Kimberley: Watch the United States!
January 09, 03A few weeks ago, we wrote that “the United States is having second thoughts! The United States government has quietly provided instructions to its customs authorities not to refuse or disrupt rough diamond trade to non-Kimberley nations! The U.S. is not going to risk trade wars with any of its partners on the diamond issue.” The official status of Kimberley in the United States is that it is a purely voluntary arrangement.
On December 31, 2002, someone woke up at the State Department. A statement was issued confirming that “the United States will begin putting this scheme into effect with the voluntary issuance by the U.S. diamond industry of Kimberley certificates to accompany rough diamond export shipments.” Voluntary is a very interesting concept in an enforcement mechanism. It is just as when you don’t have a law requiring a car to stop at a red light. This makes a red light merely a recommendation to stop – and it also says you drive through it at your own peril.
As Kimberley became “voluntary”, it became inevitable that several organizations wanted to issue their own Kimberley certificate. Some groups said that they would charge for it; others would do it gratis. In the end the World Diamond Council, from its own leaders, created a new body, called the U.S. Kimberley Process Authority (USKPA).
This USKPA will act as the single issuing authority for rough diamond export certificates as required by the international Kimberley Process Certification Scheme. Members of the Authority will be Judge S. Herman Klarsfeld, General Counsel to the New York Diamond Dealers Club; Cecilia L. Gardner, General Counsel to the Jewelers Vigilance Committee; Matthew A. Runci (Chair), President /CEO of Jewelers of America. According to the Kimberley scheme, the State Department must officially appoint this newly formed industry body as the official authority authorized to issue certificates. Without such authority, the certificates will not be recognized – and no rough of U.S. origin can be imported into the other cutting centers.
This industry “self-policing” is very intriguing. Though the USA is not a major rough trader it is used as a convenient “transfer center” for rough. In the first 10 months of 2002, the U.S. imported $491.9 million worth of rough, 76% of which (some $372 million) came from Africa. From South Africa alone $305 million was imported; everyone knows that it is extremely unlikely that these are domestically produced rough diamonds and that they may have come from other sources.
On these imports, considerable skills are needed to recognize and identify the origins of the goods. It is not at all clear how the imports are being checked and by whom – and whether there is any authority to refuse rough imports. That may be clarified during January. It seems, however, that there are no legal grounds to refuse the import of rough into the United States (unless it comes from embargoed countries.) The statement announcing the establishment of USKPA doesn’t say anything about the importation of rough. Has that task been left to the U.S. customs?
The USKPA will not have too much work in approving exports. In the first 10 months of 2002 some $174.4 million of rough was exported, the equivalent of 35% of its imports. Measured in carats, the picture doesn’t make sense: almost twice as many carats are exported as are imported….
This is something the new industry authority will have to deal with! Indeed, for the U.S. industry to “police itself” is not without risks: if they do it well -- and are not afraid to refuse to issue a certificate on questionable goods – this will set an important precedent. On the other hand, the voluntary system lacks any possibility for sanctions. If the government cannot enforce the system (because of lack of legal authority), a private group has even less chances of doing so.
And if – for no fault of the industry itself – the government failed to implement Kimberley, it would have been interesting to see what the government would have done if the World Diamond Council had not created this voluntary U.S. Kimberley Process Authority.
The U.S. government has now, finally and belatedly, come to the conclusion that “full implementation of the Kimberley Process recommendations can best be achieved through legislation. We [the U.S. Department of State] will work expeditiously with Congress to pass legislation as soon as possible in 2003.”
That sounds far too optimistic. It may take quite a while to get legislation through the House of Representatives and the Senate. In the interim, the U.S. will take measures to ensure the certification scheme is consistent with World Trade Organization requirements. If the new industry body created by the World Diamond Council works effectively, there is a good chance that its status can also be confirmed in the legislation.
It is hoped that the new body, in advising the authorities, will not unnecessarily broaden the definition of “conflict diamonds” far beyond the intention, purpose and mandate of Kimberley. When Kimberley was going to be implemented in the U.S. under anti-terrorist legislation, the definition was substantially broadened – and made inconsistent with the rest of the world. Though there are undoubtedly a lot of merits in doing so, it is at the same time most important that a “conflict diamond” is defined in an identical manner around the globe.
In any event, reality is such that this “voluntary” U.S. industry body will be more closely watched than any other Kimberley body (except for the chair). Let’s wish them well.