American Coatings Association

ACA is working with other affected industry associations to draft an amicus brief in support of an October 2012 lawsuit filed by the National Association of Manufacturers (NAM), U.S. Chamber of Commerce, and the Business Roundtable (BRT) against the U.S. Securities and Exchange Commission (SEC). That suit asks that the SEC’s Conflict Minerals Rule be set aside. The amicus brief will be submitted on Jan. 23, 2013; the SEC will respond to the merits brief on March 1, 2013.

On Aug. 22, 2012, the U.S. Securities and Exchange Commission (SEC) voted 3-2 to adopt the Conflict Minerals Rule, pursuant to section 1502 of the Dodd Frank Wall Street Reform and Consumer Act. The rule requires that publicly traded companies disclose certain conflict minerals or derivatives used in their production processes. The ‘conflict minerals’ include tin, tungsten, tantalum and gold, which are derived from the Democratic Republic of the Congo (DRC) and surrounding countries.

The U.S. government has determined that these conflict minerals are financing the conflict in the DRC and surrounding countries. In an effort to deter the human rights abuses and violence in these countries, the SEC rule requires publicly traded companies that manufacture products for which conflict minerals are necessary to the functionality or production of the product, to report whether its products were produced from sources that benefit armed groups.

On Jan. 16, 2013, the industry coalition filed their opening brief on the merits of the case. The coalition introduced their argument, stating: “The Securities and Exchange Commission’s (SEC’s) “conflict minerals” rule may have been motivated by good intentions — to reduce funding to armed groups and help end the terrible conflict in the Democratic Republic of the Congo (DRC). As the dissenting Commissioners pointed out, however, good intentions are no substitute for rigorous analysis, and the Commission’s analysis here was woefully inadequate.”

The industry associations argue that the SEC failed to meet its statutory obligation to consider the effects of the rule by failing to determine if the rule would benefit the DRC, and by underestimating the rule’s costs. Further, and of particular importance to ACA member companies, by refusing to create a de minimis exception, the SEC expanded the scope of the rule adding significant burdens and costs to U.S. industry without demonstrating any benefit for the DRC or the Congolese people.

The industry coalition also challenged provisions of the rule requiring companies to undertake an onerous “reasonable country of origin inquiry,” expanding the rule’s scope to non-manufacturers, and providing for an irrational transition period.  Lastly, the industry associations assert that the rule violates the First Amendment by requiring companies to report on their website and to the SEC if any of their products are “not DRC conflict free.” The industry coalition said requiring this disclosure is “as unfounded as it is politically charged.”

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