NEW YORK As publicly traded companies rush to comply with new conflict minerals rules by next years deadline, some metal suppliers have reported being threatened with a loss of business if they dont complete the paperwork in a timely fashion.
Copper and brass service centers, tin foundries and tin alloyers told AMM
that surveys and requests for declarations regarding the sourcing of material being supplied have come pouring in recently.
In a rule adopted last August, the U.S. Securities and Exchange Commission (SEC) requires publicly reporting companies to establish if minerals in their products are sourced from the Democratic Republic of the Congo or adjoining countries (amm.com, Aug. 23
). If so, the companies must make a reasonable effort to determine whether the purchase of these minerals is funding armed groups in the country. The legislation applies to tin, tantalum, gold and tungsten.
Weve been through a whole flurry of requests for information, said a source at one service center, adding that the company does not have materials from the DRC or surrounding area and has complied with requests.
We had (a letter) that told us we had six weeks (to respond), and if not theyre claiming they will cease business with us, he said.
The companies requesting information, many from the automotive and electronics industries, first must break down their products into parts and determine whether they contain any tin, tantalum, tungsten or gold and secondly, identify which supplier sold it to them. They then have to turn to these suppliers to determine the source of their materials.
These steps make complying with the SEC ruling difficult, said Ernst & Young conflict minerals expert Rich Goode. Goode counsels Fortune 500 companies on how to best comply with the SEC ruling issued through the Dodd-Frank Wall Street Reform and Consumer Protection Act. The fact that most of these major company have multiple segments that may not necessarily share one overall IT system can make searching for suppliers and compiling the results of their sourcing information very difficult, according to Goode.
Ernst & Young advises its clients not to use threats, according to Goode. A lot of companies are taking the position of, you answer this survey or we terminate our business relationship with you if you dont figure it out, Goode said. While those non-publicly traded companies dont have to take a compliance risk they do have a financial and reputation risk.
The implication is that we need to do this or our business relationship will change, a source at a second service center said of the letters he has received. The problem with distributors like ourselves is youre buying material from a number of sources ... we have sourcing from all over the world and theyre asking us to make blanket statements about all suppliers.
This kind of pressure could lead to inaccuracies as smaller, independent companies rush the paperwork in order to avoid losing a major client, a third service center source said who added that one automotive supplier had threaten to cancel orders with his company if he didnt respond promptly.
The surveys that companies send do allow suppliers to say they dont know if their materials are sourced from the Democratic Republic of Congo, Goode added.
Public companies have until May 31, 2014 to ensure they are in compliance with the SEC rules.