Conflict-Minerals Disclosure: SEC Deadline Nears as Advocacy and Education Ramp Up

If you’re in the glass industry, you likely know that tin is a material used in the production of float glass. What you might not know is that it is also included in a list of “conflict minerals,” certain minerals that may be used to fund armed conflict in Africa. The Glass Association of North America (GANA) is aware of the legislation the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and is monitoring the situation closely.

“We do have some publicly traded companies that come under this requirement,” says GANA executive vice president Bill Yanek.

Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 has had certain unintended consequences, according to the National Association of Manufacturers (NAM) and others from the manufacturing community.

The section in question requires that publicly traded companies, including those such as float glass producers, report to the U.S. Securities and Exchange Commission (SEC) certain information on any use of conflict minerals, which include tantalum, tin, gold, and tungsten. Section 1502 directs companies to disclose whether minerals contained in their product originated in the Democratic Republic of Congo and its adjoining nations—Angola, Zambia, Tanzania, Rwanda, Burundi, Uganda, South Sudan, Central Africa Republic, and Cameroon.

What makes the legislation particularly burdensome is that it calls on public companies to disclose the conflict-mineral information for its entire supply chain. Those corporations, therefore, must rely on information from much smaller companies that are not directly responsible for compliance and may not even have the resources to identify and document the source of minerals.

NAM estimates the SEC regulation could cost manufacturers between $9 billion and $16 billion to implement, and even then would not achieve the intended objective. Part of the problem, manufacturers say, is that it’s often extremely difficult to pinpoint the source of the minerals.

The issue, which has been ongoing since passage of the bill and the SEC’s subsequent issuance of the related regulations implementing the rule, is heating up now because the first disclosure deadline is in May. GANA is working with NAM on the advocacy and policy side, letting the much larger and influential group take the lead on the issue in order to represent the interests of manufacturers such as those in the glass business.

GANA, meanwhile, is focusing on its members. The trade association has been alerting companies, both the publicly traded ones as well as their suppliers, about the requirement, and serving as an educational resource on the issue. “As an association of our size, we’re going to work with NAM,” says Yanek. For GANA, “It is more getting the information to our members.”

True to its word, GANA made sure the issue was an important topic of discussion at the recent GANA annual conference. Yanek said that GANA is encouraging member companies to get in touch with his organization or NAM for support and information on the issue.

Complicating the situation still further is that the European Union is considering its own set of disclosure requirements that may be more expansive than, and otherwise different from, the SEC requirements. That would make it all the more complicated and burdensome for companies and, according to NAM, potentially create competitive imbalances among nations. Initial reports indicated the E.U. may include what NAM is concerned would be discriminatory reporting requirements for products imported into the E.U. that would not be applicable to those produced in E.U.-member states.

In October NAM and a group of other organizations sent a letter to Secretary of State John Kerry, Secretary of Commerce Penny Pritzker, and U.S. Trade Representative Michael Froman urging them to make their concerns known to E.U. officials.  “While the business community takes very seriously the underlying objective of Section 1502, we are concerned that requiring manufacturers to comply with two divergent regulations on conflict mineral disclosure … will … seriously damage the competitiveness of manufacturers on both sides of the Atlantic in the global economy,” the letter states.

NAM, in fact, continues to tackle the issue in multiple branches of government. The trade association kicked off 2014 by turning back to the domestic side of the Section 1502 issue, arguing its case concerning the SEC disclosure rule through a judicial channel. NAM provided a statement to USGNN.com™, which comes via its Chamber and Business Roundtable. “Recently, we presented our arguments to the U.S. Court of Appeals for the District of Columbia Circuit.  We understand the seriousness of the humanitarian situation in the Democratic Republic of Congo (DRC) and abhor the violence in that country.  We believe, however, that the SEC’s corporate disclosure rule is not an effective approach to solving this serious humanitarian challenge.  In issuing its final rule, the SEC made several regulatory choices that place unprecedented and extreme compliance burdens on America’s job creators without ending violence in the DRC.  We believe we have strong arguments and look forward to the D.C. Circuit’s decision.”

Thus, even as the May deadline looms, legal and regulatory stories remain to be played out, both domestically and internationally.

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