Conflict minerals scope assessment and compliance plan

i n f o @ a s s e n T c o m p l i a n c e . c o m w w w. a s s e n T c o m p l i a n c e . c o m T e l : 6 1 3 . 2 9 0 . 8 0 4 4

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c u s T o m s o l u T i o n s f o r c o m p l i a n c e [ r e a c H | r o H s | c p s i a | r s l | p r o p 6 5 ]

SECTION 1502CONfLICT MINErALS

STEP 1 – ScoPE ASSESSmEnT And comPliAncE PlAn

assenT compliance

jonathan hughespHone: 613.290.8044

[email protected]


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c u s T o m s o l u T i o n s f o r c o m p l i a n c y [ r e a c H | r o H s | c p s i a | r s l | p r o p 6 5 ]

agenda•AssentComplianceCorporateOverview

•BriefrecapofDodd-FrankActSection1502

•AssentComplianceinvolvementwithDodd-FrankAct

•DefiningScope

•WhatDoestheLawState?

• Implementation

•RiskMitigation

•AssentComplianceServices

•Q&A



ASSENTCOMPLIANCE

AbOuT ASSENTAssentCompliancedeliversSaaSEnvironmentalComplianceServices tocompanieswhomustcomplywithlocal,nationalandglobalenvironmentalregulations.Assentalsosupportsitssoftwaredivisionwithateamofhighlyexperienced industry consultants to provide our clients with turnkeycompliance solutions. Industry experts atTier 1 companies rankAssentComplianceamongst thetopenvironmentalcompliancesolutions intheworldandoneoftheonlyglobalsolutionproviderstoofferafullservicesolutionfromendtoend.

Our MISSIONIstohelpourclientscomplywithenvironmentalregulationsinthemostefficientandcosteffectivemannerpossible.Thisisachievedthrough SaaS automation of processes andworkingwith clientstobuildefficient internal complianceprograms thatmeetglobalcompliancerequirements.



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HOw THE ASSENT COMPLIANCE MANAgEMENT SySTEM wOrkS

inTegraTes wiTH major erp/plm

sysTems

BuilT-in crm for compliance Tasks, due diligence reporTing

and audiT Trails

modules To comply wiTH all major environmenTal

regulaTions

pulls Bill of maTerial (Bom) inTo a cenTralized compliance

daTa Base or operaTes as a sTand-alone sysTem.

Build ipc 1752-a forms. imporT/exporT via xml

allows inTernal sTaff To make engineering override

assessmenTs

communicaTes wiTH supply cHain in Bi-direcTional fasHion

To procure environmenTal informaTion from suppliers

Homogenize proprieTary supplier doc formaTs in xml

acTs as a reposiTory for any compliance relaTed maTerial



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ComplianceAssessmentServicesForEnvironmentalRegulations

InternalStandardOperatingProcedureConsulting

CompliancePlanDevelopment

ComplianceStrategyConsulting

ConflictMineralCompliance

ITSystemIntegration

CONSuLTINg SErvICES



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OTTAwA, ONTArIO CAN-AdA (HQ)

NEw yOrk, NEw yOrk

TAIPEI, TAIwAN

MuNICH, gErMANyLONdON, uk

kENyA(CONfLICT MINErALS)

bANgALOrE, INdIA

Our OffICES



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SECTION 1502 – dOdd-frANk wALL STrEET rEfOrM ANd CONSuMEr PrOTECTION ACTTHe Basics•The Conflict Minerals (3TGs)

•Tin(CassiteriteOre)

•Tungsten(Wolframite)

•Tantalum(ColtanOre)

•Gold

•The Countries

•DemocraticRepublicofCongo

•CentralAfricaRepublic

• Sudan

•Zambia

•Angola

•CongoRepublic

•Tanzania

•Burundi

•Rwanda

•Uganda



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•Conflict Minerals Definition:

•Minedinconditionsofarmedconflictandabusesofhumanrights

Asper17CFRParts229and249“TheConflictMinerals”Rule:

“It is the sense of the Congress that the exploitation and trade of conflict minerals originat-ing in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual – and gender-based violence, and contributing to an emergency humanitarian situ-ation therein”

•This situation attracts Media attention

•ChildSoldiers

• Sexualassaultonamassscale

• Intimidationandabuseoflocalpopulace

•Armedcontrolofmines,tradingroutes,andotherstrategicareas

More Media attention = More Consumer attention



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SECTION 1502 – dOdd-frANk wALL STrEET rEfOrM ANd CONSuMEr PrOTECTION ACTscope•CompaniesthatregisterwiththeSEC

• 10K(US)

• 20F(Foreign)

• 40F(Canadian)

LegalWording:Issuers that File Reports Under Sections 13(a) and 15(d) of the Exchange Act

•ConflictMinerals“necessarytothefunctionality or production”ofitsproductsmanufactured(orcontractedtobemanufactured)

• SupplierstoimpactedSECfilingcompaniesareaffectedbytheprocess,eveniftheyarenotanSECfilingcompanythemselves



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PrINCIPAL rEQuIrEMENTS (AS PArT Of ANNuAL rEPOrTINg TO SEC) – fINAL ruLES•ReasonableCountryofOriginInquiry

•Tracebackofall3TGstocountryoforigin

•Determineif3TGsarefromscraporrecycledsources

POSSIbLE SCENArIOS ANd rEQuIrEMENTS STEMMINg frOM THE rCOI:Scenario 1:• IftheIssuerknows all3TGsdidnotoriginateinDRCCountriesorarefromscraporrecycled

sources

OR

• IftheIssuer has no reason to believe thatthe3TGs may have originatedinthecoveredcoun-triesand may not be fromscraporrecycledsources.



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Requirements:•DisclosureoftheRCOIonIssuerInternetwebsite

• FileFormSDwiththeSECaspartofannualfilings:

» Disclosethedetermination

» Disclosetheprocess

» DisclosetheinternetaddressofthesitewiththeRCOIInformation

•Maintenanceofreviewablebusinessrecordstosupportareasonablecountryoforiginconclusionisnotrequiredbutitismentionedinthefinalrulesthatmaintenanceofappropriaterecordsmaybeusefulindemonstratingcompliancewiththefinalrule.

AdditionalNotefromtheFinalRules:Thesereviewablerecordsmayberequiredbyanynation-allyorinternationallyrecognizedduediligenceframeworkappliedbyanissuer.



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PrINCIPAL rEQuIrEMENTS (AS PArT Of ANNuAL rEPOrTINg TO SEC) – fINAL ruLES CONT’dScenario 2:• IftheIssuerknows or has reason to believethatthe3TGsmay haveoriginatedinthecoveredcountries.

OR

• IftheIssuerknows or has reason to believethatthe3TGsmay notbefromscraporrecycledsources.

Requirements:•Alltheabovetasksplus

•CreateConflictMineralsReport

• FiledasexhibittotheFormSD

•MakereportavailableontheInternetwebsite

•Same as proposed –Alloftheabovemustbeauditedbya3rdparty

• 10K/20FauditedasapartofoverallSECfiling

• Independent Private Sector Audit -Required for theConflictMineralsReport (exceptionssurroundingthe“UndeterminableStatus”exist)



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SECTION 1502 – dOdd-frANk wALL STrEET rEfOrM ANd CONSuMEr PrOTECTION ACTassenT compliance’s involvemenT wiTH dodd-frank secTion 1502•MeetingwithSEC

•OverthecourseofMondayDecember12thandTuesdayDecember13th,AssentCompliancemetseparatelywithCommissionerParedes,CommissionerWalterandCommissionerAguilarfor1houreachtodiscussthefollowingitemsinrespecttoDoddFrankSection1502

» NAMandTulaneReports

» Compliancecosts

» Practicalcomplianceactivities

» Impactonindustry

» Impactonsupplychains

» Feedbackonproposedrules



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•OnWednesdayDecember14th,AssentComplianceparticipatedinConflictMineraldiscussionpanelwiththefollowingpanelists:

•GE

•AMD

•BrookingsInstitute

•RIM

•ClaiganEnvironmental

•KEMET

•Thepanel discussed various issues surroundingConflictMinerals andfielded questions fromtheaudience(whichwascomprisedofcongressstaff,journalists,industrygroupsandbusinessrepresentatives)

•Assent Compliance is included 4 times in the Final Rules from the SEC based on our input at the meeting and on a separate submitted letter we provided to the SEC.



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defining scopeWhenlookingatproductsandsuppliersinscope,weneedtohave2separatequestions:

1. Whatdoesthelawstate?

2. Howdoesacompanyimplementthelegalrulesinlinewithitsbusinessprocesses?

Thefirstquestionwillprovideusthecriteria.ThesecondwillprovideuswithamethodologytodeterminewhatsuppliersmeetthosecriteriaforinclusionintheRCOI.

Thisisacriticalfirststepsinceanyomissionsatthisstagewilleffectivelynegateanyfurthereffortstowardscompliance.



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1. wHAT dOES THE LAw STATE?TheConflictMineralsprovisiondoesnotprovidedefinitionsonwhichofyoursuppliersarespe-cificallyinandoutofscope;itstateswhichcompaniesandproductsareinandoutofscope.

Tomakethisdetermination,weshouldfirstlookatwhattheregulationstates:

“..conflict minerals that are necessary to the functionality or production of a product manufactured or contracted to be manufactured.”

Thereareacoupleofitemstoaddresshere:

A. “necessary to the functionality”-TheSECprovides3criteriaforguidance(pg.22-FinalRules):

(a) whethertheconflictmineralisintentionallyaddedtotheproductoranycompo-nentoftheproductandisnotanaturally-occurringby-product

(b) whethertheconflictmineralisnecessarytotheproduct’sgenerallyexpectedfunc-tion,use,orpurpose

(c) ifconflictmineralisincorporatedforpurposesofornamentation,decorationorembellishment,whethertheprimarypurposeoftheproductisornamentationordecoration.



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B. “necessary to the production”.TheSECprovides3criteriaforguidance(pg.22–FinalRules):

(a) whethertheconflictmineralisintentionallyincludedintheproduct’sproductionprocess,otherthanifitisincludedinatool,machine,orequipmentusedtopro-ducetheproduct(suchascomputersorpowerlines)

(b) whethertheconflictmineralisincludedintheproduct

(c) whethertheconflictmineralisnecessarytoproducetheproduct

C. “manufactured or contracted to be manufactured”.HereisthetextfromtheSECFinalRulestobeusedasguidanceinmakingthisdetermination:

(a) “…thedegreeofinfluenceitexercisesoverthematerials,parts,ingredients,orcomponentstobeincludedinanyproductthatcontainsconflictmineralsortheirderivatives.”



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1. wHAT dOES THE LAw STATE? (CONT)generic producT exempTionGenericProductsExemption(andotherconsiderationsaround“contracttomanufacture”):

•Anissuerwillnotbeconsideredto“contracttomanufacture”aproduct(andthereforewould be outside the scope of the Conflict Minerals Regulation)ifitdoesnomorethantakethefol-lowingactions:

1. The issuer specifies or negotiates contractual terms with a manufacturer that do not directly relate to the manufacturing of the product such as training or technical support, price, insurance indemnity, intellectual property rights, dispute resolution, or other like terms or conditions concerning the product, unless the issuer specifies or negotiates taking these ac-tions so as to exercise a degree of influence over the manufacturing of the product that is practically equivalent to contracting on terms that directly relate to the manufacturing of the product; or

2. The issuer affixes its brand, marks, logo, or label to a generic product manufactured by a third party; or

3. The issuer services, maintains, or repairs a product manufactured by a third party.



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1. wHAT dOES THE LAw STATE? (CONT)caTalysTsWithinthefinalrules,theSECstates:

• “We do not consider a conflict mineral “necessary to the production” of a product if the conflict mineral is used as a catalyst, or in a similar manner in another process, that is necessary to pro-duce the product but is not contained in that product.”(P.22-23)

• “However, we note that there are products where a catalyst is used and is not completely washed away. In those situations, the product contains a necessary conflict mineral that is necessary to its production and is subject to the final rule.”(P.85-86)

Usingtheabovecriteria,andaspartofthefirststepinaScopeAssessment,companieswouldneedtoexaminealloftheirdifferentproductsandmanufacturingprocessestodeterminewhichprod-uctsmeetthesecriteria.

Therewillbesituationswhereaproduct’s3TGstatusmaybeunknown(IE.Youdoesnotknowwhether ornot theproduct contains3TGs). In these instances, an initial “gating”process (IE.Askingthesupplierif3TGsarepresent)wouldbeaninitialstepprecedingorinconjunctionwithaReasonableCountryofOriginInquiry.Wewilltouchonthislaterinthepresentation.



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2. IMPLEMENTINg THE LEgAL ruLES IN LINE wITH buSINESS PrOCESSESNowthatwehaveourlistofproductsinscope,thenextquestionisdeterminingwhosuppliesyouwiththesematerials.Whenlookingatthisdetermination,weneedtoexaminesomeofthefollowingfactors:

A. Which of your suppliers provide the 3TG in the final product?(a) Insomecases,youmayknowthataproductcontainsa3TGbutmaynotknowwhich

supplierormaterialprovidesorcontainsthe3TG.Inthosecases,aninitialgatingprocessshouldbeimplantedforsuppliersofthatproduct.

B. Which suppliers are active versus inactive?(a) Somesuppliersinyourdatabases(especiallywhenlookingatApprovedVendorLists)may

notbecurrent.Youwillneedtocompriseaformulaforincludingsuppliers(Ex:Supplierswhohavenotbeenusedfor1yearareconsideredinactive)

C. Data consolidation(a) WithmultipleERPs/PLMsandmultiplebusinessunits,youwillrunintocaseswherethe

samesuppliersiscalleddifferentnames(Ex:Acme,AcmeCorp,AcmeCorporation)



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D. Can all of this information be pulled from your ERP/PLM systems?(a) Oncethecriteriaforsuppliersinscopehasbeendetermined,youneedtomakesurethatit

isfeasibletousethiscriteriatopulltheinfofromyourERP/PLM

*In relation to the supplier scope determination process, we need to make sure we think about the data quality as the contacts in the database may either be out of date or not the right person to contact for Conflict Minerals information.



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2. IMPLEMENTINg THE LEgAL ruLES IN LINE wITH buSINESS PrOCESSEScreaTing risk profilesOnceyoudefinedsuppliers inscope,yournext stepshouldbe thedesignationofRiskProfiles.TheseRiskprofilesshouldprovideaninternalindicationoftheoverallriskthatsupplierposestoyourcompanywithrespecttoConflictMinerals.Thehighertherisklevel,thegreaterthechancethatthesupplieruses3TGsfromoneofthecoveredcountries.

When initially creating a risk profile you may choose to consider some of the following criteria:

•Materialsyoupurchaseformthesupplier

•Materialtype

•Volume

• Sizeofsupplier

•Whattiersupplieristhis(1,2,direct/indirect,etc)

•AretheyanSECissuer?

• Previousexperiencewithrespecttomaterialdisclosures

•Dotheyprovidefullmaterialdeclarations?



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ThisinitialRiskprofilewillhelpguideyourReasonableCountryofOriginInquiryandSourceMappingprocesses.A supplier’s riskprofilehowever shouldchangeovertimebasedon their re-sponses.Typically,youshouldbelookingatsomeofthefollowingcorporateanswersfromyoursuppliersinordertodeterminewhetherornottheirRiskprofileshouldchange:

•DoesthesupplierhaveaDRCConflictSourcingpolicyinplace?

•Havetheysurveyedtheirsuppliers?

•Dotheyaudittheirsuppliers?

•Howpromptwastheresponse?

•DotheyshowanadequateunderstandingoftheConflictMineralsprovision?

•DotheyhaveaConflictMineralsComplianceplaninplace?

AsaSupplier’sRiskprofilechangesovertime,soshouldyourapproachtogathering,analysingandauditingtheirConflictMineraldeclarations.



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2. IMPLEMENTINg THE LEgAL ruLES IN LINE wITH buSINESS PrOCESSESesTaBlisHing a risk managemenT commiTTeeAspartofyouroverallRiskmitigationprocess,notonlyshouldyouestablishRiskprofilesforyoursuppliersbutaseparateRiskManagementCommitteeshouldbecreated.

ThisRiskManagementCommitteeactsasadistinctbodywithinyourConflictMineralsComplianceprocedures.ThisbodydealswithhighrisksuppliersorothercompliancerisksuncoveredduringtheAssessment,RCOIandDueDiligencestages.

DependingonthesizeofyourcompanythelevelofscopeundertheConflictMineralsProvision,thiscommitteecanrangeinsizefrom3-9people.Thiscommitteeshouldbemadeupofinternal/externalresourceswithexpertiseinsomeofthefollowingareas:

• ProductMaterialcomposition

•CompanySupplyChain

• Legal

• Finance

•ConflictMineralsProvision



ASSENTCOMPLIANCE

Thiscommitteewillbe taskedwithmaking somedecisionswith respect to thecorporatedirec-tionandrisksyourcorporationwilltakewithrespecttoConflictMineralscompliance.Thiscaninclude,butisnotlimitedto:

•CorporateConflictMineralsdisclosure

• SubmissionforchangeofSuppliers

• Submissionforproductredesign

•Acceptanceofinsufficientinformation

Establishingastrong,knowledgeableRiskCommitteewillpaydividendsdowntheroadwhenyoucomeacrossdifficultsituationsinyourComplianceprocess.



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2. IMPLEMENTINg THE LEgAL ruLES IN LINE wITH buSINESS PrOCESSEScommon piTfalls• Internal Communications

•Thisinvolvesvirtuallyeverysingledivision–communicateyourintentionsearlyandoften

•Retrieving and rolling up the data

•Dependingonthesizeofyourcompany,andthescopeyoufallunder,thiscanbeanenor-mouseffort

•MultipleBusinessunitsandERP/PLM’smustbecoordinatedforreporting

•Scope

• Justbecauseyouaren’tinscope,doesn’tmeanyouwon’tgetaskedquestions

•Public Disclosure

• Everythingneedstobedisclosedonyourwebsite,includingyourmethodology.

•Thestepsyouaretakingnowwillbetransparenttoyourshareholdersandyourconsumersdowntheroad



ASSENTCOMPLIANCE

HOw ASSENT CAN HELPAssent Compliance offers turnkey Conflict Mineral Compliance services including ConflictMineralsScopeAssessments, ConflictMineralsReasonableCountryofOriginInquiry, ConflictMineralsReports,and ConflictMineralsSoftware forreviewablebusinessrecords.

AssentComplianceperformsfullConflictMineralsScopeassessmentsforourcustomersinordertomakethefollowingdeterminations:

1. ProductsinscopeoftheConflictMineralprovision

2. Corporateobligations

3. ConflictMineralsCompliancePlan

OurConflictMineralsScopeAssessmenthelpscompaniesmeetthefollowingOECDguidelinesforDueDiligenceinConflictMineralsupplychains:

• EstablishStrongCompanyManagementSystems

• IdentifyandAssessRiskintheSupplyChain

•DesignandImplementaStrategytoRespondtoIdentifiedRisks



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QuESTIONS?Shouldyouhaveanyquestionspleasefeelfreetoaskthematthistime.

Date post:	18-Jan-2015
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Conflict minerals scope assessment and compliance plan

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