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LABORATORY-GROWN DIAMONDS

CONCERN AND PROGRESS IN THE CAMPAIGN TO DISTINGUISH NATURAL FROM MAN-MADE DIAMONDS

The effort to distinguish between diamonds mined in nature and those that are man-made has become a major undertaking in the diamond business. 

Writing in a special report released in early October, Udi Sheintal, President of the CIBJO Diamond Commission, noted that without properly separating the one from the other, laboratory grown diamonds could potentially the suppress the prices of naturally sourced goods.

“When laboratory-grown diamonds began appearing on the market in larger numbers, the candidly-expressed pricing policy of good number of its manufacturers was that they were benchmarking their goods at several percentage points below the prices of natural diamonds with similar physical characteristics,” he wrote. “What this meant was that the economic viability of their business enterprises was inexorably linked to the health of the natural diamond trade.”

“But free markets have a habit of creating their own rules. De Beers’ entry in the laboratory-grown Diamond Jewellery sector in 2018, and its decision to offer its merchandise at a fixed price per carat, untethered to the fluctuating price of natural goods, tossed the cards up into the air. What is more, the falling cost of producing laboratory-grown diamonds, coupled with a growing number of manufacturers entering the fray, raised the level of competition in the field, pushing prices lower. According to an in-depth article published earlier this year by Rapaport, entitled “Synthetic Ethics,” prices for 1-carat laboratory-gown stones may have fallen as much as 20 percent in just one quarter,” noted Mr. Sheintal.

“And there’s the rub,” he added. “Because laboratory-grown diamonds prices were deliberately benchmarked against the price of natural diamonds at the outset, the risk exists that the public will continue to associate the one with the other, even after the economics have changed. While natural diamonds may once have inflated the price of laboratory-grown stones, the price war in the laboratory-gown diamond sector could have the effect of depressing the value of goods in the natural diamond sector.”

SEPERATING STONES AT POINT OF IMPORT

But progress is being made. There is now a comprehensive set of internationally standardised codes for all laboratory-grown diamonds that will be recognised by customs authorities when they are imported into a country or exported from it. 

It involves the Harmonized Commodity Description and Coding System, which also is known as the Harmonized System (HS) of tariff nomenclature. It assigns agreed-to codes to classify all traded products. 

The HS came into effect in 1988 and has since been developed and maintained by the World Customs Organization (WCO), an independent intergovernmental organisation based in Brussels, Belgium, with more than 200 member countries.

In June 2019, WCO ratified a new international six-digit code into its HS system, 7104.21, which it qualifies as “synthetic diamond, unworked or simply sawn or roughly shaped.” Until then, rough laboratory-grown diamonds were grouped with all other synthetic goods. The new code complements HS code 7104.91, which covers “synthetic diamond, otherwise worked,” relating to polished goods.

A number of leading gem labs are now issuing reports for laboratory-grown diamonds, such as this offered by HRD Antwerp. Their appearance and sometimes the terms used within the report can help distinguish between these reports from those issued for natural diamonds.

The World Customs Organization has approved a new international six-digit specifically for rough laboratory-grown diamonds. To date, such stones have been grouped with all other synthetic materials. 

8-DIGIT CODES FOR SYNTHETICS

Countries now have the means to distinguish between all synthetic gems and synthetic diamonds and also will more accurately quantify exports and imports of synthetic rough diamonds. 

The new code will appear under HS code 7104.2: 7104.21 in HS Edition 2022, which will replace HS Edition 2017, and become binding on all WCO members. 

Until then, countries are being urged to add an 8-digit national code – 7104.2010- to discriminate between synthetic diamonds and other synthetic gems to their customs codes ahead of time.

Two countries that have already done so are India and China, which not coincidentally are the two largest manufacturers of laboratory-gown rough diamonds. 

The European Union will adopt a Combined Nomenclature (CN) customs code for synthetic diamonds on January 1, 2020, and other countries known to be investigating changes to their custom code systems are Australia, Russia and Israel.

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