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Dodd-Frank conflict minerals provision faces first court challenge

imagesThe controversial conflict minerals provision of the Dodd-Frank Act that requires firms involved in resource extraction to disclose payments made to foreign governments will soon face its first legal challenge in a U.S. appellate court.

Proponents of the measure maintain that it would help to eliminate the resource curse — the tendency of countries rich in natural wealth, like the Democratic Republic of Congo, to have high levels of violence and corruption. Critics of the rule, however, say that it would put American firms at a disadvantage and impose a significant cost burden on manufacturing firms.

The U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturing have challenged the provision, saying that the measure would create “onerous costs” for the manufacturing industry and that regulators did not consider a cost-benefit analyses of the rule. The groups also said that there is little evidence to support the idea that conflict areas like the DRC would benefit from the law’s provision, according to Sustainable Business Forum.

The court could hold additional hearings before assigning a formal trial date, though actual trial proceedings could be as far out as 12 to 18 months in the future. While the provision may be struck down by the courts, court proceedings could stretch into several SEC reporting cycles, and firms will still be required to submit the appropriate paperwork during quarterly cycles.

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