NRF tells court retailers should be exempt from conflict minerals rule

NRF told a federal court today that retailers should not be included under regulations requiring manufacturers to determine whether merchandise contains “conflict” gold and other minerals from the Democratic Republic of the Congo.

“The SEC’s regulation makes no practical sense,” NRF said. “Manufacturers and retailers have fundamentally different functions in the commercial world and they have fundamentally different obligations under the statute at issue here.”

NRF’s comments came in a friend-of-the-court brief filed with the U.S. Court of Appeals in Washington, which is considering a lawsuit brought by the U.S. Chamber of Commerce and others over a Securities and Exchange Commission regulation requiring publicly held companies to determine whether their products include gold, tin, tungsten or tantalum from the warn-torn eastern region of the Congo or surrounding areas. The regulations implement a provision in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act intended to cut off funding for armed rebel groups involved in the fighting.

NRF argued that Dodd-Frank only gave the SEC authority to impose the rules on manufacturers, not retailers who contract with manufacturers to supply merchandise, even if it is custom-made private-label merchandise.

“A manufacturer, by definition, must know about the materials and parts that go into its products,” NRF said. Retailers ordering products, by contrast, have “little more ability to learn about and control the source of their components than a consumer who custom orders furniture.”

As written by the SEC, the regulations apply not only to manufacturers but also retailers who “contract to manufacture” private-label merchandise. A retailer simply placing its brand on a generic product is not covered, but those that have “some actual influence over the manufacturing of that product” are. Retailers selling only third-party merchandise under the product’s own brand rather than the store’s brand are not affected.

The regulations, which are set to take effect in 2014, cover products clearly containing metals such as jewelry to electronics but also some apparel and even cosmetics. NRF has argued that even if a retailer knows what minerals are in its products it is difficult to know the source of the minerals.