CONFLICT MINERALS DISCLOSURE REQUIREMENTS

RC: Could you provide a brief overview of key issues surrounding ‘conflict minerals’? What considerations do companies need to make about the materials they use and where they are sourced?

Riepenhoff: Under Section 1502 of the Dodd-Frank Act, the rules of the US Securities and Exchange Commission (SEC) provide that companies reporting to the SEC under the 1934 Securities Exchange Act determine annually whether they use conflict minerals in their manufacturing process. Conflict minerals are defined as gold, tin, tungsten, and tantalum (3TG) originating in the Democratic Republic of the Congo (DRC) and its neighbouring countries where military strife has been financed by the sale of these minerals. Companies must disclose by filing a Form SD and a Conflict Minerals Report (CMR) the source of the minerals if they come from the DRC or surrounding countries and they must determine whether the 3TG they use is ‘DRC conflict free’, ‘DRC conflict undeterminable’, or ‘Not found to be DRC conflict free’, as defined in the SEC’s final rules on conflict minerals of 22 August 2012. There are several key issues companies should consider with regard to Section 1502. These include their procurement strategy for conflict minerals, and the reliability of data received through a Reasonable Country of Origin Inquiry (RCOI). Companies should also consider how best to protect their brand and examine their exposure to a range of risks, including reputational, operational and legal. Companies are vulnerable if they do not know who their business partners are, how they operate, how they source their materials, how they manufacture, and so on. It is more important than ever that companies should know the source of the products they buy in order to manage associated risks.

Oct-Dec 2014 Issue

Assent Compliance Inc.

Clark Hill PLC

Davis Polk

KPMG LLP

MetricStream