Conflict Minerals Supplier Training.pdf

Conflict Minerals Supplier TrainingJanuary 2013

GPO-GPO-4-359-0

Table of Content

I. Overview of Conflict Minerals

II. Complexity of minerals supply chain

III. Leading Industry Initiatives

IV. Flextronics’ Conflict Minerals Policy

V. Flextronics’s Conflict Minerals Due Diligence Procedure

VI. Explanation and Preparation of conflict Minerals Reporting

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VI. Explanation and Preparation of conflict Minerals Reporting Template

VII. Glossary

Overview of Conflict Minerals

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� Exploitation and trade of conflict minerals

originating in the Democratic Republic of theCongo (DRC) is helping to finance conflict

characterized by extreme levels of violence in

the eastern DRC. This conflict has claimed

more than 5.4 million lives since it began in

the late 1990’s.

� Mining activity is crucial to the DRC economy.

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� Mining activity is crucial to the DRC economy.

However, some mines are controlled by

militant groups causing serious social and

environmental issues in the region:� Serious human rights abuses, theft, extortion

� Violence over control and taxation of mineral

resources

� Forced and child labor

� Limited development options ->artisanal and

small-scale mining

� Conservation impact, deforestation, etc.


What is DRC conflict-free?

“DRC conflict-free” is defined to mean the products that do not contain

[conflict] minerals or their derivatives determined to be directly or indirectly

financing or benefit armed groups from affected countries:

� Democratic Republic of the Congo (DRC)

� Central Africa Republic

�The Republic of the Congo

�Tanzania

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� Central Africa Republic

� The Republic of

� South Sudan

� Zambia

� Angola

�Tanzania

�Burundi

�Rwanda

�Uganda


Dodd-Frank Act: Section 1502 Conflict Minerals provision B

ackgro

und

• The U.S. Congress passed the Dodd-Frank Wall Street Reform and Consumer

Protection Act (the Act), which was signed into law on July 21, 2010. Section

1502 of the Act is a provision related to sourcing ―conflict minerals.

• The intent of the provision is to deter – through increased transparency of

companies‘ sourcing practices – the extreme violence and human rights

violations in the Democratic Republic of Congo (DRC) and neighboring countries

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Backgro

und

violations in the Democratic Republic of Congo (DRC) and neighboring countries

funded by the exploitation and trade of certain minerals.

•Section 1502 instructs the U.S. Securities and Exchange Commission (SEC), in

consultation with the U.S. Department of State, to promulgate regulations

requiring certain companies to submit annually a description of measures taken

to exercise due diligence on the source and chain of custody of Conflict

Minerals. SEC issued final Conflict Minerals reporting rules on August 22, 2012.


Conflict Minerals Implementation Timeline

July 21, 2010

• The Act signed into law

• Mandated that the SEC promulgate final Section 1502 implementation rules by April 15, 2011

December 15, 2010

• The SEC issues proposed implementation rules

• Public comment period opens

August –December 2011

• The SEC extends date for issuing final rules

• The SEC holds a Roundtable: October 18, 2011

• The SEC defers final rules until

August 22, 2012

• SEC approved final rules requiring public companies to report on their use of “Conflict Minerals”

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Exchange Act Section 13(p)(1)(A), Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ―Act‖) amends the

Exchange Act by adding new Section 13(p).

15, 2011 final rules until 2012

Disclosure requirement:

� All issuers will file Form SD and Conflict Minerals report for the calendar year

from January 1 to December 31 regardless of the issuer’s fiscal year-end.

� First Form SD disclosure report by 31 May 2014 (for the 2013 calendar year)

� Annually by May 31 for each calendar year thereafter.


SEC Disclosure Rule

SEC‘s Proposed* Steps for Section 1502 Disclosure

Determine whether compliance is required

Determine origin of conflict material and resulting

disclosureReport conflict minerals

Company must comply with

Section 1502 if:

•It files reports with SEC under the

Exchange Act and;

•Conflict minerals are ―necessary to the functionality or production‖ of a product

If Section 1502 applies, company

must perform a ―reasonable country of origin inquiry to

determine whether conflict minerals

originated in DRC countries

If conflict minerals did not originate from DRC or are DRC-

If company meets requirements in

previous column, it must:

1.Conduct supply chain due diligence,

Organisation for Economic Co-

operation and Development’s (OECD) standards considered good starting

point by SEC

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(*) SEC Proposed Rule Release No. 34-63547, Conflict Minerals. (**) That is, products containing conflict minerals that do not ―directly or indirectly finance or benefit‖ armed groups in the DRC countries.

production‖ of a product

manufactured or contracted to be manufactured by the

company/issuer

−Provision applies even if the

mineral is not present in the end

product

originate from DRC or are DRC-

conflict free:**

•Disclose conclusion and how

determined in annual report

•Post disclosure on Web site,

provide Web address in annual

report

If conflict minerals originated from DRC countries or issuer is unable to determine if minerals

are DRC-conflict free:

•Disclose conclusion in annual

report and Web site.

point by SEC

2.Create and post on its Web site a

Conflict Minerals Report , includes:

•Description of due diligence performed

•Description of the products

manufactured and facilities where DRC

materials used

•Certified independent private sector

audit report

2.Obtain an independent private sector audit (part of due diligence).

3.Furnish report as exhibit to annual

report on Form 10-K

4.Disclose auditor‘s conclusion in

annual report


What are conflict minerals?

�Cassiterite (tin ore), wolframite (tungsten ore), coltan (tantalum ore) and gold

�Often refer as 3TG (Tin, Tantalum, Tungsten and Gold)

�Originated from the Democratic Republic of Congo or an adjoining country

�The Chart below shows the percentage of Conflict Minerals Supplied from

DRC:

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Columbite-tantalite (coltan) � refined into Tantalum (Ta) :

First conflict mineral – spiked by growth in cell phone industry

Used in :

Electronic components, including mobile telephones, computers, videogame consoles, digital cameras, as alloy for making carbide tools and jet engine components.

Cassiterite � refined into Tin (Sn) :

Primary funding source of rebel groups

Used in :

Alloys, tin plating and solders for joining pipes and electronic circuits

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Wolframite � refined into Tungsten (W) :

DRC is worlds 5th largest producer for this mineral.

Used in :

Metal wires, electrodes, and contacts in lighting, electronic, electrical, heating and welding applications

Gold (Au) :

Used in :

Making jewelry, due to its superior electric conductivity and corrosion resistance, is also used in electronic, communications and aerospace equipment.

Complexity of Minerals Supply Chain

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The number of sources for metals used in a given product can vary over the life

of a product. This is a simplistic view of a supply chain where material flows

downstream to the retailer. More entities typically exist from mine to retailer.

Upstream2 - Mineral supply

chain from Mine to Smelter

Downstream2 - Mineral supply chain from

Smelter to Retailer

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chain from Mine to Smelter Smelter to Retailer

Notes:1CM – Contract Manufacturer, PCB – Printed Circuit board assembler, Semi Con – Semiconductor fabricator, ODD – optical disk drive2Upstream and downstream as defined by the OECD guidance.


Conflict Minerals Due diligence mechanisms approach

In-Region Sourcing Conflict Free Smelter Program Due Diligence

MINE SMELTER/REFINERY OEMS

Upstream Due Diligence Downstream Due Diligence

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Notes:1CM – Contract Manufacturer, PCB – Printed Circuit board assembler, Semi Con – Semiconductor fabricator, ODD – optical disk drive

Multi-Stakeholder collaboration

to verify DRC conflict-free

smelters

•Conflict Free Smelter (CFS) assessment•In-Region Sourcing program

ICGLR’s mineral tracking & certification BGR’s certification & mineral fingerprinting

Companies can ensure CFS smelters

are used in their supply chain

Company Due Diligence: •Establish Management System•Conduct supply chain risk assessment•Report results

Leading Industry Initiatives

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Responsible Supplier Chain Management

International multi-stakeholder efforts are converging to put an end to conflicts in

the DRC. Many in civil society, nongovernmental organizations (NGO’s),

governments and industry are calling for companies to respect human rights

and ensure they do not contribute to the conflict.

In December 2010, the international

‘Organization for Economic Co-Operation and

Development’ (OECD1), produced a document:

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“Due Diligence Guidance for

Responsible Supply Chains of

Minerals from Conflict-Affected

and High-Risk Areas and the

Supplement on Tin, Tantalum

and Tungsten2”, through its 3working group on due

diligence in the mining and

minerals sector.

The purpose of the

guidance is to help

companies avoid fuelling,

facilitating or exacerbating

conflict through their

sourcing practices or

contributing or being

associated with serious

human rights abuses.

1OECD: Organization for Economic Co-operation and Development (www.oecd.org); 2www.oecd.org/dataoecd/13/18/46068574.pdf; 3 www.oecd.org/daf/investment/mining


1. Establish Strong

Management Systems

2. Identify & Assess Risks

3. Design & Implement

4. Conduct Independent Third-Party

Audit

5. Monitor & Report

Strong Company Management System: •Adopt a company policy for the supply chain of minerals originating from

Identify and assess supply chain risks: •Identify risks in supply chain through supplier analysis to determine source of 3TG metals, down to smelter and mining

Design and implement strategy to respond to risks: •Report findings of supply chain risk assessment •Adopt risk

Conduct audit: •Conduct audit of due diligence practices

Monitor and Report Findings: •Publish results of supplier due diligence in annual report and on corporate website (end of first fiscal

OECD Due Diligence Guidance for Responsible Supply ChainsGuidance : 5-Step Framework for Implementation

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conflict-affected and high-risk areas. •Structure internal management to support supply chain due diligence •Establish a system of controls and transparency over the mineral supply chain •Strengthen company engagement with suppliers

region •It is expected that companies engage with industry led efforts leveraging relationships in order to identify smelters/refiners in supply chain and assess due diligence practices or identify through industry validation schemes. •Assess risk of adverse impacts in light of supply chain policy

management plan, including risk mitigation efforts such as suspending trade with certain suppliers. •Monitor track performance of risk mitigation efforts

(end of first fiscal year after date of SEC final ruling) •Consider also expanding scope of sustainability or corporate social responsibility report.


�The *EICC and *GeSI are committed to improving conditions in the electronics

supply chain, and mining activities that fuel conflict are unacceptable.

� The EICC and GeSI joint working group aims to enable companies to source

conflict-free minerals through actions including:- Implementing Conflict-Free Smelter and Due Diligence programs to verify

Electronics Industry Citizenship Coalition (EICC) and

Global eSustainability Initiative (GeSI)

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- Implementing Conflict-Free Smelter and Due Diligence programs to verify

conflict-free minerals down the supply chain to OEMs

- Supporting in-region sourcing schemes to enable future legitimate trade from

DRC and surrounding countries

- Supporting OECD due diligence guidance and pilot

- Engaging with stakeholders for collaboration and efficiency

- Supporting individual company’s assurance processes through information sharing,

standard tools and templates.*EICC: Electronics Industry Citizenship Coalition (www.eicc.info)

*GeSI: Global e-Sustainability Initiative (www.gesi.org)


The EICC/GeSI extractives workgroup will provide updated information, tools

and resources as needed to the website: http://www.eicc.info/extractives.htm

EICC - GeSI commitment on conflict minerals

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Flextronics’ Conflict Minerals Policy

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Flextronics’ Conflict Minerals Policy

� This is Flextronics Corporate Policy supporting Electronic Industry Citizenship Coalition (EICC)/Global e-Sustainability Initiative (GeSI) Initiatives to avoid the usage of conflict minerals mined from the DRC and adjoining countries.

�This Conflict Minerals policy is in line with the Global Business Initiatives on Human Rights, of which Flextronics is a member, and the framework of the

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a member, and the framework of the United Nations Principles of Human Rights encouraging governments and businesses to respect, protect and remedy human rights

� Flextronics Conflict Minerals Policy is developed and stored on the Supplier Information Page. Below is the web link:

http://www.flextronics.com/supplier/supplierq

uality/Files/Conflict%20Minerals%20Policy_Re

v3.pdf

Flextronics’s Conflict Minerals Due Diligence Procedure

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With this goal, Flextronics expect suppliers to adhere to the following:• To source materials only from

environmentally and socially

responsible suppliers.

• To comply with the Dodd-Frank

regulation and provide all

necessary declarations.

• Flextronics is an active member of the

Electronics Industry Citizens Coalition (EICC)

supporting the Conflict Minerals Due Diligence

activities.

• Flextronics adopted the common EICC Conflict Minerals Due Diligence Reporting Templateand Dashboard as a standard questionnaire

for conducting inquiries into Flextronics

supplier’s sources of metals.

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necessary declarations.

• Must pass this requirement up

the supply chain and determine

the source of specified

minerals.

supplier’s sources of metals.

• Flextronics’ maintain the transparency of supply

chain Conflict Minerals records in internal

database.

Flextronics’ Conflict Minerals Overall Process Flow

Flextronics adopted the common EICC Conflict Minerals Due Diligence reporting tool

Request sent to

Supplier

Supplier Working

On the Reporting

Template

Conflict Minerals

Processing Team

Validate the report

Store in the Sharenet

Supplier are required to:• Understand the Conflict Minerals (3TG) information from their lower tier

Supplier required to return a signed copy of reporting template once they had completed the form.

All Suppliers’ completed form will be stored in Flextronics Conflict Minerals Share net database.


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Documents attached when request sent: • Conflict Minerals

Reporting Template• Supplier Letter

from their lower tier level suppliers

• Determine whether their products or components contain 3TG

• Determine the smelter or mine origin

form.Completed template need to send for review: [email protected]

• Conflict Minerals processing Team will check and review on the template.

database.

All Conflict Minerals project related document are able to find in Flextronics Intranet.

Explanation and Preparation of Conflict Minerals Reporting Template

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� This Conflict Minerals reporting template was created by the Electronic Industry

Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI) as a

common means for the collection of sourcing information related to “Conflict Minerals”.

� Flextronics has adopt this template as a Conflict Minerals due diligence procedure to

verify the responsible sourcing of materials and to support compliance to new legislation.

� This template is consistent with EICC and GeSI’s related activities including the Conflict

Free Smelter (CFS) Program. The Conflict Free program details refer to

http://www.conflictfreesmelter.org

� The instruction on how to complete the Conflict Minerals Reporting Template is

available at YouTube: http://youtu.be/Enyu_V5Kd1k

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With this provided Conflict Minerals Reporting Template, supplier is require to completethe following sections (Tabs):a) Company Information

- Specific information about the supplier being assessed

b) Completing 6 Due Diligence Questions (Declaration Tab)- These 6 questions define the usage, origination and sourcing identification for each of the metals.

c) Completing Questions A-J (Declaration Tab)- Questions A-J are designed to access your company’s DRC conflict-free minerals sourcing due diligence activities.

d) Completing Smelter and Mine List Tab- Name and location of the source of the ore/ or smelters from which the minerals was obtained.


Instructions Tab Screen

Before supplier begin to fill in the “Declaration” tab and “Smelter List” tab,

supplier is required to read through the “Instructions” Tab. The instruction will

help to have more understanding on how to complete the reporting template.

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This common reporting template is supported

in multiple language for supplier preference.


Declaration Tab Screen

Three section that need to be fill out:a) Company Information

b) Used of 3TG questionnaire

c) Company Level Conflict Minerals due diligence questionnaire

Language preference

selection box

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• All Columns with (*) are mandatory field to complete

• Supplier are allowed to provide the information in English ONLY


a) Declaration Tab Screen – Company Information

Suppliers are required to fill out the company information.

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a) Suppliers should enter company's

Legal Name. Do not use abbreviations.

b) For Declaration scope, we

encourage suppliers to fill in the

template by company level.

c) Suppliers are required to fill in the

address, representative title and

phone number although there is

no (*) mark.


b) Declaration Tab Screen – Used of 3TG questionnaire

Note:

For question 1, if supplier select

the option as “NO” for all the 4

metals, subsequent questions

( 2 – 6) fields will changed to

black color indicating empty

field not required to be

answered.

All the 6 questions have to be fill out.

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answered.

Therefore the declaration is

completed for this section.

Explanation and Preparation of Conflict Minerals Reporting Templatec) Declaration Tab Screen – Company level Conflict Minerals

due diligence questionnaire

All the 10 (A-J) questions have to be fill out. Declaration based on company level.

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Smelter List Tab Screen

Suppliers are able to view the latest version of the Conflict-Free Smelter (CFS) List published in EICC and GeSI website by clicking on this link.

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GeSI website by clicking on this link. www.conflictfreesmelter.org/

� When supplier declared any present of 3TG minerals, all the mandatory fields are

required to complete.

� Supplier is required to provide the Metal, Smelter, Facility Location, Contact Name

and Email.

Supplier must provide the declaration in English.

The declaration is rejected if supplier provide the information in other language.

Example 1


Rejected

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Accepted

When supplier select declaration scope as “Product Level”, they must complete

the product list information.

Example 2


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AcceptedRejected

All the mandatory fields MUST be completed.

The yellow rows indicated that mandatory information is missing.

AcceptedRejected

Example 3


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Example 4

� If supplier declared any present of 3TG minerals, all the mandatory fields at

“Smelter List” tab are required to complete accordingly.

� Supplier need to make sure they fill in the correct smelter information for the

metal used in their product.

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Example above shows the supplier declare only Tin at the “Declaration” tab.

Continue next page

Supplier declared the used of Tin at the “Declaration” Tab


Example 4 – Validating (continue)

1. The metal declared at “smelter list” tab is not tally with metal declared at declaration tab.

Rejected

2. Smelter list declaredis not Tin smelter

Rejected

Accepted

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1. The metal declared is tally with the “Declaration” tab

2. Smelter list is declared correctly for the particular metal

Accepted


Example 5 – Validating

� Template will be rejected if supplier filled smelter information in Chinese.

� Template will be rejected if supplier provided invalid smelter information.

(Example: Broker, distributor, solder maker, plating company, agent and etc.)

1. Supplier fill in the information in Chinese.

2. Supplier fill in invalid smelter information.

Rejected

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Example of broker/ distributor/ agent are declared wrongly as smelter: 1. Shanghai Gold exchange

2. LMBA

3. Kester

4. Indium Corporation

information.

Glossary

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Glossary

EICC® and GeSI Due Diligence Reporting Template

PROBLEM STATEMENT

August 2010: Downstream electronics industry suppliers reported survey

fatigue and requested a moratorium on due diligence surveys from their

customers until a universal reporting template was available

EICC & GeSI PHILOSOPHY

EICC and GeSI define a common industry approach to support the due

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EICC and GeSI define a common industry approach to support the due

diligence requirements of the SEC

EICC and GeSI develop a universal reporting template for downstream

suppliers that enables companies to work with their supply chains through a

common interface

OBJECTIVE

Glossary

REPORTING TEMPLATE FUNCTIONALITY

• Aligns with SEC due diligence requirements for downstream companies

• Enables downstream suppliers to utilize one universal reporting template for

managing data requests, analysis, aggregation, and reporting to customers

using one universal reporting template in an XML-backed form

• Contains instructions, definitions and an educational packet• Will be freely available for multi-industry use

• EICC and GeSI maintain revision control

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• EICC and GeSI maintain revision control

IMPLEMENTATION OF REPORTING TEMPLATE

• March 2011: Piloted with 60+ electronics industry suppliers. 98% supported and

requested a reporting template to be completed one time per year for their customers.

• April 2011: Finalize the reporting template based on the pilot feedback.

• May – June 2011: Develop an XML-backed form and dashboard tool to provide data

aggregation and reporting. Translate the template into Chinese and Japanese.

• August 2011: Publish the reporting template on EICC and GeSI websites.

• Ongoing: Template revisions as needed (i.e. once SEC final rules are released).

Glossary

WHY?

EICC and GeSI are spearheading development of a multi-stakeholder assessment process to determine if smelters/refiners are sourcing conflict-free minerals.

Provide a mechanism that enables and encourages

responsible sourcing of tantalum, tin, gold, tungsten

•Addressing each metal separately, but concurrently,• Order of priority is (1) tantalum, (2) tin, (3) tungsten, (4) gold

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SCHEDULE• Order of priority is (1) tantalum, (2) tin, (3) tungsten, (4) gold

•Tantalum assessments are underway; tin, tungsten, and gold

smelter assessments are planned to begin in 2011.

RESULT

•A list of smelters/refiners who are compliant with the CFS

assessment protocol will be posted on a public website.• Date to be determined

• Link: www.conflictfreesmelter.org

Glossary

EICC and GeSI Conflict Free Smelter Tools & Resources can be found in this website: http://www.conflictfreesmelter.org/cfshome.htm

• Compliant Tantalum Smelter List and Due Diligence Tool are available.

• Compliant Smelter List for Tin, Tungsten and Gold are in developing progress.

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Glossary

• General Items• Name and location of passing smelter.

• Smelters’ conflict policy.

• Materials originating from Level 1 Countries• Country of Origin

• Materials originating from Level 2 countries• Country of origin

• Mine of origin or region of origin (for artisanal miners)

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• Mine of origin or region of origin (for artisanal miners)

• All points of import and export along the supply chain

• For nine surrounding countries and Kenya• For mine sources: amount of material (weight Ta) delivered to smelter from each mine and the mine capacity

• For artisanal sources: amount of material (weight Ta) delivered to smelter and the countrycapacity

• Materials originating from Level 3 countries• Output from credible internationally recognized DRC conflict-free mineral traceability

scheme

Glossary

Level 1 countries:• All countries excepting the Democratic Republic of Congo and Level 2 countries.

Level 2 countries:• Algeria, Angola, Belgium, Benin, Botswana, Burkina Faso, Burundi, Cameroon,

Canary Islands, Cape Verde, Central African Republic, Ceuta, Chad, Comoros,

Côte d'Ivoire, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon,

Gambia, Germany, Ghana, Guinea, Guinea-Bissau, Hong Kong, Japan, Kenya,

Lesotho, Liberia, Libya, Madagascar, Madeira, Malawi, Mali, Mauritania, Mauritius,

Mayotte, Melilla, Morocco, Mozambique, Namibia, Niger, Nigeria, Oman, Republic

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Mayotte, Melilla, Morocco, Mozambique, Namibia, Niger, Nigeria, Oman, Republic

of the Congo, Reunion, Rwanda, Saint Helena, São Tomé and Príncipe, Senegal,

Seychelles, Sierra Leone, Singapore, Somalia, South Africa, Sudan, Swaziland,

Tanzania, Togo, Tunisia, Uganda, United Arab Emirates, United Kingdom, United

States of America, Western Sahara, Zambia, Zimbabwe.

Level 3 country: • Democratic Republic of Congo

Glossary

SEC flowchart summary of the final ruleThe SEC final rule provides a flowchart to summarize its application to issuers:

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Thank You!

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