The following is a report provided by Daniel Meckstroth, PhD from MA:
I hosted a webinar last week on how manufacturers handled the first year of conflict minerals reporting, including their leadership decisions. Areas of focus for Year 2 reporting, legal challenges to the regulation, and the structure of the Conflict Minerals Report were discussed. Join me October 7 in Chicago for a one-day dive into manufacturers’ most pressing concerns at MAPI’s third Conflict Minerals Forum.
Our two presenters were Christine Robinson and Mark Mellen, both CPAs, with Deloitte’s Conflict Minerals Advisory Services team. During the presentation, they provided examples of what they consider leading Conflict Minerals Reports.
Last summer, Christine co-authored a paper on Year 1 reporting trends. Mark started by reviewing key statistics from the report, such as, what types of companies filed and whether they distinguished between reasonable country of origin inquiries and due diligence measures:
- Mark noted that about 25% of registrants disclosed a smelter or refiner list; he predicted this figure will rise for Year 2 reporting
- Many registrants used defined headings to distinguish the design assertion from the description of the due diligence measures actually performed
- Some provided information on how many suppliers they surveyed and response rates
- While risk mitigation / future due diligence measures aren’t required until Year 2, 55% of registrants provided these disclosures
Christine discussed requirements for Year 2 disclosures, starting with Form SD:
- Because of a partial court stay of the regulation, companies are no longer required to label products as conflict-free, not been found to be conflict-free, or undeterminable
- If a company chooses to describe its products as conflict-free, it has to undergo an independent private sector audit (IPSA)
- When providing a product description, Deloitte considers it a leading practice to describe the products consistently
Christine also discussed content considerations for Year 2, such as the suggestion to be more precise when describing the RCOI. A half-hour was dedicated to answering attendees’ questions, including:
- What penalties might the SEC impose for inadequate due diligence?
- Has the SEC issued any recent comments on conflict minerals?
- Are you seeing a trend in low participation for supplier response rates?
- Do you have any benchmarks on supplier response rates or how often companies should follow up?
- Which companies will require an IPSA in Year 3?
- What requirements exist, if any, for surveying distributors?
- Is it a problem to have a smelter list for 2014, but not 2015?
- Is a smelter list required for all levels in the supply chain? Would a country of origin list be acceptable?
Update provided in affiliation with the Manufacturers Alliance for Productivity and Innovation.