Diamond Industry Committed to Eliminating Conflict Stones

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Press Release: World Diamond Council

The World Diamond Council (WDC), representing all segments of the diamond industry in the U.S. and abroad, today reaffirmed its commitment to eliminating the destructive trade in conflict diamonds and supporting legislation to do that.

Matthew Runci, executive director of the WDC, said the organization is working to encourage prompt consideration by Congress of a draft bill, approved by industry representatives from 13 countries who met in London last month, that would create an enforceable solution to this problem.

Runci noted that the WDC fully shares the goal of legislation being prepared by representatives Tony Hall, D-OH, Frank Wolf, R-VA, and Cynthia McKinney, D-GA. While Runci said he was still studying the bill, he noted that, judging by the measure sponsored by Rep. Hall last fall, this new proposal and the WDC measure coincide in some important respects.

“We will study the details of the new bill to determine where the two proposals agree and where they differ,” Runci said. “The prospects of enacting effective legislation will improve greatly if the industry and other interested parties can unite in support of one sound bill. We have been striving to find common ground and will continue to do so.”

Runci said that to be effective, legislation must meet the following criteria:

• It must create a “certificate of origin” regime that is consistent with the realities of the diamond production, processing and distribution systems.

• It must adhere to principles already agreed to by the United Nations and the several interested governments that are determined to eliminate conflict diamonds. This international problem can be solved only with strong international cooperation.

• It must not damage the interests of African countries such as Botswana, South Africa and Namibia, which depend heavily on diamonds exports and which are not involved in illicit traffic.

“The industry is committed to stamping out conflict diamonds, and we will work with all interested parties to accomplish this goal,” Runci said.

A Diamond’s Path from Earth to Showcase

Diamonds are dug from mines or culled from riverbed gravel in 20 countries. In Africa, significant producers – in descending order by quantity – are Botswana, South Africa, Angola, Namibia, Democratic Republic of Congo and Sierra Leone.

The vast majority of rough diamonds extracted in Africa are monitored in legitimate fashion by government agencies. The trade contributes significantly to the private sector economies of these nations and is a source of needed tax revenue. This is particularly relevant in Botswana, South Africa and Namibia. As a new control mechanism takes hold in Sierra Leone, that society is also beginning to benefit from legitimate diamond exports.

However, some rough diamonds – a very small percentage of the total supply – originate in areas controlled by rebels and evade proper monitoring. These are the “conflict diamonds” that help finance violent activities of outlaws. They enter the legitimate supply chain in clandestine ways at an early stage – between the time of extraction and the point at which they are processed.

A $50 Billion-plus Market

The international market is large. After cutting, polishing and being set as jewelry, gem quality diamonds worldwide had a retail value last year of more than $50 billion. American consumers accounted for about half of that retail market.

There are two sources of gem-quality stones. “Primary” source diamonds are mined from hard rock (kimberlite), often found deep below the earth’s surface. Because of the effort required to extract them, “primary” stones are more easily counted, tracked, and controlled by authorities. “Secondary” source stones, found along river beds, have been thrust to the surface by geological events, loosened from kimberlite, and distributed over wide areas by river systems.

Laundering Is a Threat

These alluvial stones are often of the highest quality. They are commonly found in three of the countries that have seen violent competition for control of minerals: Sierra Leone, Angola and Congo. Because obtaining them does not require expensive equipment or supervised work forces, alluvial stones are more difficult to track. They can be smuggled into neighboring countries, their origin “laundered,” and exported with spurious documentation to mask their illicit status.

Regardless of the source, rough, uncut diamonds begin their transformation to jewelry when acquired by trading companies and sent to processing centers. The biggest of these are in Belgium, Israel, Thailand, the U.S., India and South Africa. There the rough stones typically are refined and sorted according to their type and quality, During this stage, diamonds from several sources are mixed and prepared for distribution to wholesalers and retailers around the world.

Diamonds arriving in the U.S. typically come in shipments that have already been cut and mixed. Therefore, it is impossible to determine by any means – scientific or documentary – the place and time that a specific diamond was extracted. That fact explains why proposals to certify the origin of each individual diamond are unfeasible. In the foreseeable future, the only practical way to eliminate conflict diamonds from the legitimate supply chain is to impose a “certificate of origin” regime that takes effect soon after diamonds are extracted.

Regulatory System Being Tested

The Wold Diamond Council has cooperated with several African countries, Belgian authorities and United Nations officials in devising such a system. It requires that authorities in the producing countries closely monitor legitimate output. Rough diamonds are to be sealed in tamper-proof containers, with each parcel assigned a counterfeit-proof document and a unique registration number. The carat weight of each shipment is recorded, and each shipment is registered in an electronic database.

The several countries that are host to processing centers would admit only sealed parcels with appropriate documentation. Processing enterprises would be bound to observe the same rules. Consuming countries, in turn, would accept imports only from countries that have met the certificate-of-origin standards Shipments from countries that decline to cooperate with the system would be denied entry.

This is the system now being tested on a pilot basis for exports of rough diamonds extracted in government-controlled areas of Sierra Leone to Belgium. It is also the system envisioned in the Conflict Diamond Act of 2001 being offered by the World Diamond Council.

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