On August 22, 2012, the SEC approved a final rule requiring certain issuers to publicly disclose their use of conflict minerals [tantalum, tin, tungsten, and gold] and whether those minerals originated in the Democratic Republic of the Congo ("DRC") or adjoining countries (“covered countries”). The rule outlines a three-step process to help issuers determine whether they are subject to its requirements, and if so, what they should do. Among other things, issuers subject to the rule will conduct a comprehensive assessment of their supply chain activities to determine whether their conflict minerals originated from a covered country.
Other participants in an issuer's supply chain, such as component manufacturers, smelters, and mining companies performing mineral extraction, are affected by the rule, regardless of whether they are public or nonpublic companies. The SEC estimates that companies (and their affected suppliers) will likely incur significant compliance costs.
Issuers will be required to provide annual disclosures on a new Form SD to be filed with the SEC. The annual disclosure period spans a calendar year for all issuers – regardless of their fiscal year end. The filing deadline for annual disclosures is May 31. Companies will first comply with the disclosure requirements on May 31, 2014 (for the 2013 calendar year).
This Dataline looks at the key provisions of the final rule.
Additionally, the recorded webcast of PwC's September 11 Assurance and Consulting practices discussion of the SEC rule, its impact, and what companies should be doing is now available.
* Paragraph .18 has been revised by deleting the words "including manufacturers that utilize component manufacturers" to clarify that the degree of influence concept applies whenever a company "contracts to manufacture" its finished goods and does not apply to components manufactured by a supplier.
** Paragraph .16 and the related observation have been revised based on the SEC staff’s May 2013 Frequently Asked Questions (FAQs). Paragraph .19 was revised to add the words "including etching a serial number or other identifier"; and paragraph .56 was revised to include reference to initial public offering registration statements, both based on the FAQs.