Can We Make Them Obey? U.S. Reporting Companies, Their Foreign Suppliers, and the Conflict Minerals Disclosure Requirements of Dodd-Frank

Harline, McKay S. | January 1, 2015

§ 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection

Act targets human rights abuses abroad, rather than financial reforms at

home. It requires certain reporting companies to make disclosures about the

conflict minerals necessary in the production or function of their products. After

repeated delays, the SEC finalized a conflict minerals disclosure rule, outlining

the process companies must follow to satisfy their disclosure obligations. This

comment discusses that process, as well as the costs imposed on the companies

required to make conflict minerals disclosures. It also highlights an important

effect of those costs: reporting companies will seek to improve their supply

chains and pass some of the mandated due diligence burden to other supply

chain businesses through contracts. But enforcement of these contracts, breaches,

and litigation in foreign jurisdictions will all increase the total costs of the

conflict minerals disclosure regime, including on foreign suppliers themselves.

This comment concludes that until the international community collectively

commits to end the conflict minerals trade, § 1502 and the SEC conflict minerals

rule will not effectively achieve their intended benefits. The costs of compliance

are simply too high.