The SEC recently adopted final rules under the Securities Exchange Act to mandate disclosure by reporting companies of the presence of "conflict minerals" in their supply chains, as required by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These new rules are anticipated to impact approximately 6,000 companies, primarily in the manufacturing sector.
The SEC defines "conflict minerals," which are found in a wide variety of products, including mobile phones and other electronic devices, to include cassiterite, columbite-tantalite, gold, wolframite and their derivatives, including tantalum, tin and tungsten. For a reporting company to be subject to the new disclosure requirements (a "Subject Company"), it must manufacture or agree to manufacture a product in which conflict minerals are necessary to the functionality or production of the product. Conflict minerals that are outside of a Subject Company's supply chain prior to January 31, 2013 are excluded under the new rules.
Subject Companies that determine conflict minerals are necessary to the functionality or production of their products are required to disclose this information annually with the SEC on a new Form SD, which must be submitted no later than May 31 of the year following the applicable reporting period.
The new rules also require Subject Companies to conduct a reasonable country of origin inquiry regarding conflict minerals in their supply chains. According to the rules, if a Subject Company has reason to believe that such conflict minerals originated in a "Covered Country" (defined to include the Democratic Republic of the Congo and any country sharing a border with it), and did not come from scrap or recycled materials, it must exercise further due diligence on the source and chain of custody of such minerals and provide (as an exhibit to the Form SD) a Conflict Minerals Report describing such diligence procedures, the affected product and any facilities used to process such minerals, among other things.
Subject Companies must comply with the new rules for the calendar year beginning January 1, 2013 and the first Form SD filings are due no later than May 31, 2014.