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.
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.
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.
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.
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.
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.
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.
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.
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.