GAO releases yearly report on conflict minerals regulation compliance

Firms’ compliance with due diligence requirements under a Securities and Exchange Commission rule continues to be high.

Image: Shutterstock Fine tungsten

Almost all companies required to conduct due diligence to determine the countries of origin for conflict minerals used in their products did so last year, according to a Government Accountability Office (GAO) report released Sept. 9.

The relevant Securities and Exchange Commission (SEC) regulation generally requires companies to disclose whether they sourced tin, tantalum, gold and/or tungsten from the Democratic Republic of the Congo (DRC).

The GAO’s review of a generalizable sample of firms found that 94% of companies required to conduct due diligence under a SEC regulation reported completing the requirement.

The SEC regulation is based on language in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act and broadly requires a company to determine whether it manufactures, or contracts to be manufactured, products with conflict minerals; to conduct a reasonable country-of-origin inquiry concerning the origin of the conflict minerals; and to exercise due diligence, if appropriate, to determine those conflict minerals’ source and chain of custody.

In 2018, 1,117 companies filed conflict minerals disclosures, about the same number as in 2017 and 2016, the GAO said. Further, an estimated 56% of companies that conducted inquiries as to the source of minerals in their products reported whether the conflict minerals in their products came from the DRC or any adjoining country, similar to the 53% and 49% in the previous two years.

The amount of total companies that reported an inability to determine the country of origin of their conflict minerals decreased from 67% in 2014 to 27% in 2018.

But of those companies required to conduct due diligence — directed for companies that hadn’t determined their minerals’ origin or that had reason to believe their minerals were from covered countries — an estimated 61% reported an inability to confirm the source of minerals in their products, the GAO said.

If companies choose to disclose their products are “DRC conflict free” in a conflict minerals report, the SEC disclosure rule requires firms to get an independent private-sector audit, the GAO report notes.

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Brian Bradley

Based in Washington, D.C., Brian covers international trade policy for American Shipper and FreightWaves. In the past, he covered nuclear defense, environmental cleanup, crime, sports, and trade at various industry and local publications.