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It will cost the electronics industry $7.93 billion to implement the Dodd-Frank conflict minerals regulation, according to an economic analysis conducted by Tulane University.
The study found that the cost of implementing regulation would be 100 times more than the Security and Exchange Commission (SEC) estimate of $79.3 million.
The Tulane analysis compared the SEC estimates to the findings of a study by the National Association of Manufacturers (NAM). It also used data from a survey of manufacturers in the electronics supply chain conducted by the Association Connecting Electronics Industries.
“The Tulane study underscores the need for the SEC to be conscious of the high costs of implementation,” said Tony Hilvers, IPC vice president of industry programs. He added the SEC must use “all reasonable options to lessen the burden of implementation,” including a phasing-in of the regulations to allow industry time to work with their supply chains to develop traceability and compliance data.
Section 1502 of the Dodd-Frank Act imposes a reporting requirement on publicly traded companies that use conflict minerals in their products. Conflict minerals include columbite-tantalite (coltan), cassiterite, gold, wolframite, and their derivatives. Wolframite is the main source of tungsten, while cassiterite is a source of tin. Columbite- tantalite is a source of tantalum.
The minerals are widely used in the production of electronics and other products.
Companies that use any of the conflict minerals must report whether the minerals originated in the Democratic Republic of Congo (DRC) or an adjoining country. Those countries include: Angola, Burundi, the Central African Republic, the Republic of Congo, Rwanda, Sudan, Tanzania, Uganda and Zambia.
If the minerals did originate in one of the countries then the manufacturing company must submit a report to the SEC that describes the measures that were taken to exercise due diligence on the source and chain of custody of the minerals.
The regulation does not penalize companies that use conflict minerals. However, it does require companies to make the required disclosures publicly available on their websites.
The regulation was prompted by concern that the selling of conflict minerals originating in the DRC is helping to finance the war efforts of rebels in the eastern DRC, where civil war has raged for years.
The Tulane study also outlined a need to establish, for a transition period, a category for conflict minerals whose origin cannot be determined. The regulations proposed by the SEC require that conflict minerals be identified as either conflict-free or as associated with conflict. In some cases, it is difficult to establish an origin of the minerals, according to some companies.