View the newsletter here.

MetalMiner also recently published a very successful A-Z Guide on conflict minerals compliance for U.S. manufacturing companies.  One of the unique aspects of this guide is that it presents conflict minerals content information on a range of finished and semi-finished metal/alloy commodity products to help users identify products of concern in relation to conflict minerals.

• Is packaging within the scope of the regulation as something that is “necessary to the functionality or production” of a product?  In some cases, packaging may serve little more than a product container to convey the product to the market or consumer in a convenient manner.  In other cases, packaging could be seen as preventing the degradation of the product, and therefore arguably contributing to its functionality.
• Is organotin – as well as other non-metallic forms of 3TG – considered a different/specific “derivative” of cassiterite that is not intended to be regulated in the same manner as the specifically-named derivative “tin”?  In the preamble of the final rule (77 Fed. Reg. 56284 – 56285), SEC addressed the matter of organotin without bringing full clarity to their views on the matter.

There may – or may not – a glimmer of insight into the Commission’s potential interpretation on these two topics.  Take a few minutes and read Footnote 9 in SEC’s Respondent Brief filed in the NAM/US Chamber lawsuit.

Then we invite you to post your thoughts, interpretations and comments here to encourage more discussion and views.

Every company faces their own challenges in understanding the requirments, assessing their needs and implementing programmatic changes.  But there are a number of common guideposts that provide reasonable indications on general progress – and shed light on whether your company is falling behind.

So, in an unabashed take-off of Jeff Foxworthy’s “You Might be a Redneck If…”, we offer the following.  If any of these sound familiar, then it is probably time to pick up the pace.  Second quarter is fast approaching and one consistent trend has emerged for companies who are immersed in this right now - this process takes more time, and is more complex, than it seems.  It is valuable to ensure you have as much time as possible in 2013 to make key decisions, gather data and develop processes to support SEC reporting or customer information requests.

You might be falling behind on conflict minerals if…

You had not heard the term “conflict minerals” before the first of this year.

Customer information requests on conflict minerals are piling up unanswered.

Your company has not established an internal conflict minerals team, or assigned formal leadership responsibility to look into the matter.

Consultant proposals for conflict minerals support are sitting on your desk that have not been reviewed or approved.

You don’t have at least a general sense about the range of your company’s products that contain conflict minerals.

You are not certain if existing information management systems can link specific suppliers through your manufacturing processes to a final product.

You think that you don’t need anything more than a spreadsheet or IT system to solve this problem.

You haven’t read the SEC regulation, the OECD Due Diligence Framework and at least one White Paper or Client Alert from a law firm or consultant.

You have not identified or assessed what gaps may exist between the SEC regulation, OECD Framework, customer requirements and your existing internal management systems.

You have not attended at least one conference or webinar on the topic (free webinars are offered practically weekly).

You have not notified your suppliers that you will soon be contacting them for more information about the products they supply you.

You don’t know how you will contact suppliers to gather relevant conflict minerals information.

You don’t know what your industry associations are doing relative to conflict minerals.

The company’s strategy is hoping the issue goes away.

We are available to help with any questions.

We have not completed our review and summary, but the report can be downloaded for free here.

Of particular initial interest to many may be:

• the illustrative list of products (page 12)
• key trends (pages 15-18)
• learnings and recommendations from pilot participants (pages 60-64).  Among the recommendations is one that Elm has voiced for two years:  that the audit/auditor standards be upgraded from the generic ISO19011.  However, the recommendation references ISO/IEC 17021, which brings its own unique concerns and challenges.
• list of 3T smelters (pages 70-75).  It is important to understand that this list does not include gold refiners, nor is the list exhaustive or  limited to  ”approved” or “certified” smelters.

We hope to have additional analysis and insights available soon.

Lawrence Heim, CPEA, Director of Elm’s Conflict Minerals services:  ”The Board of Directors agreed to take on the challenge of developing this guidance, and doing so as rapidly as possible to serve the regulated community.  I am honored that the Board asked me to play a role in that process.”

Heim continued: “Given the importance, visibility and global impact of of this guidance, the Board recognizes how critical broad-based input and consensus will be.  The Working Group’s first order of business is to present to the Board for their approval two lists: one of recommended professional peer reviewers and one of organizations/entities from whom input will be sought as stakeholders.”

The Working Group will hold its first meeting in conjunction with the Roundtable’s national meeting in San Diego January 28-30, 2013.

Elm has been a vocal proponent of strong auditing and auditor qualification/independence standards in the conflict minerals context since our initial project work in 2010.  The Securities and Exchange Commission solicited our opinion and experiences on the matter during their Conflict Minerals Roundtable in 2011.  The Auditing Roundtable and the Board of Environmental, Health & Safety Auditor Certifications submitted written comments on the use of Performance Audit standards to the SEC during the proposed rule stage, and provided a briefing paper on auditor qualifications/audit standards to the US State Department Office of Central African Affairs in 2011.

The Auditing Roundtable

The Roundtable was founded in January 1982, when managers of ten corporate environmental audit programs met to discuss their auditing programs and practices.  The Roundtable has held regular meetings since that time and has undergone many important changes.  A Code of Ethics and the first formal bylaws, adopted in 1987, opened the Roundtable membership to individuals and provided for the election of a Board of Directors by the membership at large.  Following peer review and vote by the membership, the Roundtable adopted Standards for the Performance of Environmental Audits in 1993.  In 1998, the Roundtable reorganized into its current organizational structure.  Today it is the leading organization for environmental, health and safety auditing professionals in the United States and has formalized relationships/reciprocity with other scientific and auditing professional organizations around the world.

For more information on The Auditing Roundtable, click here.

Board of Environmental, Health & Safety Auditor Certifications

In 1997, The Auditing Roundtable joined with The Institute of Internal Auditors (IIA) to establish the Board of Environmental, Health & Safety Auditor Certifications (BEAC) for the purpose of issuing professional certifications relating to environmental, health, and safety auditing and other scientific fields.  BEAC is a member of the Council of Engineering and Scientific Specialty Boards (CESB), a third-party accreditation board. The CESB has granted full accreditation to BEAC’s Certified Professional Environmental Auditor (CPEA) certification.  BEAC certification is also recognized by

• American Industrial Hygiene Association
• American Society of Safety Engineers
• American Chemistry Council
• Texas Commission on Environmental Quality
• Canadian Environmental Auditor Association

For more information about BEAC, click here.

Features of CM CheckPoint^SM include:

• Assesses from a high-level perspective practices/status/available documentation against the three-step process for SEC regulatory compliance (plus reporting/auditing) and the 5-step process of OECD Due Diligence framework and related supplements
• Reviews from a high-level perspective the framework, strategy, procedures, and generalized level of implementation at the company’s corporate level
• Topic/element/task general completion status indicators of Complete, Partially Complete, Not Started, Not Applicable
• Severity rankings for  identified gaps/deficiencies reflecting potential importance to program implementation or potential audit outcome
• Can be used to confirm site-level program implementation/consistency with corporate expectations
• Automated summary report generation on-site with intuitive visual indicators
• Comment fields for each topic and sub-element allow highlighting of relevant data, findings or limitations encountered
• Minimal disruption – requires a single Elm assessor and only a few days on site, including on-site summary reporting

Evolutionary steps in developing CM CheckPoint^SM relied on internal client staff and resources to conduct the process as an internal self-assessment.  Over time, the feedback we received was that companies supported a form of quick assessment, but expressed a strong preference for having an external subject matter expert at the helm to offer specific expertise, guidance and understanding especially in relation to what we call “emerging industry consensus”.  With CM CheckPoint^SM,  this review is facilitated by us, guiding users through the SEC conflict minerals regulations and related programs, maximizing the efficiency of the review and providing broad benchmarking insight from our experiences.

CM CheckPoint^SM was not designed for companies seeking strategic advisory or consulting support for initial program conflict minerals program scoping and design.  In that case, a detailed assessment utilizing a multi-disciplinary team of subject matter experts is best to establish a solid foundation (and related documentation) for decisions, systems and procedures reflecting corporate strategies/goals, systems, special circumstances combined with verification of site operations.

Contact us for more information.

• How far back in the supply chain do I need to go?  The preamble to the final rule makes it clear that issuers may satisfy the Reasonable Country of Origin Inquiry obtaining and relying on representations from the company’s direct (Tier 1) suppliers.   However, you must have reason to believe the representations are true and additional efforts may be required to either (a) identify/monitor “applicable warning signs or other circumstances” indicating that materials may originate from Covered Countries or are not scrap, or (b) confirm the accuracy/credibility of information from those suppliers.

• How can I be comfortable relying on information provided to me by my suppliers?  This is a difficult question but one that should be approached with an attitude of what auditors call “professional skepticism”.  For example, one company recently released a letter to its customers clearly stating that their products contain no cassiterite or its derivatives; however, one of the products manufactured by the company (based on its public website) is tinplated metals.

Spreadsheets or questionnaires limited to “Yes/No” answers present another challenge.  The customers receiving such answers have no way to gauge the context of – or what we call the “story” behind – the answers that explain programs in place/being designed.  Such explanations help strengthen the credibility of the Yes/No answers, and increase the customers’ willingness to rely on that information.  An approach we have used is to develop a supplier questionnaire that requires narrative answers, and that contains questions with a certain amount of overlap or relationship such that consistent answers across those questions would be expected.  Where one question is answered in one way, then the subsequent related question has an inconsistent answer, that is a red flag triggering direct follow-up with that supplier.

• How long will this take/when should I start? Conventional wisdom is that if you have not already completed at least one of the following tasks, you are in danger of falling behind:
  • Completed formal substantive work on regulatory applicability determinations
  • Assessing product identification strategies
  • Issuance of an RFP for external support
  • Screening consultants, either pre-RFP or as part of your proposal reviews

 It is wise to anticipate that the program scoping and implementation process will require a minimum of 9 months, depending on individual circumstances.  Keep in mind that your timetable is not just your timeline – you are also heavily reliant on and impacted by your supplier’s timetable, and the supplier tiers beyond that.

• What will the Form SD/CMR look like?  These forms are not “fill-in-the-blank” type formats.  The regulations set forth the information that is required, but the format is not specified.  Until and unless this changes, we expect there will be variability in how companies address the requirements in narrative manner.  Conflict Minerals Consortium member Source 44 has developed an initial template document for Form SD/CMR that is worth looking into.

• What is SEC’s plan for providing interpretations?  Our most recent conversation with SEC earlier this week indicated no change from past discussions on this matter:  at this time, the Commission is still evaluating what mechanism they will use to respond to the multitude of requests for interpretation.  Options include publishing an FAQ, promulgating an official interpretive guidance document or issuing letters to each specific requestor.  Of course, they also acknowledge there are many “moving parts” at this moment such as the change in Commissioners and the NAM/US Chamber lawsuit, that could have an outcome on the timing, format and substance of the interpretations.

• I had hoped to rely on the CFS to help me.  Will I be able to do this for 2013?  The CFS program is facing numerous challenges, continues to evolve and even EICC-GeSI admits some disappointment in the slower-than-expected uptake in the program.  Depending on who you believe, it is estimated that there are between 200 and 400 3TG smelters globally that may require the CFS designation.  As of the November 29, 2012 update on the CFS website, there are 15 CFS tantalum smelters, 3 CFS tin smelters, 11 CFS gold refiners and no CFS tungsten smelters.  Again, depending on which smelter count you believe, the current CFS smelter total represents 7% – 15% of the global total.  While this number will rise over time, it remains to be seen if it will increase materially in 2013.  There are also concerns about CFS auditor capacity as the number of approved audit firms was recently reduced from three to two (although that may only be a temporary reduction).  We anticipate that the majority of issuers will likely utilize the DRC Conflict Undeterminable classification for 2013, except limited in situations where information leads only to these few smelters.

These are but a few of the questions we have run across.  If you have specific questions, please feel free to contact us and we will get back to you.

The filings can be accessed here and here and Cooley’s article is here.

The filings state that SEC has agreed to an expedited “briefing schedule” for their purposes, with final briefs to be filed by March 29, 2013 in an attempt to “ensure that outstanding uncertainty about the validity of the Rule and the statute will be resolved as soon as feasible.”

We expect that SEC’s plans for issuing interpretive guidance on the rule may be delayed until after the March briefing is concluded.

And in a closely-related development, Amnesty International announced that they filed a petition to “intervene to defend new regulations that require corporations to investigate and disclose whether their sourcing practices finance armed groups in the Democratic Republic of the Congo (DRC)…  the organization, which is represented by Public Citizen Litigation Group, has filed a motion to intervene in the lawsuit so that it can help defend the regulations.”

IPC is accepting comments from non-members and industries/companies beyond their membership, but only those who are “qualified participants” in the standard development process may cast votes.  IPC’s standards development procedure is parallel to the ANSI standard development process; therefore IPC standards – once finally approved by ANSI – become ANSI standards as well.

To access the document, click here.  Click on the “+” next to Drafts, then click on the link that appears.  A file will download that includes the draft standard and the official form that is to be used for submitting comments to IPC.  Comments submitted in a manner other than this form may not be considered.