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Conflict Minerals

12 Posts tagged with the sec_conflict_minerals tag
kmanchen
0

conflict_minerals_drc.jpg

 

Companies around the world are anxiously waiting for the U.S. Securities & Exchange Commission (SEC) to issue its conflict minerals rule. It is the rule that will require companies to determine whether their products contain metals sourced from mines located in conflict areas of the Democratic Republic of the Congo and adjoining countries.

 

 

The SEC issued a proposed rule in late 2010, but they have yet to issue a final rule. Why the delay and when can companies expect a final rule?

 

 

The SEC was forced to delay their final rule after it became apparent the rule would be difficult to implement and that some rule making flexibility was required. The authorizing legislation doesn’t allow the SEC much wiggle-room and that has frustrated companies and slowed regulators.

 

 

 

Here are some key issues that the SEC is still pondering:

 

 

1. Manufacturer supply chain issues – Companies want the SEC to take into account the realities of today’s global supply chains. The intent is to have manufacturers trace the metal in their products to the mines from which it was sourced. The problem is most companies currently only have direct contact with a first tier supplier or a company immediately upstream from themselves. Components are typically sourced from multiple countries and manufacturers. Companies want the SEC to take into account the lack of transparency in the electronics supply chain and the challenges faced by manufacturers in tracing conflict minerals. They want the SEC to allow companies making a good faith but unsuccessful effort to trace the source of their conflict minerals to report their status as “indeterminate”.

 

 

2. Allowing a phase-in period - Companies want a “phase-in” period. More time is needed to develop effective and reliable mine/smelter verification (audit) programs. Reliable programs don’t exist for all regulated metals, and the ones that do are still a work-in-process. Companies also want an exemption for mined ore already at a smelter, and for minerals in products already in supplier inventories. Without such an exemption, companies would be forced to report all products of unknown origin as containing conflict minerals.

 

 

3. Allowing an exemption for recycled minerals – Companies want the SEC to exempt recycled and reclaimed metals. They claim downstream users have no ability to trace the origin of the original minerals given the various forms of recycling and the thousands of domestic and foreign consolidators, and scrap dealers. The intent of Congress was to regulate ore and metal made directly from minerals mined in the DRC and adjoining countries. Exempting recycled or reclaimed metals, they argue, would not contradict congressional intent.

 

 

4. Allowing a de minimis exception – Conflict minerals are used in products in varying quantities and for various purposes. Manufacturers point out it is not cost effective to trace the minerals in every product in which they are used. They want the SEC to establish a de minimis quantity for which reporting is not required.

 

 

The SEC is not providing a lot of information on what the final rule will look like or when we can expect it, but statements made by SEC Chairman Mary Schapiro during a March 6, 2012 congressional budgeting hearing provide some insight:

 

 

• “The commission is working to finalize the adoption (of a final rule) and I’m hopeful in the next couple of months, it will be done.”

• "We will have a phase-in period, I don't know how long, that will... give sufficient time for some of the supply chain due diligence mechanisms to be developed and put in place."

• "I don't believe a de minimis exception is possible under the statute," she said. "But the rule will try to give latitude and flexibility in some areas that I think will be helpful to different kinds of businesses in order to comply."

 

 

The earliest expected date for a final conflict minerals rule is June 2012. Industry hopes the delay provides the SEC the time it needs to consider how to best handle key industry issues and concerns. Human rights groups point out that the problem of rebel controlled mines continues. They want a rule as soon as possible.

 

 

 

How do you feel about the delay? How is it affecting you?

 

 



 

 

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VictoriaJones
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conflict_mineral_congo.jpg

 

A letter has been sent to the US Securities and Exchange Commission (SEC) Chairman, Mary Schapiro, from six lawmakers in the US Senate arguing against the use the of the term ‘furnishing’ in draft conflict mineral guidelines.

 


Senator Patrick Leahy, who co-wrote the letter, argues that if companies are allowed to ‘furnish’ rather than ‘file’ disclosures on their use of the six identified ‘conflict minerals’, it could reduce the liability of a company under securities law that undermines the purpose of the Dodd-Frank Act.


The letter says ‘We are very concerned about the outlines of the final rule, in particular, that the Commission will approve a rule that contravenes Congress’ legislative intent’.

 


The congressional intent is to require companies to file annual reports describing due diligence measures taken to identify the source of the conflict minerals used in products and the chain of custody of those materials. The report should be audited by an independent auditor and should include:

 


• description of the products are aren’t Democratic Republic of Congo conflict-free,
• identification of the independent authors of the report,
• identification of the facilities used to process conflict minerals,
• the country of origin of the conflict minerals,
• your efforts to determine mine or location of the origin of the conflict minerals, and
• a certification statement.

 

 

The essential difference is that to ‘file’ a disclosure is the formal submission of a document (often in a specific format) to the SEC, for which a company would be liable under the Exchange Act if it was untrue/negligent etc. ‘Furnishing’ on the other hand is essentially providing information, through a press release for example, and this does not therefore carry the same level of legal obligation to be accurate as a SEC filing would.

 


Would the obligation to furnish rather than file conflict mineral information undermine the intentions of Section 1502 of the Dodd-Frank Act? Would a more simplified method of submitting conflict mineral information be welcome for the final guidelines? How would such a difference affect your business?

 

 

Source: Bloomberg Business Week

 

 

 

 

 

 

 

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VictoriaJones
0

conflict_minerals_dodd_frank_act.jpg

 

The US Securities and Exchange Commission has given an estimated delivery date of ‘January-June 2012’ to “adopt rules regarding disclosure related to ‘conflict minerals’”.


The guidelines were originally promised back in April 2011. This date was moved to the end of 2011 but as the new year arrived, there was still no sign of clarification on conflict mineral legislation.


The six month timeframe may seem plentiful but opposing pressure from industry and campaign groups will make the SEC’s already difficult task, all the more complicated.


An SEC spokesperson recently said that “the Commission and staff are working hard to adopt effective rules as quickly as possible with an emphasis on getting the rules right”.


Are you waiting until the SEC releases its guidelines before implementing any processes? Or perhaps you have decided to not to wait and implemented your own processes instead? Let us know.

 


 

 

 

 

 

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VictoriaJones
0

conflict_minerals_dodd_frank_act_congo.jpg

A year and a half after the Dodd-Frank Act became law and we still don’t have any hard and fast rules explaining how to convert law into practice.

 

A recent meeting held by The Brookings Institute and Global Witness brought together various stakeholders from across industries to discuss the issue of conflict minerals.

 

This is an overview of their key findings:


• A U.N. expert group has found that since the signing of the Dodd-Frank Act, there has been a reduction in the amount of mined minerals that is funding armed conflict. By denying financing to the armed groups that perpetuate violence in the region, the provision can contribute to increased stability and improved human rights.


• No one is sure how much implementing measures will cost. The SEC estimated $71.2 million. The National Association of Manufacturers’ (NAM) estimated $9-$16 billion. The most recent estimate produced independently by Claigan Environmental predicted costs to be less than $815 million.

 

• The Electronics Industry Citizenship Coalition and the Global e-Sustainability Initiative have partnered with firms to develop the "Conflict Free Smelters Program", which allows companies performing due diligence to trace their mineral supply chain down to the smelters who are certified as being either conflict free or not. Efforts are being made to 'certify smelters in the DRC region under this program to help preserve access to the international markets for impoverished artisanal miners. However, only a minority of companies has signed up so are burdening themselves with much higher costs than expected. Once rules are issued and regulations implemented, this cost would be spread among a larger proportion of firms'.


• Some parties have talked of unintended consequences resulting from Section 1502, including the outright boycott of materials from the DRC regardless of whether they are ‘conflict free’ or not. at Section 1502 will have negative unintended consequences on citizens in the region. However, alternative reports suggest that since April 2010, when the DRC-government-imposed six-month minerals embargo ended, the trade in minerals has been on the rise.


• CREDDO have suggested that much of the talk of unintended consequences was 'akin to fear mongering;... mineral trade in that region is a relatively recent activity and citizens had (and continue to have) other sources to support their livelihoods;... (and) the benefits of increased security and reduced violence and instability are too great to dismiss Section 1502 outright'.


• The success of Section 1502 of Dodd-Frank is dependent on ‘effective implementation’.

 

• Publication of the SEC guidelines will allow for a greater chance of ‘maximising the benefits to global transparency, accountability and governance’.

 

• Whilst the SEC should ‘carefully weigh potential benefits and costs in the implementation of Section 1502 and 1504, the balance should be in favour of transparency’.

 

 

To read the full article:  http://www.brookings.edu/opinions/2011/1220_debating_dodd_frank_kaufmann.aspx

 

 

 

 

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kmanchen
0

Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the U.S. Securities and Exchange Commission (SEC) to issue a rule requiring publicly traded companies to declare whether their products contain any of the “conflict minerals” tin, tantalum, gold, or tungsten. Companies using these minerals will have to confirm the minerals were sourced from “conflict-free” mines. Industry trade group update Premier Farnell, a leading global distributor of electronic components is participating on two “conflict minerals” industry trade group (IPC) task forces. IPC’s goal is to provide guidance on conducting effective “conflict minerals” due diligence investigations. Ken Manchen (Corporate Director EHS) is representing Premier Farnell on both task forces. The first task force is preparing a company “due diligence” checklist. We hope to complete a draft checklist in January. The second task force has decided to develop two spreadsheets for requesting information from suppliers. One will enable companies to make product specific declarations. The other will enable them to make a company level declaration. We are considering endorsing the EICC-GeSI company level reporting tool.  When can we expect the SEC to issue their “conflict minerals” final rule? The SEC is not expected to issue a final rule until January or February at the earliest. It is possible that they will delay required reporting until 2013. I will keep you posted as further developments occur.

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VictoriaJones
0

A joint project to address the issue of Conflict Minerals has been set up between the US Department of State, the US Agency for International Development and a coalition of private sector partners, civil society and other. The Public-Private Alliance for Responsible Minerals Trade (PPA) has been set up to facilitate work with partners in the Congo and surrounding countries which, according to the press release, will ‘help ensure responsible trade in minerals that does not benefit rebel groups or abusive army units’.

 

Boasting a powerful backing of financial and technical expertise, the alliance will work to develop pilot supply chain systems offering audited and certified ‘conflict-free’ minerals to businesses. The PPA will ‘provide a platform for coordination among government, industry, and civil society actors seeking to support conflict-free sourcing from the DRC.’

 

It’s expected that around $3.2million will be invested in the PPA, whilst companies, trade associations and other interested parties have pledged $830,000 towards the $2million additional funding goal for 2012.

 

For more information on the PPA, visit: http://www.state.gov/

 

 

 

 

 

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VictoriaJones
0

With the SEC still yet to release guidance on reporting guidelines for the Dodd-Frank Act, companies outside of the US are also wondering what to do – wait or make an educated start.

 

The EU has so far remained quiet on what it plans to do surrounding conflict minerals. Lobbying groups remain vocal on the horrendous human rights violations, whilst businesses worry what effect additional reporting burdens will bring to an already tough climate. Whichever way the EU turns, it’s an unenviable position to be in.

 

However, something seems to be stirring. Karel De Gucht, EU trade commissioner, recently announced that some form of communication will be given in late 2011 to address conflict mineral legislation in the EU. What this communication will contain, and whether it will address the same issues as Dodd-Frank is not known.  

 

Judith Sargentini, an MEP, has spoken publicly about the expected announcement saying "I don't see Europe targeting a specific region such as eastern DRC and the neighbouring areas … I'd prefer a wider definition of 'conflict minerals', one that encompasses, but is not limited to, those coming from eastern Congo."

 

Whether the EU targets only the DRC or decides to expand its horizons further, it is clear that some clarification is needed - and for everyone concerned, the sooner, the better. 


Source: EUObserver

 

 

 

 

 

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kmanchen
0

I’m pleased to announce that I will be representing Premier Farnell in an IPC task force which has been set up to provide guidance to the electronics supply chain on conducting due diligence investigations on conflict minerals.


Under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203), any publicly traded company will be burdened with preparing and submitting detailed reports to the SEC, if its products contain the “conflict minerals” tin, tantalum, gold, or tungsten that cannot be proven to be .” “conflict-free".

17th November saw the first meeting of the task force, bringing together representatives covering the full supply chain. The goal of these meetings will be to develop guidance that is consistent with OECD guidelines, as well as the expected U.S. Securities and Exchange Commission (SEC) rule requirements.


I, on behalf of Premier Farnell, have also volunteered to participate in a second IPC task force, to prepare a conflict minerals data exchange standard. This will involve reviewing an existing data collection tool (the EICC-GeSI tool) to determine whether it is adequate, needs some modifications, or should be completely reworked.

 

The EICC/GeSI Conflict Minerals Reporting Template tool was developed to facilitate collecting and disclosing information on smelters that provide material to a company’s supply chain. It tracks supply chain information related to conflict minerals. It asks questions regarding a company’s conflict-free policy and its engagement with its direct suppliers. It also identifies and lists smelters that the company and its suppliers use.

 

Following a review of the reporting tool, the second task force will then decide to either develop a separate standard using the EICC-GeSI tool as a model or endorse the EICC-GeSI tool itself.

 

As always, I’ll keep you informed as further developments happen.

 

 

 

 

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VictoriaJones
0

Unfortunately, probably a lot more than was first thought.

 

Tulane University in New Orleans has produced a study investigating the projected costs of implementing Conflict Mineral (specifically Section 1502 of the Dodd-Frank Act) which estimated them at $7.93 billion. This is an unbelievable 100x greater than the estimate put forward by the US Securities and Exchange Commission (SEC).

 

Some of the data used for the study was submitted by IPC, the Association Connecting Electronics Industries, and they were less than impressed with the findings, calling for the SEC to ‘be conscious of the high costs of implementation’.

 

‘The Tulane study underscores the need for the SEC to be conscious of the high costs of implementation,” said IPC. “The SEC must utilize all reasonable options to lessen the burden of implementation, the most important of which is a phasing-in of the regulations to allow industry the time to work with their complex global supply chains to develop traceability and compliance data.’

 

 

Conflict Mineral recommendations

 

One of the main outcomes of the study is a calling for the SEC to introduce an extended transition period to allow businesses to put in place robust compliance methods.

In addition, the Tulane study has suggested the need for an additional ‘origin cannot be determined’ category for minerals, if only for the transition period. Currently only two categories exist: conflict-free or associated with conflict.

 

 

Conflict Minerals costs to your business

 

Whilst the SEC is still yet to release their final guidance of complying with Dodd-Frank Act, various companies have attempted to put together costs for individual businesses.

 

A recent webinar by Claigan, a conflict minerals service provider, estimated initial compliance costs of around 0.2% of a company’s annual revenue (equivalent to $100k to $300k for a $100m per annum revenue). However, they also suggested that this first figure could rise to another third or half as much again per year. If this happens, the costs to businesses will be enormous.

 

 

Start thinking about the future now!

 

Unfortunately, until the SEC confirms their guidance around Dodd-Frank, there is no way to establish an accurate figure as to how much compliance with conflict mineral legislation will actually cost businesses.

 

What is certain though is that the cost will be significant and unavoidable, so best start thinking about the potential impact to your business as soon as you can.

 

 

 

 

 

 

 

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kmanchen
3

The US Securities & Exchange Commission (SEC) held a public roundtable meeting on October 18 to allow affected parties to exchange views and provide input before they finalize their conflict minerals rule.

 

Representatives from the investment community, industry, consulting and NGOs participated. Major industry participants included AMD, Boeing, Ernst & Young, Kraft Foods and TE Connectivity.

 

In their opening statements, participants let the SEC know of their concerns. Human rights groups argued for quick action. Investment groups and industry representatives noted that reliable auditing infrastructure is not currently available and may not be for several years. They argued for regulatory flexibility and a phased-in approach. Mining representatives cautioned that until illegal activity in conflict areas is addressed the rule will not be effective. They noted that embargoes on Congo region goods are already occurring, and that will hurt the people of the region.

 

The SEC had many questions for participants on unresolved issues that will affect the final rule:

 

• Should products with small amounts of minerals (not critical to function) be exempted from the rule?

• Should a de-minimus amount be established?

• How much time do companies need to comply?

• Is self-declaration adequate?

• Are phased-in requirements needed?

• Should refiners be covered?

• Should recycled and scrap materials be exempt?

• Should stock-piled (already mined) materials and products currently in inventory be exempt?

• Should OECD guidelines be referenced in SEC due diligence guidelines?

• Should gold be addressed differently (due to its’ more complex supply chain)?

• Do independent audit requirements need to be better defined?

• Are changes needed to the proposed 10K and Annual Report reporting requirements?

 

The SEC encouraged non-participates to send in their electronic comments.

 

It was encouraging to see the SEC conduct a roundtable and request more input. Many are currently unhappy with and have criticized the SEC’s proposed approach. They object to the onerous reporting and the cost that will have to be borne by industry.

 

Stay tuned. Hopefully the SEC received the feedback it needed in finalizing its rule.

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VictoriaJones
1

Governor Jerry Brown has officially signed SB 861 into state law.

 

Raise Hope for Congo Campaign Manager JD Stier commented, ‘“This legislation is a huge milestone on the path toward peace in Congo ... California’s unprecedented action for Congo should be held as an example for other states around the country.”

 

The bill prohibits state agencies from signing contracts with companies that do not comply with federal regulations preventing business with, and the funding of, armed conflict within the Democratic Republic of Congo.

 

California was the first US state to pass state law on conflict minerals but Massachusetts has a similar bill scheduled for introduction soon. Pro-Dodd-Frank campaigners hope that more US states will soon be following suit.

 

 

 

 

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VictoriaJones
0

Ken Manchen, Corporate Director, Safety, Health & Environmental Affairs, for Newark (part of the Premier Farnell group) discusses the issues surrounding the Dodd-Frank Act and the potential impact on businesses.

 

 

"Companies in the United States are waiting for Security and Exchange Commission (SEC) clarification on their conflict minerals disclosure responsibilities. The SEC issued proposed rules in December and accepted public comments through March. The agency has stated it will evaluate the comments before finalizing the rules later this year.

 

What are conflict minerals? They are minerals being sourced from rebel-controlled mines in the Eastern region of the Democratic Republic of the Congo (DRC), where armed conflicts are resulting in thousands being killed. Horrific human rights violations are occurring, and profits from inhumanely-run mines are helping fuel these conflicts.

 

Conflict minerals include columbite-tantalite (coltan), cassiterite, wolframite, and gold. Four derivatives of these materials (tantalum, tin, tungsten, and gold) are used in the electronics industry. The US enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, and a provision in the act requires all US public companies that use any of four minerals -- tin, tantalum, tungsten, and gold -- to trace the supply back to their source. If they come from the DRC region, the company must file an audited report with the SEC declaring whether the minerals they used came from a mine that directly or indirectly financed or benefited armed groups in the region.

 

While this law is an historic attempt to address a serious problem, there is debate about whether it will help resolve the conflict in the DRC. Some believe the task is too daunting (only smelters know the source of their raw materials), and the reporting timetable too aggressive (companies must start reporting beginning January 2012), that it will cause companies to stop sourcing minerals from the Congo. This could lead to economic hardship for millions of innocent people who make their livings from the mining and minerals trade.

 

All of this is weighing on the SEC as it carefully reviews the comments it has received before issuing its final rules. In the meantime, the electronics industry is gearing up to comply. The Electronics Industry Citizenship Coalition and the Global e-Sustainability Initiative have rolled out encouraging programs to assist the electronics industry by certifying DRC smelters as conflict-free.

 

While we advise electronics companies to take action as soon as possible, some are waiting until final SEC clarification is provided."

 

 

What is your company doing about conflict minerals - choosing to wait and be safe or trying to establish a lead?

 

 

 

 

 

 

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