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Conflict Minerals Law

The Source for Legal Insights & Analysis on Conflict Minerals Compliance

Conflict Minerals Rule Weekly Recap #101 – May 4, 2015

Posted in Weekly Recaps
April 24, 2015 – May 1, 2015
The summaries provided in this Weekly Recap do not necessarily represent the views of Squire Patton Boggs (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.

As Conflict Minerals Reporting Deadline Draws Near, Conflict Minerals Filings Begin Rolling In

As of the publication date of this blog post, we will be less than a month away from the deadline to file your 2014 Form SD and Conflict Minerals Report, if applicable, for reporting year 2014. For those counting, this year’s deadline is Monday, June 1, 2015, since May 31st falls on a Sunday.

Recently, companies have already begun filing their Form SD’s and Conflict Minerals Reports. Just last week, Chico’s FAS, Inc., Viasystems Group, Inc. and Micronet Enertec Technologies, Inc. filed their Form SD’s and Conflict Minerals Reports with the SEC.

We make no comment on these filings and our acknowledgement does not necessarily serve as an endorsement of the filings, but we bring these to your attention as you are presumably in the midst of putting the final touches on your respective conflict minerals filings and may be interested in seeing examples of other filings.

NGOs’ Report Alleges Widespread Failure to Comply with Conflict Minerals Rule, Others Refute Report

In a report titled Digging for Transparency, Global Witness and Amnesty International analyzed 100 conflict minerals reports and claim that almost 80% of companies “failed to meet the minimum requirements of the U.S. conflict minerals law.” Further, the NGO’s stated that “only 16 percent go beyond their direct suppliers to contact, or attempt to contact, the smelters or refiners that process the minerals.”

Elm Sustainability Partners LLC, a provider of conflict minerals advisory services, had this to say about the report, “It is our view that the report and its conclusions take liberties with facts and interpretations of the legal mandate.  While Global Witness and Amnesty International may have certain desires for the content of the SEC filings, that does not make for noncompliance with the legal mandates.”

To read more on Elm Sustainability’s analysis of the report, please see its blog post here.

We agree that much of what the NGO’s criticize companies for not doing is not actually required by the Rule, the Instructions to Form SD, or the existing SEC guidance. But, the report is being widely quoted, and companies’ compliance efforts are being mischaracterized. On the other hand, the report gives companies a clear view of what Global Witness, Amnesty International and other NGO’s hope to see in the calendar year 2014 conflict minerals disclosures.

NGOs Update Expectations for Upcoming Conflict Minerals Filings

In September of 2013, Dynda and I highlighted Responsible Sourcing Network’s and the Enough Project’s paper, which detailed certain stakeholders’ expectations about the form and content of a company’s Form SD and Conflict Minerals Report.

Since then, the Responsible Sourcing Network has released additional guidance, including its latest Indicators Shortlist which was published in time for the second round of conflict minerals disclosures. Per Responsible Sourcing Network’s statement accompanying the release of guidance, the NGO stated “this indicator set provides a measurement tool to track and compare activities with a clear and easily replicable methodology that can be used by investors.”

As we did in September 2013, we remind companies in certain industries with active stakeholders that they should look to this paper to anticipate certain stakeholders’ expectations and demands when preparing this round of conflict minerals filings.

European Parliament Committee Votes for a Mandatory System for Conflict Minerals Importers

Posted in News and Analysis

On April 14, the International Trade Committee of the European Parliament (INTA) voted on the amendments to the EU’s conflict minerals regulation that were proposed by its members. The INTA committee adopted an amended report strengthening the system of due diligence for conflict minerals importers that was initially proposed.

The MEPs voted in favor of a mandatory system of certification for EU smelters and refiners. They rejected amendments seeking to extend this mandatory scheme to those who purchase minerals for the production of goods such as mobile phones and other electronics.

The draft regulation covers tin, tantalum and tungsten, their ores, and gold originating in conflict-affected and high-risk areas. Amendments proposing the extension of the scope of the legislation to other minerals and metals were rejected by the INTA committee.

Furthermore, MEPs approved the establishment of a “European responsible importer” label for importers that comply with the regulation and “European certification of responsibility” for “downstream operators.”

The draft regulation adopted by the INTA committee still needs to be approved by the European Parliament as a whole. This vote will take place in the European Parliament’s plenary session in May.

European Parliament Debates the Proposed Conflict Minerals Regulation

Posted in News and Analysis

On March 19, the International Trade Committee of the European Parliament (INTA) met to debate the amendments to the conflict minerals regulation that were proposed by its members. The amendments reflect the views of the political parties that have been expressed in the ongoing discussions in the committee. The debate focused on the question of mandatory versus voluntary self-certification procedures for importers of minerals from conflict affected areas. The other key issue that MEPs raised in the discussion was a list naming responsible importers. An amendment to accomplish this was proposed by the committee’s rapporteur, Luliu Winkler (EPP, Christian Democrat). The representative from the European Commission responded to the points raised in the debate and restated the Commission’s view that the mandatory system would disrupt supply chains and would not lead to a balanced and reasonable solution.

In March, two other European Parliament committees considered the draft regulation. On March 9, the Development Committee (DEVE) adopted its opinion on the proposed conflict minerals regulation. The DEVE opinion would change the proposed system of due diligence from voluntary to mandatory. The DEVE opinion is now annexed to the INTA report, and will be considered by the INTA Committee in its final vote on the issue. On the same day as the DEVE vote, the Committee on Foreign Affairs (AFET) voted on its own draft opinion. However, AFET failed to reach consensus, and the draft opinion did not receive the required votes to be adopted.

The next step in the legislative process is the INTA meeting on April 14, at which the INTA amendments to the draft report, including the annexed DEVE opinion, will be voted on in its entirety. The final report that emerges from this vote will then be voted on in the plenary session of the European Parliament in May.

Conflict Minerals Rule Weekly Recap #100 – March 30, 2015

Posted in Weekly Recaps
March 20, 2015 – March 27, 2015
The summaries provided in this Weekly Recap do not necessarily represent the views of Squire Patton Boggs (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.

Reuters: SEC Spent $2.75 Million on Conflict Minerals Rule

Sarah Lynch of Reuters reports that the SEC revealed earlier this month that it spent “about $2.75 million to write, implement and defend itself against legal challenges to its ‘conflict mineral rules.'”

SEC Chair White revealed this in response to a request from the U.S. House Financial Services committee.

According to Reuters, the amount represents:

  • 17,000 hours since July 2010 writing the rule at a cost of  about $2.1 million
  • 4,000 hours defending the rule at a cost of $520,000
  • $128,000 spent on updating its system to accept conflict minerals disclosure reports

Conflict Minerals Rule Weekly Recap #99 – March 23, 2015

Posted in Weekly Recaps
March 13, 2015 – March 20, 2015
The summaries provided in this Weekly Recap do not necessarily represent the views of Squire Patton Boggs (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.

Elm Sustainability Partners Meets with Conflict Minerals SEC Staff

Elm Sustainability Partners met with the SEC staff responsible for conflict minerals disclosure requirements earlier this month and provided a recap of its meeting in its article titled SEC Staff Updates Elm on Conflict Minerals Disclosures.

The meeting addressed the following:

  • Last year, the SEC staff noted that some issuers conflated their reasonable country-of-origin inquiry (RCOI) with the due diligence requirements, as reported by Bloomberg BNA. Elm reports that “[t]he Staff clarified that the comments were aimed at Form SD filers only.”
  • The SEC staff noted that we can expect another round of Conflict Minerals FAQs of approximately 10 questions, but did not provide any indication of timing. The previous conflict minerals FAQs can be found here.
  • The SEC staff confirmed its position described in the Keller & Heckman LLP June 2014 letter regarding the treatment of chemical compounds under the conflict minerals rule.

For more insight, see the Elm article titled SEC Staff Updates Elm on Conflict Minerals Disclosures.

Fast Company Highlights Intel’s Drive to Make World’s First Microprocessor Conflict Free,  Goal to Make Entire Product Line Conflict-Free in 2016

In 2014, Intel Corporation announced that it had built the world’s first microprocessor entirely from conflict-free minerals. Next year, Intel’s goal is for all of its products to be conflict-free.

Fast Company, in its April 2015 issue, recently highlighted Intel’s drive to make the world’s first conflict-free microprocessor and its goal to make its entire product line conflict-free in 2016 in its article titled Intel’s Carolyn Duran Has a New Way of Avoiding Conflict at Work.

Fast Company noted that Carolyn Duran, Intel’s Supply Chain Director, “visited 91 smelters in 21 countries, using Intel’s purchasing power to put pressure on smelters…” Duran stated, “We ask for due diligence to not only understand where the material came from, but also that it’s not inadvertently or directly funding conflict.”

To read the entire article, please see Intel’s Carolyn Duran Has a New Way of Avoiding Conflict at Work.

Conflict Minerals Rule Weekly Recap #98 – March 16, 2015

Posted in Weekly Recaps
March 6, 2015 – March 13, 2015
The summaries provided in this Weekly Recap do not necessarily represent the views of Squire Patton Boggs (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.

Key European Parliament Committee Adopts Mandatory EU Conflict Minerals Scheme

ITRI, a non-profit organization that represents the tin industry, reported that on March 9, 2015, the European Parliament Development Committee, one of three key European Parliament committees, adopted a mandatory European Union conflict minerals scheme, as part of the Parliament’s legislative process prior to the final parliamentary vote in May.

According to ITRI, the Development Committee “stressed that the new law should apply to undertakings ‘at all points in the minerals and metals supply chain’ which may use or supply minerals or metals from problematic areas, thus extending its scope considerably from importers of mineral and metal.” The Development Committee’s adopted position is in stark contrast to the voluntary scheme outlined in the March 2014 proposed regulation.

ITRI then noted that the opinions of the Foreign Affairs and Trade Committees are not yet available and that a final vote of the European Parliament as a whole is scheduled for May.

On the same topic, Chemical Watch, in a separate article stated that “…as the lead committee in charge of the dossier, the International Trade Committee will have the last word on the legislative file [despite the Development Committee’s position], before it goes for a vote in the Parliament’s plenary in May.”

Update on the EU’s Proposed Regulation on Conflict Minerals – Report on February 23 Meeting of INTA Committee

Posted in News and Analysis

The European Parliament Committee on International Trade (INTA) met on February 23 to discuss their draft report on the proposed regulation on conflict minerals. This meeting followed the public hearing held by the committee in December 2014.

The debate opened with the rapporteur, Iuliu Winkler, a Romanian member of the European Parliament (MEP) from the Christian Democrat parliamentary group (EPP), presenting his draft report on the regulation to the committee. MEPs were then invited to express their views and some conflicting opinions emerged. Mr. Winkler’s report reflected broad support for the proposed regulation. In particular, he approved the voluntary approach to certification and called for some changes to ensure cooperation of companies and efficiency of procedure. His report suggests that companies should be incentivized to comply with the self-certification system and a list of responsible importers should be drawn up and maintained by member states and the European Commission. This would provide visibility to complying companies and importers. Furthermore, Mr. Winkler stated that small and medium-sized enterprises (SMEs) should be protected in the process and should be offered assistance so that they can easily comply with the system.  Support for this approach was expressed by the conservative group (ECR), who favored a list of responsible importers and a voluntary approach, and the liberal group (ALDE) who endorsed the list approach and further called for a system that does not impair the competitiveness of European companies.

In contrast with these views, a representative from the Socialist group (S&D) criticized the voluntary nature of self-certification and stated that there are no incentives provided in the proposal for companies to change their procedures. She called for an obligatory reporting procedure extending throughout the supply chain which would ensure compliance of companies and assure consumers in the EU that their products are responsibly resourced. In support of this view, representatives from the far left party (GUE/NGL) favored a mandatory approach while the representative from the Green party called for a binding system that also encompasses manufactured goods. In this regard, the representative from ALDE emphasized the importance of binding legislation at EU level and called for a mandatory system for key players only, i.e. smelters and refiners.

The MEPs will now propose amendments to the draft report and these will be debated in the INTA committee meeting on March 19. The draft report will then be voted on between April 13 and 14. Following this vote, the draft report adopted by the committee will be voted on by the entire Parliament in their plenary session to take place between May 28 and 31. At this stage, should the draft proposal be approved, the European Council (made up of the member states) will begin their review of the draft proposal. The Council may adopt or propose amendments to the draft, which will become law only when both the Council and the Parliament have agreed on the final text.

Conflict Minerals Rule Weekly Recap #97 – March 9, 2015

Posted in Weekly Recaps
February 27, 2015 – March 6, 2015
The summaries provided in this Weekly Recap do not necessarily represent the views of Squire Patton Boggs (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.

House Republicans Urge Chair White to Drop Conflict Minerals Legal Challenge

Last fall, the Court of Appeals for the District of Columbia granted the SEC’s petition for rehearing of the Court’s April 2014 decision that found that certain disclosure requirements of the conflict minerals rule violated the First Amendment.

According to a Washington Post/Bloomberg article titled Republicans Tell SEC to Drop Fight Over Conflict-Minerals Rule, “House Financial Services Committee Chairman Jeb Hensarling and three other lawmakers urged SEC Chair Mary Jo White to abandon the agency’s appeal of a court decision that found parts of the conflict-minerals regulation unconstitutional.”

The article further states that in their letter, the House Republicans cited Chair White’s own remarks in October 2013 at the 14th Annual A.A. Sommer, Jr. Corporate Securities and Financial Law Lecture, Fordham Law School, where she said “But other mandates, which invoke the Commission’s mandatory disclosure powers, seem more directed at exerting societal pressure on companies to change behavior, rather than to disclose financial information that primarily informs investment decisions….But, as the Chair of the SEC, I must question, as a policy matter, using the federal securities laws and the SEC’s powers of mandatory disclosure to accomplish these goals.”

Chemical Watch: “Key” MEP Backs EU Conflict Minerals Draft Regulation Voluntary Approach

Chemical Watch, according to its article titled Key MEP Backs Voluntary Approach on Conflict Minerals, is reporting that “a key member of the European Parliament’s lead committee on the European Commission’s conflict minerals proposals has backed its preference for a voluntary, rather than mandatory, mechanism.”

Chemical Watch further provides that Iuliu Winkler, the dossier’s parliamentary rapporteur, reasoned “a voluntary scheme would allow the EU to work more effectively with other supply chain due diligence schemes already set up by business associations.”

Chemical Watch then provided an anticipated timeline of the EU draft conflict minerals regulation: “A vote in the International Trade committee on the final form of the report is scheduled for 14 April. It will then be submitted to a Parliament plenary vote in May, after which Mr. Winkler is expected to be given a mandate to negotiate with the EU Council of Ministers on the final form of the Regulation.”

CFSI Updates White Paper Titled “Five Practical Steps to Support SEC Conflict Minerals Disclosure”

The CFSI has updated its white paper titled “Five Practical Steps to Support SEC Conflict Minerals Disclosure.”

According to the press release accompanying the white paper, the CFSI white paper is designed to “provide companies and other stakeholders with useful approaches and clear, practical steps to improving their company’s conflict minerals program. It reflects the latest thinking about the relationship between the OECD Guidance and the SEC Rule and suggested activities companies may undertake when implementing their compliance programs.”

This white paper will certainly be useful, especially for downstream companies, as it provides practical guidance for companies preparing for their second round of conflict minerals filings this spring.

The white paper can be found here.

Conflict Minerals Rule Weekly Recap #96 – March 2, 2015

Posted in Weekly Recaps
February 20, 2015 – February 27, 2015
The summaries provided in this Weekly Recap do not necessarily represent the views of Squire Patton Boggs (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.

Catholic Leaders Update Statement on Conflict Minerals

In our weekly recap #84 (October 2014), we highlighted The International Cooperation for Development and Solidarity’s (CIDSE) statement on conflict minerals.

Ahead of the European Parliament Committee on International Trade’s (INTA) exchange of views on its draft report on responsible minerals sourcing, CIDSE updated its October 2014 statement on conflict minerals, which now has 125 church leader signatures.

In the updated statement, the church leaders say that they want the EU legislation to:

  • Be mandatory in nature.
  • Cover more than just importers into the EU.
  • Include other natural resources such as copper and diamonds.

To view the updated February 2015 statement, please see the CIDSE press release.

H.C. Starck Announces That Its Tantalum Supply Chain is Conflict Free

Through a press release, dated March 2, 2015, H.C. Starck, a self-described leading manufacturer of technology metals and advanced ceramics, announced that its tantalum supply chain has achieved conflict-free status.

Andreas Meier, President and CEO of H.C. Starck stated, “We are proud of the re-certification because it proves the success of our sustainability efforts in procuring raw materials.”

EU’s Proposed Regulation on Conflict Minerals – Part II

Posted in Conflict Mineral Compliance, News and Analysis, Resources and Tools

Editors Note: A prior version of this blog post incorrectly attributed the sentence in bold below. We sincerely apologize for any confusion this may have caused. This version has now been corrected. 

Views on the Draft Regulation

The draft EU conflict minerals regulation is a voluntary system of certification, which covers imports of the minerals into the EU. The US rule, in contrast, is mandatory and applies to any US reporting company that manufactures products or contracts with others to manufacture products for it. The European Commission has been critical of the US rule, which in its view has encouraged companies to divert their purchases away from central Africa to avoid the cost and effort of complying with the due diligence reporting requirements.

It appears that European industry welcomes the voluntary nature of the reporting requirements. This was confirmed by a public consultation conducted by the Commission in July 2013, where it was suggested that self-certification will increase transparency for the sourcing of minerals. At the December 5, 2014 INTA committee public hearing, many MEPs and industry representatives generally supported the proposed regulation and were in favor of the voluntary self-certification element of the proposal. However, a representative speaker from Eurometaux, an industry group, did note that the proposed EU regulation “provides a number of uncertainties that might harm the competitiveness of European companies.”

Not surprisingly, there are those that would prefer a mandatory approach to the reporting requirements. Critics of the EU proposal, including NGOs and civil society groups, have argued that the reporting requirements should be mandatory, ensuring compliance by mining companies and creating what they call a “harmonious” approach to the issue between the EU and the US. At the INTA committee hearing, the representative from Global Witness called for mandatory due diligence requirements and for the proposal to cover all minerals entering the EU (whether as raw materials or in products), not only the imports of the minerals as currently proposed.

Discussions and debates have also taken place in the Parliament over which minerals should be covered by the proposal. It has been suggested that the regulation should cover other minerals, such as copper, jade and coal.

As a result of the Parliament elections in May 2014, the composition of the Parliament has become more sharply divided between right and left, with the S&D (Socialists & Democrats) and the EPP (Christian Democrats) as the two majority parties. The Liberal Group (ALDE) lost most of their MEPs in the May 2014 elections. This change in composition has led to a Parliament that is more divided on issues such as conflict minerals, with the industry-friendly, right-leaning parties supporting the current relatively “business-friendly” proposal, while the Greens and left-leaning parties opposing it. The Liberal Group is divided and therefore may hold the deciding vote on the proposed conflict minerals regulation.

Outlook

There is a great deal of uncertainty regarding the future of the proposed regulation and the timing of the proceedings. Given the fact that both the Parliament and the Council, as co-legislators, have the right to propose amendments, the regulation that is ultimately adopted could look quite different from the draft regulation as originally proposed by the Commission.

The Parliament is concerned with the mandatory or voluntary nature of the proposal, the type of businesses subject to the regulation, the minerals covered and the geographical scope of the proposed regulation. The Council’s Working Party on Trade Questions has discussed the draft regulation since April 2014, but it is too early to tell what issues will be of greatest concern to the Council.

We will continue to post updates as the committees of Parliament, the Council and the plenary Parliament consider the proposed regulation. One thing is clear: there is significant disagreement as to which provisions will be included in the final EU conflict minerals compliance regulation.