Webinars

Conflict Minerals FAQ

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Q : Are there any standards being developed for electronically passing this data between tools (like the IPC1752A for hazardous substance information)?

A : The EICC/GeSI template is the essential form. It provides the ability to make one declaration for an entire company, division, product, or part.

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Q : Can you confirm that the requirement applies, in your interpretation, to not only product which you are selling to consumers but everything that you source? In other words - if you are having non-merchandise support elements manufactured specific to your sales environment (hangers, racking, etc.), you have to certify the origin of metals used in those elements? It's NOT just those things you are selling to consumers - right?

A : Correct. The requirement applies to all products that require tin, tantalum, tungsten and/or gold to the functionality or production of the product.

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Q : Can you walk through an example for the recycled exemption -- whether we purchase recycled scrap from a domestic US or a foreign source, a known scrap supplier in the industry, what level of questions do we need to ask and document to receive the recycling exemption?

A : This requirement is necessary for the gold trade with the vast majority of gold ore is derived from recycled or reclaimed product. If the smelter/reclaimer can certify that all used gold ore is from a recycled or scrap source (e.g. no virgin ore is purchased) the inquiry has been completed.

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Q : Even if one part number (out of thousands) has conflict mineral, we have to disclose it.

A : Yes. It would be of value if you could specify the individual product that contains conflict minerals.

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Q : Is it illegal to procure from DRC countries, or it is just a disclosure requirement?

A : No. You can even purchase conflict minerals from the DRC or adjoining countries. However you, all publically traded companies on a US stock exchange, must disclose your practices using a Reasonable Country of Origin Inquiry (RCOI) to your customers. It will then be your customer's decision regarding whether they want to purchase these products from you and directly or indirectly support the associated conflict in the DRC.

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Q : First of all I would like to thank you for your initiative to do this webinar!
I have three questions for the webinar:


· Do European or other non-U.S. foreign companies have to comply, when exporting into U.S.?

A : It is a filing requirement with the United States Security and Exchange Commission for companies traded on a US stock exchange (for example New York Stock Exchange).


· Do U.S. owned, European companies have to comply, when exporting into U.S.?

A : There is no importation requirement on disclosure. The conflict minerals requirements apply to US companies. Accordingly, if you sell to a company traded on a US stock exchange, you will likely be asked for a EICC/GeSI Conflict Minerals disclosure form.


· Do U.S. owned, European companies have to comply, when not exporting into U.S.?

A : The US filing requirement falls on the companies traded on a US stock exchange. The EICC/GeSI disclosure requirements apply to companies selling to companies that are an EICC or GeSI member.

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Q : For electronics companies that collect data from their first tier suppliers using the EICC/GeSI Conflict Minerals template, is this considered a " reasonable country of inquiry " under the law?

A : The final rules explicitly state: " The steps necessary to constitute a reasonable country of origin inquiry depend on the available infrastructure at a given time. " At this time, the EICC/GeSI Conflict Minerals template constitutes the best infrastructure and data exchange format available. Accordingly, we consider the declaration to constitute a RCOI. However, we will be independently validating the content of the certification against the requisite available information to verify the statements disclosed via the EICC/GeSI form.

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Q : For electronics companies that collect data from their first tier suppliers using the EICC/GeSI Conflict Minerals template and find that all smelters are listed as compliant " conflict-free " smelters on the www.conflictfreesmelter.org website, are there other RCOI or supply chain due diligence steps required under the law? If not, are there other reasonable RCOI or supply chain due diligence steps you might suggest as part of good faith efforts such as auditing your direct suppliers processes for gathering conflict-free data from their supply chain? Also, suppose there are some smelters you find are not listed on the www.conflictfreesmelter.org website, what reasonable supply chain due diligence steps would you recommend given that the company may be 5 or 6 tiers away from the mine?

A : This is a good first step for due diligence. We would recommend validating the disclosed statements against publically available Conflict Minerals Reports made available on disclosing company's websites, as available, and using reasonable assessments of supplier responses to assess the risk of the associated disclosures.

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Q : Given that reporting in 2014 is for 2013 does that mean that any supplier certificate's received after 1/31/2013 would need to be "retro-active" back to 1/31/2013 in order for the company to make a conflict free declaration?

A : The provided certificates should be for the entire company or division whenever possible. The disclosure process becomes exponentially more complex and costly if you disclose at the product/part level. You disclosure(s) must apply to everything sold to a customer after 1/31/2013.

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Q : How does this impact small, privately held companies? How can they possibly find the mine of origin if they are buying raw materials through several layers of distribution?

A : The SEC filing requirements and the associated expense of an independent third party audit do not impact you. The requirements to complete the EICC/GeSI template and conduct the associated Reasonable Country of Origin Inquiry (RCOI) is a requirement for doing business with publically traded companies and those that sell to publically traded companies.

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Q : Do we have to declare items that are used in the production of goods? (Tool bits that may contain tungsten to machine parts we sell)

A : No. The rule only products that require tin, tantalum, tungsten or gold for the production (e.g. etching or smelting of an alloy to make the product) or functionality (contained within a component within the product) of the product.

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Q : If we are a foreign owned corporation, we do not file SEC "SD" correct?

A : The SEC requirements apply to companies traded on a US stock exchange; regardless of ownership.

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Q : If we do not use CM on our product, do we need the independent certifications?

A : The independent audit certification is a verification of the process you used to reach your conclusion. It would be advisable, even if not mandatory, unless you are certain all of your products do not contain conflict minerals. However, the filing requirements would not be mandated.

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Q : In the spirit of the streamlining being undertaken by EICC/IPC, has Foresite considered being the streamlined "one-stop-shop" for gathering declarations at the Metals Supplier level shown in your "Visual Aid?" Thanks.

A : We have. It is our business model.

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Q : Is the outside auditor (third party) the financial, compliance auditors we current use?

A : They can be; however, they can also be an unaffiliated independent organization.

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Q : I have heard there is a standard for due diligence something from ODC i believe. I have not been able to find this guidance

A : You are probably referencing the OECD Guidance document available at www.oecd.org/daf/internationalinvestment/guidelinesformultinationalenterprises/mining.htm.

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Q : Is there a risk of spillover effect in Europe in terms of European regulations?

A : There is always a risk/likelihood of copycat legislation. Countries often view having domestic legislation in native language as both a competitive advantage for local entities and a responsible practice.

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Q : It appears in the presentation that an independent audit is required, however, it is my understanding that an audit is only required for a CMR report - and you only need to complete a CMR report IF: you "do not know" or you have confirmed conflict sources. Please confirm

A : You are likely referring to the indeterminate origin category, which applies to SEC filings for the first 2 years for " large " publically traded companies and the first 4 years for " small " publically traded companies.

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Q : What happens if a company draws the wrong conclusion, e.g. is there an amendment process? What do you do?

A : The EICC/GeSI form could be revised and resubmitted. The SEC rules would require a formal amendment pursuant to the filing requirements under the SEC rules. You would likely require legal guidance for this process.

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Q : Can you clarify the RCOI on the requirement to obtain representation from all suppliers? Is an 80/20 rule applicable? Please elaborate on what this may mean.

A : The RCOI is the evaluation process that is generally interpreted as applying to your entire supply chain. The exact steps and workload you implement will be dictated by your unique business model and corporations risk tolerance.

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Q : On page 33 of the OECD guidelines, it is stated: "downstream companies should establish internal controls over their immediate suppliers and may coordinate efforts through industry-wide initiatives to build leverage over sub-suppliers". What exactly does this mean....am I still responsible for getting responses from suppliers 2, 3, 4 tiers removed from my company?

A : The EICC/GeSI disclosure process and OECD guidelines are designed to create a tiered supplier disclosure process. Following this model, ever party within a supply chain is responsible for their own first tier suppliers.

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Q : Regarding 3 possible outcomes, which one does your products fall under if the supplier indicates he is out of scope or his products are exempt (say because those products are recycled)?

A : Outside of scope is not an acceptable answer under the EICC/GeSI requirements. Recycled would likely fall under the scrape and recycled materials exemption and thus end the inquiry.

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Q : If your company which falls under the rule acquires a new business which was previously out of scope, and this acquisition takes place after the 2 year grace period (say in 2017), will there be a grace period for being able to assess that new businesses products?

A : No. There is no concept of outside of scope under the EICC/GeSI model and the SEC rules have widely been interpreted to apply annually. Accordingly, the disclosure would be necessary and the evaluation should be part of your preliminary due diligence into the acquisition target.

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Q : Does the SD or CMR need to be signed by the CEO? Or can this be another Executive Officer determined by us?

A : The party responsible for filing documents with the SEC is responsible for serving as the signatory attesting to the accuracy of the filing.

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Q : We are privately traded company what are my obligations under this law.

A : Private companies are not subject to the SEC rules. They are still subject to customer requests under the EICC/GeSI program.

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Q : We manufacture products that are outsourced for plating (gold, tin). It will be the plater's responsibility to supply us with the conflict minerals information?

A : The plater should disclose the content of the plating material, as would any supplier under EICC/GeSI.

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Q : Is this for publicly traded companies only?

A : The SEC filing requires would be. The EICC/GeSI requirements are a customer requirement.

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Q : What are the expected fines and penalties for non-compliance?

A : SEC files only apply for false disclosures. Customers will have various responses, the most serious of which will be the loss of business and removal from the customers approved vender/supplier list.

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Q : What do you think if we make it a contractual obligation to prevent my suppliers from buying anything from the DRC? Isn't that an easier approach?

A : It could be, but it would require the same evaluation process to validate, so the workload would be similar.

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Q : How are small companies defined for the 4 year exemption?

A : The small companies delayed audit requirement is only relevant for SEC filings and you should consult component legal counsel and auditors for this assessment. It has no bearing on customer facing disclosure requirements and requests.

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Q : What are the thresholds that one has to start reporting the presence of Conflict Minerals?

A : There is no minimum or de minimus threshold for reporting.

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Q : What is the definition of a small company in order to qualify for the 4 year temporary reporting?

A : You would need to consult competent legal counsel and/or auditors to evaluate whether your company qualifies for this disclosure.

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Q : What would be considered a 'good faith effort' if a company is considering the 2 yr extension under the 'Indeterminate origin' rule. Also, is it limited to small companies only and if so what is the max size for a company to be considered under the rule?

A : You would still need to undergo the Reasonable Country of Origin (RCOI) inquiry. The Indeterminate Origin disclosure obligation only applies to the third party independent audit requirement.

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Q : When will the SEC require for companies to report the Form SD? Would it be in FY 2013 or 2014?

A : Form SD and the associated filing requirements are due on or before May 31, 2014.

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Q : Are recycled metals exempt?

A : Yes. Fully recycled metals are exempt and would represent a reasonable outcome of an RCOI.

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Q : At present it is almost impossible to declare your company as conflict-free owing to the fact that there are very few certified smelters on EICC/GeSI. Do you know when this will be resolved?

A : No. This will be an on-going process. The obligation is to identify the smelters that service your supply chain. The status of that smelter will evolve over time.

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Q : After 2013 will it be illegal to use conflict minerals?

A : No. At present, there is no indication that it will be illegal to use conflict minerals after 2013.

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Q : Does the Conflict Minerals RCOI apply to specific products; in other words, is it necessary to track supplier responses product by product?

A : No. It is a much better practice to track disclosures at the supplier level. Product level disclosures should only be used as a last resort and must be approved in most instances.

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Q : I have read that conflict minerals reporting obligations do not apply to privately held companies. Is this true or false?

A : Both. The SEC filing requirements do not apply to privately held companies. The EICC/GeSI requirements apply to businesses serving companies who are EICC/GeSI members or want to use the standard to declare they are conflict free.

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