TRANSACTIONAL: Corporate Governance: SEC Provides FAQs on Conflict Minerals Rules; Strengthens Mining Exemption

by King & Spalding

On May 30, 2013, the Securities and Exchange Commission's Division of Corporation Finance released twelve Frequently Asked Questions in an effort to provide issuers with guidance on various aspects of Exchange Act Section 13(p), Rule 13p-1 and Item 1.01 of Form SD, relating to the disclosure otherwise known as the "Conflict Minerals Rules."

Given the expanding list of interpretive questions that have developed since the rules were adopted, and this limited release of FAQs, it may be possible that additional guidance will be forthcoming from the Division of Corporation Finance. However, at this time, issuers and their counsel are still left to apply a significant amount of judgment to an issuer's facts and circumstances under the SEC's final conflict minerals rules. Nevertheless, these FAQs could provide welcome relief to many issuers, including mining companies, service providers such as transmission companies and pipeline companies (see Question #7 below), and manufacturers concerned with the makeup of their product's packaging or containers.

Conflict Minerals Rules & FAQs related to Mining Activities

The final Conflict Minerals Rules exempt issuers that mine or contract to mine conflict minerals from the disclosure provisions, reasoning that the act of mining alone does not constitute "manufacturing." The FAQs expanded on this line of reasoning, offering guidance further limiting the application of the conflict minerals rules to mining activities.

  • (Question #2) Does the mining exclusion extend to all activities customarily associated with mining?
  • (Answer) Yes, an issuer that only engages in activities customarily associated with mining, including gold mining of lower grade ore, is not considered to be manufacturing.

Examples of activities that the SEC considers to be "customarily associated" with mining include: transporting the mined ore to a processing facility; crushing and milling the ore; mixing crushed / milled ore; floatation; extraction; melting / smelting; and transport to a refinery for refining.

Other Highlights from the SEC's Conflict Minerals Rules FAQs

  • (Question #1) Do the conflict minerals rules apply to "voluntary" filers (aka "debt-only" filers)?
  • (Answer) Yes, the rules apply to all issuers that file reports with the SEC under Exchange Act Sections 13(a) and 15(d), whether or not the issuer is required to file such reports.
  • (Question #3) Is an issuer subject to the conflict minerals rules if the relevant product is manufactured by a consolidated subsidiary of an issuer rather than directly by the issuer.
  • (Answer) Yes, an issuer must make any required disclosure for itself and all of its consolidated subsidiaries. We believe that this FAQ also makes it clear that the rule does not apply to unconsolidated joint ventures.
  • (Question #5) If an issuer's product contains a conflict mineral in a "generic" component included in the product, does the issuer need to conduct a reasonable country of origin inquiry regarding the origin of the conflict mineral in the generic component?
  • (Answer) Yes, an issuer would be required to conduct a reasonable country of origin inquiry with respect to conflict minerals included in generic components included in products it manufactures or contracts to manufacture. There is no distinction between the components that an issuer directly manufactures or contracts to manufacture and the "generic" ones it purchases to include in the product.
  • (Question #6) Would a conflict mineral that is necessary to the functionality or production of a "package or container" that contains the issuer's product also be considered necessary to the functionality or production of the underlying product?
  • (Answer) No, only a conflict mineral that is contained in a product would be considered necessary to the functionality or production of a product. The packaging or container sold with a product is not considered to be part of the product even if the package or container is necessary to preserve the product. However, an issuer that manufactures and sells "packaging and containers" independent of a product would be subject to the rules (with respect to the packaging / container).
  • (Question #7) Are issuers, such as airlines, railways, and cruise lines, that manufacture or contract for the manufacturing of equipment they use in providing a service they sell required to report on the conflict minerals in that equipment?
  • (Answer) No, the Form SD requires issuers only to report on conflict minerals that are necessary to the functionality or production of "products" they manufacture or contract to have manufactured, and the SEC staff does not interpret equipment used to provide services to be "products" under the rule. The staff also provides a helpful example noting that the service provider's equipment would not be subject to the rule if the equipment is retained by the service provider, is required to be returned, or is intended to be abandoned by the customer following the terms of the service.
  • The SEC's reasoning should extend to the normal operations of most pipeline companies and transmission companies since equipment used in providing the service of transporting hydrocarbons or electricity is not a "product."
  • (Question #9) What type of product description is required for products that have not been found to be "DRC conflict free" or that are "DRC conflict undeterminable"?
  • (Answer) The rule permits an issuer to describe its products based on its own facts and circumstances because the issuer is in the best position to know its products and to describe them in terms commonly understood within its industry. An issuer is not required to describe its products using model numbers.
  • (Question #11) What transition period is available to an issuer that conducts an initial public offering?
    • (Answer) The issuer may start its relevant conflict minerals reporting for the first reporting calendar year that begins no sooner than eight months after the effective date of the initial public offering registration statement.
  • (Question #12) Does the failure to timely file a Form SD regarding conflict minerals cause an issuer to lose eligibility to use Form S-3?
    • (Answer) No

    Link to the SEC's full set of Conflict Minerals Rules FAQ's:

     Keith M. Townsend
     +1 404 572 3517

     View Profile »


     Matthew D. Bozzelli
     +1 404 572 3565

     View Profile »




     Jeffrey H. Perry
     Washington, D.C.
     +1 202 626 5521

     View Profile »

    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.

    © King & Spalding | Attorney Advertising

    Written by:

    King & Spalding

    King & Spalding 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.