1, 2011) (``CTIA''); Earthworks; Enough Project I; International
Corporate Accountability Roundtable, Enough Project, and Global
Witness (Sep. 23, 2011) (``ICAR et al. I''); Metalsmiths; NAM I;
NEI; NMA II; RILA-CERC; SIF I; TriQuint I; and WGC II.
    \129\ See letters from AAEI, AngloGold, BCE Inc. (Oct. 31, 2011)
(``BCE''), Canadian Wireless Telecommunications Association (Oct.
28, 2011) (``CWTA''), CTIA, NAM I, NCTA, NMA II, RILA-CERC, and WGC
II.
---------------------------------------------------------------------------

    Some commentators stated that the final rule should define the term
inclusively or broadly so as to include all steps in the supply chain,
from mining to manufacturing the product, because otherwise it would
become exponentially more difficult for manufacturing issuers
downstream in the supply chain to comply with the final rule.\130\ One
commentator indicated that the term should include all steps from
mining, refining, and production to the importing, exporting, or sale
of ingredients, materials, and/or processes.\131\ A few commentators
indicated that the final rule should provide a definition consistent
with the U.S. Controlled Substances Act, which includes the production,
preparation, assembling, propagation, combination, compounding, or
processing of a drug or other substance, either directly or indirectly
or by extraction from substances of natural origin.\132\ One of these
commentators stated that such a consistent definition would include the
``production, preparation, assembling, combination, compounding, or
processing of ingredients, materials, and/or processes such that the
final product has a name, character, and use, distinct from the
original ingredients, materials, and/or processes.'' \133\ One
commentator asserted that the definition should include any entity
``involved in the process of changing a product * * * from one form to
another.'' \134\ One commentator suggested that the definition ``should
be tailored only to include OEM's and those who design and specify
bills of materials for products with control over the procurement or
fabrication of the same products' bill of materials and specification
of the constituent materials of the components.'' \135\ One commentator
urged us to provide clear guidance indicating that real estate
development does not constitute manufacturing.\136\
---------------------------------------------------------------------------

    \130\ See letters from Columban Center et al., Metalsmiths, and
TriQuint I.
    \131\ See letter from Earthworks.
    \132\ See letters from Enough Project I and SIF I.
    \133\ See letter from Enough Project I (citing to its earlier
letter submitted Sep. 24, 2010 on the Pre-Proposing Release Web
site).
    \134\ See letter from Jeffrey Trott (Jan. 31, 2011) (``Trott'').
    \135\ See letter from Retail Industry Leaders Association (Nov.
1, 2011) (``RILA'').
    \136\ See letter from National Association of Real Estate
Investment Trusts (Nov. 23, 2011) (``NAREIT'').
---------------------------------------------------------------------------

ii. ``Contract to Manufacture''
    Not all commentators agreed on whether the final rule should
include an issuer that contracts to manufacture a product. However,
many commentators that agreed that the final rule should include an
issuer that contracts to manufacture a product, or did not agree but
argued in the alternative, recommended that an issuer should be
required to have some amount of control or influence over the
manufacturing process before the final rule considers that issuer to be
contracting to manufacture a product.\137\ A number of commentators
suggested the level of control necessary to be considered contracting
to manufacture a product under the final rule. In this regard, some
commentators suggested that only an issuer with direct, close, active,
and/or substantial involvement or control in the sourcing of materials,
parts, ingredients, or components to be included in its products or in
the manufacturing of those products should meet the minimum control
threshold necessary to be considered contracting to manufacture a
product.\138\ One commentator recommended that an issuer should be
considered to be contracting to manufacture a product only if it
exercises ``a sufficient level of influence, involvement or control
over the process to be able to control, in a meaningful manner, the use
of conflict minerals, or to evaluate and influence the use of conflict
minerals.''\139\ Some commentators asserted that the minimum control
threshold should be met only if the issuer explicitly specifies the
inclusion of conflict minerals in the product.\140\ Another commentator
advised that the contracting activities that should trigger conflict
minerals reporting should include designing the product, controlling
the approved materials or vendor lists for the product, and including
the issuer's name on the product.\141\
---------------------------------------------------------------------------

    \137\ See, e.g., letters from AdvaMed I, AT&T Inc. (Mar. 9,
2011) (``AT&T''), Chamber I, Cleary Gottlieb, Consumer Electronics
Retailers Coalition (Nov. 1, 2011) (``CERC''), Industry Group
Coalition I, IPC I, IPC II, JVC et al. II, NAM I, NCTA, Niotan I,
NMA II, NRF I, NRF II, PCP, RILA, Roundtable, SEMI, TIAA-CREF, and
TriQuint I.
    \138\ See letters from AT&T, CERC, Corporate Secretaries I,
CTIA, JVC et al. II, NCTA, NRF I, RILA, and Verizon.
    \139\ See letter from ABA.
    \140\ See letters from NAM I and SEMI.
    \141\ See letter from TriQuint I.
---------------------------------------------------------------------------

    Some of these commentators, as well as others, asserted that an
issuer should not be considered to meet the control threshold to the
extent that the product is not manufactured to meet an issuer's custom
specifications, but rather is manufactured to meet industry-standard
specifications common to the issuer's competitors generally.\142\ For
example, a group of jewelry industry commentators argued in one letter
that a jewelry retail issuer ordering products from jewelry
manufacturers should not be considered contracting to manufacture for
those products if the retail issuer specifies only weight, karat, or
other indicators of

quality.\143\ As another example, a mobile phone service provider
asserted that it should not be considered contracting to manufacture
its mobile phones even though it specifies to its manufacturers that
the phones must be compatible with their networks and have certain
cosmetic design requirements.\144\
---------------------------------------------------------------------------

    \142\ See letters from AngloGold, AT&T, BCE, JVC et al. II,
NCTA, and RILA-CERC.
    \143\ See letter from JVC et al. II.
    \144\ See letter from AT&T. See also letter from BCE (stating
that the commentator, a distributor of a wide range of
telecommunications and electronic products supplied by hundreds of
manufacturers, ``exerts no substantial control over the design or
the technical features of those products or any control, direct or
indirect, over the supply chains, which may be quite complex, of
such manufacturers,'' and its ``sole input into the manufacturing
process relates to providing brand name manufacturers with certain
technical specifications to ensure compliance with applicable
Canadian regulatory standards or to requesting special product
features, cosmetic in nature, to meet Canadian consumer market
demands'').
---------------------------------------------------------------------------

    Some commentators suggested that the final rule should not consider
an issuer to be contracting to manufacture products if the issuer is
selling products under its own brands, labels, trademarks, or licenses
if it had little or no influence in manufacturing those products.\145\
Other commentators recommended that the final rule should consider such
issuers to be contracting to manufacture those products.\146\ One
commentator asserted that generic products should be held to the same
standard as branded products and that the final rule should avoid using
any definitions that create a perverse incentive for an issuer to work
with special purpose entities designed to follow the technical
requirements of the law but evade its intent.\147\ Another commentator
suggested that the final rule should apply to issuers selling generic
products under their own name or a separate brand name, but not to
retailers who do not do so and have no influence over the manufacturing
of products they sell.\148\
---------------------------------------------------------------------------

    \145\ See letters from AT&T, BCE, Cleary Gottlieb, CTIA,
Industry Group Coalition I, JVC et al. II, NAM I, NCTA, and NRF I.
    \146\ See letters from Enough Project I, Howland, NEI, SIF I,
State II, and TriQuint I.
    \147\ See letter from AxamTrade (Feb. 10, 2011) (``Axam'').
    \148\ See letter from NYCBar II.
---------------------------------------------------------------------------

    Some commentators recommended that an issuer should be considered
to be contracting to manufacture a product only if the issuer has a
direct contractual relationship with the manufacturer of the product to
be sold by the issuer, the issuer has substantial control over the
manufacturer and the material specifications of the product and
specifies the conflict minerals to be used in the product, the product
will be manufactured exclusively for the issuer, and the product will
be sold by the issuer under its own brand name or a brand name owned by
the issuer or exclusively licensed to the issuer by the owner of the
brand.\149\ One of these commentators went on to assert that an issuer
should not be considered to be exerting ``substantial control'' over
manufacturing by ``merely attaching a brand label to a generic good,
contracting for the exclusive distribution of goods, or specifying the
form, fit or function of a product,'' and should not be considered to
be contracting to manufacture a product solely by ``attaching a brand
label to a generic good, contracting for the exclusive distribution of
goods, or specifying the form, fit or function of a product.'' \150\
---------------------------------------------------------------------------

    \149\ See letters from CERC and RILA.
    \150\ See letter from RILA.
---------------------------------------------------------------------------

    Other commentators stressed that the final rule should not apply to
any issuer contracting to manufacture its products.\151\ These
commentators argued generally that the statute does not include an
issuer that contracts to manufacture its products because the phrase
does not appear in the subsection of the Conflict Minerals Statutory
Provision discussing a ``person described.'' Instead, the phrase
appears only in the subsection that describes the disclosures required
in a Conflict Minerals Report. Therefore, Congress's intent in
including the phrase was only to ensure that a manufacturer otherwise
subject to the Conflict Minerals Statutory Provision could not
intentionally evade its reporting obligation merely by distancing
itself, through contracting, from the manufacturing process.\152\
---------------------------------------------------------------------------

    \151\ See, e.g., letters from BCE, CERC, CTIA, Davis Polk, NCTA,
RILA-CERC, TIC, and United States Telecom Association (Mar. 2, 2011)
(``US Telecom'').
    \152\ See letters from AT&T, CTIA, and RILA-CERC.
---------------------------------------------------------------------------

c. Final Rule
i. ``Manufacture''
    After considering the comments, we are modifying the proposed
rules, in part. The final rule, as proposed, applies to any issuer for
which conflict minerals are necessary to the functionality or
production of a product manufactured or contracted by that issuer to be
manufactured. The final rule does not define the term ``manufacture''
because we continue to believe, as discussed in the Proposing Release,
that the term is generally understood. We note, however, that we do not
consider an issuer that only services, maintains, or repairs a product
containing conflict minerals to be ``manufacturing'' a product; \153\
this interpretation is not a change from the Proposing Release, but a
clarification in response to comments.\154\
---------------------------------------------------------------------------

    \153\ See letter from JVC et al. II (commenting that ``certain
assembly and repair functions commonly performed by jewelry
retailers'' should not be defined as manufacturing).
    \154\ See, e.g., letter from ABA (commenting that the Commission
``should, either in the final rule or in the corresponding adopting
release, provide additional guidance as to activities that will not
be considered to be the manufacturing of a product for the purposes
of the rule'').
---------------------------------------------------------------------------

    We believe narrowing or expanding the definition of ``manufacture''
as suggested by some commentators would be inconsistent with the
language and framework of Section 1502. For example, the NAICS
definition, which a number of commentators suggested, appears to
exclude any issuer that manufactures a product by assembling that
product out of materials, substances, or components that are not in raw
material form. Such a definition would exclude large categories of
issuers that manufacture products through assembly, such as certain
auto and electronics manufacturers, whom we believe are intended to be
covered by the Conflict Minerals Statutory Provision. As another
example, the manufacturing definition put forth by one commentator
appears to include ``importing, exporting, or sale of conflict
minerals,'' \155\ which would expand the definition to include issuers
that clearly do not manufacture products. Also, many of the other
suggested definitions simply expound upon the generally understood
meaning of the term, which we do not believe we need to define.
---------------------------------------------------------------------------

    \155\ See letter from Earthworks.
---------------------------------------------------------------------------

ii. ``Contract to Manufacture''
    Consistent with the proposal, the final rule applies to any issuer
for which conflict minerals are necessary to the functionality or
production of a product contracted by that issuer to be manufactured,
including conflict minerals in a component of a product. In general,
the question of whether an issuer contracts to manufacture a product
will depend on the degree of influence exercised by the issuer on the
manufacturing of the product based on the individual facts and
circumstances surrounding an issuer's business and industry. The final
rule does not define when an issuer contracts to manufacture a product
because, although we believe this concept is intuitive at a basic
level, after considering comments and attempting to develop a precise
definition, we concluded that, for ``contract to manufacture'' to cover
issuers operating in the wide variety of the impacted industries and
structured

in various manners, any definition of that term would be so complicated
as to be unworkable. We do, however, provide guidance below on some
general principles that we believe are relevant in determining whether
an issuer should be considered to be contracting to manufacture a
product.
    As a threshold matter, consistent with the proposal, we believe the
statutory intent to include issuers that contract to manufacture their
products is clear based on the statutory obligation for issuers to
describe in their Conflict Minerals Reports products that are
manufactured and contracted to be manufactured that do not meet the
definition of ``DRC conflict free.'' \156\ We recognize that
commentators asserted that the statute does not include an issuer that
contracts to manufacture its products and that the sole intent behind
including the phrase in the provision was to keep manufacturers from
intentionally evading reporting requirements by contracting the
manufacturing of their products to third parties. Nonetheless, Exchange
Act Section 13(p)(1)(A)(ii) requires issuers that must file a Conflict
Minerals Report to describe their ``products manufactured or contracted
to be manufactured that are not DRC conflict free'' (emphasis added).
In our view, the inclusion of products that are ``contracted to be
manufactured'' in this requirement indicates that Congress intended the
Conflict Mineral Statutory Provision to apply to such products, and
including issuers who contract to manufacture their products in the
scope of the rule effectuates this intent. We believe our reading is
more consistent with the statute than the alternative reading--that
Congress required a description of products that were ``contracted to
be manufactured'' and were not ``DRC conflict free,'' but did not
require issuers that contracted to manufacture products to determine
whether a Conflict Minerals Report was required to be filed. This would
be internally inconsistent. It would significantly undermine the
purpose of the statutory provision to fail to apply it to issuers that
contract to manufacture their products.
---------------------------------------------------------------------------

    \156\ See Exchange Act Section 13(p)(1)(A)(ii).
---------------------------------------------------------------------------

    As another threshold matter, we believe the phrase ``contract to
manufacture'' captures manufacturers that contract the manufacturing of
components of their products. Generally, we believe that manufacturing
issuers that contract the manufacturing of certain components of their
products should, for purposes of the Conflict Minerals Statutory
Provision, be viewed as responsible for the conflict minerals in those
products to the same extent as if they manufactured the components
themselves. We believe it is inconsistent with the Conflict Minerals
Statutory Provision to allow these manufacturers to avoid the final
rule's requirements by contracting out the manufacture of components in
their products that contain conflict minerals. As two of the co-
sponsors of the Conflict Minerals Statutory Provision noted, ``[m]any
companies use component parts from any one of several suppliers when
assembling their products'' to ``help drive down the price for parts
through competition,'' but ``[i]t is of paramount importance that this
business model choice not be used as a rationale to avoid reporting and
transparency.'' \157\
---------------------------------------------------------------------------

    \157\ See letter from Senator Richard J. Durbin and
Representative Jim McDermott (Oct. 4, 2010) (Pre-Proposing Release
Web site) (``Sen. Durbin/Rep. McDermott pre-proposing'').
---------------------------------------------------------------------------

    In the proposal, we expressed our belief that an issuer that does
not manufacture a product itself but that has ``any'' influence over
the product's manufacturing should be considered to be contracting to
manufacture that product. Also, we expressed our belief that an issuer
that offers a generic product under its own brand name or a separate
brand name should be considered to be contracting to manufacture that
product so long as the issuer had contracted to have the product
manufactured specifically for itself. We had believed that these
issuers should have been considered to be contracting those products to
be manufactured because the issuers would implicitly influence the
manufacturing of the products. However, we are persuaded by
commentators that this level of control set forth in the Proposing
Release was ``overbroad'' and ``confusing'' and would impose on such an
issuer ``significant,'' ``unrealistic,'' and ``costly'' burdens.\158\
---------------------------------------------------------------------------

    \158\ See, e.g., letters from ABA, AT&T, Corporate Secretaries
I, Davis Polk, and Verizon. See also letter from NRF I (stating that
our proposed approach would be ``draconian'').
---------------------------------------------------------------------------

    Consistent with our approach in the Proposing Release, we believe
that ``contract to manufacture'' is intended to include issuers that
have some actual influence over the manufacturing of their products.
However, we have modified our view as to the circumstances under which
an issuer is considered to be contracting to manufacture a product. An
issuer is considered to be contracting to manufacture a product
depending on the degree of influence it exercises over the materials,
parts, ingredients, or components to be included in any product that
contains conflict minerals or their derivatives. The degree of
influence necessary for an issuer to be considered to be contracting to
manufacture a product is based on each issuer's individual facts and
circumstances. However, based on comments we received, we believe an
issuer should not be viewed for the purposes of the Conflict Minerals
Statutory Provision as contracting to manufacture a product if its
actions involve no more than:
    (a) Specifying or negotiating contractual terms with a manufacturer
that do not directly relate to the manufacturing of the product, such
as training or technical support, price, insurance, indemnity,
intellectual property rights, dispute resolution, or other like terms
or conditions concerning the product, unless the issuer specifies or
negotiates taking these actions so as to exercise a degree of influence
over the manufacturing of the product that is practically equivalent to
contracting on terms that directly relate to the manufacturing of the
product; or
    (b) Affixing its brand, marks, logo, or label to a generic product
manufactured by a third party; or
    (c) Servicing, maintaining, or repairing a product manufactured by
a third party.
    For example, we agree with commentators that an issuer that is a
service provider that specifies to a manufacturer that a cell phone it
will purchase from that manufacturer to sell at retail must be able to
function on a certain network does not in-and-of-itself exert
sufficient influence to ``contract to manufacture'' the phone for
purposes of the final rule. Under the proposed rules, however, such an
issuer may have reached the ``any'' influence threshold. Conversely, we
do not agree with commentators that an issuer must have ``substantial''
influence or control over the manufacturing of a product before the
issuer is considered to be contracting to manufacture that
product.\159\ Such a standard would significantly limit the coverage of
the Conflict Minerals Statutory Provision for issuers that contract to
manufacture products, and we do not believe that such a narrow scope is
consistent with the intent of the Conflict Minerals Statutory
Provision. For example, if there are specifications made by an issuer
to a manufacturer that it contracts with for the inclusion of a
particular conflict mineral in the product, the

issuer might not be viewed as exerting ``substantial'' influence on the
overall manufacturing of the product. However, we would view such an
issuer as covered under the final rule as contracting to manufacture
the product. In addition, we disagree with commentators that suggested
that the final rule should apply only to issuers that explicitly
specify that conflict minerals be included in their products.\160\ We
believe this is too narrow an interpretation of the statutory provision
and, read in this manner, the statute would be illogical. For example,
as commentators argued, Congress inserted ``contract to manufacture''
in the disclosure of products to prevent manufacturers from skirting
the disclosure requirements by contracting to manufacture certain
products. However, if ``contract to manufacture'' is not included in
the definition of ``person described,'' an issuer may evade the statute
by contracting its manufacturing to a third party. Therefore, an issuer
would never be required to disclose its minerals because the issuer
would not qualify for steps two and three.
---------------------------------------------------------------------------

    \159\ See, e.g., letters from AT&T, Corporate Secretaries I,
CTIA, JVC et al. II, NRF I, and Verizon.
    \160\ See, e.g., letters from NAM I and SEMI.
---------------------------------------------------------------------------

    Moreover, in contrast to our approach in the Proposing Release, we
do not consider an issuer to be contracting to manufacture a product
for the purposes of our rule solely if it offers a generic product
under its own brand name or a separate brand name without additional
involvement by the issuer. We are persuaded by commentators that such
an issuer would not necessarily exert a sufficient degree of influence
on the manufacturer to be considered as contracting to manufacture the
product for purposes of the Conflict Minerals Statutory Provision. As
one commentator noted, it seems that such a relationship between an
issuer and manufacturer is better characterized as one in which the
manufacturer is using the issuer as a ``sales channel'' as opposed to
one in which the issuer is ``outsourcing manufacturing to'' the
manufacturer.\161\ Such a relationship limits the issuer's influence on
the product's manufacturing to the extent that it puts the issuer in a
similar position to that of a pure retailer. One commentator noted that
the purposes of the Conflict Minerals Statutory Provision are not
served by classifying such an issuer as contracting to manufacture a
product.\162\ We agree. However, an issuer with generic products that
include its brand name or a separate brand name and that has
involvement in the product's manufacturing beyond only including such
brand name would need to consider all of the facts and circumstances in
determining whether its influence reaches such a degree so as to be
considered contracting to manufacture that product.
---------------------------------------------------------------------------

    \161\ See letter from AT&T.
    \162\ See letter from Cleary Gottlieb.
---------------------------------------------------------------------------

3. Mining Issuers as ``Manufacturing'' Issuers
a. Proposed Rules
    Under the proposed rules, we would have considered an issuer that
mines conflict minerals to be manufacturing those minerals and an
issuer contracting for the mining of conflict minerals to be
contracting for the manufacture of those minerals. In this regard, we
proposed in an instruction to the rules that mining issuers be
considered to be manufacturing conflict minerals when they extract
those minerals.\163\ We did, however, request comment on this point.
---------------------------------------------------------------------------

    \163\ See Industry Guide 7 [17 CFR 229.802(g)] (implying that
companies may ``produce'' minerals from a mining reserve).
---------------------------------------------------------------------------

b. Comments on the Proposed Rules
    A number of commentators stated specifically that the final rule
should consider any issuer that mines conflict minerals as
``manufacturing'' those conflict minerals as ``products.'' \164\ A few
commentators noted that mining issuers should be included as
manufacturers because they begin the conflict minerals supply chain and
other reporting issuers must rely on them for information.\165\ As
such, without the final rule including mining issuers, other issuers
would have a very difficult time complying with the rules, which would
eliminate transparency from the supply chain and undermine the
provision.\166\
---------------------------------------------------------------------------

    \164\ See, e.g., letters from Bario-Neal Jewelry (Mar. 1, 2011)
(``Bario-Neal''); Brilliant Earth, Inc. (Feb. 28, 2011) (``Brilliant
Earth''); CRS I; Earthworks; Electronics TakeBack Coalition (Mar. 2,
2011) (``TakeBack''); Enough Project I; Enough Project (Nov. 2,
2011) (``Enough Project IV''); Global Tungsten I; Hacker Jewelers,
Designers & Goldsmiths, Inc. (Mar. 1, 2011) (``Hacker Jewelers'');
Hoover & Strong, Inc. (Mar. 1, 2011) (``Hoover & Strong''); ICAR et
al. I; NEI; Niotan I; NYCBar I; SIF I; State II; TIAA-CREF; TriQuint
I; and U.S. Steel.
    \165\ See letters from Global Witness I and TriQuint I (noting
that mining companies do, in fact, engage in a transformative
process such that they transform natural resources into ores, which
should be considered ``manufacturing'').
    \166\ See letter from Enough Project I.
---------------------------------------------------------------------------

    Other commentators indicated that the final rule should not treat
mining issuers as manufacturers of the conflict minerals they
extract.\167\ Some of these commentators argued that the final rule
should incorporate the NAICS definition of ``manufacturing,'' which
they noted does not include mining as a type of manufacturing
activity.\168\ Certain commentators noted that mining of conflict
minerals, especially gold, shares no characteristics with the
manufacturing of products.\169\ Finally, some commentators asserted
that Congress did not intend to include mining issuers as manufacturers
based on previous versions of the Conflict Minerals Statutory
Provision, legislative statements, and a plain reading of the
statute.\170\ As some of these commentators noted, the Conflict
Minerals Statutory Provision was preceded by other legislative
proposals that were drafted to include mining issuers, but the Conflict
Minerals Statutory Provision was not drafted in such a manner.\171\ One
such commentator indicated that these previous bills ``explicitly
applied not only to companies using covered minerals in their
manufacturing processes, but also to persons engaged in `the commercial
exploration, extraction, importation, exportation, or sale' of the
covered minerals.''\172\ According to the commentator, the fact that
Congress chose not to include extraction activities in the Conflict
Minerals Statutory Provision demonstrates that Congress's intent was
not to have the Conflict Minerals Statutory Provision include mining as
manufacturing.
---------------------------------------------------------------------------

    \167\ See, e.g., letters from ABA, AngloGold, Barrick Gold,
Cleary Gottlieb, ITRI Ltd. (Jan. 27, 2011) (``ITRI I''), NAM III,
NMA II, Vale S.A. (Mar. 3, 2011) (``Vale''), and WGC II.
    \168\ See letters from AngloGold and WGC II.
    \169\ See letters from AngloGold and Barrick Gold.
    \170\ See letters from AngloGold, NMA II, National Mining
Association (Nov. 1, 2011) (``NMA III''), and Vale.
    \171\ See, e.g., letters from AngloGold and NMA II.
    \172\ Letter from NMA II (referring to S. 891 and S.A. 2707
(2009)).
---------------------------------------------------------------------------

c. Final Rule
    After considering the comments, we are modifying the proposal. We
do not consider an issuer that mines or contracts to mine conflict
minerals to be manufacturing or contracting to manufacture those
minerals unless the issuer also engages in manufacturing, whether
directly or indirectly through contract, in addition to mining. In this
regard, we do not believe that mining is ``manufacturing'' based on a
plain reading of the provision. We agree with the commentators
concerned that the statutory language does not explicitly include
mining anywhere in the Conflict Minerals Statutory Provision and
including mining would expand the statutory mandate. The Conflict
Minerals Statutory Provision does not specifically refer to mining and,
as one

commentator noted, ``[t]o extend the terms `manufacture' of a `product'
to include the mining of conflict minerals contorts the plain meaning
of those terms.'' \173\
---------------------------------------------------------------------------

    \173\ See letter from AngloGold.
---------------------------------------------------------------------------

    As discussed by commentators, legislative history demonstrates that
Congress did not intend to include issuers that solely mine conflict
minerals in the Conflict Minerals provision because it removed
references to such activities from prior versions of the provision. For
example, one commentator in two comment letters noted that prior
versions of the Conflict Minerals Statutory Provision explicitly
applied to anyone either using covered minerals in their manufacturing
processes or engaging in ``the commercial exploration, extraction,
importation, exportation or sale of the covered minerals.'' \174\
However, the final version of the Conflict Minerals Statutory Provision
omits any reference to extraction-related activities and refers solely
to manufacturing.\175\ As this commentator stated, Congress's omission
of mining activities evidences its intent ``to address the
manufacturing of goods which use or contain, as opposed to the
extracting and processing of, the covered minerals.'' \176\ Therefore,
based on both the plain reading of the provision and the legislative
history of the provision, we are persuaded that it would be
inconsistent with the language in the Conflict Minerals Statutory
Provision to include mining issuers as manufacturing issuers under the
final rule unless the mining issuer engages in manufacturing, either
directly or through contract, in addition to mining.
---------------------------------------------------------------------------

    \174\ See letters from NMA II and NMA III. These letters discuss
two legislative proposals introduced in the Senate in 2009 that were
similar to the Conflict Minerals Statutory Provision. See Congo
Conflict Minerals Act of 2009, S. 891, 111th Cong. (2009) and S.A.
2707, 111th Cong. (2009). Both of these earlier conflict minerals
proposals explicitly applied to companies using conflict minerals in
their manufacturing processes and also to persons engaged in ``the
commercial exploration, extraction, importation, exportation, or
sale'' of conflict minerals.
    \175\ See letters from NMA II.
    \176\ Id.
---------------------------------------------------------------------------

4. When Conflict Minerals Are ``Necessary'' to a Product
    The Conflict Minerals Statutory Provision requires us to promulgate
regulations requiring that any ``person described'' disclose annually
whether conflict minerals that are ``necessary'' originated in the
Covered Countries and, if so, submit to us a Conflict Minerals
Report.\177\ The provision further states that a ``person is
described'' if ``conflict minerals are necessary to the functionality
or production of a product manufactured by such person.'' \178\ The
provision, however, provides no additional explanation or guidance as
to the meaning of ``necessary to the functionality or production of a
product.'' Likewise, we did not propose to define when a conflict
mineral is necessary to the functionality or production of a product.
We did, however, request comment on whether and how our rules should
define this phrase and we provided some guidance as to the meaning of
``necessary to the production of a product.''
---------------------------------------------------------------------------

    \177\ Exchange Act Section 13(p)(1)(A).
    \178\ Exchange Act Section 13(p)(2)(B).
---------------------------------------------------------------------------

a. Proposed Rules
    Although we did not propose to define ``necessary to the
functionality or production'' in the rules, we noted in the Proposing
Release that, if a mineral is necessary, the product was included
within the scope of the rules without regard to the amount of the
mineral involved. Further, we indicated in the Proposing Release that a
conflict mineral would be considered necessary to the production of a
product if the conflict mineral was intentionally included in a
product's production process and was necessary to that process, even if
that conflict mineral was not ultimately included anywhere in the
product. On the other hand, as proposed, a conflict mineral necessary
to the functionality or production of a physical tool or machine used
to produce a product would not be considered necessary to the
production of that product, even if that tool or machine was necessary
to producing the product. For example, if an automobile containing no
conflict minerals was produced using a wrench that contains or was
itself produced using conflict minerals necessary to the functionality
or production of that wrench, the proposed rules would not consider the
conflict minerals in that wrench necessary to the production of the
automobile.
    That the conflict minerals must be ``necessary to the functionality
or production'' of an issuer's products is the only limiting factor in
the Conflict Minerals Statutory Provision.\179\ The provision has no
materiality thresholds for disclosure based on the amount of conflict
minerals an issuer uses in its manufacturing processes. Therefore, we
did not propose to include a materiality threshold for the disclosure
or reporting requirements in the proposed rules. We did, however,
request comment in the Proposing Release as to whether there should be
a de minimis threshold in our rules based on the amount of conflict
minerals used by an issuer in a particular product or in its overall
enterprise and, if so, whether such a threshold would be consistent
with the Conflict Minerals Statutory Provision.
---------------------------------------------------------------------------

    \179\ Exchange Act Section 13(p)(2)(B).
---------------------------------------------------------------------------

b. Comments on the Proposed Rules
    Many commentators suggested that the final rule explicitly define
the phrase, ``necessary to the functionality or production of a
product,'' \180\ while other commentators indicated that the final rule
should not define the phrase.\181\ Several commentators suggested
possible definitions.\182\ One commentator noted that manufacturers
make certain deliberate choices about products, such as how they look,
function, perform, cost, or are supplied, so when there has been a
choice to incorporate conflict minerals into a product, the final rule
should consider the conflict minerals ``necessary'' to the product
because the designer has deemed them to be so.\183\ Another commentator
was concerned that the proposed rules did not provide any guidance as
to either the phrase ``necessary to the functionality or production''
or the term ``product.'' \184\ As such, this commentator noted that the
proposed rules could apply to financial products that are backed by
gold or other mineral commodities, such as futures contracts for gold
bullion, shares in mutual funds that invest in gold mining stocks, or
gold bullion storage agreements with vault services providers.
---------------------------------------------------------------------------

    \180\ See, e.g., letters from CRS I, Davis Polk, Earthworks,
Enough Project I, FRS, Howland, ICAR et al. I, MSG I, NRF I, PCP,
Give Peace A Deadline (Jan. 21, 2011) (``Peace''), SEMI, SIF I, TIC,
Tiffany, TriQuint I, and US Steel.
    \181\ See, e.g., letters from Cleary Gottlieb, Global Witness I,
ITIC I, State II, and WGC II.
    \182\ See, e.g., letters from AAEI, AAFA, Bario-Neal, Brilliant
Earth, CRS I, Davis Polk, Earthworks, Enough Project I, Hacker
Jewelers, Hoover & Strong, Howland, MSG I, NAM I, Niotan I, NMA II,
NRF I, PCP, Peace, SEMI, Sen. Durbin/Rep. McDermott, SIF I, TIAA-
CREF, TIC, TriQuint I, and US Steel.
    \183\ See letter from Matheson II.
    \184\ See letter from Tiffany.
---------------------------------------------------------------------------

i. ``Necessary to the Functionality''
    A number of different commentators indicated that a conflict
mineral should be considered ``necessary to the functionality'' of a
product if that conflict mineral is intentionally added to the
product.\185\ Of these commentators, however, many were open to other
potential requirements. For example, many commentators

suggested further requirements in addition to, or instead of, being
intentionally added before a conflict mineral should be considered
``necessary to the functionality'' of a product. Many of these
commentators indicated that a conflict mineral must be intentionally
added and/or necessary either for the product's use, purpose, or
marketability, financial success, or some combination thereof.\186\ A
few commentators asserted that a conflict mineral must be intentionally
added and essential to the product's function.\187\ One commentator
stated that a conflict mineral must be intentionally added and have a
concentration in the product that exceeds 1,000 ppm per homogeneous
material.\188\
---------------------------------------------------------------------------

    \185\ See, e.g., letters from AAEI, Bario-Neal, Brilliant Earth,
Hacker Jewelers, Hoover & Strong, Howland, ITIC I, NRF I, NYCBar II,
SEMI, Sen. Durbin/Rep. McDermott, TIAA-CREF, and WGC II.
    \186\ See, e.g., letters from AAEI, Bario-Neal, Brilliant Earth,
Earthworks, Enough Project I, Hacker Jewelers, Hoover & Strong, MSG
I, Peace, and SIF I, and TIAA-CREF.
    \187\ See, e.g., letters from Howland, NAM I, and NRF I.
    \188\ See letter from TriQuint I.
---------------------------------------------------------------------------

    Only a few commentators proposed guidance as to when a conflict
mineral would be considered ``intentionally added'' to a product, and
they differed on when a conflict mineral should be considered
``intentionally added.'' One commentator stated that a conflict mineral
should not be considered intentionally added if it was unilaterally
included in a sub-component acquired by the issuer from a sub-
contractor.\189\ Two of the co-sponsors of the Conflict Minerals
Statutory Provision, however, took the opposite position and stated
that a conflict mineral should be considered intentionally added if it
is intentionally added in sub-components that an issuer contracts to
manufacture through third parties or subsidiaries.\190\ Several
commentators agreed that a conflict mineral occurring naturally in a
product should not be considered intentionally added to that
product.\191\
---------------------------------------------------------------------------

    \189\ See letter from SEMI.
    \190\ See letter from Sen. Durbin/Rep. McDermott.
    \191\ See letters from ITIC I, PCP, and Sen. Durbin/Rep.
McDermott.
---------------------------------------------------------------------------

    Instead of being intentionally added to a product, some
commentators provided other bases for concluding that a conflict
mineral is ``necessary to the functionality'' of a product. Some
commentators indicated that a conflict mineral should be considered
``necessary to the functionality'' of a product if that conflict
mineral is necessary for the product's basic function.\192\ Other
commentators stated that the basic function test would be unworkable
because there is no meaningful distinction between a product's basic
and auxiliary functions.\193\ Some commentators stated that a conflict
mineral should be considered ``necessary to the functionality'' of a
product if that conflict mineral is required either for the financial
success or marketability of the product.\194\ One commentator noted
that ``necessary to the functionality'' should be defined broadly
enough that it encompasses uses necessary to the product's economic
utility,\195\ while others disagreed due to the subjective nature of
what provides economic utility to a product.\196\ In this regard, one
commentator asserted that a conflict mineral should be considered
``necessary to the functionality'' of a product if the issuer ``uses''
conflict minerals in any manner in a product, regardless of how those
conflict minerals relate to the product's function, because any other
test would be too subjective.\197\
---------------------------------------------------------------------------

    \192\ See letters from AAFA, NYCBar I, and WGC II. See also
letter from NYCBar II (stating that a ``component in a product
necessary to its functionality if it is needed for either its basic
function or another commercially valuable function of that
product,'' and stating that it does not ``believe that `basic
function' in this regard needs to be defined since it will differ
for each product'').
    \193\ See letters from NEI, SEMI, and TIC.
    \194\ See, e.g., letters from Enough Project I, MSG I, Peace,
and TIAA-CREF.
    \195\ See letter from CRS I (suggesting ``that `necessary to the
functionality or production of a product' be defined broadly enough
that it encompasses uses necessary to the economic utility and/or
marketability of that product'').
    \196\ See, e.g., letters from NRF I and SEMI.
    \197\ See letter from Kemet.
---------------------------------------------------------------------------

ii. ``Necessary to the Production''
    Many commentators agreed that a conflict mineral should be
considered ``necessary to the production'' of a product if it is
intentionally added to the production process, and should not be
considered ``necessary to the production'' of a product if it is
unintentionally added to a product or naturally occurring in a
product.\198\ Some commentators agreed with the proposal to consider
such conflict minerals ``necessary to the production'' of a product
even if the minerals are washed away or consumed in the production
process and do not end up in the product, such as with a catalyst.\199\
As one of these commentators suggested as an example, a ``catalyst used
to make a substance or a die containing [conflict mineral] metals used
to make a part'' should be considered ``necessary to the production''
of the product using that part because the ``part is made with direct
involvements of the [conflict mineral] metal and then the part/material
is used in the product,'' even if the conflict mineral does not end up
in the product.\200\ Other commentators, however, did not believe that
conflict minerals used in the production of a product should be
considered necessary to that production process if they are washed away
or consumed in the process.\201\ As one of these commentators pointed
out, it would be ``impossible for a retailer to know whether his
supplier's supplier's supplier used and washed away a conflict
mineral'' because ``there is no meaningful measurement capability or
audit trail, especially as a product moves through dozens of suppliers
in a supply chain.'' \202\
---------------------------------------------------------------------------

    \198\ See, e.g., letters from ITIC I, Global Witness I, Japanese
Trade Associations, NYCBar I, PCP, SEMI, Sen. Durbin/Rep. McDermott,
and TIC.
    \199\ See, e.g., letters from Howland, MSG I, Niotan I, PCP,
SEMI, and TriQuint I.
    \200\ See letter from Howland.
    \201\ See, e.g., letters from Industry Group Coalition I, IPC
II, NAM I, Griffin Teggeman (Dec. 16, 2010) (``Teggeman''), and WGC
II.
    \202\ See letter from Teggeman.
---------------------------------------------------------------------------

    A number of commentators addressed whether a conflict mineral
necessary to the production of the tools, machines, or similar
equipment that are used to produce an issuer's product should be
considered ``necessary to the production'' of the issuer's
product.\203\ The large majority of these commentators, including those
from industry associations,\204\ a multi-stakeholder group representing
both human rights organizations and industry,\205\ and institutional
investors,\206\ agreed with the proposed rules that such tools,
machines, and other production equipment should not be considered
necessary to the production of the issuer's products.\207\ A small
number of commentators disagreed and stated that such tools, machines,
or similar equipment should be considered necessary to the production
of an issuer's product.\208\ One of these commentators specified

that tools, machines, or similar equipment purchased going forward
should be considered necessary to the production of the issuer's
product, although an issuer's existing production equipment should not
be deemed necessary to production.\209\ Another commentator stated that
production equipment should not be considered necessary to the
production of an issuer's products unless the issuer intentionally and
explicitly required the producer of the tools, machines, or other
production equipment to include conflict minerals.\210\
---------------------------------------------------------------------------

    \203\ See, e.g., letters from AAFA, Industry Group Coalition I,
IPC I, ITIC I, Japanese Trade Associations, NAM I, NEI, Niotan I,
Refractory Metals Association (Feb. 28, 2011) (``RMA''), SEMI, SIF
I, TIAA-CREF, TIC, and TriQuint I.
    \204\ See, e.g., letters from AAFA, Industry Group Coalition I,
IPC I, ITIC I, Japanese Trade Associations, NAM I, RMA, SEMI, and
TIC.
    \205\ See letter from MSG I (stating that ``when conflict
minerals are present in tooling or other production machinery, they
should not be considered to be necessary to production of the
product''). The letter from MSG was signed by a number of human
rights groups, including Enough Project, Free the Slaves, and
Friends of the Congo, among others.
    \206\ See, e.g., letters from NEI, SIF I, and TIAA-CREF.
    \207\ See, e.g., letters from AAFA, Industry Group Coalition I,
IPC I, ITIC I, Japanese Trade Associations, NAM I, NEI, RMA, SEMI,
SIF I, TIAA-CREF, and TIC.
    \208\ See letters from Niotan I and TriQuint I.
    \209\ See letter from TriQuint I.
    \210\ See letter from SEMI.
---------------------------------------------------------------------------

    In this regard, one commentator stated that the final rule should
not consider any indirect equipment, such as computers or power lines,
as necessary to production.\211\ Another commentator indicated that
conflict minerals used in products that are ``not intended to be sold
into commerce,'' such as those utilized solely for research and
development purposes, components provided at cost on a business-to-
business basis, or products or components used only for engineering or
testing purposes, should not be considered necessary to the production
of the product that is ultimately placed in the stream of
commerce.\212\
---------------------------------------------------------------------------

    \211\ See letter from Howland.
    \212\ See letter from ITIC I. See also letter from TechAmerica
(Nov. 1, 2011) (``Industry Group Coalition II'') (suggesting that
the final rule should exclude ``research and development equipment
made available on a business-to-business basis from the scope of the
rule'').
---------------------------------------------------------------------------

iii. De Minimis Threshold
    We received mixed comments regarding whether the final rule should
have a de minimis threshold exception, with some commentators opposed
to a de minimis exception,\213\ and other commentators supporting
it.\214\ Some commentators provided a legal basis for including a de
minimis exception despite the lack of a de minimis exception in the
Conflict Minerals Statutory Provision.\215\ Generally, these
commentators asserted that, as long as legislation does not forbid
establishing a de minimis threshold, an agency's regulations may allow
for one. Also, one commentator noted that we have ``inherent authority
to employ de minimis exceptions to avoid unreasonable and absurd
results in crafting [the] final rule,'' which is ``inherent and clearly
established by precedent.'' \216\
---------------------------------------------------------------------------

    \213\ See, e.g., letters from Calvert, Earthworks, Episcopal
Conference of Catholic Bishops of the DRC (Nov. 8, 2011) (``CENCO
II''), Global Witness I, Howland, Matheson II, NEI, NYCBar I, NYCBar
II, Rep. Berman et al., SIF I, State II, and Trott.
    \214\ See, e.g., letters from AAFA, AdvaMed I, AngloGold,
Chamber I, Davis Polk, IPC I, IPC II, IPMI I, NAM I, NRF I, PCP,
Rep. Bachus et al., Roundtable, SEMI, Teggeman, TIC, and WGC II.
    \215\ See letters from Materion, NAM I, and NRF I.
    \216\ See letter from Materion.
---------------------------------------------------------------------------

    Some commentators provided recommendations on possible de minimis
thresholds. Two commentators suggested that there should be a de
minimis exception if the cost of the conflict minerals in an issuer's
products make up less than 1% of the issuer's consolidated total
production costs.\217\ Other commentators recommended a de minimis
exception for trace, nominal, or insignificant amounts of conflict
minerals in an issuer's products.\218\ One commentator suggested a de
minimis exception when the end product derived from conflict minerals
reflects less than a certain percentage of the value of the product,
such as if the value was 5% or less of the total manufacturing
costs.\219\ Another commentator recommended a de minimis exception
relating to the inability of an issuer to determine the origin of its
minerals, such as allowing that issuer's product to be considered ``DRC
conflict free'' where the issuer is unable to determine the origin of
only 5% of the product's minerals.\220\ One commentator noted that the
final rule should permit a de minimis exception, but indicated that the
value used for the de minimis exception should be based on how the
phrase ``necessary to the functionality or production'' of a product is
to be defined in the final rule.\221\ Another commentator recommended
that the final rule permit a de minimis exception for products
containing less that 0.1% by weight of a conflict mineral.\222\ One
commentator provided three possible de minimis scenarios in which an
issuer would be excepted from reporting, specifically: If an issuer's
conflict minerals comprised less than 0.1% of a component or product,
if an issuer's global usage of conflict minerals comprised less than
0.01% of its materials, or if an issuer comprised the bottom 20% of its
industry's conflict minerals use.\223\
---------------------------------------------------------------------------

    \217\ See letters from AngloGold and WGC II.
    \218\ See letters from Davis Polk, NRF I, and Roundtable.
    \219\ See letter from TIC.
    \220\ See letter from IPMI I.
    \221\ See letter from SEMI (stating that, if the phrase was
limited to materials explicitly or intentionally added to a product
or caused to be added to a product, the de minimis threshold should
be one gram per year of necessary minerals, but if the final rule
included a ``more conservative'' meaning of the phrase, a higher de
minimis should be used, such as 0.1% of the weight of any particular
component acquired as a whole by the issuer).
    \222\ See letter from IPC I.
    \223\ See letter from NAM I.
---------------------------------------------------------------------------

c. Final Rule
    After considering the comments, we are adopting a final rule that,
like the proposed rules, does not define when a conflict mineral is
``necessary to the functionality'' of a product or when it is
``necessary to the production'' of a product.\224\ However, as we did
in the Proposing Release, we are providing guidance regarding the
interpretation of these phrases. The guidance is modified to a degree
from the guidance in the Proposing Release based on comments we
received. Whether a conflict mineral is deemed ``necessary to the
functionality'' of a product or ``necessary to the production'' of
product depends on the issuer's particular facts and circumstances, but
there are certain factors we believe issuers should consider in making
their determinations.
---------------------------------------------------------------------------

    \224\ As a threshold matter, we believe that the Conflict
Minerals Statutory Provision requires separate consideration as to
whether a conflict mineral is ``necessary to the production'' of a
product from whether a conflict mineral is ``necessary to the
functionality'' of the product, because the Conflict Minerals
Statutory Provision includes both phrases. See infra Part
II.B.4.c.iii. See also Exchange Act Sections 13(p)(1)(A) and
13(p)(2).
---------------------------------------------------------------------------

    As described below, in determining whether its conflict minerals
are ``necessary to the functionality'' of a product, an issuer should
consider: (a) Whether a conflict mineral is contained in and
intentionally added to the product or any component of the product and
is not a naturally-occurring by-product; (b) whether a conflict mineral
is necessary to the product's generally expected function, use, or
purpose; or (c) if a conflict mineral is incorporated for purposes of
ornamentation, decoration or embellishment, whether the primary purpose
of the product is ornamentation or decoration. Based on the applicable
facts and circumstances, any of these factors, either individually or
in the aggregate, may be determinative as to whether conflict minerals
are ``necessary to the functionality'' of a given product. In
determining whether its conflict minerals are ``necessary to the
production'' of a product, an issuer should consider whether a conflict
mineral is contained in the product and intentionally added in the
product's production process, including the production process of any
component of the product; and whether the conflict mineral is necessary
to produce the product. We describe changes to our guidance regarding
``necessary to the functionality'' and ``necessary to the production''
below.

i. Contained in the Product
    After considering the comments and reviewing the Conflict Minerals
Statutory Provision, as described below, we are persuaded that only a
conflict mineral that is contained in the product should be considered
``necessary to the functionality or production'' of that product. We
believe this approach is appropriate in light of the Conflict Minerals
Statutory Provision's statutory construction. As discussed above, the
Conflict Minerals Statutory Provision requires issuers with conflict
minerals ``necessary to the functionality or production'' of a product
manufactured or contracted by the issuer to be manufactured that
originated in the Covered Countries to provide a Conflict Minerals
Report.\225\ The provision includes two distinct subsections, Exchange
Act Section 13(p)(1)(A)(i) and Exchange Act Section 13(p)(1)(A)(ii),
regarding the information required in that Conflict Minerals Report.
Generally, Exchange Act Section 13(p)(1)(A)(i) deals with an issuer's
description of its due diligence measures on the source and chain of
custody of its conflict minerals, including the independent private
sector audit, and Exchange Act Section 13(p)(1)(A)(ii) requires the
issuer's description of its products that have not been found to be
``DRC conflict free.'' The Conflict Minerals Statutory Provision
defines ``DRC conflict free'' to mean ``products that do not contain
minerals that directly or indirectly finance or benefit armed groups''
in the Covered Countries.\226\ The use of the term ``contain''
indicates that the disclosures required under Exchange Act Section
13(p)(1)(A)(ii) are limited to issuers with conflict minerals actually
contained in their products.\227\ We believe it is appropriate to
include this limitation in interpreting when a conflict mineral is
necessary to the functionality or production of a product.
---------------------------------------------------------------------------

    \225\ See Exchange Act Section 13(p)(1)(A).
    \226\ Id. (emphasis added). See also Section 1502(e)(4) of the
Act (defining the phrase in the same manner as Exchange Act Section
13(p)(1)(A)(ii), except that Section 1502(e)(4) of the Act refers to
``conflict minerals'' instead of just ``minerals'').
    \227\ We note that the Second Edition of the Random House
Webster's Dictionary defines ``contain'' to include the ``to hold
within a volume or area.'' Random House Webster's Dictionary, 142
(2d ed. 1996).
---------------------------------------------------------------------------

    We note that Exchange Act Section 13(p)(1)(A)(i) does not include a
similar limitation that the product must ``contain'' the necessary
conflict minerals. As a result, it is possible to interpret the
Conflict Minerals Statutory Provision such that the term ``contain'' in
Exchange Act Section 13(p)(1)(A)(ii) does not mean that a conflict
mineral must be included in the product for it to be ``necessary to the
functionality or production'' of the product. However, we do not
believe that such an interpretation would be the proper construction.
Following that approach, the provision could be interpreted to require
issuers with conflict minerals that are ``necessary to the
functionality or production'' of a product but are not included in that
product to submit an audited Conflict Minerals Report describing their
due diligence, as required under Exchange Act Section 13(p)(1)(A)(i),
but not describing any products produced using those minerals that
directly or indirectly financed or benefited armed groups in the
Covered Countries as having not been found to be ``DRC conflict free''
because the conflict minerals are not ``contained'' in the product.
    We do not believe, however, that such an interpretation is the
better construction. It would mean that the Conflict Minerals Statutory
Provision envisions a situation in which an issuer with a conflict
mineral that is ``necessary to the functionality or production'' of its
product originated in the Covered Countries and benefited armed groups
in those countries would be required to submit a Conflict Minerals
Report describing its due diligence on the source and chain of custody
of that mineral but would not have to describe its products as having
not been found to be ``DRC conflict free.'' We believe the better
interpretation that gives meaning to the term ``contain'' is that only
conflict minerals contained in the product would be considered
``necessary'' to that product, so only those minerals trigger the
requirement to conduct a reasonable country of origin inquiry.
    Additionally, we do not believe the final rule should include
conflict minerals ``necessary to the functionality or production'' of a
product that are not contained in the product because we appreciate
commentators' concerns that the application of the provision to
minerals that do not end up in the product is especially challenging.
As noted above, commentators were mixed in their views regarding how
the rule should treat catalysts and other conflict minerals necessary
to the production of a product that do not appear in the product.
However, we note that there are products where a catalyst is used and
is not completely washed away.\228\ In those situations, the product
contains a necessary conflict mineral that is necessary to its
production and is subject to the final rule.
---------------------------------------------------------------------------

    \228\ See letters from Industry Group Coalition I and NAM I
(referring specifically to situations in which catalysts are used to
chemically react with and produce products, and trace levels of the
catalyst are found in the reacted manufactured product, but the
catalysts do not contribute to the performance of the product).
---------------------------------------------------------------------------

ii. Intentionally Added
    Although commentators did not agree on an exact definition, most
commentators from across the spectrum agreed that a conflict mineral
should be considered ``necessary to the functionality or production''
of a product for the purposes of the Conflict Minerals Statutory
Provision if, at a minimum, it was intentionally added to the product
or production process.\229\ While we are not defining the phrase, we
agree that being intentionally added, rather than being a naturally-
occurring by-product, is a significant factor in determining whether a
conflict mineral is ``necessary to the functionality or production'' of
a product. This is true regardless of who intentionally added the
conflict mineral to the product so long as it is contained in the
product.
---------------------------------------------------------------------------

    \229\ See, e.g., letters from AAEI, Bario-Neal, Brilliant Earth,
Earthworks, Enough Project I, Global Witness I, Hacker Jewelers,
Hoover & Strong, Howland, ITIC I, Japanese Trade Associations, MSG
I, Niotan I, NRF I, Peace, PCP, SEMI, Sen. Durbin/Rep. McDermott,
SIF I, TIAA-CREF, TriQuint I, and WGC II.
---------------------------------------------------------------------------

    In this regard, we note that one commentator asserted that a
conflict mineral should not be considered ``intentionally added'' by an
issuer ``if it is present in a sub-component acquired by the issuer
based on a unilateral decision of the supplier or a sub-contractor, or
a party further upstream in the supply chain.'' \230\ We disagree. As
two of the co-sponsors of the provision asserted, determining whether a
conflict mineral is considered ``necessary'' to a product should not
depend on whether the conflict mineral is added directly to the product
by the issuer or whether it is added to a component of the product that
the issuer receives from a third party. Instead, the issuer should
``report on the totality of the product and work with suppliers to
comply with the requirements.'' \231\ Therefore, in determining whether
a conflict mineral is ``necessary'' to a product, an issuer must
consider any conflict mineral contained in its product, even if that
conflict mineral is only in the product because it was included as part
of a component of the product that was

manufactured originally by a third party.
---------------------------------------------------------------------------

    \230\ See letter from SEMI.
    \231\ See letter from Sen. Durbin/Rep. McDermott (indicating
that a car manufacturer must report on any conflict minerals in the
car's radio, even if there are no conflict minerals elsewhere in the
car).
---------------------------------------------------------------------------

iii. ``Necessary to the Functionality''
    In addition to being contained in the product and intentionally
added, another factor in determining whether its conflict minerals are
``necessary to the functionality'' of a product is whether the conflict
mineral is necessary to the product's generally expected function, use,
or purpose. Some commentators suggested that we limit an issuer's
consideration of whether its conflict minerals are ``necessary to the
functionality'' of a product to the ``basic function'' or ``economic
utility'' tests. However, we believe limiting a determination to those
tests would not provide greater certainty or clarity to issuers
required to make such determinations. As one commentator noted, ``the
distinction between a `basic function' and an ancillary function is
murky and undefinable.'' \232\ Similarly, as another commentator noted,
``[e]conomic utility is very subjective and it can be the unforeseen
consequence of a derivative buried deep within a sub-component.'' \233\
Therefore, we believe these tests are so subjective as to be mostly
unworkable. We believe it is more appropriate instead to focus on a
product's generally expected function, use, or purpose, recognizing
that there are situations in which a product has multiple generally
expected functions, uses, and purposes. In such situations, a conflict
mineral need only be necessary for one such function, use, or purpose
to be necessary to the product as a whole. For example, a smart phone
has multiple generally expected functions, uses, and purposes, such as
making and receiving phone calls, accessing the internet, and listening
to stored music. If a conflict mineral is necessary to the function,
use, or purpose of any one of these, it is necessary to the
functionality of the phone.
---------------------------------------------------------------------------

    \232\ See letter from TIC.
    \233\ See letter from SEMI.
---------------------------------------------------------------------------

    Another factor in determining whether its conflict minerals are
``necessary to the functionality'' of a product is whether the conflict
mineral is incorporated for purposes of ornamentation, decoration, or
embellishment. If a primary purpose of the product is mainly
ornamentation or decoration, it is more likely that a conflict mineral
added for purposes of ornamentation, decoration or embellishment is
``necessary to the functionality'' of the product. For example, the
gold in a gold pendant hanging on a necklace is necessary to the
functionality of the pendant because it is incorporated for purposes of
ornamentation, decoration, or embellishment, and a primary purpose of
the pendant is ornamentation or decoration. Conversely, if a conflict
mineral is incorporated into a product for purposes of ornamentation,
decoration, or embellishment, and the primary purpose of the product is
not ornamentation or decoration, it is less likely to be ``necessary to
the functionality'' of the product. As one commentator noted, ``if, for
example, gold is used in an article as an ancillary feature [of a
product] strictly for purposes of ornamentation, then it is unrelated
to the functionality of the product and would be exempt from the
reporting requirements of the statute.'' \234\ We would agree that
these facts would tend to indicate that the conflict mineral is not
necessary to the functionality of the product, provided that the
primary purpose of the product is not for ornamentation or decoration.
Even so, this would only be one factor among all the facts and
circumstances in the issuer's overall determination as to whether the
conflict mineral is necessary to the functionality of the product.
---------------------------------------------------------------------------

    \234\ See letter from NRF I.
---------------------------------------------------------------------------

iv. ``Necessary to the Production''
    As with determining whether a conflict mineral is ``necessary to
the functionality'' of a product, determining whether a conflict
mineral is ``necessary to the production'' of a product involves
consideration of an issuer's particular facts and circumstances. As
noted above, the conflict mineral must be contained in the product to
trigger the determination of whether the conflict mineral is
``necessary to the production'' of the product. Consistent with this
approach, we do not consider a conflict mineral used as a catalyst or
in another manner in the production process of a product to be
``necessary to the production'' of the product if that conflict mineral
is not contained in the product, even though, based on the facts and
circumstances, the conflict mineral would have otherwise been
considered ``necessary to the production'' of the product had the
conflict mineral been included in the product. As one commentator noted
for gold, and we believe this is applicable for the other conflict
minerals as well, the ``use of gold as a catalyst in producing products
which do not in themselves contain gold will broaden the reach of the
regulations beyond what Section 1502 envisaged.'' \235\ We do, however,
consider a conflict mineral used as a catalyst or in another manner in
the production process of a product to be ``necessary to the
production'' of the product if that conflict mineral otherwise is
necessary to the production of the product and is contained in any
amount, including trace amounts, in the product.\236\
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    \235\ See WGC II.
    \236\ We note that this interpretation continues to bring
catalysts within the scope of the reporting requirements when they
are necessary to the production of the product. We understand that
not all catalysts are washed away in the production process, and the
remaining minerals may not be ``necessary to the functionality'' of
the product. See letters from Industry Group Coalition I and NAM I
(referring specifically to situations in which catalysts are used to
chemically react with and produce products, and trace levels of the
catalyst are found in the reacted manufactured product, but the
catalysts do not contribute to the performance of the product).
---------------------------------------------------------------------------

    As we indicated in the Proposing Release, we continue to believe
that a conflict mineral in a physical tool or machine used to produce a
product does not fall under the ``necessary to the production''
language in the Conflict Minerals Statutory Provision.\237\ One
commentator asserted that the language in the Conflict Minerals
Statutory Provision is intended to cover conflict minerals in tools or
machines that are necessary for the production of a product and, ``[i]n
the absence of such specificity, the rule will fail to ensure reporting
on the use of such tools or catalysts, thus leaving out a significant
market for the minerals and undermining the purpose of the law.'' \238\
We do not believe that a conflict mineral in a tool or machine is
captured by the Conflict Minerals Statutory Provision because, although
the conflict mineral may be included in the tool or machine, it is the
tool or machine and not the conflict mineral that is necessary to the
production.\239\ Additionally, the tool or machine is

unlikely to be contained in the final product.
---------------------------------------------------------------------------

    \237\ However, the issuer that manufactures or contracts to
manufacture the tool or machine would likely come within the
``necessary to the production'' or ``necessary to functionality''
language.
    \238\ See letter from Niotan I.
    \239\ As described above, we consider a conflict mineral that is
``necessary to the functionality'' of a component product also to be
``necessary to the functionality'' of any subsequent product that
incorporates the component product. We recognize that this could be
seen as a two-step analysis, and thus it could be asserted that the
conflict mineral in the component product is not necessary to the
functionality of the subsequent product. We disagree with this view,
however, because a component added to a subsequent product becomes
part of that subsequent product, which removes any segregation from
the component and the subsequent product and makes the conflict
mineral directly necessary to the functionality of the subsequent
product.
---------------------------------------------------------------------------

    Like tools and machines, indirect equipment used to produce a
product, such as computers and power lines, does not bring the product
that is produced with the equipment into the ``necessary to the
production'' language.\240\ We do not consider a conflict mineral
necessary to the functionality or production of such indirect equipment
to be necessary to the production of the product because that conflict
mineral is only tangentially necessary for production of the product.
Similarly, we do not require issuers to report on the conflict minerals
in materials, prototypes, and other demonstration devices containing or
produced using conflict minerals that are necessary to the
functionality or production of those items because we do not consider
those items to be products. Once an issuer enters those items in the
stream of commerce by offering them to third parties for consideration,
the issuer will be required to report on any conflict minerals
necessary to the functionality or production of those products.
---------------------------------------------------------------------------

    \240\ However, the issuer that manufactures or contracts to
manufacture the indirect equipment would likely come within the
definition of either ``necessary to the functionality'' or
``necessary to the production'' for the indirect equipment.
---------------------------------------------------------------------------

v. De Minimis Threshold
    Finally, after considering the comments, the final rule does not
include a de minimis exception. The statute itself does not contain a
de minimis exception, and for several reasons we believe it would be
contrary to the Conflict Minerals Statutory Provision and Congressional
purpose to include one in the final rule. First, we note that the
Conflict Minerals Statutory Provision does include an express limiting
factor--namely that a conflict mineral must be ``necessary to the
functionality or production'' of an issuer's product to trigger any
disclosure regarding those conflict minerals.\241\ As discussed above,
this standard focuses on whether the conflict mineral is ``necessary''
to a product's functionality or production; it does not focus on the
amount of a conflict mineral contained in the product. We believe that
Congress understood, in selecting the standard it did, that a conflict
mineral used in even a very small amount could be ``necessary'' to the
product's functionality or production. If it had intended that the
provision be limited further, so as not to apply to a de minimis use of
conflict minerals, we think Congress would have done so explicitly. In
this regard, we note that in Section 1504 of the Act, which adds
Exchange Act Section 13(q) as part of the same title (Title XV) of the
Act (``Miscellaneous Provisions''), Congress did explicitly include a
de minimis threshold for the requirement to disclose certain payments
by resource extraction issuers.\242\
---------------------------------------------------------------------------

    \241\ See Exchange Act Sections 13(p)(1)(A) and 13(p)(2)(B).
    \242\ See Section 1504 of the Act and Exchange Act Section
13(q). Exchange Act Section 13(q)(1)(C) states that ``the term
`payment,' means a payment that is made to further the commercial
development of oil, natural gas, or minerals; and not de minimis.''
---------------------------------------------------------------------------

    In addition, we believe that the purpose of the Conflict Minerals
Statutory Provision would not be properly implemented if we included a
de minimis exception in our final rule. As the State Department noted
in its comment letter, ``[i]n light of the nature'' of the conflict
minerals, they are often used in products ``in very limited
quantities,'' so including a de minimis threshold ``could have a
significant impact on'' the final rule.\243\ Consistent with the views
of the State Department, we believe Congress intended the disclosure
provisions to apply to the use of even small amounts of conflict
minerals originating in the Covered Countries.
---------------------------------------------------------------------------

    \243\ See State II (``In light of the nature in which the
covered minerals are often used in products, i.e. often in very
limited quantities, such a change could have a significant impact on
the proposed regulations. A de minimis threshold should not be
considered under current circumstances.'').
---------------------------------------------------------------------------

    We are cognizant of the fact that, by not including a de minimis
exception, even minute or trace amounts of a conflict mineral could
trigger disclosure obligations.\244\ However, a de minimis amount of
conflict minerals triggers disclosure obligations only if those
conflict minerals are necessary for the functionality or production of
a product, and we understand that there are instances in which only a
minute amount of conflict minerals is necessary for the functionality
or production of a product. Therefore, consistent with the proposal,
our final rule applies to issuers for which any conflict minerals are
necessary to the functionality or production of a product manufactured
or contracted by the issuer to be manufactured regardless of the amount
of the conflict mineral.
---------------------------------------------------------------------------

    \244\ See letters from Chamber I and NRF I.
---------------------------------------------------------------------------

    We recognize that not including a de minimis exception in the final
rule will be more costly for issuers than if we included one. As
described above, however, we are of the view that Congress intended not
to provide for a de minimis exception, and including one in the final
rule would therefore thwart, rather than advance, the provision's
purpose. Further, we believe focusing on whether the mineral was
intentionally added addresses some of the concerns regarding de minimis
amounts of minerals. For example, according to one commentator, a
number of metal alloys, including the high volume materials of cold
rolled steel, hot rolled steel, and stainless steel, contain tin only
as a contaminant, such that it is not part of the specification of
these alloys.\245\ Therefore, the tin in these alloys is not
intentionally added, and we do not consider the tin ``necessary to the
functionality or production'' of any product containing those alloys.
---------------------------------------------------------------------------

    \245\ See letter from Claigan Environmental Inc. (Dec. 16, 2011)
(``Claigan III'').
---------------------------------------------------------------------------

C. Location, Status, and Timing of Conflict Minerals Information

    Once it is determined that conflict minerals are necessary to the
functionality or production of a product manufactured or contracted by
the issuer to be manufactured, the issuer will have to submit conflict
minerals information in accordance with the final rule.
1. Location of Conflict Minerals Information
a. Proposed Rules
    Our proposed rules would have required issuers to provide their
disclosure about conflict minerals in their annual reports on Form 10-K
for a domestic issuer,\246\ Form 20-F for a foreign private
issuer,\247\ and Form 40-F for a Canadian issuer that files under the
Multijurisdictional Disclosure System,\248\ with their Conflict
Minerals Reports as an exhibit to their annual report.\249\ Section
1502 requires issuers to disclose information about their conflict
minerals annually, but does not otherwise specify where this disclosure
must be located, either in terms of which form or in terms of where
within a particular form. Our proposed rules would have required this
disclosure in the existing Form 10-K, Form 20-F, or Form 40-F annual
report because issuers were already required to file these reports so
we believed this approach would be less burdensome than requiring a
separate annual report.

To facilitate locating the conflict minerals disclosure within the
annual report without over-burdening investors with extensive
information about conflict minerals in the body of the report, our
proposed rules would have required issuers to include brief conflict
minerals disclosure under a separate heading entitled ``Conflict
Minerals Disclosure'' and more extensive information in a separate
exhibit to the annual report.
---------------------------------------------------------------------------

    \246\ 17 CFR 249.310.
    \247\ 17 CFR 249.220f.
    \248\ 17 CFR 249.240f.
    \249\ In the Proposing Release, we indicated that, by requiring
an issuer to provide its Conflict Minerals Report as an exhibit to
its annual report, the proposed rules would enable anyone accessing
the Commission's Electronic Data Gathering, Analysis, and Retrieval
system (the ``EDGAR'' system) to determine quickly whether an issuer
furnished a Conflict Minerals Report with its annual report.
---------------------------------------------------------------------------

    We proposed to require that an issuer disclose in its annual report
under a separate heading, entitled ``Conflict Minerals Disclosure,''
its determination as to whether any of its conflict minerals originated
in the Covered Countries, based on its reasonable country of origin
inquiry, and, for its conflict minerals that did not originate in the
Covered Countries, a brief description of the reasonable country of
origin inquiry it conducted in making such a determination. The
proposed rules would not have required an issuer that determined that
its conflict minerals did not originate in the Covered Countries, based
on its reasonable country of origin inquiry, to provide any further
disclosures. We also proposed that an issuer include brief additional
disclosure in the body of the annual report if the issuer's conflict
minerals originated in the Covered Countries or if the issuer could not
determine that its conflict minerals did not originate in the Covered
Countries, based on its reasonable country of origin inquiry. As
proposed, these rules would have required an issuer to disclose that
its conflict minerals originated in the Covered Countries, or that it
was unable to conclude that its conflict minerals did not originate in
the Covered Countries, that its Conflict Minerals Report had been
furnished as an exhibit to the annual report, that the Conflict
Minerals Report, including the certified independent private sector
audit, was publicly available on the issuer's Internet Web site, and
the issuer's Internet address on which the Conflict Minerals Report and
audit report were located.
    The Conflict Minerals Statutory Provision requires that each issuer
make its Conflict Minerals Report available to the public on the
issuer's Internet Web site.\250\ Consistent with the statute, we
proposed rules to require an issuer to make such a report, including
the certified audit report, available to the public by posting the text
of the report on its Internet Web site. As proposed, the rules would
require that the text of the Conflict Minerals Report remain on the
issuer's Web site at least until it filed its subsequent annual report.
Although the proposed rules would have required an issuer that
furnished a Conflict Minerals Report to provide some disclosures in the
body of its annual report regarding that report, we would not have
required that an issuer post this disclosure on its Web site. We
believed this was appropriate because any information disclosed in the
body of the annual report would also be included in the Conflict
Minerals Report, which would have been required to be posted on the
issuer's Internet Web site.
---------------------------------------------------------------------------

    \250\ See Exchange Act Section 13(p)(1)(E), which is entitled
``Information Available to the Public'' and states that ``[e]ach
person described under paragraph (2) shall make available to the
public on the Internet Web site of such person the information
disclosed by such person under subparagraph (A).''
---------------------------------------------------------------------------

b. Comments on the Proposed Rules
    We received mixed comments on the proposal. While many commentators
believed that the final rule should not require an issuer's conflict
minerals information to be provided in that issuer's annual
report,\251\ other commentators believed that an issuer's conflict
minerals information should be provided in that issuer's annual report,
as proposed.\252\ Commentators that did not want the conflict minerals
information included in the annual report generally agreed that the
information should be provided either in a newly created report or
form, or in a current report on Form 8-K \253\ or Form 6-K,\254\
instead.\255\ A small number of commentators stated that an issuer's
conflict minerals information should be provided solely on its Internet
Web site.\256\ Some commentators suggested that the final rule should
allow issuers to submit their conflict minerals information on a
separate form or in a current report, noting that the Conflict Minerals
Statutory Provision does not require explicitly that the information be
submitted in a Form 10-K, Form 20-F, or Form 40-F annual report.\257\
As one commentator noted, this requirement contrasts with the one in
Section 1503 of the Act,\258\ which states that mine safety disclosure
be provided in ``each periodic report filed with the Commission under
the securities laws.'' \259\ Therefore, these commentators reasoned
that if Congress intended the Conflict Minerals Statutory Provision to
require an issuer to provide the conflict minerals information in the
annual report on Forms 10-K, 20-F, or 40-F, Congress would have used
language similar to that in Section 1503.
---------------------------------------------------------------------------

    \251\ See, e.g., letters from AdvaMed I, AngloGold, Barrick
Gold, Cleary Gottlieb, Corporate Secretaries I, CTIA, Davis Polk,
Ford Motor Company (Mar. 2, 2011) (``Ford''), Industry Group
Coalition I, ITIC I, Japanese Trade Associations, JVC et al. II, NAM
I, NAM III, NCTA, NMA II, NY State Bar, Roundtable, SEMI, Taiwan
Semi, and Tiffany.
    \252\ See, e.g., letters from Earthworks, Enough Project I,
Global Witness I, Methodist Pension, Peace, and TIAA-CREF.
    \253\ 17 CFR 249.308.
    \254\ 17 CFR 249.306.
    \255\ See, e.g., letters from AdvaMed I, AngloGold, Barrick
Gold, Cleary Gottlieb, Davis Polk, Ford, ITIC I, JVC et al. II, NAM
I, NMA II, NY State Bar, and Taiwan Semi.
    \256\ See letters from Corporate Secretaries I, CTIA, NCTA, and
Tiffany.
    \257\ See, e.g., letters from AngloGold, ITIC I, JVC et al. II,
and NAM I. Exchange Act Section 13(p)(1)(A) requires only that
issuers ``disclose annually'' their conflict minerals information.
    \258\ Section 1503 of the Act.
    \259\ See letter from AngloGold.
---------------------------------------------------------------------------

    Certain commentators asserted that the subject matter underlying
the conflict minerals information is both very specialized and
substantively different from the financial and business information in
the annual report on Forms 10-K, 20-F, or 40-F.\260\ Some of these
commentators stated that the existing Exchange Act reporting system is
designed to provide investors with material information from a
financial perspective, whereas the Conflict Minerals Statutory
Provision uses the securities disclosure laws to provide conflict
mineral supply chain information for the purpose of stopping the
humanitarian crisis in the Covered Countries.\261\ Commentators
suggested that the processes with which to obtain and provide conflict
minerals information should be different from those processes developed
for current year-end reporting.\262\
---------------------------------------------------------------------------

    \260\ See, e.g., letters from Barrick Gold, CEI I, Cleary
Gottlieb, Davis Polk, Ford, ITIC I, JVC et al. II, NAM I, NMA II, NY
State Bar, PCP, Taiwan Semi, and SEMI.
    \261\ See, e.g., letters from CEI I, NY State Bar, and Taiwan
Semi.
    \262\ See letters from Davis Polk and NAM I.
---------------------------------------------------------------------------

    Other commentators argued that the disclosures required by the
final rule should be treated no differently than other disclosures
required by the Exchange Act.\263\ In this regard, one such commentator
agreed that the final rule should require that an issuer's conflict
minerals information be included in the issuer's annual report because
such a requirement is inherent in the policy goals underlying the
Conflict Minerals Statutory Provision and would foster consistency in
the form, location, and timing of the information.\264\ Similarly,
another such commentator stated that not requiring

conflict minerals information in the annual report on Forms 10-K, 20-F,
or 40-F would inhibit the public's ability to monitor an issuer's use
of conflict minerals and allow issuers to hide their conflict minerals
information.\265\ In this regard, a number of commentators believed
that there is little or no difference in the purposes of the Conflict
Minerals Statutory Provision and the rest of the Exchange Act, in that
both require the disclosure of meaningful supply chain and reputational
information about an issuer for the benefit of investors.\266\ For
example, the co-sponsors of the legislation stated explicitly that the
purposes of the Conflict Minerals Statutory Provision and the rest of
the Exchange Act are ``very much the same'' because they both ```assure
a stream of current information about an issuer for the benefit of
purchasers * * * and for the public.''' \267\ As another example, a
commentator asserted that ``conflict minerals disclosures are material
to investors and will inform and improve an investor's ability to
assess social (i.e., human rights) and reputational risks in an
issuer's supply chain.'' \268\
---------------------------------------------------------------------------

    \263\ See letters from CRS I, Global Witness I, Methodist
Pension, Sen. Durbin/Rep. McDermott, and SIF I.
    \264\ See letter from Global Witness I.
    \265\ See letter from Peace.
    \266\ See, e.g., letters from CRS I, FRS, Global Witness I,
Methodist Pension, Sen. Durbin/Rep. McDermott, Sen. Leahy et al.,
SIF I, and SIF II.
    \267\ See letter from Sen. Durbin/Rep. McDermott.
    \268\ See letter from SIF I.
---------------------------------------------------------------------------

    Some commentators were concerned about providing conflict minerals
information in the annual report on Forms 10-K, 20-F, or 40-F due to
the timing of filing an annual report.\269\ These commentators noted
that the increased burden on issuers in collecting and reporting
conflict minerals information could cause those issuers to be unable to
file their annual reports in a timely manner. Some commentators offered
an alternative scheme in which an issuer would be permitted to provide
its conflict mineral information on either a new report or form, an
amended annual report, or a current report on Form 8-K or Form 6-K
within a certain number of days following the end of the issuer's
fiscal year.\270\ A few of these commentators \271\ pointed out that
the Commission permits delays in providing certain information on an
annual report, such as with prospective incorporation by reference of
information from an issuer's proxy statement under General Instruction
G.(3) of Form 10-K \272\ and prospective incorporation by reference of
separate financial statements of unconsolidated entities under Item 3-
09 of Regulation S-X.\273\ Commentators proposed a variety of time
periods, including 120, 150, and 180 days after an issuer's fiscal
year-end, in which an issuer could be required to provide its conflict
minerals information as part of its annual report.\274\ Similarly, as
discussed in greater detail below, some commentators suggested that the
final rule should consider a single start and end date for the
reporting period for all companies, regardless of their particular
fiscal year,\275\ and one of these commentators recommended that this
one year period coincide with the calendar year.\276\
---------------------------------------------------------------------------

    \269\ See, e.g., letters from AngloGold, Cleary Gottlieb, CTIA,
Ford, ITIC I, NAM I, NY State Bar, Roundtable, and SEMI.
    \270\ See letters from AngloGold, Cleary Gottlieb, CTIA, IPC I,
ITIC I, JVC et al. II, NAM I, NY State Bar, Roundtable, and SEMI.
    \271\ See letters from Cleary Gottlieb and NY State Bar.
    \272\ General Instruction G.(3) of Form 10-K [17 CFR 249.310].
    \273\ Item 3-09 of Regulation S-X [17 CFR 210.3-09].
    \274\ See letters from AngloGold, CTIA, ITIC I, NAM I,
Roundtable, and SEMI.
    \275\ See letters from Advanced Micro Devices, Inc., Africa
Faith and Justice Network, Boston Common Asset Management, LLC,
Calvert Asset Management Co., Inc., Congo Global Action, Enough
Project, Falling Whistles, Free the Slaves, Future 500, General
Electric Company, Global Witness, Hewlett-Packard Company,
Interfaith Center on Corporate Responsibility, Jantzi-
Sustainalytics, Jesuit Conference, Jewish World Watch, Mercy
Investment Services, Inc., Microsoft Corporation, Royal Philips
Electronics, Trillium Asset Management, Unity Minerals, US SIF: The
Forum for Sustainable and Responsible Investment (Aug. 22, 2011)
(``MSG II'') and State II.
    \276\ See letter from MSG II (``We respectfully request that the
SEC rule synchronize the timing for the information contained in the
Conflict Minerals Reports from all issuers on a calendar year basis.
The MSG recommends that all issuers begin exercising and reporting
due diligence on the source and chain of custody for the subject
minerals used in their products on a common calendar date.'').
---------------------------------------------------------------------------

    Additionally, some commentators were concerned about the liability
of the principal executive offers, principal financial officers, and
auditors who must certify an annual report under Sections 302 \277\ and
906 \278\ of the Sarbanes-Oxley Act if the rule requires that an issuer
provide its conflict minerals information in its filed annual
report.\279\ In this regard, one commentator stated that, if the final
rule requires an issuer to provide conflict minerals information in its
annual report, the Commission should amend rules 13a-14(a) and (b)
\280\ and 15d-14(a) and (b) \281\ under the Exchange Act to acknowledge
that the various officer certifications required by those rules do not
extend to any conflict minerals information provided either in or as an
exhibit to the annual report.\282\ Another commentator stated that, if
we required conflict minerals disclosure in the existing annual
reports, we should include ``a clear statement in the rules or the
adopting release that the officer certifications required to be
included as exhibits to the existing annual reports would not apply to
the conflict minerals disclosure.'' \283\ Also, some commentators were
concerned about the negative effects that providing the information in
the annual report on Forms 10-K, 20-F, or 40-F would have on form or
other eligibility, incorporation by reference into Securities Act
filings, and home country reporting in the case of foreign private
issuers.\284\
---------------------------------------------------------------------------

    \277\ Public Law 107-204, 116 Stat. 745, Sec. 302 (2002).
    \278\ Public Law 107-204, 116 Stat. 745, Sec. 906 (2002).
    \279\ See, e.g., letters from ITIC I, NMA II, and Taiwan Semi.
    \280\ Rule 13a-14(a) [17 CFR 240.13a-14(a)] and Rule 13a-14(b)
[17 CFR 240.13a-14(b)].
    \281\ Rule 15d-14(a) [17 CFR 240.15d-14(a)] and Rule 15d-14(b)
[17 CFR 240.15d-14(b)].
    \282\ See letter from NY State Bar.
    \283\ See letter from Cleary Gottlieb.
    \284\ See, e.g., letters from Barrick Gold, Cleary Gottlieb,
Corporate Secretaries I, Davis Polk, ITIC I, NMA II, NY State Bar,
and WGC II. But see letter from Global Witness I (stating that
conflict minerals information should be incorporated by reference
into Securities Act filings).
---------------------------------------------------------------------------

    Some commentators indicated that, regardless of where the
information was provided, they wanted the conflict minerals information
in a location that was easily available to the public,\285\ or on the
Web sites of both the issuer and the Commission.\286\ In this regard,
certain commentators recommended that the final rule require an issuer
to post its Conflict Minerals Reports and/or its audit reports on its
Internet Web site, as we proposed.\287\ However, some of these
commentators suggested that the final rule should require an issuer to
keep that information on its Internet Web site longer than until the
issuer filed its subsequent annual report.\288\ Other commentators
noted that the final rule should not require an issuer to post its
audit report online \289\ because, as one of the commentators
noted,\290\ such

a requirement would increase costs without increasing benefits.
---------------------------------------------------------------------------

    \285\ See, e.g., letters from Episcopal Conference of Catholic
Bishops of the DRC (Apr. 5, 2011) (``CENCO I'') and Good Shepherd.
    \286\ See, e.g., letter from Catholic Charities.
    \287\ See letters from CRS I, Douglas Hileman Consulting LLC
(Oct. 31, 2011) (``Hileman Consulting''), Howland, NEI, SEMI, SIF I,
and TriQuint I.
    \288\ See letters from Hileman Consulting (suggesting ``more
than the proposed one year''), NEI (suggesting ``issuers to post
several years worth of reports on their Web sites''), SIF I
(suggesting that an ``issuer should be required to keep posted its
Conflict Minerals Report and audit reports on its Internet Web site
for five years''), and TriQuint I (suggesting that an issuer's
Conflict Minerals Reports should be posted on its Web site ``for 10
years after the issuer's products were last sold on the open
market'').
    \289\ See letters from AngloGold and NMA II.
    \290\ See letter from AngloGold.
---------------------------------------------------------------------------

    Finally, some commentators suggested that the final rule should
address how an issuer must handle a situation in which it acquires or
otherwise obtains control over a company that manufactures or contracts
to manufacture products with conflict minerals necessary to the
functionality or production of products that previously had not been
obligated to provide conflict minerals information to us.\291\ These
commentators noted that the acquired company may not have any processes
in place to determine the origin of conflict minerals in its products
and, therefore, the acquiring issuer would most likely need a
``reasonable amount of time'' \292\ to establish those processes before
it could provide an accurate specialized disclosure report that
included the acquired company's supply chain. Some commentators
recommended that the issuer not be required to report on the products
manufactured by the acquired company until the end of the first
reporting period that begins no sooner than eight months after the
effective date of the acquisition.\293\ One commentator suggested that
the issuer not be required to report on the products manufactured by
the acquired company until the end of the first reporting period that
begins no sooner than 18 months from the date of the acquisition.\294\
Another commentator recommended that the issuer not be obligated to
report with respect to the products manufactured by or for the acquired
entity ``until the first fiscal year beginning after the fiscal year in
which the acquisition is consummated.''\295\
---------------------------------------------------------------------------

    \291\ See, e.g., letters from ABA, Industry Group Coalition I,
Industry Group Coalition II, NAM I, and Semiconductor.
    \292\ Letter from Semiconductor.
    \293\ See letters from Industry Group Coalition I (suggesting an
eight month lead-in period because it is similar to the time that
will elapse between the adoption of final rules implementing the Act
and the commencement of the reporting period applicable to calendar-
year filers, and that time period is necessary to allow sufficient
time for the acquiring issuer to implement its conflict minerals
reasonable inquiry and due diligence processes throughout the supply
chain of the acquired firm), NAM I (same), and Semiconductor (same).
    \294\ See letter from Industry Group Coalition II. See also
letters from Industry Group Coalition I, NAM I, and Semiconductor.
    \295\ See letter from ABA.
---------------------------------------------------------------------------

c. Final Rule
    After considering the comments, we are revising the proposed rules
to require that an issuer provide its conflict minerals information in
a new report on a new Exchange Act form. As proposed, however, the
final rule requires an issuer to provide its Conflict Minerals Report
as an exhibit, and not in the body of the new report. In this regard,
we continue to believe that providing the Conflict Minerals Report as
an exhibit to the specialized disclosure report will enable anyone
accessing the EDGAR system to determine quickly whether an issuer
provided a Conflict Minerals Report with its specialized disclosure
report.
    We proposed requiring disclosure regarding conflict minerals in an
issuer's annual report because we believed that this approach would be
less burdensome than requiring that an issuer provide a separate
report. Based on the comments we received, however, it appears that
issuers will find it less burdensome to provide their conflict minerals
information on a new report that is separate from the annual report and
due later than the annual report. For example, one commentator
explained that ``between an issuer's fiscal year end and the date the
issuer is required to file its audited annual financial statements, the
issuer's accounting and financial reporting teams focus their resources
on preparing the issuer's annual report,'' so ``[r]equiring the
conflict minerals disclosure to be furnished at the same time as the
issuer's Exchange Act annual report would put further strain on these
resources at a time when they are likely already to be operating near
full capacity.'' \296\ Another commentator noted that issuers are going
to be required to utilize ``significantly different processes to comply
with the new reporting requirement that are outside the scope of
processes developed for regular year-end reporting, and it may be a
burden to complete the necessary inquiry and due diligence pertaining
to conflict minerals on the same timetable as'' an annual report.\297\
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    \296\ Letter from AngloGold.
    \297\ Letter from NAM I.
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    We considered commentators' arguments that it would be easier for
investors to locate the information in Forms 10-K, 20-F, and 40-F. We
believe, however, that new Form SD should provide ready access to the
information. Indeed, it may be easier for investors to find the
information when it is included in the new Form SD, rather than as one
of potentially dozens of exhibits in a voluminous Form 10-K, Form 20-F,
or Form 40-K.\298\ Therefore, the final rule requires an issuer with
conflict minerals necessary to the functionality or production of a
product it manufactures or contracts to be manufactured to provide us a
specialized disclosure report on Form SD by May 31 of each year,
reporting on the preceding calendar year. The specialized disclosure
report is due later than when an annual report is due for calendar year
end issuers so as not to interfere with such issuer's preparation of
its Exchange Act annual report, as requested by a number of
commentators.\299\ Also, as discussed in greater detail below, the
final rule requires each issuer to provide its conflict minerals
information for each calendar year, rather than its fiscal year.
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    \298\ Under the proposed rules, an issuer would have been
required to furnish its conflict minerals information in its annual
report on Form 10-K, Form 20-F or Form 40-F. As such, investment
companies that are registered under the Investment Company Act of
1940 [15 U.S.C. 80a et seq.] (``registered investment companies'')
would not have been subject to the disclosure requirement because
those companies are not required to file Form 10-K, Form 20-F or
Form 40-F. Our decision to require this disclosure in a new form is
not intended to change the scope of companies subject to the
disclosure requirement. Therefore, consistent with the proposal,
registered investment companies that are required to file reports on
Form N-CSR or Form N-SAR pursuant to Rule 30d-1 under the Investment
Company Act (17 CFR 270.30d-1) will not be subject to the final
rule.
    \299\ See, e.g., letters from AngloGold, Cleary Gottlieb, CTIA,
Ford, ITIC I, NAM I, NY State Bar, Roundtable, and SEMI.
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    We agree with the comments we received that a reasonable amount of
additional time to submit the conflict minerals information is
appropriate where an issuer acquires or otherwise obtains control over
a company that manufactures or contracts to manufacture products with
conflict minerals necessary to the functionality or production of those
products that previously had not been obligated to provide conflict
minerals information to us. We have added an instruction to the final
rule to reflect this delay. Therefore, the final rule allows an issuer
to delay the initial reporting period on the products manufactured by
the acquired company until the first calendar year beginning no sooner
than eight months after the effective date of the acquisition. This
option appears to be a reasonable approach based on some of the
comments we received.\300\ We note that a shorter period, such as
requiring an issuer to report with respect to the products manufactured
by or for the acquired entity during the first fiscal year beginning
after the fiscal year in which the acquisition is consummated, may
leave an issuer that acquires a company late in the year with an
insufficient amount of time to establish

systems to gather and report on the conflict minerals information.
---------------------------------------------------------------------------

    \300\ See, e.g., letters from Industry Group Coalition I,
Industry Group Coalition II, NAM I, and Semiconductor.
---------------------------------------------------------------------------

    Additionally, we are modifying the proposed rules regarding how
long an issuer must keep its conflict minerals disclosure or its
Conflict Minerals Report available on the issuer's Internet Web site to
reflect that the information is not to be included in an issuer's
annual report on Form 10-K, Form 20-F, or Form 40-K. The proposed rules
would have required an issuer to keep its conflict minerals information
on its Internet Web site until its subsequent annual report was filed.
We intended this period to last only one year because, whether or not
the issuer had any conflict minerals information to provide in its
subsequent annual report, the issuer had to file the subsequent annual
report one year after its prior annual report or cease to be a
reporting issuer. However, with the final rule requiring an issuer to
provide its conflict minerals information in a specialized disclosure
report on Form SD, the period between specialized disclosure reports
may be more than one year if an issuer has no reportable conflict
minerals in its subsequent calendar year. If we did not modify the
proposed rules, such an issuer may have been required to keep its
conflict minerals information on its Internet Web site for more than
one year, possibly indefinitely. Therefore, the final rule specifies
that an issuer must make its conflict minerals disclosure or its
Conflict Minerals Report available on the issuer's Internet Web site
for one year. In response to concerns expressed by commentators that
the information should be required to be mandated longer, we note that
the issuer's Form SD with the Conflict Minerals Report will be
available on EDGAR indefinitely, so the information will continue to be
widely available.
    In another release we are issuing today, we are requiring issuers
to disclose certain resource extraction payment information on Form
SD.\301\ Because of the order of the releases, we are adopting the form
in this release and amending it in the resource extraction release. We
intend, however, for the form to be used equally for these two separate
disclosure requirements.
---------------------------------------------------------------------------

    \301\ Disclosure of Payments by Resource Extraction Issuers,
Release No. 34-67717 (Aug. 22, 2012).
---------------------------------------------------------------------------

2. ``Filing'' of Conflict Minerals Information
a. Proposed Rules
    The proposed rules would have required an issuer's conflict
minerals information to be provided in the issuer's annual report on
Form 10-K, Form 20-F, or Form 40-F, as applicable, and the Conflict
Minerals Report to be included as an exhibit to the issuer's annual
report. Certain proposed item requirements would have instructed an
issuer to furnish its Conflict Minerals Report as an exhibit to its
annual report. Additionally, as proposed, an issuer's Conflict Minerals
Report, which would have included the independent private sector audit
report, would not be ``filed'' for purposes of Section 18 of the
Exchange Act and thus would not be subject to potential liability of
that section of the Exchange Act, unless the issuer stated explicitly
that the Conflict Minerals Report and the independent private sector
audit report were filed under the Exchange Act. Instead, these
documents would only have been furnished to the Commission. Similarly,
as proposed, the rules would not have considered the Conflict Minerals
Report and the independent private sector audit report to be
incorporated by reference into any filing under the Securities Act or
the Exchange Act, except to the extent that the issuer specifically
incorporated them by reference into the documents. As noted above and
in the Proposing Release, furnishing the Conflict Minerals Report would
not have subjected the issuer to Section 18 liability,\302\ but the
issuer would still have had liability for its conflict minerals
information. Under Exchange Act Section 13(p)(1)(C), a failure to
comply with the Conflict Minerals Statutory Provision would have
rendered the issuer's due diligence process ``unreliable,'' and,
therefore, the Conflict Minerals Report would ``not satisfy'' the
proposed rules.\303\ In this regard, as proposed, an issuer that failed
to comply with the proposed rules would have been subject to liability
for violations of Exchange Act Sections 13(a) or 15(d), as
applicable.\304\
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    \302\ 15 U.S.C. 78r.
    \303\ See Exchange Act Section 13(p)(1)(C).
    \304\ 15 U.S.C. 78m(a) and 15 U.S.C. 78o(d).
---------------------------------------------------------------------------

b. Comments on the Proposed Rules
    A number of commentators stated specifically that the final rule
should, as proposed, require an issuer to ``furnish'' rather than
``file'' its conflict minerals information.\305\ Many of these
commentators believed that the nature and purpose of the conflict
minerals disclosure is qualitatively different from the other
disclosure required under Exchange Act Section 13 and the conflict
minerals information is not material to investors.\306\ As one
commentator explained, ``[n]othing in the statute itself suggests that
the `reasonable' investor would find this information to be important
in deciding whether to buy or sell'' an issuer's securities, which is
``the touchstone of materiality under the federal securities laws.''
\307\ However, this commentator acknowledged that ``socially conscious
investors might well factor this information into an investment
decision.'' \308\ Some commentators asserted that the conflict minerals
information is different from other information in required filings, so
the conflict minerals information should be ``furnished.'' \309\ Other
commentators noted that, if the conflict minerals information is
material to a reasonable person's investment decision, it would have to
be disclosed in an issuer's filings even without the Conflict Minerals
Statutory Provision, so any other information regarding conflict
minerals should be ``furnished.'' \310\ Another commentator recommended
that the conflict minerals information should be ``furnished'' because,
whereas the data used to generate the financial statements in issuers'
``filed'' periodic reports are generally within their control and
subject to internal controls, issuers would be required to rely on
third parties (suppliers, smelters, etc.) for their conflict minerals
data that are mostly beyond the issuer's control.\311\
---------------------------------------------------------------------------

    \305\ See, e.g., letters from AngloGold, Barrick Gold, Cleary
Gottlieb, Corporate Secretaries I, Deloitte & Touche LLP (Mar. 2,
2011) (``Deloitte''), Ford, ITIC I, JVC et al. II, NAM III, NMA II,
NY State Bar, Taiwan Semi, and WGC II.
    \306\ See, e.g., letters from AngloGold, Barrick Gold, Cleary
Gottlieb, Ford, ITIC I, JVC et al. II, NMA II, NY State Bar, and
Taiwan Semi.
    \307\ See letter from JVC et al. II.
    \308\ See id.
    \309\ See, e.g., letters from AngloGold, Barrick Gold, Cleary
Gottlieb, Ford, ITIC I, JVC et al. II, NMA II, NY State Bar, and
Taiwan Semi.
    \310\ See letter from AngloGold and NMA II.
    \311\ See letter from Ford.
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    Some commentators argued that the conflict minerals information
should be ``furnished'' so that Exchange Act Section 18 liability would
not attach to the conflict minerals information.\312\ One of these
commentators asserted that Section 18 liability should not be available
because there is no indication that Congress intended for an issuer's
conflict minerals information to be subject to such liability.\313\ In
this regard, some commentators contended that, if ``furnished,''
issuers' conflict minerals information would still receive significant
attention and scrutiny, and the issuers' disclosures regarding this
information will still be subject to liability sufficient enough to
deter

abuse.\314\ The commentators pointed out that issuers would still be
liable for any materially false or misleading statements under the
antifraud provisions of the federal securities laws, including, Section
10(b) of the Exchange Act and Rule 10b-5 there under.\315\ They
indicated further that failure to comply with the Conflict Minerals
Statutory Provision would render the issuer's due diligence
``unreliable'' and, therefore, the Conflict Minerals Report would not
satisfy the final rule, which would subject the issuer to liability for
violations of Exchange Act Sections 13(a) or 15(d), as applicable.\316\
---------------------------------------------------------------------------

    \312\ See letters from Barrick Gold, Cleary Gottlieb, NMA II,
Society of Corporate Secretaries and Governance Professionals (Aug.
16, 2011) (``Corporate Secretaries III''), and WGC II.
    \313\ See letter from the WGC II.
    \314\ See letters from Barrick Gold, Ford, and JVC et al. II.
    \315\ See letters from Barrick Gold and JVC et al. II.
    \316\ See letters from Ford and JVC et al. II.
---------------------------------------------------------------------------

    Conversely, other commentators indicated that the final rule should
require an issuer to ``file'' its conflict minerals information.\317\
Two of the co-sponsors of the statutory provision noted that Congress
intended for an issuer's conflict minerals information, particularly
the Conflict Minerals Report, to be ``filed'' rather than ``furnished''
so that the information would be subject to the liability provisions in
Section 18 of the Exchange Act and, thereby, allow for private sector
remedies for false and misleading statements.\318\ These co-sponsors
asserted that, in the Proposing Release, we incorrectly reasoned that
the Conflict Minerals Statutory Provision's requirement that an issuer
``submit'' its Conflict Minerals Report means that Congress intended
that the information be ``furnished'' instead of ``filed.'' They noted
that the term ``furnish'' is included throughout the Act 41 times, but
that term is ``expressly not used in Section 1502,'' which demonstrates
that ``Congress intended for the word `submit' to be synonymous with
`filed,' not `furnished.''' \319\
---------------------------------------------------------------------------

    \317\ See, e.g., letters from Bario-Neal, Brilliant Earth,
Columban Center et al., Earthworks, Enough Project I, Global Witness
I, Hacker Jewelers, Hoover & Strong, Metalsmiths, Sen. Durbin/Rep.
McDermott, SIF II, TakeBack, TIAA-CREF, and World Vision US and
World Vision DRC (Feb. 21, 2012) (``World Vision II'').
    \318\ See letter from Sen. Durbin/Rep. McDermott.
    \319\ See id.
---------------------------------------------------------------------------

    Similarly, another comment letter written by other members of
Congress also emphasized that it was Congress's legislative intent to
the Conflict Minerals Report be ``filed'' not ``furnished.'' \320\ The
letter stated that it was made clear ``during the legislative process,
meetings with the SEC, and in written comments to the Commission that
Section 1502 was designed as a transparency measure to provide
investors and the public the information needed to make informed
choices.'' \321\ Therefore, according to the letter, ``[p]rotecting
investor interests by making companies liable for fraudulent or false
reporting of conflict minerals is critical--so the reports must be
`filed,' not `furnished.''' \322\
---------------------------------------------------------------------------

    \320\ See letter from Sen. Leahy et al.
    \321\ Id.
    \322\ Id.
---------------------------------------------------------------------------

    Further commentators asserted that a plain reading of the Conflict
Minerals Statutory Provision demonstrates that Congress intended that
the term ``submit'' to mean ``file.'' \323\ The commentators argued
that ``submit'' means ``file'' in the provision because new Exchange
Act Section 13(p)(2)(A) states that conflict minerals disclosure is
required if conflict minerals are necessary to the functionality or
production of a product manufactured by a person described and the
person described is required to ``file'' reports with us pursuant to
the Conflict Minerals Statutory Provision. Also, one of the
commentators noted that the term ``furnish'' is not in the text of the
provision.\324\
---------------------------------------------------------------------------

    \323\ See letters from Global Witness I and Enough Project I.
    \324\ See letter from Global Witness I.
---------------------------------------------------------------------------

    Additionally, some commentators asserted that requiring the
conflict minerals information be ``filed'' would benefit investors by
making an issuer's conflict minerals information more transparent,
accessible, accurate, and complete. In this regard, one of these
commentators suggested that requiring the conflict minerals information
to be ``filed'' would allow for private rights of action, which would
permit investors to seek remedies for material misstatements regarding
conflict minerals disclosures, and provide an incentive for issuers and
others to conduct an appropriate due diligence.\325\ Another
commentator noted that requiring issuers to ``file'' their conflict
minerals information ``promotes greater transparency, makes Section
1502 more effective,'' and helps ``facilitate access to this
information.''\326\ In a further comment letter, a group of investors
indicated that requiring issuers to ``file'' their conflict minerals
information would ``allow investors greater assurance that conflict
minerals disclosure is as comprehensive, transparent and accurate as
possible.''\327\
---------------------------------------------------------------------------

    \325\ See id.
    \326\ See letter from Enough Project I.
    \327\ See letter from SIF II.
---------------------------------------------------------------------------

    Finally, some commentators argued that the conflict minerals
information is material and, therefore, should be ``filed.'' \328\ A
group of investors in one comment letter noted that the conflict
minerals information is material to an investor in evaluating its
investment decision, so the information should be ``filed.'' \329\
Specifically, the letter stated that ``[g]iven the materiality of the
data in evaluating a company's risk, we urge the Commission to require
all information outlined in the proposed rule to be filed in the body
of the annual report rather than furnished as an exhibit.'' \330\ Also,
in another comment letter, an institutional investor indicated that the
conflict minerals information is material to an investment decision
and, therefore, ``as material information[,] this report should be
filed, not furnished as proposed by the Commission.'' \331\ Moreover,
one commentator argued that allowing the conflict minerals information
to be ``furnished'' instead of ``filed'' would ``send a regrettable
signal that the Commission believes these disclosures to be of lesser
importance at the very moment that issuers, regulators, investors, and
governments around the world are looking to the Commission to help
establish the way forward,'' which would ``scale back the vigor of
issuer compliance and undermine the entire purpose of the statute'' and
``undermine the goals of ending the resource-related violence in the
DRC and providing meaningful and reliable disclosures to the American
consumer and investor.'' \332\
---------------------------------------------------------------------------

    \328\ See letters from Global Witness I, SIF II, and TIAA-CREFF.
    \329\ See letter from SIF II.
    \330\ Id.
    \331\ See letter from TIAA-CREF.
    \332\ See letter from Global Witness I.