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Jan 31: D-Day for Conflict Minerals Compliance

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Raw materials are in the headlines again, and it's not for rising costs this time. Instead, electronic companies are scrambling to meet the January 31 Securities & Exchange Commission deadline for reporting on "conflict minerals" -- gold, tin, tantalum, and tungsten -- that have entered the supply chain.

It isn't as simple as filling out a quick form and forgetting about it; most companies lack the information, processes, and technology needed to adhere to the new SEC reporting standard. Compliance won't be easy or cheap. According to Deloitte, "The SEC has estimated it will cost U.S. businesses between $3 billion and $4 billion to implement processes to comply with "the rule."

Right now, affected companies are asking suppliers these seemingly basic questions:

  • Do you provide our company with any products manufactured with tin, tantalum, tungsten, gold, or any other conflict minerals?

  • If so, do you source any raw materials from the Democratic Republic of the Congo or surrounding regions?
Yet, the answers are nearly impossible to find. At the heart of the problem is supplier relationship management 101. Companies have relied, for too long, on incomplete supplier data that is scattered throughout various ERP and SRM tools -- or worse, hidden away in filing cabinets. Coupled with Tier-1 and Tier-2 suppliers thousands of miles away, the biggest tech companies are disconnected from what's really going on throughout the supply chain.

My hope is that there is a silver lining to this new level of reporting: Companies should be compelled to gain this level of visibility into the supply chain for every raw material, facility, and product, reducing costs and risks.

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Bolaji Ojo
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Compliance Monitoring
Bolaji Ojo   1/30/2013 5:25:41 PM
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Paul, The data is almost here and what's I've heard from the industry each time a new deadline comes up is that everyone is ready. They may be right but regulators have the final say. Is the industry really ready or is there a grace period?

Rich Krajewski
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Supply Network Guru
Is it that big?
Rich Krajewski   1/31/2013 2:44:29 AM
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Is it that big a problem that Chinese companies worry about it, too?

Bolaji Ojo
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Re: Is it that big?
Bolaji Ojo   1/31/2013 3:40:25 AM
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All companies that sell to the United States are similarly impacted.

prabhakar_deosthali
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Supply Network Guru
Re:
prabhakar_deosthali   1/31/2013 6:53:05 AM
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This enforcement in US means, after January 31st, these conflict materials will find their way to other countries.

Is the EU and the Asian countries passing similar restrictions?

Bolaji Ojo
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Re:
Bolaji Ojo   1/31/2013 8:14:24 AM
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The EU is leading efforts to exclude conflict minerals from the supply chain. The rest of the world are following (including the U.S., by the way.) I am not aware of similar legislation in China (doubt it) but two other big players in the electronics supply chain (Japan and South Korea) are probably involved.

Hospice_Houngbo
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Supply Network Guru
Re: Is it that big?
Hospice_Houngbo   1/31/2013 3:25:44 PM
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China is not ready to enforce that regulation, Could there be a pressure from the World Trade Organization (WTO) to make everyone comply?

Hospice_Houngbo
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Supply Network Guru
Re:
Hospice_Houngbo   1/31/2013 3:29:54 PM
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@prabhakar,

"Is the EU and the Asian countries passing similar restrictions?"

It is important that EU and the US lead that effort, hopefully they will impact other nations a well.

TaimoorZ
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Supply Network Guru
Re:
TaimoorZ   1/31/2013 4:28:16 PM
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@Bolaji: Any idea about the economic impact of this? How much will countries lose out on if they go with this. Who would pay for the extra cost?

TaimoorZ
User Rank
Supply Network Guru
Re: Compliance Monitoring
TaimoorZ   1/31/2013 4:31:58 PM
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@Bolaji: I think the companies would never be ready. It's in their interest to delay it as much as possible. I think if the regulations are imposed and a fine is imposed along side, that will serve to motivate the companies more to take quick actions.

Bolaji Ojo
User Rank
Blogger
Re:
Bolaji Ojo   1/31/2013 4:52:07 PM
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TaimoorZ, Some of the costs will be borne by companies and some by consumers if manufacturers are able to pass these on to their clients. It's not easy to tabulate the cost of compliance, though.

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