U.S. Conflict Minerals Rule

In 2010, the U.S. Congress passed the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), in which Section 1502 directs the U.S. Securities and Exchange Commission (SEC) to issue rules regarding the requirements for certain companies to disclose their use of so-called "conflict minerals".

On 22 August 2012, the U.S. SEC issued a final rule on conflict minerals which is known as the "Conflict Minerals Rule" that describes the assessment and reporting requirements for issuers whose products contain conflict minerals.

The Rule requires that if conflict minerals - tin, tantalum, tungsten and gold (3TG) - are "necessary to the functionality or production of products" manufactured or contracted to be manufactured by an SEC reporting company, the company must take steps to determine and make specified disclosures concerning the source of the 3TG contained in its products.

The intent of the Conflict Minerals Rule is to reduce – through increased transparency of companies' sourcing practices – a significant source of funding for armed groups that are committing human rights abuses and contributing to the conflict in the eastern Democratic Republic of Congo (DRC) and neighboring countries.

The first compliance period under the Conflict Minerals Rule began on 1 January 2013.

How to comply with the U.S. Conflict Minerals Rule

The SEC requirements are build on the five steps from a guidance published by the Organization for Economic Cooperation and Development (OECD). The guidance is called "Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas" and provides management recommendations for global supply chains to avoid contributing to conflicts through mineral/metal purchasing decisions and practices.

Find here the OECD Guidance. http://www.oecd.org/investment/mne/mining.htm

This includes a number of steps to put in place strong systems of control over the supply chain, pass vital information to buyers and to the governments and regional institutions that regulate the mineral trade, assess conflict conditions at mine sites, transportation routes and points where minerals are traded in order to source from areas and suppliers that do not contribute to conflict, and report on due diligence.

Important: Even companies not directly regulated by SEC will be impacted by the audit requirements because information/audit requirements will be pushed down through entire supply chains, including foreign-owned and privately-held companies.