Conflict Minerals

• IPC Submits Comments to the SEC on Cost Estimates for Section 1502 of the Dodd-Frank Act (conflict minerals)
• On October 18, 2011 the SEC held a roundtable discussion to apparently collect further information and opinions regarding provisions of the forthcoming rules required under Section 1502 of the Dodd-Frank Act. The SEC has re-opened the record and will take public comments on issues raised during the roundtable until November 1, 2011. IPC plans to submit brief comments re-emphasizing the points made in our March 2, 2011 comments.
• IPC's Conflict Minerals Resources

• University of Tulane's Economic Analysis of SEC's proposed Conflict Minerals Regulation, requested by Senator Durbin's office (a co-sponsor of Section 1502), estimates a total compliance cost of $7.93 billion – over one hundred times the SEC estimate of $71.2 million. The Tulane study found a number of errors in the SEC estimates and relies upon a significant amount of data gathered by the IPC survey of our members, citing our study six times and our comments three additional times. The Tulane study also supports the indeterminate origin category and a phase-in proposed by IPC and others and calls out the need for a de-minimis provision.
• On October 18, 2011, ten senators, mostly Democrats, sent a letter to the SEC urging prompt issuance of the rules. The letter is available at http://boxer.senate.gov/en/press/releases/101811.cfm. IPC and other industry partners will be redoubling our lobbying efforts next week to highlight industry support for the goals of the legislation and our concerns regarding the effects if not carefully implemented.

• IPC Submits Supplemental Comments to the SEC Following the Roundtable Discussion
• House Financial Services Committee sends letter to the SEC (.pdf)
• IPC to develop data exchange standard for conflict minerals data
• Legal filing to SEC on the legal basis supporting a phased-in implementation of the conflict minerals regulation
• Conflict Metals: Good Intentions Gone Tragically Bad
• IPC submits comments to the SEC and results of an IPC survey on the impacts of the proposed regulation (.pdf)

• Electronics Industry Citizenship Coalition (EICC) and the Global eSustainability Initiative (GeSI)
• ITRI Tin Supply Chain Initiative (iTSCi)

Overview

IPC, along with a number of affected companies and other industry associations, have been working for several years to find a solution that will cut off revenue received by rebel groups committing atrocities in the Democratic Republic of Congo (DRC) from the trade of minerals used in electronics and other products. Efforts by the U.S. Congress, human rights groups, non-governmental organizations (NGOs), the European Union, and industry are underway to improve transparency of  “conflict minerals,” columbite-tantalite (coltan), cassiterite, wolframite (ores for tantalum, tin, and cobalt, respectively) and gold, in the supply chain.

Human rights groups and NGOs are taking actions to address the continued funding of violence and atrocities in the DRC through the illegal mining of tin, gold, and tantalum ores. Beginning in 2007, NGOs such as the “Enough Project” and “Make IT Fair” are urging consumers to reject electronics made with “conflict minerals,” forcing electronics companies to pay much closer attention to the source of the metals in their products.  Some suppliers are being asked to certify that the tin used in their products are not conflict tin.

IPC and other industry associations, along with a number of affected companies and trade associations, have been working for several years to find a solution that will further their goals in limiting violence in the DRC without imposing undue burdens on industry. IPC members are committed to addressing the issues associated with conflict minerals and are actively working on both a domestic and international level to craft solutions. IPC member companies are participating in a variety of initiatives to develop industry wide protocols for removing conflict minerals from supply chains. These initiatives are systematically evaluating supply chains to determine the most effective measures to combat trade in conflict minerals.

Within the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama on July 21, 2010, are new requirements for manufacturers of products containing tin, tantalum, gold, tungsten or any other “conflict metals.” Specifically, section 1502 of the new law imposes direct U.S. Securities and Exchange Commission (SEC) reporting requirements on any publicly traded companies whose products contain metals derived from conflict minerals. Companies will be required to submit a due diligence plan with their annual SEC report. The SEC has 270 days to finalize the regulations and implement the requirements.

Although reporting requirements only apply to companies required to report to the SEC, it is expected that these requirements will rapidly be passed through the entire supply chain. The requirements are expected to flow down from the publicly traded companies through the entire supply chain from the OEMs to the solder manufacturers and everyone in between. Ultimately, while this is targeted to reporting, the reporting requirements will undoubtedly impact the selection of suppliers throughout the supply chain, as public companies now will be responsible for detailed knowledge about the location of source materials affected by the new regulations. Today, companies have no mechanism through which to comply with this requirement.

IPC is committed to addressing the use of conflict minerals and is actively working with many of its members on both a domestic and international level to address the issue. IPC member companies are participating in a variety of sector specific initiatives to develop industry wide protocols for removing conflict minerals from supply chains as well as with international organizations.

• Conflict Minerals Update in IPC Review (September/October) (Members Only)
• Conflict Minerals Update in IPC Review (July/August) (Members Only)

Legislation and Regulations

Legislation

The President signed the Financial Reform Bill (H.R. 4173) into law on July 21, 2010, which contains a provision requiring manufacturers and their customers to disclose what steps they are taking to ensure that their products do not contain “conflict minerals” from the Democratic Republic of Congo (DRC). The law will apply to manufactured goods containing tin, tantalum, gold and tungsten.

Sec. 1502 of the financial reform bill requires companies whose manufactured goods contain metals refined from the minerals columbite-tantalite (coltan and tantalum), cassiterite (tin), gold, wolframite (tungsten) or any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of Congo or an adjoining country to:

• Report annually to the U.S. Securities and Exchange Commission (SEC) if the minerals did originate from the Congo or adjoining countries. It is unclear what the obligation will be for companies who cannot determine from where the minerals originated. 
• Submit a due diligence plan with the company's annual SEC report that includes:
1. A description of the measures taken by the company to prevent sourcing from the Congo.
2. A description of the products manufactured or contracted to be manufactured that are not conflict free, the facilities used to process the conflict minerals, the country of origin of the conflict minerals and the efforts to determine the mine or location of origin.
3. An independent third party audit of the company's due diligence plan.
4. A certification by the company of its due diligence report (there is no definition of “certify” included in the language so that obligation is vague).

The SEC is required to issue regulations within 270 days of enactment of the legislation.

View Section 1502 of the Financial Reform Bill: Conflict Minerals (.pdf)

View the full financial reform bill (Public Law 111-203) (.pdf)

Regulations

United States

On December 15, 2010, the SEC issued their proposed rule implementing the conflict metals provisions in Section 1502 of the Dodd-Frank Act.

View the proposed rule for Section 1502 – Conflict Minerals (.pdf)

European Union

On December 20, 2010, the European Union (EU) Council updated restrictive measures (arms embargo, visa ban and assets freeze) imposed on the Democratic Republic of Congo (17656/1/10).The decision included additional persons designated on 1 December 2010 by the United Nations Sanctions Committee in the list of persons and entities subject to the restrictive measures.

The annex lists the people, companies, and descriptions of the activities that have led to these restrictions.  Although the list does not identify the conflict mines of origin, it does describe some areas that are controlled by military factions.

View the EU Council Decision identifying restricted parties in the Democratic Republic of Congo (.pdf)

IPC Actions

Comments to the U.S. Securities and Exchange Commission (SEC)

On March 2, 2011, IPC submitted comments to the U.S. Securities and Exchange Commission (SEC) regarding Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, on the trade of conflict minerals.

IPC, in its comments to the SEC, supported the underlying goal of the proposed rule, while encouraging the SEC to implement the requirements of Section 1502 in a manner that supports the goals of the statute without unduly burdening U.S. Manufacturing industries or causing unnecessary disruptions of the minerals trade, which is vital to the livelihood of the people of the DRC.

IPC's comments detail concerns regarding the potential significant and unintended effects that the implementation of the regulation may have and offer suggestions for minimizing the negative effects of the proposed regulation. Specifically, IPC recommends that the SEC allow companies the flexibility to develop appropriate due diligence measures, recognize ongoing efforts to improve the transparency of the supply chain, address the need to phase-in requirements, and provide the necessary time to implement these measures.  It is important that the regulations acknowledge the realities of the situation on the ground in the DRC, the complexities of the international minerals trade, and the broad and diverse global electronics supply chain.

IPC also stated that the SEC's analysis on the impact of the regulation significantly underestimates the impact and cost to U.S. manufacturers.  A survey conducted of IPC members in the electronic interconnection portion of the electronics supply chain indicated median due diligence burdens in excess of $65,000 (USD) per company in the first year.  Additional estimated costs for tracking software, additional staff, training, legal expenses, and third party audits had a median total of $170,000 (USD).  For this segment of the electronics supply chain, namely printed circuit board (PCB) and electronic manufacturing services (EMS) companies along with their suppliers, the estimated cost impact of due diligence is estimated at roughly 279 million dollars in the first year alone, with ongoing annual costs expected to be around 165 million dollars.

View IPC's comments to the SEC and results of an IPC survey on the impacts of the proposed rule (.pdf)

Joint Industry Comments to SEC (.pdf)

Legal filing to SEC on the legal basis supporting a phased-in implementation of the conflict minerals regulation

The law firm WilmerHale was retained by IPC to prepare a legal brief for the SEC that provides an analysis of the legal basis for the SEC to implement IPC's requested phased-in approach to the conflict minerals regulation. The brief summarizes IPC proposed three year phase-in and provides justification based on the text in Section 1502 of the Dodd-Frank bill and the SEC's general exemptive power under the Securities and Exchange Act of 1934. The brief also provides a comparison to the phased-in implementation of the Sarbanes-Oxley Act.

IPC legal brief to the SEC on the legal basis supporting a phased-in implementation of the conflict minerals regulation (.pdf)

IPC Data Exchange Standard

IPC will begin discussing the development of a data exchange standard for due diligence communication for the conflict minerals regulations during IPC Midwest 2011. The Electronic Industry Citizenship Coalition (EICC) and Global e-Sustainability Initiative (GeSI) recently released a due diligence communication tool for the conflict minerals regulation that can be improved upon. The IPC data exchange standard would utilize the sophistication of an XML schema incorporated in the IPC-175x family of IPC standards which would provide users with greater flexibility in their material declarations. In addition, by virtue of IPC's ANSI-accreditation, the new standard would seek input from a broader stakeholder group. Having a standardized approach to exchanging information on conflict minerals would benefit the entire industry. The industry needs a reporting tool to deal with conflict minerals and we are fortunate to have the EICC/GeSI tool as a model. IPC's open process for input will ensure that the final outcome [standard] will be useful to and adopted by the broader electronics industry. The first meeting of the working group will take place at IPC Midwest Conference & Exhibition, on September 22, 2011.

Collaborative Industry Actions

IPC is working with other electronics organizations as well a broad coalition of manufacturers.

Electronics Industry Citizenship Coalition (EICC) and the Global eSustainability Initiative (GeSI)

Two industry organizations, the Electronics Industry Citizenship Coalition (EICC) and the Global eSustainability Initiative (GeSI), are already working to address the issue on behalf of their members, which include industry leaders. The EICC and GeSI are focusing on education and stakeholder engagement with the ultimate goal of increased transparency. While that might seem easy, anyone with a passing understanding of the electronics industry supply chain knows what a distance there is between the companies that make up the industry and the artisanal miners pulling minerals out of the ground in Africa versus mines operated by warlords.

In August, 2011 EICC/GeSI announced the release of their Conflict Minerals Reporting Template tool (“Template”), which is intended to facilitate disclosure and communication of information regarding smelters that provide material to a company’s supply chain. The Template is expected to assist companies in their due diligence processes by tracking information on their supply chains, specifically related to conflict minerals. Most suppliers that directly purchase from tin, tantalum, tungsten, and gold smelters or refiners are many levels removed from the companies that sell the end products which use those materials. The Template includes questions regarding a company’s conflict-free policy, engagement with its direct suppliers, and a listing of the smelters the company and its suppliers use. The Template provides written instructions and recorded training illustrating the use of the tool. The Template is available in English, Simplified Chinese, Korean and Japanese.

Earlier in 2010 EICC/GeSI launched a pilot tantalum smelter validation process. This process will identify smelters that can demonstrate through third party validation that they only source conflict-free material. Over the course of the next few quarters the program will be expanded to include tin and possibly other metals. The group continues to engage companies from all levels of the tantalum mining and processing industry to drive toward a credible solution that promotes the responsible sourcing of tantalum.

ITRI Tin Supply Chain Initiative (iTSCi)

The IPC Solder Products Value Council (SPVC), representing the world's leading solder manufacturers, is working to ensure that the International Tin Research Institute (ITRI), a global organization representing the tin industry, do not adversely impact the electronics industry supply base.  ITRI has been working since early 2009 on the ITRI Tin Supply Chain Initiative (iTSCi), a phased-in approach towards improved due diligence, governance, and traceability of cassiterite from the DRC. The goal of the iTSCi is to provide more transparency and accountability concerning the supply of raw materials coming from the conflict zones of the DRC. IPC's SPVC supports ITRI's efforts and believes that smelters and mines are in the best position to develop and implement a system to ensure mineral traceability from the exporter back to the mine site and to develop chain of custody data.

In 2010, ITRI announced it is moving forward to Phase II of its iTSCi. Phase II involves developing and implementing a system to ensure mineral traceability from exporter back to the mine site and to develop chain of custody data. IPC staff participated in a workshop organized by ITRI, GeSI and EICC. The intent of the workshop was to review non-governmental organization (NGO) and governmental engagement strategies, identify challenges to implementing the tantalum smelter validation process to the tin supply chain and to agree on a roadmap for implementation. ITRI intends to trace the origin of minerals and ensure that those entering the supply chain are not sourced from militia-controlled mines. If they are successful, ITRI hopes to expand the project across the DRC and to initiate Phase III by 2013.