SEC’s passing of ‘conflict’ mineral rule could impact the trade

The passing of the Dodd-Frank Act means that publicly traded companies must endeavour to find out and reveal if they have used, or continue to use minerals, including gold and tungsten, that originated in the Democratic Republic of Congo (DRC) or one of nine neighbouring countries and financed or benefited militia there.

Under the provision, if a company is aware or has reason to believe that its minerals weren’t obtained from one of the countries mentioned, or are from scrap and recycled sources, then it must disclose its conclusion to the SEC; describe the inquiry it undertook to obtain the information; and post the inquiry on its website.

If a company knows or suspects its minerals may have originated from one of these countries, however, it must undertake ‘due diligence’ on the source and its mineral chain of custody and file a Conflict Minerals Report.

The Conflict Minerals Report involves obtaining an independent private sector audit and then disclosing publicly if minerals are DRC conflict-free or not.

Bigger companies will be given a period of two years (four years for smaller companies) to state that the origin of their minerals is undetermined while they trace their supply lines.

Companies without direct control over the manufacturing of their products are exempt from the regulation – a bone of contention for the environmental group Earthworks, which was otherwise pleased with the ruling.

“We are disappointed about the free pass that’s been given to big-box stores and other large retailers,” said Payal Sampat of Earthworks. “These companies have tight control over their manufacturers when it comes to product cost and quality. Why, then, are they off the hook when it comes to human rights violations or corruption?”

America’s National Retail Federation issued a statement saying that it was “too soon to determine the full impact of the regulations on retailers.”

Image: Sasha Lezhnev/Enough Project