Avoid This Major Conflict Minerals Smelter/Refiner List Error

Only a few days remain before the deadline for the SEC conflict minerals submittals and as you may expect, we are busy conducting last minute reviews of the Form SD and conflict minerals reports (CMRs).  Here is an important reminder about smelter/refiner lists.

The CMR must include “a description of … the facilities used to process the necessary conflict minerals,  … the country of origin of the necessary conflict minerals…”  The SEC did not provide guidance on what constitutes a “description”, but we have written on this matter previously.  We also offered commentary on smelters/refiners that are not on the Conflict Free Sourcing Initiative (CFSI) lists.

But confusion continues about “the country of origin“, which is really the heart of the entire disclosure.  Simply put, the country where the facility is located is frequently different from the country from which the ore came out of the ground.  Unprocessed or partially processed ores are transported globally for final processing, and there are few smelters/refiners actually located in the Covered Countries.

Where are you getting your information about countries of origin? There are essentially four ways to get this information, but sometimes you may really be getting the the country where the facility is located, rather than the country from which the ore originates.

  • The “RCOI Data” from the CFSI.  This data is available only to CFSI members.  Third parties, such as conflict minerals data management systems and consultants such as us, are not allowed access to that information.  From what we understand, CFSI’s RCOI data doesn’t actually list specific countries of origin associated with the audited smelters/refiners, but presents groups of countries called Level 1, Level 2 and Level 3 – assigned based on potential risk.  Those companies using this information should then list in their CMR all the countries that are included with each Level associated with the relevant smelters/refiners.
  • Suppliers can provide this information in the CMRT.  Column O of the Smelter List tab is intended to capture the country of origin information from suppliers.  But many suppliers are unaware of  both the actual country of origin and Column O in the CMRT.
  • IT system providers.  Those who employ commercial conflict minerals IT solutions may expect the system to have, or extract from suppliers, the actual country of origin information.  Be careful about relying only on a list generated by an IT solution: thoroughly determine what information is being reported, and where it comes from to ensure the correct information is being generated.  And as we said earlier, make sure that the system is not automatically filtering out facilities that do not have a smelter ID.
  • Do your own research.  This option can be the most labor intensive of them all, but it also results in a high level of certainty and control.  Doing your own research can involve a number of activities, such as internet research, phone calls, emails and first hand visits to the facilities.  More efficient methods available include using stand alone third party smelter/refiner verification data and the iTSCi audits that are available online.

Remember that you are ultimately responsible for your due diligence activities and results, even if you rely on third party information.  It is worth making sure you are reporting the correct information.

 

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