Diamond Source Warranty Protocol Called too Costly, Impractical

U.S. retailers are calling for additional documentation, on top of KP, for these goods

(IDEX Online News) – A recent call for a Diamond Source Warranty Protocol faced tough criticism at the World Diamond Congress in Mumbai that brought together diamond miners and manufacturers from around the world.

Industry analyst and commentator Chaim Evan-Zohar reacted strongly to the Protocol announced by Jewelers of America (JA), Diamond Manufacturers & Importers Association of America (DMIA) and Jewelers Vigilance Committee (JVC), along with other organizations and companies.

Evan-Zohar said that this system talked of seller’s obligations and buyer’s rights but “clearly not vice versa.” According to him, acceptance of the protocol would mean that polished diamonds from each mine and each polishing location had to be tracked separately. “This is a nightmare for the alluvial miners, who are precisely the people we need to protect and nourish,” he said.

According to him, the warranties built into contracts would mean that sellers could be sued even three years after a transaction. Also, he said, the protocol state that irrespective of rulings in local courts, companies could be sued in the U.S. for “other and greater damages.”

If the protocol were to be accepted, Evan-Zohar asked, “Will banks finance transactions that are not final?”

The biggest problem with the protocol, Evan-Zohar said, was that it mandated that diamond companies segregate their production from various sources at all time. “What the authors of this document fail to understand,” he said, “is that the diamond industry’s strength is its ability to buy from various sources and mix the goods to form parcels that clients would want.”

The cost of segregating and maintaining separate inventories would amount to some $500 million in India alone, estimated Russell Mehta of Rosy Blue.

In a panel discussion, AWDC President Stephane Fischler observed that many of the issues concerning chain of custody had come up because the industry did not act collectively. “There is no ‘we’ in the industry,” he said, “miners, diamond processors and finally the retailers don’t communicate with one another enough. The pipeline is unsynchronized.”

Reuven Kaufman, president of the Diamond Dealer’s Club in New York was of the opinion that the industry needed to spend less time on these issues and more on the core issue of promotion and growing demand.