Players Gear Up For KPC System From Jan 1

Mumbai, December 22: | Updated: Dec 23 2002, 05:30am hrs
The high-profiled players of the transnational, multi-billion global rough diamonds trade prepare themselves for the worlds maiden Kimberley Process diamond Certification (KPC) system that comes into effect from January 1, 2003. This KPC system, primarily for self regulation among rough diamond buyers across the globe in not dealing with the conflict diamonds, comes into force even as the political conflicts in couple of Southern African countries like Angola, Sierra Leone and few others (with diamond mines) have stopped since.

KPC System To Break Trade, Armed Conflict Links
Our Commodities Bureau

Mumbai, December 22: The KPC system is the principal international initiative established in May 2000 to develop practical approaches to the problem of conflict / blood diamonds. Through this process the effort is to break the link between trade in rough diamonds and armed conflict, particularly in Angola, Sierra Leone and Democratic Republic of Congo. Such diamonds have been termed as conflict / blood diamonds.
This move was initiated by several southern African countries led by South Africa in response to growing international pressure to address peace and security concerns, as also to protect several national economies in the sub-region (Namibia, Botswana, South Africa).
Canada, during its term on the UN Security Council committee, has played an important role in pressing for measures to strengthen implementation of these sanctions, which in turn laid the foundation for the adoption of additional sanctions of Sierra Leone, which placed similar restrictions on rough diamond imports from that country. Sanctions were also imposed on Liberia, given its role as a channel for illicit diamonds from Sierra Leone.
In December 2000 and March 2002, the UN General Assembly adopted resolutions, co-sponsored by Canada, calling for the development of international certification scheme for rough diamonds to tighten controls over the diamonds trade and prevent conflict diamonds from entering legitimate markets. The KPC process, chaired by South Africa, includes approximately 44 countries involved in producing, processing, importing and exporting rough diamonds and all these countries account for 98 per cent of the global trade in an production of rough diamonds.
Once the KPC system is in place from January 1, 2003, importers, exporters and shippers of rough diamonds which could include jewellers, diamond mining and exploration companies, tool, equipment and machinery manufacturers, and companies in the cutting and polishing industry may be affected by this certification system.

The whole idea of KPC system, however, is to prevent the diamonds mined from these and other diamond mining countries which may in future have political armed conflicts from entering the worlds mainstream diamond trade and aiding the political conflicts.

Interestingly, the members of the domestic $8 billion diamond jewellery exporting community have also waken up to the benefits of yet another diamond grading /certification system that helps boost not just the exports but even improves confidence among retail buyers of diamonds and diamond jewellery.

The final draft of KPC system and the KP Certificate is being given the last touches in the United Nations security council office and is expected to be made available by the end of this month.

It was on November 5, around 50 countries, including India, the US, China, Canada, Australia and countries in European Union, agreed in Interlaken (Switzerland) to voluntarily adhere to the KPC system.

This certification process is expected to make the transnational rough diamonds trade free of the conflict diamonds that is perceived to help the armed conflicts and rebel movements in some of the conflict ridden African nations like Angola, Sierra Leone and the Democratic Republic of Congo, known for their diamond-rich mines. Through the KPC, the member countries are explicitly forbidden from trading with non-participating countries.

Over the last two years, the United Nations, alongwith the leadership of Canada, the UNs security council had through several initiatives and innumerable meeting of members of the global rough diamond trade tried to address the most sensitive issue of prohibiting the import of rough diamonds from Angola that were not controlled through an official certificate of Origin scheme. All these efforts have culminated in the KPC scheme.

The adoption and acceptance of KPC system is very important for India, say industry sources, primarily because of the fact that India is known to be the worlds largest diamond processing country and accordingly has been perceived to be a route for conflict diamonds. However, the adoption of KPC has removed any possible doubt in this regards, and after the introduction of KPC system in India, the ongoing diamond trade in India would continue as smoothly as earlier, barring the minuscule amount of fees that the rough diamond importer would have to pay for certification to GJEPC.

It is in our own interest that we in India strictly follow the KPC system, said Vasant Mehta of V Rameshchandra & Co. However, we have already informed the concerned KPC headquarters that India imports rough diamonds mainly from three destinations De Beers London, Antwerp (Belgium) and Israel.

Mr Mehta had been one of the key members of Indias diamond trade who had participated in most of the meetings held overseas to chalk out the final proceedings for KPC system.

According to Nilesh Shah, one of the leading diamond exporters and in charge of the diamond panel of the Gem & Jewellery Export Promotion Council (GJEPC), who too was part of the meetings on the issue said, May be, the conflicts in Angola and Sierra Leone have subsided, but the whole KPC methodology is a safeguard mechanism even for the future.

Further, given the huge quantum of diamonds processed in India, the KPC system would remove any doubts that India could be a route for dealing in conflict diamonds. Because of Indias pulsating diamond processing industry it processes nine out of 10 diamonds processed across the world it was earlier perceived that India may be one of the routes for the conflict / blood diamonds. However, this fear was quashed by furnishing the facts that India does not import its rough diamonds from any of the conflict countries.

Meanwhile, a section of the global rough diamonds trading countries has approached the World Trade Organisation (WTO) to see that the non-participating countries possible efforts to stall the implementation of KPC system are not fruitful.

According to industry sources, the non-participants may challenge the KPC plan in the WTO. Accordingly, some eight nations have already approached the WTO for waivers that would allow them to strictly implement the diamond certification plan under KPC system without fears of having its restrictions overturned by the WTO. Without waivers, the Kimberley rules could be challenged in the WTO by the non-participants. The WTOs council for trade in goods which met towards the end of November is said to have discussed the waivers but were not able to come to any conclusion. The council is expected to take up the issue once again later this month, say industry sources.

Meanwhile, in India, the commerce ministry vide its letter dated November 13, 2001, has nominated th Gem & Jewellery Export Promotion Council (GJEPC) as the importing / exporting authority in terms of the requirement of Interlaken Declaration KPC certifying authority.

Accordingly, the GJEPC would monitor all consignments of rough diamonds imported in the country. Annually, India imports around $4 bn worth of rough diamonds. The customs authorities too have been informed accordingly.

In an GJEPC note circulated last month, each EJEPC members will have to pay GJEPC $100 (Rs 5,000 approx) for each packet of rough diamond imported as certifying charges. The non-members would have to pay $200 per packet.

Even when the export of rough diamonds from India is almost negligible, the GJEPC members and non-members will pay $125 and $250 per packet.

In fact, it was since September 2001, the GJEPC had already requested its members to ask their rough diamond exporting partners to mention in their invoice that the rough diamonds sold by them to Indians buyers do not contain any conflict diamonds on which an embargo has been put as per the UN Security Council Resolution No 1173, 1176, 1306 and 1343.

Further, the GJEPC has said that the KP Certificate is a forgery resistant document with a particular format which identifies a shipment of rough diamonds as being in compliance with the requirements of the certification scheme. The KP Certificate accompanies each shipment of rough diamonds on import / export. Each such shipment of rough diamonds is accompanied by a duly validated certificate, which contains the certificate number, the number of parcels (within a box/container) the carat weight, the value and the details of the importer and the exporter.

Further, the GJEPC has informed its members to take the note of the new procedure that needs to be followed in import and export of rough diamonds.

Accordingly, all rough diamond imports will be monitored by the Bharat Diamond Bourse (in Mumbai) and the Surat Hira Bourse in Surat (Gujarat). The importers will be able to collect their consignments only after the concerned authorities clear the parcels.

Importantly, GJEPC has made it clear that if through human error or oversight, an rough diamond import parcel is received by customs authorities without KP certificate by GJEPC finds that the designated KP authority from the exporting country has sent details of this shipment to GJEPC the importer would be given five working days to arrange for the original KP certificate for enabling clearance of the parcel.

If the original KP certificate is not submitted, the rough diamond parcel would be returned from within customs to the exporting company under intimation by GJEPC to the designated KP authority in the exporting country.

It would be the responsibility of the exporting country to take up further investigation and impose penalty etc on the exporter of such goods not backed by the KP Certificate.