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Time to Saddle Up on Conflict Minerals

If you thought you could get away without implementing a conflict minerals compliance program because the US Court of Appeals was going to throw the rule out, you'd better take a second look at that strategy.

That's because the same court hearing a similar case ruled in April that it lacked jurisdiction to hear the case, leaving the rule intact.

For those of you completely in the dark, the US Securities and Exchange Commission adopted in August 2012 a regulation under Section 1502 of the Dodd-Frank Act that requires publicly traded companies to annually disclose information on the source of conflict minerals — including tantalum, tin, gold, or tungsten sourced from covered countries, mostly in Africa — contained in their products. Companies will have to begin to file this with the SEC information in 2014, based on 2013 data, and to disclose that information on their websites.

Several reports, including this EBN blog, authored by Brian Fuller, have disclosed that many companies have not done enough to prepare for this new compliance regime.

Last October, the National Association of Manufacturers and others filed a petition with the US Court of Appeals for the DC Circuit, challenging the validity of the rule on the grounds that the SEC failed to consider alternatives that could have reduced the burden of compliance.

Meanwhile, another set of petitioners challenged the “resource extraction rule,” adopted by the SEC under Section 1504 of Dodd-Frank. That rule also requires disclosure, in this case of payments to governments — “made to further the commercial development of oil, natural gas, or minerals” — that do not share the wealth with their people.

The rule was pushed by human rights organizations, but business groups objected to the rule, arguing that compliance would cost too much, would not provide value to investors, and that the SEC's cost/benefit analysis was faulty.

In April, in the case American Petroleum Institute v. SEC, the DC Court of Appeals ruled that it didn't have jurisdiction to consider the challenge to the resource extraction rule and that only the district court, and not the court of appeals, has jurisdiction to consider such a challenge in the first instance.

Separate case
The petitioners in the American Petroleum Institute case also filed a complaint in the district court, so the challenge will continue there. Not so in in NAM v. SEC. Although the SEC agreed that the court of appeals had jurisdiction to hear the case, the court may disagree. And in light of the court's ruling in the other case, it looks like the court will disagree.

Oral arguments in NAM v. SEC took place on May 15 and a decision expected in a few months. In light of April's ruling, it doesn't look like detractors of the conflict minerals rule will get what they hoped for.

And that means that the time line to start compliance activities is only growing shorter. So for those not already doing so, it's time to get cracking.

12 comments on “Time to Saddle Up on Conflict Minerals

  1. rohscompliant
    May 23, 2013

    …..more bureaucracy…more regulations…more B.S……….not shooting the messenger.

  2. R.J.Matthews
    May 23, 2013

    Less death, less rape, less corruption, less misery. Seems the bureaucracy is coming from those lobbing against the conflict mineral rules who want to tie it up with lawyer and legal BS indefinitely. If they had spent a fraction of the time energy and money helping its introduction and making it work most of the pain would be over by now.

    Instead the latest efforts seem to consist of saying something is not working when proper introduction of the rules has been blocked and this after multiple concessions to industry.

     

  3. ahdand
    May 24, 2013

    @rohscomplaint: Agreed on your other two points but not sure about your regulations part.    

  4. R.J.Matthews
    May 24, 2013

    It's not a case that if National Association of Manufacturers succeeds in sabotaging progress on conflict minerals rules there will be less bureaucracy and red tape.

    http://www.natlawreview.com/article/conflict-minerals-update-courts-congress-canada-and-eu-consultations

    What will happen is that you will get multiple rules come in, in other countries and trading blocks that are likely to be harsher more bureaucratic and American industry will have less influence over.

    All this happening in a climate over a perception of big American companies not paying any tax so the EU and its socialist members could well have a field day using this as a stick to beat American companies. If you think American bureaucracy is bad it is mild compared to European rules and regulations.

    If NAM had been smart they would have backed the new rules then other counties and trading blocs would have just copied and pasted a blue print of success and American industry would have had a bigger lead than anyone else in understanding and coping with the issues involved.

    I suppose that would have needed the leadership at NAM to show some vision and imagination and plain common sense though.

     

  5. Houngbo_Hospice
    May 24, 2013

    Those who are not happy with the rules will always attempt to block their implementation – that is human nature. Question is what power does the US Securities and Exchange Commission have to enforce the regulation despite oponents' resistance.

  6. Houngbo_Hospice
    May 24, 2013

    @R.J. Matthews,

    What is the feeling of other countries, such as the EU counries about those rules? Do you think that they will come up with their own compliance program whether the US regulations is adopted or not? 

  7. R.J.Matthews
    May 25, 2013

    The US does at the moment does have a lead in highlighting this issue in some ways but Europe will catch up and bring in new laws.

    Global witness is based on in the UK Hospice Houngo so problems with conflict minerals problems will continue to be highlighted here plus it is now being noticed at a top level. https://www.gov.uk/government/news/william-hague-and-angelina-jolie-visit-eastern-drc

    This is happening in spite of a charity begins at home sentiment.

    http://www.express.co.uk/news/uk/394031/David-Cameron-scraps-plan-to-boost-foreign-aid

    I doubt the recent growing focus is down just to humanitarian concerns as the DRC is of increasing strategic importance. The Chinese have realised this for a long time and the west now has to play catch up.

    http://m.voanews.com/a/1662105.html

    http://www.africanglobe.net/business/grand-inga-sa-drc-construct-worlds-largest-hydro-power-plant/

    In Germany you have a strong Green movement plus the country needs the imported raw materials to keep it export economy which has been concerning them for a while.

    http://www.osw.waw.pl/en/publikacje/osw-commentary/2011-02-08/natural-resources-deficit-implications-german-politics

    So you are bound to get more focus there.

    The west simply cannot afford on humanitarian grounds or the grounds of long term self interest to ignore the problems in the DRC especially conflict minerals.

    Any new law or laws brought in by the EU are likely to be tougher as Europe is more left wing and socialist with a well established green movement.

    http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+IM-PRESS+20090828STO59859+0+DOC+XML+V0//EN

    http://en.wikipedia.org/wiki/European_Green_Party

    Ironic the NAM and some grandstanding politicians are the ones blocking progress as if they properly understood the issues involved they would understand the shear importance of cleaning up and expanding the supply chain of minerals from the DRC.

    That's before even getting into the moral issues.

     

  8. Houngbo_Hospice
    May 25, 2013

    @R.J.Matthews

    Good to know that other countries are concerned with the conflict minerals problems and are finding ways to resolve them. But it seems that “long term self interest” will likely prevent the enactment of “global”  compelling laws regarding the issues.

  9. R.J.Matthews
    May 26, 2013

    Well usually harder to get international agreements but the UN is looking at the problems as well as national governments.

    http://www.reuters.com/article/2013/05/23/us-congo-democratic-ban-idUSBRE94M0QX20130523

    http://www.reuters.com/article/2013/05/22/us-congo-democratic-worldbank-idUSBRE94L0KQ20130522

    http://au.news.yahoo.com/latest/a/-/article/17244652/mps-consider-probe-into-transparency-of-mining-firms/

    It would also look at whether Britain should sign up to the Extractive Industries Transparency Initiative (EITI) as well as examining mining and oil companies' roles in communities and their environmental efforts.

    The EITI, supported by the World Bank, was set up to improve transparency and accountability in countries rich in mineral resources.

     

     

  10. FLYINGSCOT
    May 27, 2013

    This must be so difficult to police unless the onus is on the consumer to prove that they bought only approved materials.  Highly complicated products that use hundreds of componnetsthat task must be quite onerous.

  11. R.J.Matthews
    May 28, 2013

    A natural choke point in the food chain is the Smelters Flying Scot.

    http://www.eicc.info/CFSProgram.shtml companies could make their job of compliance a lot easier if they put pressure on them to make faster progress.

    http://www.pddnet.com/news/2013/05/tungsten-industry-develops-conflict-minerals-legislation-compliance-framework

    The Initiative is based on the recognition that refiners, pivotally positioned as they are in the tungsten supply chain, can best determine the source of tungsten materials made available to the global marketplace.

     

  12. Ravenwood
    May 28, 2013

    Our company isn't publicly traded, so the SEC bureaucrats can take a hike. That also goes for the new crop of compliance consultants ready to fatten their pockets.

    We've been conflict mineral-free since 1990 thanks to neither.

     

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