US Electronics Industry Association Moves Forward with Conflict Minerals Audit Program A Rash Move?

Last week, the Electronics Industry Citizenship Coalition (EICC) affirmed its plan to meet the April 1 date for implementation of their Conflict Free Smelter (CFS) program.   EICC and the Global e-Sustainability Initiative (GeSI) announced the program in early 2010.

Public reports suggested that EICC had considered delaying its program until the formal announcement by the US Securities and Exchange Commission (SEC) of rules on conflict minerals due diligence and disclosure. Those rules are scheduled to be published April 15, 2011, although some sources indicate that they may be delayed.

The EICC CFS and the Organization for Economic Cooperation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, along with the supporting supplement on tin, tantalum and tungsten, serve as the two documents generally referenced as providing “standards for conflict minerals traceability programs. The SEC stated that their intent is to not “dictate the standard for, or otherwise provide guidance concerning, due diligence that issuers must use in making their supply chain determinations.

On its face, this would appear to support the notion that advancing with audits under EICC and OECD seems reasonable. However, neither program complies with one stated element of the US Conflict Minerals Law an independent private sector audit that “is conducted in accordance with standards established by the Comptroller General of the United States, in accordance with rules promulgated by the Commission.”

Conflict minerals traceability audits intended to comply with the US law must therefore meet an array of auditor standards established under SEC rules. In the proposal, the SEC stated that in their discussions with the Government Accounting Office (GAO), their preliminary determination suggested that existing audit/auditor standards would apply to the conflict mineral reports. The SEC and GAO cited the GAO Government Accounting Standards (GAS) GAO-07-731G as applicable, although other audit/auditor standards may also apply.

The OECD program references standards under ISO 19011. Those standards apply to combined environmental/quality management system audits under ISO 9000 and 14000 certification efforts with no substantive overlap with SEC auditing standards. And based on EICC ®-GeSI Conflict-Free Smelter (CFS) Assessment Program Frequently Asked Questions document dated February 25, 2011 the highly-publicized EICC program also does not contain auditor qualification, independence, competence or attestation standards sufficient for SEC.

For companies striving to comply with the US legal mandates for conflict minerals audits, conducting these audits before the SEC standards are published may create unintended consequences, including additional costs for repeating previously-completed audits.

–Lisa Reisman


*Please click here to download the MetalMiner Conflict Minerals Legislative Guide, covering the details of the new Dodd-Frank Wall Street Reform and Consumer Protection Act and how mandated audits will affect companies that purchase tin, tantalum, tungsten and gold.

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