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Friday
Apr252014

First conflict minerals report is filed with the SEC 

The first conflict minerals report was submitted to the Securities and Exchange Commission Thursday by Taiwan-based Siliconware Precision Industries Co., Ltd.

The deadline for filing Form SD with the SEC is May 31, when companies must make their conflict-minerals disclosures required by the Dodd-Frank Act.

The law requires certain SEC-reporting companies to disclose whether their products rely on conflict minerals (tin, tantalum, tungsten, and gold) from the Democratic Republic of the Congo (DRC) and bordering countries. 

The federal appeals court for the D.C. circuit issued an opinion earlier this month that partially struck down the conflict minerals disclosure rule. The court said the portion of the rule requiring reporting companies to disclose in SEC filings and on their websites if any of their products have "not been found to be 'DRC conflict-free'" runs afoul of the First Amendment.

The court remanded the case to the district court. Companies now are waiting for guidance how to make proper disclosures consistent with both the rule and the court's ruling.

The full text of Siliconware Precision Industries Co. Ltd.'s conflict-minerals report is below.

*     *     *

Conflict Minerals Report of Siliconware Precision Industries Co., Ltd. in Accordance with Rule 13p-1 under the Securities Exchange Act of 1934

This is the Conflict Minerals Report of Siliconware Precision Industries Co., Ltd. ("SPIL") for calendar year 2013 in accordance with Rule 13p-1 ("Rule 13p-1") under the Securities Exchange Act of 1934 (the "1934 Act"). Please refer to Rule 13p-1, Form SD and the 1934 Act Release No. 34-67716 for definitions to the terms used in this Report, unless otherwise defined herein.

In accordance with the rules, SPIL undertook due diligence to determine the conflict minerals status of the necessary conflict minerals used in its semiconductor packaging services. In conducting its due diligence, SPIL implemented the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD 2011) ("OECD Framework"), an internationally recognized due diligence framework.

SPIL has determined in good faith that for calendar year 2013, its conflict minerals status resulting from its due diligence efforts shows a portion to be "DRC conflict undeterminable" and the remainder to be "DRC conflict free" (terms as defined in the 1934 Act).

This Report has not been subject to an independent private sector audit as allowed under Rule 13p-1, which provides a temporary accommodation for the first two years following November 13, 2012.

SPIL’s due diligence measures were based on the Electronic Industry Citizenship Coalition and Global e-Sustainability ("EICC/GeSI") initiative with the smelters and refiners of conflict minerals who provide those conflict minerals to our suppliers. As a company in the semiconductor packaging business, SPIL is several levels removed from the actual mining of conflict minerals. SPIL does not make purchases of raw ore or unrefined conflict minerals and makes no purchases in the Covered Countries.

SPIL's due diligence measures included:

- Conducting a supply-chain survey wirth direct suppliers of materials containing conflict minerals using the EICC/GeSI Conflict Minerals Reporting Template to identify the smelters and refiners. 

- Comparing the smelters and refiners identified in the supply-chain survey against the list of smelter facilities which have been identified as "conflict free" by programs such as the EICC/GeSI Conflict Free Smelter (CFS) program for tantalum, tin, tungsten and gold.

As a result of the due diligence measures described above, SPIL has determined that the assembly services for quad flat no lead package (QFN), quad flat package (QFP), thin plastic small outline package (TSOP), plastic ball grid array (PBGA), thin and fine pitch ball grid array (TFBGA) and flip chip-chip scale package (FCCSP) are DRC conflict free, and that the assembly services for system in package (SIP) and flip chip ball grid array (FCBGA) are DRC conflict undeterminable. SPIL makes this determination due to a lack of information from its suppliers for certain integrated circuits (ICs) to conclude whether the necessary conflict minerals originated in the Covered Countries and, if so, whether the necessary conflict minerals were from recycle or scrap sources, were DRC conflict free or have not been found to be DRC conflict free.

In the next compliance period, SPIL intends to implement steps to improve the information gathered from its due diligence to further mitigate the risk that its necessary conflict minerals do not benefit armed groups. The steps include:

- Increase the response rate of suplliers' smelters surveys, including but not limited to IC suppliers.

- Informing smelters identified as a result of the supply-chain survey and requesting their participation in a program such as the CFS program to obtain a "conflict-free" designation.

________

Julie DiMauro is the executive editor of FCPA Blog and can be reached here.

Reader Comments (1)

What’s Right and What Wrong about the First Form SD SEC Filing

Siliconware Precision Industries (SPIL) made history by being the first Filer to submit Form SD with a Conflict Minerals Report to the SEC on April 24, 2014. Every executive responsible for conflict minerals reporting should thank SPIL for providing a target against which other firms will be judged.

The most important message SPIL’s CMR delivers is that it spent the minimum possible on its Conflict Minerals Reporting program. Shareholders who believe compliance reporting is an unnecessary cost (or tax), will appreciate the non-committal statement:

SPIL has determined in good faith that for calendar year 2013, its conflict minerals status resulting from its due diligence efforts shows a portion to be “DRC conflict undeterminable” and the remainder to be “DRC conflict free” (terms as defined in the 1934 Act).

What’s wrong with SPIL’s approach is that its customers cannot have confidence that SPIL provided them with accurate information. SPIL describes itself as “one of the world’s leading independent providers of semiconductor packaging and testing services.” Shareholders who focus on the revenue line must be concerned that SPIL’s customers and prospects in the electronics industry who are championing the humanitarian objectives of Dodd-Frank Section 1502 will be motivated to purchase from suppliers who are more forthcoming.

If the medium is the message, SPIL showed its lack of confidence in its filing by requiring its vice president of Corporate Research and Development to sign its Form SD. We would have expected the CEO or CFO with the full authority of the corporation to sign-off on the first Form SD to be filed with the SEC.

Another concern – SPIL stated what it intends to do to improve the information gathered from its due diligence in the next compliance period in the most general terms possible. No quantitative goals are provided. The impression this leaves is that it plans to do as little as possible.

Bottom Line: The lesson learned is that a Conflict Minerals Report is also a marketing document. Declaring your source of 3TG to be “DRC conflict undeterminable” will not provide your customers (and their customers) with the confidence and support they need. SPIL should be concerned that its competitors will outflank them on May 31.
April 26, 2014 | Unregistered CommenterJohn Logan
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