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The Chain: U.S. Palm Oil Importer Makes Zero Deforestation Commitment, U.S. SEC Adopts Rules for Resource Extraction Issuers

November 15, 2016

AAK Acquisition CalOils Adopts Zero Deforestation Policies 

AAK, a leading producer of value added vegetable oils headquartered in Sweden, completed its acquisition of California Oils September 5, 2016. California Oils, based in Richmond, California, is a major supplier of palm oil into the United States. As reported by Forest Heroes, AAK’s existing No Deforestation, No Peat, No Exploitation (NDPE) policy will now be implemented by California Oils.

In 2015, California Oils imported 110,000 metric tons of palm oil into the United States, which was 9.6 percent of all US palm oil imports during the 2014-15 growing season. California Oils 2015 revenue was $149 million with the acquisition cost at about $2 million. According to Forest Heroes, historically controversial companies such as Malaysian palm oil giants Kuala Lumpur Kepong and IOI Group ship palm oil into the U.S. via California Oils.

Among its other customers, California Oils imports palm oil for U.S. instant noodle production, which includes manufacturers Toyo Suisan, Nissin, Sanyo Foods and Nongshim, together accounting for 84 percent of the U.S. instant noodle market. These same four companies have a minimum instant noodles global market share of 22%.

U.S. SEC Adopts Rules for Resource Extraction Issuers

As reported previously by Chain Reaction Research, the SEC has now issued rules for resource extraction issuers under Dodd-Frank, the Wall Street Reform and Consumer Protection Act was signed into U.S. federal law by President Barack Obama on July 21, 2010.

The final rules require an issuer to disclose payments made to the U.S. federal government or a foreign government if the issuer engages in the commercial development of oil, natural gas, or minerals and is required to file annual reports with the Commission under the Securities Exchange Act.  The issuer must also disclose payments made by a subsidiary or entity controlled by the issuer.

There are potential regulatory scenarios where Dodd-Frank could be applicable palm oil, soy, timber and other primary resource companies.

Note: Current proposals to the SEC include requiring corporations disclose indirect use of land through their supply chains. This would require a simply change to SEC Regulation S-K, currently under review by the SEC, to include mandatory line-item reporting on:

  1. Land acquisitions in countries with weak land governance (according to the World Bank’s Land Governance Assessment Framework), and
  2. Due diligence regarding land tenure risk tied to supply chains.

SEC regulation S-K is the prescribed regulation under the US Securities Act of 1933 that governs mandatory reporting requirements for SEC filings used by public companies. It is currently under review the SEC to consider adding land-tenure data to US mandatory reporting.


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