According to a Wall Street Journal article reported by Emily Chasen, Senior Editor at The Wall Street Journal‘s CFO Journal, on Sept. 5, 2014, the U.S. Commerce Department acknowledged “it cannot determine which refiners and smelters around the world are financially fueling violence in the war-torn Congo region.”
The WSJ article noted that companies including Intel Corp. and Apple have spent a substantial amount of time and millions of dollars “investigating their supply chains to figure out which components might contain gold, tin, tungsten and tantalum from mining operations blamed for funding armed militia groups in the Democratic Republic of the Congo.” According to Tom Quaadman, vice president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, “[a]t the end of the day, the conflict minerals rule creates the worst outcome — it has not helped lessen the conflicts in the Congo and creates economic harm in the U.S.”
The SEC final rules on conflict minerals, adopted Aug. 22, 2012, pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, require companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo or an adjoining country. See SEC Adopts Final Rules for Disclosing Use of Conflict Minerals(posted Aug. 24, 2012). Additionally, the conflict mineral rules have been the subject of much litigation during the past two years, which has provided no clarity to companies as to their compliance obligations.
Editor’s note: Though the basis for the conflict mineral rules is a worthy and noble exercise, the execution has been costly and time-consuming for U.S. companies with very little benefit. If the U.S. Commerce Department cannot track the source of these minerals, how can companies be expected to do the same to comply with the disclosure rules? The SEC needs to step back and reassess the cost-benefit of the conflict mineral disclosure obligations.