No blood in my mobile: regulating foreign suppliers

Can developed countries enforce that goods consumed domestically do not contribute to human rights violations in developing countries where they are sourced? This paper studies the enforcement of new due diligence policies, which constrain firms to curb foreign sourcing linked to human rights violations through transparency and reporting. I study the US Dodd-Frank Act Conflict Mineral Rule (2010), a limiting the use of conflict minerals extracted in Democratic Republic of Congo (DRC) and adjoining countries in supply chains of US eletronic firms. The law increased administrative cost of complying firms, showing that subtantial regulatory constraints were created. I test how diligence obligations shaped exports of targeted countries, and whether they are circumvented through opaque territories called legal havens. Using a triple difference strategy and the structural gravity framework, I find that this policy decreased DRC and adjoining countries’ exports of conflict minerals by 76%. One fourth of this decrease is due to circumvention through legal havens, which then re-export more intensively to countries hosting foreign suppliers of US-regulated firms.