LONDON -- The conflicts surrounding the use of conflict minerals continue, as barely half of the publicly quoted US companies required to file their first conflict minerals (CM) reports did so by the June 2 deadline. Those that did file only managed to offer minimal transparency as to whether any tin, tungsten, tantalum, or gold used in their products was sourced from the Democratic Republic of Congo (DRC) or neighboring war-torn countries.
Conflict mineral source area.
The requirement to file such reports originated in the 2010 Dodd-Frank Act. While it is hitting many industrial sectors -- from aerospace, automotive, and drilling gear to jewelry and even clothing -- there is little doubt the responsibility for conforming has fallen hardest on the electronics industry, since all four metals (and in the case of the three Ts, their ores) are widely used in a variety of electronics gear. In the case of tantalum, it is even an enabling technology, since it is the core material for making capacitors.
The well-intentioned rule was devised to starve militia in the DRC and some other central African countries of revenues by discouraging companies, mainly smelters, from dealing with them. For the moment, and because earlier this year the Appellate Court struck down part of the rule, section 1502 in the wide-ranging Dodd-Frank legislation does not force companies to cease the use of these conflict minerals. For the first two years at least, the SEC has allowed companies to report products as "DRC conflict-free indeterminate."
However, businesses must still prove to the SEC that they have performed due diligence to ascertain the provenance of any conflict minerals, either by auditing their suppliers, or by hiring an accredited third party to do so. The result has been major consternation within boardrooms and purchasing departments, as well as a generally unwanted spotlight on companies’ global supply chains.