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Dodd-Frank

Examples of Conflict Minerals Disclosure

by   |   February 7, 2011

Section 1502 of the Dodd-Frank Act requires certain disclosures and other matters regarding issuers who use “conflict minerals . . . necessary to the functionality of production of a product manufactured by such person” that originate in the Democratic Republic of Congo or an adjoining country.  Broc Romanek of TheCorporateCounel.net has identified this issue as a “sleeper for disclosure lawyers.”  The provisions are currently subject to SEC rulemaking.  Some issuers have begun making disclosures about the eventual impact of the rules as set forth below.

Multi-Fineline Electronix, Inc.

We are subject to a variety of environmental laws and regulations relating to the storage, discharge, handling, emission, generation, manufacture, use and disposal of chemicals, solid and hazardous waste and other toxic and hazardous materials used in the manufacture of flexible printed circuits and component assemblies in our operations in the United States, Europe and Asia.  In addition, certain of our customers have, or may in the future have, environmental policies with which we are required to comply that are more stringent than applicable laws and regulations and certain provisions of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act may soon require us to report on “conflict metals” used in our products and the due diligence plan we put in place to track whether such metals originate from the Democratic Republic of Congo.  A significant portion of our manufacturing operations are located in China, where we are subject to constantly evolving environmental regulation.  The costs of complying with any change in such regulations or customer policies and the costs of remedying potential violations or resolving enforcement actions that might be initiated by governmental entities could be substantial.

Nvidia Corporation

There is also a movement to improve the transparency and accountability concerning the supply of minerals coming from the conflict zones of the Democratic Republic of Congo.  New U.S. legislation includes disclosure requirements regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries and procedures regarding a manufacturer’s efforts to prevent the sourcing of such “conflict” minerals.  The implementation of these requirements could affect the sourcing and availability of minerals used in the manufacture of semiconductor devices.  As a result, there may only be a limited pool of suppliers who provide conflict free metals, and we cannot assure you that we will be able to obtain products in sufficient quantities or at competitive prices.  Also, since our supply chain is complex, we may face reputational challenges with our customers and other stockholders if we are unable to sufficiently verify the origins for all metals used in our products.

Advanced Micro Devices, Inc.

Environmental laws are complex, change frequently and have tended to become more stringent over time.  For example, the European Union (EU) and China are two among a growing number of jurisdictions that have enacted in recent years restrictions on the use of lead, among other chemicals, in electronic products with other countries considering similar restrictions.  These regulations affect semiconductor packaging.  There is a risk that the cost, quality and manufacturing yields of lead-free products may be less favorable compared to lead-based products or that the transition to lead-free products may produce sudden changes in demand, which may result in excess inventory.  Recently, there has been a movement to improve the transparency and accountability concerning the supply of minerals coming from the conflict zones of the Democratic Republic of Congo (DRC).  There is new US legislation that includes disclosure requirements for those manufacturers who use “conflict” minerals mined from the DRC and adjoining countries.  The implementation of these requirements could affect the sourcing and availability of minerals used in the manufacture of semiconductor devices. As a result, there may only be a limited pool of suppliers who provide conflict free metals, and we cannot assure you that we will be able to obtain products in sufficient quantities or at competitive prices.  Also, since our supply chain is complex, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins for all metals used in our products.

Cabot Corporation

We have not purchased or sourced any material containing tantalum, including coltan, from the Democratic Republic of the Congo.

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