DUE DILIGENCE REPORT
DUE DILIGENCE REPORT
1. COMPANY INFORMATION
Jiangxi Tuohong New Material Co., Ltd. was established in 2011 and is a holding subsidiary of Jiangxi Guotai Group Co., Ltd., a Shanghai stock exchange listed company under the Jiangxi Provincial SASAC (stock code: 603977). Company Address: No. 3, Chunyi Road, Economic Development Zone, Yichun City.
Main products: potassium fluorotantalate and niobium oxide
Processing raw materials: tantalum-niobium ore, tantalum metal material and tantalum-niobium scrap
The time period covered by this report: December 1, 2016 to present.
2. RMAP EVALUATION SUMMARY
On December 12-13, 2016, the company conducted a third-party on-site evaluation commissioned by RMI. Based on the audit, the RMI Audit Committee (ARC) decided that Jiangxi Tuohong New Material Co., Ltd. complies with the (2017) Tantalum Audit Manual. The decision is valid for three years from the date of the decision. The status of the company in compliance with the audit requirements is updated on the RMI official website.
3. THE COMPANY'S SUPPLY CHAIN POLICY
To avoid the use of conflict minerals that directly or indirectly fund or benefit armed groups and/or conflict minerals that involve other serious human rights violations in high-risk and conflict-affected areas, the company has formulated a supply chain policy. This supply chain policy is in full compliance with the third edition of the OECD due diligence guidelines for responsible supply chains for minerals from conflict-affected and high-risk areas (OECD Guidelines). It covers all the risks identified in Appendix II of the OECD Guidelines and is applicable worldwide. The company promises to deal with any Appendix II risks as soon as it is discovered. This policy has been reviewed and approved by the senior management, and the management is committed to supporting the implementation of this policy. This policy has been widely disseminated to relevant stakeholders (suppliers, customers, employees, etc.) and can be viewed on the company's website www.74mao.cn.
4. COMPANY MANAGEMENT SYSTEM
The company has established a responsible mineral inspection management system, the company abides by the RMI responsible mineral inspection process, in accordance with the "responsible mineral inspection process management manual" compiled by the company, abides by its commitments in the supply chain policy, and has formulated due diligence in the following aspects Process:
——The company issued the "RMI Internal Control System Operation Management Measures" and established an RMI working group to oversee the design and implementation of responsible mineral supply chain management and risk management. ——The company has appointed a responsible mineral supply chain management manager (manager representative) to coordinate the work of relevant departments (including the operation management department, the quality assurance department, and the production technology department) to ensure that all departments perform their duties and perform responsible mineral supply chain management. Report any warning signs and potential risks found.
——The company has established a risk assessment committee under the RMI system operation management leading group, and has appointed compliance management personnel, procurement and senior management personnel to be responsible for regularly and irregularly evaluating the information related to the identified suppliers and raw materials, and for raw materials The rationality of the source (such as: place of production, production capacity, type characteristics, etc.) is determined, the place of origin, transportation process, and suppliers under investigation are evaluated in accordance with the warning signals, the warning signals are found, the warning signals are investigated and the handling opinions are issued.
——The company conducts due diligence management system training for key personnel of all relevant departments every year in accordance with the requirements of responsible mineral supply chain management. If the plan is updated, the company will carry out additional training as needed.
The company has communicated the latest supply chain policies and procurement requirements to all identified upstream suppliers in 2017. The company has incorporated due diligence requirements into legally binding agreements with direct suppliers. The company conducts on-site investigations of direct suppliers once or twice a year, and takes due diligence requirements as part of the conversation.
The company has established RMI's appeal mechanism and established contact channels to collect appeal information from relevant parties. Joint-stock company establishment contact/appeal email, email address: [email protected]
Record retention system: The company requires all records related to responsible mineral supply chain management to be kept for at least five years, and requires correct use and safe storage in the company database.
5. MANAGEMENT RESPONSIBILITIES AND STRUCTURE
A. The company appoints the director of the operation and management department as the chief person in charge of the "responsible mineral supply chain", whose main responsibilities include:
1) Provide staff training
2) Organize management review to evaluate the effectiveness and consistency of the due diligence system to ensure continuous improvement;
3) Report the supply chain risk management situation to the general manager;
4) Drafting, updating, issuing, and keeping of organizational procedures;
5) Communicate the responsible supply chain policy and procurement requirements to the transaction parties (suppliers);
6) Follow-up and handling of appeals;
7) Coordination of the work of various functional departments.
B. Warehouse:
1) When raw materials are put into storage, check whether the materials source and chain of custody documents are complete; isolate materials with incomplete documents or suspicious information, and release them for use after the problem is solved.
2) Mark the materials to ensure their traceability.
3) In conjunction with the Finance Department, conduct material inventory summary on the 28th of each month.
C. Finance Department:
1) Responsible for checking whether the purchased material documents are complete and consistent;
2) If there is an abnormality, it needs to be reported to the head of the "responsible mineral supply chain";
3) Joint administrative (including warehousing) departments to carry out material inventory summary monthly.
D.Operation Management Department:
1) Communicate the responsible supply chain policy and procurement requirements to the counterparty (supplier);
2) Collect and update transaction party (supplier) information, and do KYC investigation;
3) Coordinate the communication work related to the transaction party (supplier);
4) When necessary, report to senior management and organize capacity building of the counterparty (supplier) (such as training and information sharing)
6. RISK IDENTIFICATION (ALL SOURCES)
First, the company has a sound process to identify risks in the supply chain, and has developed procedures for identifying CAHRA. The procedures include the resources used, the criteria for determining "conflict-affected and high-risk" areas, and the frequency with which we review decisions.
The company uses the following resources (not limited to the following resources) to determine CAHRAs:
-"United Nations Sanctions List"
——"China Overseas Investment National Risk Rating (2018)"
-"United Nations Resolution 1952"
——Heidelberg Institute Conflict Barometer
-Fragile States Index
——Risk information published by the Ministry of Foreign Affairs of the People's Republic of China
——SECTION 1502 OF THE DODD-FRANK ACT
Second, the company has established risk identification, evaluation and management methods. The company has established a set of know-your-supplier (KYC) procedures, incorporating information on the legal status and identity of suppliers, supplier analysis and potential risks. All our suppliers have completed and returned KYC related forms this year. The company’s raw material procurement risk assessment committee has conducted risk assessments on the tantalum raw material procurement supply chain involved, and has a professional team to conduct risk control throughout the process. The company’s risk assessment committee and the procurement team review the collected summary information together. In accordance with RMI management requirements, risk assessment was carried out, and the "List of Low-risk Procurement Areas", "List of High-risk Procurement Areas", and "Supplier Blacklist" were released. A careful assessment of the supply chains currently purchased by the company has been carried out. During the reporting period, no warning signs related to the submitted replacement KYC form were found.
Third, the company formed a professional team to conduct due diligence on the current procurement supply chains, and compiled due diligence reports for each supply chain.
Fourth, the company reviews all collected information against CAHRA, sanctions list, local laws and internal procurement requirements.
Fifth, in accordance with the "Raw Material Supplier Credit Management Measures", the company completed the 2018 annual supplier credit management evaluation and established and improved the customer management list. It is required to provide information on the origin of each contract, and to ensure that you can understand the source of the transaction, the transportation route, and the name and location of the direct supplier.
Sixth, the superior joint-stock company did not receive complaints from related parties (affected persons or whistleblowers) within the time period covered by this report.
7. RISK REDUCTION (ONLY HIGH-RISK PROCUREMENT)
In response to the evaluation results of the high-risk supply chain, the company requires the tantalum raw material procurement department to take the following risk mitigation measures in a timely manner for risk control:
1) Report the high-risk supply chain survey and evaluation results to the company's senior management, and explain the relevant information, actual and potential risks of the high-risk supply chain.
2) According to the company's supply chain policy risk management strategy, formulate and implement a risk management plan. To formulate and implement effective mitigation measures for existing risks, and negotiate with suppliers and affected parties to reach an agreement. Risk reduction strategies include: Continuing trade throughout the entire process of measurable risk management, and terminating cooperation with suppliers under the condition of continuous reduction in acceptance.
3)Continue to monitor risks, and reassess them after the risk situation changes.
The company does not have any risks in the Responsible Supply Chain Policy. The company submits due diligence reports every year and publishes them on the website so that all relevant parties can supervise the company's work and participate in independent third-party audits.
Since December 2016, there has been no high-risk procurement, and the cooperation with suppliers has been terminated under unacceptable circumstances.
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