As Legal Battle Continues, Companies File First Conflict Minerals Reports

Manufacturers this week had to report to the Securities and Exchange Commission on the impact of conflict minerals in their supply chain—a contentious regulation still tied up in court.

Manufacturers filed their first reports with the SEC this week under new rules requiring them to disclose whether there are conflict minerals in their supply chains, though the long-running court battle over the rules continues.

The path to the Securities and Exchange Commission’s new conflict minerals reporting rules has been full of, well, conflict.

Mandated by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, the rules require companies to report on their products’ use of precious minerals from conflict zones in central Africa (such metals from the war-torn Democratic Republic of Congo). The regulations have been the subject of a long-running legal battle led by several large trade groups.

While litigation by the National Association of Manufacturers, the U.S. Chamber of Commerce, and the Business Roundtable has produced court decisions that scaled back the rules, the court didn’t quash them entirely. This week, the first deadline for companies to submit reports to the SEC arrived.

What the Reports Say

The reports, submitted ahead of a June 2 deadline, were mixed in tone, with only a few firms (Office Depot and ExxonMobil among them) stating that it was unlikely conflict minerals were used in their products.

Many companies, including Google, Apple, and Tesla Motors, said they found it difficult to say for sure whether their products were entirely conflict-free. Google admitted [PDF] there was a good chance they are not, in fact. Intel reported that its processors were conflict-free, but it could not confirm whether the same was true for its other products.

“Working with other companies in Silicon Valley, we commonly found that supplier data accuracy for 2013 was questionable,” Tesla Motors said in its report [PDF].

There were some surprises. IBM and HP each said that North Korea was part of its supply chain, Bloomberg reported, though HP denied that minerals from North Korea were used in its products.

But the tone of the reports suggested that companies were trying to be proactive on the problem. Apple revealed that it had been working on cutting its use of conflict minerals since 2010 but that solving the problem was easier said than done.

“Overall, the reports indicate that tech companies are at least advocating for the manufacture of conflict-free products, but they’re finding it difficult to implement such initiatives on a practical level,” Time magazine’s Victor Luckerson wrote in a summary of the findings.

A Related Meaty Issue

Meanwhile, the court battle continues. Late last month, the SEC petitioned the U.S. Court of Appeals for the District of Columbia Circuit on whether requiring companies to disclose their use of conflict minerals is unconstitutional.

An earlier court decision stemming from the trade groups’ lawsuit found that the requirement amounted to a First Amendment violation, leading the SEC to ask the appeals court to clarify the issue. Large companies currently must report on conflict minerals issues, but they are not required to disclose whether such materials are contained in their products. Given that ruling, the trade groups have argued that the reporting is an unnecessary burden.

In its petition, the SEC noted that a separate case involving the meat industry could change the rules on the issue. Last year, a number of meat industy associations sued the U.S. Department of Agriculture over country-of-origin labeling rules.

The two cases have many parallels. Both involve reporting regulations that industry groups say amounts to compelled speech, making the rules unconstitutional.

Whatever happens next, it could mean that next year’s conflict minerals reporting requirements could look a bit different.

(photo by Sasha Lezhnev/Flickr)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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