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Reporting requirements for conflict minerals, proposed by the U.S. Security and Exchange Commission (SEC), will cost the electronic interconnect industry $279 million in the first year of implementation for due diligence alone, according to a new study by the Association Connecting Electronics Industries (IPC).
The SEC last year said the requirements would only cost about $16.5 million.
Section 1502 of the Financial Reform Law passed last year requires publically traded companies to report annually to the U.S. SEC if their products contain "conflict" minerals, such as tin, tantalum, gold, and tungsten that were mined in the Democratic Republic of Congo or in neighboring countries.
The companies are required to identify the country of origin of the minerals, and whether the minerals came from mines controlled by rebel parties. The companies are also required to provide a description of the supply chain security measures being taken regarding the source and chain of custody of these minerals.
The requirements are intended to discourage the use of certain minerals benefiting armed groups in the DRC and adjacent countries.
The new IPC study, called "Results of an IPC Survey on the Impact of U.S. Conflict Minerals Reporting Requirements," collected data from 60 electronics manufacturing services (EMS) companies, printed circuit board (PCB) manufacturers, materials suppliers, and equipment suppliers.
The study says that companies would experience a median due-diligence burden in excess of 1,300 hours or $65,000 per company in the first year. In addition, estimated costs for tracking software, additional staff, training, legal expenses, and third-party audits totaled a median of $170,000.
Tony Hilvers, IPC vice president of industry programs, said although the reporting requirements apply only to publicly traded companies, the requirements will "flow down from the publicly traded companies to all of their suppliers, large and small." Recurring costs for companies in the electronic interconnect industry are expected to total approximately $165 million per year, according to Hilvers.
In comments to the SEC, the IPC encouraged the SEC to implement the reporting requirements in a way that doesn't unduly burden U.S. manufacturing industries or cause unnecessary disruptions of the minerals trade.
The IPC also said the SEC should not require the use of specific due-diligence standards or guidance as this would impose a burden on certain issuers. Rather, the SEC should provide assistance to issuers by identifying examples of acceptable due diligence, such as industry-developed smelter validation audits, the bag-and-tag scheme being developed by ITRI, or standards provided by the U.S. Department of State or other federal agencies, the Organization for Economic Co-operation and Development (OECD) standards, and others.