Exhibit 1.01
MTS Systems Corporation
Conflict Minerals Report
Introduction
This Conflict Minerals Report (the “Report”) of MTS Systems Corporation (the “Company” or “MTS”) has been prepared pursuant to Rule 13p-1 and Form SD promulgated under the Securities Exchange Act of 1934, as amended (the “Rule”) for the reporting period from January 1, 2017 to December 31, 2017.
The Rule requires disclosure of certain information when a company manufactures or contracts to manufacture products and the minerals specified in the Rule are necessary to the functionality or production of those products. The specified minerals, which the Company collectively refers to in this Report as the “Subject Materials,” are gold, columbite-tantalite (coltan), cassiterite and wolframite, including their derivatives, which are limited to tantalum, tin and tungsten. The “Covered Countries” for the purposes of the Rule and this Report are the Democratic Republic of Congo, the Republic of the Congo, the Central African Republic, South Sudan, Uganda, Rwanda, Burundi, Tanzania, Zambia and Angola. As described in this Report, the Company manufactures products for which the Subject Materials are necessary to the functionality or production of those products.
Company Overview
MTS Systems Corporation’s testing hardware, software and services solutions help customers accelerate and improve their design, development and manufacturing processes and are used for determining the mechanical behavior of materials, products and structures. MTS’s high-performance sensors provide controls for a variety of applications measuring motion, pressure, position, force and sound.
Products Overview
This Report relates to products: (i) for which Subject Materials are necessary to the functionality or production of that product; (ii) that were manufactured by the Company; and (iii) for which the manufacture was completed during calendar year 2017. These products, which are referred to in this Report collectively as the “Covered Products,” are the following: test equipment and systems for the ground vehicle, material, and structure markets in addition to high-performance sensors for a variety of industrial, monitoring and measuring, aerospace, military, cryogenic, mobile hydraulic, and liquid level applications.
Due Diligence Design and Framework
Based on the results of the good faith reasonable country of origin inquiry (“RCOI”) described in the Form SD to which this Report is filed as an exhibit, the Company has exercised due diligence on the source and chain of custody of the Subject Materials contained in its Covered Products. The Company has designed its due diligence measures to conform, in all material respects, with the internationally recognized due diligence framework as set forth in the Organization for Economic Cooperation and Development (“OECD”) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD, 2013) (“OECD Framework”) and related supplements for gold and for tin, tantalum and tungsten.
Establish company management systems:
• | MTS has a “Conflict Minerals Sourcing Policy” (the “Company Policy”) that is published on MTS’s website at: http://www.mts.com/en/about/Ethics/index.htm |
• | MTS engaged with applicable suppliers that it believed were most likely to supply products containing the Subject Materials. The Company identified its applicable suppliers using the North American Industry Classification System codes, which are standardized codes for groups of vendors with similar economic activity or production. Suppliers based in China were engaged prior to the survey to determine whether the material supplied to the Company included the Subject Materials and only suppliers that responded in the affirmative were included in the survey. Once all in-scope suppliers were aggregated, another filter was applied using dollars spent. Suppliers that represented 95% of the entire related dollars spent for Subject Materials were selected for survey. For the Sensors segment, only suppliers who have consistently responded yes to the presence of Subject Materials in the material supplied to MTS were included in the survey. |
• | The Company’s due diligence measures focus on working with its suppliers based upon a framework established by the Electronic Industry Citizenship Coalition and Global e-Sustainability (“EICC/GeSI”) initiative to identify the location of smelters and refiners of Subject Materials who provide those Subject Materials to its suppliers. The Company conducted supply chain surveys based on the EICC/GeSI conflict minerals questionnaire with all applicable suppliers identified during its applicability assessment explained above. |
Identify and assess risks in the supply chain:
• | Suppliers surveyed were asked to identify smelters and refiners (“SORs”) that process Subject Materials contained in the Company’s products, including country of origin of any Subject Materials, based on the EICC/GeSI conflict minerals questionnaire. |
• | A third party vendor logged every survey into their technology platform and reviewed every survey. |
• | Non-responsive suppliers and survey responses that were incomplete or inconsistent were identified for additional follow-up. |
• | Reasons for follow-up with suppliers included, but were not limited to, that the supplier did not provide a complete or accurate smelter list or did not receive complete conflicts mineral sourcing information from all of their relevant suppliers. Suppliers who did not provide the country of origin information in their survey responses were also sent a follow-up communication requesting that they provide additional sourcing information. |
• | Smelters identified by the Company’s suppliers were compared against the lists maintained by the Responsible Mineral Initiative (“RMI”) and the smelter list prepared by the Company’s third party vendor. |
Design and implement a strategy to respond to identified risks:
• | Suppliers that responded with smelters not listed as conformant or active on the lists prepared by RMI were re-engaged to validate sourcing from these smelters for products supplied to MTS. |
• | The Company conducted research in the public domain in order to identify sourcing information for smelters that are not on the RMI compliant smelter list, when possible. |
• | The Company notified suppliers via email and telephone whose sourcing practices do not conform to the Company policy, which could result in removal of those suppliers from the supply chain if these remediation efforts are not successful. |
• | Business Unit representatives also notified suppliers via email and telephone to ensure that applicable suppliers updated their responses with accurate and complete information. |
Carry out independent third-party audit of smelter/refiner due diligence practices:
• | MTS is a downstream consumer of Subject Materials and is many steps removed from smelters and refiners who source raw minerals and ores. MTS does not purchase raw minerals or ores, and does not, to the best of its knowledge, directly purchase Subject Materials from any of the Covered Countries. |
Report annually on supply chain due diligence:
• | This Report and the associated Form SD are available online at the following website: |
http://www.mts.com/en/about/Ethics/index.htm
Due diligence measures undertaken
In accordance with the OECD Framework, MTS took the following measures for this reporting year to exercise due diligence on the source and chain of custody of Subject Materials:
• | On behalf of MTS, a third party provider engaged all applicable suppliers and reviewed every response to determine completeness, accuracy, and consistency. |
• | Suppliers that did not send a complete or accurate response were re-engaged to update responses. |
• | MTS utilized the RMI smelter database and other proprietary resources to determine the sourcing locations for the SORs identified in MTS’s supply chain. |
• | Suppliers were notified by e-mail of the status of their responses to the surveys and if their response is rejected, or if incomplete or inconsistent, suppliers were asked to correct and resubmit. |
• | MTS aggregated all smelter data and developed a list of all SORs information received from MTS supply chain. |
• | MTS re-engaged suppliers to change sourcing from SORs that are known to source from Covered Countries or were not validated by RMI audit to be conflict free. |
Results
Based on the RCOI and after exercising the Company’s due diligence described above, MTS knows or has reason to believe that a portion of its necessary Subject Materials originated or may have originated in the Covered Countries and knows or has reason to believe that those necessary Subject Materials may not be solely from recycled or scrap sources, both because MTS identified that some Subject Materials may have originated in a Covered Country and because MTS has insufficient country of origin information from suppliers or other sources regarding all of the smelters that processed the Subject Minerals.
MTS received representations from 84% of its in-scope suppliers. Of all the smelter information received from its suppliers, approximately 82% have been designated as conflict free or actively pursuing such designation under the RMI (list of these smelters is provided in Annex 1). The remaining smelters that were identified as potentially sourcing 3TG are not currently RMI compliant or actively pursuing such designation. The source of Subject Materials from these smelters is undetermined at this time. The Company has taken and will continue to take actions to mitigate risk regarding Subject Materials used in its products.
Independent audit
An independent private sector audit of this Report is not required.
Continuous improvement efforts to mitigate risk
The Company has taken and intends to take the following steps to improve the number and quality of supplier responses in the next compliance period and to mitigate risk that the conflict minerals used in its products may finance or benefit armed groups in the Covered Countries:
• | Continue to use contract terms and conditions for new contracts requiring suppliers to respond to inquiries regarding conflict minerals in a timely manner. |
• | Continue to work with suppliers to identify to the extent possible the source of Subject Materials used in MTS’s products. |
• | Encourage suppliers to source from smelters that have received the conflict free designation or that are otherwise subject to adequate due diligence to ensure such minerals are not being used to fund conflict. |
Certain statements in this Report may be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include expectations concerning the Company's future actions to engage suppliers, to identify to the extent possible the source of Subject Materials in its products and to take other actions regarding its product sourcing. The Company's actual actions or results may differ materially from those expected or anticipated in the forward-looking statements due to both known and unknown risks and uncertainties including, but not limited to, decisions to make changes in the Company’s continual improvement efforts and delays or difficulties in engaging suppliers and identifying the source of Subject Materials contained in the Company’s products.
Annex 1: Smelter list
Metal | Smelter |
Gold | Advanced Chemical Company |
Gold | Aida Chemical Industries Co., Ltd. |
Gold | Al Etihad Gold Refinery DMCC |
Gold | Allgemeine Gold-und Silberscheideanstalt A.G. |
Gold | Almalyk Mining and Metallurgical Complex (AMMC) |
Gold | AngloGold Ashanti Córrego do Sítio Mineração |
Gold | Argor-Heraeus S.A. |
Gold | Asahi Pretec Corp. |
Gold | Asahi Refining Canada Ltd. |
Gold | Asahi Refining USA Inc. |
Gold | Asaka Riken Co., Ltd. |
Gold | AU Traders and Refiners |
Gold | Aurubis AG |
Gold | Bangalore Refinery |
Gold | Bangko Sentral ng Pilipinas (Central Bank of the Philippines) |
Gold | Boliden AB |
Gold | C. Hafner GmbH + Co. KG |
Gold | CCR Refinery - Glencore Canada Corporation |
Gold | Cendres + Métaux S.A. |
Gold | Chimet S.p.A. |
Gold | Daejin Indus Co., Ltd. |
Gold | DODUCO Contacts and Refining GmbH |
Gold | Dowa |
Gold | DS PRETECH Co., Ltd. |
Gold | DSC (Do Sung Corporation) |
Gold | Eco-System Recycling Co., Ltd. |
Gold | Emirates Gold DMCC |
Gold | Geib Refining Corporation |
Gold | Gold Refinery of Zijin Mining Group Co., Ltd. |
Gold | HeeSung Metal Ltd. |
Gold | Heimerle + Meule GmbH |
Gold | Heraeus Metals Hong Kong Ltd. |
Gold | Heraeus Precious Metals GmbH & Co. KG |
Gold | Inner Mongolia Qiankun Gold and Silver Refinery Share Co., Ltd. |
Gold | Ishifuku Metal Industry Co., Ltd. |
Gold | Istanbul Gold Refinery |
Gold | Italpreziosi |
Gold | Japan Mint |
Gold | Jiangxi Copper Co., Ltd. |
Gold | JSC Ekaterinburg Non-Ferrous Metal Processing Plant |
Gold | JSC Uralelectromed |
Metal | Smelter |
Gold | JX Nippon Mining & Metals Co., Ltd. |
Gold | Kazzinc |
Gold | Kennecott Utah Copper LLC |
Gold | KGHM Polska Miedž Spółka Akcyjna |
Gold | Kojima Chemicals Co., Ltd. |
Gold | Korea Zinc Co., Ltd. |
Gold | Kyrgyzaltyn JSC |
Gold | L'Orfebre S.A. |
Gold | LS-NIKKO Copper Inc. |
Gold | Marsam Metals |
Gold | Materion |
Gold | Matsuda Sangyo Co., Ltd. |
Gold | Metalor Technologies (Hong Kong) Ltd. |
Gold | Metalor Technologies (Singapore) Pte., Ltd. |
Gold | Metalor Technologies (Suzhou) Ltd. |
Gold | Metalor Technologies S.A. |
Gold | Metalor USA Refining Corporation |
Gold | Metalúrgica Met-Mex Peñoles S.A. De C.V. |
Gold | Mitsubishi Materials Corporation |
Gold | Mitsui Mining and Smelting Co., Ltd. |
Gold | MMTC-PAMP India Pvt., Ltd. |
Gold | Modeltech Sdn Bhd |
Gold | Moscow Special Alloys Processing Plant |
Gold | Nadir Metal Rafineri San. Ve Tic. A.Ş. |
Gold | NH Recytech Company |
Gold | Nihon Material Co., Ltd. |
Gold | Ögussa Österreichische Gold- und Silber-Scheideanstalt GmbH |
Gold | Ohura Precious Metal Industry Co., Ltd. |
Gold | OJSC "The Gulidov Krasnoyarsk Non-Ferrous Metals Plant" (OJSC Krastsvetmet) |
Gold | OJSC Novosibirsk Refinery |
Gold | PAMP S.A. |
Gold | Planta Recuperadora de Metales SpA |
Gold | Prioksky Plant of Non-Ferrous Metals |
Gold | PT Aneka Tambang (Persero) Tbk |
Gold | PX Précinox S.A. |
Gold | Rand Refinery (Pty) Ltd. |
Gold | Remondis Argentia B.V. |
Gold | Republic Metals Corporation |
Gold | Royal Canadian Mint |
Gold | SAAMP |
Gold | Safimet S.p.A |
Gold | SAFINA A.S. |
Gold | Samduck Precious Metals |
Metal | Smelter |
Gold | SAXONIA Edelmetalle GmbH |
Gold | Schone Edelmetaal B.V. |
Gold | SEMPSA Joyería Platería S.A. |
Gold | Shandong Zhaojin Gold & Silver Refinery Co., Ltd. |
Gold | Sichuan Tianze Precious Metals Co., Ltd. |
Gold | Singway Technology Co., Ltd. |
Gold | SOE Shyolkovsky Factory of Secondary Precious Metals |
Gold | Solar Applied Materials Technology Corp. |
Gold | Sumitomo Metal Mining Co., Ltd. |
Gold | SungEel HiMetal Co., Ltd. |
Gold | T.C.A S.p.A |
Gold | Tanaka Kikinzoku Kogyo K.K. |
Gold | The Refinery of Shandong Gold Mining Co., Ltd. |
Gold | Tokuriki Honten Co., Ltd. |
Gold | Torecom |
Gold | Umicore Brasil Ltda. |
Gold | Umicore Precious Metals Thailand |
Gold | Umicore S.A. Business Unit Precious Metals Refining |
Gold | United Precious Metal Refining, Inc. |
Gold | Valcambi S.A. |
Gold | Western Australian Mint (T/a The Perth Mint) |
Gold | WIELAND Edelmetalle GmbH |
Gold | Yamakin Co., Ltd. |
Gold | Yokohama Metal Co., Ltd. |
Gold | Zhongyuan Gold Smelter of Zhongjin Gold Corporation |
Tantalum | Asaka Riken Co., Ltd. |
Tantalum | Changsha South Tantalum Niobium Co., Ltd. |
Tantalum | D Block Metals, LLC |
Tantalum | Exotech Inc. |
Tantalum | F&X Electro-Materials Ltd. |
Tantalum | FIR Metals & Resource Ltd. |
Tantalum | Global Advanced Metals Aizu |
Tantalum | Global Advanced Metals Boyertown |
Tantalum | Guangdong Rising Rare Metals-EO Materials Ltd. |
Tantalum | Guangdong Zhiyuan New Material Co., Ltd. |
Tantalum | H.C. Starck Co., Ltd. |
Tantalum | H.C. Starck Hermsdorf GmbH |
Tantalum | H.C. Starck Inc. |
Tantalum | H.C. Starck Ltd. |
Tantalum | H.C. Starck Smelting GmbH & Co. KG |
Tantalum | H.C. Starck Tantalum and Niobium GmbH |
Tantalum | Hengyang King Xing Lifeng New Materials Co., Ltd. |
Tantalum | Jiangxi Dinghai Tantalum & Niobium Co., Ltd. |
Tantalum | Jiangxi Tuohong New Raw Material |
Metal | Smelter |
Tantalum | Jiujiang Janny New Material Co., Ltd. |
Tantalum | JiuJiang JinXin Nonferrous Metals Co., Ltd. |
Tantalum | Jiujiang Nonferrous Metals Smelting Company Limited |
Tantalum | Jiujiang Zhongao Tantalum & Niobium Co., Ltd. |
Tantalum | KEMET Blue Metals |
Tantalum | KEMET Blue Powder |
Tantalum | LSM Brasil S.A. |
Tantalum | Metallurgical Products India Pvt., Ltd. |
Tantalum | Mineração Taboca S.A. |
Tantalum | Mitsui Mining & Smelting |
Tantalum | Ningxia Orient Tantalum Industry Co., Ltd. |
Tantalum | NPM Silmet AS |
Tantalum | Power Resources Ltd. |
Tantalum | QuantumClean |
Tantalum | Resind Indústria e Comércio Ltda. |
Tantalum | RFH Tantalum Smeltery Co., Ltd./Yanling Jincheng Tantalum & Niobium Co., Ltd. |
Tantalum | Solikamsk Magnesium Works OAO |
Tantalum | Taki Chemicals |
Tantalum | Telex Metals |
Tantalum | Ulba Metallurgical Plant JSC |
Tantalum | XinXing HaoRong Electronic Material Co., Ltd. |
Tantalum | Yichun Jin Yang Rare Metal Co., Ltd. |
Tin | Alpha |
Tin | Chenzhou Yunxiang Mining and Metallurgy Co., Ltd. |
Tin | Chifeng Dajingzi Tin Industry Co., Ltd. |
Tin | China Tin Group Co., Ltd. |
Tin | CV Ayi Jaya |
Tin | CV Dua Sekawan |
Tin | CV Gita Pesona |
Tin | CV Tiga Sekawan |
Tin | CV United Smelting |
Tin | CV Venus Inti Perkasa |
Tin | Dowa |
Tin | EM Vinto |
Tin | Fenix Metals |
Tin | Gejiu Fengming Metallurgy Chemical Plant |
Tin | Gejiu Jinye Mineral Company |
Tin | Gejiu Kai Meng Industry and Trade LLC |
Tin | Gejiu Non-Ferrous Metal Processing Co., Ltd. |
Tin | Gejiu Yunxin Nonferrous Electrolysis Co., Ltd. |
Tin | Guangdong Hanhe Non-Ferrous Metal Co., Ltd. |
Tin | Guanyang Guida Nonferrous Metal Smelting Plant |
Tin | HuiChang Hill Tin Industry Co., Ltd. |
Metal | Smelter |
Tin | Huichang Jinshunda Tin Co., Ltd. |
Tin | Jiangxi Ketai Advanced Material Co., Ltd. |
Tin | Magnu's Minerais Metais e Ligas Ltda. |
Tin | Malaysia Smelting Corporation (MSC) |
Tin | Melt Metais e Ligas S.A. |
Tin | Metallic Resources, Inc. |
Tin | Metallo Belgium N.V. |
Tin | Metallo Spain S.L.U. |
Tin | Mineração Taboca S.A. |
Tin | Minsur |
Tin | Mitsubishi Materials Corporation |
Tin | Modeltech Sdn Bhd |
Tin | O.M. Manufacturing (Thailand) Co., Ltd. |
Tin | O.M. Manufacturing Philippines, Inc. |
Tin | Operaciones Metalurgical S.A. |
Tin | PT Aries Kencana Sejahtera |
Tin | PT Artha Cipta Langgeng |
Tin | PT ATD Makmur Mandiri Jaya |
Tin | PT Babel Inti Perkasa |
Tin | PT Bangka Prima Tin |
Tin | PT Bangka Serumpun |
Tin | PT Bangka Tin Industry |
Tin | PT Belitung Industri Sejahtera |
Tin | PT Bukit Timah |
Tin | PT DS Jaya Abadi |
Tin | PT Eunindo Usaha Mandiri |
Tin | PT Inti Stania Prima |
Tin | PT Karimun Mining |
Tin | PT Kijang Jaya Mandiri |
Tin | PT Lautan Harmonis Sejahtera |
Tin | PT Menara Cipta Mulia |
Tin | PT Mitra Stania Prima |
Tin | PT Panca Mega Persada |
Tin | PT Premium Tin Indonesia |
Tin | PT Prima Timah Utama |
Tin | PT Refined Bangka Tin |
Tin | PT Sariwiguna Binasentosa |
Tin | PT Stanindo Inti Perkasa |
Tin | PT Sukses Inti Makmur |
Tin | PT Sumber Jaya Indah |
Tin | PT Timah (Persero) Tbk Kundur |
Tin | PT Timah (Persero) Tbk Mentok |
Tin | PT Tinindo Inter Nusa |
Tin | PT Tommy Utama |
Metal | Smelter |
Tin | Resind Indústria e Comércio Ltda. |
Tin | Rui Da Hung |
Tin | Soft Metais Ltda. |
Tin | Thaisarco |
Tin | White Solder Metalurgia e Mineração Ltda. |
Tin | Yunnan Chengfeng Non-ferrous Metals Co., Ltd. |
Tin | Yunnan Tin Company Limited |
Tungsten | A.L.M.T. TUNGSTEN Corp. |
Tungsten | ACL Metais Eireli |
Tungsten | Asia Tungsten Products Vietnam Ltd. |
Tungsten | Chenzhou Diamond Tungsten Products Co., Ltd. |
Tungsten | Chongyi Zhangyuan Tungsten Co., Ltd. |
Tungsten | Fujian Jinxin Tungsten Co., Ltd. |
Tungsten | Ganzhou Haichuang Tungsten Co., Ltd. |
Tungsten | Ganzhou Huaxing Tungsten Products Co., Ltd. |
Tungsten | Ganzhou Jiangwu Ferrotungsten Co., Ltd. |
Tungsten | Ganzhou Seadragon W & Mo Co., Ltd. |
Tungsten | Global Tungsten & Powders Corp. |
Tungsten | Guangdong Xianglu Tungsten Co., Ltd. |
Tungsten | H.C. Starck Smelting GmbH & Co. KG |
Tungsten | H.C. Starck Tungsten GmbH |
Tungsten | Hunan Chenzhou Mining Co., Ltd. |
Tungsten | Hunan Chuangda Vanadium Tungsten Co., Ltd. Wuji |
Tungsten | Hunan Chunchang Nonferrous Metals Co., Ltd. |
Tungsten | Hunan Litian Tungsten Industry Co., Ltd. |
Tungsten | Hydrometallurg, JSC |
Tungsten | Japan New Metals Co., Ltd. |
Tungsten | Jiangwu H.C. Starck Tungsten Products Co., Ltd. |
Tungsten | Jiangxi Gan Bei Tungsten Co., Ltd. |
Tungsten | Jiangxi Tonggu Non-ferrous Metallurgical & Chemical Co., Ltd. |
Tungsten | Jiangxi Xinsheng Tungsten Industry Co., Ltd. |
Tungsten | Jiangxi Xiushui Xianggan Nonferrous Metals Co., Ltd. |
Tungsten | Jiangxi Yaosheng Tungsten Co., Ltd. |
Tungsten | Kennametal Fallon |
Tungsten | Kennametal Huntsville |
Tungsten | Malipo Haiyu Tungsten Co., Ltd. |
Tungsten | Moliren Ltd. |
Tungsten | Niagara Refining LLC |
Tungsten | Nui Phao H.C. Starck Tungsten Chemicals Manufacturing LLC |
Tungsten | Philippine Chuangxin Industrial Co., Inc. |
Tungsten | South-East Nonferrous Metal Company Limited of Hengyang City |
Tungsten | Tejing (Vietnam) Tungsten Co., Ltd. |
Tungsten | Unecha Refractory Metals Plant |
Tungsten | Vietnam Youngsun Tungsten Industry Co., Ltd. |
Metal | Smelter |
Tungsten | Wolfram Bergbau und Hütten AG |
Tungsten | Woltech Korea Co., Ltd. |
Tungsten | Xiamen Tungsten (H.C.) Co., Ltd. |
Tungsten | Xiamen Tungsten Co., Ltd. |
Tungsten | Xinfeng Huarui Tungsten & Molybdenum New Material Co., Ltd. |
Tungsten | Xinhai Rendan Shaoguan Tungsten Co., Ltd. |