Due Diligence Report

Date: 2020/May/15

 

1. Company Information

The company is called Lianyou Metals Co., Ltd. 

The company was established in May 2018. CID number is CID003407. 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 RMAP assessment of 2019 is 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. The company 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 VGM 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 January 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 our online company database.

 

5. Risk Identification (ALL SOURCES)

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 Supplier (KYS) to include information concerning supplier legal status and identity, supplier mapping and potential risks. The majority of our suppliers, representing 90 percent of our annual volume, have completed and returned a KYS form. The company’s due diligence program manager reviewed the provided information and the UN Sanction List with the Purchasing Team. Whenever inconsistencies, errors or incomplete information were identified in the KYS form, the company communicated the improvement areas to suppliers and requested an updated form. If red flags were identified, the company would 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 KYS 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 soft and hard tungsten materials. The material belongs to the low risk category and are supplied from companies which are listed in the RMI conformant smelter database and/or are production facilities which generate tungsten by-products due to wear and tear or discard of off-grade compositions.

 

6. Identification of CAHRAs

 

  1. Criterias to look for:

  1. Human Rights Abuses

  2. Support of non-state armed groups

  3. Support of private or public security forces

  4. Bribery

 

  1. Questions to ask:

  1. Is there an armed conflict?

  2. How well can the government implement the rule of law?

  3. Are there reports of human rights abuses?

 

  1. How to check?

  1. Armed Conflict: Using the Heidelberg Conflict Parameter

    1. Use the threshold >4 to define a high risk area

 

  1. Governance: Look for bribery, false declaration of origin, money laundering using the WGI Worldwide Governance Indicator, Fragile State Index and Corruption Perceptions Index.

    1. Use the threshold 0-25th percentile to define a high risk area

 

  1. Human Rights Abuses: Armed Conflicts and weak governments elevate the risk for human rights abuses. As Reference use OECD Guidance, Human Rights reports of UNDP, News (Reuters, Associated Press) to identify and evaluate.

    1. Lianyou Metals will consider the whole country a high risk area, not only the sourcing area, if indicators of human rights abuses are found through multiple sources.

 

  1. Report:

As of 30th of April, 2020, Lianyou Metals is sourcing from the following areas:

  1. Japan

  2. Republic of Korea

  3. Taiwan

  4. Israel

  5. Germany

  6. Belgium

  7. Brazil

  8. USA

  9. Ireland

 

According to the Heidelberg Conflict Parameter, WGI Worldwide Governance Indicator and sources regarding Human Rights Abuses, those countries above of which we source from, we determined they are not considered as CAHRAs.

 

  1. Regular reviews:

Conduct a basic review of all suppliers once a year, with immediate review if there is a possible status change reported through news sources.

© 2018-2020 LIANYOU METALS Co., Ltd.