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Focus on Manufacturing & Distribution and Public Companies: SEC Issues Final Rule on Section 1502: Conflict Minerals

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The following serves as an update to a previously published E-Focus Newsletter on the same topic in October 2011. Click here to view the previously published article.
September 24, 2012

The following serves as an update to a previously published E-Focus Newsletter on the same topic in October 2011. Click here to view the previously published article.

On August 22, 2012 the Securities and Exchange Commission (SEC) adopted a rule mandated by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank).

Based on the adoption of the rule, companies will be required to provide disclosure, on a new Form SD (Specialized Disclosure), on their use of conflict minerals, defined as ‘3TG’ minerals (Tungsten, Tantalum, Tin, and Gold) originating from the Democratic Republic of the Congo (DRC) or adjoining countries.

The first Specialized Disclosure report will be required to be filed on or by May 31, 2014 for the 2013 calendar year and annually on or by May 31 every year thereafter. These filing dates are the same, regardless of a company’s fiscal year end.

The purpose of Section 1502 is an attempt to reduce or even eliminate significant exploitation and violence in the DRC by identifying companies that source specific metals/minerals from this region of the world and making the public aware of its impact through financial statement disclosure.

A company is required to comply with the newly adopted SEC rule if it:

  1. Files reports with the SEC under the Exchange Act, and
  2. 3TG minerals are necessary to the functionality or production of their products

Furthermore, even companies that do not file with the SEC may need to conduct due diligence on their supply chain if they are suppliers to impacted SEC filers.

The industries that will be primarily affected include: Electronics and Communications, Aerospace, Automotive, Jewelry, and Industrial Manufacturing.

Under the new SEC rule, a company that utilizes 3TG minerals is now required to perform a review that is reasonably designed and performed in good faith to determine the Country of Origin of 3TG minerals used in their product and/or manufacturing processes.

If a company has no reason to believe that conflict minerals originated from the DRC, then the company must only disclose its determination and inquiry methodology on Form SD. Additionally, the description must be made publicly available on the company internet website and also reported in Form SD the internet address where the information was made available publicly.

If, however, a company knows or has reason to believe that the identified minerals may have originated from the DRC, then the company must perform “due diligence” on the source and chain of custody for those minerals. Additionally, a Conflict Minerals Report must also be filed as an exhibit to Form SD. Similar to the above public reporting requirements, a company in this situation must make the Conflict Minerals Report publicly available via the company internet website and also report in Form SD the internet address where the information has been made available publicly.

If a Conflict Minerals Report is required to be filed, as noted in the prior paragraph, the company is required to exercise due diligence on the source and chain of custody of their 3TG minerals, which must comply with a nationally or internationally recognized framework, such as the Organization for Economic Cooperation and Development (OECD). Based on the company’s internal assessment, the independent audit and certification requirements will vary. Internal company assessments include:

  • DRC Conflict Free
  • Not Been Found to be DRC Conflict Free
  • DRC Conflict Indeterminable
  • Recycled or Scrap Due Diligence

RubinBrown has a methodology to use in assisting affected companies with their internal assessments, and with audit and certification requirements. Through the use of our tools and resources, RubinBrown can provide an effective and economical solution to both public and private companies that are impacted by the SEC’s adoption of the 3TG conflict mineral assessment and reporting requirements.

To view the Section 1502, click here.

To view the adopted SEC rule, click here.

The SEC’s final rule release is over 350 pages, and each company may have unique issues in complying with it. Companies should take action now to determine the impact of this new rule.


Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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For more information, please contact:

  • Mike Ramirez, CPA — St. Louis
  • Director
  • Manufacturing & Distribution Services Group
  • 314.290.3455