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Conflict minerals rule to hit distributors

Keywords: Tags  copper, copper service centers, brass, conflict minerals, Copper and Brass Fabricators Council, Copper and Brass Servicenter Association, CBSA, tin cassiterite

AMELIA ISLAND, Fla. — Service centers will be affected by the conflict minerals reporting requirements coming into force in 2014 as many of their customers are subject to the rules, according to Copper and Brass Fabricators Council government affairs counsel John Arnett.

The rules affect all publicly listed companies, and while service centers aren’t all publicly listed many of the companies they supply are, he said at the Copper and Brass Servicenter Association (CBSA) annual conference in Amelia Island.

"Non-public companies are clearly affected because the publicly traded companies are clearly going to put pressure up the supply chain (because of their requirement to report the origin of conflict minerals in their products)," Arnett said.

The first reports are due to the U.S. Securities and Exchange Commission May 31, 2014, covering product produced in 2013. Arnett said companies must act now to prepare information for the 2014 reports.

While there is no specific penalty for failing to report, the intent is to put pressure on brand-name companies to restrict the use of conflict minerals from the Democratic Republic of the Congo and surrounding countries.

As expected, some of the brand-name companies—including Boeing Co., Chicago; Ford Motor Co., Dearborn, Mich.; General Motors Co., Detroit; Hewlett-Packard Co., Palo Alto, Calif.; IBM Corp., Armonk, N.Y.; and Motorola Inc., Schaumburg, Ill.—have made enormous efforts to be able to report that their products are conflict free, Arnett said.

In order to remain conflict free, brand-name companies will be making demands up the supply chain—flowing from finished goods manufacturers through distributors and intermediate manufacturers to smelters and finally mines—to provide such declarations, he said. "This is a burdensome, burdensome rule that affects the whole of the supply chain."

Distributor and mill representatives at the CBSA conference expressed their dissatisfaction with having to take on the additional burden. "It’s created a paperwork monster for distributors," one attendee said.

Conflict minerals include cassiterite, columbite-tantalite (coltan), gold and wolframite, as well as derivatives tantalum, tin and tungsten.

Conflict minerals in service centers’ products come under the scope of the rules only if they are "necessary to the production or functionality of the product," Arnett said, noting that intentionally adding these alloying elements would indicate that the minerals were necessary to the functionality. In the case of copper and brass products, only those specifying tin as an alloying element (a minimum or range) are within the scope of the rule. Product is deemed conflict free if sourced solely from scrap or recycled material.

In order to determine what action is necessary, Arnett said companies should follow a four-step process: determine applicability, perform initial setup and company analysis, conduct a reasonable country-of-origin inquiry and, if necessary, perform due diligence.

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