© 2018-2019 by LIANYOU METALS Co., Ltd.

Due Diligence Report

Date: 2019/04/30

 

1. Company Information

Lianyou Metals Co., Ltd.

The company was established in 2018. This is the company’s first RMAP assessment so there is no CID number yet. The company has 1 smelting facility located at No.103, Section 3, Zhongshan Road, Fangliao Township, Pingtung County, Taiwan. The smelting/refining facility is processing tungsten products.

 

2. RMAP Assessment Summary

This is the first RMAP assessment, and once the summary report is available, it will be made public at: www.lianyoucorp.com

 

3. Company Supply Chain Policy

To avoid the use of conflict minerals, which directly or indirectly finance or benefit armed groups and/or involve other serious human right abuses in high-risk and conflict-affected regions, the company has developed a supply chain policy. The supply chain policy is fully aligned with the third edition of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance). It covers all of the risks identified in Annex II of the OECD Guidance and its geographic scope is global. Lianyou is committed to addressing any Annex II risks if identified. The policy was reviewed and approved by senior management, which committed to support its implementation. The policy has been widely disseminated to relevant stakeholders (suppliers, customers, employees etc.) and is available on the company website at www.lianyoucorp.com

 

 

4. Company Management Systems

 

Management Structure

The company follows through on its commitments in the supply chain policy and has developed an internal procedure for due diligence with the following aspects:

 

The company’s Vice General Manager is responsible to oversee the due diligence program and risk management design and implementation and to coordinate the work of the relevant departments (including the Purchasing Department, Quality Department, Production Department, and Warehouse Management Department) to ensure each department follows up on their roles and responsibilities to implement the due diligence program and report any red flags and potential risks identified.

 

The company conducts due diligence management system training once a year for key staff from all relevant departments required in due diligence program. If there is an update of the program, the company conducts additional training as necessary.

 

 

Internal Systems of Control

 

The company has established/updated its due diligence management system to be aligned with the OECD Guidance and RMAP in January 2019. The company communicated the updated supply chain policy and sourcing requirements to all identified upstream suppliers in May 2019. The company will incorporate due diligence requirements into legally binding agreements with direct suppliers.

 

The company refers to RMI’s grievance mechanism to collect information on grievances from interested parties.

 

 

 

Record Keeping System

The company requires that all records relating to the due diligence program are maintained at least for five years and that they be properly used and safely stored in ERP and company server.

 

5. Risk Identification

 

The company has a robust process to identify risks in the supply chain.

Firstly, referring to the risks in the company’s supply chain policy, the company established a procedure to identify CAHRAs. The procedure includes the resources used, the criteria to define a “conflict-affected and high-risk” area as well as the frequency with which our determination is reviewed. The company uses the following resources to determine CAHRAs:

 

The Heidelberg Conflict Barometer provides conflict maps, representing an annual snapshot of the presence of armed conflict.

The INFORM Index for Risk Management provides country-level risk profiles relating to humanitarian crises.

Referring to its supply chain policy and external resources, the company has defined criteria and benchmark indicators to determine CAHRAs.

 

Secondly, the company designed a Know Your Counterparty (KYC) to include information concerning supplier legal status and identity, supplier mapping and potential risks.

The majority of our suppliers have completed and returned a KYC form. The company’s VGM reviewed the provided information and the UN Sanction List with the Purchasing Team. Whenever inconsistencies, errors or incomplete information are identified in the KYC form, the company will communicate the improvement areas to suppliers and request an updated form. If red flags are identified, the company will further engage with its suppliers to clarify and improve the documents as needed. During this reporting period, no red flags were identified related to submitted KYC forms.

 

Thirdly, the company requested origin information for each material transaction and ensured that it was able to understand the transaction origin, transportation route, as well as direct suppliers’ names and locations.

 

Fourthly, all information collected was reviewed by the company against CAHRAs, sanction lists, local laws and internal sourcing requirements.

 

 

 

Assessing risks without an upstream program:

 

The company’s main and only supply of tungsten as feed for the plant’s Sodium Tungstate production is from the secondary market in the form of tungsten powder and sludge scrap. The material belongs to the low risk category and are supplied from production facilities which generate tungsten waste due to wear and tear or discard of off-grade compositions.