The US Securities and Exchange Commission (SEC) has reaffirmed that companies should observe a 2 June reporting deadline imposed under section 1502 of the Dodd-Frank Act – aka the ‘conflict minerals rule’.
The rule, which impacts on the global supply chains of many businesses, requires listed companies using materials designated as conflict minerals – tin, tantalum, tungsten and gold (3T+G) – to file annual reports with the SEC disclosing whether the materials are sourced from the Democratic Republic of the Congo (DRC) or neighbouring countries. An initial reporting deadline for the first round of reporting on 2013 activity was set for 2 June 2014.
The measure aims to stop the use of conflict minerals, thereby cutting off a key funding source for armed groups in strife-torn regions such as the Congo.
Companies claiming that the use of 3T+G minerals is “necessary to the functionality or production” of their products must attempt to discover where those minerals originated from. In cases where they may have originated from the DRC or surrounding region, additional due diligence must be performed on the sourcing and chain of custody of the minerals.
Although the conflict minerals rule’s inclusion in section 1502 was opposed by many US companies, non-governmental human rights organisations lobbied for its addition.
The electronics industry uses 3T+G minerals in a wide range of applications, and the US information technology and motor industries have also prepared themselves for the new requirements. However, the impact of the rule extends beyond US companies as tracing the minerals’ path down the supply chain will involve seeking information from parts manufacturers, which, in turn will then question their materials suppliers.
Japanese parts manufacturer TDK, which is not listed in the US, reports that it has been swamped by inquiries from clients, receiving more than 2,000 information requests last year. Estimates suggest that 150,000 to 200,000 companies in the European Union (EU) are similarly affected.
While no penalty is imposed for not submitting a report, US human rights groups are monitoring companies’ efforts and those slow to comply may be hit with boycotts or protests, potentially affecting their earnings or stock prices. In 2012, Nintendo was criticised by conflict minerals advocacy group the Enough Project for its alleged lack of effort.
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