The U.S. Securities and Exchange Commission (SEC (News - Alert)) has adopted a rule mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act that requires companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo (DRC) or an adjoining country.
Conflict minerals are those that have been mined under conditions of armed conflict and human rights abuse, notably in the eastern provinces of the Democratic Republic of the Congo (formerly known as Zaire), by the Congolese National Army, and various rebel groups, starting in 1998. The looting of the Congo's natural resources has not been limited to domestic thieves; during the Congo Wars, Rwanda, Uganda and Burundi particularly profited from the Congo's resources.
In April 2009, Senator Sam Brownback (Republican-Kansas) introduced the Congo Conflict Minerals Act of 2009 (S. 819), which would have required electronics companies to verify and disclose their sources of conflict materials. That legislation never got out of committee. However, Brownback added comparable language as Section 1502 of theDodd–Frank Wall Street Reform and Consumer Protection Act, which passed Congress and was signed into law by U.S. President Barack Obama on July 21, 2010.
The regulatory reform law directed the SEC to issue rules requiring certain companies to disclose their use of conflict minerals—among them, tantalum, tin, gold, or tungsten, if those minerals are “necessary to the functionality or production of a product.”
Tantalum is used to manufacture popular consumer electronics products such as mobile phones, laptops, digital cameras, and game consoles; as well as global positioning systems, anti-lock braking systems and ignition systems in cars. Tin and tungsten have many industrial uses. About 70 percent of the world’s deposits of tantalum, as well as substantial deposits of gold and tin, are mined within the Congo.
Companies will be required to provide this disclosure on a new form to be filed with the SEC called Form SD.
“I am pleased that the commission has finalized this very challenging project in such a thoughtful manner,” said SEC Chairman Mary L. Schapiro (see video). “We have received significant public input on this rulemaking, and in response we incorporated many changes from the proposal that are designed to address concerns about the costs. I believe the final rule faithfully implements the statutory requirement as mandated by Congress in a fair and balanced manner.”
Under the final rule, issuers are required to file for the same period—a calendar year—regardless of when their fiscal year ends. Companies will file their first specialized disclosure report on May 31, 2014 (for the 2013 calendar year) and annually on May 31 every year thereafter.
A company that uses any of the designated minerals is required to conduct a “country of origin” inquiry — in good faith and reasonably designed to determine whether any of its minerals originated in the specified countries, or are from scrap or recycled sources.
The SEC believes that the new rule will help prevent militias linked to atrocities from profiting from mining minerals used in electronics, jewelry and other goods.
According to the Associated Press (News - Alert), while human rights advocates have lobbied for this legislation, business groups have protested that it will require companies to institute an expensive and lengthy process. The new minerals disclosure requirements will initially cost affected companies a total of $3 billion to $4 billion and up to $209 million each year afterward, the SEC estimates.
"This is going to be very difficult for companies," Mitchell Harrison, director of London-based Resource Global Consulting Services, which helps audit the extraction of natural resources, told AP. "A lot of companies are doing it right now. It's a very extensive process."
Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2012, taking place Oct. 2-5, in Austin, TX. Stay in touch with everything happening at ITEXPO (News - Alert). Follow us on Twitter.
Edited by Allison Boccamazzo