Conflict Minerals Final Rule: How will this affect you?

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I have become downright conversant in the topic of Conflict Minerals lately. As the responsible party for completing new supplier forms at ACDi, I’ve completed at least a dozen this year alone and everyone has had a question related to our Conflict Minerals mitigation program. While in early phases, this complicated regulation is going to impact the electronic manufacturing services industry in much the same way RoHS did 10 years ago by forcing all who participate to comply with the rule.

The new Conflict Minerals Rule has seen the first round of reporting from publicly traded companies who were not provided the extension period.  The first reporting cycle began in January 2013 and ended in December 2013, requiring companies to have their Specialized Disclosure Form (SD Forms) and required information submitted by May 31, 2014.   While many companies have qualified for the two or four year extensions to allow for more time for mapping of their supply chains, Apple, Intel, and Hewlett-Packard are among the leaders in the industry who are filing reports this year.

Background

The Dodd-Frank Wall Street Reform and Consumer Protection Act passed Section 1502 in July of 2010, and the issuing of the Conflict-Mineral Rules in 2012, set forth guidelines requiring companies to identify the country of origin of certain minerals commonly used in electronic devices and their manufacture.   Tin, tantalum, tungsten, and gold (3TG) are considered to be conflict minerals because of the likelihood of them arising out of the regions in the Democratic Republic of the Congo (DRC) and its surrounding regions, where human rights violations are being committed.  There has been political and civil unrest in the DRC for many years with the height of it coming about in the early to mid-1990s.  Rebel groups are using men, women, and children to process these minerals against their will, and the purchase of the minerals stemming from these regions helps to support the injustices.

How do you know if you are required to report?

Check out this flow chart leading you through the steps set forth by the SEC for determining your reporting obligations:

http://www.perkinscoie.com/files/upload/12_09_CGTIWCD_Update_flowchart.pdf

How will this affect your company?

The SEC rule exempts private companies, but the need for public companies to provide complete maps of their supply chains forces private businesses to report as well, though not directly to the SEC.   Complete mapping of the supply chain can be incredibly costly and time consuming.   And, as demonstrated by Apple, who began mapping their supply chain in 2009 in order to prepare for the first reporting cycle, it is not always possible to reasonably state the country of origin of certain minerals, especially with the financial means not accessible to small businesses.

Cost efficient tools, such as Silicon Expert, are available to assist companies in tracking the origin of the minerals used in their product. As all public companies are entered into the reporting process over the next two years, it would be wise for private and small businesses who support the larger ones such as Apple or GE, to begin the process of researching and mapping their supply chains. The first round of reporting allows for some minerals to be determined “DRC Conflict Undeterminable”, giving some companies more time to investigate.  While this is currently a way for companies to delay reporting, over the next few years, the guidelines will require all publicly traded companies involved in the manufacture or contract to manufacture of electronics containing conflict minerals to be able to answer with more certainty the country of origin of their products.

Global e-Sustainability Initiative 

The formation of new non-government organizations who are working with companies to meet the regulations of the SEC while attempting to provide ways for those who are working to earn a living, and are not involved with the militia groups in the DRC to continue to make a living.  The Global e-Sustainability Initiative and the Electronic Industry Citizenship Coalition EEIC   have partnered along with many large commercial companies in the creation of the Conflict-Free Smelter Program CFSP who helps to audit smelters and certify them as “conflict-free” suppliers.  [i]“Apple is driving smelters and refiners to be compliant with the Conflict-Free Smelter Program (CFSP) or an equivalent third-party audit program. And rather than avoiding minerals from the DRC and neighboring countries entirely, they are supporting verified supply lines and economic development in the region.”

It’s no doubt that ethical and sustainable supply chain management is necessary to the overall efficiency and health of businesses large and small. The mapping of the supply chain can only assist businesses in implementing a smarter, greener, and more efficient supply chain and continued health of the industry. It’s also a simple fact that complete supply chain mapping is a huge and costly undertaking, especially when the source is so far removed from the buyer, and will be a challenge for all industry, not just small business. Even though the firm mandates are years away, all participants in the electronic manufacturing arena should start planning their Conflict Minerals policy… now.

 

 


 

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