WORKING GROUP DIAMOND EXPERTS REPORT TO THE PLENARY

Transcription

1 WORKING GROUP DIAMOND EXPERTS REPORT TO THE PLENARY The Working Group Diamond Experts role lays mainly in providing technical solutions to Kimberley Process Certification Scheme implementation problems. Terms of Reference: The Working Group discussed the proposed ToR s (Annex I) and decided to bracket ToR 6 and 7, as these would pose an undue burden on the Working Group. Furthermore, the Working Group noted that ToR 4 captures this as well. It is understood, however, that the WG Diamond Experts would unbracket ToR 6 and 7 when another KP Working Group / Chair / Plenary would need specific information in relation to a particular situation or area. Current Technical Issues: To obtain precise and detailed information about the teething problems of the KPCScheme, an electronic query was addressed to all Participants. This has resulted in an important database of problems as perceived by import/export authorities of active Participants. More important even than the listing of these problems is the very fact that the KPCScheme is up and running! As was to be expected, most of the problems listed below, have occurred in the early days of the implementation of the KPCScheme. Comfortingly, the number of difficulties occurring on a day to day base, is on a steady decline. The reason being that import/export authorities have learned from experience and have now established proper contacts with their counterparts worldwide. Most of the identified areas of confusion or sometimes real errors, are related to an uncertainty on how to interpret the KPCScheme in a particular case. Some problems, however, are related to systematic approaches by authorities. This is especially the case where the KPCertificate brushes against existing international customs practices or agreements. It is clear that dysfunctions of the KPCScheme related to the latter group need the urgent attention of the Plenary. As the KPCScheme is a political agreement rather than a binding international treaty, its implementation depends on national certification schemes compliant with the minimum requirements of the KPCScheme. Even where national certification schemes are seemingly compliant, many practical cases illustrate the need for practical guidelines to avoid contradictory measures that could hinder, or in some cases even disrupt trade between Participants. 1. Uncertainty in relation to the placement of the KP Certificate in respect to the sealed containers: A very practical case of compliant national certification schemes from different Participants that are unable to collaborate, is illustrated by the KPCScheme minimum requirement to have the shipment of rough diamonds accompanied by a - 1 -

2 duly validated Certificate (KPCS Sec. III; a). Some Participants have enacted this minimum requirement in their national legislation by opting for the compulsory inclusion of the KPCertificate in the sealed container. Other Participants require, on the contrary, that on import the authenticity of the KPCertificate is verified even before the sealed container is opened. It is obvious that both Participants requirements, although in perfect compliance with the KPCScheme, are almost impossible to match. A clear guideline could help in this case. Guideline 1: The importing Participant must clearly and precisely be able to identify the shipment to which a Kimberley Process Certificate pertains. 2. Opening of sealed containers in transit by national authorities: Another practical problem that has emerged is the opening of sealed containers by national authorities ( s.a. Customs; Security) in countries where these shipments are transiting. This problem has already been discussed, albeit briefly, at the Interlaken Technical Working Group Meeting. The conclusion then was that a new KPCertificate should be issued by the national authority of the Participant that opened the transiting shipment. However, the consequences of this action on the statistical reporting have not been properly discussed. A further complication of this situation is offered when a shipment is opened in transit by a national authority of a non-participant. The Working Group discussed the possibility of issueing an advisory note to diamond dealers travelling with shipments, to avoid transiting through non- Participants. It was concluded, however, that avoiding travelling over non- Participants was not always possible. Furthermore, as more and more security measures are imposed on international travel, it is highly likely that more incidents are likely to happen. The Working Group concluded that the KPCScheme should not interfere with existing international agreements that allow inspection of any commodity by national authorities in performing their duties. Furthermore, it is practically impossible to avoid transiting through non-participants. Guideline 2: Shipments of rough diamonds in sealed containers that have been opened for inspection by national authorities in transit, and that are duly resealed by that national authority, will be considered compliant to the Kimberley Process Certification Scheme. The receiving Kimberley authority on import will, however, contact that national authority to verify the authenticity of the (re-)seal and report these incidents to the Chair and the annual Plenary meeting. 3. Acceptable modes of transportation: Although the KPCScheme doesn t specify nor limit by what means of transportation a shipment of rough diamonds accompanied by a KPCertificate must travel, some Participants have refused personal transport

3 The Working Group concluded that although a national authority is sovereign in its decisions within its own jurisdiction, it cannot invoke the KPCScheme to explain limitations on modes of transportation. 4. Territories of Participants covered by the KPCScheme: Especially with respect to regional economic integration organisations but not limited to these, it is not always clear to Participants which (custom-) territories are included in the KPCScheme. The Working Group concluded that this may lead to uncertainty in respect to which customs territories are to be considered authorised destinations. Guideline 3: All Participants must inform the Chair and the other Participants which of their territories have to be considered authorised destinations. 5. The use of alpha 2 ISO country codes to identify Participants: Although the mention of the alpha 2 ISO country code on the KPCertificate is a minimum requirement of the KPCScheme, some Participants have not included it on their KPCertificates. In two cases erroneous country codes have been used. This could lead to confusion. The Working Group discussed the issue and questioned the need for the inclusion of this code as on all the KPCertificates of all active Participants, the issuing Participant is clearly defined in writing. Mistaken identies in statistical reporting will therefore be very unlikely to occur. Furthermore, one Participant is today materially incapable of meeting this requirement. Guideline 4: The use of the alpha2 ISO country code on the Kimberley Process Certificate is considered non-essential to the effective implementation of the Kimberley Process Certification Scheme, and should, therefore, be considered an Optional Certificate Element. 6. The use of the HS- Harmonised System codes for the classification of rough diamonds: The discussion on the HS-Harmonised System codes has been held jointly with the Working Group on Statistics, and was co-chaired by Mr. Rob Dunn. The consistent use of the detailed (6 characters) HS-codes ; and for the classification of rough diamonds, has been identified by most Participants, as the reason for most of the problems that have surfaced. Practically, shipments that have been exported from a Participant with accompanying KPCertificate that mentions the relevant HS-codes, have met significant difficulties upon import into another Participant where the national authority questions the indicated codes. For a number of Participants this constitutes a violation of their customs legislation that can even result in criminal charges and/or hefty fines for the importer. It is clear that conflicting views on - 3 -

4 classification issues between exporting and importing authorities should not automatically lead to liability claims on the importer. Typical cases involve the reclassification of unsorted rough diamonds to sorted industrial rough diamonds and sorted non-industrial rough diamonds Also making the distinction between industrial and non-industrial rough diamonds poses, seemingly, a serious problem. Even worse classification mishaps have occurred when rough diamonds are reclassified, as polished diamonds are the other way around. In both cases these administrative mishaps could create serious problems for the importer that could even be criminally charged for importing rough diamonds without KPCertificate. Similar in nature, shipments containing very small rough diamonds have been reclassified as diamond powder for which no KPCertificate can be obtained. Even more complicated cases involve reclassification of sorted industrial rough diamonds into sorted industrial polished diamonds that also falls outside of the scope of the KPCScheme. Finally, return shipments of broken polished diamonds are frequently challenged by importing authorities. The Working Groups learned that the classification and the use of the HS- Harmonised codes is a prerogative of the customs services, and is centralised at the World Customs Organisation. Interpretation differences between the KP Participants and the WCO could lead to serious problems in statistical reporting. Guideline 5: Participants that are also members of the World Customs Organisation, should instruct their customs services to seek detailed clarification and straightforward guidelines from the World Customs Organisation, on the correct and consequent use of the HS-Harmonised codes in relation to shipments of rough diamonds. In the mean time, Participants should report divergences in classification on a regular basis to the Chair. ( Finished discussion of this item on the agenda, the Working Group on Statistics and the Working Group Diamond Experts broke away and continued separately). 7. Declared value in US$ on the KPCertificate: As the value has to be mentioned on the KPCertificate as a minimum requirement, frequent problems have been observed. A number of value-related difficulties had already been identified at the Interlaken Technical Working Group, however no decision was taken at that point by the Plenary

5 One Participant has referred to the suggestions of this Working Group to avoid mentioning any value on its KPCertificate. Other Participants have indicated serious problems with sample shipments that have not been valuated and that are shipped, precisely to be valuated in the trading centers. Other value-related problems have been observed where in some cases the indicated value amounted to only a fraction (undervaluing) of the assumed real value, whereas in other cases the value indicated on the KPCertificate was highly inflated (overvaluing). The Working Group discussed the reasons for including the value on the KPCertificate. Together with the carat weight/mass, they are the only characteristics on the KPCertificate that can identify the rough diamonds in the shipment. The Working Group concluded, however, that the mention of the value in US$ on the KPCertificate is not in all cases sufficient to properly identify the shipment. Guideline 6: The Working Group decided to study the issue of the mention of value in US$ on the Kimberley Process Certificate in detail and to propose improvements to better identify rough diamonds in shipments, to be discussed at the next Plenary meeting. 8. Mention of country of origin: The mention of the country of origin on the KPCertificate is conditional of wether the rough diamonds in the shipment are all from the same unmixed- origin. Most of the time when a country of origin is mentioned on the KPCertificate, it is when a shipment is sent from a diamond producing Participant. Therefore, rough diamond shipments coming from trading centers do not mention a country of origin as these shipments do not represent unmixed origins. The fact that in these cases correctly - no country of origin has been mentioned on the KPCertificate, has led in a number of cases in Participants where unknown or mixed is not allowed on customs declarations, to refusal of import. In some other cases, rough diamonds that have been returned to trading centers, have been accompanied by KPCertificates that mention as country of origin, the country of the trading center that had exported the diamonds. Throughout the discussion in the Working Group, it became clear that the term country of origin is not without problems, as this term is also used on customs declarations with different meanings. The suggestion to use the term country of extraction instead, did not reach consensus. Guideline 7: A Country of Origin should only be mentioned on the Kimberley Process Certificate when the shipment contains rough diamonds that are all mined or - 5 -

6 extracted in one country. Most of the time, only diamond producing countries will be able to ascertain this with an acceptable degree of accuracy. 9. Other issues: Format of the Certificate: Some Participants have incorporated the KPCertificate in their existing customs declaration without much modification. In one case this has resulted in a KPCertificate(Import) and a KPCertificate(Export). Not only is this very confusing, but the information on a KPCertificate is not necessarily identical to that on a customs declaration. Guideline 8: The Kimberley Process Certificate is an identification document for a shipment of rough diamonds. As such, it doesn t replace, or make redundant, other necessary documents such as customs declarations and invoices. To avoid confusion, a Kimberley Process Certificate should preferably have a different layout than these pre-existing forms. Security features: Some Participants issue KPCertificates that are clearly lacking any security features. In these cases it is not always clear wether the issued KPCertificate is an originalor only a copy. Guideline 9: Participants should demonstrate that their Kimberley Process Certificates are Tamper and forgery resistant as mentioned in KPCS- ANNEX I A. Requirements imposed on other authorities: In some cases, exporting authorities of Participants have requested import confirmations to be made within very short time limits that pose substantial problems to the importing authorities of other Participants. In other cases, the importing authorities of Participants have requested to obtain electronic confirmation from the exporting authorities of other Participants of the sending of shipments before releasing shipments that were accompanied by duly validated KPCertificates. Guideline 10: No undue burdens should be imposed on other governments, authorities or industry by requiring very short confirmation delays. Electronic confirmation of import should be performed as soon as possible. Where paper import confirmation certificates have to be physically returned, regular transmission periods should be accepted. Electronic advance warning of arrival of shipments, when unencrypted, should be avoided where possible, as this could result in serious security breaches

7 This enumeration of incidents is by no means complete, but captures the most frequently encountered difficulties that the simultaneous implementation of the Kimberley Process Certification Scheme has brought about. The working document for this discussion has been prepared on the basis of information received from Participants and members of the Working Group Diamond Experts ( Australia; Botswana; Canada; Israel; South Africa; Russian Federation and the World Diamond Council) and the Working Group Breakaway Session was chaired by Mark Van Bockstael (World Diamond Council). Johannesburg, April 28 th

8 ANNEX I WORKING GROUP DIAMOND EXPERTS TERMS OF REFERENCE 1. To identify areas of confusion and unclearness about procedural and administrative matters that could reduce the quality of the statistical analysis of data transmitted by Participants. 2. To produce Guideline concerning the reporting methods; to correct possible flaws in the currently used administrative procedures; and to improve the quality of data transmitted from Participants. 3. To provide diamond expert opinion and technical assistance to all participating countries in order to be able to fully implement the KPCS, or to improve the data collection and reporting capabilities of the importing/exporting national authorities. 4. To provide diamond expert opinion and technical assistance to all KPCS Committees that have been tasked to perform duties within the framework of the KPCS. 5. To consider and make Guideline to Participants/ Plenary on possible amendments and/or improvements to the KP Scheme. 6. [To accumulate detailed information on geologic diamond occurrences worldwide, the characteristics of the diamonds from these deposits and their possible contribution to the rough diamond pipeline.] 7. [To accumulate detailed information on the flow of rough diamonds in the rough diamond pipeline, and the trade in rough diamonds in the trade centers.] - 8 -