In addition to the Reasonable Country of Origin Inquiry (RCOI), the heavy lifting in conflict mineral compliance is the effort to survey your suppliers to gather Conflict Mineral Reporting Templates (CMRT). Industry has spent enormous amount of time in reaching out to suppliers and gathering this information in the past year. Different organizations have conducted studies on 2013 filings and have reported that the result of this supply chain analysis was not completely successful.
What does an issuer expect from its supplier in the conflict mineral survey?
The first criteria to complete a conflict mineral survey successfully is to have the supplier conduct a similar survey at its level in the supply base to understand the origin of conflict minerals in its products. Supplier should be able to identify the parts supplied by them to the listed company who asked for this survey and analyze and confirm whether those products contain 3TG. The supplier should have also established a decent level of due diligence within its organization to ensure that it does not fall under a risky supplier category.
The responses which are made through the CMRT should be based on the factual research the supplier has conducted. If the report is provided at product level, the supplier should be able to identify the parts/products and confirm whether the research was conducted by them. The report should also contain the smelter names which they have identified in their supply base which constitute the maximum percentage of supply of the conflict minerals.
Supplier Training and support- A tool to motivate the suppliers to provide better declarations
Conflict mineral compliance is a new regulation in US. Most suppliers are unaware about the details of the compliance requirements. In most cases, issuers who are affected by the SEC filing requirement have a vast supplier base spread across different parts of the world. This makes it more difficult to get responses as there is nothing legally binding the supplier to provide information. In several cases, replacing the non-responding supplier is not an easy task.
Most studies in the industry confirm that issuers who invested more resources in the front end communication, training and support have managed to reduce their overall conflict mineral compliance cost. A training delivered in a supplier conference or through a webinar will act as an effective tool for improving supplier responses and quality of responses.
A seminar/ webinar focusing on the regulation, its applicability, reporting process and tools (if any) will help suppliers to engage with the issuer more closely in this compliance process. Supplier training should be refreshed every year due to change of resources in the supply base and update them about the recent development and changes in the reporting process.