Search

Editors

Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Michael Scher
Senior Editor

Elizabeth K. Spahn Contributing Editor

Julie DiMauro Contributing Editor

Eric Carlson Contributing Editor

Michael Kuria Contributing Editor

Thomas Fox Contributing Editor

Philip Fitzgerald Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Brook Horowitz Contributing Editor

Connect

Subscribe to receive the free FCPA Blog daily

Close
FCPA Blog Daily News

« Interview with Vincente Martinez of the CFTC Whistleblower Program: Part II | Main | Six Lessons from the SEC's First Whistleblower Reward »
Wednesday
Sep052012

What, Then, Are Conflict Minerals?

Under the SEC's new 356-page conflict minerals rule, reporting companies must now disclose their use of tantalum, tin, gold, or tungsten mined in the Democratic Republic of the Congo or a contiguous country.

Disclosure is required, the rule says, if those minerals are “necessary to the functionality or production of a product” manufactured by the issuer. 

Companies are required to make the disclosure on a new form to be filed with the SEC called Form SD.

The rule applies to any company that files reports with the SEC under the Exchange Act.

Countries of origin included in the rule because they border the Democratic Republic of the Congo are: Angola (and its discontiguous Cabinda Province), Burundi, Central African Republic, Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia.

*     *     *

A company that uses any of the designated minerals, the rule says, must conduct a reasonable country of origin inquiry performed in good faith and reasonably designed to determine whether any of its minerals originated in the covered countries or are from scrap or recycled sources.

The company must then post on its website (and the Form SD) whether it knows (or has no reason to believe) that the minerals did not originate in the covered countries.

If, however, the company knows or has reason to believe the minerals may have originated in the covered countries, then it 'must undertake due diligence on the source and chain of custody of its conflict minerals and file a Conflict Minerals Report as an exhibit to the Form SD.' That report or a link to it also must be posted on the company's website.

The due diligence the company does 'must conform to a nationally or internationally recognized due diligence framework, such as the due diligence guidance approved by the Organisation for Economic Co-operation and Development (OECD).'

If a company determines that its products are 'DRC conflict free' — that is, the minerals may originate from the covered countries but did not finance or benefit armed groups — then the company must perform an audit and certification. The audit has to come from an independent private sector auditor.

If the minerals are found not be “DRC Conflict Free,” the audit must identify the facilities used to process the conflict minerals, the country of origin of the conflict minerals in the products, and the efforts made to determine the mine or location of origin with the greatest possible specificity.

*     *     *

There's a two-year grace period for most companies, and four for small companies, when they can specify “DRC conflict undeterminable.” But if they do that, they also need to describe the products in question, and if known the facilities used to process the conflict minerals in those products, the country of origin of the conflict minerals, and what efforts were made "to determine the mine or location of origin with the greatest possible specificity."

The final 356-page rule can be downloaded in pdf here.

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Post:
 
All HTML will be escaped. Hyperlinks will be created for URLs automatically.