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
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
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.