What Dodd-Frank Repeal? Companies Continue to File Conflict Minerals Disclosures

conflict minerals Sergey Milovidov/Adobe Stock

The fate of the Dodd-Frank Act — including whether U.S. companies will still be required to trace their conflict minerals — may be up in the air, but many of them are nevertheless conducting audits and filing conflict minerals reports as before.

In April, the acting chairman of the Securities and Exchange Commission (SEC) came out against enforcing Dodd-Frank Section 1502, which required companies to trace the origins of any tin, tungsten, tantalum or gold (3TG) used in their products and disclose whether these conflict minerals have been sourced from the Democratic Republic of Congo (DRC).

According to Development International’s annual study of conflict minerals disclosures, there was a 5.6% decrease in the number of companies filing a Conflict Minerals Report (CMR), Form SD (“Specialized Disclosure”) or both for 2016, compared with 2015.

The summer filing deadline came well after the SEC’s announcement, but as Development International pointed out, “from an affected issuer’s compliance standpoint, there is no meaningful guidance, legislative or regulatory change.” In addition, the European Union had passed its own legislation this May that will require conflict minerals reporting starting 2021.

Development International reports that a total of 1,153 issuers had filed conflict minerals disclosures with the SEC for reporting year 2016. There were 125 issuers who did not file a 2016 CMR but had done so for 2015.

For those companies that filed a CMR, the average SEC compliance score improved, increasing to 84% from 79% in 2015. Approximately one out of 10 companies reported that more than 90% of their smelters or refiners in their 3TG supply chains are audited by an independent third party. Development International concludes that “the majority of companies subject to Dodd-Frank Section 1502 remain committed to conflict minerals due diligence.”

Nevertheless, a lot of ambiguity remains. Sixty-three percent of companies that filed a CMR reported that their products were “DRC conflict undeterminable.” Some said that while they have “no reason to believe” that there are conflict minerals in their supply chains, they cannot prove it.

The reasons given for this included uncooperative suppliers or unreliable information from suppliers, as well as reluctance to conduct an independent private sector audit (IPSA).

Sixteen companies underwent IPSAs in 2016, and most of them made a “DRC conflict free” claim. Eight companies made a “DRC conflict free” claim without having undergone an IPSA, which the SEC discourages.

Like prior years, a number of implausible 3TG countries of origin [COO] were claimed by companies, such as Belgium, Hong Kong, Singapore and United Arab Emirates.

“There are no known deposits of cassiterite, columbite-tantalite, wolframite or gold deposits on the island-cities of Hong Kong and Singapore,” the study authors write, “Nevertheless, 13 CMR filers reported one or more of these countries as likely COOs in their supply chains.”

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