Conflict Minerals Compliance - Heads Up: Purchases You Make This Year May End Up Reportable After the Transition Period

If your company has been relying on the “Undeterminable” designation to get you through the first two reporting periods – heads up. Your transition period may already be over, and you didn’t even realize it.

Many companies may not realize that parts and components they are purchasing in 2014 may very well end up being reportable in the May 2016 conflict minerals report, when the Transition Period is no longer in force. This is because companies that buy items/parts/components this year and complete the manufacture of the final product anytime after January 1, 2015 – which is only 11 months away – then those products are reportable for the following period, which is the May 2016 deadline. The Transition Period ends with the 2015 reporting deadline. Thus, your business may end up required to report your products as ‘not found to be conflict free,’ based on supplier practices and policies that are in place right now.

Why is this? The Final Rule issued by the SEC explains that the reporting period applies to products for which the manufacture of that product was completed in that calendar year. So if you buy components in 2014, but you do not complete the manufacture of the product until 2015, then you would not report on the conflict minerals information for that component until the following year, which is the May 2016 reporting deadline.

What does this mean? You may have thought that since we are still within the two-year Transition Period, that your policies and purchases will not be held to a higher level of scrutiny. However, you may be wrong! Depending on when you complete the manufacture of your products, the sourcing and thus conflict minerals information may be from years prior.

What to do. If your company wants to avoid reporting products as “not found to be ‘DRC Conflict Free,’” 3E recommends acting now to engage your suppliers to avoid this fate. 3E Supply Chain (3E SC) provides a solution that can engage and educate suppliers, obtain the needed conflict minerals information, and report back to you on the condition of your supply chain with enough time left to make any needed changes to avoid an unfavorable conflict minerals report.

For more information, please join our free webinar “Conflict Minerals Compliance: Preparing for Your SEC Filing” on February 13. Additional information can be found here.