You couldn’t find a more Pyrrhic victory. A U.S. Appeals Court has ruled that the Conflict Minerals disclosure requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act violates the First Amendment rights of manufacturing companies. The ruling, in favor of the National Association of Manufacturers, (NAM) means enterprises cannot be compelled by the Securities and Exchange Commission to certify that their products are “conflict free,” that is, that the items were produced with no components sourced from the African war zones of the Democratic Republic of Congo.
NAM was against the regulation because of its concern that it costs companies a lot of money to achieve and prove compliance. The association estimates U.S. manufacturers will have to spend much more than the $3 billion to $4 billion that the SEC estimated would cost companies to prove that their components and end-equipment were not produced with raw materials sold under conditions that benefitted the Congolese warlords.
Nobody should be celebrating. What NAM has achieved is a victory that they can only proclaim in a press statement. I am betting they will find it difficult getting many CEOs and corporate executives lining up publicly to extol the ruling. The Conflict Minerals regulation isn’t one companies have been quick to condemn. Rather, many manufacturers, including the leading electronics equipment manufacturers and component vendors, have spoken publicly about how they’ve taken steps to ensure their supply chains are scrupulously cleansed of raw minerals originating from the Congo. That is not about to change.
Furthermore, the U.S. Appeals Court ruling applies only to the United States. The court has no jurisdiction outside the United States and cannot impose the ruling on other national and regional regulatory bodies, including the European Union, which has emphatically backed and advocated positions similar to the one outlined in the Dodd-Frank legislation.
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