CONFLICT MINERALS RULE - from Securities and Exchange Commission

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    MJSA Member Update

    MJSA Member Alert: SEC Releases Conflict Minerals Rule


    Dear MJSA Member,


    On Aug. 22, the Securities and Exchange Commission (SEC) voted to adopt a rule implementing the conflict minerals provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 1502. The rule requires publicly held companies to disclose whether their products contain conflict gold (or other named minerals, such as tungsten) from the Democratic Republic of Congo or surrounding countries.


    The regulatory reform law directed the Commission to issue rules requiring certain companies to disclose their use of conflict minerals (including tantalum, tin, gold, or tungsten) if those minerals are "necessary to the functionality or production of a product" manufactured by those companies. (Products that contain conflict minerals among their components are covered by this definition.) Companies are required to provide this disclosure on a new form to be filed with the SEC, called Form SD.


    The final rule also applies to products that companies contract to have manufactured by outside vendors. Consequently, this rule could affect also publicly traded distributors or retailers, if they have some actual influence over the manufacturing of that product (e.g., they influence the choice of the materials, parts, ingredients, or components to be included).


    A company is deemed not to have influence over the manufacturing if it merely affixes its brand, marks, logo, or label to a generic product manufactured by a third party; services, maintains, or repairs a product manufactured by a third party; or specifies or negotiates contractual terms with a manufacturer that do not directly relate to the manufacturing of the product, such as training or technical support, price, insurance, indemnity, intellectual property rights, and dispute resolution. The requirements apply equally to domestic and foreign issuers.


    For companies affected by the law, they must determine whether they use conflict minerals, such as gold or tungsten. If a company finds that it does use such minerals, it must try to research the origin of minerals. If they determine that the gold may have come from DRC or surrounding countries, or may not be recycled or scrap (see note below), the company must perform "due diligence" on its supply chain to see if the conflict minerals financed or benefited armed groups in the region.


    Note: Companies that use recycled or scrap conflict minerals, however, are not automatically required to conduct due diligence of their supply chains, says the SEC. They are also not automatically required to file a conflict minerals report. MJSA, along with other trade associations, participated in a joint submission to the SEC last year, requesting that exclusion.


    The first reports by companies covered by the new rule are due May 31, 2014, and cover calendar year 2013. 


    For more information on this rule, click here for an SEC fact sheet. 


    To download a copy of the final SEC rule, click here