Conflict Minerals Confusion: Supply Risk and Compliance Uncertainty

Our network site, MetalMiner, recently published a paper that is setting the pace to be our most downloaded research brief in history: The Definitive Guide to Conflict Minerals Compliance for Manufacturers: An A–Z Guide to Conflict Minerals and Semi-Finished Metals. A major value of the paper is that it cuts through much of the confusion in the market on different approaches to compliance, exploring challenges associated with each potential model.

Our team frames the exploration by noting the following:

Our initial discussions with industry participants suggest that many OEMs (original equipment manufacturers) have conflict minerals “front and center” of their legal/compliance/ procurement/supply chain agendas for 2013. However, in some cases, the various tiers of the supply chain lack the most basic information regarding legislation and the specifics around the SEC rules, which are necessary in order to support their customers’ demands for information. In addition, we have seen a couple of different approaches taken by affected companies.

The legislation and follow-on regulations have created some gray areas. One area is focused on the definition of “manufacturer.” This also includes situations where a company “contracts to manufacture” products using a third-party manufacturer/assembler. Another area the SEC does not specifically address involves the case of imported material. Overseas suppliers and those not owned by US-based companies—while exempt from this legislation in their home countries—must comply with the US OEM reporting requirements.

Special care and due diligence will add cost and burden to domestic suppliers. Ensuring that suppliers won’t distort or misrepresent information in their declarations may require the use of outside surveyors to examine mill test certificates, chemical compositions and certificates of origin. Some may require third-party on-site inspections. Speaking of chemical compositions, the law, along with the implementing regulations, does not contain any de minimis or materiality threshold that triggers the applicability of the requirements. Therefore, 3T’s/G that are present in any amount that is not naturally occurring trigger the regulation and traceability processes.

Unfortunately, the Conflict Minerals implementation approaches themselves lead to a number of questions, exceptions and challenges, only truly understood and appreciated during an actual implementation process. This paper explores some of these issues in greater detail.

Spend Matters readers can download this complimentary analysis on the MetalMiner site here.

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