There are many good logistics reasons for manufacturers to source raw materials locally. Transportation and labor costs are high on the list, but recently the Securities and Exchange Commission (SEC) added another reason by adopting a rule requiring companies to publicly disclose their use of conflict minerals that originate in the Democratic Republic of the Congo (DRC) or an adjoining country. Conflict minerals are those that are extracted using slave labor and where militant groups use the profits to fund their violent operations.
If you're a manufacturer and use minerals that include tantalum, tin, gold, or tungsten, you'll soon have to make sourcing information available to the SEC via a new form by May 31, 2014 (for the 2013 calendar year) and annually on May 31 every year thereafter.
This law exempts companies that don't exert direct control over the manufacture of such products, such as those that attach their brand or label to a generic product made by another company. SEC Chairman Mary L. Schapiro believes this rule is fair and balanced.
But Dan McGroarty would rather eliminate the need for such a rule in the first place. He's president of the American Resources Policy Network, an education and public policy research organization that promotes the development of U.S. mineral resources. One of this organization's goals is to “inform the public how dependent America is on other nations for minerals and metals that exist here.”
McGroarty believes the conflict minerals provision of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act contains too many loopholes to have a meaningful impact on the human rights violations it's trying to prevent. Besides, why should U.S. manufacturers look overseas for what's readily available in their own backyard—if only Uncle Sam would allow them to dig for it?
The American Resources Policy Network believes America should responsibly take advantage of its own mineral resources, but that the U.S. Environmental Protection Agency blocks these opportunities—furthering manufacturing's mineral dependence on unstable countries. It also increases raw material costs for American manufacturers, which then stifles investment and job creation.
While McGroarty agrees with the spirit of the SEC action, he cites problems with the conflict metals legislation that will make compliance costly and time consuming.
“Taking a metal and establishing the mine of origin is difficult, and in a conflict zone, the difficulties are multiplied,” he replied to my e-mail requesting more information on his organization's position. “The people overseeing the conflict mines have a vested interest in merging their metals into the market stream of legitimate metals trading. Companies are in a tough spot doing this sort of detective work, and the new 1502 rules acknowledge this, by granting an extension of 2 years (4 years for smaller commercial entities) to sort out how they can confirm provenance and comply with the law.”
He also points out that manufacturers have more sourcing challenges than the Congo to worry about. Worker safety and human rights challenges are rife in Russia, China and Kazakhstan, as well.
He believes the solution is simple for the U.S. government: remove the barriers to using our own assets.
“Instead of working to ensure U.S. mining companies can responsibly and efficiently develop these resources, the U.S. Environmental Protection Agency is taking unprecedented steps to shut down, and even preemptively block new mining projects,” he continued. “The number one thing we can do as Americans to stop the scourge of blood minerals is to develop a vibrant mining industry here at home, based on our strong environmental, labor and human rights standards.”
He believes our country's existing mining standards already increase the likelihood that minerals are extracted responsibly and cites the concepts of "mining for closure" and "progressive reclamation" as examples. These practices ensure mines are designed from the onset to “facilitate closure and return of the land to the extent possible for public use when the mining is done. Progressive reclamation means this process doesn't wait until the end of mine-life, but takes place at stages as the mining progresses.
“These approaches are widely used in the U.S., and one company's best practice in time becomes the industry norm,” McGroarty concluded. “If we care about the standards by which the metals we use are mined, â€˜mined in America' is a good proxy for state-of-the-art, stringent standards, rigorously applied.”
Material handling equipment manufacturers play a part in mining safety. For example, conveyor manufacturers such as those that are members of the Conveyor Equipment Manufacturers Association (CEMA) contribute mightily to the safety of such worksites. In fact CEMA is a good source of additional information on safety.
Having a “Mined and Made in America” tag appearing on products like cell phones and other consumer electronics products would be more than a manufacturing success story. It could be a supply chain strategy that proves instrumental for manufacturers mining another commodity that's getting harder to find: young logistics talent.