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Final SEC Regulations on Conflict Minerals Ease Requirements for Some, Will Take Effect in January 2013

Wednesday, August 29, 2012
STR Client Advisory

Final SEC Regulations on Conflict Minerals Ease Requirements for Some, Will Take Effect in January 2013

By a 3 to 2 vote the Securities and Exchange Commission approved Aug. 23 its long-awaited final rule implementing the conflict minerals provisions of the Wall Street Reform and Consumer Protection Act. Issuers must comply with the final rule starting Jan. 1, 2013. 

Under the final rule, U.S. and foreign companies are required to report and make public the use of so-called conflict minerals from the Democratic Republic of Congo or adjoining countries in their products if (a) they are required to file reports with the SEC under the Exchange Act of 1934 and (b) the conflict minerals are necessary to the functionality or production of a product that they manufacture or contract to manufacture. The term conflict minerals includes cassiterite, columbite-tantalite, gold and wolframite or their derivatives. These minerals are used in the manufacture of goods such as cell phones, computers and video game systems, medical equipment, electronics, automotive parts, high-speed tools, machine parts, jewelry, glass and lamps. 

The final rule includes important changes and clarifications from the SEC’s proposed rule that may ease the burden on some affected parties. 

• Disclosures are to be filed on a new Form SD rather than in a company’s annual report. This form will be filed on a calendar instead of fiscal year basis. First reports will be due May 31, 2014. 

• The final rule has no de minimis exclusion; however, only conflict minerals contained in the final product must be reported. No reporting is required for conflict minerals used in the production process but not included in the final product. 

• The determination of whether a company “has influence over the manufacture of a product” is a factual determination; i.e., a company will not be considered to have influence over the manufacture of a product simply by negotiating contract terms or because its brand, mark or logo is affixed to a product. 

• A two-year transition period will allow companies to report their products as “DRC conflict indeterminable” when certain requirements are met. 

• When scrap metal is used companies are not required to file a detailed conflict minerals report. They are, however, required to file a Form SD describing the inquiry that they undertook leading to this conclusion. 

Because of the complexity of the issues involved, the new regulations create significant compliance burdens and uncertainty for companies. Our team of experts is available to provide information and answer any questions that you may have.

Key Contacts:

Kristen Smith
(202) 730-4965

Nicole Bivens Collinson
(202) 730-4956

Melissa Miller Proctor

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