Conflict Minerals Compliance Basics: Product Filtering

In our second installment of “Conflict Minerals Compliance Basics,” we are going to cover the all important first step of product filtering.

Product Filtering Process

The goal of filtering is to reduce the effort required for compliance by only querying suppliers whose products are in scope. For companies, particularly retailers, with thousands of products that need to be considered, effective filtering can help reduce the compliance burden and the number of data collection inquiries passed up the supply chain. However, the desire for minimizing the work required to comply must be balanced with risk management. A manufacturing process involving the use of 3TG can occur several layers up the supply chain and may not be known to downstream companies utilizing a given component or part in a final assembly. Thus, any product for which 3TG may be necessary to functionality or production should be investigated. 

Step One

Before screening for 3TG, a clear boundary should be drawn around which products are in scope based on the company’s degree of influence over their manufacture. Directly manufactured products are clearly in scope; however, the contract to manufacture criterion is less clear. Per the regulation, whether a product is considered to be contracted for manufacture depends on the degree of influence the company exercises over the materials, parts, ingredients or components included in any product that contains conflict minerals or their derivatives. Although the regulation does not explicitly define the “degree of influence” required, it does provide certain cases where this threshold would not be triggered. For example, if a company is solely affixing its brand, marks, logo, or label to a generic product manufactured by a third party, it would not be considered to be contracting the manufacture of that product. There is some debate with regard to whether taking additional actions beyond fixing a label, for example by specifying color or other aesthetic attributes, is enough to trigger the threshold. 

Step Two

Once a company determines which products are in scope based on manufacturing influence, these products should be reviewed for possible presence of 3TG. The more information a company is able to gather about its products, the easier and more effective its filtering process will be. If a Bill of Materials is available, then the presence of 3TG can be detected relatively easily. When this is not available, it is best to cast a wide net to reduce the risk of overlooking a product that should be investigated. Something as simple as a product description or a categorization can offer useful hints into the product’s material composition. All products that clearly contain 3TG based on the Bill of Materials can move to the RCOI and Due Diligence step.  

An initial data quality review is also advisable at this point. When the filtering process includes thousands of products, completeness and accuracy of the product data are vital to a successful filtering outcome.

Step Three

Product “filtering” is the next step in the process. The available information must be carefully reviewed to flag products that potentially contain 3TG. These determinations must be informed by knowledge on product components, material composition and manufacturing processes. For many companies this can be the most arduous part of the process. For retailers, expertise must be developed across every product category. 3TG can appear in the most unlikely of places, such as a key material for anti-microbial fabrics used for sportswear or as a stabilizer in PVC. Some good places to acquire knowledge on presence of 3TG are commodity lists, Safety Data Sheets (SDSs), BOMs, industry trade papers, and process manufacturing knowledge. Ideally, software or web-based tools are used to automate the filter process—this reduces potential for human error and the time required to complete the filtering process.

Step Four

Flagged products are then moved to a group where further investigation is required to understand whether they contain 3TG or not. The suppliers of these products should be queried and ideally asked to provide a declaration stating that the product does not contain 3TG. If the supplier confirms the presence of 3TG or a declaration is not forthcoming, then the product should be moved into the RCOI and Due Diligence phase.

If you wish to learn more about product filtering you can check out Source Intelligence’s white paper, “Product Filtering: A Critical First Step in Conflict Minerals Compliance.”