Supplier- vs. Part-Centric Approaches to Comply With SEC Conflict Minerals Rule

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Below is an excerpt from MetalMiner’s recently published white paper, “The Definitive Guide to Conflict Minerals Compliance for Manufacturers.” If your company uses, say, HRC steel in its products, you should download this paper.

Another question raised by the SEC rules involves the purchase of what we might deem “vanilla commodities,” such as steel HRC (hot rolled coil), from mills that also produce tinplate. (Publicly traded integrated steel producers that produce tinplate are subject to the SEC conflict minerals rules).

Does an OEM buying vanilla HRC from a tinplate producer (e.g. US Steel, ArcelorMittal, Severstal, etc.) need to verify that the steel producer is certified conflict-free, or can the OEM effectively ignore that part of the due diligence process since HRC doesn’t contain tin, tungsten, tantalum and gold (3Ts/G)?

The matter becomes more complicated if the implementation 
of the conflict-free program on the part of the OEM involves what we would term this “supplier-centric” approach, as we have described, vs. a “part/product-centric” approach.

Download the complete paper for free.

A supplier-centric approach to conflict minerals compliance involves the use of the sorts of sourcing surveys or tools we have described (such as the EICC-GeSI template) that 
are provided to all or a portion of an OEM’s supply base. We say OEM, but include any publicly traded company that may have to comply with the regulations/legislation. The OEM’s approach might involve examining “all suppliers that supply us with metal and/or electronics” and demanding that the supplier complete a survey.

We know of one company that deployed this type of approach and received a 40% completion response rate. (This highlights the point that any supplier information request process will require active management to achieve the intended results.) The supplier-centric approach might make logical sense for companies with tens of thousands of purchased SKUs or parts, as one supplier-wide declaration may cover hundreds or thousands of individual parts.

This approach remains risky.

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