The document summarizes requirements for companies related to reporting on conflict minerals originating from the Democratic Republic of Congo and surrounding countries. Key points: - The SEC rule requires publicly traded companies to report on conflict minerals like tin, tantalum, and tungsten used in their products. - Companies must conduct due diligence on their supply chains to determine if conflict minerals originate from covered countries. Additional reporting and auditing is required if they do originate from those areas. - Industry groups have developed tools and templates to help companies comply with reporting requirements and identify conflict-free smelters and refiners. Collaborating with suppliers like contract manufacturers can also help companies meet requirements.

1. Conflict Minerals
& Your Supply Chain
By Juanita Ervin

2. Content
Executive Summary...........................................................1
Background on the Conflict Minerals Regulation............. 2
Requirements, Deadlines and Impact ..............................3
Industry Response ...........................................................6
Best Practices in Managing the
Supply Chain Due Diligence Process...............................9
Teaming with Your Contract Manufacturer
for Compliance Activities................................................10
Conclusion ......................................................................11

3. On August 22, 2012 the Securities and Exchange
Commission (SEC) adopted a new rule pursuant to
Section 1502 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act that requires publicly-traded
companies in the United States to report the use of
“Conflict Minerals”.
Under the rule, Conflict Minerals are cassiterite,
columbite-tantalite, gold woframite and their derivatives
which have been limited to tantalum, tin and tungsten
(collectively known as the 3Ts), that are sourced from
mines in the Democratic Republic of the Congo (DRC) or
surrounding countries (collectively known as the
“Covered Countries”.) Currently the list in the final rule
includes Angola, Burundi, Central African Republic, the
Republic of the Congo, Rwanda, South Sudan, Tanzania,
Uganda and Zambia. Both list of Conflict Minerals and
the list of Covered Countries can be revised by the U.S.
Secretary of State, as needed.
While the reporting requirement only applies to publicly-traded
companies, it also impacts any company
supplying a company that is required to report since
publicly-traded companies are requiring their suppliers to
support their due diligence efforts.
From an electronics industry perspective, components
and commonly used materials that could contain the
3Ts include solder, tantalum capacitors, metal wires,
electrodes and contacts. Additionally, gold may be used
in communications and aerospace equipment.
The first report will be required on May 31, 2014.
For the next two years for large companies and four
years for smaller companies, reporting can include the
classifications of Conflict Minerals Free, not been found
to be DRC conflict free or undeterminable. Beginning
in 2016-18, undeterminable will not be an option and
an independent audit will be required for all companies
required to report.
This paper looks at Conflict Minerals regulations
from the perspective of a company in the electronics
manufacturing services (EMS) in terms of the processes
necessary to support disclosure requirements and the
likely support services needed over time.
COVERED COUNTRIES
Angola
Burundi
Central African Republic
The Republic of Congo
Rwanda
South Sudan
Tanzania
Zambia
Uganda
Executive Summary
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4. Background on the
Conflict Minerals Regulation
Overview
The violent conflict in the Democratic Republic of the Congo (DRC), has been partially
financed by the exploitation and trade of conflict minerals originating in the DRC. Armed
groups engaged in mining operations in the region are also believed to subject workers
and the local population to human rights abuses. The intent of the new SEC reporting
requirements was to increase public awareness of this issue and bring greater due
diligence to supply chains which may be utilizing these minerals, thereby encouraging
companies to find other sources.
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5. Requirements
Deadlines and Impact
Under Dodd-Frank Section 1502’s new rule, all SEC issuers
(both U.S. and foreign companies issuing shares through U.S.
exchanges) that manufacture or contract to manufacture
products where “Conflict Minerals are necessary to the
functionality or production” of the product are subject to the
rule.
Under the rule, an issuer first needs to determine
whether its manufactured products contain Conflict
Minerals necessary to the products’ functionality or their
production process. If no Conflict Minerals are present,
they are not required to take further action.
This applies both to original equipment
manufacturers (OEMs) and those who
“contract to manufacture”. Companies
who private label, meaning affix their
brand, marks, logo or label to a
generic product manufactured by a
third party, are not subject to the rule.
Companies who service, maintain or
repair products manufactured by a
third party are also not subject to the
rule.
are expected
to conduct a
“reasonable country
of origin inquiry”
(RCOI) i f Conflict
Minerals are
Issuers subject to the rule who have products
that incorporate Conflict Minerals either for functionality
or as part of the production process, are next required
to determine if those minerals originated in the Covered
Countries.
Issuers
found.
In doing that assessment, SEC guidelines also eliminate
products where Conflict Minerals occur as a by-product of
the production process and instances where the Conflict
Mineral is used as a catalyst but not contained in the final
product.
Issuers are expected to conduct a “reasonable country of
origin inquiry” (RCOI) if Conflict Minerals are found. The
actual steps of the RCOI are not defined.
The guidelines do state the that RCOI must be designed
to determine if any Conflict Minerals that are not from
recycled or scrap sources originated in the Covered
Countries and companies must make a good faith effort
in their assessment.
If it is determined that the Conflict Materials did not
originate in a Covered Country or came from recycled
or scrap sources, the issuer fills out a special disclosure
report known as Form SD to describe the RCOI
used to reach that determination and that is
the extent of the reporting requirement.
If the RCOI indicates that the Conflict
Materials came from a Covered
Country, or the issuer believes that
it may have come from a Covered
Country additional reporting and
ultimately, third-party auditing, is
required. In the transition period of the
rule, issuers must conduct due diligence
on the source and chain of custody of the
Conflict Materials originating from Covered
Companies. The due diligence process must be based
on a nationally or internationally recognized due diligence
framework. The guidelines mention the due diligence
guidance approved by the Organisation for Economic
Co-operation and Development (OECD) as one example
of an acceptable framework.
If the due diligence indicates the Conflict Minerals are not
from a Covered Country or have come from recycled or
scrap sources, only Form SD must be filed.
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6. Requirements
Deadlines and Impact
However, if the Conflict Minerals have been determined to have come from
a Covered Country or an indeterminate source, a Conflict Minerals Report
(CMR) must be filed as an exhibit to Form SD and typically includes:
steps
If undeterminable Conflict Minerals are
listed, the CRM must also describe the
steps being taken or planned, if any,
since the end of the period covered in
the most recent prior CRM, to mitigate
the risk that the products’ necessary
Conflict Minerals benefit armed groups.
This should include any steps which
improve the due diligence process.
Additionally, unless the Conflict Minerals are all listed as DRC Conflict
Undeterminable, the issuer must obtain an independent private sector audit
of its CRM, certify that it obtained the audit, identify the auditor and include
the audit documentation with the report. The CRM must also be posted on the
issuer’s website.
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7. Requirements
Deadlines and Impact
In terms of implementation of the rule, the following deadlines apply:
May 31, 2014
Jan-Dec 2013
May 31, 2018
May 31, 2016
First effective period for
due diligence and reporting
Larger companies can no
longer classify Conflict
Materials as undetermin-able
and the independent
private sector audit is
required
Smaller companies can
no longer classify Conflict
Materials as undetermin-able
and the independent
private sector audit is
required.
First
report due. During
the first two years for larger
companies and four years for
smaller companies (less than $75
million in public float or if unable to
determine size of float, less than
$50
million in revenue for the fiscal
year), no independent private sector
audit will be required for
undeterminable users
The SEC revised the proposed rule, in part due to concerns expressed by commenters on the overall cost of
compliance. The revised cost is estimated in the $3-4 billion range with ongoing compliance costs in the
$207-$609 million range. The full text of the final rule is available here:
http://www.sec.gov/rules/final/2012/34-67716.pdf
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8. Industry Response
In terms of the electronics industry, the best way to control the costs associated with due diligence and
reporting costs is through the use of common databases that document status at the lot code/date code level
for the bulk of material and components which contain Conflict Minerals. For companies purchasing a wide
range of materials, there is also a need for automated systems that roll up supply chain reporting.
Fortunately, industry associations and third party vendors are supporting this effort. While companies can
design their own systems there are also a number of third-party tools, either launching or already in place.
These include:
• The Electronic Industry Citizenship Coalition (EICC)
in conjunction with the GeSI has developed a number
of tools and processes to address both reporting and
auditing. Their Conflict Minerals Reporting template
is available at: http://www.conflictfreesourcing.
org/conflict-minerals-reporting-template/. The
data collected is also used to identify new smelters
and refiners that may be candidates for audits
under EICC’s Conflict Free Smelter Initiative (CFSI)
Conflict Free Smelter Program. EICCmaintains
a list of Conflict Free smelters and refiners which
is accessible with registration at http://www.
conflictfreesourcing.org/conflict-free-smelter-refiner-lists/.
• iPoint Systems has developed the iPCMP system
which allows for cascade and roll-up of the EICC-GeSI
data from an issuer’s supply chain instead
of managing individual spreadsheets to and from
those suppliers. Reports can be visible in the iPCMP
database, in EICC-GeSI format or stored in the
issuer’s Online Storage.
• SiliconExpert Technologies, a provider of electronic
componentmanagement tools, has developed a
Conflict Minerals Module which now provides the
conflict mineral status on more than 1,000 suppliers.
TheConflict Minerals Module is included for all
SiliconExpert Part Search and BOM Manager tool
subscribers providing the most up to date conflict
mineral statuses, all documents and templates
available (EICC, COC, Conflict Mineral Policy,
Responsibility Report, History, Etc.), customized
views, access to smelter &mining information and
more.
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9. Industry Response
• There are a variety of third-party software Conflict
Minerals modules designed to interface with popular
ERP systems.
• TheOrganization for Economic Co-operation and
Development (OECD) has published a document
titled, “Due DiligenceGuidance for Responsible
Supply Chains of Minerals from Conflict-Affected and
High-Risk Areas” which is available at http://www.
oecd.org/daf/inv/mne/mining.htm.While the SEC
rule allows issuers to define their own due diligence
process, this document was cited as an example of
acceptable guidelines.
• The iTSCi Programme is a joint industry mechanism
designed to address Conflict Mineral concerns in
the DRC, Rwanda and other Great Lakes Region
countries. The Programme establishes traceability
in the upstreammineral chain for 3Tminerals by
working with local governments and their field
agents, and assists companies to establish due
diligence through independent monitoring on the
ground and regular audits. The Programme supports
the practical implementation of the OECD’s Due
DiligenceGuidance for Responsible Supply Chains of
Minerals from Conflict-Affected and High-Risk Areas
as well as the UN Security Council Resolution 1952
(2010) due diligence recommendations. Members are
expected to recognize all aspects of these guidelines
and cooperate with monitoring, evaluation and audits
as required, as well as working on their own company
policies and contracts to influence the supply chain
in a positive way. Through the implementation of
the OECDGuidance, the Programme aims to aid
compliance with the US Securities and Exchange
Commission (SEC) Rule interpreting the US Dodd
Frank law, section 1502 on Conflict Minerals. The
Programme complements other initiatives, including
the Conflict–Free Smelter audit program (CFSI), the
ICGLR’s Regional
• Certification Initiative, and BGR’s Certified Trading
Chains Initiative (CTC). Additional information can be
obtained by writing itsci@itri.co.uk
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10. Industry Response
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• ThePublic-Private Alliance for Responsible Minerals Trade
(PPA) is amulti-sector and multi-stakeholder initiative
to support supply chain solutions to conflict minerals
challenges in the DRC and the Great Lakes Region
(GLR) of Central Africa. The PPA provides funding and
coordination support to organizations working within
the region to develop verifiable conflict-free supply
chains; align chain-of-custody programs and practices;
encourage responsible sourcing from the region; promote
transparency; and bolster in-region civil society and
governmental capacity. Additional information is available
at: http://www.resolv.org/site-ppa/.
• The Solutions for Hope Project was announced by
Motorola Solutions Inc. and AVX Corporation in July 2011.
The project was launched as a pilot initiative to source
conflict-free tantalum from the DRC. More information
is available at: http://solutions-network.org/site-solutionsforhope/.
• PC was active in commenting on the SEC rule and the
similar EU regulations that are in development. They have
developed both fact sheets and due diligence guides on
the SEC rule that are available here: https://www.ipc.org/
ContentPage.aspx?pageid=Conflict-Minerals.
• Major audit, tax and advisory firms are offering due
diligence and auditing-related services.
In short, there is a growing body of tools and support
infrastructure for compliance. The challenge is finding the
right mix relative to scope of work and cost objectives.
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11. Best Practices in Managing
the Supply Chain
Due Diligence Process
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The OECD publication titled “Due Diligence Guidance for Responsible
Supply Chains of Minerals from Conflict Affected and High Risk Areas:
Second Edition”1, was mentioned in the SEC rule as an example of an
acceptable due diligence framework.
The document outlines a five-step process that can be tailored based on
the minerals being monitored and each company’s position in the supply
chain. The framework elements are paraphrased here for brevity:
Step 1. Establish strong company management systems
which include:
• Communication of the Company’s Conflict Minerals policy to suppliers
and the public
• An internal management team supporting supply chain due diligence
• A system of controls that will provide traceability over the Conflict
Minerals chain of custody
• Incorporate Conflict Mineral related clauses in supplier contracts and
assist suppliers in compliance activities, when necessary
• Establish a grievancemechanismwhere any concerns about reporting
accuracy can be shared
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Step 2. Identify and assess risk in the supply chain.
Step 3. Design and implement a strategy to respond to identified risks.
• Report the findings of the supply chain risk assessment to the
company’s designated seniormanagement representative(s)
• Develop and adopt a risk management plan
• Implement the risk management plan and report agreed upon metrics to
seniormanagement
• Course correct as needed for risk mitigation or changes in
circumstances.
Step 4. Carry out independent third-party audit of supply chain due
diligence at identified points in the supply chain.
Step 5. Report on supply chain due diligence as required.

12. Teaming with Your
Contract Manufacturer
for Compliance Activities
Optimum Design
Associates utilizes an
UnipointQuality
Management
System
While the cause is just, there is no question that the regulation
increases costs in the supply chain. And, since electronics
manufacturing services (EMS) companies often purchase
material on behalf of their customers, they are also often
the link in the supply chain which has the bulk of the data
collection requirements.
For that reason, it can be valuable for issuers to utilize the
most common industry standards and collaborate with their
EMS providers in determining due diligence requirements. An
EMS provider’s ability in terms of processes and systems to
support compliance with the final rule in Dodd Frank Section
1502 should be analyzed during the supplier selection
process, if the issuer’s products are likely to trigger reporting
requirements.
Since the intent of this rule and the likely intent of any EU
rules is to ultimately purge the supply chain of materials
classified as not DRC Conflict Free, an EMS provider’s ability
to support identification of DRC Conflict Free components
and/or materials over time should be evaluated if it is likely
that internal design engineering resources will need to be
supplemented.Often tools such as Silicon Expert, which
has added a Conflict Minerals module, are already used
for product lifecycle management (PLM). In short, analyses
performed as part of a standard new product introduction
(NPI) process or in support of customer redesign efforts
can be easily expanded to support elimination of not DRC
Conflict Free materials and components.
Finally, it is also important to evaluate an EMS supplier’s
systems for configuration management and traceability. As
an example, Optimum Design Associates utilizes an Unipoint
Quality Management System which provides centralized
quality data tracking and configuration management/
traceability support. In addition to providing customized
quality data reporting, it also provides a centralized product
documentation database and required traceability data for
customers requiring detailed product history recordkeeping.
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13. Conclusion
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The SEC’s new rule pursuant to Section 1502 of Dodd Frank will add cost to
the supply chain. However, it does provide some flexibility in how companies
structure due diligence processes within their supply chains. When electronic
product manufacturing is outsourced, much of the reporting roll-up is resident at
EMS providers. Leveraged to its fullest extent, the EMS business model minimizes
fixed cost by sharing the cost of resources of production over its customer base.
The same cost reduction synergy exists in compliance processes, when issuers
adopt the more commonly accepted reporting templates or utilize systems
capable of interfacing with the internal systems suppliers use for data collection
and reporting at their level. Teaming with EMS providers to set up systems which
not only address the initial reporting requirements, but also support redesign efforts
that ultimately minimize future reporting requirements will help lower the costs of
compliance further.
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14. Learn from the Industry’s
Top Experts
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15. Citations
1. OECD (2013), OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-
Affected and High-Risk Areas: Second Edition, OECD Publishing, accessed 27 February 2014; available
at: http://dx.doi.org/10.1787/9789264185050-en.
Juanita Ervin is Optimum Design Associate’s Quality Systems Manager.
She can be reached at jervin@optimumdesign.com
About Optimum Design Associates
Optimum Design Associates (ODA) is a leading provider of award winning printed circuit board (PCB)
layout, engineering, and in-house turnkey electronics manufacturing services (EMS). Established in 1991,
ODA continues to meet the challenge of creating complex, high-density printed PCB layouts for some of
the world’s leading high-tech original equipmentmanufacturers (OEMs). ODA has offices in California and
Australia. Its California facility is ITAR-registered and certified to ISO 9001:2008.