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See page 3 and 4.

 

Specific statement:

"The Recognized Framework used to develop Due Diligence Framework

 

Our conflict minerals process and policy are designed to conform in all material respects with the Organization for Economic Co-operation and Development Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (“OECD Guidance”).

 

 

Description of Due Diligence Performed on the Source and Chain of Custody of those Conflict Minerals

 

Step 1: Establish strong company management systems

 

As noted above, Tesla has adopted a human rights and conflict minerals policy. The policy was reviewed and updated in December 2015. Our supplier manuals also address conflict minerals and state our expectation that all Tesla suppliers are accountable for performing due diligence on their mineral supply chains in accordance with the OECD Guidance. Our contractual terms with suppliers (i.e., General Terms and Conditions) include verbiage that provides the expectation that all Tesla suppliers are accountable for performing conflict minerals due diligence aligned with the OECD Guidance as required by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

We maintain a small team within our supply chain personnel to lead the due diligence efforts. Our internal cross-functional “Steering Committee” composed of Tesla management from Supply Chain, Accounting and Legal oversees the due diligence efforts and potential risks and issues within our supply base. We use the Conflict-Free Sourcing Initiative (“CFSI”) Reporting Template (“CMRT”) to query at risk Tier 1 suppliers to identify smelters in congruence with the OECD Guidance.

 

We are using the automotive industry standard International Material Data System (“IMDS”) to help determine which suppliers are at risk for conflict minerals for all Tesla products. From that database, we review the existing supplier base annually to include newly added suppliers and existing suppliers who provide products to Tesla, to determine which Tier 1 suppliers are likely to supply a product with a conflict mineral (Gold, Tantalum, Tin, Tungsten, or “3TG”). For any Tier 1 supplier which has products that are determined to be highly unlikely to provide 3TG, we do not pursue additional conflict minerals due diligence and do not include that supplier in the Reasonable Country of Origin Inquiry (“RCOI”).

 

Step 2: Identify and assess risk in the supply chain

 

We sent out an inquiry letter to the Tier 1 suppliers which have products not determined to be “highly unlikely” to provide 3TG based on our data analysis from IMDS. Suppliers were given approximately one month to respond to this letter and submit their CMRT. Any suppliers that did not respond were queried again and given additional time to respond. We continually reached out to in-scope suppliers on a monthly basis towards the end of 2015 to receive the most up-to-date report.

 

Any concerns with supplier responses throughout data collection were brought to the attention of a member of, or the entire, Tesla Motors Conflict Minerals Steering Committee for further review and action. Suppliers who did not respond were brought to the attention of a Steering Committee member for escalation.

 

In addition, we continued to engage with other manufacturing companies in Silicon Valley to discuss conflict minerals activities across multiple industries. This Silicon Valley Conflict Minerals Forum has been instrumental in developing an aligned strategy and approach to the conflict minerals due diligence challenge. Tesla regularly participates, hosts gatherings, and encourages participation in the forum from neighboring peers.

 

Step 3: Design and implement a strategy to respond to identified risks

 

We performed risk-based assessments on all Tier 1 and potential Tier 1 suppliers as part of our sourcing process and through IMDS we identified which direct suppliers were highly likely to supply products that contain 3TG. Based on this supplier list, we conducted a supply chain survey using the CMRT, requesting Tier 1 suppliers to identify smelters and refiners and country of origin of the conflict minerals. Using the CMRT, we received reports back on Tier 1 supplier progress and collected the determined list of smelters used in the supply chain. We followed up with suppliers that did not respond to the original request for information with further inquiries and deadlines.

 

We performed documentation review of the smelters and refiners identified by the Tier 1 suppliers using the CMRT and made further inquiries to suppliers if we needed more clarification. We developed an in-house template to track the progress and response rate to determine next steps and escalation as necessary. We reported progress at each internal Steering Committee meeting and collected feedback from the Steering Committee regarding further actions to take.

 

Step 4: Carry out independent third-party audit of supply chain due diligence at identified points in the supply chain

 

We support the Conflict-Free Sourcing Initiative’s outreach efforts and Conflict-Free Smelter Program’s (“CFSP”) smelter audits through our membership. We reserve the right to ask any high risk Tier 1 supplier to audit their supply chain conflict minerals due diligence using a 3rd party independent auditor.

 

As outlined in the OECD Guidance, the internationally recognized standard on which our company’s system is based, we support an industry initiative that audits smelters’ and refiners’ due diligence activities. That industry initiative is the EICC and GeSI’s Conflict-Free Sourcing Initiative. The data on which we relied for certain statements in this declaration was obtained through our membership in the CFSI, using the Reasonable Country of Origin Inquiry report for member TSLA.

 

Step 5: Report on supply chain due diligence

 

We report on our due diligence efforts as required by law."