Western Digital 2014 Annual Report Download - page 34

The costs of compliance with state, federal and international legal and regulatory requirements, such as environmental, labor,
trade, health, safety and tax regulations, and customers’ standards of corporate citizenship could cause an increase in our
operating costs.
We are subject to, and may become subject to additional, state, federal and international laws and regulations
governing our environmental, labor, trade, health, safety and tax practices. These laws and regulations, particularly
those applicable to our international operations, are or may be complex, extensive and subject to change. We will need
to ensure that we and our component suppliers timely comply with such laws and regulations, which may result in an
increase in our operating costs. Legislation has been, and may in the future be, enacted in locations where we manu-
facture or sell our products. In addition, climate change and financial reform legislation is a significant topic of dis-
cussion and has generated and may continue to generate federal, international or other regulatory responses in the near
future. If we or our component suppliers fail to timely comply with applicable legislation, our customers may refuse
to purchase our products or we may face increased operating costs as a result of taxes, fines or penalties, which would
have a materially adverse effect on our business, financial condition and operating results.
In connection with our compliance with environmental laws and regulations, as well as our compliance with
industry environmental initiatives, the standards of business conduct required by some of our customers, and our
commitment to sound corporate citizenship in all aspects of our business, we could incur substantial compliance and
operating costs and be subject to disruptions to our operations and logistics. In addition, if we were found to be in
violation of these laws or noncompliant with these initiatives or standards of conduct, we could be subject to gov-
ernmental fines, liability to our customers and damage to our reputation and corporate brand which could cause our
financial condition or operating results to suffer.
Conflict minerals regulations may cause us to incur additional expenses and could limit the supply and increase the cost of certain
components and metals contained in our products.
In August 2012, the SEC adopted new rules establishing diligence and disclosure requirements regarding the use
and source of gold, tantalum, tin and tungsten, commonly referred to as 3TG or conflict minerals, that are necessary
to the functionality or production of products manufactured or contracted to be manufactured by public companies.
These new rules require us to determine and report annually whether such 3TG originated from the Democratic
Republic of the Congo or an adjoining country, the first such report was due on June 2, 2014. These new rules could
affect our ability to source components that contain 3TG, or 3TG generally, at acceptable prices and could impact the
availability of such components or 3TG, since there may be only a limited number of suppliers of “conflict free” 3TG.
Our customers, including our OEM customers, may require that our products contain only conflict free 3TG, and our
revenues and margins may be harmed if we are unable to meet this requirement at a reasonable price, or at all, or are
unable to pass through any increased costs associated with meeting this requirement. Additionally, we may suffer
reputational harm with our customers and other stakeholders if our products are not conflict free or if we are unable to
sufficiently verify the origins of the 3TG contained in our products through the due diligence procedures that we
implement. We could incur significant costs to the extent that we are required to make changes to products, proc-
esses, or sources of supply due to the foregoing requirements or pressures. To the extent that proposed conflict miner-
als legislation is adopted by the European Commission or Canada, these risks could increase.
Violation of applicable laws, including labor or environmental laws, and certain other practices by our suppliers or customers
could harm our business.
We expect our suppliers and customers to operate in compliance with applicable laws and regulations, including
labor and environmental laws, and to otherwise meet our required standards of conduct. While our internal operating
guidelines promote ethical business practices, we do not control our suppliers or customers or their labor or environ-
mental practices. The violation of labor, environmental or other laws by any of our suppliers or customers, or
divergence of a supplier’s or customer’s business practices from those generally accepted as ethical, could harm our
business by:
‰interrupting or otherwise disrupting the shipment of our product components;
‰damaging our reputation;
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