U.S. government acts quickly on Kimberley Process critique

New York—In response to a recent report from the Government Accountability Office (GAO) that found weaknesses in several areas of Kimberley Process Certification Scheme (KP) implementation through the Clean Diamond Trade Act, the State, Homeland Security and Commerce departments sent letters to the GAO detailing the changes they put in place to correct the problems, according to a press release issued on Friday from Jewelers of America.

"I applaud our government for responding quickly and decisively to correct flaws in U.S. compliance with the rules of the Kimberley Process and the Clean Diamond Trade Act," said Jewelers of America president and CEO Matthew A. Runci in the release. "The government's corrective actions will add teeth to U.S. oversight functions, especially in regards to regular monitoring, which is an essential element of any credible system."

The key criticisms made by the GAO and the U.S. government response are as follows:

The GAO found the United States does not periodically or regularly inspect rough-diamond imports and exports to ensure contents match their KP certificates.
In response, Homeland Security's Customs and Border Protection will institute a periodic and random selection process for imports. Selected shipments will undergo a full document review, an examination of the tamper-resistant packaging and a verification of the shipment's contents. For exports, Customs will establish a process to target diamond shipments, ensuring regular and random verification of these packages as well.

The GAO found the United States lacks an effective system for confirming the receipt of rough-diamond shipments with the exporting KP participant countries.
This KP requirement helps prevent possible diversions of rough-diamond packages to illicit sources—and the U.S. confirmation response has been particularly weak, especially when compared with other KP participants (Belgium, for example, reported that in 2005, all other KP countries confirmed receipt of 97 percent of its shipments, while the United States only confirmed 18 percent). In response, Homeland Security will now provide monthly reports to State on all shipments of rough diamonds. State will then forward the confirmations of receipt of these packages to the relevant foreign export authorities. State says implementation of this system will begin shortly.

The GAO found the United States has no system for monitoring the U.S. Kimberley Process Authority (USKPA), the private-sector group that issues Kimberley Certificates through designated licensees (such as third-party shippers).
The GAO says other KP countries have reported receiving U.S. KP certificates that have been altered using correction fluids (such as Wite-Out), or that contain typographical errors and incorrect dates. Such alterations and mistakes could mean the certificates have been tampered with, a violation of KP requirements. To address these problems, State began implementing a plan in March 2006, which now includes quarterly visits to USKPA licensees, diamond importers and exporters, and regular meetings with the USKPA board. State will direct the USKPA to develop a plan for reviewing the activities of its licensees as well.

The GAO says that while big improvements have been made, there are still unexplained discrepancies in U.S. rough-diamond trade data. For example, the United States exported approximately 300,000 carats more than it imported in 2005.
In a country with no diamond mining, like the United States, unexplained excess exports could involve illicit rough diamonds, though the GAO acknowledges that other factors might be involved, such as the levels of inventories and the volume of U.S. cutting and polishing. Commerce's U.S. Census Bureau has taken several steps to resolve the problem, and stated in a letter to the GAO that if the excess exports continue, it will work with the U.S. Kimberley Process Implementation Coordinating Committee to research the issue.

To read the GAO's complete report, visit www.gao.gov/new.items/d06978.pdf.

For more information about Jewelers of America, visit www.jewelers.org.