• If the issuer is involved in
  • Specifying or negotiating contractual terms with manufacturer
  • Affixing brand, logo, marks or label to a generic product
  • Services, maintenance or repair activity
• If the issuer is not directly or indirectly involved in manufacturing process

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We reviewed the SD form submissions of several publicly listed companies to understand the nature of research done that led to the ‘conflict mineral declaration of 2014’.

We observed, towards the end of 2013 and beginning of 2014 all companies frantically sent out and started collecting responses from their supply base. Also most of the companies gave out their CMRT forms at a company level without effectively identifying the smelters in their supply chain. Additionally the effort done on implementing the due diligence process was very limited. This resulted in responses that were similar across the supply base and comprised very limited mineral traceability information. The final outcome was, most companies provided their compliance status as ‘Unknown’.

We understand that the process is expected to evolve further in the coming years, hence in this article we are sharing a few areas of primary concern for the companies:

• The upcoming challenge in conflict mineral compliance will be to show incremental progress in the efforts on a year-on-year basis.
• Most companies will have to invest effort in identifying smelters in their supply chain.
• Identifying the product chemical composition and driving product level CMRT declarations from the suppliers will be a crucial step for companies to channelize their efforts towards high impact suppliers, who account for the major percentage of conflict minerals in their products.
• The due diligence process implementation will have to be performed in alliance with expert consulting companies.

Because of the already existing regulations in compliance (including ROHS, REACH, WEEE and Prop 65), most electronic companies will have to reach out to their supply base to collect diverse information. Due to the vast depth of efforts and the evolving nature of conflict minerals compliance, most companies might resort to end-to-end conflict mineral solution providers rather than running this as a special project within their finance or compliance department. Most software solution providers in the environmental compliance area have already extended their solution to include conflict mineral modules which will make this consolidation more easy and achievable. The ideal strategy for the industry will be to consolidate these activities with the conflict mineral RCOI.

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Compliance is mandatory for all SEC “issuers”, including foreign issuers, that manufacture or contract to manufacture products where “conflict minerals are necessary to the functionality or production” of the product. The rule was enacted as part of an effort to curtail human rights abuses in Africa by regulation of US public companies and also to provide transparency into corporate practices.

The SEC rule does not specifically ban use of materials from such mines, but it requires companies to track and report the origin of the minerals through their supply chain.

The aim is to dissuade companies from using minerals sourced at mines where human rights abuses take place and not engaging in trade that facilitates regional conflict.

The SEC disclosure process involves the following steps

Minerals that are not conflict free must be listed in the Conflict Minerals Report, which must be audited by an independent auditor. Additional documentation is also required for any materials that come from the affected countries to show that it meets the Organisation for Economic Co-operation and Development (OECD) due-diligence procedures documenting and the materials are conflict free. The first Forms under the rule will be required for the calendar year ending December 31, 2013 and will need to be filed by 31 May 2014.

For most companies Rule will not be easy and will be time consuming with the SEC estimating that initial compliance costs could be between $3 billion to $4 billion,as the complete supply chain needs to be analyzed for source of minerals, particularly those contained in procured parts, assemblies or items purchased from vendors. The fact that the supply base is not geared to address these requirements and the information provided by them is not always accurate only adds to the challenge. Hence, it requires multidisciplinary teams working across product lines and tracing multiple supply chains for these materials and their origin.

On one hand, committing to using only conflict-free materials can mean paying higher costs for those materials but on the other hand a company’s reputation and goodwill is at risk if its products include conflict minerals. Despite the challenges and oppositions raised against various sections of the rule in court, experts believe that ultimately compliance will be mandatory and in fact will be extended to include more industries currently exempt from the rule. Therefore, a company that is committed to a conflict-free business plan can leverage its status towards strategic competitive advantage and be seen as a good corporate citizen.

�ۿ۴�ý is an industry leader in the compliance space and is one of the first companies to offer that will help you comply with this regulation.

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Conflict Minerals are mined in conditions of ‘armed conflicts and human rights abuses’. Minerals including casseterite, wolframite, coltan, and gold are widely extracted from Congo, especially from its eastern parts. These minerals are purchased by various multinational electronic companies across the world, and are widely used to manufacture of a variety of electronic devices including mobile phones, laptops, MP3 players, and various other consumer electronic items.

aims to put an end to the constant exploitation and atrocities going on in Congo, by closely monitoring the issuers & the companies that use Conflict Minerals. According to this act, both domestic and foreign providers of Conflict Minerals, as well as the companies that use them, are forcefully obliged to comply with Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Conflicts Minerals Provision), and therefore should disclose the details of the Conflict Minerals that they use, in their annual reports. This public disclosure will highlight the exploitation and trade of minerals from Democratic Republic of Congo and its adjoining countries.

Dodd–Frank Wall Street Reform and Consumer Protection Act was passed by the US Senate on May 20, 2010, and was signed by American President Barack Obama on July 21, 2010.

According to experts, this Act will completely purge the funding of armed groups in Democratic Republic of Congo. Armed groups in and around Congo make millions of dollars every year by selling Conflict Minerals and their derivatives, to various companies across the world.

According to the Conflict Minerals Regulation Act, companies are legally bound to publically disclose whether their products contain conflict minerals or not, while submitting their annual reports. Companies that use Conflict Minerals should file a separate report along with their annual report, stating the steps taken to properly exercise the due diligence on the source and the chain of custody of the conflict minerals, the details of the products which are not “DRC Conflict Free”, the processing facilities, the country of origin of the Conflict Minerals, and the efforts to determine the origin. Such reports would help in getting better transparency and accountability from those companies & issuers who handle Conflict Mineral ores or their derivatives.

�ۿ۴�ý Technologies, global leaders in environmental compliance services, provide Conflict Minerals traceability auditing & consulting services to help companies and businesses understand and comply with the Conflict Minerals Regulation requirements that may impact the manufacture of their products. We have a team of environmental compliance experts who can address your questions regarding Conflict Minerals Disclosure, and provide you with the needed guidance with the compliance requirements of Securities and Exchange Commission.

Need any guidance on environmental compliance & Disclosure? Drop us a line and we will get back to you as soon as possible!

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