Conflict Minerals Compliance Basics: Companies That “Contract to Manufacture” Products

In this edition of “Conflict Minerals Compliance Basics,” we will cover if companies that “contract to manufacture” products are subject to Dodd-Frank 1502.

A company is considered to be “contracting to manufacture” a product if it has some actual influence over the manufacturing of that product. This determination is based on facts and circumstances, taking into account the degree of influence a company exercises over the product’s manufacturing. A company is not be deemed to have influence over the manufacturing if it merely:

• Affixes its brand, marks, logo, or label to a generic product manufactured by a third party.

• Services, maintains, or repairs a product manufactured by a third party.

• Specifies or negotiates contractual terms with a manufacturer that do not directly relate to the manufacturing of the product.

The requirements apply equally to domestic and foreign issuers.

A common question asked by companies is if an issuer that specifies that its logo be etched into a generic product that is manufactured by a third party considered to be “contracting to manufacture” the product?  The answer is no. In the adopting release, the Commission stated that an issuer is not considered to be “contracting to manufacture” a generic product if its actions involve no more than “affixing its brand, marks, logo, or label to a generic product manufactured by a third party.” Etching or otherwise marking a generic product that is manufactured by a third party, with a logo, serial number, or other identifier is not considered to be “contracting to manufacture.”

If you wish to learn if your company is subject to the law, contact Source Intelligence to get the necessary information to come in to compliance.