What are Conflict Minerals?

Dodd-Frank Act 2010
SEC Proposed Rule

Conflict minerals are certain minerals that have been linked to the armed conflict in the Democratic Republic of the Congo, creating a humanitarian crisis characterized by extreme levels of violence (particularly sexual and gender-based violence) against civilian populations.

Section 1520 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, adopted by the United States in July 2010, introduced a new reporting requirement in the SEC (Securities and Exchange Commission) annual report that must be filed by all publically traded companies in the US, whether domestic or foreign.

The SEC final rule was due April 15, 2011 to be effective for fiscal years ending May 2012 and thereafter. However, release of final rules has been delayed repeatedly, with the SEC holding its most recent public roundtable on October 18, 2011. Until the final rules are issued, the effective date will remain indeterminate.

What are the conflict minerals?
Columbite-tantalite (coltan) is the metal ore from which tantalum and niobium are extracted
  Tantalum is used in electronic components (mobile telephones, computers, videogame consoles, digital cameras) and as an alloy for making carbide tools and jet engine components
  Niobium is used in alloys for gas pipelines, jet and rocket engines, superconducting magnets, electronics, optics and jewelry
Cassiterite is the metal ore that is most commonly used to produce tin
  Tin is used in alloys, tin plating, and solders for joining pipes and electronic circuits
Gold is used for making jewelry and in electronic, communications & aerospace equipment (provides superior electric conductivity and corrosion resistance)
Wolframite is the metal ore that is used to produce tungsten
  Tungsten is used for metal wires, electrodes and contacts (lighting, electronic, electrical, heating, welding applications)
All derivatives of the above
Any other mineral or its derivatives that the Secretary of State determines to be financing conflict in the DRC countries

The SEC Proposed Rule outlines a three step disclosure requirement based upon the following three questions:

Question #1: Are conflict minerals “necessary to the functionality or production” of your product?
If a mineral is “necessary” the product is covered without regard to the amount of the mineral involved (no de minimis proposed)
Includes products where conflict mineral is intentionally included in the production process, even if it is not included in the final product
No action is required if products do not contain one of the conflict minerals
Question #2: Did your conflict minerals originate in "the DRC countries"?
Includes the Democratic Republic of the Congo and all adjoining countries sharing an internationally recognized border -- currently Sudan, Uganda, Rwanda, Burundi, Tanzania, Zambia, Angola, Congo and Central African Republic
Must make a “reasonable country of origin inquiry” to determine the source and chain of custody of your conflict minerals; smelter certifications and/or supplier declarations must be reasonably reliable
  Note: cannot establish country of origin for recycled minerals
Due diligence in the supply chain requires the use of a national or international standard and an audit performed by an independent third party
Question #3: Did your conflict minerals “directly or indirectly finance or benefit armed groups” in the DRC countries?
Armed groups are those listed in Country Reports on Human Rights Practices (released annually by the Department of State) as perpetrators of serious human rights abuses
  Criteria include physical control of mines; use of forced civilian labor; the taxation/extortion/control of trading facilities or any part of the trade route
"DRC conflict free" means conflict minerals did not finance or benefit armed groups in the DRC countries; recycled minerals are considered DRC conflict free

The SEC Proposed Rule requires two levels of disclosure:

Conflict Minerals Disclosure is required for products that contain conflict minerals (regardless of origin). It is submitted as a separate heading in the body of the SEC annual report and posted on your company website. Required elements include:
Whether conflict minerals originated in DRC countries
Whether conflict minerals were obtained from recycled or scrap sources
Brief description of your company’s "country of origin inquiry"
Conflict Minerals Report is required for products containing conflict minerals from the DRC countries, for recycled materials, and when DRC countries cannot be eliminated as the country of origin. It is submitted as an exhibit to the SEC annual report and posted on your company website. Required elements include:
Description of products with conflict minerals
Whether products are “DRC conflict free”
For products not “DRC conflict free”: country of origin and processing facility for the conflict minerals
Due diligence measures taken to establish the source and chain of custody of the conflict minerals; your efforts to determine the mine/origin with the greatest possible specificity
Due diligence measures taken to determine the conflict minerals were recycled or scrap (reclaimed from end-user or post-consumer products)
Audit report of the independent private sector auditor
Certification by the person filing the SEC report

This summary of Conflict Minerals is designed to provide you with an accurate, easy-to-understand overview of the topic and does not constitute legal advice. The actual standard in the original language should be reviewed and used for all business, legal, and product compliance purposes.

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