Two New Legislative Requirements Causing Fits for Manufacturers and Suppliers

New SEC “Conflict Minerals” Requirement Expected to Cost Companies $8 Billion; California Law on “Human Trafficking” is Even Broader in Scope

“Is the SEC Going Too Far?” Compliance Officers Ask

--()--Pepper Hamilton LLP:

WHAT:

 

Conflict Minerals” – A Dodd-Frank Act mandated SEC rule expected in final form before year end will require all manufacturer public companies to confirm that certain minerals or metals used in the production of their goods – both in the product and in the production process – do not come from mines in a region of the world involved in human rights violations.

 
The so-called “Conflict Minerals” or “Conflict Metals” are:
 

-- Tungsten

-- Gold
-- Tin
-- Tantalum
 
and come from places like the Democratic Republic of the Congo (DRC) and adjoining countries in Central Africa. These metals are extremely common in consumer products, including electronics, medical devices, automobiles, tools, and canned and foil-wrapped goods.
 

Supply Chain Transparency”—In addition, a new California statute imposes a similar requirement on many companies doing business in the state. The California Transparency in Supply Chain Act of 2010 will require manufacturers and retailers to disclose on their websites what efforts they are making to eliminate the use of slave labor and human trafficking from their supply chains.

 

WHO:

All public companies that manufacture or arrange for the manufacture of products are subject to the expected SEC rule. In addition, their upstream suppliers will be drawn into due diligence obligations.

 
In California, any manufacturer or retailer with $100 million or more in global sales and $50,000 or more in tangible property or employee compensation in the state will be subject to the new law. The geographic expanse covered by this requirement is not limited to any region or continent.
 

WHEN:

SEC final rule is expected by the end of the year. The California statute takes effect January 1, 2012.

 

WHY:

An economic study by Tulane University estimates that the cost of implementing the Dodd-Frank conflict minerals regulation will cost companies, and their complex supply chains, $7.93 billion —100 times more than the estimate prepared by the SEC – and that reporting obligations will impact far more companies than predicted. The California law applies to a far broader geographic reach than the SEC requirements.

 
Suppliers will be under tremendous pressure from their public company customers (and even nonpublic entities subject to the California law) that need to be in compliance.
 

EXPERT:

Pepper Hamilton LLP attorney Jane Luxton, partner with the Environmental Practice Group and chair of the law firm’s Sustainability, CleanTech and Climate Change Team, advises clients on conflict minerals and has long-standing involvement with the U.S. and international metals industries. Ms. Luxton is available to comment on the new legislation and how companies can ensure compliance.

 
She says: “The decision-makers behind these well-intentioned programs have grossly underestimated how costly and complicated it will be for companies and their suppliers to comply with these new requirements.”

Contacts

Pepper Hamilton LLP
Blair Kahora Cardinal, 610-649-9292
blair@buchananpr.com

Release Summary

Pepper Hamilton LLP partner Jane Luxton is available to comment on two new supply chain transparency requirements -- SEC “Conflict Minerals” and the California law on “Human Trafficking”

Contacts

Pepper Hamilton LLP
Blair Kahora Cardinal, 610-649-9292
blair@buchananpr.com