Analysis released by the Tulane University Law School has found that aggregate cost to comply with the Dodd-Frank Act's Conflict Minerals rule, as it is currently proposed, could run as high as $7.93 billion, dwarfing the Securities and Exchange Commission's $71.2 million estimate of the costs for companies to comply with the reporting requirement.

The study entitled “A Critical Analysis of the SEC and NAM Economic Impact Models and the Proposal of a Third Model in View of the Implementation of Section 1502 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act” was prepared at the request of Senator Dick Durbin of Illinois, a co-sponsor of the conflict minerals provision in Dodd-Frank.

The paper, authored by Tulane graduate student Chris Bayer, suggests that its implementation will require significant effort on the part of affected companies. The analysis also made comparison between the SEC estimates and the findings by the National Association of Manufactures.

“The Tulane study underscores the need for the SEC to be conscious of the high costs of implementation,” says Tony Hilvers, vice president of industry programs at electronics industry trade association, IPC. “The SEC must utilize all reasonable options to lessen the burden of implementation, the most important of which is a phasing-in of the regulations to allow industry the time to work with their complex global supply chains to develop traceability and compliance data,” he said in a statement.

The Conflict Minerals rule will require U.S. companies to file new disclosures on their use of minerals such as gold, tantalums, tungsten, and coltan and conduct due diligence on the sourcing by suppliers of such materials in an effort to provide more transparency on minerals mined from the war-torn region of the African Congo. Section 1502 of the Dodd-Frank Act requires the SEC to establish rulemaking and implement the disclosure reporting requirements for supply-chain transparency. The rule was proposed last year and the comment period ended in March of this year.

Jane Luxton, partner at law firm Pepper Hamilton, says there is no definite answer on which estimate is more accurate. She says each one was made based on different set of assumptions. However, she says the Tulane University study did use a large number of accurate assumptions in estimating the total cost involved. “It is on the mark on a lot of these assumptions and the researcher did a good job in addressing the overlapping suppliers' issue, which we will find later,” she says.