7 Tips for Complying with the Conflict Minerals Rule

With the recent publication of Form SD, the disclosure form that all companies subject to the Conflict Minerals Rule must file with the Securities and Exchange Commission (SEC), it is a good time to brush up on the Rule’s compliance requirements. Here are seven things companies should do to help ensure their compliance with the Conflict Minerals Rule:

  1. Adopt a company policy for managing the mineral supply chain and communicate it to suppliers. The policy should establish a system of controls to track the chain of custody and outlines the procedures for conducting due diligence. This will help determine whether minerals have originated from covered countries.
  2. Determine whether the Rule applies to any products the company manufactures. If a company manufactures (or contracts to manufacture) a product of which conflict minerals are "necessary to the functionality or production," the Rule applies.
  3. Conduct a “reasonable country of origin inquiry” (RCOI). This inquiry will determine (1) whether the minerals originated in a covered country, (2) where they were processed, and (3) whether they came from scrap or recycled sources. The company may request this information from any of its suppliers and rely on it provided the company has reason to believe that the responses are true.
  4. Conduct due diligence. If a company determines as a result of the RCOI that it knows or has reason to believe that the minerals (1) may have originated in a covered country, and (2) may not be from scrap or recycled sources, the company must perform due diligence on the source and chain of custody of the minerals.The aim of the due diligence is to trace the history of the conflict minerals from the time they were mined through their delivery to the manufacturer. During due diligence, the company may need to collect information from employees who provided information during the RCOI or who have contact with suppliers and contractors.
  5. File a Form SD and, if necessary, attach a Conflict Minerals Report. If the company determines that its conflict minerals did not originate in a covered country or that they came from recycled or scrap sources, it must file a Form SD with the SEC that includes a brief description of the RCOI and its result.On the other hand, if the company knows that its conflict minerals originated in a covered country or were not from recycled or scrap sources, it must investigate the source and chain of custody of those minerals and file a Conflict Minerals Report as an exhibit to Form SD.
  6. Identify and assess risks in the supply chain. Companies should follow their established policies and controls to make sure the minerals used in their products are not originating from conflict-affected or high-risk areas. For detailed steps in this process, companies should consult the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.
  7. Implement a system for responding to risks. The system should ensure that senior management is notified of the findings of the risk assessment and should attempt to mitigate all risks by, among other things, engaging suppliers and/or forming joint initiatives with other companies.

Topics:  Compliance, Conflict Mineral Rules, Form SD, SEC, Supply Chain

Published In: General Business Updates, Finance & Banking Updates, International Trade Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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