On August 22, 2012, the U.S. Securities and Exchange Commission adopted Rule 13p-1 under the Exchange Act, which is known as the “Conflict Minerals Rule.” The rule requires certain companies to disclose their use of conflict minerals if those minerals are “necessary to the functionality or production of a product” manufactured by those companies. Under the Act, those minerals are tantalum, tin, tungsten or gold (3TG).
"The rule" is intended to reduce a significant source of funding for armed groups that are committing human rights abuses in the eastern Democratic Republic of the Congo (DRC) and specific adjoining countries (Angola, Burundi, Central African Republic, Congo Republic [a different nation than DRC], Rwanda, Sudan, Tanzania, Uganda, and Zambia).
Broadly, the regulation requires companies to investigate their supply chains and publicly disclose the origin of the conflict minerals used in their products on their 10-K, 20-F and 40-F filings, as well as on their websites. To fall under the rule requirements, conflict minerals must be “necessary to the functionality” or “necessary to the production” of a product manufactured or contracted to be manufactured by a SEC issuer. Although the final rule does not explicitly define these terms, it does provide additional guidance for issuers to consider when determining regulatory applicability.
Where do we start? Many companies are currently asking themselves this question when it comes to complying with the U.S. regulation on conflict minerals. For companies that manufacture thousands of products—such as retailers with name brands—the requirement to publicly disclose the origin of gold, tin, tantalum and tungsten (3TG) used in these products is especially challenging. The prospect of surveying and requesting data from every tier 1 supplier is daunting and inefficient. However, evidence of sufficient due diligence on product mineral origins is an essential requirement for conflict mineral compliance.
In this white paper, we go into detail on the following topics: