Conflict minerals compliance Section 1502 of the Dodd-Frank Act

The new requirements

Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires manufacturers that file with the SEC to:

  • Determine if their products contain "conflict minerals"
  • Investigate the source of the minerals
  • Report whether they may have originated in the Democratic Republic of Congo or surrounding countries (DRC Conflict Region)

Companies will be impacted if they meet all of the following criteria:

  • The company files reports with the SEC under Section 13(a) or 15(d) of the Exchange Act (including foreign issuers)
  • The company manufactures or contracts to manufacture a product
  • Conflict minerals are "necessary to the functionality or production" of such product. (Conflict minerals are gold, tantalum, tin, and tungsten.)

Companies that meet the above criteria must perform a Reasonable Country of Origin Inquiry (RCOI). This can be an onerous and expensive requirement, as manufacturers must trace their supply chain all the way back to the source to determine if any component contains minerals coming from the DRC Conflict Region. The first SEC report filing is due by May 31, 2014, with annual filings to follow. An accompanying audit report also may be required, as noted below.

The RCOI must be reasonably designed to determine if conflict minerals originated in a covered country. Absolute certainty is not required to meet the requirement, but the RCOI must be performed in good faith and cannot ignore red flags.

All companies required to perform the RCOI must complete the SEC’s Form SD by the deadline. Depending on the findings of the RCOI, manufacturers also may be required to submit other documents, including a Conflict Minerals Report and a Third-Party Audit Report expressing an opinion on the design of the manufacturer’s due diligence measures.

We’re here to help

Baker Tilly professionals stand ready to assist you with this process and provide guidance each step of the way to help you meet these new requirements. Baker Tilly’s manufacturing and distribution specialists have deep experience working with companies like yours. We have in-depth knowledge of the industry and we understand the supply chain.

We are already helping middle-market companies meet the challenges of this new conflict mineral regulation. Our audit professionals have researched this issue extensively. We know what’s required and we can advise you and assist you in complying with these new requirements fully and efficiently, allowing you to focus on your core business.