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Technology & Entrepreneurship

World Hunger For Minerals Funds Conflict And Controversy

May 6, 2014

Armed groups often force people to mine the minerals – called “conflict minerals” – at gunpoint and use the profits from their sales to buy weapons and pay soldiers. It is estimated that as much of 35 percent of the Republic of Congo’s vast mineral wealth goes to armed groups every year.  

The 2010 Dodd-Frank Consumer Protection Act places restrictions on the trade and use of conflict minerals. One of the act’s requirements is for corporations to report whether they’re using conflict minerals from the Congolese conflict zone. The U.S. Securities and Exchange Commission (SEC) has pulled back one of the reporting requirements after a U.S. Court of Appeals ruled that it violated the First Amendment, but the rest of the rules are going into effect on June 1.  

Based on the latest SEC guidance, companies do not need to make a concluding statement in their conflict minerals reports stating that products are either “not found to be DRC conflict free,” “DRC conflict undeterminable,” or “DRC conflict free.”  

That said, they still need to file the conflict minerals report including a description of their due diligence efforts; the location of facilities that produce the minerals, the country of origin, etc. The SEC has essentially said that companies still need to do everything required by the rule, except provide an ultimate concluding statement.  

This new guidance raises an interesting question for companies that were planning to file reports stating that products were DRC conflict undeterminable. Despite the SEC’s guidance, companies may wish to use this designation to clarify that products should not be presumed to be “not DRC conflict free.”   If a company is at the point where it’s able to say that certain products are DRC conflict free, and it was already going to have its conflict minerals report audited, there is no reason why it wouldn’t continue to file a report using the "DRC conflict free" designation. The company will get a benefit from that, and it has already done the work.