WASHINGTON (CN) - When certain minerals "necessary to the functionality or production of a product'' come from places in which their sale funds armed conflict, the manufacturer must investigate whether the minerals come from the Democratic Republic of the Congo or an adjoining country, and if so, disclose certain facts, according to regulations proposed by the Securities and Exchange Commission.
This rule has been proposed because the U.S. Government does not want its country's manufacturers to aide or fund perpetration of the violent conflict in the areas.
Examples of minerals that may be necessary to the functionality or production of a product are gold and tantalum, which are used to produce connections in electronics and other goods.
If conflict minerals are obtained from the Democratic Republic of the Congo or adjoining countries, a separate report must be filed that describes the due diligence taken by the manufacturer to determine that the minerals purchased were bought from legitimate exporters, with all required export documentation from the nation of origin.
Due diligence under the act would require an independent private sector audit of the manufacturer's report on the chain of control of the minerals and the certification of the minerals' points of origin.
The regulations would implement sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Conflict Minerals Provision of Dodd-Frank states that "It is the sense of the Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an emergency humanitarian situation."
In a related proposal, the SEC would require any publicly held company engaged in resource extraction to disclose "information relating to any payment made by the issuer, or by a subsidiary or another entity controlled by the issuer, to a foreign government or the federal government for the purpose of the commercial development of oil, natural gas, or minerals" to the SEC in an annual report.
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