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The Potential Change to Trade No One is Talking About

Washington is keeping itself busy keeping the world on the edge of its seat about what’s going to happen next with everything, and in this case, what’s going to happen next with conflict minerals.

BAT, NAFTA, China and Mexico have commanded the lion’s share of attention on the Hill when it comes to trade, but little has been said about the repeal of the Dodd-Frank Act, which would also eliminate regulations for conflict minerals altogether.

The Dodd-Frank Act, which President Obama signed into law in 2010, was intended as a response to the financial crisis to help improve transparency and accountability in the financial system and protect American taxpayers from things like big bank bailouts.

As part of Dodd-Frank, rules were put in place to address potential conflict minerals (coltan, tantalum, tin, tungsten, gold) and whether they were coming from or near the Democratic Republic of the Congo and benefitting armed groups there. The rules required retailers to disclose any potential conflict minerals in their products.

Last week, however, the current administration passed the Financial CHOICE Act, which would repeal Dodd-Frank, taking conflict minerals regulation with it.

So what does this mean?

If you ask the Trump Administration, a repeal of the Dodd-Frank Act in favor of the CHOICE Act is another step forward in reforming the country’s financial system, though little has been said about conflict minerals.

“There were rumors early in the Trump Administration that the president would issue an executive order to temporarily suspend conflict mineral regulations. To date, there have not been any moves by the administration to suspend or overturn these regulations, however, President Trump has repeatedly expressed (Tweeted) his support for the Financial CHOICE Act,” said Nate Herman, senior vice president of supply chain for the American Apparel & Footwear Association. “If Congress approves the Financial CHOICE Act as currently written, and President Trump signs it into law, the conflict mineral regulation would be eliminated. As a result, the industry would no longer be required to file annual conflict mineral reports to the Securities and Exchange Commission.”

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Will this be good or bad for the apparel industry?

While retailers may be inclined to give thanks for fewer reports and regulations, some are concerned not requiring companies to disclose conflict minerals could mean conflict minerals start making their way into apparel supply chains in a bigger way.

That’s one thing Dan Viederman, managing director at Humanity United, a social investment organization committed to protecting vulnerable populations from exploitation, is worried about.

“The Dodd-Frank legislation provides an incentive for companies to understand and address severe problems like those in the conflict minerals space, even if those companies wouldn’t have come to that on their own,” said Viederman, who has been focused on labor rights in supply chains for 20 years.

Some companies have been vocal about their efforts to eliminate conflict minerals from their supply chains because it’s part of their ethos, but leaving conflict minerals regulation to individual devices may not be the best way to go, according to Viederman.

“You need a collaborative industry-wide solution, but if the law goes away, then the momentum for an industry-wide solution dissipates and the playing field becomes much more un-level for companies that are trying to do things the right way,” Viederman said.

On the contrary, however, Herman pointed out that conflict minerals regulation, as is, wasn’t working for the apparel industry.

“While the goals of conflict mineral regulation is laudable, these regulations have had little impact on the ground while added great expense for the apparel and footwear industry, which uses limited amounts of the minerals in question,” Herman said. “As an alternative, our industry is very supportive of voluntary supply chain traceability initiatives, such as the Conflict Free Smelter Initiative (CSFI), which has been proven successful.”

Whatever the outcome, companies may either have to voice their concern for the removal of the regulation with the repeal of Dodd-Frank, or maintain the same efforts in their own supply chains—regulation or not.

“I would hope that well meaning companies would see it in their interest to articulate why regulation in this space is necessary,” Viederman said. “In the absence of regulation, their efforts to clean up their own supply chains could be undercut by unethical players in their own sector, and in the industry.”