A SYSTEM FOR INTERNATIONAL ROUGH DIAMOND EXPORT AND IMPORT CONTROLS

The World Diamond Council extends special recognition and appreciation to

Mark van Bockstael, Director of International Affairs for HRD – Antwerp

for allowing the Technical Committee to adapt for this purpose a system he designed.

October 17, 2000

INTERNATIONAL ROUGH DIAMOND EXPORT AND IMPORT CONTROLS

BACKGROUND

UN sanctions embargoing conflict diamonds from Angola and Sierra Leone have created the need for the diamond trade and governments to assure that conflict diamonds are not allowed to enter the legitimate international diamond distribution network through imports to diamond producing or consuming nations. Since conflict diamonds cannot be identified through physical inspection and also since they are often transshipped through countries that are not involved in conflict, a global system of export certification and import verification must be established. This global system will ensure that all diamonds legally imported into diamond cutting, trading and consuming nations will be of known, verifiable, non-conflict origin.

The diamond industry, through the World Diamond Council (WDC), seeks to cooperate with the United Nations and governments to ensure that conflict diamonds are excluded from the legitimate diamond trade through implementation of an efficient and workable system of international diamond controls. The WDC and governments recognize the important role that diamonds play in the economic development of many diamond mining and producing countries; the WDC, therefore, seeks to implement a system of controls that does not harm the legitimate diamond industry.

The system of international diamond export and import controls presented herein establishes an international conflict free trade zone (CFTZ) for diamond producing, cutting and trading nations. Nations that implement strict controls over their exports and imports of rough diamonds will be deemed conflict free diamond centers and, therefore, will be able to trade freely with each other and to freely export diamonds to consuming nations. CFTZ nations will also be able to freely process (i.e. sort, mix and manufacture) diamonds in their diamond centers. To ensure that conflict diamonds do not enter the world markets, all diamond importing countries will be required to restrict imports to only those coming from countries that implement rough diamond export and import controls.

OBJECTIVE

The primary objective of the Technical Committee of the World Diamond Council is to create an international process for rough diamond export and import verification which:

  • Restricts the flow of “conflict” rough diamonds.
  • Requires that all rough diamonds imported into diamond mining, manufacturing and trading nations will be accompanied by reliable verification documentation as defined below, and thereby assures that their sources are known, legitimate and conflict free.
  • Requires that all diamonds imported into any country, for any trade or commercial purpose, originate from known, legitimate, conflict free sources that are implementing strict rough diamond import controls.
  • Establishes an international conflict free trade zone (CFTZ) within which, and from which, diamonds may be freely traded, sorted, processed, imported and exported so as to ensure that the legitimate diamond trade may continue to operate economically and efficiently.
  • Enables a process whereby sellers throughout the diamond distribution system may assure their customers that the diamonds they are selling originate only from sources that are certified as being conflict free.

OUTLINE OF REGULATIONS

I. Diamonds imported into any country must originate from countries that implement strict rough diamond export and import controls as defined below.

II. Rough diamond regulations include the following:

A. Rough Diamond Export Controls

1. All rough diamonds packaged for export are sealed in a transparent, tamperproof security bag by a government official of the exporting country.

2. The sealed security bag includes a fully visible Certificate of Export Origin (described below) that has a unique export registration number, total carat weight and total export value of the rough shipment.

3. The shipment data (registration number, total carat weight and total export value of the rough) are recorded in a government-controlled system.

4. All rough exporting countries must strictly adhere to the following import control regulations for any rough diamonds imported into their country.

B. Rough Diamond Import Controls

1. Only sealed containers of rough diamonds originating from a country that is strictly implementing rough diamond export controls as defined above may be imported by any country.

2. The importing country must be able to verify the data on the export document by electronic or other reliable means.

3. Sealed containers of rough diamonds are subject to inspection by the authorities.

C. Rough diamond export and import controls, as defined above, will also ensure that only conflict free diamonds flow between the commercial diamond centers of the world.

III. Conflict Free Trade Zones (CFTZ)

A. Diamonds may be freely imported and exported between all diamond mining, manufacturing and trading centers that implement and adhere to both the proposed rough diamond regulations stated above and to the system for international rough diamond export and import verification as described below.

ROUGH DIAMOND EXPORT AND IMPORT VERIFICATION DOCUMENTATION

I. The proposed documentation is a form in three parts to be used in combination with the guidelines and regulations set forth herein to implement an international system of rough diamond export and import controls. The documentation introduces the concept of a printed Certificate of Export Origin (COEO) for rough diamonds, along with an Import Confirmation Certificate (ICC) and a Security Slip. The complete schematic-guidelines, regulations and documentation-creates a comprehensive transparent, auditable, closed-loop tracking mechanism for legitimate rough diamonds. This system will also ensure the importing country’s compliance with United Nations Security Council Resolution 1306.

PROPOSED THREE-PART EXPORT AND IMPORT VERIFICATION DOCUMENT

A. Certificate of Export Origin

1. Tamper and forgery resistant by design.

2. Printed on watermarked security paper with an intaglio border.

3. Features two numbers.

a. A unique sequential export registration number.

b. A randomly generated perforated number that may not duplicate the export registration number.

4. Contains red and green UV inks.

5. Shows carat weight and US$ value of shipment.

6. Lists quality characteristics on reverse side.

B. Detachable Import Confirmation Certificate (ICC)

1. Displays sequential printed and perforated numbers of COEO.

2. Has importing authority’s valuation on reverse side.

3. Must be returned to exporting authority to create the closed loop effect.

C. Security Slip

1. Has intaglio printing.

2. Contains red and green UV inks.

3. Displays the same sequential printed number as COEO and ICC.

4. Ensures the link between COEO and physical parcels of rough diamonds.

5. Must be fixed and sealed on parcels in such a way that opening the box containing the rough diamonds will rupture the seal and break the Security Slip.

6. Guarantees the link between COEO and physical parcel of rough diamonds.

7. A box sealed with a Security Slip may only be opened at its destination and only by the importing authority.

II. Exporting

A. Exporting authority completes all required information on the three-part form, makes a photocopy of the document in its entirety (including Security Slip), enters COEO data in a national database and retains all document photocopies.

B. Rough diamonds will be packed in a box that is sealed with the detachable Security Slip firmly affixed to the box in a way that prevents unauthorized opening.

C. Certificate of Export Origin and Import Confirmation Certificate along with the commercial invoice and the box containing the rough diamonds will be sealed in a tamper proof, transparent, sequentially numbered security bag.

D. Every security bag will have its own detachable tag bearing the number of the bag. When removed from the bag, this numbered security bag identification tag will be attached to the photocopy of the COEO that is retained by the exporting authority.

III. Audit Trail

A. The audit trail is maintained by the exporting authority.

B. Security printer keeps record of dispatched COEO numbers.

C. Exporting authority maintains a physical file of photocopied documents.

D. The security bag number will be recorded on the Import Confirmation Certificate contained in that bag.

E. All Import Confirmation Certificates are returned to the exporting authority who verifies that the security bag number on the ICC matches the retained security bag identification tag before attaching the ICC to the retained photocopy of its matching COEO document.

F. Exporting authority keeps a ledger to account for all documents, including those that are faulty, which will be stamped “VOID” and kept in numerical order in the physical file.

II. Importing

A. Importing authority records and retains original COEO.

B. Importing authority enters COEO data in national database.

C. The sequential number of the security bag is recorded on the ICC.

D. ICC is photocopied and attached to original COEO.

E. Original ICC is returned to exporting authority.

III. Electronic Data Transmission

At the expense of the exporting and importing authorities, a system of hardware and software may be implemented that will enhance the overall processing for rough diamond export and import controls. Such an electronic system should include electronic data registration, encryption and data transmittal between the exporting and importing authorities via a secured server.

A. Exporting authority sends secure transmittal of a shipment’s characteristics to the importing authority.

B. All data transmitted is encrypted to prevent tampering or unauthorized access.

C. The stream of transmitted data should include the printed sequential number and the randomly generated perforated number of the COEO; total carat weight; total value; and, digitized photographs to enable immediate identification of a parcel.

D. When a package of rough diamonds arrives, the importing authority will transmit a confirmation of receipt to the exporting authority that includes the number of the Security Slip and the sequential number from the security bag in which it was shipped.

IV. Conditions

A. Exporting authority or government regulatory agency defines conditions on exporter to ensure that rough diamond exports are conflict free.

B. Importing country must have ability to verify authenticity of COEO.

C. All imports are subject to inspection by import authority.