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Conflict minerals: Dodd-Frank Act Section 1502
The first filing deadline to comply with the U.S. Security and Exchange Commission’s (SEC) conflict minerals disclosure requirements covering calendar year 2013 is just around the corner.
According to the SEC, conflict minerals from the Democratic Republic of the Congo (DRC) account for between 5% and 20% of the world supply, depending on the mineral.
Electronics are most often cited for containing conflict minerals, but these minerals can also be found in other products such as automobiles, chemicals, jewelry and even makeup. Conflict minerals are tin, tantalum, tungsten and gold, and are commonly referred to as “3TG.”
If a company has not yet developed a program to meet compliance obligations concerning conflict materials or is not certain whether or not it is subject to Section 1502 of the Dodd-Frank Act, it is important to address the following questions:
- Does the organization sell any products that have an electrical component? If it buzzes, blinks or beeps it is likely that the product has at least one conflict mineral in it.
- Does the company contract to manufacture products? Just because the manufacturing of products that contain conflict minerals is outsourced does not mean a company is exempt.
- Do any of the company’s products contain paint, glass or plastic? Conflict minerals can show up in places you might not expect.
If any of the questions above can be answered with “yes,” you need to take action.
The right people within the company need to be involved. This typically includes representatives from legal, supply chain, procurement, finance, sustainability and even IT professionals to help figure out which products may contain 3TG.
Next, you should conduct a reasonable country of origin inquiry to determine where the minerals in the company’s products come from. This may require suppliers to investigate their own suppliers to determine the source of conflict minerals used in their products.
Companies that have not addressed conflict minerals in 2013 and feel that they may be subject to the rule, may want to consider enlisting a third party for assistance.
While companies have a two-year period to claim an “undeterminable” status, which means that they have not been able to ascertain the source of their conflict minerals, this is only a filing status and not a grace period. Companies still must investigate their supply chain and file SEC mandated Form SD and a Conflict Minerals Report each year by June 2.
Non-compliance could subject companies to liabilities under Section 18 of the Securities Exchange Act. This year’s deadline is just around the corner, so it is important to addresses this timely topic now.