Using Purchase Orders to Track Manufacturers' Conflict Minerals Exposure

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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 makes industrial machinery, say, or anything involving metal/metal parts, you should download this paper.

Let’s examine a hypothetical company to demonstrate the various approaches the company could take.

We’ll pretend that our sample company produces industrial machinery. The company buys and sells globally, has a dozen divisions and 20+ primary product lines. Purchased components on an annual basis exceed 750,000 line items (e.g. this is a $30 billion company). The company asks the third question of the [SEC final rule] process flow: “What is our conflict minerals risk exposure?”

How does the company begin to answer that question?

Download the complete paper here – free!

According to Jim Dale, who leads the conflict minerals efforts at the Metal Powder Industries Federation/Refractory Metals Association, “Most companies in their POs [purchase orders] will have a requirement that includes an affidavit,” and the affidavit will flag the OEM as to when any of the 3Ts/G appear in a purchase order.

But that approach has a number of limitations, the main one involving the fact that many of the POs containing finished products/parts/ assemblies don’t specifically call out the 3Ts/G, yet they could contain them.

Returning to our industrial machinery example: if that company purchases cutting tools made with tungsten carbide, the PO will likely not contain the words “tungsten carbide” and may just say “cutting tool,” “drill bits,” “drill rods,” “pick holders,” etc. In other words, the PO approach to identifying potential conflict minerals within the supply chain will fail to adequately identify all potential conflict minerals.

Furthermore, where a PO or product specification contains a performance specification (such as hardness or abrasion-resistance, like with tungsten carbide), such performance requirements may implicitly require the actual conflict minerals, but will obviously not identify the specific material content.

So how does an OEM who must comply with the rules go about identifying, asking, and answering the question, ‘Do we source conflict minerals from conflict-free sources’?

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