For Apple and others, tin supply chain has ties to rebel-held Myanmar mine

Peter Kucik, a former senior sanctions advisor at the U.S. Treasury Department, said the findings highlighted the need for thorough due diligence.

“The facts suggest potential sanctions risk for the parties involved,” Kucik said.

Two companies in Apple’s supply chain, the world’s No. 1 tin producer Yunnan Tin Co Ltd and leading Taiwan-based solder maker Shenmao Technology, told Reuters that some tin they bought was from the Wa mine.

Mandy Gan, a tin analyst from China’s leading mineral research company, Asian Metal, and another tin expert, both of whom visited the UWSA mine this year, said many other Chinese smelting firms supplying global consumer goods makers also bought tin from the Man Maw mine.

Sanctions experts said even the indirect use of the tin might be considered a violation of U.S. sanctions law, which does not require authorities to prove intent. A U.S. government official involved in Myanmar policy consulted on Reuters’ findings said the government was likely to investigate any ties to the UWSA.

Still, Washington-based sanctions attorney Erich Ferrari said it was unlikely the Treasury Department would initiate an enforcement action against companies for an issue so deep in the supply chain. Once the ties were publicized, however, authorities could impose penalties if the companies did not wind down the transactions and find new suppliers, he said.

SUPPLY CHAIN

The chain connecting some of the world’s best known brands with a mine in one the most inaccessible corners of Southeast Asia has many links. ((For a GRAPHIC, click on: http://tmsnrt.rs/2giJmcq))

One key intermediary is state-owned Yunnan Cultural Industry International (YCII), based in Yunnan, southwestern China, which said in a statement on its website that it enjoys “a long-term, stable strategic partnership” with the UWSA statelet.

YCII declined several interview requests.

YCII is, in turn, a major supplier of tin to the world’s top producer, Yunnan Tin, also based in Yunnan.

Yunnan Tin supplies many companies, including big contract manufacturers such as Foxconn Technology Co and, indirectly, Pegatron Corp, whose clients include Apple. It also supplies major solder makers such as Shenmao Technology, also a supplier to Pegatron.

“Myanmar is not considered a conflict-affected area by CFSI…As long as smelters present a certified sourcing document, that’s acceptable for us,” said Tim Lin, an executive overseeing sourcing at Taiwan-based Shenmao, who said about a quarter of its supply of the metal came from Yunnan Tin.

In the last two years, Yunnan Tin has also shipped more than 12,000 tons of metal to the United States, according to shipment data from U.S.-based trade tracking company Panjiva.

More than 500 publicly traded companies in the United States say their suppliers use tin from Yunnan Tin or Yuntinic Resources, its San Mateo, California-based division, according to a review of the supply chain disclosures consumer companies make to the U.S. Securities and Exchange Commission.

Two members of Yunnan Tin’s board, vice chairwoman Yang Yimin and secretary and vice general manager Pan Wenhao, confirmed in interviews that a “portion” of the company’s tin came from the UWSA-operated mine. “We certainly buy tin indirectly from Myanmar,” Pan told Reuters. “We don’t specifically pay attention to where they source their materials from.”

Yunnan Tin mixes the Wa tin with metal from mines in central and southwestern China, said Pan, before processing it into products such as tin paste.

That means it is impossible to say for certain which shipments from the company contain Wa tin, but Pan estimated Yunnan Tin’s purchases from the mine account for about a third of its total annual tin consumption, or at least 16,500 tons.

Apple said in a statement it worked with suppliers to help them meet stringent standards, “and those who are ultimately unable or unwilling to comply are removed from our supply chain”.

“While we have no evidence of illegal tin from Myanmar in our products, we’ll continue to investigate, address any issues we find and do all we can to raise standards and protect human rights,” it said. Foxconn said it “enforced stringent supplier management requirements in accordance with international and local conflict minerals legislation and has proactively communicated these requirements to our suppliers”.

It added that less than 1 percent of its tin was procured from Yunnan Tin, all of which was used in products for a “single, non-U.S.-based customer”. Pegatron Corp said it carried out “annual due diligence on suppliers and encourage them to source from validated conflict-free supply chains”.

“Pegatron will continue working with customers and international organizations to investigate and source minerals responsibly,” the company added. FROM JEWELLERY TO APPLIANCES

Companies that sell consumer products in the United States are required by the Dodd-Frank Act to publish their suppliers of tin and other minerals.

Among the companies listing Yunnan Tin, Tiffany said one of its suppliers had indirectly sourced a “very small amount of tin” from the Chinese smelter for use in silver solder for jewelry and hollowware.

The company added that, as Yunnan Tin was certified as conflict-free by the CFSI, “use of this smelter by our vendors is consistent with our Conflict Minerals Policy”.

Starbucks said small amounts of Yunnan Tin metal, sourced from second or third party suppliers, went into the ovens in its coffee shops. The company had received no information indicating it was using minerals from Myanmar, a spokeswoman said, but was pushing suppliers for more detailed sourcing disclosures. A GE spokesman said the company strived to use ethical sourcing in its mineral supply chain, adding it had “noted the concerns raised by Reuters and will address them through our internal process and with our external partners”. A spokeswoman from discount retailer Target said in a statement it was “committed to responsible business conduct”. “We take these allegations very seriously, and we are looking into this,” the statement said.

(Additional reporting by Antoni Slodkowski in Yangon, JR Wu in Taipei, Jussi Rosendahl in Helsinki and Helena Soderpalm in Stockholm, Paul Carsten in Beijing and Sijia Zhang in Hong Kong; Editing by Alex Richardson)