Truck Manufacturers, Suppliers Face Hurdles in Supply Chain Search for Conflict Minerals
By Eric Miller, Staff Reporter
This story appears in the June 15 print edition of Transport Topics.
Truck manufacturers and component suppliers said they are continuing to experience challenges as they search for “conflict minerals” in their supply chains.
A sampling of trucking-related public companies showed there is substantial uncertainty in how prevalent the minerals are in their supply chains, according to reports filed with the Securities and Exchange Commission.
A 2012 regulation from the SEC mandates that U.S. public companies conduct a “reasonable country of origin inquiry” search to determine whether there is a “reason to believe” that tantalum, tin, tungsten or gold — or 3TG — originating in the Democratic Republic of the Congo or surrounding countries was used in their products.
Truck engine maker Cummins Inc. said in 2014 it surveyed its 800 direct suppliers for any traces of the minerals that have been used to fund conflicts in the Congo republic and surrounding area in Africa.
“Because of our size, the complexity of our products and the depth, breadth and constant evolution of our supply chain, it is difficult to identify actors upstream from our direct suppliers,” the company wrote in its report. “Through our due diligence process, we found that the majority of the suppliers we believed were sourcing from a covered country were unable to determine the smelter or refiner of the 3TG in their products.”
Navistar Inc. said that responses from its suppliers contained “inconsistencies or incomplete data.”
“Furthermore, although most suppliers provided responses that listed the known smelters/refiners in their supply chain, they did not specify what smelters/refiners were associated with products shipped to Navistar,” the company wrote. “Navistar is therefore unable to validate smelters or refiners or determine whether the conflict minerals reported were in fact contained in the products.”
The same was true for truck maker Paccar Inc., despite receiving responses from 84% of its suppliers.
“From the responses received from its suppliers to date, Paccar has not been able to fully determine the specific mines and smelters that processed the conflict minerals used in its products, or if the minerals are sourced from a recycler or scrap supplier,” the company wrote.
Truck makers Volvo and Daimler are not traded on U.S. stock exchanges and there not required to file reports.
Industry suppliers such as Meritor Inc., Wabco Holdings Inc., Dana Holdings Corp. and Eaton Corp. reported similar responses to SEC.
All reported “good-faith” efforts but said they could not validate the extent of 3TG minerals in their supply chains or used in their products.
Catherine Boland, vice president of legislative affairs for the Motor and Equipment Manufacturers Association, said SEC has given large companies until May 31, 2016, to definitively identify the conflict minerals in their supply chains.
Small companies have a 4-year grace period.
SEC has not stated the penalties for noncompliance, Boland told Transport Topics.
To conduct the search and collect documentation, many of the companies have created “cross functional” teams.
SEC has said the required compliance will cost businesses a total of $3 billion to $4 billion, but other estimates have been as high as $16 billion.
Many companies report they have used software programs created by global organizations that offer guidance in identifying the source and chain of custody of the conflict minerals, but still found it difficult to validate their lack of use of conflict minerals.
Despite efforts by many companies, an April 2015 report by human rights groups Global Witness and Amnesty International concluded that almost 80% of 100 U.S. companies they surveyed and filed their 2013 due diligence reports failed to do the minimum required by the law.
“Some corporations have stepped up and shown leadership by identifying and visiting the mines and smelters where their minerals are extracted and processed,” the report said. “But others have turned their back on the problem.”
The report added, “Most of America’s biggest corporations have blind spots in their supply chains — leaving them oblivious to whether the products they sell contain minerals that have funded conflict.”
