OECD Due Diligence Guidance — Workshops

If you are an EU importer of tin, tantalum, tungsten or gold (3TG) covered by the EU Conflict Minerals Regulation, as of 1 January your due diligence process must comply with the OECD Due Diligence Guidance. Non-compliance may have serious legal and reputational consequences.

You may have listened to webinars and read white papers on conflict minerals due diligence and compliance. But, if you haven’t done so already, now you actually have to get down to business and develop your own due diligence program. Conflict minerals due diligence is more than mere supplier engagement.  So, are you sure that you are working on all the recommended steps?

Join Dynda Thomas and Bernhard Maier for a four-part series of 30-minute workshops zeroing in on Steps 1 – 4 of the OECD Due Diligence Guidance and the specific actions that are included in the OECD’s recommendations. You can join us for any one or all of the sessions.  The workshop will share some valuable insights from due diligence procedures implemented by US companies to comply with the US Conflict Minerals Rule.

Agenda (all sessions start at 1 p.m. GMT)

  • Thursday 4 February 2021: OECD Step 1 – Strong Company Management Systems
  • Thursday 11 February 2021: OECD Step 2 – Identify and Assess Risks
  • Thursday 18 February 2021: OECD Step 3 – Address and Mitigate Risks
  • Thursday 25 February 2021: OECD Step 4 – Independent Third-party Audits

Register for the 4 part workshop

Note: the opinions expressed are those of the author and do not necessarily reflect the views of the Firm, its clients, or any of its or their respective affiliates.  This article is for general information purposes and is not intended to be and should not be taken as legal advice.

Department of Labor’s “Do-Good” Investing Rule — Biden Administration Review

In yesterday’s post, we said we expected that the Biden Administration would re-focus attention on the US conflict minerals rule.  In a similar vein, by the end of Inauguration Day, the Biden Administration indicated that it wants a review of recent amendments to a Labor Department rule that require that ERISA plan fiduciaries put financial considerations above all other considerations when making investment decisions. 

Amendments to the Labor Department’s “do-good investing rule” took effect on January 12, 2021.  Those amendments require that ERISA plan fiduciaries select investments based solely on financial considerations.  Notably, the amended rule does recognize that some environmental, social and governance (ESG) factors can be relevant to the analysis of economic value and allows non-pecuniary considerations under certain circumstances.  The investing rule applies to private-sector employee benefit plans.  Under the rule in effect before January 12, 2021, when competing investment options served a plan’s financial interests equally well, fiduciaries could choose to make investment decisions to advance ESG goals.  The differences between the prior rule and the amended rule may seem to be only at the edges.  But, the effect of the amendments is significant.  It seems likely that a reversal will come from the Biden Administration, and that reversal will probably go further than the prior rule in promoting the consideration of ESG factors when making investment decisions.   

The question of investment decision factors has been the subject of disagreement for many years, and it has been the subject of more pointed conversation during the last few years.  The back-and-forth with this rule represents the clash of interests between plan fiduciaries who want to pursue ESG objectives, plan fiduciaries who want certainty and are concerned about liability, investors who want to promote ESG goals, and parties who say it is difficult to analyze and compare the plethora of ESG characteristics of companies.

Conflict minerals and other responsible sourcing concerns are among the ESG factors getting increased attention.  So, we will continue to watch these developments to alert companies about the importance and expanding relevance of their conflict minerals disclosures. 

New Day for the US Conflict Minerals Rule

It’s Inauguration Day in the US, and it’s likely to be a new day for the US conflict minerals rule.  Where have we been and where are we going?

2012 – 2016

Pursuant to Section 1502 of the Dodd-Frank Act of 2010, the SEC issued its conflict minerals rule in 2012, requiring reporting companies to report on their use and sourcing of tin, tantalum, tungsten and gold (3TG).  In 2014, SEC reporting companies began reporting on their “reasonable country of origin inquiry” and their due diligence measures by filing their first Form SDs.  A handful of companies also provided independent private-sector audits (IPSAs) as contemplated by the rule.  The rule itself included no specific required form of disclosure.  So, the initial filings on Form SD varied a bit.  But, because industry groups and lawyers had suggested approaches to the reporting before the first due date, the filings did show significant commonalities. Within two years, reporting companies had largely settled on standard formatting for their disclosures on Form SD and for their conflict minerals reports.

A due diligence inquiry template created by the Conflict-Free Sourcing Initiative (now known as the Responsible Minerals Initiative or RMI) has probably been the single most important compliance tool available to companies.  The conflict minerals reporting template (CMRT) is available to all at no cost.  Almost all companies across all industries in all countries now use it to engage with suppliers and gather conflict minerals supply chain information.  (The CMRT has been modified to be responsive to the additional geographic scope of the EU conflict minerals regulation.)

During this early period, certain industry groups challenged the US conflict minerals rule in US courts.  The result of that challenge was the US court of appeals’ conclusion that portions of the US conflict minerals rule violated reporting companies’ free speech rights.


The Trump Administration signaled that rules like the US conflict minerals rule might be  eliminated.  Members of Congress introduced legislation that would have repealed Section 1502 of Dodd-Frank, which was the legislative basis for the US conflict minerals rule.  No such legislation was passed.  In April, as required by the decision of the US court of appeals, the US district court entered a final judgment invalidating the portion of the rule that required companies to state whether any of their products “have not been found to be ‘DRC conflict free.’”  The district court remanded the matter back to the SEC to take additional action in furtherance of the court’s decision.  The SEC Division of Corporation Finance issued a statement that it would not recommend enforcement action if a company were to file only a Form SD describing its reasonable country of origin inquiry and whether any of its conflict minerals originate (or may originate) from a covered country.   The SEC indicated that this position was subject to further action.

2018 – 2020

The SEC did not issue any re-formulation of the US conflict minerals rule. Most companies continued their due diligence measures and disclosures without much change.  Less than a handful each year provided an IPSA.  NGOs that score conflict minerals disclosures concluded that the due diligence and reporting were now less rigorous.  There are many possible reasons for the types of filings made and the disclosures included in them.  But, the most likely is that companies continued the procedures they already had in place and did not make significant changes to their disclosures because there was no new guidance or interpretation by the SEC.    Importantly, the focus of most industries and reporting companies since 2014 has been on smelters and refiners of 3TG (SORs) — encouraging SORs to participate in and comply with recognized due diligence assessment standards.


It is expected that the Biden Administration’s SEC will renew focus on the US conflict minerals rule and other responsible sourcing measures.  The SEC could provide additional guidance and re-formulation of the US conflict minerals rule to address the courts’ decisions.  Such a re-formulation could result in a significant overhaul of the rule.  Congress could also weigh in with new legislation.

With a renewed focus on strengthening the US conflict minerals rule (along with the implementation of the EU conflict minerals regulation which came into full effect on January 1), there is likely to be significant activity in 2021 relating to 3TG due diligence and reporting.

Countdown to EU Conflict Minerals Regulation (7 Months)

In less than 7 months, the EU conflict minerals regulation will take full effect, and importers into the European Union of certain threshold amounts of tin, tantalum, tungsten and gold (3TG) and of metals containing 3TG will be subject to it.  As of today, despite Brexit, importers into the UK will be subject to it as well. Those Union importers should be taking action now to supplement their compliance programs to address the due diligence, risk mitigation and audit requirements of the EU regulation.  In anticipation of those requirements, some importers may consider replacing certain of their direct and indirect suppliers.  And, such changes take time.  

The EU conflict minerals regulation is expected to cover over 1,000 Union importers and will indirectly impact tens of thousands of economic actors in the European Union – many more than are covered by the US conflict minerals rule. The EU regulation covers more forms of minerals and metals and has a much broader geographic focus than the US rule. Further, Union importers will be required to obtain third-party audits and undertake consultations with stakeholders if they reach certain conclusions about the direct and indirect suppliers in their supply chains.

EU Conflict Minerals Regulation — Adding to Your Compliance Program outlines the types of initial steps a Union importer can take to develop (or expand) its conflict minerals compliance program to address the requirements of the EU regulation.

COVID-19 and Conflict Minerals

We have been following this year’s conflict minerals filings to determine whether reporting companies have highlighted any impact of the COVID-19 shut-downs on their conflict minerals due diligence measures or results.

Based on our review of the 320 filings through May 27, 2020, 14 conflict minerals reports included references to “COVID-19,” “coronavirus” and/or the “pandemic. Four more reports mentioned “COVID-19” or “coronavirus” in their forward looking statements disclaimers. One report included a reference to the COVID-19 pandemic in the attached independent private sector audit letter. Of the 14 references included in the conflict minerals reports, 11 said that COVID-19 negatively impacted suppliers’ response rates or responsiveness, two indicated that their due diligence steps taken were limited by impacts of the COVID-19 pandemic on their businesses, and one explained that some Responsible Minerals Initiative audits of smelters and refiners were restricted by the COVID-19 outbreak. All of these references were included in the conflict minerals reports, and none were included in the Form SDs themselves.

Whether stated in the filings or not, the disclosures included in the conflict minerals reports for calendar year 2019 will, of course, be viewed against the backdrop of the COVID-19 pandemic and its effects on business and operations during the first five months of 2020.

COVID-19 in Conflict Minerals Reports — Update

As we discussed in a previous post, early in 2019, some companies were expressing concern that, because of the impacts of the shut-downs associated with COVID-19, certain of their suppliers might not be able to provide responses to their conflict minerals inquiries in a timely manner.  They worried that their conflict minerals disclosures for calendar year 2019 could be less robust as a result.

As of May 13, 2020, based on our review, none of the Form SDs filed had referred to “COVID-19,” “coronavirus” or the “pandemic. Now, through the end of May 21, 2020, with 10 days left in the filing season for calendar year 2019, based on our review, five companies mentioned “COVID-19,” coronavirus” or the “pandemic” when explaining suppliers’ responses.

It is possible that the COVID-19 shut-down has impacted the quality and number of supplier responses to conflict minerals inquiries for other companies that have not included discussion that in their filings.

Impact of COVID-19 Shut Downs on Conflict Minerals Reporting

You will recall that on March 25, 2020, to address certain challenges created by COVID-19, the Securities and Exchange Commission (SEC) issued the Order that extended the filing periods for certain public company reporting obligations under the Securities Exchange Act.  The relief granted by the Order applied to specific Securities Exchange Act reporting requirements.  However, Section 13(p) of the Securities Exchange Act, which requires the filing of conflict minerals disclosures on Form SD, was not covered by the Order. In response to an inquiry we made to SEC staff, we were told that the SEC was considering whether to provide that same extension for the Form SD filings.

As the COVID-19 business shut-downs continued in earnest, some companies were expressing concern that certain of their suppliers might not be able to provide responses to their conflict minerals inquiries in a timely manner.  They worried that their disclosures could be less robust as a result, and they hoped that they would have more time to complete their filings.  But, no extension of the conflict minerals filing deadline has been given.

It is now May 13, and we are in the midst of  the SEC conflict minerals filing season.  Based on our review of the filings, none of the Form SDs filed to date for calendar year 2019 refer to “COVID-19,” “coronavirus” or the “pandemic.”  It is possible that the COVID-19 shut-down has impacted the quality and number of supplier responses to conflict minerals inquiries.  But so far, companies have not mentioned that impact in their filings.


Form SD Conflict Minerals Report Filing Deadline Unchanged

As of March 26, 2020, the filing deadline for Form SD’s is unchanged from the May 31 deadline included in the text of the Conflict Minerals Rule (and in the instructions to the Form SD).  Note: because May 31, 2020 is a Sunday, the filing deadline for the Form SD’s for reporting year 2019 is Monday, June 1, 2020.

To address certain challenges created by COVID-19, on March 25, 2020, the Securities and Exchange Commission (SEC) issued an Order that, among other things, extended the filing periods for certain public company reporting obligations under the Securities Exchange Act.  The relief granted by the Order applies to specific Securities Exchange Act reporting requirements that are listed by section.  Notably, however, Section 13(p) of the Securities Exchange Act, which requires the filing of conflict minerals disclosures on Form SD, is not included in the list of reporting requirements covered by the Order. 

Questions have been posed to the SEC staff as to whether such relief could also be granted for this year’s Form SD filing deadline.  But, until we hear more, companies would be wise to continue their work to meet the June 1, 2020 filing deadline for the 2019 reporting year.

EU Conflict Minerals Regulation Flowchart — Launching Today!

We are pleased to announce the launch of our EU Conflict Minerals Regulation Flowchart, which promises to be a valuable tool for those charged with compliance with the EU conflict minerals regulation.

In 2017, the EU adopted its conflict minerals regulation, which is intended to help businesses identify and address the risk that 3TGs (tin, tantalum, tungsten, and gold) in their products are linked to adverse impacts in conflict-affected or high-risk areas around the world. The due diligence and disclosure obligations of the EU regulation commence on January 1, 2021. However, there will be consequences to having even indirect relationships with non-conformant smelters and refiners. So, it is wise to analyze your supply chains before the obligations take effect and then actively manage your supply chain relationships to reduce the costs of compliance and to minimize any negative impacts on your business.

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EU Conflict Minerals Regulation – Step 1: Check Your Customs Declarations

While many companies are working to complete their due diligence and prepare conflict minerals disclosure for their SEC filings due May 31, others are considering whether they will be subject to the EU conflict minerals regulation when its due diligence and disclosure obligations take effect on 1 January 2021.

When companies had to determine whether they were covered by the US rule, SEC reporting companies had to examine the rule closely, determine whether products they manufactured or contracted with others to manufacture contained any 3TGs, and decide how to deal with the existence of compounds. In contrast, the EU regulation makes it easy for companies to determine whether they are covered by it. Companies need only review their EU Customs Declarations against Annex I of the EU Regulation. If they import the listed minerals or metals in amounts above the thresholds specified in Annex I, they must comply with the due diligence and disclosure obligations with respect to those minerals or metals imported.

So, step 1 is – check your Customs Declarations.

And, watch for our EU conflict minerals regulation flowchart to be released next week.  Like our US conflict minerals rule flowchart, the EU conflict minerals regulation flowchart will allow conflict minerals teams to work through the concepts of the regulation to make quick references to relevant provisions of the regulation.