PPAI’s Washington Report

Through our legislative contacts and lobbyists, PPAI has access to information, insight and analysis that you won’t see published anywhere else. Information that will help you better understand how what happens in D.C. can affect your business and employees at home—information that will help you become more aware and better prepared to advocate for your business, profession and industry. I hope you find this information beneficial to your business.

While the upcoming election dominates headlines across the country, legislators and federal agency staffs are busy implementing legislation and regulation that will impact how you go to business. This week’s Washington Report highlights the work of two efforts on the Hill—implementation of the Dodd-Frank Reform and revisions to the Lacey Act:

 

CONFLICT MINERALS

We are expecting the Securities and Exchange Commission (SEC) to issue final rules later this month providing guidance on what has already become a very confusing issue—tracking “conflict minerals.”

It started when Congress passed and the President signed into law the Dodd-Frank Wall Street Reform And Consumer Protection Act in 2010. Public Law 111-203 includes a provision that will require some businesses that are already required to file reports to the SEC by other laws to disclose the source of certain conflict minerals.

According to the Conference Report, H. Rept. 111-517, the provision of the new law “requires disclosure to the SEC by all persons otherwise required to file with the SEC for whom minerals originating in the Democratic Republic of Congo and adjoining countries are necessary to the functionality or production of a product manufactured by such person. Such a public disclosure report by the person must describe the measures taken to exercise due diligence on the source and chain of custody of such materials, the products manufactured, and other matters; requires an independent audit of the report.” The term “conflict mineral” refers to columbite-tantalite (coltan), cassiterite, gold, wolframite or their derivatives; or any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country.

The SEC had 270 days after enactment (July 21, 2010) to promulgate the regulations to implement this new disclosure requirement, with the first report to be due for the company’s first full fiscal year that begins after the date of the promulgation of the regulations. The SEC missed the July 21 deadline.

While most businesses do not file reports with the SEC and therefore do not have a direct conflict-mineral reporting requirement under the law, this law is all about “sourcing” so other businesses including those in the promotional products industry, may be asked by companies that do have the reporting requirement, to provide information.

As the General Accounting Office (GAO) has observed: “The anticipated disclosure rule could impact any U.S. or foreign company that is a supplier to those covered companies that produce products containing conflict minerals, because covered companies required to disclose the use of conflict minerals in their products will need to obtain conflict minerals sourcing information from their suppliers. Consequently, U.S. and foreign companies across the conflict minerals supply chains may also need to conduct due diligence and trace their supply chains to provide sourcing information to covered companies.

“In practice, a company’s supply chain for products containing tin, tantalum, tungsten and gold can be complex and can vary considerably. For example, a company’s conflict minerals supply chains may involve several different entities taking different actions to help develop products and move them through the supply chain. In addition, the supply chains for some companies’ products may contain a small number of component parts, whereas the supply chains for other companies’ products may contain thousands of component parts, which may be sourced from hundreds of different suppliers.”

Needless to say, there is a lot of confusion and hopefully the SEC guidance will help clear things up. PPAI will report on it when information is made available by the SEC.

LACEY ACT REVISIONS

The Lacey Act was enacted in 1900 as the United States’ first wildlife protection statute. The Act controls “illegal” wildlife, fish and plant trafficking. In 2008 it was amended to curb illegal logging of exotic woods. The amendment actually expanded the Lacey Act protections to a broader range of plants and plant products. The Lacey Act now makes it unlawful to import, export, transport, sell, receive, acquire or purchase in interstate or foreign commerce any plant, with some limited exceptions, taken in violation of any federal, state, tribal or foreign law that protects plants. The Lacey Act also now makes it unlawful to make or submit any false record, account or label for, or any false identification of, any plant covered by the act.

The amendment attempts to curb illegal activity through the customs process by requiring an import declaration that must contain, among other things, the scientific name of the plant, value of the importation, quantity of the plant and name of the country from which the plant was harvested. There are no exceptions and, as a result, many products that have a minimal amount of wood or wood products in them are covered. Violations can result in forfeiture of the products without recourse.

The questions, which even the government has been pondering since enactment, include:

  • Whether an exception from the declaration requirement for products containing minimal amounts of plant material could be developed that would be less burdensome while still carrying out the intent of the Lacey Act amendments;
  • How importers may comply with the declaration requirement when importing composite plant products whose genus, species and country of harvest of some or all of the plant material may be extremely difficult or prohibitively expensive to determine;
  • How to accommodate products made of re-used plant materials, or plant materials harvested or manufactured prior to the 2008 Lacey Act amendments, and for which identifying country of harvest, and possibly species, would be difficult if not impossible; and
  • Whether groups of species commonly used in commercial production, could be given a separate name that could be entered on the declaration form as a type of shorthand identification of genus and species, such as the currently recognized “SPF” acronym for spruce, pine and fir.

Congress may consider legislation this fall to provide at least some relief from the more onerous aspects of the law. In particular, there is a bill that makes it clear the law does not apply to products before the 2008 revision; it provides some relief from the forfeiture provision for innocent infringement; and, it provides composite product relief.

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