 
Congolese national army against women and children. While M23 
eventually withdrew from the cities, the group's presence in the 
region continues. In February 2013, the UN reported that eastern DRC 
continues to be plagued by recurrent waves of conflict, chronic 
humanitarian crises, and serious human rights violations, including 
sexual and gender-based violence. The report added that contributing 
factors to the cycles of violence have been the continuing presence of 
Congolese and foreign armed groups taking advantage of security 
vacuums in the eastern part of the country, the illegal exploitation 
of resources, interference by neighboring countries, and the weak 
capacity of the national army and police to effectively protect 
civilians and the national territory and ensure law and order. In 
March 2013, the UN Secretary-General appointed a Special Envoy to the 
Great Lakes Region of Africa to support the implementation of the 11-
nation "Peace, Security and Cooperation Framework for the Democratic 
Republic of the Congo and the Region" adopted in February 2013. 
According to the UN, the agreement seeks to end the recurring cycle of 
conflicts and crisis in the eastern DRC and to build peace. 
Additionally, on March 28, 2013, the UN Security Council authorized 
the deployment of an intervention brigade within the current 
peacekeeping operations in DRC to address imminent threats to peace 
and security. The objectives of the new force based in North Kivu 
province are to neutralize armed groups, reduce the threat they pose 
to state authority and civilian security, and make space for 
stabilization activities. 

U.S. Government Response to Situation in the DRC: 

Congress has focused on issues related to the DRC for almost a decade. 
In 2006, Congress passed the Democratic Republic of Congo Relief, 
Security, and Democracy Promotion Act of 2006.[Footnote 12] The act 
stated that it is the policy of the United States, among other things, 
to engage with governments working for peace and security throughout 
the DRC and hold accountable individuals, entities, and countries 
working to destabilize the government. In July 2010, Congress included 
several provisions in section 1502 of the Dodd-Frank Act related to 
conflict minerals in the DRC and adjoining countries.[Footnote 13] 
Specifically, section 1502(a) of the Act states that "it is the sense 
of Congress that the exploitation and trade of conflict minerals 
originating in the [DRC] is helping to finance conflict characterized 
by extreme levels of violence in the eastern Democratic Republic of 
the Congo, particularly sexual-and gender-based violence, and 
contributing to an emergency humanitarian situation therein," 
warranting the provisions of Section 1502(b) of the Act. Section 
1502(b) requires SEC, in consultation with State, to promulgate 
disclosure and reporting regulations regarding the use of conflict 
minerals from the DRC and adjoining countries. In November 2011, State 
and USAID, in collaboration with NGOs, industry, and other 
governments, launched the Public-Private Alliance for Responsible 
Minerals Trade (PPA) to support responsible supply chain solutions 
regarding conflict minerals from the DRC and neighboring countries. 
The PPA supports pilot programs, with the ultimate goal of producing 
scalable, self-sustaining systems, to demonstrate a fully traced and 
validated conflict-mineral supply chain in a way that is credible to 
companies, civil society, and government. According to USAID, in 
addition to the PPA, the U.S. government's contribution to the 
Responsible Minerals Trade Program in the DRC region has amounted to 
almost $19 million and includes activities focused on the protection 
of artisanal mining communities, institutional and human capacity 
building for responsible minerals trade, and capacity building in 
mining sector security, among other issues. 

SEC's Final Conflict Minerals Rule: 

The SEC Commissioners adopted[Footnote 14] the final conflict minerals 
rule on August 22, 2012, after a number of delays during the drafting 
process.[Footnote 15] SEC reported that during its rule-making process 
it received more than 400 letters commenting on the draft rule. 
[Footnote 16] As adopted, the final rule applies to any issuer that 
files reports with SEC under Section 13(a) or Section 15(d) of the 
Securities Exchange Act of 1934[Footnote 17] (Securities Exchange Act) 
and uses conflict minerals that are necessary to the functionality or 
production of a product manufactured or contracted by that issuer to 
be manufactured. According to SEC, issuers that have a reporting 
obligation are domestic and foreign companies that offer shares 
publicly and file forms 10-K, 20-F, or 40-F with SEC. For the purposes 
of our report, we refer to those issuing companies affected by the 
rule as "SEC-reporting companies under the rule." (See appendix II for 
more information on the steps a company needs to take to fulfill its 
reporting requirements.) Under the rule, such companies must file a 
disclosure report and conduct a "reasonable country of origin inquiry" 
to determine whether they must also file a conflict minerals report. 
[Footnote 18] Companies that are required to file a conflict minerals 
report must exercise due diligence on the source and chain of custody 
of their conflict minerals. The due diligence measures used by 
companies must conform to a nationally or internationally recognized 
due diligence framework, such as the due diligence guidance approved 
by OECD. If a company determines that its products are "DRC conflict-
free" because they may have originated from the covered countries but 
did not finance or benefit armed groups, then the company must obtain 
an independent private sector audit and provide certification that it 
conducted an audit. If a company's products have not been found to be 
"DRC conflict-free," then the company must provide additional 
information in its conflict minerals report. For a temporary period--4 
years for smaller reporting companies or 2 years for all other 
reporting companies--if a company is unable to determine whether the 
minerals in its products originated in the DRC or the adjoining 
countries or financed or benefited armed groups in those countries, 
then those products are considered "DRC conflict undeterminable" and 
no audit is required.[Footnote 19] Under the rule, all companies will 
need to file their first disclosure report to SEC on May 31, 2014, 
which covers the 2013 calendar year, and on May 31 annually 
thereafter. Figure 2 shows the reporting time frames for SEC-reporting 
companies under the rule. 

Figure 2: Timeline for SEC-Reporting Companies to Submit Conflict 
Minerals Disclosures to SEC: 

[Refer to PDF for image: timeline] 

August 22, 2012: 
SEC adopts Conflict Minerals Rule. 

2013-2016: 
Transition period for smaller companies; DRC conflict undeterminable. 

2013-2014: 
Transition period for all other companies; DRC conflict undeterminable. 

May 31, 2014: 
First conflict minerals disclosures due to SEC: 
* Covers reporting for January 1, 2013, through December 31, 2013; 
* Thereafter, annually on May 31, covering the most recently completed 
calendar year. 

May 31, 2015: 
Conflict minerals disclosures due to SEC. 

May 31, 2016: 
Conflict minerals disclosures due to SEC. 

May 31, 2017: 
Conflict minerals disclosures due to SEC. 

May 31, 2018: 
Conflict minerals disclosures due to SEC. 

Continues indefinitely. 

Source: GAO analysis. 

[End of figure] 

In October 2012, the U.S. Chamber of Commerce, the National 
Association of Manufacturers, and the Business Roundtable filed a 
lawsuit against SEC regarding the final conflict minerals 
rule.[Footnote 20] In their petition, the two industry associations 
asked that the rule "be modified or set aside in whole or in part." 
The petitioners have asked the court to review, among other things, 
whether SEC's economic analysis is inadequate and whether SEC's 
interpretations of certain key terms in section 1502 of the Act are 
consistent with congressional intent. 

Conflict Minerals Description and Supply Chain: 

The four conflict minerals covered by section 1502(b) of the Dodd-
Frank Act are mined in various locations around the world. For 
example, tin is predominantly mined in China, Indonesia, Peru, and 
Bolivia, as well as in the DRC, while tantalum is reportedly 
predominantly mined in areas such as Australia, Brazil, and Canada. 
From 2006 through 2011, the majority of tungsten production--
reportedly 77 to 87 percent of global production--was mined in China. 
Gold, however, is mined in many different countries, including the 
DRC. Our review of United States Geological Survey data on tantalum, 
tin, tungsten, and gold mined in the DRC showed that about 12 percent 
of the global tantalum supply and less than 1 percent of the global 
tungsten supply was mined in the DRC in 2011. About 3 percent of the 
global tin supply, and less than 1 percent of the global gold supply, 
was mined in the DRC in 2010. As we reported in our 2012 report, 
various industries, particularly in manufacturing, use these minerals 
in a wide variety of products and in varying amounts. For example, 
many industries use tin in the form of tin solder, which is used to 
join metal pieces together.[Footnote 21] According to company 
representatives, tin is also found in food packaging, in steel 
coatings on automobile parts, and in some plastics. According to 
industry association and company representatives, the majority of 
tantalum is used to manufacture tantalum capacitors, which enable 
energy storage in electronic products such as cell phones and 
computers.[Footnote 22] Tungsten is used in automobile manufacturing, 
drill bits and cutting tools, and other industrial manufacturing 
tools. It is also the primary component of filaments in light bulbs. 
In addition to its use as currency and in jewelry, gold is also used 
by other industries, such as the electronics industry. 

A company's supply chain for products containing tin, tantalum, 
tungsten, and gold can be complex and can vary considerably in the way 
it operates, according to industry association and company 
representatives. Generally, however, the supply chain for companies 
using conflict minerals begins at the mine site, where tin, tantalum, 
and tungsten ore are extracted from the ground using mechanized or 
artisanal mining techniques.[Footnote 23] Figure 3 provides additional 
information on a simplified supply chain for all four conflict 
minerals. 

Figure 3: Simplified Conflict Minerals Supply Chain: 

[Refer to PDF for image: illustration] 

Supply chain: 

Mine: Metal ores sent to next two entities: 
Local processors/traders; 
Exporter. 

Metal ores and Metals and products to: Smelters. 

Metal and products from Smelters to: 
Banks and exchanges; 
Component parts manufacturers. 

Component parts manufacturers to: 
Original equipment manufacturers. 

Source: GAO analysis. 

[End of figure] 

For artisanal mining, the local processor or trader (which may be an 
individual or company) purchases minerals directly from the mine sites 
and typically processes or upgrades them before selling them to an 
exporter. The exporter may also purchase minerals directly from mine 
sites rather than going through a local processor or trader. Exporters 
may carry out further processing or upgrading before exporting 
materials to a smelter or refiner, where they are either converted 
into metals or purified into a higher-purity metal. Smelters primarily 
provide high-purity tin, tantalum, and tungsten directly to component 
parts manufacturers, although some sell high-purity metals through 
traders or exchanges.[Footnote 24] Gold refiners typically sell high-
purity gold to banks, for use as a store of value, or to international 
exchanges, where gold is bought and sold.[Footnote 25] However, some 
gold refiners sell gold directly to manufacturers as well. Banks and 
traders may sell gold to manufacturers, including jewelry and 
component parts manufacturers. The component parts manufacturers 
construct individual parts--such as capacitors, engine parts, or 
clasps for necklaces--that they sell to original equipment 
manufacturers. The original equipment manufacturers complete the final 
assembly of a product and sell the final product to the consumer. 

Stakeholder-Developed Initiatives May Facilitate Compliance with 
Conflict Minerals Rule, but Other Factors May Affect the Rule's Impact 
on Reducing Benefits to Armed Groups: 

SEC's adoption of the final conflict minerals rule on August 22, 2012, 
has raised companies' awareness regarding conflict minerals and the 
due diligence necessary to identify whether conflict minerals may have 
benefited armed groups. Specifically, officials representing industry 
associations stated that the final conflict minerals rule has acted as 
an impetus for some of their members to start thinking about whether 
the rule impacts them and some have also started collecting 
information to comply with the rule. Officials stated that stakeholder-
developed initiatives, such as in-region and global sourcing 
initiatives, may increase companies' assurance that conflict minerals 
they are using are not benefiting armed groups in the DRC and 
neighboring countries. However, constraining factors such as the lack 
of security, lack of infrastructure, and capacity constraints could 
undermine companies' ability to ensure conflict-free sourcing from the 
region. 

Adoption of the Final Rule Has Raised Companies' Awareness Regarding 
Sourcing of Conflict Minerals: 

Since SEC issued the final conflict minerals rule pursuant to the Dodd 
Frank Act, companies have become more aware of the issues surrounding 
conflict minerals and have started to consider the source of materials 
used in products, given the requirement in the final rule for a 
company that uses tin, tantalum, tungsten, or gold to exercise due 
diligence on the source and chain of custody of its conflict minerals, 
if there is reason to believe that they may have originated in the DRC 
or an adjoining country.[Footnote 26] According to some industry 
officials we interviewed, the final rule has helped resolve some 
uncertainties, such as the breadth of the industries covered, that 
existed before the promulgation of the rule. Numerous industry 
officials and representatives from international organizations and 
NGOs we interviewed have indicated that the creation and promulgation 
of the SEC rule has increased visibility into the issue of conflict 
minerals and raised awareness of the due diligence process, 
particularly for those companies that are not required to report under 
the rule but that may still be impacted indirectly by the rule. 
[Footnote 27] Specifically, officials of industry associations 
representing member companies that use tin, tantalum, tungsten, or 
gold in their products stated that many companies are aware of the SEC 
rule, especially the larger companies that may file a disclosure 
report with SEC, and are working to start complying with the rule. 
Some smaller companies, which may not be required to report under the 
rule, may not be as aware of or familiar with the rule but are 
receiving information from industry associations on how the rule may 
impact them. For example, some officials from industry associations 
stated that they were putting together guidance documents that break 
down the SEC rule and had also sent questions to SEC seeking to 
clarify points in the rule. Agency officials stated that the SEC rule 
has raised visibility globally of conflict minerals. For example, 
State reported in February 2013 that the issuance of the SEC rule was 
a vital step in establishing a clear and harmonized global framework 
for responsible minerals trade from the DRC region. Furthermore, State 
indicated that the SEC rule has also shaped and influenced initiatives 
to create a conflict-free supply chain by the International Conference 
of the Great Lakes Region (ICGLR) and the governments of the DRC and 
Rwanda. We provide a more detailed discussion later in this report on 
the ways in which companies required to report under the rule, in 
order to comply, are interacting with companies not required to report 
under the rule. 

Stakeholder-Developed Initiatives May Increase Companies' Assurance 
That Conflict Minerals They Use Are Not Benefiting DRC Armed Groups: 

Stakeholder-Developed Initiatives May Aid Companies' Due Diligence 
Efforts: 

Some agency officials we interviewed stated that stakeholder-developed 
initiatives focused on sourcing of minerals may enhance companies' 
ability to achieve the SEC rule's desired outcome of denying armed 
groups in the DRC benefits from conflict minerals. As mentioned in our 
2012 report, stakeholder-developed initiatives--which include the 
development of guidance documents, audit protocols, and in-region 
sourcing--support efforts by companies reporting to SEC under the rule 
to (1) conduct due diligence of their conflict minerals supply chain, 
(2) identify the source of conflict minerals within their supply 
chain, and (3) responsibly source conflict minerals. These initiatives 
can be classified as in-region or global, and some are now being 
expanded. 

In-Region Sourcing Initiatives Focus on Tracing of Conflict Minerals: 

In-region sourcing initiatives, as we reported in 2012, may support 
responsible sourcing of conflict minerals from Central Africa and the 
identification of specific mines of origin for those minerals. 
Regional sourcing initiatives in the DRC and neighboring countries 
focus on tracing minerals from the mine to the mineral smelter or 
refiner by supporting a bagging and tagging program or some type of 
traceability scheme. Examples of such initiatives include the ITRI Tin 
Supply Chain Initiative (iTSCi) and the Conflict-Free Tin Initiative 
(CFTI). (See appendix III for more detailed information on these and 
selected other in-region sourcing initiatives). The iTSCi initiative 
was developed by a tin industry association known as ITRI. The 
initiative supports responsible sourcing of tin, tantalum, and 
tungsten from Central Africa and was launched in Rwanda in December 
2010 and in the Katanga province of the DRC in March 2011. iTSCi 
expanded its activities in the Maniema province of the DRC in December 
2012. We reported in 2012 that iTSCi is a traceability and due 
diligence program that creates auditable and verifiable chains of 
custody for tin, tantalum, and tungsten through (1) tagging and 
bagging of materials and the collection of tagging data and (2) 
regular incident reporting and continuous monitoring of mines and 
companies participating in the program. In October 2012, the Dutch 
government, with industry partners such as iTSCi, started the Conflict-
Free Tin Initiative focused on conflict-free tin sourcing from South 
Kivu in the DRC, a region that is prone to insecurity and violence by 
illegal armed groups. This initiative is a traceability and due 
diligence mechanism that brings partners along the supply chain 
together, from mine to smelter to end-user. This also includes 
consumers as well as the DRC government and civil society[Footnote 28] 
and uses the OECD due diligence guidance. According to an implementer, 
the progress of the initiative will depend on how the security 
situation in South Kivu develops. 

While the in-region sourcing initiatives have focused on tin, 
tantalum, and tungsten to date, one of the most recent in-region 
initiatives in the DRC is through the Public-Private Alliance for 
Responsible Minerals Trade (PPA) and is focused on a pilot gold 
traceability scheme. In fall of 2012, Partnership Africa Canada began 
work on establishing an in-region gold traceability project partially 
funded by PPA. According to information from PPA, the project aims to 
create a traceable conflict-free mineral chain for artisanal gold from 
the eastern DRC, in the Orientale province, thus demonstrating the 
feasibility of creating artisanal gold chains with full traceability 
from mine site to gold refiner. 

According to industry and agency officials, in-region sourcing 
programs can provide better economic incentive for miners to sell 
minerals that do not benefit armed groups. For example, iTSCi reported 
in February 2013 that the tin initiative in South Kivu had led to a 
number of immediate benefits for the local population, which depends 
on mining as its source of income. Specifically, the price paid to the 
miners for conflict-free minerals mined at the site had more than 
doubled. iTSCi further reported that the additional income had allowed 
the mining cooperatives to invest in basic equipment such as 
electricity generators and to improve productivity and working 
conditions. Additionally, some agency officials stated that in-region 
initiatives can help develop capacity in the DRC. 

Global Sourcing Initiatives Affect Companies throughout the Supply 
Chain: 

We reported in 2012 that global sourcing initiatives may minimize the 
risk of minerals that have been exploited by illegal armed groups from 
entering the supply chain and support companies' efforts to identify 
the source of the conflict minerals across the supply chain around the 
world. (See appendix III for more detailed information on selected 
global sourcing initiatives.) One such global initiative is the 
Conflict-Free Smelter Program, co-developed by the Global e-
Sustainability Initiative (GeSI) and the Electronics Industry 
Citizenship Coalition (EICC). The Conflict-Free Smelter Program is a 
voluntary initiative in which an independent third party audits 
smelters' procurement activities---among other activities---and 
determines if the smelters demonstrated that the minerals they 
processed originated from conflict-free sources. Companies that can 
trace their conflict minerals supply chain back to compliant smelters 
or refiners can claim that the minerals in their products are from a 
smelter[Footnote 29] whose processes reasonably assure conflict-free 
production.[Footnote 30] 

Industry experts we interviewed explained that if initiatives such as 
the Conflict-Free Smelter Program can result in smelters refining 
minerals that did not benefit armed groups, then companies can comply 
better with the SEC rule requirements and have more confidence in 
their supply chain sources. Specifically, one expert stated that 
companies that are conducting due diligence under the rule would not 
have to audit the smelter themselves, if the smelter has already been 
audited under the Conflict-Free Smelter Program. Agency officials, 
both in Washington, D.C., and in the DRC, reported that the Conflict 
Free Smelter Program seems to be a positive initiative since the more 
smelters are certified as conflict-free, the more beneficial this will 
be for companies reporting under the SEC rule. 

Overall, agency officials we interviewed stated that existing 
initiatives and traceability schemes on the ground in the DRC and 
neighboring countries have been yielding benefits of producing 
conflict-free minerals; however, according to these officials, more 
progress could be made in the responsible sourcing of conflict 
minerals from the region. Some industry experts also indicated that 
while progress has been made and the initiation or expansion of in-
region sourcing initiatives is possible, factors such as the ones 
described below remain a concern. 

Lack of Security, Inadequate Infrastructure, and Capacity Constraints 
in the DRC Could Affect Companies' Ability to Ensure Conflict-Free 
Sourcing of Minerals: 

Some agency officials as well as representatives we interviewed from 
NGOs, industry, and international organizations cited lack of 
security, inadequate infrastructure, and capacity constraints as 
factors that could affect the ability to expand on efforts to achieve 
conflict-free sourcing of minerals from the eastern DRC and thereby 
potentially contribute to armed groups benefiting from the conflict 
minerals trade. We also cited these same factors in our 2010 report 
and pointed out that these factors posed challenges to tracking the 
mines of origin for minerals artisanally mined in eastern DRC. 
[Footnote 31] While officials we spoke to for this report discussed 
these factors in the context of the SEC rule, these factors are pre-
existing regional challenges that pre-date both the Dodd Frank Act and 
the SEC conflict minerals rule.[Footnote 32] 

Lack of Security in Eastern DRC Could Hamper Sourcing Initiatives: 

Officials cited the lack of security, including weak governance, as a 
factor that could impact responsible sourcing from the DRC. The UN 
reported that the DRC government has been unable to exercise authority 
in eastern DRC, which has become more evident as illegal armed groups 
clashed in the Kivu provinces late in 2012. State also reported that 
lack of security has prevented the export of conflict-free minerals 
from certain areas in eastern DRC. Industry and NGO officials who work 
on the ground in the DRC pointed out that the threat from illegal 
armed groups poses a challenge to the conflict-free minerals 
initiatives operating in eastern DRC and the neighboring provinces. 
Although the mining sites are constantly monitored, the monitoring 
activities could be suspended at any time as the security situation 
evolves. For example, an NGO reported that tagging was suspended for 
days in July 2012 at an iTSCi site in the Katanga province because of 
the movement of armed groups in the vicinity of the mine sites; 
however, there were no reported cases of armed groups successfully 
taking control of the sites or directly exploiting minerals to fund 
activities. 

In-region sourcing initiatives have operated in areas that have been 
vetted by various stakeholders and have the support of government and 
civil society actors. According to the UN Group of Experts on the 
Democratic Republic of the Congo (UNGoE), the security situation at 
tin, tantalum, and tungsten mining sites has improved and the trade of 
these minerals has become a much less important source of financing 
for armed groups. However, the UNGoE reported a "genuine risk that 
military actors would move their rackets to mining activities that 
were not closely supervised." They further reported that the gold 
trade is linked to armed groups and criminal networks in the Congolese 
armed forces. According to the UNGoE, lack of security at gold mining 
sites throughout eastern DRC remained widespread. Agency officials 
emphasized that armed groups still existed in the DRC despite the 
initiatives in place and would seek control of any significant revenue-
producing activity in the region. 

Some industry officials cited concerns about sourcing from the DRC, 
even through the in-region sourcing initiatives, because of the 
potential impact on brand reputation and financial risk. For example, 
a representative of a smelter indicated that if the company purchased 
minerals from a mine that is part of a traceability scheme that is 
deemed conflict-free but then illegal armed groups infiltrated and 
compromised the mine in the future, the company would not be able to 
say with certainty that the minerals it had purchased were conflict-
free. 

Limited Infrastructure Could Hamper Access to Mines: 

Officials cited limited infrastructure as a factor that could affect 
the creation or expansion of in-region sourcing initiatives. Officials 
from UNGoE and industry representatives we interviewed noted a lack of 
infrastructure in place that would enable companies to set up or 
expand operations in the DRC. Limited transportation and poor roads in 
eastern DRC also make it difficult to get to mine sites. For example, 
an agency official in the DRC commented that mines may be a day's walk 
from a main road. Also, an NGO reported that in selecting a potential 
pilot site for a traceability scheme, accessibility to the site by 
road was a key criterion and would involve using off-road vehicles due 
to the significant deterioration of roads leading to the mine. 
Moreover, according to an NGO representative, the remoteness of mines 
also makes it difficult for DRC mine officials to validate mines and 
ensure that the mines have not been compromised by armed groups. 
Furthermore, State officials indicated that the lack of infrastructure 
prevents trade initiatives from developing economies of scale and 
expanding. 

Lack of Capacity Could Impact Due Diligence: 

Officials we interviewed cited the lack of technical, economic, and 
political capacity as another factor that may affect the creation or 
expansion of in-region sourcing initiatives focused on responsible 
sourcing in the DRC and neighboring countries. In 2013, the OECD 
reported that while the understanding of responsible sourcing is "high 
for those actors in the DRC and Rwanda who have participated in such 
initiatives, the same is not true for state agents" in the country. 
[Footnote 33] The OECD report also pointed out that Ugandan and 
Burundian government officials and other entities lack technical 
understanding of due diligence requirements. Some NGO officials stated 
that lack of capacity can impact the due diligence process in the 
supply chain, especially if the numbers of trained mining agents is 
insufficient. For example, some agency officials and an NGO reported 
that the DRC does not have enough mine agents to certify the mines, of 
which there may be over 2,000 in eastern DRC alone, or even to 
negotiate and manage mining contracts. Moreover, an NGO official 
stated that mines need to be reinspected every 6 to 12 months in order 
to ensure proper due diligence in accordance with OECD and ICGLR 
guidance; however, the NGO official stated that the DRC government 
does not have the capacity to inspect at such frequency. 

Some agency officials and officials we interviewed from industry, 
NGOs, and international organizations also commented that the DRC 
government lacks capacity to mitigate corruption and smuggling. The 
lack of capacity can impact due diligence and can contribute to 
illegal minerals trade and cross-border smuggling. For example, the UN 
reported that illegal trade of minerals undermines the exercise of due 
diligence in the DRC and affects the credibility of due diligence-
based certification and traceability systems.[Footnote 34] According 
to some industry experts, mining agents may not be properly 
compensated, due to the lack of governance in eastern DRC, and may 
look for other ways to earn money, which could involve colluding with 
illegal armed groups. 

With regard to smuggling, the OECD reported that as long as there are 
no traceability or certification schemes in place that cover the whole 
region, and most notably, the Kivu provinces, Uganda, and Burundi, 
smuggling and contamination of clean materials will continue to pose a 
threat to formalization of the artisanal mining sector and due 
diligence initiatives. According to a 2012 UNGoE report, several tons 
of gold worth hundreds of millions of dollars are smuggled from the 
eastern DRC through neighboring countries, where it is ultimately 
smelted and sold to jewelers in markets, such as the United Arab 
Emirates. Representatives from some industry associations that we 
interviewed stated that armed groups and criminal elements have 
shifted efforts to gold mines because it is relatively easy to smuggle 
gold because of its size. Furthermore, gold's high value in the market 
makes it more viable for smuggling than tin, tantalum, and tungsten. 

Many Companies Not Required to Report to SEC under the Conflict 
Minerals Rule Will Likely Be Affected; Limited Aggregated Information 
about Them Exists: 

Even companies that are not required to file disclosures under SEC's 
conflict minerals rule will likely be affected by the rule. These 
companies may supply components or parts that contain conflict 
minerals to companies reporting to SEC under the rule and may be asked 
by such companies to provide information specifying the origin of the 
minerals. Aside from the supply chain relationship, while information 
is publicly available about some smelters and refiners, there is 
little aggregated information available about companies that do not 
report to SEC under the rule but may trade in conflict minerals. 

Companies Not Required to Report to SEC under the Rule May Provide 
Information on the Origin of Conflict Minerals in Their Products to 
Companies That Will Report to SEC under the Rule: 

Companies Not Required to Report to SEC under the Rule May Supply 
Products That May Contain Conflict Minerals to SEC-Reporting Companies 
under the Rule: 

Companies that are not required to report to SEC under the rule may 
supply products that contain conflict minerals to SEC-reporting 
companies under the rule. SEC relied on estimates provided by a 
commentator indicating that 278,000 suppliers--most of which would be 
companies that would not report to SEC under the rule--could be 
indirectly impacted by the rule. Moreover, the release contains an 
estimate that each of the nearly 6,000 companies that could be 
directly impacted by the rule has roughly 1,000 first-tier suppliers, 
on average.[Footnote 35] These suppliers, including first-tier 
suppliers, could provide products that contain conflict minerals to 
companies required to report to SEC under the rule. Examples of these 
products include tin solder for joining metal, tantalum capacitors for 
storing energy in cellular phones, tungsten carbide for hardened 
cutting tools, or gold plating for wires to increase durability and 
resistance to corrosion. The first-tier supplier has a direct 
commercial relationship with the original equipment manufacturer, 
meaning the first-tier supplier sells materials or component parts, 
which have been aggregated by suppliers throughout the supply chain, 
to the original equipment manufacturer for final assembly. According 
to an industry official, in general, component parts manufacturers 
construct individual parts--such as capacitors, engine parts, circuit 
boards, and other components--and assemble them into more complex 
components. 

[Side bar] 

Estimate of the Number of Companies Required to Report to SEC under the 
Rule: 

SEC estimates that 5,994 reporting issuers (companies that issue 
stock publicly and are required to report to SEC) will be affected by 
the rule and will need to determine if their products contain conflict 
minerals. If their products do contain conflict minerals, they will 
need to conduct some measure of "reasonable country of origin inquiry." 
Following the inquiry, if those reporting issuers have reason to 
believe that the conflict minerals in their products were sourced from 
the DRC or adjoining countries, those issuers may be required to 
conduct due diligence, according to SEC. For a complete explanation of 
the reporting procedures under the rule, see appendix II. Reporting 
issuers are domestic and foreign companies that file forms 10-K, 20-F, 
and 40-F under the Securities Exchange Act. According to SEC and 
industry officials, these companies vary in size and revenue, but in 
general, tend to be larger, mature companies that can have a diverse 
product line; their revenues can range from the millions of dollars to 
hundreds of billions; they are domestic and foreign companies; and they 
may have operations in several countries. According to SEC and industry 
officials, some SEC reporting companies under the rule frequently sell 
products to consumers. 
Source: GAO analysis of SEC information. 

[End of side bar] 

Using an electronics company as a model, processed metals move through 
several suppliers that manufacture component parts after the smelter--
first to circuit board and computer chip manufacturers, then to 
cellular phone and other electronics manufacturers, and finally to the 
brand-name electronics company, which is the original equipment 
manufacturer that manufactures products recognizable to the consumer, 
such as cellular phones, tablets, and laptop computers. Beyond the 
first-tier supplier, there are tier 2-, 3-, 4-, or higher-tiered 
suppliers that, beginning with the raw materials from the smelter or 
refiner, manufacture component parts that are assembled into more 
complex component parts as they move from higher-to lower-tiered 
suppliers in the supply chain, to the first-tier supplier, and finally 
to the original equipment manufacturer.[Footnote 36] See figure 4 for 
a simplified version of the supply chain, and the tiered structure of 
suppliers. 

Figure 4: Simplified Conflict Minerals Supply Chain Showing Supplier 
Tiers: 

[Refer to PDF for image: illustration] 

Supply chain: 

Mine: Metal ores sent to next two entities: 
Local processors/traders; 
Exporter. 

Metal ores and Metals and products to: Smelters. 

Metal and products from Smelters to: 
Banks and exchanges; 
Component parts manufacturers, Tier 1; 
Component parts manufacturers, Tier 2; 
Component parts manufacturers, Tier 3; 
Component parts manufacturers, Tier 4. 

Component parts manufacturers (all tiers) to: 
Original equipment manufacturers. 

Source: GAO analysis. 

[End of figure] 

While many companies will likely be directly or indirectly impacted by 
the rule, some companies that use conflict minerals may not be, partly 
because (1) the companies are not issuers that are required to file 
with SEC under the Securities Exchange Act, and (2) these same 
companies potentially do not sell components or parts to a company 
that will be required to report to SEC under the rule. Industry and 
consulting firm representatives have differing views on the number of 
companies that purchase conflict minerals from the DRC and adjoining 
countries but may not be impacted by the rule. 

SEC-Reporting Companies under the Rule May Request Information on the 
Origin of Conflict Minerals in Products They Receive from Their 
Suppliers: 

Suppliers that provide products that may contain conflict minerals to 
companies required to report to SEC under the rule may provide 
information on the minerals' origins to those reporting companies that 
request it. The SEC release does not specify the steps and outcomes 
for the reasonable country of origin inquiry, and indicates that such 
a determination depends on each issuer's facts and circumstances. 
However, in conducting a country of origin inquiry, issuers may 
inquire of their suppliers the origin of any conflict minerals in the 
products. According to the release, the issuer's inquiry must be 
reasonably designed to determine whether any of its conflict minerals 
originated in the DRC and adjoining countries, and must be performed 
in good faith. If, after this inquiry, the issuer has a reason to 
believe that its conflict minerals may have originated in the DRC and 
adjoining countries, the issuer proceeds to exercising due diligence. 
Industry associations such as the EICC and GeSI have created templates 
for companies to use when contacting suppliers to inquire about the 
types and origins of conflict minerals in a given product.[Footnote 
37] For example, companies required to report under the rule could 
submit the inquiries to their first-tier suppliers. Those suppliers 
could either provide the reporting company with sufficient information 
or initiate the inquiry process up the supply chain, such as by 
distributing the inquiries to suppliers at the next tier--tier 2 
suppliers. The tier 2 suppliers could inquire up the supply chain to 
additional suppliers, until the inquiries arrive at the smelter. 
Smelters then could provide the suppliers with information about the 
origin of the conflict minerals. Figure 5 illustrates the flow of 
information up the supply chain. 

Figure 5: Flow of Supply Chain Inquiries from the Original Equipment 
Manufacturers to the Mine: 

[Refer to PDF for image: illustration] 

Supply chain inquires flow in the opposite direction from the Conflict 
Minerals Supply Chain: 

Metal and products: 

Original equipment manufacturers to Component parts manufacturers (all 
tiers); 

Component parts manufacturers (all tiers): to: Banks and exchanges; 

Banks and exchanges to: Smelters. 

Smelters to: 
Local processors/traders; 
Exporter. 

Local processors/traders; Exporter; to: Mine:. 

Source: GAO analysis. 

[End of figure] 

As discussed earlier, smelters have various means to preclude untraced 
minerals from entering their supply, such as participation in the 
iTSCi initiative and the Conflict Free Smelters Program. According to 
smelting industry representatives, these initiatives and 
certifications have reduced the burden of responding to the multiple 
amounts of inquiries many smelters have already received from 
suppliers. 

Officials from consulting firms and industry associations that we 
spoke with told us that many companies that will respond under the 
rule have started contacting their first-tier suppliers and providing 
them with country of origin inquiries. According to these officials, 
several of these companies that have submitted inquiries to their 
suppliers have experienced challenges, which include identifying 
suppliers beyond the first-tier suppliers, because for original 
equipment manufacturers, suppliers beyond the first tier are less 
visible. As discussed earlier, original equipment manufacturers 
purchase component parts primarily from their first-tier suppliers and 
do not have direct commercial relationships with suppliers in higher 
tiers of the supply chain. According to industry representatives and 
agency officials, these challenges may impact how companies file under 
the rule. For example, as previously discussed, the SEC rule allows 
companies to disclose their products as "DRC conflict undeterminable." 
This provision allows companies to state that the source of the 
conflict minerals in their products, and the likelihood that the 
conflict minerals benefited or financed armed groups from the DRC and 
adjoining countries, could not be determined after having conducted 
due diligence to obtain that information from their suppliers. For the 
reporting period beginning January 1, 2013, companies may use this 
provision for 4 years for smaller reporting companies or 2 years for 
all other reporting companies. Although the number of companies 
required to report under the rule that may utilize the "DRC conflict 
undeterminable" provision is unknown, SEC officials and 
representatives of industry associations and consulting firms 
anticipate that many companies required to report under the rule will 
utilize the provision based on the results of their due diligence 
efforts. 

Representatives from industry and consulting firms that we interviewed 
stated that the purchasing power of issuing companies under the rule 
may influence their suppliers to provide information on the source of 
any conflict minerals in their products when requested. According to 
an industry representative, since companies that report to SEC under 
the rule tend to be large, mature corporations with great purchasing 
power in their respective industries, it would be difficult for 
suppliers to ignore their request for information on the origin of 
conflict minerals in products the suppliers provide to them. For 
example, jewelry industry representatives told us that they have 
advised their members, which are primarily small, independent jewelry 
companies not required to report to SEC under the rule, to respond to 
any requests from customers seeking information on the origin of 
conflict minerals in products they supply, because the risk of not 
responding could result in a loss of business for those companies. 

Information Is Publicly Available about Smelters and Refiners, and the 
Types of Conflict Minerals They Use: 

Some information is publicly available about smelters and refiners, 
and their involvement in the conflict minerals supply chain. According 
to SEC officials, while smelters and refiners are not exempted from 
the SEC rule, most of these suppliers will likely not be required to 
report to SEC under the rule because of their filing status.[Footnote 
38] Smelter and refiners are considered the choke-point of the 
conflict minerals supply chain, as previously discussed, and comprise 
a small portion of the overall number of suppliers in the conflict 
minerals supply chain that may be impacted by the SEC rule. While it 
is not possible to determine the universe of suppliers that would not 
be required to report under the rule, smelters and refiners are a more 
identifiable population for which there is some aggregated 
information, such as the types of conflict minerals they use, and 
their location.[Footnote 39] We found the following information on 
smelters and refiners: 

* Smelters and refiners constitute a small but important portion of 
suppliers that likely will not file a conflict minerals report under 
the SEC rule. Organizations have estimated the number of smelters and 
refiners around the world to be nearly 500; however, the actual number 
of smelters and refiners of conflict minerals is unknown. We 
aggregated publicly available information on smelters and refiners 
from lists compiled by the EICC and GeSI, the OECD, and the London 
Bullion Market Association (LBMA), which provided information on 278 
smelters and refiners. As we have previously discussed, roughly 
278,000 suppliers could be affected by the rule, based on the estimate 
provided to SEC. Of the 278 smelters of tin, tantalum, tungsten, and 
refiners of gold that we were able to identify, the majority (271) of 
these companies would likely not be required to report under the rule. 

* Over half of the smelters and refiners of the conflict minerals we 
identified were located in three countries. Of the 278 smelters and 
refiners of tin, tantalum, tungsten, and gold that we were able to 
identify, more than half (156) were located in three countries: China 
(82), Japan (39), and Indonesia (35). According to industry 
representatives, participation in due diligence efforts of smelters 
and refiners from these countries, particularly China and Indonesia, 
is critical in assisting companies with fulfilling the reporting 
requirements of the SEC rule. Several organizations, including an NGO, 
and representatives from government and industry, are conducting 
outreach to smelters to provide information on the SEC rule in an 
effort to increase participation from smelters and refiners from these 
countries. For more information on the location of smelters and 
refiners we identified in our analysis, see figure 6. 

Figure 6: Number of Smelters and Refiners of Conflict Minerals We 
Identified, by Country: 

[Refer to PDF for image: horizontal bar graph] 

Count of mineral smelters and refiners: 

Country: China; 
Tin (Sn): 30; 
Tungsten (W): 32; 
Tantalum (Ta): 13; 
Gold (Au): 7. 

Country: Japan; 
Tin (Sn): 9; 
Tungsten (W): 8; 
Tantalum (Ta): 5; 
Gold (Au): 17. 

Country: Indonesia; 
Tin (Sn): 34; 
Gold (Au): 1. 

Country: USA; 
Tin (Sn): 5; 
Tungsten (W): 5; 
Tantalum (Ta): 6; 
Gold (Au): 6. 

Country: Russia; 
Tin (Sn): 2; 
Tungsten (W): 3; 
Tantalum (Ta): 1; 
Gold (Au): 8. 

Country: Germany; 
Tungsten (W): 2; 
Tantalum (Ta): 1; 
Gold (Au): 4. 

Country: Switzerland; 
Gold (Au): 6. 

Country: Bolivia; 
Tin (Sn): 5. 

Country: Brazil; 
Tin (Sn): 2; 
Tantalum (Ta): 1; 
Gold (Au): 2. 

Country: Canada; 
Tin (Sn): 1; 
Tungsten (W): 1; 
Gold (Au): 3. 

Country: Korea; 
Tin (Sn): 4; 
Tungsten (W): 1. 

Country: Thailand; 
Tin (Sn): 4; 
Tantalum (Ta): 1. 

Country: Malaysia; 
Tin (Sn): 4. 

Country: Peru; 
Tin (Sn): 4. 

Country: Singapore; 
Tin (Sn): 4. 

Country: Belgium; 
Tin (Sn): 2; 
Gold (Au): 1. 

Country: Turkey; 
Gold (Au): 3. 

Country: Austria; 
Tungsten (W): 1; 
Tantalum (Ta): 1. 

Country: Chile; 
Tin (Sn): 1; 
Gold (Au): 1. 

Country: France; 
Tin (Sn): 1; 
Tungsten (W): 1. 

Country: Hong Kong; 
Gold (Au): 2. 

Country: Kazakhstan; 
Tantalum (Ta): 1; 
Gold (Au): 1. 

Country: Mexico; 
Gold (Au): 2. 

Country: Republic of Korea; 
Gold (Au): 2. 

Country: South Africa; 
Tantalum (Ta): 1; 
Gold (Au): 1. 

Country: Uzbekistan; 
Gold (Au): 2. 

Country: Australia; 
Gold (Au): 1. 

Country: Czech Republic; 
Tin (Sn): 1. 

Country: Estonia; 
Tantalum (Ta): 1. 

Country: India; 
Tantalum (Ta): 1. 

Country: Italy; 
Gold (Au): 1. 

Country: Kyrgyzstan; 
Gold (Au): 1. 

Country: Netherlands; 
Gold (Au): 1. 

Country: Philippines; 
Gold (Au): 1. 

Country: Saudi Arabia; 
Gold (Au): 1. 

Country: Spain; 
Gold (Au): 1. 

Country: Sweden; 
Gold (Au): 1. 

Country: Taiwan; 
Gold (Au): 1. 

Source: GAO analysis of smelter information provided by the EICC-GeSI, 
OECD, and the LBMA. 

Note: Eight smelters and refiners in our analysis processed more than 
one conflict mineral, resulting in duplicative counting in 21 cases. In 
addition, some smelters and refiners have operations in several 
countries. 

[End of figure] 

* Many smelters and refiners of conflict minerals in our analysis 
processed tin. Of the 278 smelters and refiners in our analysis, we 
were able to identify 113 that processed tin, followed by gold (78), 
tungsten (54), and tantalum (33). Furthermore, over half (64 of 113) 
of the tin smelters in our analysis were located in China (30) or 
Indonesia (34). In addition, over 67 percent of global production 
comes from mines in China and Indonesia, according to U.S. Geological 
Survey data. Tin and its derivatives have wide applications and are 
used in manufacturing a variety of products, including tin soldering 
for joining pipes, coatings for steel containers, and a wide range of 
tin chemical applications, according to the U.S. Geological Survey. 
According to industry and consulting firm representatives, around 12 
to 15 smelters process nearly 80 percent of the world's tin. 

* Most smelters and refiners in our analysis did not have a conflict 
minerals policy publicly available. Of the 278 smelters and refiners 
we were able to identify, 63 had a conflict minerals policy publicly 
available on their website. Of the 63 smelters with a conflict 
minerals policy publicly available, 26 smelters had successfully 
completed a Conflict Free Smelter Program audit and were designated as 
"conflict-free" by the EICC and GeSI,[Footnote 40] while several had 
reportedly followed some sort of due diligence, such as the OECD Due 
Diligence Guidance or the LMBA Responsible Gold Guidance.[Footnote 41] 
Other smelters in our analysis had posted policies on their website 
stating that the company only sources conflict minerals outside of the 
conflict areas of the DRC and adjoining countries. We were unable to 
identify a website for 86 of the 278 smelters in our analysis, and 129 
of the 278 smelters had no conflict minerals policy publicly available 
on their website.[Footnote 42] 

Some information is publicly available on companies that use conflict 
minerals but are not required to report under the rule, as in the case 
of many smelters and refiners we were able to identify. However, data 
for the universe of these companies are limited. Specifically, based 
on our analysis, aggregated data on the types of conflict minerals in 
the products manufactured by these companies as well as information on 
how such companies source their conflict minerals are not available, 
except for a few companies. For example, several of these companies 
provide information publicly about their continued participation in 
initiatives that source conflict minerals from the DRC, and have 
agreed to purchase conflict minerals, such as tin and tantalum, from 
closely monitored sources through initiatives such as iTSCi and the 
Solutions for Hope, as previously mentioned.[Footnote 43] However, 
according to agency and international organization officials, in some 
instances buyers from small firms, mainly from East Asia, are on the 
ground in the DRC and adjoining countries, and continue to purchase 
untraced minerals as well as minerals that have been smuggled out of 
the DRC into adjoining countries. In addition, according to an 
industry representative, it may be difficult to identify information 
on these companies because they tend to be small and serve very 
specific markets. 

Little Additional Information on the Rate of Sexual Violence in 
Eastern DRC and Neighboring Countries Has Become Available since GAO's 
2012 Report: 

Since our 2012 report, one population-based survey providing data on 
the rate of sexual violence has been published in Uganda, and one is 
under way in the DRC; during the same period, no similar surveys have 
been conducted in Rwanda or Burundi. We also found some additional 
case file data available on sexual violence for all four countries. 
However, as we reported in 2011, case file data on sexual violence are 
not suitable for estimating a rate of sexual violence. 

Since GAO's 2012 Report, One Population-Based Survey on the Rate of 
Sexual Violence Has Been Published in Uganda and One Is Planned for 
DRC: 

We found that one new population-based survey on the rate of sexual 
violence has been conducted since our 2012 report[Footnote 44]--the 
2011 Uganda Demographic and Health Survey (DHS), published in August 
2012. According to the survey, "28 percent of women and 9 percent of 
men age 15-49 report that they have experienced sexual violence at 
least once in their lifetime." These national estimates are based on a 
random sample. Since we first reported on sexual violence in our 2011 
report, we have identified six other population-based surveys that 
provided data on the rate of sexual violence in these countries. 

[Side bar] 

Surveys Are More Appropriate for Estimating a Rate of Sexual Violence: 

In our 2011 report on sexual violence, we discussed two sources of 
data on sexual violence in eastern DRC and neighboring countries—-
population-based surveys and case files—-and concluded that population-
based surveys are more appropriate for estimating a rate of sexual 
violence. Case file data have shortcomings and biases that 
significantly limit their utility for estimating the rate of sexual 
violence. For example, case file data are not generated from a random 
sample; are reliant on victims seeking services to be counted, 
although some victims may lack access to service; and allow for the 
potential double counting of the same sexual violence incident in the 
case file data collected. 
Source: GAO. 

[End of side bar] 

In reviewing whether there had been updates to any of the previous 
surveys conducted, we found that the authors of the McGill study, a 
population-based survey conducted in eastern DRC that was highlighted 
in our 2011 report, had no plans to conduct a follow-up survey. We 
found that fieldwork for a DHS for the DRC is expected to launch in 
August 2013, with data expected around September 2014. 

Figure 7: Population-Based Surveys That Estimate the Rate of Sexual 
Violence in Eastern DRC, Rwanda, and Uganda: 

[Refer to PDF for image: timeline] 

Publication date: 

2007: 

Uganda: 
Uganda Bureau of Statistics. 

2008: 

Democratic Republic of the Congo (DRC): 
DRC Ministry of Planning; 
University of California Berkeley. 

2010: 

Democratic Republic of the Congo (DRC): 
McGill University. 

Rwanda: 
DHS; 
IMAGES survey. 

Uganda: 
University of California Berkeley. 

2012: 

Uganda: 
DHS. 

2014: 

Democratic Republic of the Congo (DRC): 
Expected Demographic and Health Survey (DHS). 

Source: GAO analysis. 

Notes: For our analysis of the quality of the surveys, refer to our 
2011 report (GAO-11-702). For DHS surveys covered after our 2011 
report, we found that these surveys are weighted, present confidence 
intervals, and adhere to other survey standards. During our search for 
studies published since our 2012 report, we discovered the IMAGES 
survey, which we had not previously reported on in either our 2011 or 
2012 report. 

[End of figure] 

We also found a team of two organizations that released estimates in 
2010 based on survey data of sexual violence in Rwanda. Sonke Gender 
Justice Network and Promundo-US conducted a probability cluster sample 
in 2010 as part of its IMAGES survey and found that "57 percent of 
women reported having experienced gender-based violence committed by a 
partner" and "17 percent of men experienced sexual violence when they 
were a child." However, this survey was not weighted to reflect 
unequal probabilities of selection, and it does not contain confidence 
intervals. Therefore, we are not able to assess the accuracy or 
precision of the estimates. 

Some Additional Case File Data Has Become Available on Sexual Violence 
since GAO's 2012 Report: 

Following up on our 2011 and 2012 reports, we asked U.S. and UN 
agencies as well as researchers and NGOs if they had any updated case 
file data. In April 2013, State submitted its annual country reports 
on human rights practices to Congress, which provided case file 
information pertaining to sexual violence in the DRC and neighboring 
countries. The 2012 Department of State Human Rights Reports reported 
the following: 

* In DRC, the Ministry of Gender reported 10,037 cases of sexual-and 
gender-based violence in 2011 in eastern DRC. 

* In Rwanda, prosecutors reported that they investigated 351 cases of 
rape in 2012. Of those 351 cases, 109 were filed in courts, 143 were 
dropped, and 99 were pending investigation. 

* In Uganda, 520 cases of rape were reported in 2011, of which 269 
were tried. 

* In Burundi, Centre Seruka, a clinic for rape victims averaged 121 
rape cases per month between January and September 2012. 

Various UN entities reported other case file data. In March 2013, the 
UN Secretary-General reported that 764 people had become victims of 
sexual violence in eastern DRC from December 2011 and through November 
2012.[Footnote 45] In May 2013, the UN Joint Human Rights Office 
reported that an armed group committed 135 cases of sexual violence 
from November 20, 2012 through November 30, 2012. Furthermore, in 
December 2012, the UN Office for the Coordination of Humanitarian 
Affairs reported 70 rapes in Minova, a town in eastern DRC, from 
November 30 through December 4, 2012. Because case file data are not 
aggregated across various sources and the extent to which various 
reports overlap is unclear, it is difficult to obtain complete data on 
case files or even a sense of magnitude. One shortcoming of both case 
file data and surveys is that time frames, locales, and definitions of 
sexual violence are not consistent across data collection operations. 
As we reported in 2011, case file data on sexual violence are not 
suitable for estimating a rate of sexual violence because case file 
data are not based on a random sample and the results of analyzing 
these data are not generalizable. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to SEC, State, and USAID, for their 
review and comment. SEC, State, and USAID provided technical comments, 
which we incorporated in this report as appropriate. We also provided 
relevant portions of the draft of this report to relevant external 
stakeholders for their technical comment. We received technical 
comments from some of these stakeholders, which we incorporated 
throughout this report as appropriate. 

We are sending copies of this report to appropriate congressional 
committees. The report is also available at no charge on the GAO 
website at [hyperlink, http://www.gao.gov/]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-4802 or evansl@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix IV. 

Signed by: 

Lawrance L. Evans, Jr.
Director, International Affairs and Trade: 

List of Addressees: 

The Honorable Barbara Mikulski: 
Chairwoman: 
The Honorable Richard Shelby: 
Ranking Member: 
Committee on Appropriations: 
United States Senate: 

The Honorable Tim Johnson: 
Chairman: 
The Honorable Mike Crapo: 
Ranking Member: 
Committee on Banking, Housing, and Urban Affairs: 
United States Senate: 

The Honorable Max Baucus: 
Chairman: 
The Honorable Orrin G. Hatch: 
Ranking Member: 
Committee on Finance: 
United States Senate: 

The Honorable Robert Menendez: 
Chairman: 
The Honorable Bob Corker: 
Ranking Member: 
Committee on Foreign Relations: 
United States Senate: 

The Honorable Hal Rogers: 
Chairman: 
The Honorable Nita Lowey: 
Ranking Member: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Jeb Hensarling: 
Chairman: 
The Honorable Maxine Waters: 
Ranking Member: 
Committee on Financial Services: 
House of Representatives: 

The Honorable Ed Royce: 
Chairman: 
The Honorable Eliot Engel: 
Ranking Member: 
Committee on Foreign Affairs: 
House of Representatives: 

The Honorable Dave Camp: 
Chairman: 
The Honorable Sander Levin: 
Ranking Member: 
Committee on Ways and Means: 
House of Representatives: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

To describe factors that may impact whether the Securities and 
Exchange Commission's (SEC) conflict minerals rule denies armed groups 
in the Democratic Republic of the Congo (DRC) and adjoining countries 
benefits from conflict minerals, we interviewed officials from SEC, 
the Department of State (State), and the United States Agency for 
International Development (USAID), as well as representatives from 
international organizations, nongovernmental organizations (NGO), 
industry associations, consulting firms, and smelters and refiners of 
tin, tantalum, tungsten, and gold to get their views on the final SEC 
rule as well as any impacting factors. We chose the experts and 
stakeholders we interviewed to capture a range of perspectives about 
the types of minerals traded and because we had established contacts 
with these entities on our last review. In addition, some of the 
stakeholders we talked to have been working on the ground in the DRC. 
These experts and stakeholders constitute a nongeneralizable sample. 
The information gathered cannot be generalized and cannot be used to 
infer views of other experts or stakeholders cognizant of conflict 
minerals issues. We reviewed Section 1502 of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Pub. L. No. 111-203); 
reports and other documents from relevant U.S. agencies, such as SEC's 
final conflict minerals rule, press releases, and statements; reports 
issued by the UN Group of Experts on the Democratic Republic of the 
Congo (UNGoE) and the Organisation for Economic Co-operation and 
Development (OECD); as well as documents and reports from industry 
associations and NGOs. We did not travel to the DRC or speak with 
government officials in the DRC but obtained perspectives on issues 
from some stakeholders who operate in the DRC. 

To identify and describe available information about entities that use 
conflict minerals and do not report to SEC under the rule, we 
interviewed officials from SEC, State, and USAID, as well as 
representatives from international organizations, NGOs, industry 
associations, consulting firms, and smelters and refiners of tin, 
tantalum, tungsten, and gold to get their views on the extent to which 
information is publicly available on companies that are not required 
to report under the rule that may use conflict minerals in their 
products, and the source of the conflict minerals. We reviewed and 
analyzed reports and other documents from organizations such as the 
OECD, London Bullion Market Association (LBMA), and the Electronics 
Industry Citizenship Coalition and the Global e-Sustainability 
Initiative (EICC and GeSI), as well as documents and reports from 
industry associations and NGOs. In addition, we conducted searches in 
the Nexis database using selected Standard Industrial Classification 
(SIC) codes listed under the Manufacturing division. Overall, there 
were 20 subcategories under the Manufacturing division of SIC codes, 
which include subcategories such as Tobacco Products; Paper and Allied 
Products; and Electronic and Other Electrical Equipment and 
Components, Except Computer Equipment. We selected SIC codes under the 
Manufacturing division for industries that have a higher likelihood of 
using conflict minerals in their product, such as Electronic and Other 
Electrical Equipment and Components, Except Computer Equipment. 
Through the database analysis, we were able to determine the filing 
status, location, revenue, and industry classification of the 
companies. We were unable to determine the types of products the 
companies produced, and the types of conflict minerals potentially 
used in the manufacturing process of their products. Because SIC codes 
do not indicate specific products, we were unable to use the Nexis 
data to develop an aggregate description of entities that use conflict 
minerals but do not report to SEC under the rule. 

We compiled a list of smelters and refiners--which are a smaller 
universe of companies that are primarily not required to report under 
the rule--from the EICC and GeSI's Conflict Minerals Reporting 
Template and Dashboard, OECD's Final Downstream Report On One-Year 
Pilot Implementation of the Supplement on Tin, Tantalum, and Tungsten, 
and the LBMA's Good Delivery List. The data were current as of March 
15, 2013. We selected these smelters and refiners because information 
is publicly available on the types of minerals these smelters and 
refiners process; however, we did not conduct an audit to verify how 
these entities sourced materials for processing. To compile our list 
of smelters and refiners, we reviewed and compared the lists from each 
source to identify and delete duplicate smelters and refiners. 
Additional duplicates were identified and deleted as a result of 
Internet searches using the names of the smelters and refiners. While 
we made efforts to eliminate duplicate information where possible, 
smelters and refiners may be listed under different names, and 
therefore, some duplicate information may exist in the data. 
Information included in the list of smelters from the EICC and GeSI, 
OECD, and LMBA included (1) the location of the smelter or refiner, 
(2) the types of minerals smelted or refined, and (3) the due 
diligence guidance reportedly followed, in some cases. We identified 
278 smelters and refiners of tin, tantalum, tungsten, and gold, and 
analyzed any publicly available information--mainly information posted 
on the companies' websites or information provided on the websites of 
organizations such as the EICC and GeSI or the LBMA--on their 
practices and policies for sourcing conflict minerals. This analysis 
included examining websites of 192 of 278 smelters and refiners to 
identify the types of due diligence guidance they reported to use to 
determine the country of origin of their conflict minerals sources. We 
were unable to identify the websites for 86 smelters or refiners on 
our list, which could have been the result of a smelter not possessing 
a website, or differing translations of company names from foreign 
characters--such as Chinese script or the Cyrillic alphabet--to the 
Roman alphabet. Additional limitations included our sample of 278 
smelters and refiners, as organizations have estimated that the number 
of smelters and refiners is nearly 500, particularly if smaller 
smelters and refiners that process ores into metals at the mine site 
are included. These smelters and refiners, or secondary smelters, 
often have small operations and may not have a website, according to 
an industry representative. Furthermore, the number of gold refiners 
could potentially be much larger, considering that little equipment 
and space is required to refine gold, depending on the quality; and 
gold can be refined at the mine site. The 278 smelters and refiners we 
were able to identify may not be representative of others, and the 
information we report about these 278 cannot be generalized to other 
smelters and refiners of tin, tantalum, tungsten, and gold. 

In response to a mandate in the Dodd-Frank Wall Street Reform and 
Consumer Protection Act that GAO submit an annual report that assesses 
the rate of sexual violence in war-torn areas of the DRC and adjoining 
countries, we identified and assessed any additional published 
information available on sexual violence in war-torn eastern DRC, as 
well as three neighboring countries that border eastern DRC--Rwanda, 
Uganda, and Burundi--since our 2012 report on sexual violence in these 
areas.[Footnote 46] During the course of our review, we interviewed 
officials from State and USAID and interviewed NGO representatives and 
researchers to discuss the collection of sexual violence-related data-
-including population-based surveys and case file data--in the DRC and 
adjoining countries. Specifically, we followed up with researchers and 
representatives from those groups we interviewed for our prior review 
on sexual violence rates in eastern DRC and neighboring countries, 
including officials from the United Nations Population Fund, United 
Nations High Commissioner for Refugees, United Nations Special 
Representative to the Secretary-General on Sexual Violence in 
Conflict; and representatives from the Harvard Humanitarian Initiative 
and others. We also conducted Internet literature searches to identify 
new academic articles containing any additional data on sexual 
violence. 

We conducted this performance audit from November 2012 to July 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: SEC's Flowchart Summary of the Disclosure Process for the 
Final Conflict Minerals Rule: 

The Securities and Exchange Commission (SEC) issued a flowchart 
summary of the final rule to guide SEC-reporting companies affected by 
the rule through the disclosure process (see figure 8). In general, 
the process shows that an SEC-reporting company needs to (1) determine 
whether its manufactured products contain conflict minerals; (2) 
determine whether conflict minerals are necessary to the product and, 
if so, whether the conflict minerals originated in the DRC or an 
adjoining country; and (3) possibly conduct due diligence and 
potentially provide a Conflict Minerals Report. 

Figure 8: SEC's Flowchart Summary of the Final Conflict Minerals Rule: 

[Refer to PDF for image: flow chart] 

Start: 

1. Does the issuer file reports with the SEC under Sections 13(a) or 
15(d) of the Exchange Act? 
If yes; continue; 
If no: Rule does not apply--end. 

2. Does the issuer manufacture or contract to manufacture products? 
If yes; continue; 
If no: Rule does not apply--end. 

3. Are conflict minerals necessary to the functionality or production 
of the product manufactured or contracted to manufactured? 
If yes; continue; 
If no: Rule does not apply--end. 

4. Were the conflict minerals outside the supply chain prior to 
January 31, 2013? 
If yes: Rule does not apply--end; 
If no, if newly minted, go to #6; 
If no, if potentially scrap or recycled: go to #5. 

5. Based on the RCOI, does the issuer know or reasonably believe that 
the conflict minerals come from scrap or recycled? 
If no, go to #6; 
If yes, go to #7. 

6. Based on a reasonable country of origin inquiry (RCOI), does the 
issuer know or have reason to believe that the conflict minerals may 
have originated in the DRC or an adjoining country (the covered 
countries)? 
If yes, go to #8; 
If no, go to #7. 

7. File a Form SD that discloses the issuer’s determination and 
briefly describes the RCOI and the results of the inquiry--end. 

8. Exercise due diligence on the source and chain of custody of its 
conflict minerals following a nationally or internationally recognized 
due diligence framework, if such framework is available for a specific 
conflict mineral. In exercising this due diligence does the issuer 
determine the conflict minerals are not from the covered countries or 
are from scrap or recycled? 
If no, go to #9; 
If yes, go to #10. 

9. File a Form SD with a Conflict Minerals Report as an exhibit, which 
includes a description of the measures the issuer has taken to 
exercise due diligence. In exercising the due diligence, was the 
issuer able to determine whether the conflict minerals financed or 
benefited armed groups? 
If yes, go to #11; 
If no, go to #14. 

10. File a Form SD that discloses the issuer’s determination and 
briefly describes the RCOI and due diligence measures taken and the 
results thereof--end. 

11. Is it less than two years after effectiveness of the rule (four 
years for Smaller Reporting Companies); 
If yes, go to #12; 
If no, go to #13. 

12. The Conflict Minerals Report must also include a description of 
products that are “DRC Conflict Undeterminable” and the steps taken or 
that will be taken, if any, since the end of the period covered in the 
last Conflict Minerals Report to mitigate the risk that the necessary 
conflict minerals benefit armed groups, including any steps to improve 
due diligence. No audit is required--end. 

13. The Conflict Minerals Report must also include an independent 
private sector audit report, which expresses an opinion or conclusion 
as to whether the design of the issuer’s due diligence measures is in 
conformity with the criteria set forth in the due diligence framework 
and whether the description of the issuer’s due diligence measures is 
consistent with the process undertaken by the issuer. Also, include a 
description of the products that have not been found to be DRC 
Conflict Free, the facilities used to process the necessary conflict 
minerals in those products, the country of origin of the minerals and 
the efforts to determine the mine or location of origin of those 
minerals with the greatest possible specificity--end. 

Source: SEC. 

Note: The SEC indicated that the flowchart is intended to be used as a 
guide and that issuers should refer to the text in the rule for a more 
comprehensive description of the rule's requirements. 

[End of figure] 

[End of section] 

Appendix III: Updates of Global and In-Region Sourcing Initiatives: 

In our 2012 report, we discussed a number of initiatives that various 
stakeholders developed and implemented that may help companies 
reporting to the Securities and Exchange Commission (SEC) and their 
suppliers comply with SEC's conflict minerals disclosure rule. For 
this report, we updated information pertaining to some of these global 
and in-region sourcing initiatives.[Footnote 47] 

Global Sourcing Initiatives: 

OECD Due Diligence Guidance: 

The Organisation for Economic Co-operation and Development (OECD) 
adopted the OECD Due Diligence Guidance for Responsible Supply Chains 
of Minerals from Conflict-Affected and High-Risk Areas (hereafter 
referred to as OECD Due Diligence Guidance) to promote accountability 
and transparency in conflict minerals supply chains.[Footnote 48] The 
OECD Due Diligence Guidance and the corresponding supplements provide 
detailed guidance for companies operating in and sourcing minerals 
from conflict areas. In addition to the basic framework, OECD 
developed two supplements--one on tin, tantalum, and tungsten and the 
other on gold--to provide companies with specific guidance relevant to 
the conflict minerals supply chains. To increase awareness of and to 
develop emerging practices for implementing the OECD Due Diligence 
Guidance and the supplement on tin, tantalum, and tungsten, OECD 
conducted implementation pilot projects. In January 2013, OECD issued 
the final downstream report, which focuses on how companies implement 
due diligence in the supply chains of tin, tantalum, and tungsten, and 
the final upstream report, which provides an overall assessment of the 
progress and initial impact of due diligence in the tin, tantalum, and 
tungsten upstream supply chain.[Footnote 49] 

Conflict-Free Smelter Program: 

The Conflict-Free Smelter Program is a voluntary program in which 
smelters undergo an independent third party audit, in accordance with 
the OECD Due Diligence Guidance, to verify the origin of minerals 
processed at their facilities. The EICC and GeSI have also developed 
audit protocols for the program in consultation with a number of 
stakeholders--including NGOs, smelters, component manufacturers, 
original equipment manufacturers, and industry associations within and 
outside the electronics industry--to ensure wide-spread support for 
the program. In December 2010, the first tantalum smelter was 
certified conflict-free through the program after successfully 
undergoing an audit, and as of May 1, 2013, 18 of approximately 23 
tantalum smelting companies had been certified as conflict-free. As of 
May 1, 2013, 5 tin smelting companies had been certified as conflict-
free, 7 tungsten smelting companies had begun discussions with 
representatives of the program, and 12 gold refining companies had 
been certified as conflict-free through the program. 

World Gold Council's Conflict-Free Gold Standard and Tools: 

The World Gold Council developed and issued the Conflict-Free Gold 
Standard, an industry-led approach to combat the potential misuse of 
mined gold to fund armed conflict, in October 2012. The standard was 
developed with council member companies, which constituted the world's 
leading gold producers, and with extensive input from stakeholders to 
establish a common approach by which gold producers can assess and 
provide assurance that their gold has been extracted in a manner that 
does not cause, support, or benefit unlawful armed conflict or 
contribute to serious human rights abuses or breaches of international 
humanitarian law. According to a World Gold Council official, the 
participating companies' conformance to the Standard will be 
externally audited and assured and will operationalize the 
requirements of OECD guidance. The results of the audit using the 
standard will be recognized across other stakeholder initiatives such 
as the London Bullion Market Association's Responsible Gold Guidance. 
The Standard should also support refiners in meeting their due 
diligence requirements. 

In-Region Sourcing Initiatives: 

Conflict-Free Tin Initiative: 

The Conflict-Free Tin Initiative (CFTI) is a pilot that was launched 
in September 2012 and aims to create demand for conflict-free tin from 
eastern DRC. The traceability and due diligence mechanism through the 
ITRI Tin Supply Chain Initiative is operated by Pact, an independent 
NGO, and is operated out of the Kalimbi mine in South Kivu. According 
to an NGO, the Netherlands Ministry of Foreign Affairs is a neutral 
broker that brought the partners along the supply chain together, from 
mine to smelter to end user. The DRC government and local civil 
society are closely involved in the initiative, which is structured 
within the framework of the International Conference of the Great 
Lakes Region (ICGLR) and will be consistent with the due diligence 
guidance of OECD. CFTI reported that between October 2012 and January 
2013, 210 tons of materials were produced in the Kalimbi mine and the 
first container of conflict-free tin was transported to the trader in 
the DRC in December 2012. In January 2013, the first two containers of 
conflict-free tin were shipped to the smelter in Malaysia. The CFTI 
reports that next steps will involve the conflict-free tin making its 
way from the smelter to soldering companies and eventually to end 
users as finished product. 

ICGLR's Regional Certification Mechanism and Other Initiatives: 

The ICGLR started working with an NGO in 2010 to develop a regional 
certification mechanism to ensure that conflict minerals are fully 
traceable. ICGLR's regional certification mechanism may enable member 
countries and their mining companies to demonstrate where and under 
what conditions minerals were produced; through the regional 
certification mechanism, individual member governments are to issue 
ICGLR regional certificates for those mineral shipments that are in 
compliance with the standards of the mechanism. According to an 
official at a partnering NGO, the first two certificates out of the 
region were scheduled to come from sites in Rwanda and DRC in the late 
spring and from Uganda by December 2013. However, State indicated that 
the certificates from Rwanda and DRC have been delayed and will likely 
not be issued until late summer 2013. Regional certificates from other 
ICGLR countries will take some time because of capacity issues. 

According to USAID, in addition to the regional certification 
mechanism, ICGLR's other initiatives focused on eliminating the 
illegal exploitation of natural resources include harmonization of 
national legislation, formalization of the artisanal mining sector, 
formalization of the extractives industries transparency initiative, a 
whistleblowing mechanism, and a regional database on the flow of 
minerals. 

[End of section] 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contact: 

Lawrance L. Evans, Jr., (202) 512-4802 or evansl@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Godwin Agbara, Assistant 
Director; Andrea Riba Miller; Kyerion Printup; Justin Fisher; Debbie 
Chung; Ernie Jackson; Russ Burnett; Etana Finkler; Brian Hackney; and 
Leah DeWolf made key contributions to this report. 

[End of section] 

Footnotes: 

[1] GAO, The Democratic Republic of the Congo: U.S. Agencies Should 
Take Further Actions to Contribute to the Effective Regulation and 
Control of the Minerals Trade in Eastern Democratic Republic of the 
Congo, [hyperlink, http://www.gao.gov/products/GAO-10-1030] 
(Washington, D.C.: Sept. 30, 2010). 

[2] According to the UN, M23, for March 23 Movement, is an armed group 
that formed in May 2012 in eastern DRC. 

[3] The Dodd-Frank Act defines conflict minerals as columbite-
tantalite (coltan), cassiterite, gold, wolframite, or their 
derivatives, and any other mineral or its derivatives determined by 
the Secretary of State. Columbite-tantalite (coltan), cassiterite, and 
wolframite ores are ores from which tantalum, tin, and tungsten, 
respectively, are processed. 

[4] The countries adjoining the DRC are Angola, Zambia, Tanzania, 
Burundi, Rwanda, Uganda, South Sudan, Central African Republic, and 
the Republic of the Congo. 

[5] 77 Federal Register at 56274 (Sept. 12, 2012). 

[6] GAO, The Democratic Republic of the Congo: Information on the Rate 
of Sexual Violence in War-Torn Eastern DRC and Adjoining Countries, 
[hyperlink, http://www.gao.gov/products/GAO-11-702] (Washington, D.C.: 
July 13, 2011). 

[7] GAO, Conflict Minerals Disclosure Rule: SEC's Actions and 
Stakeholder-Developed Initiatives, [hyperlink, 
http://www.gao.gov/products/GAO-12-763] (Washington, D.C.: July 16, 
2012). In the report, we addressed the mandate requiring us to 
describe any issues that SEC encountered in promulgating a conflict 
minerals disclosure rule. 

[8] We did not have access to information about specific entities or 
companies so we described what we learned about entities that are not 
required to report to the SEC under the conflict minerals rule. 

[9] As we reported in 2012, the neighboring countries of eastern DRC 
are Burundi, Rwanda, and Uganda. 

[10] For our review, we selected smelters to interview based on the 
types of minerals the smelters processed and their willingness to 
speak with us. We sought to speak with officials of at least one 
smelter or refiner for each of the conflict minerals--tin, tantalum, 
tungsten, and gold. 

[11] MONUSCO took over from an earlier UN peacekeeping operation--the 
United Nations Organization Mission in Democratic Republic of the 
Congo--on July 1, 2010. 

[12] Pub. L. No. 109-456, sec 102(14). 

[13] Pub. L. No.111-203, sec 1502. According to an expert in conflict 
minerals that we interviewed, Canada and the European Union have taken 
steps to propose conflict minerals initiatives: Canada has a proposed 
conflict minerals rule that is currently in its comment period, and 
the European Union currently is having consultations on a potential 
conflicts minerals rule. 

[14] According to SEC, when SEC proposes or adopts a set of rules, 
often those rules are contained in a single document, called a 
proposing release or adopting release. 

[15] In 2012 we reported on some of the factors that caused delays in 
developing, modifying, and finalizing the rule. [hyperlink, 
http://www.gao.gov/products/GAO-12-763]. 

[16] SEC reported that commentary came from corporations, professional 
associations, human rights and public policy groups, bar associations, 
auditors, institutional investors, investment firms, U.S. and foreign 
government officials, consumers, and other interested parties and 
stakeholders. 

[17] 15 U.S.C. § 78m(a) and 78o(d). 

[18] According to SEC, the report will be filed on Form SD. 

[19] According to the SEC rule, SEC-reporting companies may describe 
their products as "DRC conflict undeterminable" if, following their 
exercise of due diligence, they are unable to determine that their 
minerals meet the statutory definition of "DRC conflict-free" because 
they have conflict minerals from the DRC or the adjoining countries 
but were unable to determine if their conflict minerals financed or 
benefited armed groups; or they had reason to believe that their 
conflict minerals may have originated in the DRC and adjoining 
countries and may not have come from recycled or scrap sources and the 
information gathered failed to clarify the conflict minerals' country 
of origin, benefits to armed groups, or whether it came from scrap or 
recycled sources. 

[20] National Association of Manufacturers, Chamber of Commerce of the 
United States of America, and Business Roundtable v. U.S. Securities 
and Exchange Commission, 12-1422, U.S. Court of Appeals for the 
District of Columbia Circuit. In May 2013, the U.S. Court of Appeals 
transferred the case to the U.S. District Court for the District of 
Columbia citing a recent jurisdictional decision based on a similar 
case. 

[21] See [hyperlink, http://www.gao.gov/products/GAO-12-763]. For 
example, tin solder is used to attach individual components on circuit 
boards. 

[22] Tantalum is also used to produce alloy additives, which can be 
found in turbines in jet engines; mill and chemical products; thin 
films, which are used in semiconductors; and other products. 

[23] Artisanal mining is a form of mining that is characterized by a 
lack of mechanization or capital investment. 

[24] According to OECD, in many instances smelters and refiners do not 
actually take ownership of the mineral but provide a service and 
charge a fee based on the amount of minerals smelted. Ownership of the 
minerals may remain with the mineral trader, bank, or component parts 
manufacturer. 

[25] According to a World Gold Council representative, in most cases 
refiners are paid a fee to refine gold and the transaction is 
conducted between the miner, trader, and the bank. 

[26] OECD defines "due diligence" as an ongoing, proactive, and 
reactive process through which companies can ensure that they respect 
human rights and do not contribute to conflict. Due diligence can also 
help companies ensure that they observe international law and comply 
with domestic laws, including those governing the illicit trade in 
minerals and UN sanctions. Risk-based due diligence refers to the 
steps companies should take to identify and address actual or 
potential risks in order to prevent or mitigate adverse impacts 
associated with their activities or sourcing decisions. 

[27] Some agency officials and NGOs mentioned that the uncertainty of 
the SEC rule's outcome due to it being challenged may make it harder 
for companies to move forward in implementing their due diligence 
process to address the SEC reporting requirements. 

[28] The World Bank defines the term "civil society" to refer to the 
wide array of nongovernmental and not-for-profit organizations that 
have a presence in public life, expressing the interests and values of 
their members or others, based on ethical, cultural, political, 
scientific, religious, or philanthropic considerations. 

[29] Smelters are the natural choke point in the supply chain--meaning 
that there are numerous sources of raw materials (ore) that flow into 
a smelter and numerous uses for the refined metals that leave the 
smelter. 

[30] According to industry representatives, independent third-party 
audits for the Conflict-Free Smelter Program are lagging and thus 
cannot assure that minerals are conflict-free on future purchasing 
actions. 

[31] [hyperlink, http://www.gao.gov/products/GAO-10-1030]. 

[32] The list of factors is not intended to be exhaustive and is based 
on views of experts and stakeholders. Additional factors may exist 
once the SEC rule has been in place for a longer period of time. We 
did not address how the challenges raised by the factors discussed can 
be mitigated or what progress the DRC government has made to address 
them because it was outside the scope of our review. 

[33] Organisation for Economic Co-operation and Development, Upstream 
Implementation of the OECD Due Diligence Guidance for Responsible 
Supply Chains of Minerals from Conflict-Affected and High-Risk Areas: 
Final Report on One-Year Pilot Implementation of the Supplement on 
Tin, Tantalum, and Tungsten (OECD: January 2013). 

[34] Letter dated 12 November 2012 from the Chair of the Security 
Council to resolution 1533 (2004) concerning the Democratic Republic 
of the Congo addressed to the President of the Security Council 
(S/2012/843), the United Nations Security Council (Nov. 15, 2012). 

[35] The actual number of first-tier suppliers is unknown, and 
organizations that commented on the release provided varying estimates 
on the number of first-tier suppliers that could potentially be 
affected by the SEC rule. As cited in the SEC release, commentators 
provided estimates indicating that SEC-reporting companies under the 
rule averaged nearly 160 to 10,000 first-tier suppliers, each. In 
addition, another commentator estimated that SEC-reporting companies 
averaged 1,060 first-tier suppliers each. After accounting for 
redundancies, because a supplier may be in more than one supply chain, 
SEC revised the number of potentially affected suppliers, provided by 
one commentator, to 278,000 suppliers. 

[36] SEC estimates that a number of SEC-reporting companies under the 
rule may be original equipment manufacturers and first-tier suppliers, 
although SEC-reporting companies under the rule could exist anywhere 
on the supply chain. 

[37] According to EICC and GeSI, as of April 30, 2013, the EICC and 
GeSI activities are now under the Conflict Free Sourcing Initiative, 
which is an expanded initiative of the EICC and GeSI Extractives Work 
Group that includes more stakeholders and a wider range of industry 
sectors supporting the sourcing of conflict-free minerals. 

[38] According to SEC officials, since most of these companies do not 
file reports with SEC under Section 13(a) or 15(d) of the Securities 
Exchange Act, they would not be required to report under the rule. 

[39] We are reporting information we found and analyzed on smelters 
and refiners to address the mandated question concerning available 
information about entities that use conflict minerals and do not 
report to SEC under the rule. 

[40] Five additional tin smelters have successfully completed a 
Conflict Free Smelter Program audit, bringing the number of certified 
"conflict-free" smelters to 35; however, the EICC and GeSI has yet to 
identify these smelters publicly, including the location of the 
smelters, due to binding non-disclosure agreements with the smelters. 

[41] LMBA created the Responsible Gold Guidance for Good Delivery 
Refiners to combat systematic or widespread abuses of human rights, 
and to avoid contributing to conflict, among other abuses, according 
to the guidance. In addition, the guidance follows the five steps 
framework for risk-based due diligence of the OECD Due Diligence 
Guidance for Responsible Supply Chains of Minerals from Conflict-
Affected and High-Risk Areas adopted on December 15, 2010 and follows 
the requirements detailed in the OECD Gold Supplement adopted on July 
17, 2012. Since January 2012, the LBMA has required all Good Delivery 
Gold Refiners to comply with the Responsible Gold Guidance. 

[42] We were unable to identify a website for 86 of the 278 smelters 
in our analysis, and therefore were unable to determine whether these 
companies have policies regarding procuring conflict minerals from the 
DRC and adjoining countries. The inability to locate some websites of 
smelters in our analysis could be linked to factors such as language 
as well as company names and websites that may contain characters not 
found in the Roman alphabet. According to an official with the EICC 
and GeSI, some smelters may have such small operations at the mine 
site in remote locations that they do not create websites. 

[43] Solutions for Hope is a "closed-pipeline" initiative to trace the 
flow of tantalum from the mine to the end-use company. 

[44] [hyperlink, http://www.gao.gov/products/GAO-12-763]. 

[45] United Nations Security Council, Sexual Violence in Conflict: 
Report of the Secretary-General, A/67/792-S/2013/149 (New York, NY: 
Mar 14, 2013). 

[46] GAO, Conflict Minerals Disclosure Rule: SEC's Actions and 
Stakeholder-Developed Initiatives, [hyperlink, 
http://www.gao.gov/products/GAO-12-763] (Washington, D.C.: July 16, 
2012). We did not include information on studies or reports that were 
preliminary. 

[47] We did not conduct a comprehensive review of all the initiatives 
we identified in our 2012 report since that was not within the scope 
of this review. In the process of this review, we did obtain some new 
information pertaining to selected global and in-region sourcing 
initiatives, which is reflected in this appendix. However, we did not 
talk to or obtain information from the government of the DRC on in-
region initiatives or legislation related to conflict minerals because 
this was outside of the scope of our current review. 

[48] Organisation for Economic Co-operation and Development, OECD Due 
Diligence Guidance for Responsible Supply Chains of Minerals from 
Conflict-Affected and High-Risk Areas, second edition (OECD 
Publishing, 2011). Accessed July 2, 2013, [hyperlink, 
http://dx.doi.org/10.1787/9789264185050-en]. The guidance was adopted 
on May 25, 2011. 

[49] Organisation for Economic Co-operation and Development, 
Downstream Implementation of the OECD Due Diligence Guidance for 
Responsible Supply Chains of Minerals from Conflict-Affected and High-
Risk Areas: Final Downstream Report on One-Year Pilot Implementation 
of the Supplement on Tin, Tantalum, and Tungsten (OECD: January 2013); 
and Upstream Implementation of the OECD Due Diligence Guidance for 
Responsible Supply Chains of Minerals from Conflict-Affected and High-
Risk Areas: Final Report on One-Year Pilot Implementation of the 
Supplement on Tin, Tantalum, and Tungsten (OECD: January 2013). 

[End of section] 

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