“A calculation on the back of an envelope will show that every year the worldwide diamond industry loses approximately $100-$135 million because of the (highly unjustified) practice of gemological laboratories only giving a diamond's weight to the second decimal point.

Every third decimal point that weighs less than 0.009 is rounded downwards. If you have a $3,000 p/c stone that weighs 0.505 carat, the GIA’s or any other certificate will say it weighs 0.50 carat. In this instance the seller loses $15 since in fact, the true price for the stone should be $1,515. The seller is losing almost 1 percent of the value!” These observations were made by International Diamond Manufacturers Association (IDMA) President, Moti Ganz, in an editorial scheduled for publication in the next issue of Yahalom magazine.

Ganz realizes that this is not a new issue – the noted German diamond grading authority Dr. Godehard Lenzen already wrote about it 30 years ago. Lenzen actually lashed out against the WFDB/IDMA and the IDC, when he observed in 1979: “the recommendations of the WFDB/IDMA for describing the weight, adopted in the IDC Rules for grading polished diamonds, are no longer valid: deriving from an old traditional rule of the diamond trade, [a] rounding down of the weighing result, is in fact recommended so long as the third (thousandth) decimal is less than 9, and rounding up if the third decimal equals 9.”

Incidentally, CIBJO has a similar rule: “The weight of the diamond is always expressed in carats (international abbreviation ‘ct’) to two decimal points. It can be rounded off upwards only if the third decimal figure is a nine,” CIBJO's Diamond Blue Book states.

The German gemologist gave a practical but rather disturbing example: weighing results of 0.991 ct, 0.992 ct, 0.993 ct, 0.994 ct, 0.995 ct, 0.996 ct, 0.997 ct and 0.998 ct are without exception rounded down to 0.99 carat for gemological certificate purposes, while only the result 0.999 ct is rounded up to 1.00 ct.

“So while statistically we may be losing something in the range of 0.5%-1% because of the grading rules, in fact, it is much more. There is a price jump between a figure below and above one carat,” says Ganz. He finds it amazing that in 30 years, nobody has raised this issue in a serious manner.

Conflict with Federal Trade Commission Rules?

Just because CIBJO, IDC, etc. set a rule, that doesn’t mean that all gemological laboratories necessarily adhere to it. Some source close to the GIA thinks that rounding upwards may already take place from 0.008 and not 0.009.

What is interesting is what the U.S. Federal Trade Commission has to say about the issue. It doesn’t comment on individual laboratories. In its guide to the public, it writes, “If the weight is given in decimal parts of a carat, the figure should be accurate to the last decimal place. For example, ‘0.30 carat’ could represent a diamond that weighs between 0.295 - 0.304 carat.” On a certificate the 0.295 carat, 0.296 carat, 0.297 carat and 0.298 carat would be rounded down to 0.29 carat. It seems unreasonable that certificates provide a lower weight than required by the FTC. It is simply money thrown away.

The FTC also notes that “if diamond weight is stated as fractional parts of a carat, the retailer should disclose two things: that the weight is not exact, and the reasonable range of weight for each fraction or the weight tolerance being used,” says FTC Facts for Consumers. It seems to devalue the “value” of a certificate, if the retailer must qualify and say that the weight indicated on the certificate may be slightly higher…

The FTC is concerned with truth in marketing, with avoiding deceptions, with protecting the consumers. Its rules were not necessarily designed to obligate laboratories.

But the industry must come to terms with the fact that marketing practices today are vastly different from a few decades ago. Much of the business (and all of the electronic trade) is based on certificates.

Pandora by John William Waterhouse, 1896 (detail)

Re-Opening the Debate – a Pandora’s Box?

The IDMA president announced his intention to re-open the debate. It must be recognized that, in fact, it is only getting worse. When one sells 30 stones in a parcel, or in lots, it doesn’t matter that the total weight is indicated to the hundredth of a carat – that is, to the second decimal point. Example: 100 stones, total weight 33.36 ct. Manufacturers and wholesalers, however, supply not only parcels or lots, but increasingly sell mostly single stones with certificates. Moreover, the trend in recent years has become to certify smaller size stones with a dossier, which magnifies the problem. In normal years (not during the crisis), some 3-4 million certificates are issued per year.

In terms of money, diamond traders pay laboratories some $250 million a year for certification. To this one must add shipping costs, administrative costs, insurance and interest payments on the time that is lost as the stone is taken out of the normal selling cycle.

Maybe these costs are unavoidable. “But why should we lose an additional $100-$135 million because of the how-many-decimals-after-the-point issue?” asks Ganz. It is indeed absurd that with the refinement of weighing techniques, it has become trade practice to give and calculate the weight accurately to the thousandth of a carat – that is, to the third or even fourth decimal place. Laboratories say that they use the “invisible” extra figures for their internal records to verify the authenticity of the stone when presented for rechecking, or for other claims.

“As they HAVE and RECORD the third figure after the decimal point anyway, why not put it on the certificate? Just because CIBJO, IDC etc., say that two figures are enough? In whose interest are these organizations working?” Ganz wonders.

If anyone doubts the arithmetic, just take some 25 certified stones and put them together in one parcel at a scale. The total weight will be anywhere between 0.8 percent-5 percent more than the sum of the individual weight figures appearing on the certificates. Especially in cheaper goods, the differences become substantial.

“This is money we are simply throwing away – for no justifiable reason,” says Ganz, who seems quite determined to change this practice.

He might well have opened a Pandora’s Box. Pandora, the first created woman in Greek mythology, had been given a large jar and instruction by Zeus to keep it closed. However, she had also been given the gift of curiosity, and ultimately opened it. When she opened it, all of the evils, ills, diseases, and burdensome labor that mankind had not known previously, escaped from the jar, but it is said, that at the very bottom of her box, there lay hope. We don’t need hope – for Moti Ganz some extra $100-$150 million for the industry will be just fine.