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Conflict Minerals Law

The Source for Legal Insights & Analysis on Conflict Minerals Compliance

Conflict Minerals Rule Weekly Recap #79 – September 12, 2014

Posted in Weekly Recaps
September 12, 2014 – September 19, 2014
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.

WSJ: Conflict Minerals List Makes Compliance a Little Easier

Rachel Ensign of the Wall Street Journal reports on the usefulness of the Department of Commerce’s list of smelters and refiners of conflict minerals in her article titled “The Morning Risk Report: Conflict Minerals List Makes Compliance a Little Easier.” Section 1502(d)(3)(C) of the Dodd-Frank Wall Street Reform and Consumer Protection Act required the Department of Commerce to publish a list “of all known conflict mineral processing facilities worldwide.”

Ensign reports that despite the Department of Commerce’s admission that it cannot distinguish between those facilities that are conflict-free and those that are not, the list will at least provide a baseline identification of smelters and refiners that are processing conflict minerals.

Bloomberg BNA: D.C. Circuit Shows Interest in Rehearing Panel’s SEC Conflict Minerals Rule Decision

Y. Wilczek of Bloomberg BNA, in an article titled “D.C. Circuit Shows Interest in Rehearing Panel’s SEC Conflict Minerals Rule Decision,” reports that the D.C. Circuit court ordered the three business groups that challenged the conflict minerals rule to file a joint response to Amnesty International’s August 2014 petition to the full court to rehear the case. Amnesty International petitioned the court to rehear the case in light of the decision in American Meat Institute v. USDA, which upheld the USDA’s regulations requiring meat producers to label the country of origin in which the products originated.

As required, the joint response was filed on Friday, September 12, 2014.

Plastics One Incorporated: Position on Conflict Minerals

Plastics One Inc., a medical component and cable manufacturer, recently released its position on conflict minerals. Excerpts from its position follow. “Plastics One Incorporated recognizes and supports the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 1502 concerning Conflict Minerals. As a privately held company we are not required to report to the Security and Exchange Commission however we do accept our responsibility to support our customers and human rights. Our goal is to identify and eliminate the use of conflict minerals used in our manufacturing processes derived in the Democratic Republic of Congo and adjoining countries. Plastics One practices reasonable due diligence by surveying and partnering with suppliers that share our goal.”

FORM SD – EDGAR Filing Glitch — Conflict Minerals Report is “Exhibit 1.02″

Posted in Uncategorized

The Division of Corporation Finance has confirmed that there is a glitch in the EDGAR filing system.  EDGAR is not accepting Exhibit 1.01 to the Form SD but is accepting Exhibit 1.02. 

Therefore, despite the Instructions to the Form SD, you will need to refer to your Conflict Minerals Report as “Exhibit 1.02” in order for the filing to be accepted.  The Division of Corporation Finance recommends changing the reference on the report itself as well – in order to be internally consistent. 

So, we urge you to change the reference on your Conflict Minerals Report to Exhibit 1.02, change your filing index reference to Exhibit 1.02, and code your filing for EDGAR purposes so that the Conflict Minerals Report is Exhibit 1.02 rather than Exhibit 1.01.  

Conflict Minerals – Motion to Stay DENIED

Posted in Conflict Mineral Compliance, Legal Challenges, News and Analysis

In a ruling today, May 14, the Court of Appeals denied the emergency motion to stay the Conflict Minerals Rule.  So, companies should complete their analysis and, if necessary, their drafting of Form SDs and Conflict Minerals Reports to be ready to file by the June 2 deadline.  However, remember that on May 2, the SEC issued a partial stay of the Conflict Minerals Rule.  This partial stay implements the substance of the statement of the Director of Corporation Finance that modified the reporting requirements and was released on Tuesday, April 29th.  Our  blog post of April 29th  summarizes the SEC Statement. 

The emergency motion to stay was filed by the National Association of Manufacturers, the US Chamber of Commerce, and the Business Roundtable on May 5.

Conflict Minerals Legal Challenge — SEC, NAM, Industry Coalition and Amnesty International Briefs Filed

Posted in Conflict Mineral Compliance, Legal Challenges, News and Analysis

Between May 8 and May 13, briefs on the trade associations’ emergency motion for stay were filed by the SEC, the trade association petitioners, an industry coalition, and Amnesty International.  Two steps remain —   First, the oral argument in American Meat Institute, which is set for May 19.  American Meat Institute is a case involving a First Amendment issue related to the one in the conflict minerals case.  Second, the decision by the Court of Appeals on the trade associations’ emergency motion for stay, which was requested to be made by May 26 (just one week before the conflict minerals June 2 filing deadline).    

SEC Reply Brief

The SEC filed its brief opposing the trade associations’ emergency motion for stay on Friday, May 9.  In the “Background” section of the brief, the SEC described the disclosure that it expects issuers to provide as a result of the partial stay it issued on May 2, 2014.   As it did in its partial stay, the SEC explained that its stay of the portion of the Rule that would have required companies to categorize products as “not found to be ‘DRC conflict free’” would avoid the risk of First Amendment harm.  The SEC went on to argue that the disclosure of a company’s reasonable country of origin inquiry and due diligence efforts would have value as it would “bring greater public awareness of the source of issuers’ conflict minerals and [ ] promote the exercise of due diligence on conflict minerals supply chains.”     

Trade Associations’ Reply in Support

The trade associations’ reply in support of their emergency motion was filed today, May 13th.  In their brief, the trade associations argued that without the required description of products as “not found to be ‘DRC conflict free,’”  “the current Rule utterly fails to link any issuers to armed groups, which was the whole reason for the Rule in the first place” (emphasis in original).   As has been noted by many companies now struggling to draft their first reports, the disclosures remaining after implementing the SEC’s partial stay do not show which issuers are sourcing from mines controlled by armed groups and which issuers are sourcing from “other, wholly legitimate mines in the region that are not controlled by armed groups.”  The trade associations argued that it is not possible to accomplish the intent of Congress without the “unconstitutional threat of shaming.”

Amicus Briefs

Industry Coalition — On May 8th an industry coalition consisting of American Coatings Association, American Chemistry Council, Can Manufacturers Institute, Consumer Specialty Products Association, Foodservice Packaging Institute, North American Metal Packaging Alliance, Inc., and The Society of the Plastics Industry filed an amicus brief supporting the trade associations’ emergency motion for stay.   In its brief, the industry coalition requested that the Rule or at least the June 2, 2014 filing deadline be stayed “until all litigation regarding the Rule has been completed and the SEC clarifies what information must be included in any Form SDs and conflict minerals reports.”  The industry coalition argued that alternative disclosure requirements need to be developed and that the SEC Statement from April 29 did not provide clear guidance on what companies must include in their reports in the wake of the Court of Appeals decision.

Amnesty International –  Finally, Amnesty International filed a brief in opposition to the motion for stay on May 9th.  Amnesty argued that a stay of the Rule would “harm investors and consumers like Amnesty International who have a strong interest in using the information disclosed under the Conflict Minerals Rule.”   They did not elaborate on precisely how they would use that information, but other NGOs have indicated that they will review and score companies’ disclosure and report their results in order to pressure companies to alter their sourcing practices.    

As we wait for the Court’s decision on the emergency motion for stay and for the argument of American Meat Institute, companies should be aware that if they file their Form SDs and Conflict Minerals Reports before May 26, those filings may include disclosures that will not ultimately be required.  Stay tuned for the results of these proceedings.

Second Form SD and Conflict Minerals Report Filed

Posted in Conflict Mineral Compliance, Legal Challenges, News and Analysis

Today, Monday May 12, the second Form SD and Conflict Minerals Report was filed with the SEC by Affymetrix, Inc.  Affymetrix described itself as a “provider of life science products and molecular diagnostic products.” 

Consistent with our usual practice, we will not provide a critique of the filing here.  However, it is worth noting that, like the Siliconware filing in April, this filing also attempts to use the product label of “DRC conflict undeterminable” — which, according to the SEC’s Partial Stay, is not required for the calendar year 2013 disclosure.  This underscores the importance of being familiar with the most recent SEC guidance and court rulings before finalizing disclosure.  And note, it is possible that there will be further decisions made by the Court of Appeals and by the SEC before the June 2 filing deadline.  Therefore, by waiting a couple of weeks to file, companies may have additional guidance and may be able to take advantage of reduced requirements or clarifications when preparing their final drafts of disclosures.

We will continue to report filings, SEC actions, and decisions in connection with the legal challenge.

Conflict Minerals Rule Weekly Recap #76 – April 25, 2014

Posted in Weekly Recaps
April 25, 2014 – May 2, 2014
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.

SEC Releases Statement on Conflict Minerals Rule

Last week, the SEC’s Director of the Division of Corporation Finance released a statement on the effect of the Court of Appeals decision on the conflict minerals rule.

In its statement, the SEC indicated that it expects companies to file reports by the June 2, 2014 filing date and stated that those reports “should comply with and address those portions of Rule 13p-1 and Form SD that the Court upheld.”

For more information, see Dynda’s blog post titled URGENT – SEC Releases Statement on Conflict Minerals Rule.

Minnesota State Bar Association Adopts Conflict-Free Minerals Policy

According to an Enough Project blog post titled Minnesota Lawyers Support Conflict-Free Initiative, last week the Minnesota State Bar Association (MSBA) adopted a conflict-free minerals policy.

The MSBA’s resolution reads as follows:

Therefore, be it resolved that the MSBA support the efforts of companies to purchase conflict-free minerals and support transparent supply chains in the DRC;

Be it also resolved that the MSBA will purchase, and encourage MSBA members to purchase, electronics products from the high ranking companies noted in the Enough Project’s Conflict Minerals Company Rankings.

The Enough Project blog post notes that lawyers interact with electronics on a daily basis (whether it be reading and responding to e-mails on a mobile phone or drafting a brief on a laptop computer) and because they are educated consumers, they can encourage responsible practices in the electronics trade.

Conflict Minerals — Industry Groups File Motion For Full Stay in Response to SEC Partial Stay

Posted in Conflict Mineral Compliance, Legal Challenges, News and Analysis

On May 2, the SEC issued a partial stay of the Conflict Minerals Rule.  This partial stay implements the substance of the statement of the Director of Corporation Finance that was released on Tuesday, April 29th.  Our  blog post of April 29th  summarizes the SEC Statement. 

As they indicated they would, the trade groups that challenged the Conflict Minerals Rule filed a motion today with the D.C. Court of Appeals seeking a stay of the implementation of any portion of the Conflict Minerals Rule. 

The groups argued that the required filings (as modified by the SEC’s partial stay) will not accomplish the objectives of Dodd-Frank Section 1502 without the “compelled speech” that is no longer required.   They requested that the Conflict Minerals Rule be stayed until the District Court (to which the case was remanded) makes a decision regarding the appropriate remedy.   The groups asked for a decision on their motion by May 26 – just 7 days before the first conflict minerals disclosures are required to be filed with the SEC.

URGENT — SEC Releases Statement on Conflict Minerals Rule

Posted in Conflict Mineral Compliance, Legal Challenges, News and Analysis

On Tuesday, April 29, 2014, Keith Higgins, the Director of the Division of Corporation Finance, released an eagerly awaited statement on the effect of the Court of Appeals decision on the conflict minerals rule.  Two weeks ago, the Court of Appeals found that the conflict minerals rule violated the First Amendment when it required reporting companies to report and post on their websites that any of their products have “not been found to be ‘DRC conflict free.’”   Further, the statement pointed out that the Court specifically noted that there was no “First Amendment objection to any other aspect of the conflict minerals report or required disclosures.” 

As a result of that reading of the Court’s decision, the SEC indicated that it expects companies to file reports by the June 2, 2014 filing date, and stated that those reports “should comply with and address those portions of Rule 13p-1 and Form SD that the Court upheld.”  According to the statement, that means:

  • Companies filing only the Form SD (without any Conflict Minerals Report) must disclose their RCOI and briefly describe their inquiry.
  • Companies that are required to file the Conflict Minerals Report must describe their due diligence.
  • No product descriptions are required in a Conflict Minerals Report. But, for products that would have been identified as either “DRC conflict undeterminable” or “not found to be ‘DRC conflict free,’” companies are required to disclose the smelters/refiners, the country of origin,  and the efforts to determine the mine or location of origin of the conflict minerals in those products.
  • Although companies are not required to use product descriptions, they are permitted to do so if they wish.
  • Until further notice, no independent private sector audit is required unless a company chooses to describe products as “DRC conflict free.”

For the time being, we urge you to complete your inquiries, diligence, and the drafting of any required reports with this new guidance in mind.  However, be aware that the trade associations that challenged the rule or the district court may act in response to this statement by the SEC.  No doubt, this will not be the last word on how companies should comply with the conflict minerals rule.

SEC Commissioners Issue Joint Statement on Conflict Minerals Rule

Posted in Conflict Mineral Compliance, Legal Challenges, News and Analysis

Today, two SEC Commissioners issued a joint statement indicating that they believe that the effectiveness of the conflict minerals rule should be stayed pending the final outcome of the legal challenge because they believe that the district court could conclude that the entire conflict minerals rule is invalid.  

In part, they said:

  • “The First Amendment concerns permeate all the required disclosures, not just the listing of products that have not been determined to be DRC conflict free.” They explained that a description of a company’s due diligence procedures would imply that it may have “blood on its hands” (quoting language from the Court of Appeals decision).
  •  The due diligence process that might be required to be included in a company’s disclosure if the rule is implemented is “not severable from the unconstitutional scarlet letter of not DRC conflict free.”
  • “Marching ahead with some portion of the rule that might ultimately be invalidated is a waste of the Commission’s time and resources…and a waste of vast sums of shareholder money. ”

Then later in the day, there were reports that the SEC was planning to implement the portions of the conflict minerals rule that were not struck down by the Court of Appeals decision on April 14th.   It is unclear whether that implementation would require descriptions of products as “DRC conflict undeterminable,”  despite the fact that such a label indirectly states what was found to be a violation of the First Amendment — that the reporting company was not able to determine that the product is DRC conflict free.  

The sequence and timing of the joint statement and the reports about the SEC’s expected action are interesting to say the least.  Observers expect that the SEC will announce its decision soon. 

Stay tuned.  And in the meantime, we suggest that you continue your inquiries, due diligence and drafting of disclosures so that you are ready to respond quickly as this develops further.

Conflict Minerals Rule Weekly Recap #75 – April 18, 2014

Posted in Weekly Recaps
April 18, 2014 - April 25, 2014
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.

KPMG: Conflict Minerals and Beyond: Part Four – Reporting and Disclosure

We have been following KPMG’s “Conflict Minerals and Beyond Series” for quite some time. Last summer, we highlighted the first three parts to the conflict minerals series. Last week, KPMG released its fourth and final part of the series titled Reporting and Disclosure.

According to KPMG, “[t]his report is intended to provide an introductory guide that companies should consider in preparing for the first filing requirements due on June 2, 2014. It includes case studies of companies that have been working on conflict minerals – offering insights into challenges, lessons learned, and ideas for developing a conflict minerals program.”

Reuters: Congo Province May Begin Exporting Certified “Conflict-Free” Minerals Soon

According to Peter Jones of Reuters, the “DRC’s tin producing North Kivu province may begin exports of certified ‘conflict-free’ minerals as soon as next week after the roll-out of a new barcode tagging scheme.”

Mr. Jones explains, “The new certification scheme organized by the tin industry body ITRI, which was rolled out in North Kivu in early March, aims to revive production by classifying mines according to a ‘traffic-light’ code – green for ‘conflict free’, yellow for unclear, and red for mines in violence-plagued zones.”

Emmanuel Ndimubanzi Ngoroba, head of Congo’s division of mines in North Kivu, informed Mr. Jones, “We’ve validated 17 mining sites in North Kivu as green, meaning conflict free.”

For more information, see Mr. Jones article titled Congo Province Poised to Start Certified “Conflict-Free” Tin Exports.

U.S. Lawmakers Urge SEC Chair Mary Jo White Not to Delay Implementation of the Conflict Minerals Rule

Twelve Democratic Senators and Representatives, led by Senator Dick Durbin (D-IL), sent a letter to SEC Chair Mary Jo White insisting that the SEC refrain from delaying the initial year reporting deadline of June 2, 2014.

The letter states, “With the Securities and Exchange Commission’s Final Rule on Conflict Minerals now fully upheld by the United States District Court for the District of Columbia and with that decision largely affirmed by the United States Court of Appeals for the District of Columbia Circuit, we write to urge that all due diligence and other reporting requirements due on the May 31, 2014, initial filing deadline move forward as promulgated.” The letter goes on to state, “We urge the SEC to continue implementation of this rule in light of the judicial validation of both the underlying statute and the SEC’s promulgated rule.”

Earlier this month, a federal court of appeals upheld the due diligence requirements of the rule, but found that part of the rule violated the First Amendment and remanded the case to the district court for further proceedings. Because of the uncertainty about the implications of the ruling and the pending argument in another case in which the First Amendment standard of review is being considered, the SEC could opt to stay the rule until more clarity can be provided and the other First Amendment case is decided.

A copy of the letter can be found on Senator Durbin’s website.