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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

What, Then, Are Conflict Minerals?

Under the SEC’s new 356-page conflict minerals rule, reporting companies must now disclose their use of tantalum, tin, gold, or tungsten mined in the Democratic Republic of the Congo or a contiguous country.

Disclosure is required, the rule says, if those minerals are “necessary to the functionality or production of a product” manufactured by the issuer.

Companies are required to make the disclosure on a new form to be filed with the SEC called Form SD.

The rule applies to any company that files reports with the SEC under the Exchange Act.

Countries of origin included in the rule because they border the Democratic Republic of the Congo are: Angola (and its discontiguous Cabinda Province), Burundi, Central African Republic, Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia.

*     *     *

A company that uses any of the designated minerals, the rule says, must conduct a reasonable country of origin inquiry performed in good faith and reasonably designed to determine whether any of its minerals originated in the covered countries or are from scrap or recycled sources.

The company must then post on its website (and the Form SD) whether it knows (or has no reason to believe) that the minerals did not originate in the covered countries.

If, however, the company knows or has reason to believe the minerals may have originated in the covered countries, then it ‘must undertake due diligence on the source and chain of custody of its conflict minerals and file a Conflict Minerals Report as an exhibit to the Form SD.’ That report or a link to it also must be posted on the company’s website.

The due diligence the company does ‘must conform to a nationally or internationally recognized due diligence framework, such as the due diligence guidance approved by the Organisation for Economic Co-operation and Development (OECD).’

If a company determines that its products are ‘DRC conflict free’ — that is, the minerals may originate from the covered countries but did not finance or benefit armed groups — then the company must perform an audit and certification. The audit has to come from an independent private sector auditor.

If the minerals are found not be “DRC Conflict Free,” the audit must identify the facilities used to process the conflict minerals, the country of origin of the conflict minerals in the products, and the efforts made to determine the mine or location of origin with the greatest possible specificity.

*     *     *

There’s a two-year grace period for most companies, and four for small companies, when they can specify “DRC conflict undeterminable.” But if they do that, they also need to describe the products in question, and if known the facilities used to process the conflict minerals in those products, the country of origin of the conflict minerals, and what efforts were made “to determine the mine or location of origin with the greatest possible specificity.”

The final 356-page rule can be downloaded in pdf here.

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