The U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) heard oral arguments Jan. 7 on a 2012 Securities and Exchange Commission rule governing conflict minerals.
A coalition of industry groups argues the SEC rule is arbitrary and capricious, burdensome to industry and contrary to the intent of the original Dodd-Frank statute mandating the regulation.
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires certain companies to disclose their use of conflict minerals originating from the Democratic Republic of the Congo. The minerals are tantalum, tin, gold or tungsten. And they must be disclosed if those minerals are “necessary to the functionality or production of a product.”
But members of the coalition–which include the National Association of Manufacturers (NAM), the U.S. Chamber of Commerce and the Business Roundtable—fault the SEC for not including a de minimus exception in the rule.
Lack of such an exception means finished products would be subject to reporting requirements even if the product contained only trace amounts of the mineral; even if the trace amounts were the result of an unintentional by-product of the manufacturing process, the coalition argues.
CSPA, along with six other trade associations demonstrated the practical implications of failing to adopt an exemption in a January 2013 Amicus brief filed in support of the coalition’s lawsuit. Specifically, the Amicus brief pointed out that the SEC “made no effort to determine the number of non-manufacturing entities that would be captured by its decision, nor did it make any assessment of the unique burdens that the reporting requirements would impose on retailers with broad product lines and no direct knowledge of manufacturing processes at issue. The Commission also failed to assess the extent to which imposing reporting requirements on non-manufacturing issuers would simply replicate information that was already being filed with the SEC by the manufacturers that actually make the finished products.”
CSPA will continue to monitor this issue and relay the D.C. Circuit’s ruling when available. The issue landed in the D.C. Circuit after the U.S. District Court for the District of Columbia denied the plaintiff’s motion for summary judgment and sided with the SEC in July 2013.
There is no clear timetable on when the court will issue its decision. But companies subject to the conflict minerals rule will need to watch the calendar, as the first filing is due May 31, 2014. The filing covers the 2013 calendar year.
Below are links to a helpful fact sheet as well as the final rule:
Final Rule: http://www.sec.gov/rules/final/2012/34-67716.pdf