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In 2012, companies that file reports with the Securities Exchange Commission under the Exchange Act will be required to disclose annually whether they use “conflict minerals” originating from the Democratic Republic of the Congo or nine adjoining countries (Uganda, Rwanda, Burundi, Tanzania, Zambia, Angola, Republic of the Congo, Central African Republic and Sudan). According to the Act, the “conflict minerals” must be “necessary to the functionality or production” of a product that the company either manufactures or contracts to be manufactured.
Conflict minerals are currently defined as cassiterite, columbite-tantalite, wolframite or their derivatives: tin, tantalum, gold and tungsten. Products that could contain conflict mineral derivatives range from cutting tools, capacitors, alloys and ingot used to make jet engine discs, blades and vanes, filaments, catalysts, lubricants and smart glass. The secretary of state can also add other minerals to the conflict minerals list as appropriate.
The requirement for annual disclosure was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203), which was signed into law July 21, 2010. Section 1502, Conflict Minerals, mandated that the SEC promulgate rules for the annual disclosure of “conflict minerals” use. The proposed rule was published in the Federal Register on December 23, 2010, and the final rules are expected to be published after July 2011.
The legislation stated, “It is the sense of the Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo . . .” As part of the legislation, the secretary of state shall produce the Conflict Minerals Map – a “map of mineral-rich zones, trade routes, and areas under the control of armed groups in the Democratic Republic of the Congo and adjoining countries.”
The Organization for Economic Co-operation and Development is setting up a yearlong pilot implementation phase. Over the year, participants will answer three standardized questionnaires on their company’s progress in implementing the five steps of the OECD Due Diligence Guidance: Supplement on Tin, Tantalum, and Tungsten. Published in December 2011, the report provides recommendations to companies to source minerals responsibly. OECD consultants will compile the answers into reports on implementation.