The Securities and Exchange Commission voted Wednesday toapprove a rule requiring companies to disclose any conflictminerals they use to manufacture products, a measure that criticssays will impose significant costs on companies.

The controversial regulation,which was mandated by Dodd-Frank, says companies must disclosetheir usage of tantalum, tin, tungsten and gold from the DemocraticRepublic of the Congo and surrounding African countries. The finalversion provides some leeway on recycled and scrap material, andgives companies until May 31, 2014, to file their firstdisclosure.

However, many have criticized the SEC for not fully assessingthe cost of the measure.

A recentstudy by the Graduate School of Management at the University ofCalifornia at Davis says the rule will cost companies much morethan regulators contend, reflecting the expense of complying andmaking annual disclosures. This may put U.S. companies at adisadvantage to foreign competitors that do not have to comply,according to the study's lead author, Paul Griffin.

The SEC initially estimated the conflict minerals regulationwould cost companies $71.2 million, but Reuters recently quoted an SEC official's estimate that it willcost $3 billion to $4 billion. The National Association ofManufacturers has put the cost far higher, at $9 billion to $16billion.

Griffin's research looked at the effect of conflict mineraldisclosure on 206 companies—103 that voluntarily disclosedinformation on conflict minerals and 103 similar companies that didnot disclose. The study concludes that the cost of the regulationoverall to those companies was about $6.5 billion, but says thatfigure may represent the lower end of the spectrum since the SECestimates around 1,200 companies will be affected by theprovision.

Postponing the rule's start date will be helpful, Griffin says.“To the extent there is delay, I think that could be costbeneficial to companies exposed to the rule to undertake audits andanalyses to figure out what's going on in the supply chain,” henotes. He says that while the many predicted the regulation wouldbe upheld due to the political makeup of the commission, the marketmay be surprised by future legislation.

“The surprises down the road will be what will take place inCongress as far as future legislation on supply chain and humanrights issues, and the various states that get involved,” Griffinsays, noting that California and Maryland already have legislationrequiring companies to disclose their use of conflictminerals, and even some cities have become “conflict-free.”

Some companies, such as Intel and Hewlett-Packard, have resolvedto avoid the use of such minerals, but Griffin expects many to be“late to the party on this one.”

“The other aspect to consider is large pension funds willresolve to invest in companies that are only conflict-free,”Griffin says. “It's already happening.”

For more on Dodd-Frank rules, see Shareholders Stymied For Now.