NORTH AMERICAN NEWS by John Wolz, editor, GlobalFastenerNews.com
US Conflict Minerals Regulations involve entire supply chain New US Conflict Minerals Regulations can affect the entire supply chain, directly or indirectly, Consultant Lawrence Heim told the joint meeting of the National Fastener Distributors Association and the Pacific-West Fastener Association.
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or example, Apple announced it would only use products from certified smelters, Heim cited. “By September Apple wants all uncertified product out of its supply chain. When Apple shakes a tree, all the leaves fall.” However, “your customers might not go down this route,” noted Heim, a consultant with ElmGroup.com. “This is more about your customer than anything else.” “Materials now on your shelf are okay,” he assured NFDA and PacWest members. Conflict minerals are mined in areas of armed conflict and human rights abuses, especially in Africa’s eastern Congo provinces. In addition to rebel groups, neighboring governments have smuggled natural resources out of the Democratic Republic of the Congo. Profits finance more fighting. Minerals involved are tin (cassiterite), tungsten (wolframite) and tantalum (coltan) – dubbed the 3Ts or the 3TGs including gold – and are used principally by multinational electronics companies for manufacturing mobile phones, laptops, and MP3 players. The law is “disclosure-based” – anticipating that consumer behavior will act as “financial enforcement,” Heim explained. Ultimately the law is about “incentives to stop buying from the DRC.” It does not ban DRC-source material, require product labeling or supply chain audits. The required reporting is with US Securities & Exchange Commission (SEC) Form SD and due annually starting 31st May 2014. It must have an “executive
officer” signature. The report describes products, due diligence, processing facilities and country of origin. The information must be published on the company’s website for one year. The law applies to materials originating in the Democratic Republic of the Congo (DRC) and adjoining countries: Angola, Burundi, Central African Republic, Congo Republic, Rwanda, Sudan, Tanzania, Uganda and Zambia. The law puts the US Securities & Exchange Commission in charge of implementation. Regulations require US and certain foreign companies to report and make public the use of so-called “conflict minerals” from the DRC or adjoining countries in their products. Other countries are also considering ways to discourage DRC minerals. Heim cited several “key definitions” in the regulations such as “necessary to the functionality or production.” That would be “generally expected function, use or purpose of the product as a whole. Ornamentation is not “necessary” to the use, he pointed out. However, where a product has multiple uses, if conflict materials are “necessary” to any single function, it is then necessary to the product as a whole. “Contained in” is a key factor, Heim said. For example, do materials used in an intermediate chemical process remain in the final product? Tools, computers and other equipment supporting production are excluded, he noted. Products containing 3TG can be determined “DRC conflict free” if verified as
coming from scrap or recycled sources and as not directly or indirectly financing armed groups in the DRC or adjoining countries. The law applies to publicly traded companies subject to SEC regulations, including manufacturers, processors and smelters and private label contract manufacturers. Suppliers should (1) determine if the rules apply to their products, (2) inquire about country of origin and (3) provide due diligence. The “reasonable country of origin inquiry” must be “reasonably designed” and be performed in “good faith,” Heim explained. The rules allow reliance on supplier information, but can’t ignore “applicable warning signs or other circumstances.” Solutions include smelter audits for electronics manufacturing and refinery audits, and supply chain programs, for gold. IT systems should be available for conflict minerals data management systems. Heim said public companies need to establish a corporate policy; review existing programmes and processes for links; coordinate departments and assign roles; strategise decision criteria and contingencies; and assess products, content, use and suppliers. The Conflict Minerals Law contains requirements of independent third party supply chain traceability audits and reporting of audit information to the public and SEC. Other companies may become involved through audit requirements pushed down through supply chains, including privately held and foreign owned companies.
Quebbeman and Lomasney lead IFI for 2014-15 Mark Quebbeman of Semblex Corporation is the 71st chairperson of the Industrial Fasteners Institute and Dave Lomasney of MacLean-Fogg Component Solutions is vice chair.
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uebbeman succeeds Steve Paddock of Böllhoff Inc. He started in the fastener industry directly out of college in the Camcar sales development program. In 20 years with Camcar he held various sales and product roles in Colorado, Indiana and Kentucky. He then spent two years outside the fastener industry, but returned in 2001 as vice president of sales and marketing at Semblex. Lomasney joined MacLean-Fogg in 2009 as president of MFCS. Though MacLean-Fogg is his first fastener job, he came with a mechanical engineering degree and 25 years of operations and engineering experience with automotive companies TRW and Magna.
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Fastener + Fixing Magazine • Issue 87 May 2014