Industry Groups Attempt To Overturn Conflict Minerals Rule

US Court of Appeals to hear a challenge by three industry groups against the rule Tuesday
Jan 6, 2014 2:30 PM ET
Campaign: Conflict Minerals

On May 31, 2014 under Section 1502 of the SEC’s Conflict Minerals Rule, U.S. publicly traded companies will have to file a special disclosure for the 12-month reporting period ending on December 31, 2013. The aim of the rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, is to provide transparency into corporate practices and specifically to reduce funding for armed groups involved in human rights violations in the Democratic Republic of the Congo and surrounding countries. 

Section 1502 compels public disclosure for any issuer whose products are identified as containing one or more of the four conflict minerals (tantalum, tin, tungsten and gold also known as “3TG”) suspected to have originated in the DRC or surrounding countries.  These minerals are found in thousands of products from a wide range of industries.

Because of the amount of companies the rule affects, Tuesday, the US Court of Appeals for the District of Columbia Circuit will hear a challenge by three industry groups against the rule. This is by no means the first attempt to invalidate the rule as the US Chamber of Commerce tried to weaken it as it was being drawn up. Again in July of 2013, the federal district court upheld the rule in full after industry groups argued that the rule would make the humanitarian situation worse.  They claimed that it would impose significant costs without showing any benefits and that the rule should not be applied to companies who outsource their manufacturing.

In the hearing Tuesday, the three industry groups will argue that the conflict minerals rule breaches the First Amendment of the US Constitution and that requiring companies to disclose their use of conflict minerals violates the free speech provision.

One of the supporters of the rule who recently joined the lawsuit is Amnesty International, who’s Executive Director, Steven Hawkins stated, “The legal challenge to the Conflict Minerals Rule is nothing but a crass effort by industry groups to put profits ahead of principles.”

If the rule holds up, there are many different approaches for an implementation of a compliance program.  Source Intelligence has recently released a paper that analyzes the 4 prevailing approaches.  To download the paper, click HERE.