OEMs, Suppliers File SEC Audits; Say Conflict Minerals Hard to Trace

This story appears in the June 23 print edition of Transport Topics.

Publicly traded truck makers and industry suppliers told federal regulators they have not determined whether their suppliers use African “conflict minerals” in the manufacture of products.

It was the first of the companies’ disclosures to the U.S. Securities and Exchange Commission in compliance with a May 31 deadline. The reports will be annual.

The SEC requires public companies to conduct a “reasonable country of origin inquiry” to determine whether there is “reason to believe” that tantalum, tin, tungsten or gold (or 3TG) originated in the Democratic Republic of the Congo or surrounding countries.

The SEC defines conflict minerals as those commodities or their derivatives determined by the U.S. secretary of state to be financing hostilities in Congo or the nine countries surrounding that African nation.

In the first round of documents filed with the SEC, Navistar Inc. said it has surveyed 125 suppliers.

“Based on these initial survey results, Navistar was unable to determine the origin of 3TG in all our North American Truck segment products and therefore cannot exclude the possibility that some 3TG in such products may have originated in the Democratic Republic of the Congo or an adjoining country,” Navistar reported.

Likewise, Paccar Inc. said it has gone to great efforts to determine if the 3TG minerals it uses can be traced to the same smelters known or suspected to fund hostilities in the Congo region.

Paccar said it has issued requests for information from more than 1,100 of its production suppliers worldwide, but to date “has not been able to fully determine the specific mines and smelters that processed the conflict minerals used in its products.”

Truck makers Volvo AB and Daimler AG are not listed on the U.S. stock exchange and therefore are not required to file conflict minerals reports.

Catherine Boland, a vice president with the Motor and Equipment Manufacturers Association, has helped members with their compliance obligations. She said she would have been “shocked” if a large number of companies could determine with any precision the source of the minerals they use this early on.

Despite the deadlines, there is no penalty for companies that file late or don’t file reports at all.

However, Boland said those companies could suffer a blow to their public image if they do not make a final determination by the next deadline, in 2015.

Truck engine-manufacturer Cummins Inc. said in its report, that as a downstream company, it generally does not have a direct relationship with smelters and refiners.

“Because of our size, the complexity of our products and the depth, breadth and constant evolution of our supply chain, it is difficult to identify actors upstream from our direct suppliers,” the company said.

Nonetheless, Cummins said it surveyed more than 900 direct suppliers but was unable to determine the origin of their smelter or refiner processing 3TG minerals.

Suppliers Meritor Inc. and Wabco said they were unable to determine with certainty the source of the minerals used in their manufacturing process.

Meritor said 89 of its 434 direct suppliers said their products may contain 3TG, but only eight provided information on the 3TG that was included in the specific products they provided to the company.

Likewise, Wabco said it surveyed its 619 suppliers, Eaton Corp. surveyed 2,300 suppliers and Dana Holding Corp. surveyed its supplier shipping locations. None of them could ensure it wasn’t using conflict minerals.

Caterpillar Inc. said that because it was many steps removed from the mining process, it had to rely on information provided by its estimated 58,300 suppliers.

“The majority of those suppliers either provided an incomplete or inconclusive response, or did not provide any response,” Caterpillar said.

Therefore, the company said it “did not receive sufficient information” to conclude that the 3TG minerals did not originate in the Congo region.

Tanya Bolden, manager for corporate responsibility for the Automobile Industry Action Group, said that not only are companies finding the search difficult, but they also are reluctant to arrive at firm conclusions because they have at least another year left to drill down into their supply chains.

“The government really wants companies in this first year to demonstrate that they are taking the necessary steps to gain the visibility that is expected,” Bolden said.

The rule, approved by the SEC in 2012, stems from mandates contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in July 2010.