As the clock ticks on a May 31 deadline to submit conflict mineral reports to the federal government, some in the plastics industry are wondering how the new law aimed at addressing a humanitarian crisis in Africa applies to them.
The Securities and Exchange Commission is requiring publicly-traded companies to determine whether their products contain gold, tantalum, tin or tungsten from mines controlled by armed groups in the Democratic Republic of Congo region.
While the so-called 3TG materials aren't mainstays of the plastics industry, privately-held manufacturers are being asked to comply with the disclosure requirements by their customers in the electronics, automotive, aerospace, medical device and appliance industries.
Private companies aren't subject to the new rule but they get picked up indirectly, said Michael Littenberg, an attorney with Schulte Roth & Zabel LLP in New York. He specializes in SEC rules and regulations and works with companies on human rights initiatives.
"If you supply to a public company, as a commercial matter you end up doing a lot of the same work around the traceability of your supply chain," Littenberg said in a telephone interview.
About 6,000 companies and as many as 280,000 of their suppliers are scrambling to satisfy the 2012 provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The SEC has stated that it expects the cost to comply with the new rule to reach $3 billion to $4 billion for initial adherence and $207 million to $609 million in following years. However, Littenberg said for the most part the plastics industry faces more of a time investment.
"If you're building a car, think of all the components you have and how many people they come from," he said. "There are some large companies that have a thousand or more vendors. Plastics companies tend to buy from a discreet number of vendors so that takes some of the bite out of this for their industry."
Still, there is work to be done.
Tom Wood, vice president of sales for ES Plastic Products LLC, in Waterford, Wis., said he received dozens of requests to participate in supply chain audits. He wishes he and his counterparts at other companies could simply check a box that says "not applicable." But that's not acceptable for the conflict mineral reports due in four months and then annually every May.
"We're a plastic injection molder with no precious metal components in the parts we produce," Wood said in a telephone interview. "Like many of our competitors, we process general purpose resin. But we sell to recognizable Fortune 500 companies so we have to comply with the request."
