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Conflict Minerals Reporting

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Conflict Minerals Reporting
Due Diligence for Dodd-Frank Section 1502
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Satisfy due diligence requirements for Dodd-Frank Section 1502 and comply with public reporting mandates from the US Securities and Exchange Commission (SEC) with SCS Global Services. Our third-party Conflict Minerals Report auditing and due diligence system development enables you to properly disclose sources of conflict minerals and helps you mitigate your risk of supporting armed conflict within the Democratic Republic of Congo (DRC) and surrounding countries.

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Meet your SEC compliance requirements:

  • Due Diligence System Development - We help ensure that your due diligence system for conflict minerals is effective and meets Dodd-Frank requirements, and assist you with conflict minerals compliance planning and policy development, risk profiling, supply chain mapping, and risk mitigation. Through these services, we identify critical gaps and risks in your current system and the recommendations outlined in the Organisation for Economic Co-operation and Development (OECD) Due Diligence Guidance and frameworks such as the EICC Conflict-Free Smelter Initiative Checklist.
  • Conflict Mineral Report Auditing - We offer performance-based independent private sector audits (IPSAs) for Conflict Minerals Reports, following US Government Accountability Office's (GAO) “Yellow Book” guidelines. Auditing confirms that the due diligence described within your Conflict Minerals Report conforms to the OECD framework and is consistent with due diligence measures that your company has undertaken.
Due Diligence System

Our Supply Chain Services division has been assisting companies in defining and implementing sourcing policies and establishing risk-based due diligence processes since the passing of Dodd-Frank Act Section 1502 in 2010. We deploy a global network of expert auditors to clearly communicate the goals of your conflict minerals due diligence system and gather and validate evidence of conformance.

Process
  1. Develop Sourcing Policy (Optional)

    We work with you to define sourcing policies around key products and product components. Credible certification systems available for these preferred attributes are identified in your sourcing policy.

  2. Establish Risk Profiles

    We build a risk profile for each product component by factoring in both the probability that conflict minerals are contained within the component, and the amount spent per component. This approach enables you to accurately narrow your list of target suppliers and expedites your due diligence development process.

  3. Map Supply Chain

    We establish a supplier traceability program to map your supply chain, including its scale and complexity. The goal is to identify potential conflict minerals that might be used in your product or production process. We first identify EICC-certified smelters and refineries. For high-risk suppliers sourcing from uncertified facilities, we perform further investigation to map specific mines or locations of origin. Our checklists are based on the EICC questionnaire. We regularly work with software solution providers to gather necessary data on your suppliers.

  4. Respond to Identified Risks

    We identify critical gaps and risks in your current system, consistent with the recommendations outlined in the OECD Due Diligence Guidance or frameworks such as the EICC Conflict-Free Smelter Initiative Checklist.

Private Sector Audits

You must file a Conflict Minerals Report (CMR) if your product or production process contains tantalum, tin, tungsten, and gold (a.k.a. 'CM 3TG') sourced from any of the "Covered Countries" and if those minerals are not from scrap or recycled sources. The SEC final rule states that the Conflict Minerals Report must be audited by an independent private sector auditor on an annual basis.

Audit Process
  1. Submit Conflict Minerals Report

    We evaluate your CMR, descriptions of key staff and responsibilities, standard operating procedures for chain of custody systems and risk management, conflict minerals policies, and other related documents.

  2. Submit Records

    Submit your records to us, including: supplier contracts, supplier communications, risk assessments, risk management plans, management meeting minutes, and any audit reports or evaluations conducted by your company or independent auditors.

  3. Interviews

    We conduct interviews with relevant staff, consultants and suppliers.

  4. Assessment Report

    We provide a summary report based on the reporting requirements of the GAO's “Yellow Book” and guidance from the American Institute of Certified Public Accountants (AICPA). A checklist based on the OECD guidance and relevant supplements is also provided; each indicator is checked against the due diligence system reported in the CMR. This same checklist is used to indicate relevant evidence collected in support of the overall findings.

  5. Verification Decision

    Based on the evidence and information provided, we conclude whether or not the design of your due diligence framework as set forth in the Conflict Minerals Report is in conformity with the criteria set forth in the OECD guidance.

  6. Renewal

    Annual audits of your reporting are required in order to meet SEC reporting requirements.
FAQs

What is the Dodd-Frank Act Section 1502?

Dodd-Frank Section 1502 was enacted by the US Congress in 2010, responding to concerns over the sale of conflict minerals used to finance regional conflicts in the Democratic Republic of the Congo (DRC) and nine adjoining countries (“Covered Countries”). Section 1502 requires public companies to disclose any use of minerals sourced from mining operations in these conflict regions. The ruling applies to all SEC “issuers” (including foreign issuers) that manufacture or contract to manufacture products where conflict minerals are necessary to the functionality or production of the product.

What are the “Covered Countries”?

The ten countries are the Democratic Republic of the Congo (DRC), Central Africa Republic, The Republic of the Congo, Tanzania, Burundi, South Sudan, Zambia, Rwanda, Angola, and Uganda.

What level of disclosure does the SEC require you to report?

The US Securities and Exchange Commission (SEC) final rule provides a three-step procedure for determining the level of disclosure you are required to provide about your products:

  1. Determine if your products contain conflict minerals - Dodd-Frank Section 1502 defines “conflict minerals” as cassiterite, columbite-tantalite, gold and wolframite, as well as their derivatives. Section 1502 applies to manufactured products that contain conflict minerals deemed “necessary” to the functionality of your manufactured product or the product production process. Most private label retailers are exempt.
  2. Conduct a "Reasonable Country of Origin Inquiry" (RCOI) to determine the source of your conflict minerals - This inquiry is conducted in order to determine whether conflict minerals used in your production or the production process originated in any of the Covered Countries. You are not required to exercise due diligence if these conflict minerals are not from the Covered Countries, or are derived from recycled or scrap sources; however, you must file an annual disclosure report via SEC Form SD, describing the RCOI you used to determine your “conflict free” status.
  3. Exercise Due Diligence to determine if you are directly or indirectly financing armed groups - Due diligence is required if conflict minerals are “necessary” to your operation, are not from recycled or scrap sources, and originated in the Covered Countries. Due diligence is the process of determining whether your minerals directly or indirectly financed or benefited armed groups. In this case, you must file a Conflict Minerals Report as an exhibit to Form SD.

What regulatory deadlines exist for conflict minerals reporting audits?

The SEC is granting a temporary provision period for companies to establish necessary traceability systems in the Covered Countries. If during this period, you find it is "undeterminable" whether your product or production process contains conflict minerals, you must disclose your result findings and describe the measures you have taken to exercise due diligence on the source and chain of custody of your conflict minerals. This grace period ends in 2016 for large companies and in 2018 for small companies. After the grace period, IPSAs are required for companies who determine they have conflict minerals from the Covered Countries.

Which frameworks are acceptable for performing Due Diligence?

The final rule requires that due diligence be conducted using a nationally or internationally recognized due diligence framework (e.g., 2011 Organization for Economic Co-operation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas).

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Neil Mendenhall
Director of Service Development

510.452.8018
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