Conflict Minerals Compliance: Why You Must Disclose Your Smelters & Refiners

Conflict Minerals Compliance: Why You Must Disclose Your Smelters & Refiners

One of the most common questions our regulatory experts have received from issuers this year is whether or not smelters and refiners need to be disclosed on Conflict Minerals Reports (CMRs), due in May.

The answer is yes, and here’s why.

The U.S. Securities and Exchange Commission (SEC) is clear on this issue. The Final Rule of Section 1502 of the Dodd-Frank Act, Section E.1.c (page 183-184) states:

The final rule also requires, unless an issuer’s products are “DRC conflict free,” the Conflict Minerals Report to include a description of the facilities used to process those conflict minerals, the country of origin of those conflict minerals, and the efforts to determine the mine or location of origin with the greatest possible specificity.

Despite the SEC’s stay on the independent private sector audit requirement, its statement issued on April 29th, 2014, demonstrates the issuer’s continued obligation to disclose smelters and refiners on their CMRs. The statement reads:

For those companies that are required to file a Conflict Minerals Report, the report should include a description of the due diligence that the company undertook. If the company has products that fall within the scope of Items 1.01(c)(2) or 1.01(c)(2)(i) of Form SD, it would not have to identify the products as “DRC conflict undeterminable” or “not found to be ‘DRC conflict free,’” but should disclose, for those products, the facilities used to produce the conflict minerals, the country of origin of the minerals and the efforts to determine the mine or location of origin.

The confusion is understandable. While 40 percent of companies chose to disclose smelter and refiner information last year, 60 percent of companies still opted not to disclose this information.

The common explanation from these companies was they were “DRC conflict undeterminable” and therefore only needed to disclose the facilities used to process the conflict minerals, if known. Since their determinations were not certain, the smelters and refiners in their supply chain (ie. the facilities used to process conflict minerals) were not known and therefore did not need to be disclosed.

This is incorrect.

Some companies have confused the April 29th, 2014 SEC guidance (referenced above) as an extension of the use of the “DRC conflict undeterminable” status, which it is not.

The Final Rule and the SEC are clear on the issue of smelter and refiner disclosure. If you are in scope and submit a CMR to the SEC, you should disclose a list of your smelters and refiners as well as the country of origin (this is not necessarily the same as the location of your smelters) as part of your CMR.

Assent Compliance’s regulatory experts are available to help companies verify their smelter data by validating the information against our master database. This service will help ensure companies submit accurate and complete CMRs to the SEC in May.


 

To request a review of your organization’s smelter data, contact us at info@assentcompliance.com.

Newsletter