Bannockburn, Ill. A new study from the IPC — Association Connecting Electronics Industries forecasts that reporting requirements for conflict minerals proposed by the U.S. Security and Exchange Commission (SEC) would cost the electronic interconnect industry an estimated $279 million in the first year of implementation for due diligence alone, compared to the government’s estimate of $16.5 million.
In July 2010, provisions requiring publically-traded companies to report annually to the U.S. SEC if their products contain conflict minerals, i.e., tin, tantalum, gold, and tungsten, were included in Section 1502 of the Financial Reform Bill (U.S. Public Law 111-203).
Companies are required to identify the country of origin of the minerals and whether the minerals came from mines controlled by rebel parties, said IPC. Each company must also submit a report on their due diligence with respect to the required inquiries.
The IPC study, “Results of an IPC Survey on the Impact of U.S. Conflict Minerals Reporting Requirements,” collected data from 60 electronics manufacturing services (EMS) companies, printed circuit board (PCB) manufacturers, materials suppliers and equipment suppliers.
The study reports that companies would experience a median due-diligence burden in excess of 1,300 hours or $65,000 per company in the first year. In addition, estimated costs for tracking software, additional staff, training, legal expenses and third-party audits totaled a median of $170,000.
“Although the reporting requirements apply only to publicly-traded companies, it is clear that the requirements will rapidly flow down from the publicly-traded companies to all of their suppliers, large and small. Recurring costs for companies in the electronic interconnect industry are expected to total approximately $165 million per year,” said Tony Hilvers, IPC vice president of industry programs, in a statement.
In its comments to the SEC, IPC writes: “IPC encourages the SEC to implement the requirements of Section 1502 in a manner that supports the goals of the statute without unduly burdening U.S. manufacturing industries or causing unnecessary disruptions of the minerals trade, which is vital to the livelihood of the people of the Democratic Republic of the Congo (DRC).”
“IPC believes that the SEC should not require the use of specific due-diligence standards or guidance as this would impose a significant burden on certain issuers. The SEC should, however, provide assistance to issuers by identifying examples of acceptable due diligence, such as industry-developed smelter validation audits, the bag-and-tag scheme being developed by ITRI, information or standards provided by the U.S. Department of State or other federal agencies, the Organization for Economic Co-operation and Development (OECD) standards, and others,” added IPC.