* US SEC hosts roundtable on conflict minerals
* SEC is behind as it struggles to craft the final rule
* Lawmakers put pressure on SEC to hurry up
* Companies seek phase-in; fear compliance nightmare
By Sarah N. Lynch
WASHINGTON, Oct 18 (Reuters) - U.S. lawmakers pressed regulators to finalize strict new rules requiring public companies to disclose if any of their products use certain African “conflict minerals,” despite cautions by companies that the rules could have unintended consequences.
The U.S. Securities and Exchange Commission is already six months behind schedule as it struggles to come up with a workable way to implement the rule.
The rule, which was tucked into last year’s Dodd-Frank Wall Street overhaul law at the last minute, will require companies to disclose whether they use tantalum, tin, gold or tungsten from the war-torn Democratic Republic of the Congo.
Companies have strongly cautioned the SEC to slow down and scale back its December proposal. They say it will be costly and difficult to put into practice, as these minerals can be used in minuscule amounts and are almost impossible to track.
“Respectfully this is not something we can turn on a dime and start doing in 2012. It is going to take us some time,” said Irma Villarreal, the chief securities counsel for Kraft Foods Inc , at an SEC roundtable on conflict minerals on Tuesday. “We don’t have the ability to talk to 100,000 suppliers to ensure what and who has conflict minerals.”
But lawmakers who support the conflict minerals provision are stepping up the pressure on the SEC and also on U.S. corporations to embrace the measure.
Senator Richard Durbin, one of the authors of the provision, sought to sway corporate leaders at the SEC discussion with an emotional account of his trip to the Democratic Republic of the Congo where he witnessed women who had been sexually assaulted, waiting on a long line for treatment outside a hospital.
“What is fueling this war more and more is the pursuit of precious minerals,” said Durbin. “Why are these so valuable? Because of our insatiable appetite for iPads and Blackberries and cell phones that use these minerals,” he added, wielding an Apple iPad before the audience.
A group of 11 Senate Democrats and one Senate Republican also wrote a letter to the SEC on Tuesday asking the agency to finalize the rules.
“The people of the DRC have suffered for far too long,” wrote the lawmakers, including Senators Barbara Boxer, John Boozman, and Christopher Coons.
“We urge you to issue strong regulations soon with no phase-ins, exemptions, or delays so that companies can fully implement their obligations under the Dodd-Frank legislation.”
The conflict minerals rule in principle seems straightforward, but in practice has proven tricky to formulate.
As proposed, companies would need to identify if any conflict minerals are used in their products. If the minerals are present, they would then need to conduct a due diligence check to track them through the supply chain to their origins. An audited conflict minerals disclosure exhibit would also need to be filed as an exhibit to a company’s annual report.
Companies and business groups have largely opposed the measure as proposed, saying it captures far too many companies who do not directly manufacture their goods and have little say or knowledge about the origins of the minerals used in their products. They have urged the SEC to implement the plan over time, and also to give relief to companies that use trace amounts of the minerals in question.
But lawmakers, human rights groups and some socially conscious investors have decried the delay in the SEC’s rulemaking process.
“We are hoping there will not be a phase-in period,” said Calvert Investments senior vice president Bennett Freeman, who noted it would “dilute and delay” the much-needed pressure on suppliers.