New-Tech Europe | Sep 2017 | Digital Edition

and regulators have “significantly expanded the scope of required disclosures beyond the core concept of materiality.” Statements like these indicate a change in sentiment on the part of regulators, at least with regard to Conflict Minerals, but for now, many of the costs for suppliers remain unabated. Meanwhile, with the EU Commission’s new Guidelines for social responsibility reporting, customer requirements for expansive third-party surveys continue to grow in number. The unfortunate result is an increasingly complex set of regulatory requirements that has created a shift in organizational focus from product quality and performance to paperwork; investment by companies and efforts by regulators largely wasted on merely documenting “compliance” without meaningfully effecting positive change in the social, economic and geopolitical crises that was their original intent to resolve. Conflict Minerals: Flawed Means to a Noble End Conflict minerals rules emerged in 2010 from section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The underlying goal of the legislation is to prevent funding of violent actors and human rights abuses in the eastern Democratic Republic of the Congo through the sourcing of “T3G” minerals (Tin, Tantalum, Tungsten, and Gold) from mines controlled or taxed by warring factions. The European Union and the Far East have developed their own versions of Conflict Minerals regulations based on the rules imposed on US manufacturers. In response electronics suppliers are required, either by regulatory bodies

like the SEC or by their customers, to provide documented evidence tracing minerals in their products back to the smelter and further to the point of origin. Due to the scale and complexity of the global electronics supply chain, establishing a reliable chain of custody from the finished product back to the mine comes with several significant challenges. For example, Mini-Circuits is fully committed to taking all necessary steps to meet the disclosure requirements of customers and regulators to comply with Conflict Minerals rules. However, we rarely if ever purchase T3G minerals directly, but rather in the bill of materials of sub-components, several levels downstream from the smelter. We maintain strict standards of documentation from our direct suppliers, but the difficulties obtaining relevant data suppliers further upstream and beyond the smelter, many of whom are not required to file disclosures under US Law, are well known. Therefore, our best efforts to provide traceability of minerals to a conflict-free source are ultimately only as reliable as the companies and individuals providing it down the line. It is our desire not only to meet our customers’ requirements and comply with the rules of the Conflict Minerals agenda, but also to see that our efforts to do so contribute to its fundamental humanitarian goals. Unfortunately, much research on this issue has shown evidence to the contrary. The IPC cites a study by Tulane University Adjunct Lecturer, Chris Bayer that found SEC issuers incurred an average annual expense $545,962 to comply with Dodd- Frank. A followup studyof 238 survey participants, 73% of whom were not SEC issuers but still performed

conflict minerals due diligence to meet customer requirements, found that the average cost of due diligence activities was $129,000 per year. Despite this level of investment, a 2014 open letter signed by over 70 academics and experts policy in the region asserts, “The conflict minerals campaign fundamentally misunderstands the relationship between minerals and conflict in the eastern DRC.” Profit from minerals does fuel conflict but is not the underlying cause, nor is it a necessary element to sustain violence. Mining is also vital to the local economy, employing eight to ten million people across the country. The letter goes on to say, “nearly four years after the passing of the Dodd-Frank Act, only a small fraction of the hundreds of mining sites in the eastern DRC have been reached by traceability or certification efforts.” The artisanal mining sites in question are located in isolated regions where systems for reliable auditing and certification, have yet to be established, making it difficult if not impossible to obtain proof that a mineral source is conflict-free. The requirements of section 1502 of Dodd-Frank unintentionally drive buyers to simply source minerals from other parts of the world. This may succeed in delivering more ethical products, but does nothing to improve the security and livelihood of the Congolese people, which was the original basis for the legislation. The Conflict Minerals agenda has been a source of much debate, and in part due to its questionable results since the passing of Dodd- Frank in 2010, regulatory reform seems to be already underway. In addition to the statements of SEC senior officials, easing enforcement, in May, the House Financial Services

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