Aftermarket Insider Issue 83 - (Page 13)

overview For several years, there has been increasing concern about human rights and environmental abuses in the mining industry in the Congo and other parts of Africa, where warlords engage in human rights violations and use mining proceeds to fuel regional conflicts. Under the Dodd-Frank Act, the Securities and Exchange Commission (SEC) has been tasked with adopting rules requiring public companies to disclose their use of conflict minerals, with enhanced diligence and disclosure obligations for minerals originating in the Democratic Republic of Congo (DRC) and neighboring countries. The rule is intended to greatly reduce funding for armed groups committing human rights abuses in the DRC. Although the conflict minerals rule technically applies only to public companies, it will have a significant impact on any company anywhere in the world, public or private, that is part of a registrant’s supply chain. To meet their obligations under the rule, registrants will need to collect supply chain information from their suppliers. Therefore, a significant number of private company suppliers also will need to be familiar with the conflict minerals rule and the obligations that their direct and indirect customers are likely to place on them. This article provides a basic overview of the conflict minerals provision of the Dodd-Frank Act, as well as additional resources to help determine whether your company is subject to its disclosure rules. This article is for informational purposes only and does not constitute legal advice. The rules are extremely lengthy and complex and a definitive determination of the applicability of the rules to individual companies should be made in consultation with experienced legal counsel. Minerals at Issue Dodd–Frank Section 1502 defines “conflict minerals” as cassiterite, columbite-tantalite, gold and wolframite, as well as their derivatives and other minerals that the U.S. Secretary of State may designate in the future. The industries most likely to be affected include electronics and communications, aerospace, automotive, jewelry and industrial products. The following are common uses of these minerals: • Columbite-tantalite (coltan) is the metal ore from which tantalum is extracted; tantalum uses include electronic components (mobile telephones, computers, video game consoles, digital cameras) and alloys for making carbide tools and engine components. • Cassiterite is the metal ore most commonly used to produce tin; tin uses include alloys, tin plating and solder for joining pipes and electronic circuits. • Gold uses include jewelry as well as electronic, communications and aerospace equipment (provides superior electric conductivity and corrosion resistance). • Wolframite is the metal ore used to produce tungsten; tungsten uses include metal wires, electrodes and contacts (lighting, electronic, electrical, heating and welding applications). The final rule exempts any conflict minerals that are “outside the supply chain” prior to Jan. 31, 2013. Conflict minerals are “outside the supply chain” only “after any of the abovelisted minerals have been smelted; after gold has been fully refined; or after any conflict mineral, or its derivatives, that have not been smelted or fully refined are located outside of the Covered Countries.” Covered Countries Dodd–Frank Section 1502 defines the affected countries or “Covered Countries” as DRC, Central Africa Republic, South Sudan, The Republic of the Congo, Tanzania, Burundi, Angola, Uganda and Rwanda. According to the SEC, the Covered Countries account for 15 to 20 percent of the world’s supply of tantalum and smaller percentages of the other three minerals. Covered Companies A company is only covered by the new rules if it is (1) an “issuer” (i.e., public company) that files reports with the SEC under Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (i.e., a public company that files Forms 10-Q, 10-K, 20-F and 8-K with the SEC); and (2) conflict minerals are “necessary to the functionality or production of a product” that the issuer either manufactures or contracts with a third party to manufacture. The rule does not define the phrases “contract to manufacture,” “necessary to the functionality” or “necessary to the production” of a product, but the SEC has issued guidance to help issuers determine their reporting requirements. Necessary to the Functionality or Production SEC guidance suggests that in determining whether a conflict mineral is “necessary to the functionality” of a product, an issuer should consider: AFTERMARKET INSIDER | VOLUME 83 | 13

Table of Contents for the Digital Edition of Aftermarket Insider Issue 83

Health Care Help:industry News
Millennials:The Aftermarket Generation
Talking Telematics:INSIDE TECHNOLOGY
Dress for Success
Workplace Wear:TOOLBOX
Conflict Minerals
Facts and Feedback:MARKET INTELLIGENCE
Words from a Winner:HEAD OF THE CLASS

Aftermarket Insider Issue 83