5 Things You Should Know About Conflict Mineral Legislation

Newsletter

Volume 14

April 6, 2015

5 Things You Should Know  About Conflict Mineral Legislation per  Dodd-Frank Act Section 1502

Have you gotten the survey yet? The one asking you to report on your usage of Conflict Minerals from the Republic of Congo and the surrounding areas?   Welcome to the club!

It seems that I receive Conflict Mineral surveys from both public and private companies every week (you know who you are!).  It got me thinking about how cool it is that the products we supply to manufacturers are subject to SEC regulations! All kidding aside, this regulation is all about transparency in the supply chain in order to restrain trade practices that finance inhumane behaviors in areas of conflict in Africa.  Since this hot topic is top of mind, we decided to spend this issue discussing our Top 5 things You Need to Know about Conflict Mineral Legislation and how this regulation impacts manufacturers and the supply chain community.

1. What are Conflict Minerals?

“Conflict Minerals” is the term used to describe the minerals tantalum, tin, tungsten and gold that are sourced from mines under the control of violent forces in the Democratic Republic of Congo (DRC) and the surrounding countries.  Commonly referred to by the acronym 3TG, these minerals are commonly used in aerospace, electronics, wiring and many other products.

2. What is the Conflict Mineral Act and where did it originate?

In 2010, Congress enacted Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act amending the SEC Act of 1934.  Referred to as “Conflict Mineral Legislation”, the Act requires “Reporting Companies” to disclose their use of certain minerals needed to manufacture their products, and to conduct a reasonable country of origin inquiry (RCOI) into the source of those minerals. The Reporting Companies must use a new form (Form SD), where they are required to record if the minerals they use and source are DRC Conflict Free, Not DRC Conflict Free or DRC Conflict undeterminable.  These findings must be filed with the SEC annually by May 31 for the prior year, and must be made publically available.

The final rules were enacted in 2012 and took effect in 2013, with the first reporting deadline of May 31, 2014.  You can visit the following link to the SEC facts page for a concise(ish) summary of the legislation.

http://www.sec.gov/News/Article/Detail/Article/1365171562058#.VRtPh_nF_GA

3. Does my company need to comply?

Great Question!  Section 1502 covers what the SEC refers to as Reporting Companies who use certain minerals in their products.  Reporting Companies are defined as all public companies and other private companies that file periodic SEC reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

Since the legislators didn’t want anyone to feel excluded, and in an effort to make the entire supply chain for Conflict Minerals transparent, they drafted the rules to include anyone in the supply chain of Reporting Companies. The supply chain includes companies supplying or manufacturing raw materials, components or finished products (including fasteners!).

4. What is the OECDs role in Conflict Minerals?

Due diligence is an important part of Section 1502.  The Organization for Economic Cooperation and Development (OECD), an international organization endorsed by the US State Department and the United Nations, has programs to help companies’ source minerals responsibly throughout the entire supply chain.   The OECD’s “Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas” is currently the only recognized due diligence framework available compliant with Section 1502.

You can visit the OECD’s website and download the report here: http://www.oecd.org/daf/inv/mne/GuidanceEdition2.pdf

5. What can my company do to create conflict-free supply chains?

I recommend you visit the website http://www.conflictfreesourcing.org.  Make sure to download the free reporting template:  http://www.conflictfreesourcing.org/conflict-minerals-reporting-template.   I have filled out this template multiple times already and plan to have my downstream suppliers complete the form by 2016.

Another great source of information is the Big 4 accounting consultancies: Deloitte, PWC, EY and KPMG.  I really like PWCs website.  They have a very informative section with benchmarks based on industry. Here is the aerospace benchmark.    http://www.pwc.com/en_US/us/cfodirect/assets/pdf/aerospace-conflict-minerals-benchmarking.pdf.  Interestingly 2 of the 10 reporting companies reported the Conflict Minerals status was undeterminable. I’m curious to see what the benchmarking data shows in future years.

Finally, I recommend working with your trade group and legal counsel.  I recently attended a trade group seminar where our speaker suggested we develop a compliance report for use with our downstream suppliers and vendors that mirrors what we are required to report upstream.  This strategy makes a lot of sense to me, and will be part of my operations plans for 2016.

Please email me at robin@mfsupply.com with any questions, comments or feedback.  Thanks!

The Screw Lady