The New EU Conflict Minerals Regulation — Is It Something To Be Thankful For?

Since the US Presidential Election 2 weeks ago, some have been looking forward to a possible repeal of the US conflict minerals rule by a newly-elected Trump Administration. But, the completion of the negotiations on the new EU conflict minerals regulation makes it clear that companies should not slow their due diligence efforts on the source and chain of custody of the tin, tantalum, tungsten and gold in their products.

The negotiations of the EU conflict minerals regulation concluded yesterday (November 22, 2016) through the so-called “trilogue negotiations.” This is another major step toward the final adoption of the legislation and the establishment of an EU legislative framework for conflict minerals.

How Did We Get Here? — After the European Parliament and Council agreed on their respective negotiating mandates, the trilogue negotiations started. The EU’s trilogue negotiations are held between the European Commission, European Parliament and Council. In June 2016, an important breakthrough occurred when these three institutions reached a political understanding on certain contentious elements of the conflict minerals legislation. At that point in the negotiations, the obligations on upstream companies in the conflict minerals supply chain were set.

Once this political understanding was reached, the negotiations continued on a more technical level. It is important to note that the Netherlands led the Council’s negotiations until June 2016 until Slovakia assumed the Council Presidency role in July 2016.

What Just Happened? — The negotiations among the three institutions continued for several months. Ultimately, on November 22, 2016 the trilogue negotiations were “successfully” concluded. Under the new regulation, starting on January 1, 2021, an estimated 95 percent plus of the minerals processed in smelters or refiners within the EU will be required to go through a due diligence process. Large manufacturers in the EU will be obliged to disclose their strategies for monitoring the sources of their minerals.

One of the controversial issues that was battled through until the end was whether the due diligence system would be mandatory or voluntary. The European Parliament finally won the battle with mandatory due diligence requirements for importers of conflict minerals from all conflict-affected and high-risk areas (not just central Africa) making it into the final text. The due diligence review will be required to be in accordance with the OECD guidelines. Then, authorities from the EU Member States themselves will be responsible for ensuring and enforcing compliance. They will determine any sanctions for non-compliance as well.

One important accommodation was made in the agreement that was reached. Smaller importers of minerals and metals (for example, jewelers and dentists) will not be obliged to comply with the mandatory due diligence requirements.   The European Commission will, however, closely monitor the gold market and EU gold imports in an attempt to assure that efforts on responsible sourcing are not defeated by these exemptions.

An additional term that is now part of the final text is a disclosure regime for large EU manufacturers and sellers. This provision will apply to large EU firms that are subject to the EU law on non-financial reporting for their purchases of tin, tantalum, tungsten and gold for use in their products. This term puts into place a voluntary reporting mechanism to encourage these companies to report on their sourcing practices by addressing certain performance indicators.  The reports would be made to an EU registry.

Finally, a review clause has been introduced into the regulation, whereby the European Commission will review and report to the European Parliament and Council on the effectiveness of the new regulation two years after the implementation date and every three years thereafter. More specifically, the European Commission’s effectiveness report will cover both the impact of the regulation on the ground in conflict-affected and high-risk areas as well as compliance by EU companies. The report will also propose possible additional measures if companies’ due diligence efforts are deemed to be insufficient.

What Happens Now? — While the trilogue negotiations have concluded, there are still a few procedural steps to take before the regulation becomes official EU legislation. The legislative text as agreed during the trilogue negotiations (in English) will be submitted to judicial linguists who will review the text for legal consistency and translate it into all EU official languages. Any resulting amendments would consist of only minor linguistic changes which would not alter the content of what was agreed upon in the trilogue negotiations. The judicial linguist process should take a few months. Once this process is finished, the text will be submitted for a final approval by the Council and the European Parliament. The exact timing of the final approval is not known yet, but it is likely to occur during the first quarter of 2017. The conflict minerals regulation will become official EU legislation once it is published at the Official Journal of the EU and will enter into force 20 days after its publication.

  • Dynda A. Thomas (US) and Christina Economides (Belgium)

UK Modern Slavery Act — Let The Posting Begin

Many organizations started voluntarily posting their modern slavery and human trafficking statements months ago. But now, the Modern Slavery Act’s transition period is over, and there are real deadlines to meet.  Covered companies with financial years ending 31 March 2016 must post statements as soon as reasonably practicable but within six months of their financial year end.  For those companies, their deadline for posting a statement was 30 September 2016.   Non-governmental organizations have already started reviewing, scoring and rating posted modern slavery statements.  So, in addition to focusing on the content of the statement, it is important to attend to the Modern Slavery Act’s technical requirements so that the statement is viewed as being compliant.

Here are a few technical requirements to keep in mind:

  • The statement should describe the steps taken by the company during the financial year covered by the statement.
  • The statement must be approved by the Board of Directors.  If the board of directors meets only quarterly, the statement needs to be prepared early enough to meet the Board’s meeting schedule.
  • The statement must be signed by a director. The person signing is intended to be a senior person in the business to assure accountability. So, it is best for the person signing to be a statutory director. Website content is not typically “signed,” so this is an unusual requirement and is sometimes missed.
  • Companies must include a link to the modern slavery statement in a prominent place on their website’s homepage. According to the Home Office Guidance, this means a link that is directly visible on the homepage or part of an obvious drop-down menu on that page. The Guidance recommends a link that uses words such as “Modern Slavery Act Transparency Statement” so that the contents of the link are clear. Website content is important for organizations, and it can be a challenge to meet these posting requirements.  At the very least, it takes time and coordination to implement a homepage link, so that additional time must be built into the compliance schedule.
  • Finally, a UK quoted company should consider how its Modern Slavery Act statement fits in with the Strategic Report and Directors’ Report required by the Companies Act 2006, which requires a report on human rights issues where necessary to understand the company’s business.

Budgeting for Conflict Minerals Compliance: Apps and Platforms — Is That All I Need?

As we approach the end of conflict minerals compliance year 4 (with 3 years of reports behind us), companies are budgeting for how they will address conflict minerals in 2017.  Since the SEC rule took effect, supply chain professionals and in-house lawyers have found that compliance is complicated, time-consuming, and still changing because of the increasing expectations of non-governmental organizations and other stakeholders.  Companies are eager to find a compliance solution that will take less time and fewer resources. The “bad news” is that, although IT and software solutions can be an invaluable tool and provide great value, companies cannot expect to comply with the SEC rule’s requirements solely by entering into a relationship with a strong software provider.

To be sure, software and IT solutions can provide invaluable assistance to companies as they implement and improve their conflict minerals programs.  But, there are many important elements of conflict minerals compliance and reporting that are simply not addressed even by the best IT or software systems.   You will want to make sure that your board and senior management understand that signing the contract with a software provider is the start (and not the end) of your compliance work.  They may need to understand that your budget contemplates additional resources to complete your annual reasonable country of origin inquiry, due diligence, and reporting.  And, it would be wise to continue to include room in your budget for auditors and legal advisors.  (We won’t discuss the independent private sector audit (IPSA) here, but there has been no change since last year and no additional guidance on IPSAs from the SEC.)

IT and software can make supplier outreach and questionnaire efforts more efficient and can help to minimize supplier fatigue.  They can also help with other crucial activities such as:

  • mining of product recipes, bills of material, and material data safety sheets
  • supplier engagement (training and education, automated follow up, determination of country of origin, identification of smelters/refiners)
  • noting gaps and red flags in supplier responses
  • development of audit trail
  • vetting, verifying, and listing of smelter/refiners and determining DRC conflict-free status based on recognized certification programs

But, there are other important elements of conflict minerals compliance and due diligence that are not addressed by IT or software solutions alone.  These elements include:

  • development and implementation of policies
  • consideration of potential countries of origin, which has significant implications for reporting obligations
  • analyzing important details behind certain data summarized by the software provider
  • considering important stakeholder input (investors, customers, NGOs, activists)
  • identifying and addressing possible risks associated with disclosure
  • addressing the elements of the OECD Due Diligence Guidelines not covered by supplier engagement and smelter/refiner identification and vetting
  • protecting proprietary product information and know-how
  • monitoring changes in compliance requirements, guidance and industry norms

As the number of suppliers and scope of due diligence grow, more companies are turning to IT and software solutions to help them with large portions of their supplier outreach, smelter/refiner vetting, responses to customers, and creation of audit trail.  But, there are many elements of conflict minerals compliance that cannot be effectively addressed by a software platform.  It is important to remember that additional resources will continue to be needed to meet the conflict minerals compliance requirements arising out of the SEC rule (and the EU regulation when it is finally rolled out).

SEC Conflict Minerals Rule Legal Challenge is Over – But Not For Good

What Just Happened?

April 7, 2016 was the deadline for filing a petition for writ of certiorari to the US Supreme Court seeking a review of the court of appeals’ decision on the conflict minerals rule.   The SEC did not file the petition, and Amnesty International (the intervenor in the case) did not make the filing either.

In her March 4, 2016 letter to House Speaker Paul Ryan explaining the government’s decision not to file the petition for a writ of certiorari, Attorney General Loretta Lynch walked through key elements of the court of appeals’ decision and offered a glimpse into the next procedural steps for the rule.   First, she recited the court’s decision that the conflict minerals rule’s disclosure requirements:

violate the First Amendment to the extent [they] require regulated entities to report…that any of their products have “not been found to be ‘DRC conflict free.’”

She went on to highlight that the court of appeals’ majority opinion specifically noted that its ruling may not only apply to the conflict minerals rule but also to the statute that required the SEC to create the rule — Section 1502 of the Dodd-Frank Act. It is yet to be determined whether the offending product descriptor (disclosing that a product has “not been found to be ‘DRC conflict free’”) was required by Section 1502.  Therefore, it is yet to be determined whether the court’s judgment about the First Amendment violation will apply to the SEC’s conflict minerals rule and the statute or just the SEC rule.  As a result of the court of appeals’ original decision (which was confirmed in August 2015), the case was to be remanded to the district court “for further proceedings consistent with [the court of appeals’] opinion.”  That remand was put on hold during the appeals process.  So, the remand will now occur, and we can be sure that the issues highlighted in Attorney General Lynch’s letter will be addressed in those proceedings.

Following the August 2015 court of appeals’ ruling, there was a hue and cry by non-governmental organizations and others about the ruling and its implications.  But, that commentary focused more on the impact of the ruling on regulatory disclosure requirements in general than on the need for the specific conflict minerals product descriptor that was found to be unconstitutional.   Some of the commentary expressed concern that few disclosure requirements would survive First Amendment scrutiny and that companies’ free speech claims would now trump any and all disclosure and reporting obligations.  But, the SEC and the Justice Department must not have shared those concerns.

Keep in mind – as noted above, the ruling of the court of appeals was a narrow one. Without going through all the analysis about standards of review for commercial First Amendment cases, the bottom line is that the court of appeals determined that requiring a company to make a statement in an SEC filing posted to its website that its products were “not found to be ‘DRC conflict-free’” was too much under these circumstances.  The decision did not reach conclusions about listing of product ingredients or about point of sale country of origin labeling.  And, the ruling was not a decision about health and safety disclosures or disclosure aimed at economic or investor protection.

What Does This Mean?

What does all this mean for companies that are preparing their calendar year 2015 reports (due by May 31, 2016)?   In short — as of today, the decision of the SEC not to file the petition for a writ does not change what companies should be doing as they work toward this year’s filings.

As of today, the SEC’s existing guidance issued in April 2014, and implemented by the SEC’s May 2014 partial stay of the rule, remains in place.  So, until otherwise advised by the SEC, companies should continue to look to the April 2014 SEC Statement for guidance.

What Are Companies Required to Disclose in Their Conflict Minerals Reports?

Companies must disclose information about their due diligence processes and procedures in their conflict minerals reports. And, as of today (according to the April 2014 SEC Guidance):

  • No company is required to describe its products as “DRC conflict free,” “having not been found to be ‘DRC conflict free,’” or “DRC conflict undeterminable”
  • If a company voluntarily elects to describe any of its products as “DRC conflict free” in its conflict minerals report, it must obtain an independent private sector audit (IPSA) on its due diligence
  • For products that are not described as “DRC conflict free,” companies must disclose smelters/refiners that processed the conflict minerals in those products, if they are known
  • For products that are not described as “DRC conflict free,” companies must disclose country of origin of the conflict minerals in those products, if they are known
  • For products that are not described as “DRC conflict free,” companies must disclose their efforts to determine the mine or location of origin of their conflict minerals
  • The transition period allowing companies to use the “DRC conflict undeterminable” descriptor has expired for most companies. (“Smaller reporting companies” have 2 more years to use this descriptor.)  The SEC has stated informally that, for now, companies may still use this term notwithstanding the end of the transition period.  But, of course, since the SEC has indicated that no specific descriptions are required, any labels or descriptors could be used in the filings.

But, there are nuances to the smelter/refiner, country of origin, and other disclosure requirements.  So, companies are advised to seek guidance from experienced counsel on the specific requirements that apply to them.

The biggest question for this reporting year has been whether an IPSA is required and whether companies are volunteering to obtain IPSA’s even if not required.  If the conflict minerals rule survives review by the district court and the SEC, it is likely that IPSA’s will ultimately be required for companies that file conflict minerals reports.  That could change, of course, as a result of considerations by the district court and the SEC in light of the court of appeals’ decision.  But, according to the existing guidance, for calendar year 2015 reports due in May of 2016, an IPSA is only required if a company chooses to describe a product as “DRC conflict free” in its conflict minerals report.

It seems almost inconceivable that the SEC would change the existing guidance for the calendar year 2015 reports due by May 2016.  Such a change so close to the reporting deadline would be incredibly disruptive and costly, and it would, no doubt, be met by a legal challenge to delay implementation of any such changes.

What is the Next Procedural Step for the Conflict Minerals Rule?

The court of appeals’ decision itself remanded the case back to the district court “for further proceedings consistent with [the court of appeals’] opinion.”  Those proceedings will consider whether the judgment about the First Amendment violation also applies to Section 1502 of Dodd-Frank or only to the SEC’s conflict minerals rule.  And, if revision of the rule by the SEC is eventually required, that process itself would be rule-making.  And, such a rule-making process could result in yet another legal challenge.

So, the initial legal challenge to the SEC’s 2012 conflict minerals rule is over. But, as the rule is remanded to the district court and then possibly to the SEC, more challenges are likely to follow.  Nevertheless, because the EU is developing its own conflict minerals regulation, companies should not stop their investigations and review activities.  Regardless of what happens to the SEC rule, supply chain transparency and detailed sourcing information about tin, tantalum, tungsten, and gold will be required of many companies going forward.

UK Modern Slavery Act 2015 – 2 Weeks Notice

If your organization has a financial year-end of March 31, 2016 and is covered by the UK Modern Slavery Act 2015 (MSA), yours is in the first wave of MSA statements (MSA Statements) that must be published. The MSA Statement will set out what steps your organization has taken during the financial year to ensure that slavery and human trafficking is not taking place in your supply chains or in your own operations. The first MSA Statements that are due will cover efforts undertaken between April 1, 2015 and March 31, 2016 (Year 1).

So, for the most part, steps taken after March 31 (less than 2 weeks from now) will not be relevant to your first MSA Statement. (Remember, for an organization with a financial year-end of April 30, 2016, your first MSA Statement will cover efforts undertaken between May 1, 2015 and April 30, 2016 and so on.) If your organization is in the first wave of MSA Statements that must be published, you do have a bit of time before you need to start drafting your MSA Statement. But, you should consider now whether there are any additional steps you can take before March 31, 2016, so that those steps can be included in your MSA Statement for Year 1.   You are free to include a description of what you plan to do going forward. But, a description of plans is optional and what the MSA requires is information about efforts that were actually undertaken during Year 1.

If you are covered by the California Transparency in Supply Chains Act (California Act) and you have already posted a California Act statement, you need to remember that the MSA is broader and requires more due diligence than the California Act. The MSA requires sellers of products or services with annual turnover of £36 million (approximately $52 million) that carry on a business or part of a business in the UK to disclose their efforts to ensure that slavery and human trafficking is not taking place in their operations or in any of their supply chains (not just their direct supply chains). The disclosure required by the MSA must be published on the organization’s website as soon as reasonably practicable after the end of that financial year. The UK Government guidance urges organizations to publish their statements within 6 months of the year end. For those with a financial year-end of March 31, 2016, your MSA Statements should be published by October 31, 2016.

When we work with organizations, we use our Slavery and Human Trafficking Due Diligence Self-Assessment Checklist to take an initial inventory of the efforts that have already been taken. For organizations with a financial year-end of March 31, 2016, if you have done nothing else, some of the actions outlined below could be taken before the March 31, 2016 deadline and would be a good starting point for your compliance efforts.

Internal Organization — Designate a working group and develop an overall schedule with deadlines.

Communicate with Senior Management and Board — Make an initial report to senior management and board of directors (remember that the MSA Statements must be signed, so the board will need to understand the process and requirements).

Supply Chain — Develop a slavery and human trafficking policy.

Industry Group Involvement — Determine relevant industry groups and investigate their slavery and human trafficking-related activities.

Assess Risk — Consider the level of risk of slavery and human trafficking based on your products, geographic locations, and industry.

Address Supply Chain Management with IT System Solutions — Inventory existing IT systems and their connection to supply chain and suppliers.

Internal Communications – Alert employees and managers to the slavery and human trafficking requirements.

External Communications – Provide initial responses to customers and understand existing supplier engagement efforts to build upon.

Contracts — Review key supply contracts and inventory supplier codes of conduct.

If you’d like more information on the MSA or other responsible sourcing issues, please contact Dynda Thomas, 1-216-479-8583, dynda.thomas@squirepb.com.

 

Conflict Minerals Legal Challenge — Another Extension

The next and last step of the legal challenge of the SEC’s 2012 conflict minerals rule would be for the SEC to file a petition for writ of certiorari to the U. S. Supreme Court.  The deadline for making that filing has been extended again, this time from March 9th to April 7th, 2016.

 

 

EU Conflict Minerals Regulation — What’s Going On?

Many of you are asking what is happening with the EU conflict minerals regulation, what is the likely timing for adopting the regulation, and what should you do now to prepare.

Process — The development of the EU conflict minerals regulation has now entered the final negotiation phase. This phase, known as the “trialogue negotiations,” involves informal meetings between the Council of the EU, European Parliament and European Commission. This phase follows the adoption of the official position by the Council of the EU at the end of December 2015. The position of the Council of the EU is unfortunately not publically available.

The Council’s position was reached during the Luxembourg presidency which ended on 31 December 2015. The presidency of the Council rotates every 6 months between member states and moved from Luxembourg to the Netherlands on January 1, 2016. The issue of conflict minerals has been identified by the Netherlands as one of its priorities with the aim of concluding the negotiations by the end of its term on June 30, 2016. However, the presidency has acknowledged that given the complexity of the issue, a final resolution may not be accomplished until the next presidency, which will be Slovakia.

Timing and Content — The most controversial issue to be resolved continues to be whether the due diligence system will be mandatory or voluntary. This issue was hotly debated in the European Parliament last May. The Parliament voted to adopt many amendments to the Commission’s proposed regulation. It is expected that the discussions between the three European institutions will be difficult because of the divergent views of the Council and the Parliament on several points. We believe that the negotiations will ultimately result in some form of regulation being adopted. But, because a consensus must be reached, the resulting regulation may be a slightly watered-down version of the current European Parliament proposal.  Although the Council is hoping to adopt the regulation by the end of June, it is possible that negotiations will extend into the fall because of the lack of agreement on whether the regulation will be mandatory and because of the need to address assistance to small and medium-sized enterprises if the final regulation covers downstream companies.

Following the adoption of a final regulation, a date will be set for its entry into force. The regulation will be directly and uniformly applicable in all member states from that date, and it will not be necessary for each member state to draft separate legislation to incorporate it into national law. This means that once the trialogue negotiations are completed and a regulation is adopted, it will not take long for companies to feel the pressure to commence their compliance programs.

If the final regulation is mandatory, there will likely be some transition period to allow companies to build up some compliance efforts before the regulation takes effect. The Parliament amendments proposed a 2-year transition period to allow time to create a third-party smelter and refiner audit system.

What To Do Now — The good news is that the due diligence procedures and framework called for in the draft EU regulation are based on the same OECD Guidelines that are used for compliance with the US rule.  So, depending on the strength of your existing program, you may be able to simply expand your existing compliance plan to meet the European requirements.  And, don’t be fooled by the concept of a “transition period.”  It would be wise to start laying the groundwork for compliance as soon as the regulation is finalized because it takes many months to gather the relevant information about your business, your products, and your supply chains.  Regardless of any transition period, putting a good process in place quickly will help you comply with the regulation when it does become effective.

EU Conflict Minerals Regulation — Source Intelligence Webinar

Dynda Thomas will be participating in a Source Intelligence-hosted webinar titled “EU Conflict Minerals:  When, What and How to Comply.” She will discuss the key provisions and the status of the proposed EU regulation and how to build your compliance program so that you are ready when the regulation is adopted (likely later this year).  Other speakers include:  Leah Butler (Electronic Industry Citizenship Coalition-EICC) and Lina Ramos (Source Intelligence).

The webinar is set for Tuesday, February 2, 2016 at 11:00 Central European Time (CET).

Click here to register:  Webinar Registration

Cobalt and Conflict Minerals — 3TG and C?

Companies and industry groups have been working for over 3 years on investigation and due diligence processes to determine the source and chain of custody of the tin, tantalum, tungsten and gold (3TG) in their products.   But, there could now be pressure to add to the list of conflict minerals.  Compliance Week raised this question last week in its article “Is Cobalt the Next Conflict Mineral?”

In addition to the long-time focus on 3TG, NGOs and human rights advocates have also been concerned with cobalt mining in the Democratic Republic of Congo (DRC).  Amnesty International’s recent report “This is What We Die For” includes a lengthy and detailed analysis of cobalt mining in the DRC and human rights conditions in those mining operations (including the health risks and dangers associated with artisanal cobalt mining and the prevalence of the worst forms of child labor in those operations).  Amnesty International’s report concludes that governments should include cobalt in their required due diligence and reporting on mineral supply chains.

The report’s specific focus on worker safety and child labor is very different from previous DRC minerals-related reports that focused more on the financing of armed groups that use violence against civilians to control territory.  If nothing else, this report demonstrates that the push for conflict minerals supply chain transparency can pivot to increased attention on child labor and worker safety in mining operations, which are also serious concerns in the mining of 3TG.

Could cobalt be added to the definition of “conflict minerals” under the SEC’s conflict minerals rule?  It seems unlikely to occur as a result of new legislation.  As currently configured, Congress does not appear to have the appetite for adding to the conflict minerals legislation at a time when there is genuine disagreement as to whether the conflict minerals rule is accomplishing its goals.  But, the rule itself leaves open the possibility of adding to the list of conflict minerals.  In the SEC’s release that accompanied the final conflict minerals rule, conflict minerals is defined as tin, tantalum, tungsten, gold “or any other minerals or their derivatives determined by the Secretary of State to be financing conflict in the Covered Countries.”  The Amnesty International report could be intended to be support for such a determination by the US Secretary of State.  A determination that cobalt is financing conflict in central Africa would be consistent with other actions by the Obama Administration regarding human rights and the mineral trade in the DRC.

Of course, adding cobalt to the definition of conflict minerals would impact companies that are working to gather sourcing information about the 3TG in their products.  And, those companies that are now able to (or soon hope to) identify products as “DRC conflict free” would suffer a set-back as they would need to undertake a whole new line of investigation on cobalt and would not be in a position to claim “DRC conflict free” status until that is accomplished.

Companies in the electronics industry have invested significant time and effort in certifying the smelters and refiners of the 3TG in their products, and the electronics industry is widely recognized as the market leader for its accomplishments in increasing supply chain transparency.   Notably, earlier this month, Intel announced that it is now manufacturing “conflict-free” microprocessors.  And, the company went on to commit that its broader product base would also be “conflict-free.”   But, adding cobalt to the SEC’s definition of conflict minerals would mean starting over, at least with respect to cobalt in Intel’s supply chain.  And, adding cobalt to the list of conflict minerals could jeopardize the momentum finally being gained in the education of suppliers and the public about conflict minerals.  Intel’s recent survey of millenials’ attitudes towards conflict minerals indicated that a surprising number of people still do not fully understand the conflict minerals issue or what efforts industry has undertaken toward responsible minerals sourcing.  Naming cobalt a conflict mineral could create more confusion and would require companies who previously claimed “DRC conflict free” status to amend that claim until they can confirm that status as to cobalt.

But, even if cobalt is not added to the SEC’s definition of conflict minerals, NGOs could pressure companies to include cobalt in their disclosures.  NGOs have already made it clear that they expect companies to do more and disclose more than is required by the conflict minerals rule.  They urge non-reporting companies to develop policies and publish information about their supply chains. They also urge companies to take “good practice” steps that are over and above what is required by the rule.  NGOs have gained power and influence around the conflict minerals issue as they have scored company supply chain disclosures and called out industries and specific companies as laggards.  By doing so, they have provided potential plaintiffs with a road map to legal claims.  And as “consensus” develops around additional issues of concern, NGOs are likely to pressure companies to address these issues in their supply chain investigations and to include them in their disclosures.  As we have seen in the last six months as companies are facing class action consumer fraud claims based on their supply chain disclosures, more supply chain transparency disclosure means more risk.

The increased focus on cobalt illustrates why companies are well advised to develop due diligence processes and procedures that can be built upon and that address the risks in their own individual supply chains — based on their geographies, industries and products and not just based on the specifics of current government regulation.

Resource Extraction Payment Disclosure Rule — You Have More Time To Comment

In a January 21, 2016 release titled Extension of Comment Period for Disclosure of Payments by Resource Extraction Issuers, the Securities and Exchange Commission extended the comment periods for the revised proposed Rule 13q-1 (and the related amendment to Form SD).  That proposed rule relates to the disclosure of payments by resource extraction issuers in connection with the commercial development of oil, natural gas, or minerals around the globe.  As we discussed in our post of December 11, 2015, the SEC originally provided an initial comment period ending on January 25, 2016 and a reply comment period ending on February 16, 2016.  The Commission has now extended the initial comment period to February 16, 2016 and the reply comment period to March 8, 2016.

Remember, all comments will be posted on the SEC’s web site.  And, the SEC may add its own additional materials as well. 

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