For purposes of the conflict minerals rule, conflict minerals that are sourced from recycled or scrap materials are deemed to be “DRC conflict free” and require disclosure only about the inquiry that led the reporting company to conclude that they were from those recycled or scrap sources.  That means that for products whose conflict minerals are from recycled or scrap sources, there is no requirement to undertake due diligence or to report their processing facilities, countries of origin, or efforts to determine mine or location or origin.

Conflict minerals from recycled and scrap sources are given special treatment under the Rule because, as a practical matter, it is impossible to trace the mine of origin of materials that are recovered from existing products and materials and combined into the recycled or scrap material.  

What Qualifies as Recycled or Scrap

Conflict minerals are considered to be from recycled or scrap sources if they are from recycled metals — reclaimed end-user products, post-consumer products, or scrap processed metals created during product manufacturing.  Recycled metal includes excess, obsolete, defective and scrap metal materials that contain refined or processed metals that are appropriate to recycle in the production of conflict minerals.  But, tin, tantalum, tungsten, or gold that are partially processed, unprocessed or are a by-product from another ore are not considered to be “recycled” under the Rule.

Impact of Recycled or Scrap Sources on Compliance Costs

Because of the Rule’s special treatment of conflict minerals from recycled or scrap sources, companies that can source 100% from recycled or scrap can significantly reduce the cost of their conflict minerals compliance efforts. 

If a company’s conflict minerals are confirmed to be 100% from recycled or scrap sources, it can avoid undertaking due diligence, it will not have to analyze supplier due diligence responses, and it will not be required to prepare or file a Conflict Minerals Report with the SEC.  Depending upon the company, its products and the size of its supply chain, avoiding those steps could equate to hundreds of thousands of dollars per year of savings.  It will be difficult for a significant number of companies to source 100% from recycled or scrap.  But, for those that already source a significant portion from recycled or scrap sources, it could be worth considering a push to source completely from recycled or scrap because of the potential savings.     

Further, as more companies announce that their products are “conflict-free,” their suppliers will have to find ways to confirm and assure that their conflict minerals are conflict-free.  Some of those suppliers may turn to recycled or scrap sources as one way to meet their customers’ requirements.

Increasing Value of Recycled or Scrap Sources

All these factors should make recycled and scrap sources of conflict minerals more attractive, and (over time) should increase the value of recycled and scrap as a source of conflict minerals.  An increased demand for recycled and scrap materials will in turn further promote e-waste and other recycling programs.  And, such demand may encourage the expansion, and even creation, of businesses that can confirm that their conflict minerals are 100% from recycled and scrap sources.