SEC to ‘Reconsider’ Conflict Minerals Reporting

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By Andrea Vittorio

The acting head of the Securities and Exchange Commission has directed the staff to “reconsider” a rule that requires companies to trace their use of minerals from war-torn regions in Africa.

Industry groups have long criticized the conflict minerals disclosure rule for falling outside the agency’s mission and for being hard to implement. The SEC is now seeking feedback on the rule and on guidance it issued in 2014 to help companies comply with it.

Acting Chairman Michael Piwowar’s move Jan. 31 to see whether “any additional relief is appropriate” isn’t surprising, given his past opposition to the rule and the new administration’s emphasis on cutting back regulations, but it was swift.

Companies from General Motors to General Electric are required by the 2010 Dodd-Frank Act to report to the SEC every year on their conflict mineral use. Many have found it difficult to fully trace their use of tin, tantalum, tungsten and gold, which have been linked to armed conflict and human rights abuses in the Democratic Republic of the Congo and neighboring countries.

Impact Unclear

The rule’s effectiveness in reducing conflicts has also been called into question. Rebels are still profiting from gold mining in the region, the U.N. Security Council said in June.

“While visiting Africa last year, I heard first-hand from the people affected by this misguided rule,” Piwowar said in a statement. Some companies, including Exxon Mobil Corp. and Owens Corning, are telling suppliers not to source from the region at all, effectively creating an embargo, according to the Responsible Sourcing Network.

Meanwhile, Piwowar said legitimate mining operators face “such onerous costs to comply with the rule that they are being put out of business.”

Global Witness, one of the environmental and human rights groups that advocated for the rule, is concerned about where the SEC’s reconsideration is heading. “If this rule were to be weakened or otherwise changed, it would make it significantly harder for companies to do the right thing,” Carly Oboth, a policy adviser on Global Witness’ conflict resources team, told Bloomberg BNA.

Responsible Sourcing

Consumer demand and investor interest in corporate social responsibility isn’t likely to let up. Apple Inc., Intel Corp. and other companies have said they will continue efforts to source responsibly, even if reporting requirements are rolled back.

Republicans in Congress in the past have proposed eliminating the Dodd-Frank mandate for conflict minerals disclosure and may try again soon with a similar measure on financial reform.

“Given the global market available to companies today, if they don’t have to abide by something in this country, they’re likely to abide by something in another country,” Patricia Jurewicz, director of the Responsible Sourcing Network, told Bloomberg BNA. Similar ethical sourcing guidelines are in place in China and are being finalized in the European Union.

The SEC declined to comment. The U.S. Chamber of Commerce, one of the groups that sued the agency over the rule, didn’t immediately return a request for comment.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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