Conflict Minerals Report
For The Year Ended December 31, 2016
This report (this “Conflict Minerals Report”) for the year ended December 31, 2016 is presented to comply with Rule 13p-1 under the Securities Exchange Act of 1934, as amended, and Form SD (collectively, the “Rule”). The Rule was adopted by the Securities and Exchange Commission (the “SEC”) to implement reporting and disclosure requirements related to certain minerals as directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). The Rule imposes certain reporting obligations on SEC registrants, like Amphenol Corporation (together with its subsidiaries, the “Company”, “Amphenol” “us” or “we”), whose manufactured products contain certain minerals or their derivatives which are necessary to the functionality or production of their products. These minerals include cassiterite, columbite-tantalite, gold, wolframite, and their derivatives, which are limited to tin, tantalum, tungsten, and gold (“3TG” or “conflict minerals”) for the purposes of this assessment. These reporting obligations apply to registrants regardless of the geographic origin of the 3TG and whether or not they fund armed conflict in the Democratic Republic of the Congo (the “DRC”) or an adjoining country (together with the DRC, the “Covered Countries” or the “Conflict Region”).
This Conflict Minerals Report is not audited.
This Conflict Minerals Report has been prepared by management of the Company. The information includes the activities of all majority-owned subsidiaries.
Amphenol is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable. Amphenol designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia, Australia and Africa and sells its products through its own global sales force, independent representatives and a global network of electronics distributors. Amphenol has a diversified presence as a leader in high growth areas of the interconnect market including: automotive, broadband communications, commercial aerospace, industrial, information technology and data communications, military, mobile devices and mobile networks. Amphenol Corporation was incorporated in Delaware in 1986, but certain businesses now part of the Company have had operations since prior to 1900. Our principal executive offices are located at 358 Hall Avenue, Wallingford, Connecticut, 06492.
Conflict Minerals Philosophy and Guidelines
Our initial conflict minerals policy was crafted in 2010. The key principles guiding the Company’s conflict minerals philosophy and the guidelines pursuant to which the Company’s current conflict minerals program was established are expressed in two documents as modified and updated from time-to-time: (i) the Product Stewardship Policy — Conflict Minerals; and (ii) The Amphenol Corporation Code of Business Conduct and Ethics. Text from the relevant portions of these documents is set forth below:
Product Stewardship Policy — Conflict Minerals
To outline Amphenol Corporation’s practices regarding the sourcing of Conflict Minerals as well as the verification of such practices.
This policy applies to all employees of Amphenol Corporation (“Amphenol” or the “Company”) and its subsidiaries and affiliates. Amphenol will, as far as it is reasonably practicable, ensure that the Company’s activities, and those of its suppliers and sub-contractors, will comply with this policy.
Amphenol is committed to implementing programs and practices that promote environmental sustainability and social responsibility, while continually improving product quality and reliability. To that end, Amphenol is committed to ensuring its products are “DRC conflict-free”, that is, they do not contain metals derived from “conflict minerals” - columbite-tantalite (tantalum), cassiterite (tin), gold, wolframite (tungsten) - which directly or indirectly finance or benefit armed groups through mining or mineral trading in the Democratic Republic of the Congo (DRC) or an adjoining country.
In carrying out this policy, Amphenol will implement programs and practices that, wherever practicable:
preclude the sourcing of conflict minerals from facilities in the DRC or adjoining countries that have not been certified as conflict free
ensure that its suppliers have procedures in place to demonstrate and verify continuing conformance to this principle
audit its suppliers for the continued accuracy of those verifications
maintain records of verifications for both internal and/or external audit
assign internal roles and responsibilities and provide appropriate staff training to manage program
communicate the Company’s efforts to stakeholders
All Amphenol managers, employees, partners and suppliers are expected to adhere to the spirit as well as the letter of this policy.
The senior executive responsible for each local operating unit is ultimately responsible for stewardship of the products made there and shall:
provide appropriate staffing and assign internal roles and responsibilities to manage the Product Stewardship — Conflict Minerals Program
maintain an awareness of and familiarity with regional, national and multi-national (e.g., European Union) statutes, regulations, directives and criteria applicable to the operation
develop and implement programs and procedures necessary to carry out this policy, addressing existing and new product lines
provide training to all affected employees of the requirements of this policy and the implementation of its programs and procedures. In particular, those personnel who interface with Amphenol’s customers (e.g., sales and marketing, product designers, quality assurance staff) should be familiar with all material aspects of this program
maintain an adequate, verifiable database, consistent with the products being manufactured at a local operating unit, to facilitate transfer of information to customers and other stakeholders
The Company reserves the right to unilaterally terminate, suspend or amend this policy at any time.
Section 12 of the Amphenol Corporation Code of Business Conduct and Ethics reads as follows:
The ores from which gold, tantalum, tin and tungsten are derived, that come from the Democratic Republic of the Congo and adjoining nearby countries (including Angola, Burundi, Central African Republic, The Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia), which support the on-going conflicts in that region, are referred to herein as Conflict Minerals. It is believed that the proceeds of mining Conflict Minerals may contribute to armed conflict and human rights abuses. In support of initiatives to cut financing for this armed conflict and human rights abuses and in compliance with the regulations applicable to publicly traded companies, Amphenol has implemented programs and practices that are intended to:
Confirm with reasonable certainty that the gold, tantalum, tin and tungsten purchased from suppliers and used in its products are not derived from Conflict Minerals
Maintain, as necessary and appropriate, records of supplier verifications for both internal and/or external audit
Assign internal roles and responsibilities and provide appropriate staff training to manage these programs and practices
Communicate the Company’s efforts, as necessary and appropriate, to stakeholders
We have developed a process and are implementing a strategy to support the objectives of the Rule and our policy. Our commitment includes:
Developing policies and processes toward precluding the use of 3TG necessary to the functionality or production of our product(s) that finance or benefit armed groups in the Conflict Region.
Encouraging suppliers whose products contain 3TG to establish policies, due diligence frameworks, and management systems consistent with the Organisation for Economic Co-operation and Development (“OECD”) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High Risk-Areas that are designed to accomplish these goals, and requiring their suppliers to do the same.
Amphenol believes in establishing and maintaining long-term relationships with suppliers whenever possible. However, if we determine that any supplier is, or a reasonable risk exists that such supplier may be, violating this policy, we will require the supplier to commit to, devise and undertake suitable corrective action to move to a conflict-free source. If suitable action is not taken, we will look to alternative sources for the product. Amphenol’s efforts are not to ban procurement of 3TG from the DRC and adjoining countries, but to assure 3TG procurement from responsible sources in the region. If we determine that any of the components of our products contain 3TG from a mine or facility in the Conflict Region that is not “conflict free”, we will work towards transitioning to components and materials that are “conflict free”.
Supply Chain Overview
Amphenol has a complex, broad and dynamic supply chain. In many cases, the presence of 3TG in our supply chain is obvious, particularly in the case of raw materials. Nevertheless, we performed a comprehensive analysis of our product components and raw materials, and the role our suppliers serve in both our manufacturing and product delivery processes. Through this analysis we determined that many contain 3TG, triggering obligations under the Rule. We also determined that 3TG is a small portion of overall materials content. We don’t source directly from mines, smelters or refiners. Rather, in almost all cases we are many levels removed from the mines, smelters or refiners.
Reasonable Country of Origin Inquiry and Due Diligence
Subsequent to its supply chain overview, the Company sought to determine whether its necessary 3TG originated in the Covered Countries. Amphenol’s primary methodology to achieve this objective is to rely upon our direct and sub-tier suppliers to provide information on the origin of the 3TG contained in components and materials supplied to us.
We reached out to our suppliers that provide components or materials that are likely to contain 3TG. Initially we conducted supplier training designed to educate certain key suppliers regarding the relevant, emerging SEC requirements and Amphenol’s expectations. We launched our conflict minerals communication survey to key suppliers in 2012. By 2014, our reasonable country of origin inquiry process had expanded such that we sough to reach all suppliers of components or materials containing 3TG in that year. This extensive process continued through 2015 and 2016.
We aim to further develop transparency into our supply chain through our supply chain reasonable country of origin inquiry and due diligence processes, driving accountability within the supply chain by leveraging our compliance program, and continuing our supplier outreach efforts.
Due Diligence Process
Design of Our Due Diligence and Description of the Due Diligence Process
Our conflict minerals compliance program together with our related investigative processes and efforts have been developed in conjunction with reference to the 2nd edition of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (the “OECD Guidance”) and the related supplements for gold and for tin, tantalum and tungsten.
Our conflict minerals compliance process included: the development of a Conflict Minerals Policy, establishment of governance structures with cross functional team members and senior executives, communication to, and engagement of, suppliers, due diligence compliance process and measurement, record keeping and escalation procedures. The measures discussed below are not all of the measures we took in furtherance of our conflict minerals compliance program or pursuant to the Rule and the OECD Guidance. In addition, some of the measures discussed below are not expressly provided for in the OECD Guidance.
Amphenol has established a management system for complying with the Rule and implementing our compliance program. This management system operates within the Company’s Product Stewardship Group and is currently led by our Director EHS & Sustainability and includes a team of subject matter experts from relevant functions such as, legal, purchasing, quality assurance, corporate sustainability programs, manufacturing and environmental health and safety. The Director EHS & Sustainability acts as the conflict minerals program manager. Senior management is briefed about the process and results on a regular basis.
Management Systems and Policies
As described above, Amphenol has included a provision in the Amphenol Corporation Code of Business Conduct and Ethics regarding Conflict Minerals. This provision is cited above and is also posted on our website at: www.amphenol.com, and can be found by clicking on “Investors”, “Governance” and then “Code of Business Conduct” at http://www.amphenol.com/investors/governance/code_of_conduct. The Product Stewardship Policy —Conflict Minerals also governs our conflict minerals approach. The information contained on our website is not incorporated by reference into this Conflict Minerals Report or our Form SD and should not be considered part of this Conflict Minerals Report or the Form SD.
Reasonable Country of Origin Inquiry
Amphenol has a decentralized management structure designed to encourage local accountability and responsibility for management responsibilities. Pursuant to this structure, each local operating unit reports into a group management structure particular to a certain product line or market focus. In 2016, there were nine such operating groups, each led by a Group General Manager who reports to our Chief Executive Officer.
Each individual operating unit in the Company evaluated its product lines to determine whether it manufactured or contracted to manufacture products for which 3TG are necessary to functionality or production. Then, with respect to the related procurement of materials or components containing 3TG, each individual operating unit conducted its own reasonable country of origin inquiry (“RCOI”). Thus, each operating unit identified its suppliers, narrowed the group of relevant suppliers to those providing materials or supplies that could potentially contain 3TG, and then interfaced with those suppliers to conduct a RCOI. To assist with completion of this task, management and key product stewardship personnel of each of these groups were given RCOI materials prepared with reference to the OECD Guidance and we held internal training sessions delivered by the internal team regarding our RCOI process.
The operating units conducted outreach, training, and an extensive surveying project of our supply chain through the use of questionnaires prepared by our internal team with reference to the OECD Guidance. Each operating unit reported the results of its surveying project to group management. Group management then provided certificates to Amphenol headquarters with the results of their inquiries.
The supplier responses to our RCOI have been electronically archived. The operating units collectively identified 24,434 vendor identification codes, some of which are likely duplicative given the Company’s decentralized management structure. Of these, they determined 4,788 to potentially be within the scope of our RCOI. Of these 4,788 suppliers potentially within the scope of the RCOI, the Company sent 4,788 requests for information and received 4,319 responses to our requests for information. Each local operating unit relied on these supplier’s responses to provide us with information about the source of 3TG contained in the components supplied to us. Many of our direct suppliers are similarly reliant upon information provided by their suppliers.
Our operating units have procedures to follow-up to identify and escalate any identified issues associated with non-responsiveness or problematic responses to our RCOI.
Amphenol has established our compliance process and set forth documentation and record maintenance mechanisms to ensure the retaining of relevant documentation in an electronic database.
Amphenol’s due diligence efforts are not conducted at the operating unit level, but rather are conducted by headquarters representatives.
Results of RCOI and Due Diligence
Feedback from the processes described herein has allowed us to render the conclusions in this Conflict Minerals Report.
Through its good faith RCOI, and subsequent due diligence efforts, Amphenol has no reason to believe any of the 3TG necessary to the functionality or production of its products is financing or benefiting armed conflict in the DRC or its adjoining countries, but is not able to conclude with certainty that all of the products we sell that contain 3TG are conflict-free. We have reached this conclusion because we have been unable to determine the origin of at least a portion of the 3TG used in some of our products. Based on data gathered by our RCOI, certain information about smelters/refiners and countries of origin in our supply chain is listed in Annexes I and II.
In the course of our RCOI and related due diligence, Amphenol has determined that certain elements of our supply chain originate in the Conflict Region. These findings were escalated in compliance with our due diligence escalation procedure. Through this process we learned that a portion of our feedstock and component materials contained gold, tantalum or tin which originated from the Conflict Region. Through diligence and further inquiry, we concluded that KEMET, Malaysia Smelting Corporation and Thaisarco have been audited and confirmed as conflict-free by the Conflict-Free Sourcing Initiative. Sudan Gold Refinery and Fidelity Printers and Refiners Ltd. are gold refiners engaged in the Conflict Free Sourcing Program, but have not yet been audited.
Due Diligence Risk Mitigation and Maturation
As we move towards enhancing our due diligence program, we intend to continue to mitigate possible risk that the necessary 3TG in our products could benefit armed groups in the Conflict Region. In furtherance of this goal, the Company has continued to increase the number of personnel with responsibility for supply chain due diligence efforts. We strive to enhance supplier communication, engage with certain suppliers to build supplier capability for conflict minerals supply chain traceability, and communicate training and escalation processes to improve due diligence data accuracy and completion. To the extent we were to discover that any of our suppliers are sourcing from smelters or refiners that support conflict, Amphenol will work toward using alternate sources within a reasonable time frame.
Identify and Assess Risk in the Supply Chain
Because of our size, the breadth and complexity of the raw materials and components used in our products, and the constant evolution of our supply chain, identifying actors upstream from our direct suppliers is a challenge. The Company will continue to seek to identify cost effective methodologies and to monitor practices used by other companies and industry associations to enhance visibility to subsequent tiers of the supply chain.
Audit of Supply Chain Due Diligence
Amphenol does not have a direct relationship with 3TG smelters and refiners, nor do we perform direct audits of these entities that provide our supply chain the 3TG. However, we do utilize information made available by and rely upon industry efforts to influence smelters and refineries to become audited and compliant through the Conflict-Free Sourcing Initiative’s Conflict-Free Smelter Program, of which Amphenol is a member company.