George Bush’s Last Eight Days Of July…
July 24, 03Diamond trade with non-Kimberley compliant countries will stop totally as of midnight July 31, 2003. It will have no impact on the business if Lebanon will be declared non-compliant. However, if the United States were to be declared non-compliant it would mean that Israel, India, Belgium and other centers will not be allowed to ship either rough or polished to the world’s largest diamond consumption market. The DTC will be faced with the problem of not being able to ship rough diamonds to New York. To be precise: if the United States is found non-compliant, U.S. law doesn’t prohibit the importation of diamonds. The Kimberley Process, however, will not allow the Participant Countries to export to the United States. The problem will be in the cutting centers, not in the United States.
As common sense would not tolerate the prospect that the United States would become off limit to diamonds, there are reasons to assume that in the last eight remaining days of July, U.S. President George Bush will sign the necessary papers, will give the U.S. customs and other official bodies the necessary instructions, and will advise U.S. Congress accordingly. The trouble is that he hasn’t done that so far. Papers submitted for his signature have been sent back and forth between the U.S. Department of State and the National Security Council (NSC). It may well be that the war in Liberia is troubling the president; diamonds are not an irrelevant factor there. However, with the July 31 deadline quickly approaching, we pray that President Bush will find the time to sign something – but even then the Kimberley Process status of the United States remains on shaky grounds.
There are basically two entirely different issues at stake which have given rise to serious doubts as to whether the U.S. will indeed be compliant – even after the President signs the necessary papers. I personally expect that because the United States is so powerful -- and because the entire industry basically wants to be able to continue to sell to American clients - the always very pragmatic and ingenious chairman of the Kimberley Process, Abbey Chikane, will find an administrative way to declare the United States as “being in compliance” - and will ignore that it most probably isn’t. After all, if Chikane declares that a round table is absolutely square – then it is square, and nobody ought to question that!
What troubles the other Kimberley countries? First of all, both the United States government and/or the industry body that calls itself the Kimberley Process Authority do not accept any responsibility for the correctness of the declarations made on the certificate. While Kimberley is a “governmental process” - and the whole idea of Kimberley was that governments should guarantee the non-conflict nature of its rough exports, in the United States the government has put the burden squarely on the exporter. He declares – and that’s it. The catch is that if he declares falsely, he may be violating the law (as of today, the law is not yet in effect though it has been passed).
What bothers some Participants is that nobody will ever be able to find out whether the exporter’s declaration is correct or not. The way we understand the U.S. system, the United States will become the “Disney-world” of rough diamonds, a make-believe fiction. The other Participants of the Kimberley Process will have to decide whether to accept that U.S. Kimberley certificates contain a disclaimer saying “the issuer of this certificate accepts no responsibility relating to the accuracy of the data recorded by the exporter of the referenced shipment.”
The U.S. diamond industry representatives, who have set up the (private and non-profit) U.S. Kimberley Process Authority, have decided to include the disclaimer on the certificate, to protect itself. One cannot argue with that. This Authority considers itself only as the issuer who is merely the party providing the blank certificate to the trader. It doesn’t see the goods. The trader (exporter) or party who executes the certificate is fully liable. Any so-called U.S. government certification merely means that the government confirms that the trader (i.e. exporter) has reported the transaction to the U.S. authorities. The exporter remains fully liable for accurate completion of that report and the certificate. The law (that has not yet taken effect) requires that the United States Bureau of Customs and Border Protection and the United States Bureau of Immigration and Customs Enforcement are authorized, as appropriate, to enforce the laws and regulations governing exports of rough diamonds, including the validation of the Kimberley Process Certificate by the exporting authority. It seems that, except for rubber-stamping, the Bureau of Customs has really no input in the process.
Though we have said many times that the United States is one of the easiest places in the world to use as transit point for conflict diamonds and get these diamonds into the “legal environment”, the fact that there are hardly any conflict diamond areas left makes much of the discussion highly theoretical and hypothetical – even though Liberia is casting a shadow. In essence, there should be no real fear that the United States, or individual exporters, will export conflict diamonds. However, it is the United States that is arguing that we need Kimberley “as a preventive instrument”, to prevent new conflict diamonds areas emerging, and to be ready to deal with the situation if and when, God forbid, there will be a recurrence. If we accept that argument, it follows that the United States must also adopt a reliable and internationally respected system. It is not helpful for the United States to be seen as being involved in endless manipulations to become “technically” correct, “technically” compliant – while the whole scheme seems so meaningless.
The American industry representatives running the Kimberley Certificate Authority claim that they have found no reference in the Kimberley Documents that would prohibit the procedures they adopted. Utterly gobbledygook. If in Sierra Leone, DRC, India, Belgium, Lebanon, Israel, South Africa or anywhere else the responsibility for the certificate was handed to the exporter, without any mechanism for the government to verify or check, the United States would be the first country to say that this is not correct. But the diamond industry will have to swallow the fact that there is one law for all Kimberley countries and another law for the United States. That’s the reality of life – and we’d better accept it. The U.S. industry representatives correctly point out that the Clean Diamond Trade Act provides for penalties, both civil and criminal, for anyone who willfully violates the act. Providing false information on the certificate could, indeed, be interpreted as an illegal practice. However, how would such an offender ever be caught? He wouldn’t.
What has all of this to do with President Bush? When the President signed the Clean Diamond Trade Act, he said, among other things, that “section 15 of the Act provides that the legislation takes effect on the date the President certifies to the Congress that either of two specified events has occurred. The first event is that "an applicable waiver that has been granted by the World Trade Organization (WTO) is in effect." The second event is that "an applicable decision in a resolution adopted by the United Nations Security Council pursuant to Chapter VII of the Charter of the United Nations is in effect." Once the Act takes effect, it "shall thereafter remain in effect during those periods in which, as certified by the President to the Congress, an applicable waiver or decision" by the World Trade Organization or the United Nations Security Council, respectively, "is in effect."
In plain English: the law only takes effect when the U.S. President advises Congress that he has declared it to take effect. Until now, he hasn’t done so. Until now, the law – that would penalize those exporters who are making false statements – is not yet the law of the land. To be precise: any exporter shipping conflict diamonds, with a Kimberley Certificate, that leaves the United States up to this very date, has not violated any law.
The WTO has granted the waiver, so there should be no problem for the president to declare that the law is in effect. But President Bush, when he signed the law, made it clear that he didn’t see himself duty-bound to immediately inform Congress. Said President Bush: “If section 15 imposed a mandatory duty on the President to certify to the Congress whether either of the two specified events has occurred and whether either remains in effect, a serious question would exist as to whether section 15 unconstitutionally delegated legislative power to international bodies. In order to avoid this constitutional question, I will construe the certification process as conferring broad discretion on the President. Specifically, I will construe section 15 as giving the President broad discretion whether to certify to the Congress that an applicable waiver or decision is in effect. Similarly, I will construe section 15 as imposing no obligation on the President to withdraw an existing certification in response to any particular event. Rather, I will construe section 15 as giving the President the discretion to determine when a certification that an applicable waiver or decision is no longer in effect is warranted,” said Bush.
Again, translated into plain English, President Bush says that “irrespective of what the WTO or the UN may decide in the future, I will not be bound by anything – I will decide the way I see fit.” There is more to it: if the Plenary of the Kimberley Process, a meeting of all the almost 70 governments which participate in the scheme, make a decision, President Bush reserves the right not to accept such decision. Says Bush: “Although under this Act I have discretion to issue regulations consistent with future changes to the Kimberley Process Certification Scheme (KPCS), under the Constitution, the President cannot be bound to accept or follow changes that might be made to the KPCS at some future date absent subsequent legislation. I will construe this Act accordingly.”
If the President will issue his certification to Congress, then all is well? No, the Act requires the President to do many things that he hasn’t done so far. Says the Act: “The President shall prohibit the importation into, or exportation from, the United States of any rough diamond, from whatever source, that has not been controlled through the Kimberley Process Certification Scheme.” The United States Customs should receive instructions to which countries diamonds are allowed to be exported to, or imported from, and to which countries they cannot. Customs officials say that, after the President instructs them accordingly, they will need at least one month to make all the necessary arrangements to comply.
What would I do, if, for one moment, I were President Bush? I would probably stay away from it all – and not sign anything. On the other hand: I might have little choice. The law imposes on the U.S. President a number of “mission impossibles”. According to the law, for example, not later than one year after the date of the enactment of this Act and every 12 months thereafter for such period as this Act is in effect, the President shall transmit to the Congress a report (1) describing actions taken by countries that have exported rough diamonds to the United States during the preceding 12-month period to control the exportation of the diamonds through the Kimberley Process Certification Scheme; (2) describing whether there is statistical information or other evidence that would indicate efforts to circumvent the Kimberley Process Certification Scheme, including cutting rough diamonds for the purpose of circumventing the Kimberley Process Certification Scheme; (3) identifying each country that, during the preceding 12-month period, exported rough diamonds to the United States and was exporting rough diamonds not controlled through the Kimberley Process Certification Scheme, if the failure to do so has significantly increased the likelihood that those diamonds not so controlled are being imported into the United States; and (4) identifying any problems or obstacles encountered in the implementation of this Act or the Kimberly Process Certification Scheme.
And if these annual reports weren’t enough, there are also half-yearly reports. For each country that is NOT a member of Kimberley, the President shall, every 6 months after the initial report in which the [non-Kimberley] country was identified, transmit to the Congress a report that explains what actions have been taken by the United States or such country since the previous report to ensure that diamonds, the exportation of which was not controlled through the Kimberley Process Certification Scheme, are not being imported from that country into the United States.
The requirement to issue a semiannual report with respect to a country under this subsection shall remain in effect until such time as the country is controlling the importation and exportation of rough diamonds through the Kimberley Process Certification Scheme.
And if these reports aren’t sufficient, the law requires a further monitoring by the General Accounting Office (GAO). Says the law: “Not later than 24 months after the effective date of this Act, the Comptroller General of the United States shall transmit a report to the Congress on the effectiveness of the provisions of this Act in preventing the importation or exportation of rough diamonds that is prohibited under [this Act.]. The Comptroller General shall include in the report any recommendations on any modifications to this Act that may be necessary.”
We fail to comprehend how the GAO possibly could measure the effectiveness of a U.S. Kimberley system whose effectiveness is being questioned by virtually all of the scheme’s non-American members. Of course, the GAO will only have to report on the performance of the system 24 months after the effective date of the Act. The effective date hasn’t arrived yet. We expect the date will be reached within the next eight days. If the President doesn’t find an occasion to sign within this time framework – a serious disruption of trade seems inevitable. That’s the last thing anyone wants – including, presumably, President Bush himself.