Some of the nation's flagship brands are being marred by their suppliers' use of banned North Korean gold.
Dozens of companies have disclosed recently that their suppliers used gold refined by North Korea's central bank, including Hewlett-Packard, Ralph Lauren, Williams-Sonoma, Rockwell Automation and IBM, according to
Wall Street Journal columnist Joel Schectman.
The potential violations appeared unwitting in most cases, and occurred upstream in the companies' supply chains. IBM, for example, revealed North Korean gold was used in making its memory-storage systems even though its suppliers were required to "procure minerals from responsible sources."
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U.S. law forbids importing materials from North Korea even if they are in a completely different form by the time they reach the retail customer.
"It's a problem even if the raw materials are coming very indirectly through suppliers," said Alexandra Lopez-Casero, an attorney at Nixon Peabody LLP who specializes in sanctions.
The Dodd-Frank Act required companies to query their suppliers and report this month for the first time whether gold, tungsten, tantalum or tin used in their products came from mines controlled by armed groups in the war-torn Congo. In checking for a Congo connection, the companies revealed a North Korean one, Schectman wrote.
In most cases, the companies' suppliers may have used North Korean gold, but that gold did not necessarily make it into the U.S. products at all, he said. For instance, Ralph Lauren said listing the North Korean central bank was an error and none of the gold was used in any of its products.
Compounding the confusion was that reporting paperwork some companies used had incorrectly listed a North Korean gold smelter used as being located in South Korea.
"I think it reveals there is still a long way to go in understanding supply chains," Michael Littenberg, an attorney who deals with conflict-mineral disclosures, told Schectman.
Among the 1,277 U.S. companies reporting their supply chains, 68 listed the Central Bank of the Democratic People's Republic of Korea — the outlaw regime of North Korea — in their filings with the Securities and Exchange Commission (SEC),
Bloomberg reported.
Gold is often used in consumer electronics products to help connect components such as SIM cards in mobile phones.
Only 1.9 percent of companies conducted proper due diligence as specified by the SEC, Bruce Calder, vice president of Claigan Environmental, a corporate-compliance firm that compiled the U.S. data, told Bloomberg
Almost 40 percent of filings were "missing one or more mandatory items," suggesting those companies "did not understand the requirements to such a significant degree that their conflict minerals report was meaningless," Calder said.
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