Any conflict minerals that were “outside the supply chain” before today are exempt from the conflict minerals rule. Under the conflict minerals rule, conflict minerals are “outside the supply chain” only in the following instances:
- after any columbite-tantalite, cassiterite, and wolframite minerals have been smelted;
- after gold has been fully refined; or
- after any conflict mineral, or its derivatives, that have not been smelted or fully refined are located outside of the Democratic Republic of the Congo or any adjoining country (“Covered Countries”).
Accordingly, even if a product contains a conflict mineral, if the conflict mineral in that product was “outside the supply chain” prior to January 31, 2013, the conflict minerals rule does not apply to that product.
When it explained that exemption, the SEC reasoned that although existing stockpiles could have financed or benefited armed groups in the Covered Countries, once those minerals are smelted, refined, or outside of the Covered Countries, it is unlikely that they could further finance or benefit armed groups. In addition, requiring reporting companies to determine the origin and chain of custody of these minerals that may have been extracted prior to the adoption of the conflict minerals rule could result in undue costs if the minerals could not be sold.
Yes, the SEC recognized the burdens of the diligence and disclosure required by the Rule. But, this exemption is not likely to make an appreciable difference in companies’ overall reporting obligations. Yes, it is January 31st, but this date probably will not be all that significant for your conflict minerals compliance efforts.