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.

Those who will be responsible for conflict minerals compliance can prepare by watching some of the scores of free, on-demand webinars that are available online, or by reading any of the hundreds of law firm client alerts on the subject. But, ultimately, you will have to focus on the particulars of the regulation itself. Our EU Conflict Minerals Regulation Flowchart puts the EU regulation at your fingertips – it organizes the regulation by topic, provides a general discussion of each topic and then provides quick links to the relevant provisions in the regulation. It also provides a comparison of how each of the requirements of the EU regulation applies to imports of minerals versus imports of metals.

We invite you to download the EU Conflict Minerals Regulation Flowchart and use the diagram on page 1 as your starting point. Then, use the links to access the relevant provisions or work through the outline page by page. You may choose links that take you directly to the EU conflict minerals regulation, which is presented as it appears in the Official Journal of the European Union and is fully searchable. The flowchart and the regulation are housed together to allow you to navigate freely between them.

We developed the EU Conflict Minerals Regulation Flowchart as a companion to the US Conflict Minerals Rule Flowchart that we released in 2012. The US flowchart is still useful today – providing big picture guidance, definitions and discussions of elements of the regulation, and providing links to the SEC conflict minerals release and FAQ responses. The US flowchart was widely recognized when it was released as a helpful resource to in-house conflict minerals teams (including in-house lawyers).

And, to make it easy for you to find the flowcharts in the future, we’ve added them to the Resources tab at the top of the blog, and we’ve added two download buttons in the right hand menu on the blog page.

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.

EU Conflict Minerals Regime

You’re no doubt working hard to complete your due diligence analysis and finalize your Form SD (and Conflict Minerals Report) as required by the US Conflict Minerals Rule.  But, around the corner is another conflict minerals regime that could impact your business — the EU Conflict Minerals Regulation.  The EU’s due diligence and disclosure obligations do not take effect until 2021, but if you are a Union importer, there are things you will want to do before that date to minimize your compliance costs and avoid possible disruptions to your supply chains.

This LexisNexis article gives an introductory look into the EU Conflict Minerals Regulation and warns businesses to start working to manage their supply chains in order to avoid some additional burdens that are built into the regulation.

The article, “The EU conflict minerals regime,” can be accessed on LexisNexis here.

Those without a LexisNexis subscription may reach out via email to obtain access to the article.

 

 

 

Costs of Conflict Minerals Compliance (1 of 3) – Why lower than expected?

The out-of-pocket costs of compliance with the SEC conflict minerals rule have been lower than those originally estimated by industry and by the SEC. But, it’s not because the original estimates were over-stated or inflated.  And, these lower than expected out-of-pocket costs don’t mean that business’ concerns about compliance were misplaced.  These lower costs have resulted mostly (but not completely) from tools and approaches developed by industry.

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Financial CHOICE Act Passes in the House — Would Repeal SEC Conflict Minerals Rule

Today, on June 8, 2017, the US House of Representatives passed the Financial CHOICE Act by a vote of 233 to 186.  The bill was sponsored by House Financial Services Committee Chairman Jeb Hensarling (R-Texas). The headline of the bill is that it would reverse much of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Section 1502 of Dodd-Frank is the statutory authority for the SEC’s conflict minerals rule. Page 482 of the 589 page bill includes a provision that would simply and completely repeal Section 1502 (among several other disclosure and miscellaneous provisions). However, according to many observers, the bill is not expected to pass the Senate in its current form.

We will continue to watch as the bill progresses to the Senate for action there.  Subscribe to our blog to get updates on the bill.

EU Conflict Minerals Regulation — Finally Published in the Official Journal!

At long last, the EU Conflict Minerals Regulation was published today in the Official Journal of the European Union.  The EU Conflict Minerals Regulation 2017 (as published) will enter into force 20 days after publication (June 8, 2017) and take effect 1 month after that (July 8, 2017).

The effective date is January 2021, but companies would be wise to start thinking about how the regulation will impact them.  There are some significant consequences for importers that deal with non-compliant smelters or refiners — including required consultations and third-party audits.  These consultations and audits will be time-consuming and expensive.  So, importers will be motivated to manage their supply chains so that they can avoid these additional burdens. Those who have been working on conflict minerals compliance under the US rule know that it takes some time to examine and successfully manage the make-up of a company’s supply chains.  So, don’t wait to examine this final regulation more closely.

Conflict Minerals Rule — Will It Stay or Will It Go?

With only 19 days left before the SECs Form SD filing deadline, there is still a lot of talk about consequences of the SECs April 7, 2017 Statement (“April 2017 Statement”).  In that statement, the SEC staff indicated that it would not recommend enforcement action to the Commission if a company that is otherwise required to file a conflict minerals report as an exhibit to its Form SD does not file that conflict minerals report. Filers have been considering what the April 2017 Statement means for them and whether they will make any changes to their filings based on it.

In a small sampling, our quick review of the 31 calendar year 2016 Form SD filings made as of May 11, 2017 shows that 13 filed Form SDs only, 18 included conflict minerals reports as exhibits, and none appear to have omitted their conflict minerals reports based on the April 2017 Statement.

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Conflict Minerals Report No Longer Required? Wait — Not So Fast

Those hoping for updated SEC guidance that would relieve or reduce companies’ conflict minerals diligence and disclosure obligations for calendar year 2016 got only a fraction of what they wanted. Last Friday, April 7, 2017, the SECs Acting Chair Michael Piwowar issued a statement that said “it is difficult to conceive of a circumstance that would counsel in favor of enforcing” the requirements that companies file a Conflict Minerals Report or (if required) provide an independent private sector audit (IPSA) relating to its due diligence.

On the same day, the SEC Division of Corporation Finance issued a statement that it would not recommend enforcement if a company files 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 Staff went on to warn that its statement was subject to further action by the Commission, was related to enforcement action only, and was not a statement of a legal conclusion. This statement is very different from the April 2014 SEC Statement, which provided affirmative guidance and told companies what they should do and what the SEC expected to see in the filings.

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Final EU Conflict Minerals Regulation – Only the Publication Step Remains

Today, April 3, 2017, the European Council took the last procedural step and approved the EU conflict minerals regulation. Publication in the Official Journal of the European Union will be the next and final step of the process. The publication could occur in 3 to 6 weeks.  Here is the text of the official EU Conflict Minerals Regulation.

As discussed in our blog post of March 20, 2017, the EU regulation applies to importers into the EU of at least 95% of all minerals or metals containing or consisting of tin, tantalum, tungsten or gold. The regulation requires those importers to perform due diligence in an effort to promote responsible sourcing of those minerals and metals to ensure that their supply chains do not contribute to funding of armed conflict. The due diligence requirements will become effective starting on January 1, 2021, but importers are encouraged to apply the due diligence procedures as soon as possible. There will be negative financial and reputational consequences of having relationships with smelters and refiners that do not comply with approved third-party audit process requirements.  So, importers would be wise to get an early start and commence their efforts actively to manage their supply chains in advance of the January 2021 effective date.

According to the EU regulation, covered companies will be required to use the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (or other guidelines that may be approved in the future) as the framework for their supply chain due diligence procedures.

One of the key areas for action yet to come is a non-binding handbook to be prepared by the Commission to help companies determine what constitutes a “conflict-affected and high-risk area.”  The content of this handbook could be surprising to many because “conflict-affected and high-risk areas” will likely include many parts of the world from which importers source their minerals and metals.  Further, having significant commercial relationships in such regions could subject even non-importers to questions about their sourcing and operations.

European Conflict Minerals Regulation — Details On What EU Importers Must Do

The proposed EU conflict minerals regulation has almost reached the last step before becoming an official EU regulation. On March 16, 2017, the European Parliament voted to approve the regulation, and the Council of the EU is expected to formally approve it in the weeks to come.  The Council’s vote will be the last step before the regulation is published and goes into effect.  The proposed regulation includes many of the same basic provisions as the US rule, but several reporting obligations and the coverage of the regulation are broader than those of the US rule.

Some are disappointed with the final EU regulation, saying that it is not strong enough.  But, those EU importers that are covered by it will certainly bear a significant burden to comply with its requirements.

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