“Conflict minerals” mined in conditions of armed conflict and human rights abuses, particularly in the Democratic Republic of Congo (DRC) in central Africa, are likely to become very important for many composites manufacturers. That’s because Congress decided to cut off funding for warring factions in Africa by requiring publicly traded companies to disclose the use of four metals – tin, tantalum, tungsten and gold (also called “3TG”) and derivative compounds. Mining of 3TG funds an ongoing conflict there.
What does this mean for the mostly privately held companies in the composites industry? Briefly, any company selling composites raw materials or molded products that are used by publicly traded companies in the manufacture of their own products will be required to report their use of conflict minerals. This means many companies that thought they were exempt are not.
For example, 3TG or compounds present in showers or sinks for RVs or pre-manufactured housing, automotive and aircraft components, sporting goods, appliance parts, electrical equipment and many other composite products will have to be reported if these products are sold to stock issuing companies.
Rulings by Congress and the SEC
Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed by Congress in 2010, requires the Securities and Exchange Commission (SEC) to disseminate rules requiring stock issuers (publicly traded companies) with “conflict minerals that are necessary to the functionality or production of a product manufactured” to disclose annually whether any of those minerals originated in the DRC or an adjoining country.
The resulting SEC rule, published in the Sept. 12, 2012, Federal Register, requires publicly traded companies to reach throughout their supply chains to determine
- if any purchased products or materials contain 3TG or any compounds of these metals
- and, if they do, were they mined in the DRC or adjoining areas.
Reporting is only required for 3TG or compounds that are “necessary to the functionality or production of a product.” Tin present as a contaminant in steel used to fabricate plate or fasteners, for example, does not need to be reported. Conversely, organotin compounds widely used as stabilizers in plastics have a function in the product and are not incidental byproducts or contaminants and are considered by many publicly traded companies to be reportable under the Dodd-Frank requirements.
This illustrates one of the many challenges with the SEC rule. While tin compounds like organotin stabilizers seem clearly within the view of Congress to require disclosure if the tin was mined in the conflict area, the preamble to the SEC rule suggests organotin compounds are exempt. Many large publicly traded OEM manufacturers have told me they expect the SEC interpretation to eventually come into line with the apparent Congressional intent.
There is no exemption based on traces or small amounts of 3TG. Any use of 3TG or compound anywhere in the supply chain, at any concentration level, becomes reportable.