Editorial: Kimberley in America — three years on

More than three years into the international adoption of the Kimberley process for the tracking and certification of rough diamond trading, a new report by the United States Government Accountability Office (GAO) is lauding the progress the U.S. government has made implementing needed bureaucratic changes while pointing out some embarrassingly lax oversight.

In November 2002, 37 diamond-producing and diamond-trading countries launched the Kimberley Process Certification Scheme — a voluntary global system to control the trade of rough diamonds and assure consumers that in buying diamonds they weren’t helping to finance the kinds of nightmarish bush wars that wracked countries such as Sierra Leone, Liberia, the Democratic Republic of the Congo and Angola in the late 1990s and early 2000s.

Today, there are 45 countries participating in the Kimberley Process, plus the European Union, accounting for 99.8% of global rough-diamond production.There have been some consequences already for participants’ breaches in the Kimberley Process. For example, in July 2004 the chair of the KPCS expelled the Republic of Congo owing to its failure to account for the origin of large quantities of rough diamond exports.

While the U.S. isn’t a diamond-producing nation, it is a significant global trader of rough and polished diamonds, and is the world’s largest consumer market for diamond jewelery.

In 2003, the U.S. was the seventh-largest exporter of rough diamonds among non-mining Kimberley Process participants (exporting about US$227 million worth), and the fifth-largest exporter of polished diamonds.

Specifically, the top destinations for U.S. rough diamond exports are Israel (40%), the European Community (31%), and the United Arab Emirates (8%), while the top sources of rough diamond imports into the U.S. are the European Community (65%), Israel (24%) and South Africa (4%).

And while the Customs and Border Patrol (CBP) controls about 300 ports of entry to the U.S., about 85% of rough diamonds come into the country through the John F. Kennedy airport in New York City.

In the U.S., the Kimberley Process was implemented under the statutory framework of the Clean Diamond Trade Act (CDTA), which was enacted in April 2003 and is overseen by multiple U.S. governmental agencies and a private, non-profit entity named the U.S. Kimberley Process Authority (USKPA).

Domestically, the departments of State, Treasury, Homeland Security and Commerce and the USKPA are involved in controlling the import and export of rough diamonds. The State department oversees the USKPA, which, through 17 licensed private entities, issues the Kimberley Process certificates that must accompany all U.S. export shipments of rough diamonds.

Internationally, the State department is the chief driver of the Kimberley Process, and is assisted by the U.S. Agency for International Development (USAID), the U.S. Geological Survey, and the Census department.

In its 62-page report, entitled “Conflict diamonds: Agency actions needed to enhance implementation of the Clean Diamond Trade Act,” the GAO gives credit to the U.S. government for improving its data collection with regards to the rough-diamond trade, but cautions that more work needs to be done, and comments that the system is “still vulnerable to illicit trade.”

For example, despite improving the accuracy of its trade data on rough diamonds, resulting in a significant reduction in the excess of exports over imports — from almost 3 million carats in 2003 to less than 300,000 carats in 2005 — the U.S. currently does not know what factors, such as stockpiles, account for the remaining excess in exports.

Overall, the GAO found lax oversight of much of the CDTA paperwork coupled with monitoring of diamond shipments that relied too much on electronic checks rather than physical inspections.

Regarding international obligations, the GAO report slammed the U.S. government for not fully complying with the Kimberley Process standard that requires participants to confirm rough diamond import receipts with the relevant foreign exporting authority.

On the plus side, however, the U.S. government has taken a leading role in helping Sierra Leone and Liberia try to meet the most basic requirements of the Kimberley Process, providing a total of US$7.6 million in assistance to Sierra Leone (US$6.1 million) and Liberia’s (US$1.4 million) efforts to implement systems for controlling their trade in rough diamonds.

As a result, legal diamond exports from Sierra Leone rose from US$10 million in 2000 to US$140 million in 2005.

Liberia, though, is not doing as well: In June 2006, the United Nations decided to extend its rough-diamond-related sanctions on Liberia for another six months, with the option of assessing the country’s efforts to comply with KPCS again in another four months.

We’re pleased to see that the U.S. government departments named in the GAO report have agreed with its findings and are already taking steps to correct the lapses in the enforcement of the CDTA, and are further harmonizing the U.S. system with most other Kimberley Process participants.

The issue of conflict diamonds will undoubtedly resurface in the mass media in January, when the big-budget Hollywood movie The Blood Diamond is released. In it, Leonardo di Caprio plays an African mercenary chasing after a particularly valuable diamond found by a black artisanal miner working amid the horrors of last decade’s war in Sierra Leone.

When that spotlight shines on our industry, it will be a good time to tell anyone thinking of boycotting African diamonds that, yes, it was pretty bad in a few places like Sierra Leone, but that was in the past and the Kimberley Process has changed things for the better.