JVC: Conflict mineral rule still stands
April 21, 2014
New York--Despite last week’s court ruling, public companies listed with the Securities and Exchange Commission still have to trace their supply chains and file conflict mineral reports, the Jewelers Vigilance Committee said.
On April 14, the U.S. Court of Appeals in the District of Columbia Circuit issued an opinion in the National Association of Manufacturers’ (NAM) challenge of several aspects of the “conflict” minerals provision of the Dodd-Frank Act, which was passed in 2010 as part of the Wall Street Reform and Consumer Protection Act.
The JVC said the court rejected most of NAM’s arguments but did hold that requiring certain companies to publicly report that their products have “not been found to be ‘DRC conflict free’” violates the First Amendment by compelling speech.
What this means is that companies covered by the rule still must report to the SEC about the origin of their tin, tantalum, tungsten and gold, as these minerals could be funding to conflict in the Democratic Republic of Congo and nine neighboring countries.
In addition, companies covered by Dodd Frank must exercise due diligence regarding their supply chains if they minerals they use may have originated in the DRC or an adjoining country.
What the appeals court found to be unconstitutional, however, is the requirement that after conducting this due diligence, companies be compelled to publicly report if any of their products have “not been found to be ‘DRC conflict free.’”
According to the court, this requirement compels specific speech instead of allowing companies to use their own language to describe their products, a violation of the First Amendment.
“By compelling an issuer to confess blood on its hands, the statue interferes with that exercise of the freedom of speech,” the court wrote in the majority opinion.
The JVC notes that the ruling does not change the requirement that a disclosure must be made to the SEC if a company determines that its products contain minerals linked to conflict; it does, however, allow companies to make that disclosure in language of their own choosing.
The case has been remanded to the District Court for further proceedings. The JVC said the coming weeks will determine the full impact of the ruling, as the parties involved decide how to proceed.
In the meantime, the JVC said companies covered by the law must continue to prepare their SEC filings. This year, the first filings are due on May 31 but, because the 31st falls on a Saturday, the deadline for filing is actually Monday, June 2.
These companies will need the cooperation of both their direct and indirect suppliers to do so, which means that businesses in the supply chains of covered companies that are not public, SEC-reporting companies will be called upon to provide information about mineral origin and implement responsible supply chain processes as well.
Questions on Dodd-Frank and conflict minerals can be directed to Suzan Flamm at firstname.lastname@example.org.
The JVC also has a kit available to help suppliers of gold and tungsten implement assurance programs, and that is available on JVCLegal.org. Also available on the website is a summary of the main points of the court decision.