WDC Proposes Conflict Diamond Legislation

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Press Release

Legislative Proposal to Eliminate Conflict Diamond

Trade Unveiled by World Diamond Council at London Meeting

LONDON – Proposed legislation to ban importation of conflict diamonds into the United States and to create an international system to eliminate conflict diamond trade worldwide was unveiled today at a meeting of the World Diamond Council (WDC).

Specific provisions of the proposed legislation are based on principles already approved by the United Nations and by interested parties in key countries where diamonds are mined, processed or imported. A critical goal is to avoid harming the economies of African countries that depend on diamond exports and that already regulate them properly.

The proposed measure also envisions the negotiation of an international agreement under which all countries with significant involvement in the diamond trade would make specific commitments to prevent conflict diamonds from entering the supply chain for legitimate diamonds. Conflict diamonds constitute a very small percentage of the world supply.

¡§This is a crucial step forward in the campaign to rid the world of an appalling practice,¡¨ said Eli Izhakoff, chairman of the WDC. ¡§It is intolerable that rebels and bandits in a few African countries have financed atrocious acts by smuggling rough diamonds out of conflict zones. Our industry has a responsibility to do everything we can to eliminate tainted diamonds and we are committed to doing out part.¡¨

Because of the way diamonds are processed and distributed, the most effective way to prevent conflict diamonds from entering the legitimate supply chain is to focus on rough diamonds when they are extracted. It is also critical that shipments be tracked from the point of extraction to centers where rough diamonds are cut and polished. Therefore, the proposal calls for a ¡§certificate of origin¡¨ regimen in which packets of newly extracted rough diamonds would be sealed, documented and recorded in data bases ¡V all under the supervision of government officials.

The documentation would include the carat weight of each shipment, along with a unique registration number. Whether the packet then went to a processing center such as Antwerp or Tel Aviv, or was transshipped through another country, such as Switzerland, its content could be identified ¡V reliably ¡V as coming from a legitimate source rather than from a conflict zone.

Under the proposed legislation, the U.S. government would bar imports from any country that failed to meet these standards. Further, the administration would have broad authority to determine if the standards were being observed. Violators would be subject to a fine of $250,000 and the U.S. Customs Service would have authority to seize illicit shipments. Existing law already makes fraudulent importation practices a federal crime.

The proposed legislation provides that the President negotiate an international agreement that would make the certificate of origin program the global standard. The proposal envisions that the agreement be concluded by September 1 (A detailed summary of the bill is attached.)

The proposed legislation was drafted for the WDC by Warren Connelly and Bruce Wilson, trade experts at the international law firm Akin, Gump, Strauss, Hauer & Feld. Last July, at their biannual congress in Antwerp, industry leaders from around the word adopted a set of principles to combat conflict diamonds. They also created the WDC, giving it the mandate to translate the principals into reality. Council participants come from 13 countries on five continents.

The WDC will now discuss its legislative proposal with government authorities, non-governmental organizations and other interested parties in the U.S. and elsewhere. These discussions will aim at prompt passage of the proposed legislation by the U.S. Congress and achievement of a formal international agreement.

Said Izhakoff: ¡§This is an international problem that demands an international solution. We believe there is broad agreement internationally on the principles on which this proposal is based. Now it is up to governments to run these principles into law and to enforce the rules vigorously.¡¨

Highlights of Model Legislation

The purpose of this model legislation is to bar conflict diamonds from entering the U.S. and to seek creation of an international system that would ban trade in conflict diamonds worldwide. This proposal is designed to govern U.S. imports starting September 1, 2001 ¡V regardless of the status of the international agreement envisioned in this measure. Exports from countries that fail to cooperate in the monitoring system would be denied entry into the U.S.

The system outlined here will be effective because the model legislation draws on concepts agreed to by interested parties in countries that have significant roles in the extraction, processing and importation of diamonds. This proposal is fully consistent with principles adopted by the United Nations, by countries participating in the ¡§Kimberley Process¡¨ initiated by South Africa, and by all segments of the diamond industry.

Because it is the product of an international consensus, the system proposed here can achieve the desired result without damaging the economies of African nations that export diamonds legitimately. In operational terms, it focuses on preventing the introduction of tainted rough diamonds into the early phase of the supply chain ¡V the point when they go from places of extraction to processing centers.

It is only at that early stage that a ¡§certificate of origin¡¨ system to track shipments of rough diamonds can be considered effective and credible. By employing tamper-proof containers, authentic documentation on each parcel of rough diamonds and databases that keep track of each parcel of rough diamonds and databases that keep trace of each parcel, including the carat weight of contents, the system can exclude contraband from the supply.

Following is a summary of the legislation.

Title I

Section 101¡K

¡Kcites the ¡§devastating effects¡¨ perpetuated by conflict diamonds and the several efforts by the UN and the U.S. to stem illicit traffic. It establishes as U.S. policy the goal of preventing rough diamonds originating in conflict areas from entering the international supply chain.

Section 102¡K

¡Kdefines the physical properties of rough diamonds covered by the regulatory system and describes conflict diamonds as those ¡§used by rebel movements to finance their military activities, including attempts to undermine or overthrow legitimate governments.¡¨

Section 103¡K

¡K specifically bars the import of diamonds from Sierra Leone and Angola, in keeping with UN Security Council resolutions applying to exports from those countries. However, rough diamonds certified as legitimate by the internationally recognized governments of those countries are exempt from the sanction. The same prohibition applies to goods from countries that may be subject to similar UN resolutions in the future.

More broadly, diamond exports from any country that fails to implement an acceptable system of rough diamond controls would also be excluded from the U.S.

Section 104¡K

¡K recognizes that it is very difficult to foresee every circumstance in which violators might seek to evade the ban on conflict diamonds. Therefore, this section gives the President additional authority to prohibit importation of diamonds ¡§if he has reasonable grounds o believe¡¨ that particular shipments circumvent UN resolutions. One means of circumvention involves sending rough diamonds to nations bordering Angola or Sierra Leone, and then exporting them to processing centers. The section lists seven countries that might be affected, though the President could add others. The seven countries are Liberia, Burkina Faso, the Democratic Republic of Congo, the Republic of Cote d¡¦Ivoire, Guinea, Togo and Ukraine.

Section 105¡K

¡K authorizes the Secretary of the Treasury to issue regulations necessary to enforce the import ban. It also required that the Treasury Department compile ¡V by August 1, 2001 ¡V a list of countries that have either become signatories to a formal agreement or have unilaterally implemented the certification standards required by the new system.

Section 106¡K

¡K sets a civil penalty of $250,0100 for violation of the import restrictions. Both those attempting to bring in conflict diamonds and those knowingly importing them would be subject to the penalty. While the model legislation itself does not provide for criminal prosecution, an existing statute ¡V Title 18 of the U.S. Code, Section 542 ¡V does make fraudulent importation practices a federal crime, with a maximum prison sentence of two years. Therefore, violation of the legislation now proposed could result in criminal prosecution. Further, the U.S. Customs Service is authorized to seize contraband under certain circumstances.

Title II

Section 201¡K

¡Kconsists of findings that effective control of conflict diamonds depends on ¡§international cooperative efforts involving governments, the private sector, civil society, and appropriate international organizations.¡¨ The findings also acknowledge the work done by the UN, the Working Group on African Diamonds (the ¡§Kimberley Process¡¨), the World Diamond Council and others.

Section 202¡K

¡Ksays that it is the sense of Congress that the President should negotiate an international agreement to eliminate trade in conflict diamonds. It recommends that the agreement be reached by August 31, 2001.

Section 203¡K

¡Ksets out the principal provisions of the certification system that participating countries should adopt:

„h Rough diamonds, when exported from the country of extraction, must be sealed in secure, transparent containers by government agents.

„h Each sealed container must carry an authenticated document citing the country of extraction. The document must be fully visible to inspectors and must contain a unique registration number along with the carat weight of the rough diamonds.

„h Each exporting country, including those engaged in transshipment of diamonds, must maintain a database containing information on each parcel of rough diamonds.

„h No country subscribing to the tracking system may import diamonds if the criteria cited above are not met.

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