United States: SEC Staff Provides Guidance On Conflict Mineral And Resource Extraction Disclosure Requirements

On May 30, 2013, the staff (the "Staff") of the U.S. Securities and Exchange Commission (the "SEC") published Frequently Asked Questions ("FAQs") regarding certain disclosures required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act").1 The new FAQs provide important guidance to issuers regarding disclosures they may be required to make in connection with products containing conflict minerals and certain payments made by resource extraction issuers.


Title XV of the Dodd-Frank Act, entitled "Miscellaneous Provisions," contains these "specialized corporate disclosure" provisions, which include:

  • Conflict Minerals. Section 1502 of the Dodd-Frank Act requires issuers to disclose annually whether any "conflict minerals" that are "necessary to the functionality or production" of a product of the issuer originated in the Democratic Republic of the Congo or an adjoining country and, if so, to provide a report describing, among other matters, the measures taken to exercise due diligence on the source and chain of custody of those minerals. This disclosure must include an independent private sector audit of the report that is certified by the issuer.
  • Resource Extraction Payments. Section 1504 of the Dodd-Frank Act requires issuers engaged in the commercial development of oil, natural gas, or minerals to disclose, in an annual report, certain payments made to the United States or a foreign government.

In August 2012, the SEC adopted final rules establishing the process by which issuers provide the disclosures required by the specialized corporate disclosure provisions.2 Pursuant to these rules, issuers are required to provide such disclosures using the newly promulgated Form SD. Disclosures made pursuant to the Conflict Minerals Rule are included under Item 1.01 of Form SD, while disclosures under the Resource Extraction Rule are included under Item 2.01 of Form SD.

Since the adoption of the new rules, issuers have raised a variety of questions with the Staff regarding the scope of the specialized corporate disclosure requirements. In the FAQs, the Staff has attempted to respond to several of the most common inquiries.


The Conflict Minerals FAQs provide guidance regarding the disclosure requirements under the Conflict Minerals Rule, including:

  • Types of Issuers Covered. The Conflict Minerals Rule applies to all issuers that file reports with the SEC under Exchange Act Sections 13(a) or 15(d), whether or not the issuer is required to file such reports (thereby including so-called "voluntary files"). Registered investment companies that are required to file reports pursuant to Rule 30d-1 under the Investment Company Act are not subject to the Conflict Minerals Rule.
  • Mining Activities Do Not Trigger Disclosure. Issuers that only engage in activities customarily associated with mining (including gold mining of lower grade ore) are not considered to be "manufacturing" those minerals and are not required to make disclosures under Item 1.01 of Form SD.
  • Consolidated Subsidiaries Covered. Issuers must determine the origin of conflict minerals, and make any required disclosures regarding such minerals, for themselves and all consolidated subsidiaries.
  • Etching a Logo or Identifier Not Considered Contracting to Manufacture. In the commentary to the Conflict Minerals Rule adopting release, the SEC noted that an issuer is not considered to be "contracting to manufacture" a generic product if its actions involve no more than "affixing its brand, marks, logo, or label to a generic product manufactured by a third party." In the FAQs, the Staff indicated that etching or otherwise marking a generic product, manufactured by a third party, with a logo, serial number, or other identifier is not considered to be "contracting to manufacture."
  • Generic Components Require Inquiry. Issuers are required to conduct a reasonable country of origin inquiry with respect to conflict minerals included in generic components included in products they manufacture or contract to manufacture. There is no distinction between the components of a product that an issuer directly manufactures or contracts to manufacture and the "generic" components of a product the issuer purchases to include in a product.
  • Packaging Not Part of Products. The packaging or container sold with a product is not considered to be part of the product for purposes of the Conflict Minerals Rule. This is true even if a product's package or container is necessary to preserve the usability of the product up to and following the product's purchase. If, however, an issuer manufactures and sells packaging or containers independent of the product, the packaging or containers, in that circumstance, would be considered a product.
  • Equipment Used to Provide Services Not Considered Products. The Staff indicated that it "would not object if issuers did not file reports . . . regarding the conflict minerals in the equipment that they manufacture or contract to have manufactured if that equipment is used for the service provided by the issuer and the equipment is retained by the service provider, is required to be returned to the service provider, or is intended to be abandoned by the customer following the terms of the service." The Staff further indicated that it does not consider equipment used to provide services to be products under the Conflict Minerals Rule.
  • Tools, Machines, and Equipment Not Considered Products. An issuer's tools, machines, or other equipment that it manufactures or contracts to have manufactured are not considered "products" of that issuer. Even if such tools, machines or other equipment are later sold by the issuer, the Staff will not view the items' entry into the stream of commerce as transforming them into products of the issuer.
  • Form S-3 Eligibility. The failure by an issuer to timely file Form SD for disclosures required under the Conflict Minerals Rule does not impact an issuer's eligibility to file a registration statement on Form S-3.


The Resource Extraction FAQs also provide useful guidance on several topics related to disclosure requirements under the Resource Extraction Rule, including:

  • Subsidiaries and Controlled Companies. Payments made to governments by the issuer, a subsidiary of the issuer, or an entity under the control of the issuer must be disclosed by the issuer. A reporting issuer that is not engaged in commercial development activities itself but which has a subsidiary or entity under its control that engages in those activities would be considered a resource extraction issuer and would be subject to the resource extraction disclosure requirements.
  • Service Providers Are Not Resource Extraction Issuers. Companies providing only services associated with resource exploration, extraction, processing, and export generally would not be considered to be "resource extraction issuers." By way of example, the Staff noted that it does not believe companies that provide hardware and logistics to help companies explore for or extract resources would be considered to be exploring for or extracting the resources even though their services are being used to explore or extract. Similarly, the Staff stated that it does not believe a company engaged by an operator to provide hydraulic fracturing services or drilling services for the operator, thus enabling the operator to extract resources, would be considered to be a resource extraction issuer. If, however, a service provider makes a payment on behalf of a resource extraction issuer that falls within the definition of "payment" under the Resource Extraction Rule, the resource extraction issuer must disclose such payments.
  • "Mineral" Definition. For purposes of the Resource Extraction Rule, disclosure is required with respect to "any material commonly understood to be a mineral, which would include any material for which disclosure would be required under Industry Guide 7, 'Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations,' notwithstanding any test of materiality used for purposes of Guide 7."
  • Transportation Activities. If an issuer transports resources across international borders and has an ownership interest in such resources, the Staff indicated that it would consider the issuer to be a resource extraction issuer. The Staff also indicated, however, that it would not consider an issuer to be a resource extraction issuer if it merely transported resources in which it did not have an ownership interest across international borders.
  • Cash Basis Reporting. Payments required to be disclosed under the Resource Extraction Rule should be presented on an unaudited, cash basis for the year in which the payments are made.
  • No Requirement to Segregate Taxable Income. If a resource extraction issuer pays taxes on multiple sources of income in a particular country and is required to disclose such tax payments under the Resource Extraction Rule, the issuer may either (1) elect to segregate income from exploration, extraction, processing, and export from income earned on other business activities, and disclose only income taxes paid solely on the income generated by the commercial development activities or (2) report the aggregate tax payment and disclose that the reported payment information includes payments made for purposes other than commercial development activities.
  • Form S-3 Eligibility. The failure by an issuer to timely file Form SD for disclosures required under the Resource Extraction Rule does not impact an issuer's eligibility to file a registration statement on Form S-3.


As a reminder, the new reporting requirements under the Conflict Minerals Rule are now in effect for the calendar year ending December 31, 2013, and any required disclosures must be included in a report on Form SD filed by May 31, 2014. Disclosures required under the Resource Extraction Rule must be included in a report on Form SD filed within 150 days after the conclusion of any fiscal year ending after September 30, 2013. Issuers who have not already done so should begin to assess their compliance with, and implement appropriate disclosure controls and procedures regarding, these new disclosure requirements.


1. See Dodd-Frank Wall Street Reform and Consumer Protection Act Frequently Asked Questions: Conflict Minerals (May 30, 2013), available at http://www.sec.gov/divisions/corpfin/guidance/conflictminerals-faq.htm (the "Conflict Minerals FAQs"); Dodd-Frank Wall Street Reform and Consumer Protection Act Frequently Asked Questions: Disclosure of Payments by Resource Extraction Issuers (May 30, 2013), available at http://www.sec.gov/divisions/corpfin/guidance/resourceextraction-faq.htm (the "Resource Extraction FAQs").

2 See Conflict Minerals, Exchange Act Release No. 34-67716 (Aug. 22, 2012); Disclosure of Payments by Resource Extraction Issuers, Exchange Act Release No. 34-67717 (Aug. 22, 2012); see also 17 C.F.R. 13p-1 (the "Conflict Minerals Rule"); 17 C.F.R. 240.13q-1 (the "Resource Extraction Rule").

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions