The United States government, effective immediately, has changed some of the country’s Kimberley Process requirements, passing some of the U.S. customs’ burdens to the recipient of the rough diamonds in the U.S. This also solves some internal problems arising from an inconsistency between the import and export statistics and the actual trade.

Under the new regulations, the ultimate consignee of the rough diamonds, for example, is obligated to confirm the receipt of the goods, within 15 calendar days, to the foreign export authority that issued the Kimberley certificate. In most countries, it is the Kimberley Authority that informs the countries from where the diamonds originated of the receipt of the goods – that responsibility is now transferred to the importing diamantaire. Basically, it seems that some of the administrative burden has been passed to the individual importer and exporter. Moreover, and this is in line with anti-money laundering legislation, an importer of rough must now keep the Kimberley certificate and all associated records for a period of five years.

The changes in the Kimberley Process were published in the U.S. Federal Register on September 23, 2004, at the initiative of the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). Technically, the U.S. Kimberley regulations had previously been issued as an interim final rule. Interim final means that it isn’t final final. Now it has issued the final final rules, but, in that process, OFAC has revised certain reporting and record keeping requirements of the regulations.

The changes in the system are in four general and a few minor respects:

(1) The new rules specify that the ultimate consignee is responsible for retaining the original Kimberley Process Certificate accompanying an importation into the United States;

(2) The new rules require the ultimate consignee to report the receipt of a shipment of rough diamonds to the relevant foreign exporting authority within 15 calendar days of the date that the shipment arrived at a U.S. port of entry;

(3) The new rules advise persons engaged in the diamond trade of a pending requirement of U.S. Customs and Border Protection (Customs) that customs brokers, importers, and filers making entry of a shipment of rough diamonds either submit through Custom’s Automated Broker Interface (ABI) system the unique identifying number of the Kimberley Process Certificate accompanying the shipment or, for non-ABI entries, indicate the certificate number on the Customs Form 7501 Entry Summary at each entry line; and

(4) The new rules clarify the country-of-origin reporting requirements for shipments of parcels of mixed origin rough diamonds, basically confirming some of the present practices.

There are also some additional more minor changes. For example, the new regulations requires a United States citizen importing rough diamonds into the United States to maintain full and accurate records of the transaction for at least five years after the date of the transaction. In many countries (such as Israel), the original Kimberley certificate remains with the government and the importer gets a copy.

To avoid any confusion over whom the certificate should be held by, and to eliminate any uncertainty, the rules now specify that the ultimate consignee reported on the Customs Form 7501 Entry Summary or its electronic equivalent filed with Customs is responsible for retaining the original certificate for a period of at least five years from the date of the importation.

There has been quite some uncertainty about the reporting of goods originating from mixed origins. 

The regulations define the term Kimberley Process Certificate to include a requirement that the certificate identify the country of origin for a shipment of one or more parcels of rough diamonds of unmixed (i.e., from the same) origin.

The U.S. government realizes that the definition’s silence with respect to the treatment of a shipment that includes a parcel of mixed origin rough diamonds has prompted questions from importers as to whether the certificate may be used and how it should be completed, in such circumstances.

A shipment including a parcel of mixed-origin rough diamonds is to be entered into the United States with the Kimberley Process Certificate validated by the relevant exporting authority, and the certificate need not indicate the countries of origin of the diamonds. With respect to such a shipment, however, OFAC is now specifying that the country of origin field must be filled in with asterisks.

This had been the practice up to now anyway, but it was never noted as an official requirement. Now it is, although the regulations also advise that the shipment must still comply with all other country of origin reporting requirements imposed by law.

When a U.S. government agency imposes an administrative burden on the public, it is, by law, required to estimate the time involved (and that means time lost) in the implementation of the regulations. OFAC estimates that the likely respondents and record-keepers affected by the new collection of information, all business organizations and individuals engaged in the international diamond trade, cover some 250 different entities and the estimated total annual number of responses is 3,000.

Translated into hours wasted that comes to some 500 hours, as the average annual burden per respondent is 2 hours, based on an estimated annual frequency of 10 to 15 responses and an estimated time per response of 10 minutes. If that estimate turns out to be incorrect, the affected diamantaires are invited to send their comments immediately to the relevant government agency.

It is not clear what will happen if diamantaires refrain from confirming receipt of rough to the overseas Kimberley authority. It is worthwhile remembering that the original Clean Diamond Trade Act provides for criminal penalties of $50,000 per count for corporations and individuals and/or ten years imprisonment for individuals. Civil penalties of up to $10,000 per violation may be imposed on any person who violates any order or regulation issued in respect to the Act. So forgetting to confirm the receipt of a parcel may well become a very expensive or painful exercise. It is not clear whether the reporting function can be outsourced to, for example, the courier companies. That might save both time and headaches – two characteristics that have been too often associated with the Kimberley certification scheme.