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Corporate Compliance Insights
Home Compliance

Conflict Minerals – Compliance Update

by James L. Ervin Jr.
October 30, 2014
in Compliance
Conflict Minerals – Compliance Update

with contributing author Tom Larned

By now, businesses (manufacturing or retail) that are engaged in the global marketplace in areas ranging from telecommunications and industrial equipment to automotive and aerospace should be familiar with the term “conflict minerals.”1,2  More importantly, these entities should be familiar with the U.S. Conflict Minerals Rules (the CMR), which were passed by the U.S. Congress, subsequently adopted by the U.S. Securities and Exchange Commission (SEC) and set forth prohibitions against the use of conflict minerals.

Challenges before the U.S. federal court system have resulted in decisions that have held that U.S. conflict minerals rules and regulations, “violate the First Amendment to the extent the statute and rule require regulated entities to report to the Commission and to state on their website that any of their product have not been found to be ‘DRC (Democratic Republic of the Congo) conflict free.’” See National Association of Manufacturers, et al. v. SEC, et al., No. 13-5252 (D.C. Cir. April 14, 2014) (hereinafter “NAM”).3

The effect of the NAM decision was that the SEC issued an Order partially staying the CMR because the “effective date for compliance . . . that would require . . . statements by issuers . . .  the Court of Appeals held would violate the First Amendment.” See Order Issuing Stay, May 2, 2014 (In the Matter of Exchange Act Rule 13p-1 and Form SD, Securities Exchange Act of 1934, Release No. 72079/May 2, 2014, File No. S7-40-10); see also 5 U.S.C. 705.  However, the Court of Appeals in the NAM case noted that there was no First Amendment objection to any other aspect of the CMR.” Id. at 17 n.8.  Therefore, compliance with the CMR is still required.

Although it would seem that life goes on regarding conflict minerals compliance, the NAM decision continues to leave a cloud of uncertainty.  This is made more so with the July 29, 2014, decision in American Meat Institute v. U.S. Department of Agriculture, No. 13-5281 (D.C. Cir. July 29, 2014).  In American Meat Institute, the U.S. Court of Appeals for the D.C. Circuit, sitting en banc, held that the country-of-origin labeling of meat products is not unconstitutionally compelled speech in violation of the First Amendment. The D.C. Circuit decision is important because it directly impacts the same court’s decision in the NAM case, since the critical issue regarding the standard of review is the same in both cases.

In American Meat Institute, the D.C. Circuit re-examined the standard of review set forth in the 1985 Supreme Court case Zauderer v. Officer of Disciplinary Counsel, 471 U.S. 626 (1985), which established that mandated disclosures do not violate the First Amendment if they are limited to purely factual and uncontroversial information and are reasonably related to the government’s interest in preventing consumer deception. The D.C. Circuit had previously limited the application of Zauderer to situations where disclosure requirements are “reasonably related to the State’s interest in preventing deception of consumers.” The D.C. Circuit in American Meat Institute held that Zauderer now extends beyond instances of deception, but to broader interpretations, which encompassed the meat-labeling disclosures at issue in the American Meat Institute case.

By the D.C. Circuit revisiting its interpretation of Zauderer, the decision in the NAM case could change. The SEC has already requested a rehearing of the NAM case. As of the date of this article, neither the courts, nor the SEC, have altered their positions. So, where does this leave companies in the global marketplace who are affected by the CMR? The answer is simple: focused on compliance.

1 See “Conflict Minerals: Compliance Considerations and Takeaways,” Corporate Compliance Insights (September 2014)

2 Conflict Minerals include tantalum, tin, gold or tungsten.  Collectively, these minerals are referred to as “3T&G” or “3TG.”

3 The Court of Appeals in the National Association of Manufacturers case noted however, there was no “First Amendment objection to any other aspect of the conflict minerals report or required disclosures.” See Id. at 17 n.8.


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James L. Ervin Jr.

James Ervin headshot 9-10-14James L. Ervin, Jr. is a Partner at Roetzel & Andress, where he focuses his practice on regulatory enforcement, white-collar criminal defense, business litigation and public law. Much of his legal work is centered on the Foreign Corrupt Practices Act, the False Claims Act, the UK Bribery Act and other anti-corruption laws both in the United States and abroad. Mr. Ervin has worked with clients to develop, train and implement policies, procedures and protocols related to corporate compliance practices and has also represented numerous clients in federal and state healthcare and fraud related matters. Mr. Ervin earned his law degree from Capital University Law School and his undergraduate degree from The University of Arizona. He can be reached at jervin@ralaw.com or 614-723-2081.

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