October 18, 2013 – October 25, 2013
The summaries provided in this Weekly Recap do not necessarily represent the views of Squire Sanders (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.
SEC Files Reply Brief in Conflict Minerals Appeal
On October 23, 2013, the SEC filed its initial reply brief in the U.S. Court of Appeals for the District of Columbia Circuit.
The main issues in the appeal are whether: (1) the SEC’s decision to forgo adopting a de minimis exception was reasonable, (2) the SEC’s economic analysis of the rule complied with the Administrative Procedure Act and the Exchange Act, and (3) the disclosure obligation mandated by the conflict minerals rule violates the First Amendment.
A summary of the SEC’s positions can be found on pages 26-28 of its brief. The SEC argues that its decision not to adopt a de minimis exception was reasonable because “conflict minerals are frequently used in small amounts” and therefore a de minimis exception would thwart congressional intent of the rule. In addition, the SEC states that its analysis was sufficient and that it “provided an extensive qualitative analysis of the costs and benefits of its discretionary choices and a thorough quantitative analysis of the costs of the final rule.” Finally, the SEC argues that the conflict minerals rule does not violate the First Amendment because the rule “compel[s] disclosure of factual information.”
The next important upcoming date in regards to the appeal is Wednesday, October 30, where the briefs for the amici curiae in support of appellees and intervenor-appellees are due.
CFO Magazine Profiles Brooks Sports and its Path Towards Conflict Minerals Compliance
CFO Magazine sat down with David Bohan, President and Chief Operating Officer of Brooks Sports, a Seattle-based running shoe and apparel firm, to discuss the company’s efforts in complying with the conflict minerals rule.
Mr. Bohan noted that the conflict minerals rule has brought on an added level of compliance for the company. Prior to the enactment of the rule, Brooks Sports always tested its products for certain materials. Now, the conflict minerals rule forces it to look into its supply chain. Mr. Bohan stated that his main concern is determining the country of origin of the zippers on the apparel of Brooks Sports. Mr. Bohan elaborated, “It’s at the bottom of the zipper or in the zipper pull that maybe you’ll have some tin.”
Even though Brooks Sports is a private company and thus not subject to the rule on its own, it is owned by Berkshire Hathaway, and Berkshire Hathaway must determine the origin of conflict minerals and make any required disclosures regarding conflict minerals for itself and all of its consolidated subsidiaries.
Politico: “What’s in Your Smartphone?”
In the article, Mr. Eric Bradner (Politico) provides a great recap of the legal challenge and its current status, discussion from the U.S. Chamber of Commerce and The Enough Project, and a summary of other international efforts including similarly proposed laws in Canada and the European Union.
Below are a few noteworthy statements or quotes from the article that we want to bring to your attention. To read the entire article, please click on the link above.
- “…where warlords control mines and smuggling routes, profiting to the tune of more than $185 million annually by terrorizing locals into extracting the metals for little or no pay.”
- “A decision by the U.S. Circuit Court of Appeals in the District of Columbia, could come in early 2014.”
- “The Chamber is ‘talking to people on the Hill about potential changes’ that would make the SEC’s rule easier for companies to stomach, Quaadman says. Its proposals include carving out a ‘de minimis‘ exemption for companies that use minuscule amounts of the minerals and providing clearer guidance on a company’s due diligence obligations.”
- “Canada is in the early stages of drafting a proposal, while the EU is expected to make a decision within weeks or months on its own regulation.”
- “…in recent days, EU trade officials have also begun considering a less stringent proposal that would apply only to European-owned metal processors, a lobbyist close to the discussions said.”
- “As a result of the steps being taken, militias have seen their prices for the minerals drop by more than 55 percent…”