WASHINGTON — Retailers, apparel brands and jewelry makers expressed concern over a regulation adopted by the Securities and Exchange Commission on Wednesday that requires companies to disclose information about their use of tin, gold and two other minerals mined in the Democratic Republic of the Congo and neighboring countries.

This story first appeared in the August 23, 2012 issue of WWD. Subscribe Today.

The SEC voted 3 to 2 to adopt the rule, which was included in the Dodd-Frank Act financial overhaul legislation passed by Congress in 2010 that increases SEC reporting requirements for public companies.

“The statute explains that the exploitation and trade of conflict minerals by armed groups is helping to finance conflict in the region and that the emergency humanitarian crisis there warrants these disclosure requirements,” said SEC chairman Mary L. Schapiro. “Congress intended to further the humanitarian goal of ending the extremely violent conflict in the DRC, which has been partially financed by conflict minerals originating in the DRC. Congress chose to use the securities laws disclosure requirements to accomplish its goal.”

The four target minerals are gold, tin, tantalum and tungsten. Tin is used in small amounts in buckles, zippers and buttons in apparel and gold is used in a wide variety of jewelry and accessories.

A broad swath of the business community has raised concerns to federal regulators about the potential costs of complying with the requirement and the difficulties associated with trying to track what are often trace amounts of minerals back to the Congo and its neighboring countries.

“Even if most of your product is not using tin, which is the case in our industry, and even if you are sure the tin you do use doesn’t come from the Congo or any surrounding countries in Africa — only 4 percent of the tin in the world comes from that region — you still have to go through all of the due diligence to prove it is not from the region,” said Nate Herman, vice president of international trade at the American Apparel & Footwear Association.

Several of AAFA’s members that make jewelry are impacted by the disclosure requirements on gold, which is more difficult to track because the gold supply chain is more diverse. While the disclosure rule applies to public companies, Herman said the implications are that any privately held firms that sell to public companies will also have to do due diligence in order for the public company to meet the rule.

“It is very complicated to get that much supply chain visibility,” said David French, senior vice president of government relations at the National Retail Federation. “Most of these minerals can be smelted and transformed multiple times…and tracking them all the way back to the source is complicated.”

Bill Hughes, senior vice president for government affairs at the Retail Industry Leaders Association, said while the regulation is “well intentioned and RILA supports the idea,” the general industry concern is that “all of the ores, including from the Congo region, go into smelters and get mixed together and it is difficult to know where they came from.”

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