GA Trade July-Aug 2014 - page 24

he Security and Exchange
Commission (SEC) adopted a
rulemandated by the Dodd-Frank
Wall Street Reform and Consumer
ProtectionAct to require companies
to publicly disclose their use of
conflict minerals. The new disclosure
obligations also affect German
companies. Besides the effect on the
electronic industry, the obligations
usually apply to the jewelry trade,
aircraft and aerospace industry, as
well as medical devices. The intent
and purpose of the regulation is to
make it more difficult for armed
groups in conflict-affected and
high-risk areas to finance their
activities through themining of
and trade inminerals.
Since June 2013, publicly listed
companies have been obliged to
file a disclosure report regarding
their use of conflict minerals for
the very first time. Conflict minerals
originate in the Democratic
Republic of the Congo (DRC) or an
adjoining country e.g. Central
Africa Republic, Zambia, Angola,
the Republic of Congo, Tanzania,
Burundi, Ruanda and Uganda.
Minerals such as cassiterite,
columbite-tantalite, gold, and
wolframite are affected, if they are
“necessary to the functionality or
production of a product”manufac-
tured by those companies.
Business associations hoped for the
judgment of the Court of Appeals for
the District of Columbia Circuit. The
court ruled that the requirement for
issuers to report whether any of their
products have “not been found to be
‘DRC conflict free’” violated the First
Amendment last April. However, the
court upheld the remainder of the
Conflict Minerals law. Based on the
recent court decision, the SEC has
reduced some of the conflict mineral
disclosures. The SEC's Division of
Corporation Finance issued a
statement confirming the existing
filing deadline for SEC issuers subject
to the Conflict Mineral law.
Despite the judgment, a specialized
disclosure report (Form SD) is still
required to be filed. Companies which
filed a ConflictMinerals Report must
describe the due diligence procedures
they performed. Companies which do
not need to file a ConflictMinerals
Report should disclose their country
of origin inquiry and briefly describe
the investigations they undertook in
their Form SD. A company can elect
tomake a statement regardingwhich
of their products are “DRC conflict
free". In this case, a company has
obtained an independent private
sector audit as required by the
ConflictMineral law.
A company can be sued for
making false or misleading state-
ments by anyone who relied upon
such information to purchase or
sell a security, and also for damages
and attorney fees, among other
Despite companies’ best efforts to
comply, legal questions remain,
particularly over the definition of
whether conflict minerals are
“critical to the functionality”
of products andmust be traced. For
instance, financial services compa-
nies might want to think about what
materials are present in the chips in
their credit or debit cards. Telecom-
munications companies might have
to perform due diligence onmore
than their cellphones.
Howdoes theDodd Frank
Act affect German companies
in theU.S.?
Generally, this legislation affects any
SEC-listed company in theU.S. that
utilizes the abovementionedminerals.
A key factor to ensure the legitimacy
ofminerals in the supply chain is to
ByVerenaEike, GTAI
for Using Conflict Minerals
About theAuthor
Verena Eike
Legal Services
75Broad Street, 21st Floor
New York, NY 10004
T 212 584 9717
GermanAmerican Trade July/Aug 2014
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