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CTEA August Meeting 12 August 2014
Brad Heath
CEO, VirTex Enterprises
Conflict Minerals
Update
What are Conflict Minerals and Why Should I Care?
Overview of Original Conflict Minerals Legislation
Legal Updates
Compliance Updates
Regulatory Developments
Industry Task Force Info
IPC Data Exchange Standards
Software Tools and Resources
Whats Next?
Agenda
Global concern over the mining of high value minerals and its use in financing conflicts in the Democratic Republic of Congo
There is substantial evidence that monies collected from the mining of these minerals finds its way to the groups involved in extensive human rights violations including kidnapping, torture, murder, rape and the use of child labor.
NGOs have successfully lobbied government entities to limit and control the purchasing and use of these conflict minerals by tracking them to the original sources the mines and smelters
Conflict Minerals and the DRC
Great infographic Available from Venkel
http://www.venkel.com/compliance/infographics/conflict-
minerals-infographic
These materials are used in many places
throughout the electronics supply chain
Obvious Sources are in Electronics
components, but just like ROHS, there are
many other places that materials like Tin
can be used.
3TG Defined
Source AIAG Conflict Minerals Update 2014
Tin Usage in Automobiles
Source AIAG Conflict Minerals Update 2014
Tungsten and Gold Usage in
Automobiles
Source AIAG Conflict Minerals Update 2014
Tantalum Usage in Automobiles
Section 1502 of the Dodd-Frank Act amends the Securities and Exchange Act of 1934 to add Section 13(p). The SEC has promulgated Rule 13(p)-1.
Applies to:
all Exchange Act filers
domestic and foreign issuers
Filings made on new Form SD:
calendar year reporting for ALL filers, regardless of fiscal year end
first Form SD due May 31, 2014 (for YE 2013)
due annually on May 31 thereafter
deemed filed but not CEO/CFO certified
Dodd Frank Requirements
Companies must disclose their use of the 3TG minerals if those minerals are:
necessary to the functionality or production of a product manufactured or contracted to be manufactured by the company.
Companies must have actual influence over the manufacturing process for the conflict mineral rules to apply.
Dodd Frank Requirements
SEC Flow Chart (from the SECs Release No. 34-67716)
Dodd Frank Requirements
1) Establish strong company management systems
Identify a lead for conflict minerals reporting
Understand how to use the Conflict Minerals Reporting Template
(CMRT) or equivalent
Develop and document a conflict minerals policy and incorporate
into terms and conditions
2) Identify and assess risk in the supply chain
Conduct a reasonable country of origin inquiry
Evaluate supplier responses
OECG Guidance
3) Design and implement a strategy to respond to identified risks
Escalation process
Risk mitigation process
4) Third party audit of smelters/refiners due diligence practices
Obtain list of conflict free smelters at
http://www.conflictfreesourcing.org
5) Report annually on supply chain due diligence
Respond to customer requests for conflict minerals information
OECG Guidance
Source: Fern Abrams IPC Update at Semicon 2014
April 14, 2014 the US Court of Appeals struck down the part of the rule that would have compelled companies to disclose the possible use of DRC-sourced conflict minerals on their websites
May 15, 2014 the Court of Appeals denied the NAMs request for a stay of the conflict minerals disclosure rule
On May 29, 2014 Amnesty International and the SEC petitioned the U.S. Court of Appeals for the D.C. Circuit to rehear the case en banc
Legal Challenge Update
Source: Fern Abrams IPC Update at Semicon 2014
Approximately 1,300 forms were filed by June 15
300 filed as conflict free
Mainly based on RCOI
Small number of suppliers
Limited use of conflict minerals
1,000 filed as conflict undeterminable
Four companies had audits (not required for conflict undeterminable status)
SEC had originally estimated 5,000 filers
Compliance Update
Compliance Update
Source: Fern Abrams IPC Update at Semicon 2014
On May 30, 2014 an unnamed SEC staffer verbally communicated to an attorney for the SPI that chemical compounds manufactured from tin, tantalum, and tungsten are not in the scope of the conflict minerals rule
Alloys that contain the 3T remain subject to the rule
Gold plating chemicals would need to be evaluated by the issuer on a case-by-case basis unless future clarifications from SEC address gold
Not available in writing
Regulatory Developments
Source: Fern Abrams IPC Update at Semicon 2014
On May 30, 2014 an unnamed SEC staffer verbally communicated to an attorney for the SPI that chemical compounds manufactured from tin, tantalum, and tungsten are not in the scope of the conflict minerals rule
Alloys that contain the 3T remain subject to the rule
Gold plating chemicals would need to be evaluated by the issuer on a case-by-case basis unless future clarifications from SEC address gold
Not available in writing
Regulatory Developments
Source: Fern Abrams IPC Update at Semicon 2014
System for a voluntary EU responsible importer self-certification
EU accompanying measures to promote responsible sourcing
EU to publish an annual list of responsible smelters and refiners
Member State authorities will implement the requirements
Scope
3TG minerals & metals (tin, tantalum, tungsten, gold)
Global: all conflict affected regions, not limited to DRC region
Focus on upstream part of the supply chain, especially smelters / refiners
EU Commission Proposal
Source: Fern Abrams IPC Update at Semicon 2014
Public procurement incentives for companies selling products containing 3TG
Financial support for
SMEs to carry out due diligence
The OECD for capacity building and outreach activities
Visible recognition for the efforts of EU companies who source responsibly from conflict-affected countries
Policy dialogues and diplomatic outreach with governments in extraction, processing and consuming countries to encourage a broader use of due diligence
Raw materials diplomacy including in the context of multi-stakeholder due diligence initiatives
Development cooperation with the countries concerned
Support by EU Member States through their own policies and instruments
EU Commission Proposal
Source: Fern Abrams IPC Update at Semicon 2014
EU proposal is different from DF with respect to:
Global scope, not only DRC region
Voluntary self-certification, at least for first 3 years
Focus on upstream actors (smelters) instead of stock listed companies
Tries to include incentives for sourcing responsibly from conflict regions
Both
Build on the OECD due diligence framework
Limit metals to 3TG only (for now)
Use public pressure via NGOs, media, etc. to support scrutiny
EU Proposal vs Dodd Frank
Automotive Industry Action Group (AIAG)
Association Connecting Electronic Industries
(IPC)
Electronic Industry Citizenship Coalition (EICC)
Global e-Sustainability Initiative (GeSI)
Conflict Free Sourcing Inititative (CFSI)
Industry Groups
IPC-1755 Conflict Minerals Data Exchange Standard:
Defines what data is to be collected and shared
Defines the language (XML) for sharing data
IPC-1755 is NOT a reporting form
Independent third-party providers develop tools (i.e. forms) compatible with IPC-1755
Ex. CFSI Template, iPoint Conflict Minerals Platform
Data can be easily exchanged among all tools that support IPC-1755
Some tools provide sophisticated data management
Tools can also interface with internal company systems
Visit http://www.ipc.org/1755 to download the standard
IPC 1755 Data Exchange
Vendors Developing Software Conflict Minerals Tools
AIAG/iPoint
Papros/MRPRO
BomCheck
PTC
Dassault Systems
Total Parts Plus
CFSI Template
Silicone Experts
Foresite
Software Tools
Recommended