The U.S. Securities and Exchange Commission (SEC) said last week that it’s suspending enforcement of the costliest requirements of the “conflict minerals” rule, after a court remanded it back to the regulator because part of it violates the U.S. Constitution.

 

Acting SEC Chairman Mike Piwowar, a Republican, said he has asked staff for a recommendation on how to proceed with the rule, which requires companies to disclose if their products contain certain minerals from the Democratic Republic of Congo, a Reuters story reports. For now, Piwowar said, companies won’t be required to conduct a due diligence review or an audit, which are both part of the process used to determine the origin of the minerals. The move isn’t totally unexpected because a leaked document from the Trump Administration that has been floating around Washington for weeks calls for the rule to be temporarily suspended.

 

“Until these issues are resolved, it is difficult to conceive of a circumstance that would counsel in favor of enforcing” the due diligence requirements, Piwowar said in a statement, Reuters reports.

 

The move drew immediate backlash from SEC Democratic Commissioner Kara Stein, who accused Piwowar of acting beyond his authority to gut the meat of a rule mandated by Congress, adopted by the SEC and reviewed by the courts.

 

“It’s unprecedented for one commissioner, acting alone and without official notice and comment, to engage in de facto rulemaking,” Stein said, Reuters reports. “It represents a troubling attack not only on the Commission process, but also on the restraints of government power.”

 

The conflict minerals rule is required by the 2010 Dodd-Frank Wall Street reform law and is supported by human rights groups which want companies to tell investors if their products contain tantalum, tin, gold or tungsten mined from the Democratic Republic of Congo, in the hope that such disclosures will curb funding to armed groups known for human rights abuses. Business groups, however, have contended that the rule forces companies to furnish information that is irrelevant to making investment decisions and that it’s cost prohibitive for companies to trace the source of minerals through the supply chain.

 

Interestingly, an EPSNews article notes that while the electronics industry has maintained the rule is costly and burdensome, many electronics companies have embraced the effort that seeks to boycott minerals sourced from the Congo and other regions in Africa known for armed conflict. Indeed, capacitor manufacturers such as AVX Corp. and Kemet—significant users of tantalum—have spearheaded electronics industry efforts toward conflict-free sourcing, the article explains. What’s more, AVX and Motorola Solutions were founders of the Solutions for Hope tantalum program that tests the feasibility of responsible sourcing, and Flextronics, Hewlett-Packard and Intel have joined the effort, the article continues.

 

It’s unlikely, given the electronics industry’s investment, that compliance efforts will simply be dropped, especially since companies increasingly embrace the ideals of positive change through corporate social responsibility programs. In 2015, for example, the electronics industry was one of the most conflict-minerals compliant segments in U.S. manufacturing, according to Dr. Chris Bayer of Development International, who conducted the Conflict Mineral Benchmarking Study RY2015, EPSNews notes. The top 13 compliance leaders—companies which met all compliance criteria outlined by the SEC and the Organization for Economic Co-operation and Development’s (OECD)—were Qualcomm, Intel, MSC Industrial Direct, China Mobile, Curtiss Wright, Chicago Bridge Iron, Hughes Satellite Systems, Internet Initiative Japan, Aptargroup, Key Technology, Hasbro, Cree and Nvidia.

 

What are your thoughts on the role of due diligence and its impact on reducing conflict minerals in the supply chain?