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Conflict Minerals Sourcing Policy

Many industries rely upon certain minerals that are mined in the area of Africa described as the “Conflict Region,” which includes the Democratic Republic of the Congo and surrounding countries, to produce their products. These minerals include tin, tungsten, tantalum and gold. Some of these minerals are mined and sold under the control of armed groups that engage in violent conflict and human rights abuses. To address concern that proceeds from the mining of these minerals have been used to fund these armed groups in the Conflict Region, the U.S. Securities and Exchange Commission (“SEC”) adopted rules which require publicly traded manufacturing companies in the U.S. to disclose the use of any conflict minerals necessary to the functionality or production of products they manufacture or contract to manufacture. Companies using conflict minerals must also disclose their supply chain inquiries to verify whether these minerals originated in the Conflict Region.

In sourcing materials from vendors, it is the policy of NCI Building Systems, Inc. (“NCI”) to avoid the use of conflict minerals originating from the Conflict Region, unless those minerals have been sourced responsibly. NCI’s suppliers acquire and use minerals from multiple sources worldwide. As part of NCI’s commitment to corporate responsibility, NCI expects its suppliers to develop reasonable due diligence frameworks and policies designed to prevent the use of conflict minerals sourced from the Conflict Region from being included in products sold to NCI, unless the facilities from which those minerals originated have been certified as “conflict free.”

NCI’s Expectations for Suppliers:

  • Supply “DRC Conflict Free” materials. Suppliers are expected to supply materials to NCI that are “DRC conflict free,” which means any tin, tungsten, tantalum and gold necessary to the functionality or production of supplied materials was sourced only from (1) mines and smelters outside of the Conflict Region or (2) mines and smelters which have been certified by an independent third party as “conflict free” if sourced within the Conflict Region.

  • Adopt conflict minerals policies. NCI encourages its suppliers to adopt a policy regarding conflict minerals consistent with NCI’s policy, implement management systems to support compliance with their policy and require their suppliers to take the same steps.

  • Send surveys to their suppliers and complete NCI’s survey. NCI’s suppliers are expected to pass the EICC-GeSI Conflict Minerals Reporting Template (the “CMRT”) to their suppliers and successively upstream until the smelter/refiner is identified. The survey information must then be passed back down through the levels of the supply chain to NCI’s direct supplier, who then can complete the CMRT and provide responses to NCI.

Suppliers who do not comply with these requirements shall be reviewed by our purchasing managers for future business. NCI will continue to regularly perform due diligence and survey its suppliers to verify compliance with this policy.

Item 1.01 Conflict Minerals Disclosure and Report

This Form SD of NCI Building Systems, Inc. (“NCI”, “we”, “our” or “us”) is filed pursuant to Rule 13p-1 of the Securities and Exchange Act of 1934, as amended, (“Rule 13p-1”) for the reporting period beginning January 1, 2016 and ending December 31, 2016. Unless otherwise defined, any term used herein shall have the meaning ascribed to such term in Rule 13p-1 or Form SD.

NCI is an integrated manufacturer and marketer of metal products for the nonresidential construction industry. In accordance with Rule 13p-1, NCI surveyed the products manufactured by NCI or contracted by NCI to be manufactured and concluded that paint and foam insulation used in NCI’s metal products may contain tin, tantalum, tungsten or gold, (collectively, “3TG” or “conflict minerals”) that are necessary to the functionality or production of such products. NCI understands that certain of its suppliers use tin as a catalyst or component in the production of certain paint products supplied to NCI. NCI further understands that conflict minerals may be present in expandable resins or foams contained in its insulated metal panels. NCI undertook in good faith a reasonable country of origin inquiry (“RCOI”) to determine whether the 3TG used in the production of paint incorporated into NCI’s metal products or foams contained in NCI’s insulated metal panels originated in the Democratic Republic of the Congo or one of its adjoining countries (collectively, the “Covered Countries”).

NCI does not purchase raw materials directly from mines, smelters or refiners. Accordingly, NCI relies on direct suppliers in the supply chain between NCI and the original sources of raw materials to provide information regarding the origin of any conflict minerals that may be included in NCI’s products.

As a downstream purchaser of conflict minerals, NCI’s RCOI and due diligence measures can provide only reasonable – not absolute – assurance regarding the source and chain of custody of the necessary conflict minerals. NCI’s RCOI and due diligence processes are based on the necessity of seeking data from direct suppliers and those suppliers seeking similar information within their supply chains to identify the original sources of the necessary conflict minerals.

As part of NCI’s due diligence, a conflict minerals team comprised of individuals from NCI’s legal department communicates regularly and meets periodically to discuss NCI’s compliance efforts. NCI began an outreach program to notify direct suppliers of NCI’s obligations under the Conflict Minerals Rules. In 2014, with assistance of outside legal counsel, the team created and published a formal conflict minerals policy, which is available on NCI’s website at www.ncibuildingsystems.com under “Sustainability/Responsibility – Conflict Minerals.”

NCI initiated the RCOI process for the 2016 compliance year by sending an email and a letter to each of its paint and foam insulation suppliers who sold NCI products that contained or may have contained necessary conflict minerals. The letter stated NCI’s position on the sourcing of conflict minerals and requested that each supplier (i) determine whether it supplies NCI with goods or materials containing conflict minerals, (ii) identify all smelters in its supply chain that supply conflict minerals, and (iii) complete and return a copy of the EICC-GeSI Conflict Minerals Reporting Template (the “Conflict Minerals Reporting Template”) developed by the Electronic Industry Citizenship Coalition (“EICC”) and the Global e-Sustainability Initiative (“GeSI”). The template was developed to increase the flow of information about conflict minerals between suppliers and customers. The template requests information about NCI’s suppliers’ policies, engagement with their suppliers, names and locations of smelters and refiners, and origin of conflict minerals. NCI used this template in order to provide a readily recognizable form to its suppliers and ideally ease the burden in replying.

NCI developed a documentation system to track survey progress and responses, which enabled it to identify direct suppliers that failed to provide the requested information. Members of the conflict minerals team followed up with each supplier that did not respond and maintained a log to chronicle communication with suppliers. The team reviewed and analyzed the responses from suppliers and determined which suppliers required further discussion to address unclear or incomplete responses.

NCI asked any supplier that confirmed the use of 3TG in their products to identify the source of the 3TG, including information on smelters or mines of origin. NCI inquired about policies on the use of conflict minerals in their products and educated them on NCI’s expectations regarding conflict minerals. Suppliers that submitted incomplete responses were strongly encouraged to engage with their own suppliers and continue to seek the necessary information to fully and accurately complete the template. Through these efforts, by the end of its diligence process, responses were received from all of the suppliers that NCI surveyed.

Most of NCI’s suppliers informed us, either by return of the Conflict Minerals Reporting Template or by notice on company letterhead, that none of the products supplied to NCI contained 3TG minerals. Of the suppliers that indicated the products they supply to NCI do contain necessary 3TG, all represented that the 3TG in such products did not originate in the Covered Countries, and these suppliers provided a list of the names and locations of the smelters of minerals in their supply chain. In each such case, NCI reviewed the list and confirmed that none of the smelters listed are located in a Covered Country. 

Based on its RCOI, NCI is not aware, and it has concluded that it has no reason to believe, that any of the necessary conflict minerals contained in products it manufactured or contracted to manufacture in 2016 originated or may have originated in the Covered Countries.

A copy of this discussion is publicly available on our website at www.ncibuildingsystems.com/sustainability_conflictminerals.html.



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