Regulation

Report: Less than half of auto producers prepared to meet conflict minerals rule deadline

PricewaterhouseCoopersA report released last week by PricewaterhouseCoopers found that less than half of all automotive manufacturers and suppliers have discussed the implementation of a conflict minerals policy to comply with the SEC’s May 31 deadline.

Section 1502 of Dodd-Frank requires public firms to disclose whether materials used in production were sourced to the benefit of armed groups responsible for human rights violations.

Last August, the SEC adopted the conflict minerals rule to require public companies to disclose their use of conflict minerals, such as tantalum, tin, tungsten or gold, originated in the Democratic Republic of Congo or adjoining nations.

The survey found that only 42 percent of automotive manufacturers and suppliers have begun to develop or have already developed a conflict minerals policy, while one-third of respondents have not yet discussed developing a policy.

Thirty-one percent of survey respondents said the biggest challenge to achieving compliance with the SEC rule will be obtaining accurate and complete information from suppliers. Thirty-three percent of respondents said they would consider opportunities to enhance the supply chain in the compliance process, if the incremental costs are low.

“Automotive companies will expect their suppliers to provide information about the source of their conflict minerals,” Aaron Sikora, an automotive partner at PwC U.S., said. “Some companies expect their suppliers to certify that their products are conflict-free. This information will help the automotive companies comply with the conflict minerals rules. Automotive companies that view conflict minerals as a strategic opportunity to enhance supply chain logistics and find efficiencies throughout the intricate network of suppliers will likely benefit in the long run.”

Numerous parts of a vehicle can contain conflict minerals. To comply with the conflict minerals rule, automakers are encouraged to review their supply chain process to evaluate each product and determine the extent of reporting requirements. When and if conflict minerals are found, companies will be required to take the necessary measures to ensure full disclosure and to identify the sourcing of the conflict minerals within the product.

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