More Conflict Minerals Drama

by Parker Poe Adams & Bernstein LLP

Well, it wouldn’t be February without a “helpful” reminder that Form SD filings are due on May 31st and a new development that casts confusion over the process. This year, the confusion comes in the form of last week’s statement from Acting SEC Chairman Michael S. Piwowar declaring that he has “directed the staff to reconsider whether the 2014 guidance on the conflict minerals rule is still appropriate and whether any additional relief is appropriate.”

Leaving aside the bigger issue of whether anything about conflict minerals reporting is appropriate, this development once again means that companies will be approaching their filing deadlines without a clear understanding of what is going on.

Prior conflict minerals developments…

In April 2014, the Court of Appeals for the D.C. Circuit in National Association of Manufacturers v. SEC held that the rule’s requirement that companies state that their products have not been found to be “DRC conflict free” violated the First Amendment. Subsequently, the SEC staff released guidance relieving issuers of the obligation to put those labels in their reports. The case was subsequently remanded to the district court for further consideration and continues to work its way through the litigation process. In the meantime, companies have been filing Form SDs without stating that their products are “DRC conflict free” since doing so, according to the SEC’s guidance, would trigger the requirement for an independent private sector audit.

Acting Chairman Piwowar’s recent statement…

Acting Chairman Piwowar supported his statement, in part, with some personal observations:

“While visiting Africa last year, I heard first-hand from the people affected by this misguided rule. The disclosure requirements have caused a de facto boycott of minerals from portions of Africa, with effects far beyond the Congo-adjacent region. Legitimate mining operators are facing such onerous costs to comply with the rule that they are being put out of business. It is also unclear that the rule has in fact resulted in any reduction in the power and control of armed gangs or eased the human suffering of many innocent men, women, and children in the Congo and surrounding areas. Moreover, the withdrawal from the region may undermine U.S. national security interests by creating a vacuum filled by those with less benign interests.”

He further noted the ongoing litigation and the fact that the temporary interim transition period provided for in the rule has expired. He then solicited public comment on both the rule and the staff’s 2014 guidance during a 45-day comment period

What does this mean?

It is not yet clear whether this directive could impact upcoming filings related to 2016, though that appears unlikely in light of the comment period. This means that companies must assume that they will have to comply with the current rules and that the SEC will still monitor compliance. The following advice from a year ago (see this Doug’s Note) still, therefore, applies:

  • Review the Form SD filings of your peers. If you previously filed a Form SD, this allows you to compare your conclusions and disclosures to other companies in your industry. If you didn’t previously file a Form SD, it is a good way to collect information about your peers’ products and supply chain.
  • Separate the RCOI and due diligence disclosures. A Conflict Minerals Report (“CMR”) is required to be filed if the company either determines that its covered minerals came from one of the covered countries or is unable to determine that its covered minerals did not come from the covered countries. Draw clear distinctions between the reasonable country of origin inquiry and supply chain due diligence to make the CMRs easier to follow and help define the scope of any audits that may ultimately be required upon resolution of the pending litigation or further SEC rulemaking. The due diligence section should essentially track the five-step due diligence framework released by the Organisation for Economic Co-operation and Development (“OECD”), though it is not required to do so, in order to simplify any subsequent IPSAs.
  • Improve Smelter and Refiner Disclosure. Companies are expected to make ongoing, good faith inquiries that provide increasing visibility into their supply chain and applicable smelters and refiners. Continue to pressure suppliers to provide the information necessary to obtain this information. Review the Department of Commerce’s list of smelters and refiners that contains a list of all the processing facilities known by the U.S. government, as well as the Conflict Free Sourcing Initiative Lists, which helps companies identify whether the facilities are conflict-free.
  • Independent Private Sector Audits. A few companies have conducted mock audits or pre-audit readiness assessments. Alternatively, consider conducting a “gap analysis” to identify any gaps between the company’s compliance program and the requirements of the conflict minerals rule and the OECD framework.
  • Pressure from Stakeholders. More and more stakeholders other than the SEC, including customers, consumer groups and research firms, employees, non-governmental organizations and socially responsible investors, are closely scrutinizing conflict minerals disclosure. In implementing compliance procedures and crafting disclosure, companies should consider who their stakeholders are and what message they are trying to send.
  • Be flexible. As companies continue to integrate and improve their conflict minerals compliance programs, they should aim to design and structure the programs with enough flexibility to accommodate additional supply chain compliance initiatives outside the U.S.
  • Keep up with changing circumstances. Remember also that business operations are fluid—product lines, manufacturing processes, suppliers and product uses contantly change.  Train employees to proactively and promptly pass along any changes in operations that could trigger the conflict minerals rules.

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.

© Parker Poe Adams & Bernstein LLP | Attorney Advertising

Written by:

Parker Poe Adams & Bernstein LLP

Parker Poe Adams & Bernstein LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.