Import Bans on Conflict Minerals and Timber: Comparing US and EU Efforts to Prevent International Trade in Illegally Exploited Resources

Transcription

1 ECPR General Conference, Université de Montréal, August 2015 DRAFT PAPER (August 6, 2015) Import Bans on Conflict Minerals and Timber: Comparing US and EU Efforts to Prevent International Trade in Illegally Exploited Resources Lena Partzsch Sina Leipold Domestic regulations for global supply chains gain prominence in Australia, Canada, the EU and the US. Governments have turned away from the paradigm of free trade and have introduced import bans on conflict minerals and timber. This norm shift acknowledges that resource-intense life styles of developed countries may contribute to resource depletion and, supposedly, violence in other parts of the world. The paper carves out the emergence and cascade of a new international norm that holds importers liable for human-rights violations and environmental devastation in countries of origin. Our focus is on the policy fields of timber (2008 US Legal Timber Protection Act, 2010 EU Timber Regulation, 2012 Australia the Illegal Logging Prohibiton Act) and minerals (2003 Kimberley Process Certification Scheme, 2010 US Dodd-Frank Act section 1502, 2013 Canadian parliament Conflict Minerals Act proposal, 2014 European Commission due diligence proposal). By exploring similarities and differences across the two fields we aim to understand what allows for the emergence and cascade of new norms and what can be learned from each field regarding the potentials and possible drawbacks of this particular norm shift to greater foreign accountability. The paper shows that new efforts to prevent international trade in illegally exploited resources in both policy fields are characterized by a hybridity between a re-centering of the state and ongoing trends of outsourcing the proliferation of environmental and human rights-related norms to private parties. The trick is that the new approaches, while they employ multi-nationals to do sustainability governance, are based on legality, i.e. enforcing rules of the countries of origin, and therefore they do not disagree with the rules of the World Trade Organization nor do they violate the sovereignty of the foreign countries. This legality trick allows the new norm to resonate with broader public understandings of what is considered appropriate behaviour in the international system. 1

2 1. Introduction In International Relations (IR), norms define what can be considered appropriate behavior in the community of states (Finnemore et al., 1998; Risse et al., 1999). The norm of free trade has been prior-ranking to most states, especially to the EU and the US, for the last two and a half decades. It has manifested in the foundation of the World Trade Organization (WTO), in 1993, that enforces unlimited exchange of goods between countries, without control of human rights and environmental standards adherence abroad (Esty, 2001). In consequence, multi-national companies often accept illegal practices without being hold accountable by neither exporting nor importing countries (Sachs et al., 2007). The case of Shell in Nigeria gained a lot of attention. The multi-national oil company was not hold liable for human-rights violations and the devastation of the Ogoni people's lands (Kohl, 2014). Since the film Blood Diamonds in 2006 with Leonardo DiCaprio, the term of blood or conflict diamonds has become part of everyday speech. The term refers to the social and ecological costs of diamond mining. Returns from trading gemstones like diamonds as well as other lootable resources often finance armed conflicts and thus are metaphorically tainted with blood (Smillie, 2013; Collier et al., 2009). Well-known examples are trade in diamonds during the civil wars in Angola ( ) and Sierra Leone ( ). Timber has most prominently figured in conflicts that have affected Liberia, the Democratic Republic of the Congo (DR Congo), and Cambodia (Price et al., 2007). The term of blood consumption expresses that not only the purchase of illegal diamonds, minerals and timber but, more fundamentally, the resource-intense life styles of developed countries may contribute to resource depletion and, supposedly, violence in other parts of the world (Swilling et al., 2012; Partzsch, 2015). IR scholars have criticized respective lacks of accountability for a long time (Grant et al., 2005; Sachs et al., 2007). Now governance efforts aiming to prevent actors from selling illegally exploited resources at international markets gain prominence in Australia, Canada, the EU and the US (Bartley, 2014; Sarfaty, 2015 forthcoming). Governments introduce domestic (binding) regulations for global supply chains, in particular, in the areas of timber (2008 US Legal Timber Protection Act, 2010 EU Timber Regulation, 2012 Australia the Illegal Logging Prohibiton Act) and minerals (2003 Kimberley Process Certification Scheme, 2010 US Dodd-Frank Act section 1502, 2013 Canadian parliament Conflict Minerals Act proposal, 2014 European Commission 2

3 due diligence proposal). These regulations allow states to transmit environmental and human rights-related norms to third-party suppliers and their host governments via multi-national companies. They do not only affect companies; they serve as an alternative to international law for shaping the behavior of host governments (Sarfaty, 2015 forthcoming). Under pressure from third-party suppliers, developing countries may pass legislation and strengthen their rule of law in order to prevent global companies from shifting their supply chains to other countries. However, they may also weaken their law to make compliance with the legality provision easier for their companies and, thus, gain international competitiveness (Bartley, 2014). So possible effects are discussed controversially. The paper seeks to better understand what the actual shifts are. In a first part, we will therefore look at one of the most popular IR models of change, the Norm Innovation Cycle (Finnemore et al., 1998). Against this theoretical background, in a second and third part, we will compare the two fields of forestry and mining, and explore similarities and differences between the political developments in countries of conflict consumption (Australia, Canada, EU, US). While the new governance approach is unidirectional, it also affects host countries. Therefore, the fourth part of this paper looks at implementation processes on the ground in those countries that host multinational companies that need to fulfil due diligence requirements, such as DR Congo ( host countries or countries of origin ). We will demonstrate, in a fifth (discussion) part that the analyzed efforts to prevent international trade in illegally harvested resources are characterized by a hybridity: On the one hand, supply chain-regulations signify a turn away from the paradigm of free trade and the emergence of a new norm. On the other hand, in particularly when it comes to implementation, these new regulations resonate with broader public understandings and ongoing trends of outsourcing the proliferation of environmental and human rights-related norms to private parties. There is a significant gap of research on the emergence of this novel governance approach. While strategic benefits of outsourcing regulation and enforcement to private entities are commonly acknowledged, the governance of global supply chains has been understudied in existing literature. More literature is available on forestry in terms of the emergence of the new regulations (e.g. Leipold et al., 2015 forthcoming; Bartley, 2014) as well as the implementation in countries of origin ( McDermott et al. 3

4 2014, Lesniewska/McDermott 2014, Cashore/Stone 2014). With regards to mining, first studies discuss the (potential) impact of the US Dodd-Frank Act section 1502 on business companies and exporting countries (Manhart/Schleicher 2013; Sarfaty 2015). These studies deal primarily with legal (and economic) consequences for companies. In addition to those secondary sources, our study is based on 67 expert interviews, approx. 200 policy documents, and participant observation data which were collected between autumn 2013 and spring Norm Change in the International System (Theoretical Framework) Scholars have developed many different models of change (for an overview see Kristof, 2010). A well-known model among international norm scholars is the Norm Life Cycle (Finnemore et al., 1998). Finnemore et al. (1998) use this circular model to explain the role norms play in political change, both the ways in which norms, themselves, change and the ways in which they change other features of the political landscape. They assume processes of strategic social construction, in which actors strategize rationally to reconfigure preferences, identities, or social context (Finnemore et al., 1998, p. 288). In this paper we are mainly interested in how norm change manifests in new regulations and which actors have established the new norm of greater foreign accountability in the international system. The Norm Life Cycle consists of three phases: (1) norm emergence, (2) norm cascade and (3) norm internalization. In the first phase, norm emergence, agents play a significant role as they need to convince a critical mass of states. Norm entrepreneurs call attention to issues or even create issues, in a sense of framing, by using language that names, interprets and dramatizes: Norms do not appear out of thin air; they are actively built by agents having strong notions about appropriate or desirable behavior in their community (Finnemore et al., 1998, pp ). In the second phase, norm cascade, convinced states need to persuade further states (Finnemore et al., 1998, p. 900). Empirical studies suggest that one-third of the total states in the system must accept a norm to tip the process. It also matters which states adopt the norm. Some states are critical to a norm s adoption; others are less so (Finnemore et al., 1998, p. 900). With regards to supply chain regulations, countries with high purchasing power, such as the EU and the US, do certainly matter more. Finnemore et al., 1998 (p. 901) explain how in the case of land mines, by May 1997 the 4

5 number of states supporting the ban on anti-personnel land mines reached 60, or approximately one-third of the total states in the system. After that point, a norm cascade occurred, and 124 states ratified the Ottawa land mine treaty in December In our cases of the new norm in forestry and mining, only a limited set of consumer countries is actually crucial for the cascade of the norm (while host countries may adopt similar regulations without having the same purchasing power). The aim in this phase is however that norms are internalized by all actors and achieve a taken-for-granted quality that makes conformance possible in the third phase, norm internalization. At this stage, norms are considered normal (in importing and exporting countries). This does not mean that nobody acts against the norm, for example, landmines are still in use. But the international community takes actions against norm violations. We may be able to explain the diffusion of a new norm as a consequence of international pressure. Finnemore et al. (1998, p. 902) use the term of contagion that, in the second phase, norm cascade, occurs among states. This means that international or regional demonstration effect may become more important than domestic politics for effecting norm change. So we can assume that, once a critical state, such as the US, demonstrates that supply chain regulation is possible, others may follow. Hardly, however, on the ground-change happens without domestic pressure from groups such as NGOs, industry groups or bureaucracies, as a norm always needs to compete and stand up to other norms (Risse et al., 1999). New norms never enter a normative vacuum but instead emerge in a highly contested normative space where they must compete with other perceptions what is considered appropriate behaviour, at the international and the local level (Finnemore et al., 1998; Zimmermann, 2012). While domestic regulation on global supply chains fits into the human-rights based system, process-based import restrictions have so far been considered an illegal trade barrier under the free trade paradigm (Fishman et al., 2014; Smillie, 2013). The construction of (new) cognitive frames is an essential component of norm entrepreneurs political strategies (Finnemore et al., 1998, pp ; Elgström, 2000). Only if the new frames resonate with broader public understandings and are adopted as a new way of talking about and understanding issues, a new norm can be successful (Finnemore et al., 1998, pp ). 5

6 3. Import Bans on Illegally Harvested Timber In the field of forestry, the norm to hold companies in consumer countries liable for social and environmental issues caused by illegal forest operations also in other parts of the world emerged slowly over the past decades. The first import ban on illegally harvested timber was adopted by the US in 2008: the US adopted the Legal Timber Protection Act (LTPA) (amending the US Lacey Act). This initiative was quickly followed by the European Timber Regulation (EUTR) in 2010 and the Australian Illegal Logging Prohibition Act (ILPA) in First Phase of the Norm Life Cycle (Norm Emergence): These initiatives evolved from the international attention towards illegal logging since the late 1990s. Since the 1998 G8 Summit, illegal logging has been high up on the global forest policy agenda. It has been associated with social conflict, (international) organized crime and widespread deforestation and in many tropical countries (cf. CIFOR 2003). This framing led to a first norm change on the international level from a focus on private initiatives to promote sustainable forest management (i.e. certification schemes) towards a focus on (inter)governmental initiatives to promote legal forest management. Based on the increasing awareness of forests as a vital part of the Earth s ecology spurred by the international environmental movement in the 1970s and 80s, the first overarching forest certification body was founded in 1993 (mostly through the engagement of Word Wide Fund for Nature (WWF) and Greenpeace): the Forest Stewardship Council (FSC) (Bartley 2003). Shortly after, several industry groups also launched certification programs, most prominently the Sustainable Forestry Initiative (SFI) and the Programme for the Endorsement of Forest Certification (PEFC). With this, [f]orest certification was emerging globally as the most advanced case of nonstate driven private authority (Cashore et al., 2004). Yet, the uptake of these schemes remained limited, particularly in the major target countries of the tropics (Pattberg, 2006). Partly as a result of this limited adoption, the idea to ensure legality gained prominence in global forest governance (Leipold & Winkel, 2015). Against the background of many forestry operations not even meeting the basic legal obligations of a country, policy schemes like the Forest Law Enforcement and Governance (FLEG), initiated by the 6

7 World Bank and the US and the UK governments, and the European Union s Forest Law Enforcement, Governance and Trade Initiative (FLEGT) were developed. For a long time, these intergovernmental public initiatives of importing consumer countries (the EU and the US, in particular) targeted producer countries from where most illegal wood was exported (e.g. Indonesia, Ghana or the African Great Lakes Region). They aimed to support exporting countries to enforce their own forest laws and thus, advance their economic development as well as their social and environmental stewardship in the forest sector. Yet, these initiatives were soon criticized for being too weak as they promoted voluntary measures, private governance, and soft law (Humphreys 2006). This spurred several initiatives by environmental NGOs such as the Environmental Investigation Agency in the US, Greenpeace and Friends of the Earth in Europe. In parallel, also industry groups in the US, the EU and Australia became increasingly interested in the issue as it touched upon questions of competitiveness in global timber markets. This multi-faceted nature of illegal logging provided a fertile ground for fusing environmental concerns about deforestation and conflict timber with economic concerns about unfair competition (from imported illegal dumping timber) and reputational damage (through consumer boycotts of tropical timber, in particular) in the US, the EU, and Australia. In all these (consumer) countries both, environmental and industry groups, pushed for a new generation of legally-binding policies against illegal logging on a world wide-scale, resulting in the passage of the US LTPA, the EUTR and the Australian ILPA (Leipold et al. 2015). Second Phase of the Norm Life Cycle (Norm Cascade): All three policies are legally-binding measures that prohibit placing timber harvested in contravention to the laws of the country of origin on the respective market. To ensure compliance, each policy requires economic operators to exercise due care (LTPA) or due diligence (EUTR, ILPA) (Leipold et al., 2015). As such, they reflect an evolution from voluntary governance schemes focusing on producer countries towards legallybinding policies in consumer countries. The first of these policies was the 2008 amendment of the US Lacey Act which was quickly followed by the EU Timber Regulation 2010 and the Australian Illegal Logging Prohibiton Act As the policymaking processes of all three laws ran mostly parallel and there was a close exchange 7

8 among key stakeholders across continents (Leipold et al. 2015), a norm cascade already occurred during policy making. Notably, the approaches to ensure compliance differ across the three laws, and this demonstrates that the new norm has not entered into a vacuum but had to be integrated in a legal and political culture of the country at stake. The LTPA s due care requirement, for instance, means that a company has to undertake the care a reasonably prudent person would use in similar circumstances. Hence, there is no fixed standard or checklist of what to do in order to meet the required due care instead, due care has to be defined for each prosecution case. In contrast, the EUTR s and ILPA s due diligence requirement prescribes specific steps, companies need to undertake in order to meet the requirement. These are steps to insure sufficient information, risk assessment and risk mitigation in the EU according to a risk-based approach (assessing the risk of illegality depending on the tree species and/or the country of harvest). 4. Import Bans on Conflict Minerals Import bans on conflict minerals were adopted by the US in 2010 and were drafted by Canada in 2013 and the EU in The Dodd-Frank Act section 1502 is US federal law (Finnemore and Sikkink 1998: 900; Sarfaty 2015: 2, 11). Passed as a response to the 2007 Financial Crisis, the 2010 Dodd Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) brought significant changes to financial regulation in the US. In particular, section 1502 requires that companies in the US need to ensure that minerals originating in the DR Congo or any of the nine adjoining countries are not benefiting armed groups in the area. Section 1502 imposes reasonable inquiry and due diligence to companies by monitoring and administering their purchases and sales of potential conflict minerals (coltan, tantalum, tin, tungsten, gold) (Manhart/Schleicher 2013; Sarfaty 2015: 19-23). The quality of the due diligence must meet nationally or internationally recognized standards, such as the Organization for Economic Cooperation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected And High-Risk Areas. Companies must file a disclosure form (Form SD for specialized disclosure) and a Conflict Minerals Report as an exhibit to Form SD. An independent private sector audit is required for the Conflict Minerals Report (Sarfaty 2015: 19-23). Liability is attached for any false or misleading statement (Sarfaty 2015: Kommentar [LP1]: (Rwanda, Burundi, Uganda, South Sudan, Central African Republic, Congo Brazzaville, Angola, Zambia, and Tanzania) Kommentar [LP2]: Cassiterite is an ore/tin 8

9 20). Moreover, California and Maryland have passed laws to incentivize compliance with section These regulations prohibit companies in violation of the disclosure requirements to contract with California s and Maryland s state agencies (Sarfaty 2015: 20-21). First Phase of the Norm Life Cycle (Norm Emergence): Global Witness, a non-governmental organization (NGO) with offices in London and Washington, paved the way for import bans on conflict minerals (Sarfaty 2015: 4, 21; Smillie 2013: 1007). The NGO can be considered a crucial norm entrepreneur (Finnemore et al., 1998: 896) for its efforts to uncover links between natural resources, conflicts and corruption. The NGO s reports called attention to the issue of armed groups being funded almost exclusively through the sales of diamonds in the Angolan civil war (Global Witness, 1998, 2000). What was novel was that the activists framed the issue in a way that foreign governments and multi.national companies were responsible for violence in others parts of the world. Global Witness accomplished to fit the norm of diamond importers being liable for violence in countries of origin into the context of the UN security norm system. In June 1998 the UN Security Council expanded its existing sanctions regime against the National Union for the Total Independence of Angola (UNITA) to include a ban on any Angolan diamond imports not accompanied by a certificate of origin issued by the Angolan government (Smillie, 2005). In the following the UN Security Council Sanction Committee on Angola, chaired by Canada s UN ambassador Robert Fowler, released a report the Fowler Report in March 2000, that, for the first time, named companies, weapon dealers and heads of state (the presidents of Togo and Burkina Faso) for their continued involvement in trafficking diamonds and weapons. This step of naming and shaming signified a new way of talking about and understanding issues of armed conflicts (Smillie, 2005). After having read the diverse reports and in parallel to a public debate in South African media, Phumzile Mlambo-Ngcuka, then South-African Minister of Minerals and Energy, invited some NGO and business representatives to an informal meeting in Kimberley, South Africa, in May This event was the beginning of the so called Kimberley Process (Smillie, 2005; Murphy, 2011). This stakeholder process resulted in the Kimberley Process Certification Scheme (KPCE), established in The KPCE 9

10 requires all raw diamonds certified to be legal by the government of the country of origin to be imported by other states. 81 states signed the agreements, in particular, the US, the EU and India (where 92% of the world's diamonds were cut and polished in Surat, close to Bombay, in 2003). As member states agreed that they would not trade with non-members, common commercial sense obliged every country with a diamond industry to join (Smillie, 2013: 1013). Second Phase of the Norm Life Cycle (Norm Cascade): While norm entrepreneur Global Witness (2011) brought into question the effectiveness of the Kimberley process and pulled out of the scheme in 2011, the NGO efforts have caused the emergence of the new norm of foreign accountability in the field of minerals; and we can see a cascade. The 2010 Dodd Frank Act section follows the same main principle as the KPCE, and, again, Global Witness is said to have paved the way for the adoption of this binding and probably more effective regulation against conflict minerals (Sarfaty 2015: 4, 21; Smillie 2013: 1007). Several business coalitions formed in response to the 2010 Dodd-Frank Act section 1502, for example, in early 2011, a working group of companies, mostly members of the Electronic Industry Citizen Coalition (EICC) and the Global e-sustainability Initiative (GeSI), formed the Conflict Free Smelter Program (CFS) (Manhart/Schleicher 2013: 41). Producers of electronic devices, especially mobile phones, have received special attention (e.g. Poulsen, 2010; McEachran, 2013; Költzsch, 2014). Among other minerals, tantalum is used to make the capacitors in most cell phones, and tin makes up the inside lining of some cell phones and is used to solder circuit boards. In 2010, after the Dodd-Frank Act was passed, US-based company Apple completed a detailed study on the use of tantalum, tin, tungsten and gold throughout its supply chain including both component/subcomponent suppliers and metal smelters. Apple requires all suppliers to only source from validated smelters, according to standards developed by the Extractives Work Group a joint of EICC and GeSI. 2 In 2011 the US government launched the Public-Private Alliance for Responsible Minerals Trade in Congo 3 with government bodies, companies and NGOs (including Global Witness). Members are requested to provide financial support for the efforts of 1 ( ). 2 See ( ). 3 ( ). 10

11 the Alliance to implement on the ground-projects (Manhart/Schleicher 2013: 46-47). In 2012, the Dutch government started a similar initiative with almost all the same companies and NGOs, the Conflict-Free Tin Initiative (CFTI) 4. CFTI finances best practice downstream suppliers, i.e. mines in the DR Congo and Malaysia. The aim of this initiative is to develop mechanisms that systematically support companies that comply with responsible sourcing standards (Manhart/Schleicher 2013: 45-46). In 2013 (after two and a half years of preparation, including participation in the CFTI), Bas van Abel founded the Fairphone company in the Netherlands (the Dodd-Frank Act does not apply here). His motivation was to develop a mobile device which does not contain any conflict minerals and with fair labor conditions for the workforce along the supply chain. 5 The company received a lot of public attention (McEachran, 2013; Költzsch, 2014). A year after the Fairphone was founded in the Netherlands, in March 2014, the European Commission proposed a draft regulation setting up a system for supply chain due diligence self-certification of responsible importers of tin, tantalum and tungsten, their ores, and gold originating in conflict-affected and high-risk area. The Commission suggests that the quality of the due diligence must meet with the OECD Due Diligence Guidance, while the Dodd-Frank Act lists OECD Due Diligence Guidance only as one option among others (Sarfaty 2015: 3). Moreover, the EU proposal is not limited to a specific area of origin and is hence more comprehensive than the US Dodd-Frank section In May 2015, the European Parliament voted in favor of the Commission s proposal. The Canadian Parliament voted on a similar proposal in September 2014, i.e. the Conflict Minerals Act 6 that is however, similar to the US Dodd-Frank Act section 1502, limited to conflict minerals from the Great Lakes Region of Africa. The bill was not adopted in first reading and is now read a second time and referred to the Standing Committee. The EU and the Canadian legislative proposals however signify the cascade of the new norm to domestically regulate global supply chains and turn away from the free trade-paradigm. In the following section, we will demonstrate that, moreover, the cascade of the new norm of greater foreign accountability. Still, the norm is in the phase of cascade, including its adaptation to and acceptance by the over-all norm system. 4 ( ). 5 See ( ). 6 See: ( ). 11

12 5. Implementation on the Ground The challenge for the timber regulations, the Dodd-Frank Act section 1502, and in fact all existing and future supply chain-related regulation, is how to effectively implement due care and due diligence requirements given the multi-tiered and fluid nature of supply chains as well as the power dynamics between buyers and suppliers at usually far away geographic distance (Sarfaty 2015: 11). While in the forest sector, regulations is limited to enforcing legality, in the mining sector, companies need to monitor and administer their purchases and sales of potential conflict minerals. Thereby supply chains often comprise seven or eight layers in the supply chain between the original artisanal mine and the final packaged good in the consumer sector (Sarfaty 2015: 12). In the forest sector, implementation is slowly emerging in all three cases, the US, the EU, and Australia. In the few studies analyzing these regulations and their emerging implementation, expectations range from an enhanced promotion of environmental and social stewardship in the forest sector (Cashore/Stone 2012: 1) to possible adverse effects such as disproportionate burdens on smallholders (McDermott et al. 2014: 8) or incentives for governments to weaken their laws (Bartley 2014: 105). The Legal Timber Protection Act (LTPA) Since the LTPA came into force in 2008, there have been three prosecution cases: (1) the United States vs. Three pallets of tropical hardwood, concerning a shipment of tropical hardwood from Peru declared under an improper tariff code (U.S. Department of the Interior 2010), (2) the United States vs. Gibson Guitars, concerning the import of ebony from Madagascar and (3) the United States vs. Gibson Guitars, concerning the import of ebony and rosewood from India. The first case resulted in a seizure of goods and went mostly unnoticed by the public. The latter two cases, however, triggered a widespread media debate. Although the violation of the LTPA could be proven for the ebony from Madagascar, the Indian case could not be decided due to legal issues in India (U.S. Department of Justice 2012). Nevertheless, both Gibson prosecutions were settled in 2012 with a Criminal Enforcement Agreement requiring Gibson Guitars to pay a 300,000 USD penalty, a 50,000 USD community service payment, cooperate in Lacey Act investigations and prosecutions, and follow a customized Lacey Act Compliance Program (U.S. Department of Justice 2012). This law enforcement is to a 12

13 large extent driven by private investigations of the NGO Environmental Investigation Agency who uncovers potential prosecution cases. It provided, for instance, the core report that led to the investigation of Gibson s operations. Despite the limited number of cases, the LTPA is generally perceived as effective regulation in the US and interviews indicate that this perception also dominates internationally. This perception has recently also been underlined by a statistical analysis by Prestemon (2015). This perception mostly emerges out of the approach taken in implementation. Given scarce resources of the implementing agencies, the underlying logic is to use high profile prosecutions and penalties to create threat scenarios for importing companies. Exactly these threat scenarios, however, turn enforcement into a political minefield for the competent authorities because importing companies lobby against the LTPA (Leipold/Winkel 2015b). In addition to the politics connected to implementation, there are also certain practical hurdles. The second Gibson case, for instance, demonstrates that legality might in some cases be a legal gray area. Also, complex global supply chains, corruption, and sophisticated composite products pose considerable difficulties to a complete chain of evidence, for both companies and enforcing authorities. Although more and more sophisticated methods emerge to track raw materials (e.g. micro chips or special paints) or determine the specific origin of wood and fiber (e.g. isotope analysis), they are not yet widely used. It is also contested whether these methods should substitute proper documentation authorized by the respective national government as this touches upon national sovereignty over natural resources. In addition to these discussions on the prove of (il)legality, the concept of due care is also at the core of implementation discussions in the US. As there is no fixed standard of due care, several environmentalists mention that specific risk assessment tools provided by NGOs could serve as opportunity to creat[e] a higher standard of [ ] what due care is (representative of a US environmental NGO) by providing more and more information to companies that they will then need to take into account in order to meet a reasonably prudent care. In response, standardization of due care through (official) guidelines is increasingly discussed (participant observation), and some industry representatives started to support certification schemes as a possibility to demonstrate due care and franchise out risks (US industry representative). 13

14 EUTR The EUTR implementation situation is much more diverse as the regulation needs to be transferred into national law by the EU member states and is enforced by their national or local authorities. This results in very different pace and quality of implementation and a widely shared concern that the implementation may vary across member states. This may provide a loophole for companies who are able to relocate their operations and, as a consequence, may incentivize member states to pass legislation with the lowest possible penalties and lax enforcement (Schwer/Sotirov 2014). Already now, different implementation styles become apparent in different member states. In Germany, for instance, competent authorities are portrayed as focusing on education and information efforts (participant observation, government and industry representatives from Germany). This is underlined by a due diligence system which gives very detailed guidance. In addition, companies are granted generous transition periods to develop due diligence systems and competent authorities are described as closely cooperating with industry (government and industry representatives from Germany). Similar to the US debate, also in Europe, the prove of (il)legality and the question how to demonstrate due diligence are at the core of implementation discussions. Yet, as due diligence provides more guidance on how to meet this requirement than due care, discussions on the EUTR and ILPA focus more on specific guidelines. In the German implementation debate, for instance, the particular basis to make risk-based assessments of goods is debated. With regard to the prove of (il)legality, a first investigation of imports from the DR Congo by German authorities in 2014 initiated by a report from Greenpeace triggered a debate on how to ensure legality. In this case, records and communications had been falsified to the extreme. The respective German government ministry had even been presented with a false letter from a Congolese government ministry which was stating that the goods in question were legal. In reaction, German authorities increasingly promote the application of testing and tracking systems (such as isotope analysis) (German government and NGO representatives). Another debate in the German context evolves around the question what kind of due diligence system is suitable to ensure legality. The EUTR allows private agencies to become monitoring organizations that aid the promulgation by offering customized due diligence systems. These also often offer legality verification systems. Hence, this 14

15 question is connected to the role of certification and verification schemes. Certification schemes are not recognized as sufficient due diligence system but only as building block of such a system. Yet, several stakeholders expect that the EUTR might nevertheless promote certification as a vital part of due diligence. Others, however, point to a potential crowding-out effect by so called legality verification schemes. These schemes emerged over the past few years and have been portrayed by German stakeholders as gaining increasing popularity among companies. This development is by some viewed critically as legality verification is less comprehensive in terms of environmental and social aspects than sustainability certification (German government, NGO and industry representatives). ILPA The implementation of the Australian ILPA is just beginning. In November 2014, an 18 months transition period stated to educate the respective companies (DAFF, 2013: 37). Hence, the debates about implementation are also in a very early stage and there is no scientific analysis of the law or its implementation yet. What is remarkable about ILPA is that it is the only of the three regulations that officially recognizes the certification schemes FSC and PEFC, European FLEGT licenses and the Indonesian verification system SVLK. In addition it provides country-specific guidelines for some of Australia s major timber trading partners. This difference to the other two regulations might become significant as it provides a clearer incentive for companies to utilize these schemes as due diligence system. Kimberley Process Certification Scheme (KPCE): The Kimberley Process Certification Scheme (KPCE) is considered to be highly ineffective (Smillie, 2013). The Scheme has no administrative center (Smillie, 2013: 1014). The monitoring system requires that each member state has to voluntarily host a review team every three years. The teams are typically comprised of the representatives of three other governments and one each from industry and civil society. Each team member has to pay his or way, which means that countries and stakeholders with fewer resources often play no role in the process. The produced reports were often delayed, and in many cases there has been little or no follow-up (Smillie, 2013: 1014). A review 15

16 of compliance in the DRC in 2004 and 2009, for example, found that internal controls were weak and almost nonexistent (Smillie, 2013: 1014). Decision-making in the KPCE is based on unanimity: This [need for consensus] has meant that almost every attempt to bring meaningful reform to the KPCS since 2003 has been thwarted and almost every attempt to sanction noncompliance has been blocked (Smillie, 2013). In particular, NGO representatives failed with attempts to expand the monitoring system and to integrate, for example, human rights abuse. So monitoring is confined to whether raw diamonds come from the place the exporter had stated on the manifest (Smillie, 2013, p. 1018). Dodd-Frank Act Section 1502: Not only are nearly 6,000 companies directly affected by section 1502, but there are also thousands of suppliers to these companies that are indirectly affected (Sarfaty 2015: 20). First studies exist on the implementation of the Dodd-Frank Act by business companies in the DR Congo (Manhart/Schleicher 2013; Sarfaty 2015). The Congolese Civil Wars began in 1996, and the country has been an arena of riots and armed conflicts since then with at least 3.8 million dead people (Coghlan et al., 2004). Several studies prove the conflict, in particular, to be a resource war financed through the illegal exploitation of timber and minerals (Cramer, 2011; UNEP 2009: 20). In reaction to the adoption of the US Dodd-Frank Act section 1502 in 2010 (and although the Act became effective only in January 2013), in DR Congo, President Joseph Kabila suspended artisanal mining activities in North Kivu, South Kivu and Maniema from September 2010 to March 2011 (Manhart/Schleicher 2013: 30). This led to a collapse of the mining industry in these regions (while mining continued especially in the Katenga region, see Manhart/Schleicher 2013: 30-32). The general scope on all artisanal mining irrespective of its role in conflict financing was originally not intended by the Dodd-Frank Act. The UN Group of Experts on the Democratic Republic of the Congo (UNGoE) and also the UN Security Council resolution 1952 (2010) recommended the OECD Due Diligence Guidance on Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, published in The OECD (2011) approach consists of five steps: 1. Establish strong company management systems; 2. Identify and assess risks in the supply chain; 16

17 3. Design and implement a strategy to respond to identified risks; 4. Carry out independent third-party audit of supply chain due diligence at identified points of the supply chain; 5. Report on supply chain due diligence. Immediately after the adoption, the Congolese government required mineral exporters to exercise due diligence in accordance with the OECD Guidance (Manhart/Schleicher 2013: 30). Non-compliance is sanctioned with the suspension of trading license (Manhart/Schleicher 2013: 30). Several pilot projects are under way to comply with the OECD approach. As mentioned above, companies such as Apple and Fairphone have established strong company management systems. Based on interviews with representatives from business, governments and international organizations, Manhart and Schleicher (2013: 28-29) find that most companies fulfill the requirements by collecting letters and questionnaires from supply companies further downstream. Letter are often standardized (Manhart/Schleicher 2013: 29). Questionnaires often refer to standard questionnaires provided by, for example, the Conflict Free Smelter (CFS) Programme (Manhart/Schleicher 2013: 28-29). Motorola Solutions and AVX Corporation launched the pilot project Solutions for Hope (SfH) in the Katanga region (that was excluded from the presidential artisanal mining suspension) in July Manhart and Schleicher (2013: 44-45) analyze this project s compliance with several due diligence steps: Firstly, the conflict-free status of the mine was reviewed by the International Tin Research Institute (ITRI) Tin Supply Chain Initiative (itsci). The itsci is an example of an industry association formed in reaction to new compliance requirements. Smelters, processors, miners, traders and users of tin ore launched the initiative in 2009 (Manhart/Schleicher 2013: 36-37). It assists upstream companies in sourcing conflict free ores from the African Great Lakes Region in conformance with the OECD Due Diligence Guidance (Manhart/Schleicher 2013:36-37). Secondly, the traceability process of bagging and tagging was implemented for the SfH project. In the following, an independent audit was carried out by Gregory Mthembu-Salter, former member of the UNGoE, in line with the OECD Due Diligence Guidance. Finally, annual smelter audits were provided by the Conflict- Free Smelter Program (CFS) (Manhart/Schleicher 2013: 44-45). Like in the SfH project, companies usually outsource compliance to private parties such as consulting firms: What we therefore see developing is a chain of outsourcing 17

18 involving layers of monitoring and enforcement, and often competing systems of incentives (Sarfaty, 2015 forthcoming): 3). In consequence, Sarfaty (2015 forthcoming) warns that reporting does not lead to the same organizational learning or behavioral change in firms as would occur with an internal review process. Companies are facing a proliferation of sometimes competing certification standards and sourcing initiatives developed by industry groups, governmental bodies, and consulting firms, which are trying to capitalize the growing business for implementation services (Sarfaty 2015: 30). At the same time, there is doubt whether information provided reflects reality, or if due diligence only means additional costs for companies (Manhart/Schleicher 2013: 29). Not enough mine agents inspect mines and mitigate corruption, while existing government agents are tempted by bribes to let minerals pass through uninspected (Sarfaty 2015: 34). No analytical laboratory method is used to cross-check the given information, although instruments would be available, at least, for some minerals. Identification of the origin of tin, tantalum and tungsten (3T minerals), coltan, cassiterite and wolframite concentrate is possible, based on the characteristic mineralogical and geochemical features of the ores (Manhart/Schleicher 2013: 43-44). The UNGoE (2015) reports a trend to validate and to certify mining activities in the DR Congo. However, Manhart et al. (2013: 5) argue that compliance costs mainly set an incentive to generally abandon sourcing from the DR Congo and adjoining countries, resulting into a long-term de facto embargo. So far, compliance to the Dodd-Frank Act is mostly achieved by making sure that no material is directly or indirectly sourced from the DR Congo or any adjoining country (Manhart et al., 2013: 2). Instead, US companies use minerals from other parts of the world and from recycling materials that allows to give a conflict free guarantee (Manhart et al., 2013: 28). The declining demand for Congolese minerals led to a price decrease by half at local mining sites, and these low price minerals are increasingly exported to China (Manhart et al., 2013: 31). Moreover, the smuggling of ores into Rwanda, Uganda and Burundi increased significantly (while armed groups receive significantly lower prices, at least) (Manhart/Schleicher 2013: 30-32; Sarfaty 2015: 33-34). Since the adoption of the US Dodd Frank Act Section 1502 in 2010, the security situation improved in many of the larger mines closely observed by international companies, mining authorities and Congolese civil society (Manhart/Schleicher 2013: 18

19 12). However, insecurity is still widespread at gold mining sites throughout the eastern DR Congo (UNGoE 2015). 6. Discussion: Comparing Import Bans on Conflict Minerals and Timber When looking at the policy field of forestry and mining, we can see a norm shift to greater foreign (or global) liability for human-rights violations and environmental devastation (against which often no actions are taken in countries of origin). As shown for the two fields, the new norm of greater foreign accountability slowly emerged over the last decades. While, in general, imports are increasingly produced under conditions that voluntarily go beyond legal requirements of countries of origin (Kalfagianni, 2015; Pattberg 2006), the norm has been that governments ban only imports which may harm the health of consumers in their own countries (Kohl, 2014; Sachs et al., 2007). Only most recently, we can now see the emergence of a new norm that requires due diligence from companies by monitoring and administering their purchases and sales along global supply chains and, so far, cascades in very few areas, such as forestry and mining. The key innovative characteristic of the LTPA, EUTR, ILPA, the Dodd-Frank Act and other efforts of binding legislation in this direction is to regulate from abroad through multi-national companies. What is novel in both policy fields, forestry and mining, is that consumer governments are deploying importing companies to regulate themselves and indirectly regulate other firms in their supply chain. Yet, scholars interpret the new regulations in quite different way. To some scholars, the new approach of binding regulation for global supply chains stands in contrast to earlier approaches of (public-) private governance, such as the Forest Stewardship Council (e.g. Bartley, 2014). Other scholars emphasize that this novel governance approach exemplifies an ongoing trend of private certification because multi-national companies increasingly join (public-) private initiatives in order to comply with binding regulations along their supply chains (e.g. Sarfaty, 2015 forthcoming). We agree with both these positions and argue that the new norm signifies a hybrid approach: On the one hand, we can see a new norm that to a certain extent turns away from the free-trade paradigm and re-centers the state. On the other hand, the new regulations fit into the existing WTO system by imposing the same often privately defined requirements on domestic and foreign companies. 19

20 The new regulations promote a shift towards a more state-centered approach by, first, being legally binding in consumer countries and, second, supporting law enforcement in producer countries without interfering into the respective countries national sovereignty over their forest/mining laws or other laws on natural resources. This is particularly relevant with regard to WTO conformity as it ensures that none of the three laws legally discriminates between domestic and imported goods. The new regulations do not prescribe particular social or environmental standards but require legality (or conflict freeness, respectively) which is eventually defined by the respective exporting state and make this requirement binding for domestic producers as well as importers (in case of the US Dodd-Frank Act, if they want to export to the US). However, the new regulations also foster to some extent private certification and verification schemes. Particularly the ILPA officially recognizes several of these schemes, and compliance to the US Dodd-Frank Act section 1502 is de facto outsourced to private parties. Hence, the new norm does not completely break with ongoing trends of privatizing public law. Especially, when it comes to implementation, we can see that companies increasingly join (public-) private certification schemes to demonstrate (imposed) care and diligence. The hybridity of state-centrism and privatization was essential for emergence of the new norm, as the norm has not entered a normative vacuum but instead is competing with other perceptions of what has considered appropriate behaviour in the international system (Finnemore et al., 1998, pp ). The fact that new frames of greater foreign accountability resonate with broader public understandings turns out to become increasingly relevant in implementation discussions. Compliance by companies is linked to compliance by their suppliers. As a result, especially in the policy field of mining, companies are responsible for implementing and enforcing regulatory standards on firms abroad, on behalf of other states (Sarfaty 2015: 16). In the policy field of forestry, only the ILPA officially recognizes private schemes as substitutes for due diligence systems. Yet, also in the cases of the EUTR and the LTPA, implementation discussions point to a move towards a privatization of ensuring legality. Whether this move will happen and which specific effects it might have, however, is uncertain. Whereas particularly a move towards legality verification is often seen as cementing low standards, Bartley (2014) argues for the cases of China and Indonesia that a move towards legality verification might actually correspond more to the realities 20