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A Giant Leap Toward Diamond Source Disclosure


The diamond trade took a significant if unexpected step toward transparency at the recent Kimberley Process (KP) intersessional meeting in Dubai.

 

The KP adopted a resolution that allows states to proactively list the country of origin on KP certificates for mixed parcels, the World Diamond Council (WDC) reported in a May 17 press release that went largely unnoticed in the media.

 

The move enables companies to adhere to the G7 import restrictions on Russian diamonds with greater ease and enhances their source verification or traceability programs by providing a clearer indication of origin on KP certificates.  

 

Prior to the change, the KP stipulated that rough diamonds that have passed through more than one location should be marked as mixed, or simply with an asterisk.

 

As a result, the majority of rough was certified as such when reaching the cutting wheel. That is because most goods pass through trading centers such as Antwerp, Dubai, or Ramat Gan where they are mixed with other goods, before being shipped to India for manufacturing. 

 

Such mixing also occurs in producer countries, with De Beers goods being the most significant example.  The company aggregates – mixes into categories – its production from Botswana, Canada, Namibia and South Africa in Gaborone before selling the rough to its sightholder or auction clients.

 

Historically, therefore, those diamonds were exported from Botswana with mixed-origin KP certificates. The adjustment enables De Beers supply to be marked as being from Botswana, Canada, Namibia, and South Africa. All four countries are said to have adopted and implemented the ruling. Key manufacturing and trading centers, including India, are also believed to be on board.

 

Special plenary session

 

Passing the decision was no simple task given the KP requires consensus among approximately 85 member states to change its rules. The WDC, which took on the initiative, noted that the decision itself didn’t require a vote.

 

It recognized that the mixed origin or asterisk requirement on such certificates was a minimum criterion of the scheme. It doesn’t prevent countries from going over and above the minimum requirements, explained WDC president Feriel Zerouki.

 

For example, in KP audits, the group acknowledges best practice whereby a country takes steps beyond the prerequisite, she noted.

 

Rather, the core challenge was to have the KP indicate to its members that they could go over and above those minimum criteria, Zerouki recalled. That required the WDC to gain support of the major KP participants for the initiative prior to the intersessional meeting.

 

Furthermore, the KP chair – Ahmed Bin Sulayem, of the United Arab Emirates (UAE) – needed to call a special plenary session at the intersessional meeting, since decisions can only be made at a plenary. The KP meets twice a year; at the May intersessional, and at the November plenary meeting where resolutions are adopted.

 

While calling a special plenary session was an unprecedented move, it allowed the KP to fast-track the implementation of source disclosure on mixed-origin certificates.

 

Having established that a vote wasn’t required for going over and above the minimum requirements, consensus was reached to note that the vast majority of members – all except one – supported the concept.

 

The decision was adopted. The WDC achieved its goal to have the KP broadcast to its members that such disclosures could be made. The first batch of such KP certificates for De Beers goods were reportedly shipped immediately after the Dubai meeting.

 

Import restrictions

 

For the industry, the issue of mixed-origin KP certificates gained greater urgency after the G7 nations adopted stricter measures to prevent the import of Russian diamonds to their markets. As of March 1, businesses had to show that their rough and polished above 1 carat was not from Russia. The stipulation will be extended to 0.50-carat goods from September 1.

 

At some G7 borders that requires providing evidence about where the diamond was sourced. Others, including the US, require self-declaration by the importer, at least during the sunrise period after which it is believed an evidence-based mechanism will be required.

 

The EU, meanwhile, is working on a technology-based traceability system to verify its diamond imports. Last week, the EU extended the sunrise period for the mandatory adoption of a full traceability scheme to March 1, 2025.   

 

The mixed origin issue was a major factor preventing KP certificates from being used as a provenance mechanism. In a June 4 statement, De Beers gave a nod to the WDC announcement by calling for countries to disclose provenance on mixed-origin KP certificates. The company – where Zerouki is an executive – also called for an extension to the sunrise period by one year, to September 2025.

 

There is a lot of confusion surrounding the G7 import restrictions. That is largely due to each country implementing their own systems, despite the initial consensus about their adoption. Love it or hate it, the often-criticized KP can play an important role in verifying the country of origin of rough diamonds – so long as the majority of certificates make that disclosure.

 

The decision on mixed-parcel certificates should therefore be celebrated.  

 

“This is a huge success for the diamond industry as countries use their sovereign rights to independently certify the origin of parcels within the KP certificates,” Zerouki stressed. “We encourage all industry members to engage and encourage their KP diamond offices to apply this change and maintain transparency across the supply chain.”

 

Indeed, against all odds, the WDC managed to correct a major weakness of the KP. In doing so, it has allowed for an easier adoption of evidence-based traceability at the rough stage.

 

That provenance disclosures can be made on mixed-origin certificates represents a giant leap for industry transparency. It now requires broad adoption among KP member states to be truly effective.   


Image: WDC president Feriel Zerouki (left0 in conversation with KP chair Ahmed Bin Sulayem. (credit: WDC)

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