Conflict Minerals Sourcing is Subject of State Department Inquiry
The Department of State is seeking input from stakeholders no later than April 28 to inform recommendations of how best to support responsible sourcing of tin, tantalum, tungsten, and gold (known as conflict minerals).
Under the 2010 Dodd-Frank Act and the Securities and Exchange Commission’s implementing regulations, companies that file reports with the SEC under the Securities and Exchange Act of 1934, whether foreign or domestic, must file a specialized report disclosing their use of conflict minerals originating in the Democratic Republic of the Congo or an adjoining country if those minerals are necessary to the functionality or production of a product they manufacture or contract to manufacture. The minerals at issue are used to make a variety of goods such as cell phones, computers and video game systems, medical equipment, high-speed tools, machine parts, glass, and lamps.
SEC regulations require companies that use any of these conflict minerals to conduct a reasonable inquiry to determine whether they originated in the covered countries. If the inquiry determines that the company knows or has reason to believe that the minerals may have originated in those countries, the company must undertake due diligence on the source and chain of custody of its conflict minerals, file a conflict minerals report with the SEC, and make that report publicly available on its Web site.
Since the law and the SEC regulations were implemented the following developments have taken place.
- A federal court ruled in April 2014 that the requirement to publicly disclose that a company’s products use conflict minerals that have not been found to be conflict-free violates constitutional free speech protections, prompting the SEC to issue guidance advising companies that they would not be required to make such disclosures and issue an order staying the effect of the rule’s compliance date for those portions of the rule found to be unconstitutional.
- The Government Accountability Office reported in August 2015 that most companies have been unable to determine the source of their conflict minerals.
- The House Financial Services Committee approved in September 2016 legislation that would have eliminated the requirement for companies to disclose whether their products contain conflict minerals.
- The SEC solicited through March 17 comments on possible further relief from the conflict minerals regulations.