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Top 3 Problems with Smelter Verification
2015
Table of Contents
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1. Volume of Data2. Supplier Inaccuracies3. Engaging Smelters4. What is happening in Indonesia?5. Q & A
Problem #1 – Volume of Data
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Supplier entries on the CMRT form can number in the 1,000sWhen you have 100s or 1,000s of Suppliers, the sheer size of the data presents a problemNeed to view all of the data – how can this be with 100,000s of potential entries
Consolidation of dataMerging Duplicates while still maintaining integrity of original informationPurging invalid smelters (AKA Pawn shops)Purging invalid entries (Ex: “???????”)
Cross-Referencing dataReconciliation of data with CFSI, LBMA and DOC lists
Both are moving targets (Ex: CFSI list changes smelters and your Suppliers change smeltersNo Single source, publically available list – for that you need a friend service Provider
Managing all of this data at scale is extremely difficult due to the size, complexity and dynamic nature of the data. In addition, you as the CM Program owner can not control those 3 items
Problem #1 – Volume of Data – Solutions!
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Establish a Smelter Data WarehouseYou must parse the data so that it can be handled outside of the CMRTThis can be as complex using IT tools or as simple as a spreadsheet
This becomes your company’s reference for Smelter info and the gatekeeper for CMRT & SEC reporting (more on that next week!)
Track key metrics:CID#CFSI StatusCountries of originOther 3rd Party status (Ex: LBMA)
Create Merge & Purge rules and stick to them!If you are going to use a manually administered Smelter Data Warehouse, acknowledge the limitations (Ex: You won’t be able to match Smelters to products) and create rule setsMerge duplicates and Purge bad data accordinglyEx Rules:
Merge data if CID, Metal and Country matchPurge data if Smelter name is not on DOC list
GOALThis Warehouse should be what you paste into your CMRT and report on your CMR
Problem #2 – Supplier Inaccuracies
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Many suppliers have limited understanding of SmelterTheir bad data is your bad data
Smelter data almost viewed as an afterthought Since no Smelter is a direct supplier of theirs, they feel it is not their responsibility
Common response: “This what my Supplier gave me.”
Invalid data RAMPANT in Supplier CMRTsAir quote Smelters – “Smelters”
Not really smeltersQuite often traders, sometimes literally pawn shops
Old CIDs or 2.0+ CFSI IDsCID and Smelter info does not matchCorrupt data (?????s, bad characters, etc)
If you do not fix these problems and simply pass them on, you are part of the problem
Problem #2 – Supplier Inaccuracies – Solutions!
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Educate your Suppliers!Create an FAQ
These are the known smelters:CFSILMBADOC
If you have Smelters on your list that aren’t on these list, then they are probably not a real smelterWhy it is important
Bad smelter info can be jeopardize corporate filing of SEC issuers
Feel free to directly you Supplier to our Success Center where your suppliers can access this info for free: http://www.assentcompliance.com/supplier-success-center/
Outline your rules for Smelter Verification – BE TRANSPARENT You should be disclosing your process in the CMR anywaysIt will help Suppliers understand what they should doIt will help customers understand what information your Merged & Purged as well as whyDon’t just copy and paste Smelter lists from your Supplier CMRTs
Merge and Purge!
Problem #3 – Engaging Smelters
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For Smelters on the DOC list but not on the CFSI/LBMA list, this can be a real problem (These are commonly referred to as undocumented smelters) No group efforts on Due Diligence is being done on the sources of 3TGS from these Smelters
You need to either undertake those efforts internally or work with someone who is
Native Language and Time zone issuesDepending on your geographic location, communication can be impractical and data review impossible
Artisanal & Guerilla MiningPose the same problem with Smelters which “Mom & Pop shops” do for Manufacturers
Lack of records of SourceSpecifically Shanghai Gold Exchange
Convincing Smelters of the merits of joining a 3rd Party Smelter certification programNot SEC issuersMany tiers removed from the end users
Problem #3 – Engaging Smelters – Solutions!
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Remember the criteria of Dodd-Frank and 2 key tenets of any potential Audits:Your ProcessYour execution of the Process
Your process should account for non-CFSI/LBMA smeltersYour execution should include outreach and be executed in good faith (along with meeting the criteria of reasonableness)
Quick tipsTake the list of Undocumented Smelters from your Smelter WarehouseThese Smelters need to feed back into your current Conflict Minerals data gathering processThe following information needs to be obtained:
Intent to enroll with a Regulated body (Ex: CFSI or LBMA)?Date of intent
Disclosure of Current Conflict Minerals policies3TG Sources (NOTE: Many smelters will not provide countries but areas)
This is very difficult part of the Due Diligence process but best efforts must be made in order to satisfy your requirements and provide accurate data to your customers.
Indonesia
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Most Indonesian Smelters are owned by the Indonesian Government (Ex: “PT ______”)
In 2013, Friends of the Earth (FOE) published a study that documented widespread Human Right’s & Environmental issues within the Indonesian mining industry, specifically Bangka Island
This findings include:Worker safetyChild LabourEnvironmental damage done from Tin silt runoff
Leading OEMs have put together working groups and fact finding missions including:AppleSamsungSony MotorolaLG
No regulatory framework has been proposed but this is the sort of information that fuels discussions on expanding the Conflict Minerals regulations (primarily EU-based discussions)
Here is a link to more info: http://www.ebnonline.com/author.asp?section_id=1059&doc_id=268088
2015 – What’s next
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Give us CMRTs you have received from your Supply Chain and will run a Red Flag analysis & Data Validation check on them at no cost!
Slide deck and Recording to be sent shortly
Continued Tactical level Webinar Series
Last webinar in the series next week – February 5th – 11am EST
Creating reports for the SEC
Register here: https://attendee.gotowebinar.com/register/8571762226576845826
Get In Touch
[email protected] | WWW.ASSENTCOMPLIANCE.COM | TEL: 1-866-964-6931
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CANADAASSENT COMPLIANCE INC.
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