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Conflict Minerals Act Will Have Widespread Impact on Global Supply Chain

April 27, 2011

Although far less publicized than various other provisions of the Dodd-Frank Act, the Congo Conflict Minerals Act of 2009 will have a significant impact on countless U.S. suppliers of automotive, consumer and other products that use certain common minerals in their products, including suppliers who themselves are not publicly traded companies. This is the result of a provision in Dodd-Frank requiring public disclosure if companies source cassiterite (tin), columbite-tantalite (coltan, tantalum, niobium), gold, or wolframite (tungsten) or their derivatives from mines in the Democratic Republic of Congo (DRC) or adjoining countries.

In December, the Securities and Exchange Commission ("SEC") by unanimous vote issued a lengthy rulemaking proposal to implement the conflict minerals provisions of Dodd-Frank. The comment period, originally set to end in January, was extended until March 2. The SEC is now reviewing comments and may issue a final rule as early as August. Although still some months away, however, the burdensome provisions of the new rule will require careful advance planning by manufacturers and their suppliers.

A key aspect of the law and proposed rule is the requirement that publicly traded companies manufacturing or contracting to manufacture products for which any of the four minerals is necessary to the functionality of the product would be required to report annually to the SEC, even if the minerals were not from the DRC or adjoining country. The disclosure would include the determination that the minerals used were not from a geographic area covered by the law and would describe the country-of-origin inquiry the company made to reach that determination. If the inquiry revealed that the minerals did originate in the geographic area, or if the company was unable to determine that the minerals did not originate in such geographic area, a full Conflicts Minerals Report, accompanied by an independent audit, would be required.

As is evident from the above, many publicly traded companies will be affected by the forthcoming disclosure requirements. Suppliers also will be directly or indirectly affected either because they themselves are issuers or, even if not publicly traded entities, will be required by their customers to undertake the due diligence required to meet the stringent requirements of the conflict minerals law. Although many aspects of the proposed rule will need to be resolved before the rule is finalized, all companies in the supply chain that use metals derived from the minerals listed in the law or their derivatives should begin the potentially difficult process of identifying all such products and tracing and documenting the source of the minerals used.

Dykema supply chain specialists, including attorneys from the Firm's international trade and corporate/securities practices and the Automotive and Manufacturing Industry Group, will continue to follow and advise on further developments on this important topic and can assist manufacturers and suppliers in the due diligence, planning and other tasks needed to comply with the conflict minerals reporting requirements. Please contact Paul M. Laurenza at 202-906-8646, Sheryl L. Toby at 248-203-0522, or Ronald L. Rose at 248-203-0519 for more information.


As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do  not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation.Your comments on this newsletter, or any Dykema publication, are always welcome. © 2011 Dykema Gossett PLLC.
 

As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2017 Dykema Gossett PLLC.