Category Archives: Press

NEW YORK – The World Diamond Council has retained a leading international trade law firm to prepare workable and effective model legislation to stop the trade in conflict diamonds, Eli Izhakoff, chairman of the WDC, announced today.

“This is a crucial element in our campaign to eliminate conflict diamonds entirely,” Izhakoff said. “This is a complex global challenge. To meet it effectively, we must have an international framework allowing all nations involved to coordinate their efforts. That includes countries in which diamonds are extracted, those in which stones are processed and major polished diamond importing countries, starting with the largest importer, the United States.”

The firm assigned to develop the model legislation, Akin, Gump, Strauss, Hauer & Feld, LLP, is expected to complete its draft in 90 days. “We will then urge the governments most concerned to consider the proposal on a priority basis,” Izhakoff said. “There is broad agreement among all interested parties – including our industry and non-governmental organizations concerned with the

issue – on the principles to be followed. Now we have to agree on strong, workable measures and get the job done quickly.”

Conflict diamonds are those that originate in areas under rebel control in troubled parts of Africa, such as Sierra Leone. Though these stones represent only a tiny percentage of the world supply, profits from their illicit sale have fueled violence and upheaval. Typically, contraband is funneled through neighboring countries with the connivance of corrupt officials, and then sneaked into normal channels.

Izhakoff said: “All sectors of our industry – producers, processors, distributors and retailers – are appalled by this practice. We are committed to ending it once and for all.”

In consultation with humanitarian organizations, government officials, and the United Nations, industry representatives last July created the World Diamond Council. The WDC has been working to choke off transshipment of suspect stones. But a permanent solution requires a comprehensive system that will track stones from their point of extraction to the major diamond processing centers. Violators will be subject to criminal prosecution.

With that system in place, importing countries such as the United States would be equipped to bar entry to any shipment of suspicious origin. The model legislation now being written will provide the legal basis for these controls. Akin, Gump, which is based in Washington, was chosen because of its expertise. Its co-founder, Robert Strauss, served as U.S. Trade Representative in the Carter Administration.

The two attorneys in charge of the WDC project, Warren Connelly and S. Bruce Wilson, have extensive experience in areas relevant to the conflict diamond issue. Connelly heads the firm’s international trade practice group. Wilson served as a negotiator in the U.S. Trade Representative’s office and as staff director of the Subcommittee on Trade of the House Ways & Means Committee.

NEW YORK – The World Diamond Council today welcomed action by the U.N. General Assembly to eliminate conflict diamonds as a major milestone on the road to solving a serious humanitarian problem.

Eli Izhakoff, chairman of the WDC, said of the General Assembly decision: “This move, taken December 1 without dissent of a single member country, heartens us tremendously. It demonstrates the broad consensus to take comprehensive, effective action in a spirit of cooperation among all interested nations: those in which diamonds are mined, processed and sold. The agreement to move forward also underscores that a united front has been established between the nations and all segments of our industry.”

The resolution, introduced by South Africa and co-sponsored by several nations, including the United States, is far more than a statement of intent. Rather it endorses the kind of “certificate of origin regime” needed to track legitimate diamonds from the time they are extracted in rough form through processing and distribution stages.

Industry leaders, together with several African governments, have been working since last spring to perfect a system that employs tamper-proof containers, counterfeit-proof warranties and electronic record keeping to secure the integrity of

legitimate diamond shipments. With all the relevant countries observing the same practices and rules, it will be possible to cleanse the worldwide supply of the very small percentage of conflict diamonds.

These are stones smuggled out of rebel-controlled territory in Sierra Leone, Angola and the Democratic Republic of the Congo. Profits from this illicit traffic underwrite continued fighting, often with terrible consequences for innocent civilians.

“While all parties of goodwill can be proud of the progress made,” said Izhakoff, “we realize that there is more to be done.” The WDC has commissioned a major Washington-based law firm to draft model legislation for c2onsideration by all interested countries. That draft is expected to be completed around January 1. Meanwhile, representatives of involved countries will meet in Namibia later in January to consider several technical issues concerning implementation of the tracking system.

“This complex international problem that can be addressed only by coordinated international action,” said Izhakoff. “We will not rest until this is accomplished.”

Last week, the World Diamond Council (WDC) met in London to further the process of forging an international coalition in the fight against conflict diamonds. Most importantly, the WDC unveiled proposed legislation to (1) ban the importation of conflict diamonds into the United States, and (2) create an international system to eliminate trade in conflict diamonds worldwide. 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. An important goal is to avoid harming the economies of African countries that depend on diamond exports and that are already properly regulated. 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.

At each stage of the process over these many months, I have been extremely impressed with the cooperation and coordination of industry leaders, human rights groups, and government officials. At the London meetings WDC members were unwavering in their determination to stem the flow of conflict diamonds that threaten the international integrity of our industry. The stakes have never been higher. And the commitment of all parties – including GIA – has never been greater.

Reprinted with permission from the Gemological Institute of America. Copyright 2000 GIA. This article was originally published in the GIA Insider, January 26, 2001, Vol 3, Issue 2. The GIA Insider can be found at http://www.gia.edu/.

An insidious sliver of the diamond trade that helps to finance violence in parts of Africa is the subject of mounting concern–and rightly so. A WomanNews story (“Price is too high for some gems, groups say,” Feb. 7) reflected that concern. Jewelry retailers, like other interested parties, are appalled that rebels use profits from smuggled “conflict diamonds” to buy the weapons used to terrorize fragile societies like Sierra Leone and Angola.

The global community, while starting slower than it might have, is now mobilized to squelch this practice. In this context, the community includes the countries in which diamonds are mined, processed and imported; international organizations starting with the United Nations; and all sectors of the diamond industry. Solid progress toward an effective international regulatory system is being made. With cooperation from the U.S. government, it can begin operating this year.

The question today is whether momentum can be maintained, or whether confusion about what needs to be done will impede the effort. Some well-meaning groups apparently believe that conducting street theater and promoting laws that cannot be enforced will produce better results than a program that addresses the problem’s core. Waving a placard in front of a jewelry store helps not a single victim of violence in Sierra Leone.

A few facts will help consumers understand what can work. It would be wonderful if we could identify the place of origin of each diamond in a showcase. But science does not yet provide that capability where cut and polished stones are concerned. It is also difficult to identify the origin of rough diamonds, particularly in small quantities.

American retailers typically import diamonds that have been cut in processing centers abroad. Starting in 1999, Tiffany instructed its suppliers overseas that we would not do business with anyone trafficking in conflict diamonds.

The most reputable supplier, however, could have tainted stones without knowing it. The fact is that conflict diamonds pollute the supply chain at an early stage–after they are extracted from the earth and before they are sent to processing centers, where shipments from different sources are mixed.

As the UN, individual governments and the industry focused on the problem, two realities became clear. First, no solution would work unless it had the cooperation of all the major actors in the public and private sectors. Second, an effective program would require strong measures to bar tainted rough diamonds from entering the early phase of the supply chain. Melding these essential elements will make it possible to tell during later stages of distribution where a stone did not originate. Then a consumer can be assured that he or she is not buying a conflict diamond.

Last year these realities guided forward-looking activities in a variety of forums. A coalition of African nations started what became known as the Kimberley Process, seeking cooperative measures to eliminate conflict diamonds.

Both the UN Security Council and the General Assembly took similar steps. And the diamond industry, meeting in Antwerp, Belgium, adopted a set of strong principles that would underpin an international regulatory system. To implement those principles, participants at the Antwerp conference created the World Diamond Council, in which Tiffany is playing a prominent role.

The regulatory system we envision focuses on a “certificate of origin” program in which exporting and importing nations cooperate. It aims at protecting the security of rough diamonds as they move from the point of extraction to processing centers. It includes the use of tamper-proof containers, counterfeit-proof documents accompanying each parcel and electronic databases in which each shipment’s number and carat weight is recorded.

Refusal to participate would be costly to any country involved in the diamond trade. It would be illegal to import diamonds into the U.S., for instance, from a country that fails to employ adequate regulations on rough diamonds.

As a pilot project, the system is now used to monitor diamonds obtained in government-controlled areas of Sierra Leone and sent to Belgium.

What must happen now is adoption of uniform standards by the many nations involved. To accelerate this process, the World Diamond Council commissioned the drafting of model legislation. Our proposed bill has two major provisions:

It would prohibit importation into the U.S. of diamonds from countries that fail to observe the certificate of origin rules and make violators subject to stiff penalties.

It would authorize the U.S. president to negotiate agreements with other nations to formalize the international standards.

Because the U.S. is the world’s largest importer of diamonds, firm action by Washington will greatly influence others. And because of its impact on the market, the U.S. has both the obligation and the opportunity to lead. In taking the unusual step of requesting government regulation, the diamond industry has shown its commitment to eliminating conflict diamonds. Now government must do its part.

Michael J. Kowalski is the president and CEO of Tiffany & Co. and a member of the World Diamond Council

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 World 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 Diamonds Act of 2001 being offered by the World Diamond Council.