August 2, 2013 – August 9, 2013

The summaries provided in this Weekly Recap do not necessarily represent the views of Squire Sanders (US) LLP and should not be deemed to be endorsements of them. The Recap is intended to be a compilation of articles and events to encourage discussion within the conflict minerals community and to keep our readers updated on the most recent developments.

Challenging the Conflict Minerals Rule: Legal Decision Appealed

Last month, Judge Robert Wilkins of the United States District Court for the District of Columbia rejected the business industry groups’ argument that elements of the conflict minerals rule were arbitrary and capricious and that the rule violated the First Amendment.

On August 12th, the business industry groups appealed that decision to the U.S. Court of Appeals for the District of Columbia Circuit. 

MEC-CME Releases Conflict Minerals Policy Statement

Meehan Electronics Corporation (MEC) and Cord Master Engineering (CME), specializing in the electronic component value added services, cable assembly, and turnkey manufacturing, and located in North Adams, Massachusetts, recently released its statement on conflict minerals. Excerpts from the statement follow.

“As non-SEC registered small businesses, MEC and CME are not directly subject to the conflict metals reporting requirements of Section 1502 of the Dodd-Frank Financial Reform Act; however, we are responsibly working with our customers, suppliers and industry organizations to create a system of controls to insure transparency and traceability for the conflict minerals supply chain. More specifically, we have taken the following initiatives:

  1. We have identified where the conflict minerals are necessary to the functionality of our manufactured products and to our services.
  2. We have adopted the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI) standards as a reporting tool for due diligence, in conjunction with the EICC Conflict-Free Smelters Program.”

To view MEC-CME’s entire conflict minerals policy statement, please see MEC-CME Conflict Minerals Policy Statement.

KMPG’s Conflict Minerals and Beyond Series – Part Three: Optimizing the Supply Chain

Last year, KPMG introduced a four-part series covering the conflict minerals rule. This summer, KPMG released part three, titled Optimizing the Supply Chain. According to the release accompanying the report, “[t]he purpose of this report is to show how companies can optimize the supply chain and the potential benefits and challenges of doing so. It is intended to be useful for companies that have to obey other supply chain regulations, of which there are a growing number worldwide.”

To view Part I and Part II to the conflict minerals series, please see KPMG: Conflict Minerals Series.

Form 10-Q: Conflict Minerals Risk Factor Disclosure

In their recent Quarterly Reports on Form 10-Q, many reporting companies updated their risk factors pursuant to Item 1A. of Form 10-Q to include a stand-alone conflict minerals risk factor disclosure. Dolby Laboratories, Inc. (“Dolby”), a company specializing in audio encoding and compression, was one such reporting company.

In its Form 10-Q for the quarter ended June 28, 2013, Dolby stated “[t]he SEC has adopted rules regarding disclosure of the use of conflict minerals (commonly referred to as tantalum, tin, tungsten, and gold), which are mined from the Democratic Republic of the Congo and surrounding countries. This requirement could affect the sourcing of materials used in our products as well as the companies we use to manufacture our products. In circumstances where conflict minerals in our products are found to be sourced from the Democratic Republic of the Congo or surrounding countries, Dolby may take actions to change materials or designs to reduce the possibility that Dolby’s purchase of conflict minerals may fund armed groups in the region. These actions could add engineering and other costs to the manufacture of our products.

We expect to incur costs to design and implement a process to discover the origin of the tantalum, tin, tungsten, and gold used in our products, and to audit our conflict minerals disclosures. Our reputation may also suffer if we have included conflict minerals originating in the Democratic Republic of the Congo or surrounding countries in our products, and those conflict minerals funded armed groups in the region.”

The risk factor above is similar to many other stand-alone risk factors relating to conflict minerals. We expect that many companies will turn to stand-alone risk factors rather than embedding their discussion of conflict minerals in other risk factors on regulation, environmental requirements and general supply chain matters.