SEC Issues New FAQs on Conflicts Minerals and Resource Extraction Payments Disclosure

May 31, 2013

Yesterday, the SEC’s Division of Corporation Finance published guidance in the form of FAQs on the specialized disclosure requirements relating to conflict minerals and resource extraction payments, two new disclosure requirements that were adopted last year pursuant to the Dodd-Frank Act. The new disclosures will be required for the first time in 2014 on new Form SD. The FAQs can be found on the SEC’s website, here (conflict minerals) and here (resource extraction payments).

The interpretive points clarified in the FAQs include the following:

Form SD Generally

  • Voluntary filers must file Form SD with any applicable specialized disclosure.
  • Failure to timely file Form SD will not cause an issuer to lose its eligibility to use short-form registration on Form S-3. (The FAQ does not mention Form F-3, used by foreign private issuers, but the reasoning would apply equally.)

Conflict Minerals

  • The conflict minerals disclosure requirements apply to a reporting company and all of its consolidated subsidiaries.
  • The packaging and container for a product are not considered to be part of the product, even if the packaging or container is necessary to preserve the usability of the product up to and following the product’s purchase. (Packaging and containers sold independently of the product are considered products in their own right.)
  • If a company manufactures a product, there is no distinction in the required analysis and disclosure between the components that the issuer manufactures itself and “generic” components that the issuer purchases for inclusion in the product.
  • Services are not products, and equipment that an issuer may manufacture or contract to manufacture to allow it to provide a service is not itself a product.
  • Tools, machines and other equipment that an issuer manufactures or contracts to manufacture for use in the manufacture of other products are not themselves products, even if the issuer later sells them.
  • Mining companies that engage only in activities customarily associated with mining, including processing and smelting, are not considered to be “manufacturing” the minerals they mine.
  • Following an IPO, an issuer may begin providing conflict minerals disclosure for the first calendar year that begins no sooner than eight months after the effective date of the IPO registration statement.

Resource Extraction Payments

  • A company that provides only services associated with exploration, extraction, processing and export of a resource will not generally be considered to be a resource extraction issuer.
  • Transportation activities are generally not covered by the rule, unless the activities are directly related to the export of the resource.
  • Penalties and fines related to resource extraction paid to government agencies are not reportable.
  • Payments may not be reported on an accrual basis; they must be presented on a cash basis for the year in which they were made.
  • If an issuer pays corporate level income tax on many different sources of income in a particular country, it need not segregate its tax payments to report the amount corresponding solely to resource extraction activities, although it may choose to do so. If the issuer presents information on an aggregate basis, it may disclose that the information includes payments made for purposes other than commercial development activities.


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