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CONFLICT MINERALS

What EICC members need to know about conflict minerals, from a responsibility perspective as well as for reporting requirements. Issues addressed range from covered minerals and countries, to reporting requirements and due diligence

guidance.

Mike Loch – Motorola Solutions, CFSI Co-ChairMichael Rohwer – EICC, CFSI Audit Program Manager

Roadmap

• Overview • CFSI Approach to Conflict-Free Sourcing• Compliance & Reporting Requirements

EICC® 81 Members (July 12, 2013)

4

GeSI Members (as of Sep 2013)

Members

Partners

5

CFSI Partners( As of Sep 8, 2013 )

Partner Industry Associations

Non-Member Partner Companies

+ 4others

6

Overview: Conflict Minerals

• Illegal mining and trading of certain ores in the DRC has been exploited to fund armed conflict and serious human rights abuses.

– Columbite-tantalite refined into tantalum (Ta) – Cassiterite refined into tin (Sn) – Wolframite refined into tungsten (W) – Gold (Au)

• As defined in §1502 of Dodd-Frank Act– Regardless of origin– Regardless of whether connected to armed groups

Overview: Obligations3 major bodies of work address conflict minerals

reporting:– The United States Dodd-Frank Act of 2010– The related Securities and Exchange Commission final

rule on compliance with Dodd-Frank (SEC final rule); and

– The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance)

Overview: Response• The EICC and GeSI are committed to improving conditions in the supply chain. Mining activities that fuel conflict are unacceptable.

• In order to help companies meet reporting obligations and to source conflict-free minerals the following actions are undertaken:

– Supporting in-region sourcing schemes to enable future legitimate trade from DRC and surrounding countries – Implementing Conflict-Free Smelter Program (CFSP) that requires OECD guidance to aid in the identification of smelters and refiners that have sourced conflict-free minerals – Developing the Conflict Minerals Reporting Template (CMRT) to help companies gather due diligence information in a common format – Engaging with multiple industries for collaboration and efficiency

In-Region Schemes

Conflict-Free Smelter Program (CFS)

Company Assurance

Finished Product

MINE SMELTER/REFINERY OEMS

CFSI Approach to Conflict-Free Sourcing

(pinch point)

In-Region Programs• The ICGLR is an 11 member organization consisting of the Countries of the

Great Lakes region of Africa have implemented their Regional Certification Mechanism (RCM)

• iTSCi program is the first in-region mineral tracing initiative supporting locations in DRC and Rwanda

• The CTC is a program supported by the German government and certifies mines to defined performance standards.

• The Public-Private Alliance, sponsored by the U.S. State Department and USAID partnering with industry and civil society, is supporting systems that trace and certified mineral supply chains in the Great Lakes Region

• Solutions for Hope program sources conflict-free tantalum from Katanga province of DRC

• Partnership for Social and Economic Sustainability program sources conflict-free tantalum from Katanga province of DRC

• Conflict Free Tin Initiative program sources conflict-free tin from the South Kivu province of DRC

Conflict-Free Smelter (CFS) Program

A voluntary initiative with independent 3rd party audits of smelter and refiner procurement and tolling activities to assess if the smelter or refiner demonstrates that all the minerals they processed originated from conflict-free sources.

CFSI (formerly the EICC and GeSI extractives workgroup) worked in collaboration with multiple stakeholders to develop the CFS program.

• Why: Provides a credible mechanism that enables and encourages responsible sourcing of tantalum, tin, tungsten and gold

• Schedule: Addressing each metal separately, but concurrently • Results: A list of smelters and refiners who are compliant with the CFS

assessment protocol will be posted on the CFS website.

http://www.conflictfreesmelter.org ** Companies make their own sourcing decisions. **

Conflict Minerals Reporting Template (CMRT)

• What is the Conflict Minerals Reporting Template (CMRT)?– A tool that provides a common means to collect due diligence

information related to the source of conflict minerals. – Companies may use of the Template as an element of their conflict

minerals DD program to assist in verifying responsible sourcing. – Companies will be able to forward a completed Template to all of their

customers that request this information.

Compliance: Program Elements

• High-level Compliance Steps1. Company Conflict Minerals Program

Framework2. Identify and Assess Risk in the Supply Chain 3. Risk Management 4. Smelters or Refiners5. Report6. Implement Program Improvements and Repeat

Compliance: Step 1

• Company Conflict Minerals Program Framework– Build a company management system:

• Identify functional areas to support CM program• Collect data on products and suppliers which contribute

those necessary conflict minerals to the products• Adopt a policy and expectations for your suppliers• Implement internal controls

Compliance: Step 2

• Identify and Assess Risk in the Supply Chain– Collect supplier data

• Conduct a supply-chain survey (CMRT)– Review and respond to unreasonable responses

• Assess CFS information for RCOI determination• Potential validation information resources

– Other recognized industry approach– Participation in in-region sourcing program(s)– Information attained from industry initiative program(s)– Information attained directly from a smelter– Other indirect information (smelter location)

Compliance: Step 2 Continued•Make Covered Country sourcing conclusions from ‘all’ applicable information sources• Aggregate smelter/refiner data• Determine smelter/refiner’s

information:– Country of origin information (CC

or non-CC)– Utilize CFS or other recognized

industry approach– Solely recycle/scrap

Compliance: Step 3• Risk Management

– If the smelter or refiner (SoRs) sources from covered country or unknown implement OECD Due Diligence

• Compare smelters to CF independent audit program reference lists (e.g. CFS, LBMA, RJC)

– DRC CF: Listed smelters– DRC conflict undeterminable: smelters not

yet ‘listed’– Identify additional/future activities to

improve DD

Goal: identify smelters and rely on industry program

Compliance: Step 3 Continued

• Identify program improvement to support better data gathering– Strategize how to improve supplier survey

response rate and accuracy– Identify and execute strategies to increase

smelter/refiner participation in independent 3rd party validation audits

– Modify database to meet changing compliance requirements

Compliance: Step 4

• Utilize CFSP determine– Country of origin information for successfully

audited SoRs– Conflict-Free status information

• For example:– If a product’s supply chain SoRs are all CFS

validated, then may be reported as conflict-free in CMR

Reporting: Step 5

• If you’ve already determined that the SEC Rule applies, conducted your RCOI and DD:– Report via Form SD (and CMR as required)

Goal: Transparency of sourcing information• Form SD template provided within the SEC Final Rule. –

pg. 344• Report(s) to be filed “. . .no later than May 31 after the

end of the issuer’s most recent calendar year.” – pg. 345• “Report must be signed by the registrant on behalf of

the registrant by an executive officer.” – pg. 346

Reporting: Form SD

Under a separate “Conflict Minerals Disclosure” heading• If you have established that a large majority of CM in

your supply base did not originate in the covered countries or were from scrap or recycled materials – Briefly describe the RCOI

• Otherwise, all substantive content should be contained in the CMR

• In either case, the information must be posted in a public website and a link to the posting must be included on Form SD

Reporting: CMRCompany’s CM Policies conform in all material respects to a nationally or internationally recognized due diligence framework

For products “not found to be DRC conflict free”,1. Provide description of product(s)2. Smelter/refiner facilities used to process CMs3. Country of origin of the CMs in those products4. Efforts to determine mine or location of origin

Likewise for products which are “DRC conflict undeterminable”, 5. Provide description of product(s)6. Smelter/refiner facilities used to process CMs, if known7. Country of origin of the CMs in those products, if known8. Efforts to determine mine or location of origin9. Steps to mitigate the risk that its CMs benefit armed groups (including steps to improve

due diligence)

Reporting: SD or CMR or Both?Determination by Registrant Scenario Result FileNecessary CMs are from outside the covered countries and/or solely from recycle/scrap

1 DRC conflict free Form SD

Know (or have reason to believe) necessary CMs originated from a conflict free sources including from within the covered countries

2 DRC conflict free Form SD & Audited CMR

Know (or has reason to believe) necessary CMs originated from within the covered countries and are not (or may not be) from recycle/scrap sources

3 DRC conflict undeterminable

Form SD & CMR

4 DRC conflict free& DRC conflict undeterminable

Form SD & Audited CMR

Know (or have reason to believe) necessary CMs originated from a conflict source within the covered countries

5 Not found to be DRC conflict free

Form SD & Audited CMR

Compliance: Step 6

• Do it all again, next year

What is CFSI Doing?• The CFSI continues to drive improvements in its programs to

enable companies in their ability to source conflict-free minerals• Improving governance of the initiative, both in structure and

revenue generation are key to sustainability and health• Company assurance activities of the CFSI are focused on

improving company capabilities to validate responsible sourcing of materials by creating common standards, tools and processes

• CMRT• White papers• FAQs• CFS RCOI Data

– Aggregated to ensure some level of confidentiality– Accurate enough to meet compliance requirements

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Governance Changes for the CFSIThe initiative is undergoing continued improvement:

• Name change completed, CFSI is the umbrella• Continue work on future structure (upstream /

downstream / NGO)• Revenue generation options being implemented

(membership and royalties)• CFSP improvements

Overall development and implementation will continue in 2013 and into 2014

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Partitioning of CFSI Information:Public Vs. Private

• Current rate of companies joining CFSI is not providing adequate revenue to expand the initiative quickly enough

• New revenue sources being established:– RCOI information from CFSP audits only to be provided to CFSI

member companies (Compliant smelter/refiner lists will remain public) [available in October 2013]

– Use of the CFSP Compliant smelter/refiner list(s) (copyrighted work) in public documents or for-sale information systems will be available to members only, or for CFSI sponsoring vendors [deadline before end of 2013]

• Member identification program being created• Considering discounts for partner association members

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Options for CFSI Participation• EICC or GeSI Membership

– Full Membership provides access to CFSI and all EICC/GeSI WG’s( http://www.eicc.info/Membership_Application.shtml )( http://www.gesi.org/Membership/tabid/59/Default.aspx )

• CFSI Partner Company Participation( http://www.eicc.info/documents/ExternalWGMembers-Companies.pdf )

– $5K fee annually– Voting rights, access to all Work Groups, access to RCOI information

• CFSI Partner Association Participation( http://www.eicc.info/documents/ExternalWGMembers-Organizations.pdf )

– $20K fee annually– Voting rights (one vote for organization)– Up to two participants to CFSI Meeting or CFSI Work Groups, responsible for

disseminating all information (staff or constituent members welcome)

• White Paper on the Extractives WG (now the CFSI) available (www.conflictfreesmelter.org)

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Questions?Thank you

What is CFSI Doing?

• Providing tools and resources• CMRT• White papers• FAQs

• Preparing a list of smelter’s country of origin information

• Aggregated to ensure some level of confidentiality• Accurate enough to meet compliance requirements

The Electronic Industry Citizenship Coalition

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Sponsored by

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