SEC Final Rule: Disclosing the Use of Conflict Minerals

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Gavel.png FINAL RULE: approved by the SEC on August 22, 2012
Dodd-Frank Timeline, Conflict Minerals, SEC
Final Rule Issue Effective Date First Report Due
September 12, 2012 November 13, 2012 May 31, 2014

On August 22, 2012, the SEC approved a final rule requiring companies to publicly disclose any use of conflict minerals that originated in or around the Democratic Republic of the Congo (DRC). The rule was mandated by Title XV of the Dodd-Frank Act. Under the rule, companies that use tantalum, tin, gold, or tungsten must disclose this fact on new SEC Form SD, provided that such minerals “necessary to the functionality or production of a product” manufactured or contracted to manufacture by those companies.

The rule appeared in the Federal Register on September 12, 2012, and became effective on November 13, 2012. Companies will be required to submit their first disclosure report by May 31, 2014 for the 2013 fiscal year.

Note: The U.S. Chamber of Commerce, the Business Roundtable, and the National Association of Manufacturers had challenged the conflict minerals rule, saying it was too costly and violated companies' First Amendment free speech rights. On July 25, 2013, however a U.S. federal judge upheld the rule.[1]

Summary of the Rule

  • Contracted to Manufacture definition: If the company has actual influence over the manufacture of a product, but not if it merely affects its brand, logo, or label, or if it is merely involved with repair or maintenance functions.
  • Determining whether a conflict mineral originated in DRC or other covered country: Any company using these minerals must perform a reasonable "country of origin" inquiry. Such information must be made available on the company's web site and in Form SD.
  • Necessary information to include in the report:
    • If "conflict free," include certified audit
    • If "not conflict free," list products manufactured or contracted, the facilities used, country of origin and to the best of the company's ability, the mine or location of origin.
    • If "undeterminable," include the above information, plus the steps taken, or will take, to to mitigate the risk that its necessary conflict minerals benefit armed groups, including any steps to improve due diligence.

If a company’s conflict minerals are derived from recycled or scrap sources rather than from mined sources, the company’s products containing such minerals are considered “DRC conflict free.”

References

  1. Federal judge upholds SEC's conflict minerals rule. Reuters. Retrieved on July 25, 2013.

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