Reporting Year 2023 (RY2023) is underway marking year 11 of reporting supply chain due diligence of the source and chain of custody of Conflict Minerals under Dodd-Frank. While events from recent years threatened the domestic Conflict Minerals law, there has been no change in reporting under the law and an Extended Minerals Reporting Template for cobalt and mica is being collected by many companies although this is not required by law at this time.
Preparation for RY2023 starts shortly after the completion of the previous reporting year as companies review internal processes, documents, and implement improvements.
Conflict Minerals reporting is an annual obligation for companies in scope of the law, and once the requisite forms are filed with the SEC at the end of May each year, efforts begin for the next reporting year if the project is managed appropriately. Although political decisions could impact Conflict Minerals reporting, the RY2023 cycle started as early as June 2023 for companies that continue their due diligence activities. Companies that have been through the disclosure process know that the due diligence process should not be interrupted if filings are to be done appropriately and by the legal deadline.
For more on US Conflict Minerals reporting, continue reading below.
Performing supplier Reasonable Country of Origin Inquiries (RCOIs) and smelter RCOIs, and performing subsequent due diligence on smelters regarding their Conflict Free status, is a daunting task. Copious amounts of errors in supplier Conflict Minerals Reporting Templates (CMRTs) makes cleansing these CMRTs and identifying valid smelters a laborious task. The required research regarding smelters in the DRC and surrounding countries, and performing due diligence on these smelters is also extremely challenging.
If your company, whether an issuer or an upstream supplier, is still struggling with managing supply chain transparency issues, like Dodd-Frank, let us know how GCG can help. Our successful implementation and management of Conflict Minerals over the past three years, for both issuers and suppliers alike, can help you manage your suppliers, conduct supplier and smelter RCOIs, perform required due diligence steps, and prepare form SD and the CMR for the SEC. We can also help you prepare for the pending Conflict Minerals law in the EU that came into effect January 1st, 2021.
What it is: The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed in to law on July 21, 2010, contains Section 1502 which refers to the use of Conflict Minerals in the Democratic Republic of the Congo (DRC). In short, this section is being referred to as the Conflict Minerals Law.
Why it is important: Section 1502 is important to manufacturers and suppliers of electronics because it applies to minerals that are commonly used in electronics.
What you need to know: The Conflict Minerals Law is not a ban on using certain minerals, however it contains new reporting and disclosure requirements for materials contained in products, as well as due diligence, audit and certification requirements.
What is required: Section 1502 applies to companies required to report to the Securities and Exchange Commission (SEC) who manufacture products containing the defined “Conflict Minerals” or their derivatives. The requirements under Section 1502 include:
·Annual disclosures to the SEC: Report annually to the SEC if the identified minerals originated from the DRC or adjoining countries
·Due diligence requirements: Description of sourcing and chain of custody of the identified minerals including the country of origin and mine; description of the products/contracted products that contain the identified minerals; information regarding the facilities used to process the identified minerals
· Audit/certification requirements: Possible independent third-party auditing and certification of the due diligence plan and report
What you need to read: Six pages in Section 1502 of the law starting on page 851.
When you need to start: If you are an issuer and you haven't already filed your Form SD and CMR for the past two reporting years, you are not in compliance with the SEC rules for Dodd-Frank. If you are just starting, you should have a clear plan of how you are going to complete your supplier RCOIs, manage, CMRTs, perform smelter RCOIs, and perform smelter due diligence.
If you are a supplier and not an issuer, chances are that your customers have requested an RCOI from you, and therefore you need to query your upstream suppliers for this same information. Suppliers should start collecting this information as soon as possible for each reporting year, keeping in mind that your upstream suppliers need time to collect this information, and your customers who may be issuers must collect, cleanse, and research this information all in order to prepare the Form SD and CMR for the SEC by the May 31st deadline.
What are the Identified Minerals/Conflict Minerals (CM): The following minerals are identified as Conflict Minerals, known as the three “T”s and “G”:
- Cassiterite (ore for tin): tin is used as solder on circuit boards in every electronic device we use
- Columbite-tantalite (coltan, ore for tantalum): tantalum stores electricity and is essential to portable electronics and high-speed processing devices, such as laptops and cell phones
- Wolframite (tungsten, wolfram, ore for cobalt): commonly used in tools; enables cell phone vibration
- Gold: used in the wiring of electronic devices
- Or their derivatives and any other mineral, or its derivatives, as determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country
What you need to do: Track identified minerals in your supply chain; determine and disclose the country of origin of identified Conflict Minerals. This means determining the chain of custody of the Conflict Minerals in your products and supply chain and disclosing your company’s sourcing practices of Conflict Minerals. If it is determined that you use Conflict Minerals, your goal should be to develop a “conflict free” supply chain in order to satisfy social demands, in addition to environmental requirements.
How to do it: Using The GoodBye Chain Group’s (GCG) MDW-ES Product Environmental Compliance (PEC) software solution, your company can determine the material and substance composition of your products, including identifying Conflict Minerals. Once you know that your company is using minerals that may be identified as Conflict Minerals, you can satisfy requests throughout your supply chain regarding Conflict Minerals disclosure to your customers and begin efforts in determining the required chain of custody of Conflict Minerals. If you don’t already have MDW-ES, GCG can generate material and substance reports for you through our BoM Management Services including a Conflict Minerals report, that will identify minerals that may be determined as Conflict Minerals. Emerging legislation like the Conflict Minerals Law underscores the need for full disclosure data and material and substance management. GCG has been providing PEC software solutions using its award-winning MDW-ES software since 2003, when there were no tools yet available for substance and material data management. MDW-ES was the first software solution of its kind, and our experienced technical staff has over 8 years of experience managing all types of data and can provide you with any and all reporting needs relating to Product Environmental Compliance.
How GCG can help:
GCG offers comprehensive Conflict Minerals consulting and implementation services including assisting both issuers and actors in the supply chain to prepare corporate policies, declarations, and statements; identify CM parts and suppliers; design and execute supplier communication plan and Reasonable Country of Origin Inquiry (RCOI); analyze supplier RCOIs and prepare metrics; design and execute smelter and refiner RCOIs; analyze smelters and refiners and prepare metrics; perform all due diligence in accordance with OECD guidelines; prepare internal Gap Statements and Technical Report; perform risk assessments and risk mitigation; prepare Conflict Minerals Report and Form SD; perform supplier outreach and training.
Why this law has been passed: For over a decade and a half, violent conflict has plagued the eastern Congo, causing more death than any war since World War II. Although the Congo’s conflict is long-standing, the Conflict Minerals trade remains the primary source. Conflict Minerals are vital to the technologies that we use every day in electronic products making them worth hundreds of millions of dollars per year. The demand for Conflict Minerals provides incentives for the Congolese army to control strategic mines and trading routes using extreme methods of violence and exploitation, and has resulted in further violence growing from rebel groups, militias, and criminal networks. Passing of this law hopes to accomplish some of the following: Developing industry-wide protocols for removing Conflict Minerals from supply chains resulting in “conflict free” supply chains; ensuring electronics companies pay more attention to the origin of the materials in their products and the social impacts of their material sourcing; limiting violence in the DRC by choking off revenue from rebel groups who commit violence and exploitation in the DRC over the Conflict Minerals trade; promoting a platform of transparency regarding Conflict Minerals and promotion of future supply chain transparencies; promoting “social” supply chain needs in addition to current environmental and safety needs in the supply chain.
Link to: Page 851
IPC Link: H.R. 4173