WFDB and IDMA Resolution on Conflict Diamonds

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WFDB and IDMA, representing all the principal diamond manufacturing and trading centers of the world, have consistently been aware of and been involved in combating the conflict diamond problem. Particularly, they point to the numerous resolutions passed by themselves and their members.

We believe that more can and should be done to limit, if not eliminate, this problem entirely. We believe that the solution to the conflict diamond problem is a moral imperative above all others. However, we do not believe that the solution necessarily entails damage or limitation to the 96+% of the world diamond trade which is legitimate. On the contrary, we believe that an enlightened and effective approach to the problem can lead to the improvement of the diamond market overall.

It is our understanding that all concerned parties are aware of the positive benefits of diamonds as well as their potential role in providing prosperity, a key ingredient of peace, in countries currently experiencing strife. Over the past year, various solutions have been proposed. We have analyzed these proposals, some of which we have found to be ineffective, others more practical and some impractical. All the proposals have had elements that we believe are logical and should be incorporated into an effective solution.

As diamond manufacturers and traders primarily responsible for the conversion of rough diamonds into polished and the marketing of those polished diamonds, we are proposing a number of concrete steps to be taken by all parties concerned, which we believe will lead to a more effective and immediate resolution of the problem.

While our proposal may be subject in the future to any number of improvements, we believe it is in the first instance, practically implementable in the short term, and it does not preclude further steps being taken first, in order that the process not be delayed with theoretical concepts and technologies.

1. We recognize that rough diamonds individually are not sufficiently determinable as to source and origin. However, with the correct system, rough diamond parcels can be monitored within a net.

2. There is no implementable means of tagging, tracking and identifying finished polished diamonds.

3. All legitimate diamonds in their rough form can travel within an identifiable net.

Accordingly we propose:

1. Each accredited rough diamond importing country, whether a producer, manufacturing or dealing center, enacts “redline” legislation. As such, no parcel of rough may be imported unless such parcel of rough has been sealed and registered in a universally standardized manner by an accredited export authority from the exporting country.

2. Each exporting country, which can be either a producer country or accredited dealing/manufacturing center, will establish accredited export offices or a diamond board, which will seal parcels of rough diamonds to be exported and registered in an international database. If the country is a producer, it will be accredited only if it has control mechanisms in place to determine the flow of rough and legitimate ownership of rough presented to the export authority.

3. Polished diamond-consuming countries will enact legislation forbidding importation of polished diamonds from any manufacturing/dealing country that does not have “redline” legislation as regards the importation of rough.

4. Each and every country, as part of the diamond net, be they rough exporters, importers, or polished consumers countries, enacts legislation bringing criminal penalties on any individual and/or company proven to be knowingly involved in illegal rough diamonds.

5. Each and every diamond organization adopts an ethical code of conduct as regards conflict diamonds, labor practices and good business practices in general, which the failure to adhere to would lead to expulsion from WFDB, IDMA and all other relevant organizations.

6. As a positive measure of compliance, all relevant and interested parties promote adherence to the code of conduct as a positive consumer choice in the marketplace.

7. We enlist the support of the banks, insurance, shipping companies and other pertinent providers of goods and services to our industry to expose and cease business relations with any entity that is found knowingly to violate these principals.

8. That there is a continual analysis of relevant technologies and investment by the industry in developing them further for implementation leading to greater compliance.

9. That compliance with the above be monitored and controlled by an International Diamond Council comprised of producers, manufacturers, traders, governments and relevant international organizations. That this process be fully verified and audited.

A joint committee of both organizations has been formed in order to ensure rapid implementation of the above.

As we envision it, each time rough diamonds leave a producer or rough trading center, those rough diamonds would be sealed in a standardized manner by an authority accredited by the “International Diamond Council.” This is the only means by which those diamonds could be imported into the next country.

We understand that it is the nature of the diamond business and directly related to the profitability of mines and the efficient manufacturing processes currently employed, that rough diamonds of various origins and qualities are mixed together into “saleable” parcels. Therefore, our system allows for the mixture or dealing center to be subject once again to sealing and documentation.

Key to the whole process is monitoring and keeping accounts of the data flows. In particular, it is essential to be able to verify and see that one-country exports to another are matched by those countries official imports from the exporting country. All accounts should, ultimately, balance. The establishment of the International Diamond Council is crucial to this process in that the International Diamond Council would be to balance all imports and exports and accredit importing and exporting authorities in each country.

Just as importantly, it is undoubtedly correct to assume that a certain degree of deliberate noncompliance may occur. The International Diamond Council would be required to remove export accreditation from producer countries where rough exports are known to exceed production capacity or verified official imports.

By the same token, the International Diamond Council would be able to remove the accreditation of countries to import diamonds if it was found that those countries were allowing the import of nonverifiable rough.

We believe that funding for our proposals can be achieved through charging a minimal levy, both on the import and export of rough diamonds. Undoubtedly, effectiveness of the system can be improved over time. However, we believe that we will immediately close off all the legal loopholes by which conflict diamonds may currently be entering the trade. This will make the task of relevant customs and criminal authorities far easier in terms of identifying and prosecuting perpetrators. In particular, if all legitimate rough diamonds are knowingly “declared,” the four- percent of conflict rough diamonds will be impossible for those few companies trading in them to hide.

As a final note, we do not claim that this is an immediately perfect system, or that improvements cannot be made. However, we believe that these are practical implementable measures, that they will be highly effective in terms of the current status quo and that they can be relatively rapidly implemented without precluding any further additions.

Most significally, we believe that our proposals will see immediate results and that they are non-restrictive to the legitimate industry and producer countries. In fact they stand to enhance the legitimate trade. By adopting a code of conduct, consumer choice can be made into a positive enhancement of the diamond industry, without the necessity of negative imagery.

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