SEC Adopts New Conflict Mineral Disclosure Rules

SEC Adopts New Conflict Mineral Disclosure Rules

The SEC recently adopted final disclosure and reporting rules requiring certain public companies to disclose on a new Form SD their use of conflict minerals originating in the Democratic Republic of the Congo or an adjoining country. These minerals include gold, tin, tantalum, tungsten and their derivatives. Perkins Coie experts examine these new requirements and provide practical guidance on what companies can do now comply with the new rules.

Excerpt:  What Are Conflict Minerals?

As defined in the Dodd-Frank Act, conflict minerals include gold, tin, tantalum, tungsten and their derivatives. Conflict minerals also include any other mineral or mineral derivative as determined by the secretary of state to be financing conflict in the DRC or an adjoining country. "Adjoining countries" presently includes Angola, Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda and Zambia. The DRC and its adjoining countries are referred to in these new rules as "covered countries."

Which Companies Are Subject to the New Disclosure Rules?

Companies That Meet All of the Specified Conditions. Companies that meet all of the following conditions will need to comply with these new rules:


The company files reports with the SEC under Section 13(a) or 15(d) of the Exchange Act (including foreign issuers);
The company manufactures or contracts to manufacture a product; and
Conflict minerals are "necessary to the functionality or production" of such product.

What Can a Company Do Now to Prepare to Comply With these New Rules?

1. Create a Conflict Minerals Risk Profile

Develop a preliminary list of products that potentially contain conflict minerals.
Conduct targeted interviews of personnel with supply chain oversight to determine if conflict minerals are "necessary to the functionality or production" of a company product.
If commercially feasible, consider removing conflict minerals from the supply chain prior to January 1, 2013 to avoid the inquiry and audit burdens of these new rules.

2. Design and Implement a Practical Supply Chain Compliance Program

If conflict minerals are "necessary to the functionality or production" of a company product, begin planning a reasonable country of origin inquiry.
Consider developing a source and chain of custody due diligence process and framework.
Consider how to integrate supply chain compliance efforts into existing anti-corruption (e.g., U.S. Foreign Corrupt Practices Act (FCPA) and U.K. Bribery Act) and compliance programs and how to leverage efforts in those areas to comply with these new rules.
Consider implementing a Conflict Minerals Code of Conduct setting forth expectations for employees and transaction partners (including suppliers).
Consider creating Conflict Minerals compliance questionnaires and certification procedures for suppliers.

3. Train Relevant Employees

Begin preparing best-practices conflict minerals training programs for employees who are responsible for supply chain management and oversight.
Begin preparing customized training for key suppliers with the greatest risk exposure.

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