On Aug. 22, 2012, the U.S. Securities and Exchange Commission (the SEC) finalized the Conflict Minerals Rule voting 3-2 to adopt the rule, pursuant to section 1502 of the Dodd Frank Wall Street Reform and Consumer Act of 2010. The Conflict Minerals Rule aims to end the conflict in the Democratic Republic of the Congo (DRC) and the adjoining region. This conflict has been partially financed by the trade of certain minerals, known as “conflict minerals,” in the DRC and in surrounding countries. The rule requires all U.S. publicly traded companies to conduct supply chain due diligence to determine the origin of minerals that have been associated with the on-going conflict in the DRC. The rule took effect on January 1, 2013 and requires annual reporting.
ACA and its membership fully support the efforts to end the humanitarian crisis in the DRC, as well as the intent of the legislation that authorized the SEC Conflict Minerals Rule. However, the rule is impaired by several factors: the lack of a de minimis threshold that would exempt those companies whose products may or may not contain a trace amount of a conflict mineral from reporting, which will make the cost of compliance for these companies significant; the undefined and purposefully vague terms and requirements, which has created confusion among those companies that are required to make disclosures about their use of conflict minerals; and the fact that the SEC fell short of its statutory obligation to evaluate the economic consequences of its action, either with respect to U.S. industry or the situation in the Congo. Notably, while the cost of compliance for affected companies will be significant — since they may have to test products to determine if any amount of conflict minerals remains — the impact on reducing human rights will be minimal since the amount of the mineral present in the product is minuscule.