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Hollingsworth LLP Files Coalition Amici Brief in Support of D.C. Circuit Challenge to SEC Conflict Minerals Rule.

news | January 23, 2013

On January 23, 2013, Hollingsworth LLP filed an industry coalition amici brief, in support of a Petition by the U.S. Chamber of Commerce, the National Association of Manufacturers, and the Business Roundtable, challenging the SEC’s “Conflict Minerals” Rule. The Firm’s brief was filed on behalf of the American Chemistry Council, the American Coatings Association, the Can Manufacturers Institute, the Consumer Specialty Products Association, the National Retail Federation, Precision Machined Products Association, and Society of the Plastics Industry.  Under the SEC Rule, manufacturers and retailers of products containing even trace amounts of tin, tantalum, tungsten, or gold potentially obtained from the Democratic Republic of Congo are subject to extraordinary investigation and disclosure requirements.  The industry coalition amici brief explains that the SEC’s failure to fulfill its statutory duty to assess the costs and benefits of its rulemaking decisions has resulted in a final rule that imposes billions of dollars of costs on industries throughout the U.S. economy, without any showing that the imposed requirements will further Congress’s humanitarian objectives in the Congo. 
Through the use of specific industry case studies, the industry coalition amici brief demonstrates how the SEC Rule would broadly sweep in incidental, de minimis uses of the metals in such seemingly unrelated markets as house paints, food wrappers, toothpaste, and diapers, as well as packaging materials used for a broad spectrum of products marketed across the United States.  By failing to adopt a sensible de minimis exception, the SEC rule imposes wholly unreasonable and burdensome requirements on manufacturers who do not make significant use of conflict minerals in their products, but whose products may (or may not) contain trace elements of such minerals (which most often will not originate in the Congo) as a result of manufacturing processes (e.g., the use of catalysts) employed by third party suppliers of ingredient materials at one stage, or more, in long upstream supply chains.  In addition, by failing to adequately define what it means to be a “derivative” of a conflict mineral, the SEC rule arguably imposes reporting requirements for the presence of metals in forms chemically distinct from the base metals at issue in the underlying statute, thus dramatically expanding the economic scope of the SEC Rule to markets with only the most tenuous connection to mining activities in the Congo.  And by requiring retailers to report on the use of conflict minerals in products that the retailer obtains by contract with third party manufacturers, the SEC broadly swept in an entirely new sector of the economy that is not included, and was never intended to be included, in the Congressional directive.

For further information regarding the D.C. Circuit challenge to the SEC Conflict Minerals Rule, see The National Law Journal, Rocks and a Hard Place (Jan. 28, 2013).