Conflict Minerals Webinar - Electronic Parts Cross …...Supply Chain Assessment Reasonable country...

Impacts of SEC Regulations in the Electronics Industry

Conflict Minerals Webinar

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Agenda

Agenda

• SiliconExpert Introduction 5 minutes

• David Cheek- Cheek Consulting 25 minutes

• Tierney Powers- SiliconExpert 20 minutes

• Questions & Answers 10 minutes

Tierney Powers

Sales Associate

(415) 990-7256

tierney@siliconexpert.com

SiliconExpert Panelist

• Leading OEMs, Distributors, Suppliers &

EMSs use SiliconExpert Daily

• Our Electronic Component Database of

over 250 million components powers our:

o Comprehensive software tools

o Integrated solutions

o Professional services

About Us

Reactive vs. Proactive Approaches to Obsolescence Management

250 Million+ Orderable Part Numbers

Up to 42 Parametric values/product line

Risk Analysis & Obsolescence

Forecasting Algorithms developed

with CALCE

Environmental Data tracked: EU &

China RoHS, REACH, WEEE

compliance & Material Declarations

Parametrically-derived cross-references

for millions of parts

Our Database

Reactive vs. Proactive Approaches to Obsolescence Management SiliconExpert & Conflict Minerals

Data Collection

* EICC stands for: Electronic Industry Citizenship Coalition * COC stands for : certificate of compliance (company statement)

Conflict Mineral Module

David Cheek Founder Cheek Technical Consulting

(719) 694-2670

(719) 237-8293

david@cheektc.com www.cheektc.com

Today’s Expert Panelist

David Cheek

22 August 2013

Objective

Background

Responsible organizations

Update

Supply Chain

Implementation

Conclusion

References

Contact Information

Most Conflict Mineral webinars concentrate on legal aspects

No implementation view Discussion laying the ground work for

implementing Conflict Minerals and highlights some of the issues ◦ Implementation will vary depending on your situation

Limiting this webinar to the Supply Chain Assessment

My perspective implementing the Supply Chain analysis

Dodd-Frank Wall Street and Consumer Protection Act of 2010, Section 1502 ◦ Intent is to limit the funding of the war in the

Democratic Republic of the Congo (DRC) and the 9 adjoining countries

SEC released the Final Ruling on 22 August 2012 ◦ 356 Pages vs 6 in Section 1502

Requires publically traded companies to Disclose the source of Conflict Minerals used in their products

Defined Conflict Minerals as ◦ Tin, Tungsten, Tantalum and Gold (3TG) ◦ “any other mineral or its derivative determined by the (US)

Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country”

Supply chain audit to define the source of Conflict Minerals ◦ Suppliers and Validate data

Form SD and Conflict Minerals Report must be provided to SEC

Defined Grace period (2/4 Years) ◦ Conflict Mineral Undeterminable

Private Companies, Distributors and Small Businesses are Exempt

Gold from the DRC is 0.08% global production ◦ China, US, and Australia

Tungsten from the DRC is 0.28% ◦ China, Russia and Canada

Tin from the DRC is 3.62% ◦ China, Indonesia and Peru

Tantalum from the DRC is 12.99% (4th) ◦ Brazil, Mozambique and Rwanda

Based on 2009 data

Anyone who manufacturers ◦ NIKE, Ford and Walmart are working Conflict Minerals

Small businesses and Privately held companies although exempt are affected

Primarily focused on the electronics industry

Supply Chain Assessment ◦ Reasonable country of origin inquiry (RCOI) to determine if

minerals were sourced from the conflict zone ◦ Determine source to smelter or mine

Implement Supply Chain Due Diligence ◦ “Nationally or Internationally due diligence framework” –

OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas

Generate documentation ◦ Form SD (Specialized Disclosure) ◦ Conflict Minerals Report (CMR) which must be posted to

website for 1 year

Legal/Compliance or Purchasing/Supply Chain will be responsible for implementing Conflict Minerals within a company ◦ PWC July 2013 Study (PricewaterhouseCoopers)

This person will lead a cross functional team working across multiple divisions

Implementation strategy depends on decisions at corporate level

CFO or Legal will probably sign Form SD

Establish strong company management systems

Identify and assess risk in the supply chain

Design and implement a strategy to respond to identified risks

Carry out independent third-party audit of supply chain due diligence at identified points in the supply chain

Report on supply chain due diligence

What impacts will the 2-year grace period have on suppliers that have a 4 –year grace period? ◦ Legally the supplier can take the 4-year grace period. In

reality they will be on the same schedule as customer with a 2-year grace period but on the 4-year documentation schedule to the SEC

What impacts will being Exempt have on suppliers (Small business/Privately held)? Issue of Legal vs Commercial Obligations. Legally a small

company does not need to comply if it is exempt. But to not impact their revenue stream they will provide the Supply Chain data to the customer but not the documentation (SD/CMR) to the SEC.

Industry is still working through implementation issues

EICC/GeSI Conflict Minerals Reporting Template is the defacto standard (V2.03a)

IPC 1755 proposed format in ballot

Conflict Mineral Report is not defined

Vendor awareness and response

Limited number of Conflict Free Smelters ◦ Ta (22), Au (19), Sn (5), W (0)

Update on the NAM, Chamber of Commerce and Business Roundtable – 24 July 2013

District Court Judge Robert Wilkins rejected all of the plaintiffs’ claims, denied the plaintiffs’ motion for summary judgment, and granted the SEC’s summary judgment motion. The Conflict Minerals Rule therefore continues in effect as adopted.

Understand your Supply chain ◦ How you manufacture (i.e. ODM)

Need to understand how you Purchase ◦ ASL (Business relationship) or AVL (No relationship)

Cyclical nature of Purchasing and Conflict Mineral impacts ◦ SEC exempted everything in the supply chain prior to 31

January 2013

Risk based analysis ◦ Prioritize list based on probability Conflict Minerals is

present ◦ Trustworthiness of supplier/vendor

Data Format ◦ PDF, EICC/GESI, other

Define who will work issues ◦ In-house, Contract Manufacturer, Build-to-print supplier

What are you willing to accept for proof of compliance for simple components ◦ Metals

Due Diligence measures ◦ Validate data

Start with a survey (i.e. Survey Monkey) of a portion of your suppliers ◦ Determine what is available ◦ Define the holes in your process ◦ Define the level of effort ◦ Help address the question if supplier does not provide CM

information

Tie all the available supplier information together to generate your supplier list ◦ Remove suppliers that don’t provide CM or you have data

Develop canned supplier emails ◦ Include link to Template, YouTube video, etc.,

Be prepared to educate your suppliers

Use Analysis Tool (i.e. Silicon Expert ) as the first step in the analysis process to filter list ◦ Issue will be to determine if the data is acceptable (i.e. PDF)

Prioritize list based on Risk ◦ Probability of a CM being present ◦ Trustworthiness of supplier/vendor

Supplier list will include suppliers/materials that may not be listed in your Analysis Tool ◦ Chemical (Glue, Epoxy, etc.) ◦ Build-to-Print (Metal Fabricators, Molders, etc.) ◦ Mil-Spec items ◦ Hardware (screws, nuts, washers, etc.)

Filtered out Suppliers ◦ Have data in acceptable format

◦ No CM used (includes HW)

Start contacting companies requesting CM data ◦ Found that the information is available in the EICC/GESI

format but not posted to website

Record contact information

Develop process to validate supplier data ◦ Most Recent Template (2.03a)

◦ Mandatory Fields completed (i.e. No Yellow)

◦ All Questions answered

◦ Smelter Information detailed

◦ Checker Tab fields Green instead of Red

◦ Product List includes PN information for your Declaration Scope

Need to validate smelter information ◦ Identified Smelters names in Template are not all Conflict

Free

◦ Need to develop Smelter validation procedure

Not the most recent version ◦ Request the information in the latest revision

Declaration Fields void of information (i.e. Yellow)

Declaration Scope does not list products in Product List Tab

Checker fields void of information (i.e. Red) No Smelters identified Not all smelters identified ◦ Gold but not Tin smelters identified

Some companies save the Template in PDF

After you’ve evaluated the data you need to decide what to do ◦ Do nothing if not buying from zone or purchasing from

zone but legitimate smelters

If you are buying from the region and funding the war ◦ Do nothing

◦ Work with supplier to stop funding the war

◦ Stop buying from supplier

◦ Get new supplier

Industry is moving towards providing Conflict Mineral data in the EICC/GESI format but all companies are not ready

Time consuming process

Use the available tools at your disposal

EBN Infographic ◦ http://visual.ly/conflict-minerals ◦ http://www.ebnonline.com/author.asp?section_id=

2981&doc_id=261574

PWC Study ◦ http://www.pwc.com/us/en

Court Case ◦ http://www.actio.net/default/index.cfm/actio-

blog/breaking-nam-vs-sec-case-rejected-by-courts/

Conflict Free Smelter ◦ www.conflictfreesmelter.org

David Cheek ◦ David@CheekTC.com

◦ Cheekdj@yahoo.com

◦ (719)237-8293(Cell)

Tierney Powers

Sales Associate

(415) 990-7256

tierney@siliconexpert.com

SiliconExpert Panelist

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Definition of Conflict Minerals

Environmental Team

Conflict Minerals- Products

SiliconExpert Research and Analysis

Conflict Minerals Process

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Reactive vs. Proactive Approaches to Obsolescence Management SiliconExpert & Conflict Minerals

Data Collection

* EICC stands for: Electronic Industry Citizenship Coalition * COC stands for : certificate of compliance (company statement)

Conflict Mineral Module

New Module: Conflict Minerals Live Demo Portion

Q&A

Q&A Session

Contact Information:

If we do not get to your question in this 1 hour allotted time period,

we will respond personally via email following this broadcast