United States Government Accountability Office

GAO Report to Congressional Committees

CONFLICT 

DIAMONDS 

Agency Actions 

Needed to Enhance 

Implementation of the 

Clean Diamond Trade 

Act 

September 2006 

 

GAO-06-978 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2006

CONFLICT DIAMONDS

Agency Actions Needed to Enhance 

Implementation of the Clean Diamond 

Trade Act 

Highlights of GAO-06-978, a report to 

congressional committees 

In 2003, the United States and other 

countries began implementing the 

Kimberley Process Certification 

Scheme (KPCS) to curtail the trade 

of rough diamonds that had fueled 

severe conflicts in Africa, known as

conflict diamonds. CDTA provides

the statutory framework for U.S.

implementation of the KPCS. As

mandated in CDTA, this report (1) 

describes the institutional 

framework established to

implement the act, (2) examines 

implementation of the domestic

provisions of the act and

challenges it faces, and (3) 

examines how the United States 

has helped to strengthen the KPCS

and challenges it faces. 

The United States has used multiple U.S. agencies and a private, not-forprofit entity to implement the domestic and international provisions of the 

Clean Diamond Trade Act (CDTA). The Departments of State and the 

Treasury have led U.S. efforts to implement the domestic provisions of the 

act; State has led the U.S. efforts to curtail trade in conflict diamonds 

abroad. Domestically, the Departments of State, the Treasury, Homeland 

Security, and Commerce, and the private entity, called the U.S. Kimberley 

Process Authority (USKPA), have been responsible for controlling U.S. 

imports and exports of rough diamonds. Internationally, State, the U.S. 

Agency for International Development (USAID), and the U.S. Geological 

Survey have helped to strengthen KPCS. 

Domestically, the U.S. systems for reporting rough diamond statistics and for 

controlling imports and exports of these diamonds are vulnerable to illicit 

trade. The United States has enhanced the quality of its rough diamond 

trade data by improving its collection processes, but work remains to be 

done. Also, the United States does not periodically inspect rough diamond 

imports or exports to ensure that the contents of the rough diamond parcels 

match the Kimberley Process certificates. In addition, the United States 

lacks an effective system for confirming receipt of imports—a Kimberley 

Process requirement for avoiding possible diversions of rough diamond 

imports. Finally, the United States has not had a plan for monitoring 

USKPA, but is developing and testing one. 

Internationally, the United States has helped to strengthen KPCS by 

participating in KPCS activities and providing assistance to Sierra Leone and 

Liberia in their efforts to comply with KPCS, but donor assistance to these 

countries faces challenges. Donors and diamond producing countries are 

considering a regional approach to help enhance the effectiveness of donor 

diamond-related assistance because this assistance is constrained by the 

limited capacity and resources of these countries and the need to harmonize 

diamond policies among countries vulnerable to illicit cross border diamond 

trading. 

Diamond Mining Site in Sierra Leone—A Recipient Country of U.S. Assistance

Source: GAO.

What GAO Recommends

This report contains 

recommendations to the 

Secretaries of the Departments of

State, the Treasury, Homeland

Security, and Commerce. It 

recommends improvements in the 

(1) accuracy of U.S. rough diamond 

trade data; (2) processes for 

importing and exporting rough

diamonds, including conducting 

periodic physical inspections and 

confirmation of rough diamond 

import receipts with foreign 

exporting authorities; (3) oversight 

of the activities of USKPA and its 

licensees who issue Kimberley 

Process certificates; and (4) 

approach for providing some of the

U.S. diamond-related assistance. 

The departments reviewed a draft

copy of this report and concurred

with GAO’s recommendations. 

www.gao.gov/cgi-bin/getrpt?GAO-06-978.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Loren Yager at 

(202) 512-4347 or yagerl@gao.gov. 
Conflict Diamonds

Contents 

Letter 1

Results in Brief 3

Background 6

Several U.S. Agencies and USKPA Have Implemented CDTA 10 

U.S. Agencies Have Improved Systems for Implementing CDTA’s 

Domestic Provisions but Are Still Vulnerable to Illicit Trade 13 

The United States Has Helped to Strengthen KPCS Internationally, 

but Assistance-Related Efforts Face Challenges 29 

Conclusions 38

Recommendations for Executive Action 40 

Agency Comments and Our Evaluation 41 

Appendix I Objectives, Scope, and Methodology 42 

Appendix II U.S. and Global Trade In Rough Diamonds 44 

Appendix III Top Polished Diamond Exporting and Top Diamond 

Mining Countries 46 

Appendix IV Timeline of KPCS and CDTA-Related Events 48 

Appendix V List of KPCS Participants 49 

Appendix VI Comments from the Department of State 51 

Appendix VII Comments from the Department of the Treasury 55 

Page i GAO-06-978
Conflict Diamonds

Appendix VIII Comments from the Department of Homeland 

Security 57 

Appendix IX Comments from the Department of Commerce 59 

Appendix X Comments from the Department of Interior 61 

Appendix XI GAO Contact and Staff Acknowledgments 62 

Tables 

Table 1: U.S. Agency Responsibilities for Implementing CDTA’s 

International Provisions 12 

Table 2: U.S. Import Confirmations to Select Countries Compared 

to All Other Trading Countries, 2004 and 2005 22 

Table 3: Number of U.S. Kimberley Process Certificates Issued, 

2003–2005 26

Table 4: U.S.-Funded Diamond-Related Projects Supporting the 

Implementation of KPCS in Sierra Leone and Liberia 31 

Table 5: Top Destinations for U.S. Rough Diamond Exports, 2005 

(value > 1 percent of U.S. exports) 44 

Table 6: Top Sources of U.S. Rough Diamond Imports, by 

Exporting Participant, 2005 (value > 1 percent of US 

imports) 44

Table 7: Top (Non-Mining) Rough Diamond Exporting KPCS 

Participants, 2003 (exports > $200 million) 45 

Table 8: Economic Importance of Mining for Selected Countries, 

2003 45 

Figures 

Figure 1: KPCS Structure and Responsibilities 8 

Figure 2: Discrepancy in U.S. Rough-Diamond Trade Volume and 

Census Data Improvements 17 

Figure 3: U.S. Import Control Process and Weaknesses 18 

Page ii GAO-06-978
Conflict Diamonds

Figure 4: U.S. Export Control Process and Weaknesses 24 

Figure 5: Diamond Mining Site in Sierra Leone—A Recipient 

Country of U.S. Assistance 34 

Figure 6: Liberian Ministry of Lands, Mines, and Energy Building 

and Secured Annex under Construction for Housing 

Liberia’s Rough Diamond Exporting and Importing 

Authority 36

Figure 7: Top Polished Diamond Exporting Countries, 2004 

(estimated exports > $200 million) 46 

Figure 8: Top Diamond Mining Countries, 2003 (mining value > $50 

million) 47

Abbreviations 

AES Automated Export System 

CBP Customs and Border Protection 

CDTA Clean Diamond Trade Act 

DIPAM Diamond Policy and Management Project 

IDMP Integrated Diamond Management Program 

KPCS Kimberley Process Certification Scheme 

MSI Management Systems International

PDA Peace Diamond Alliance Support Project 

UN United Nations 

USAID United States Agency for International Development 

USGS United States Geological Survey 

USKPA United States Kimberley Process Authority 

WTO World Trade Organization 

This is a work of the U.S. government and is not subject to copyright protection in the 

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reproduce this material separately. 

Page iii GAO-06-978
United States Government Accountability Office

Washington, DC 20548 

September 27, 2006 

The Honorable Charles E. Grassley 

Chairman 

The Honorable Max Baucus 

Ranking Minority Member 

Committee on Finance 

United States Senate 

The Honorable Charles E. Grassley 

Chairman 

The Honorable Max Baucus 

Ranking Minority Member 

Committee on Finance 

United States Senate 

The Honorable Richard G. Lugar 

Chairman 

The Honorable Joseph R. Biden, Jr. 

Ranking Minority Member 

Committee on Foreign Relations 

United States Senate 

The Honorable Richard G. Lugar 

Chairman 

The Honorable Joseph R. Biden, Jr. 

Ranking Minority Member 

Committee on Foreign Relations 

United States Senate 

The Honorable Henry J. Hyde 

Chairman 

The Honorable Tom Lantos 

Ranking Minority Member 

Committee on International Relations 

House of Representatives 

The Honorable Henry J. Hyde 

Chairman 

The Honorable Tom Lantos 

Ranking Minority Member 

Committee on International Relations 

House of Representatives 

The Honorable William M. Thomas 

Chairman 

The Honorable Charles B. Rangel 

Ranking Minority Member 

Committee on Ways and Means 

House of Representatives 

The Honorable William M. Thomas 

Chairman 

The Honorable Charles B. Rangel 

Ranking Minority Member 

Committee on Ways and Means 

House of Representatives 

When legitimately traded, rough diamonds (uncut and unpolished 

diamonds) can make a major contribution to the economies of producing, 

exporting, and importing countries, especially developing countries. In the 

1990s, however, rough diamonds that became known as conflict diamonds 

fueled severe conflicts and humanitarian crises in countries such as 

Liberia, Sierra Leone, the Democratic Republic of the Congo, and Angola.1

When legitimately traded, rough diamonds (uncut and unpolished 

diamonds) can make a major contribution to the economies of producing, 

exporting, and importing countries, especially developing countries. In the 

1990s, however, rough diamonds that became known as conflict diamonds 

fueled severe conflicts and humanitarian crises in countries such as 

Liberia, Sierra Leone, the Democratic Republic of the Congo, and Angola.1

 1

The United Nations (UN) General Assembly defines conflict diamonds as rough diamonds

used by rebel movements to finance efforts to undermine or overthrow legitimate 

governments. UN General Assembly Resolution 55/56 (Jan. 29, 2001). 

Page 1 GAO-06-978 Conflict Diamonds
Although many of these conflicts have now ended and the international 

community has taken steps to gain control of the rough diamond trade, the 

United Nations (UN) and other sources report that illicit trading of rough 

diamonds still exists and could potentially finance civil conflicts as well as 

criminal and terrorist activities.2

In November 2002, diamond producing and diamond trading countries 

launched a voluntary global system, called the Kimberley Process 

Certification Scheme (KPCS), to control the trade of rough diamonds and 

to assure consumers that the diamonds they purchase have not helped to 

finance violent conflicts.

3

 Implementation of KPCS began on January 1,

2003. The United States and other KPCS participants are responsible for 

ensuring that the integrity of the certification scheme is upheld and that 

the Kimberley Process works towards preventing conflict diamonds from 

entering the legitimate trade of rough diamonds. In instances of 

noncompliance, KPCS can expel or suspend a participant from the 

certification scheme. For example, in July 2004, the Chair of KPCS 

expelled the Republic of Congo from participation because this country 

could not account for the origin of large quantities of rough diamonds.4

The United States has a major interest in KPCS because the certification 

scheme helps ensure the protection of the legitimate trade in these 

diamonds by breaking the link between conflict and rough diamonds. 

Although the United States is not a producer of rough diamonds, it is a 

significant global trader of rough and polished diamonds and the world’s 

largest consumer market for diamond jewelry. In 2003, the United States 

was the seventh largest exporter of rough diamonds among non-mining 

KPCS participants (exporting about $227 million worth), and the fifth 

largest exporter of polished diamonds.5

 2

In November 2005, KPCS adopted a resolution on the subject of illicit diamond production 

in Côte d’Ivoire that outlined a series of measures to prevent the introduction of conflict 

diamonds from Côte d’Ivoire into legitimate trade, including a detailed assessment of the

import and export volumes. The assessment will be carried out in cooperation with the UN. 

3

In mid-2002, GAO reported on the efforts to develop KPCS. See GAO, International Trade: 

Critical Issues Remain in Deterring Conflict Diamond Trade, GAO-02-678 (Washington,

D.C.: June 14, 2002); and GAO, International Trade: Significant Challenges Remain in

Deterring Trade in Conflict Diamonds, GAO-02-425T (Washington, D.C.: Feb. 13, 2002). 

4

For additional details regarding KPCS, see www.kimberleyprocess.com. 

5

Appendixes II and III contain additional rough- and polished-diamond-related information.

Page 2 GAO-06-978 Conflict Diamonds
The United States enacted the Clean Diamond Trade Act (CDTA) in April 

2003 to provide the statutory framework for implementing KPCS.6

 As 

mandated in CDTA, this report (1) describes the institutional framework 

the U.S. government has created to implement CDTA, (2) examines how 

the United States has implemented the provisions of CDTA domestically 

and what principal challenges it faces, and (3) examines how the United 

States has helped to strengthen KPCS and what principal challenges it 

faces. 

To meet these objectives, we examined documents relevant to the 

Kimberley Process and CDTA implementation from the UN, KPCS, U.S. 

and foreign government agencies, the diamond industry, and nongovernmental groups. Additionally, we conducted audit work in the United 

States (Washington, D.C., and New York City); Canada; Belgium; Russia; 

Italy; Sierra Leone; and Liberia. We also met with representatives from the 

Department of State (State), the Department of the Treasury’s (the 

Treasury) Office of Foreign Assets Control (OFAC), the Department of 

Homeland Security’s (Homeland Security) Bureau of Customs and Border 

Protection (CBP) and Bureau of Immigration and Customs Enforcement 

(ICE), the Department of Commerce’s (Commerce) Bureau of the Census 

(Census), the Department of the Interior’s U.S. Geological Survey (USGS), 

the U.S. Agency for International Development (USAID), the Office of the 

U.S. Trade Representative (USTR), and the U.S. Kimberley Process 

Authority (USKPA); as well as non-governmental groups, the diamond 

industry, foreign governments, and the UN and other international 

organizations. Furthermore, we analyzed Census data submissions to 

KPCS. We conducted our work from September 2005 through September 

2006 in accordance with generally accepted government auditing 

standards. Appendix I contains a more detailed description of our scope 

and methodology. 

The United States uses multiple U.S. agencies and a private, not-for-profit 

entity (USKPA) to implement the domestic and international provisions of 

CDTA. State and the Treasury lead U.S. efforts to implement the domestic 

provisions of the act; State leads the U.S. efforts to curtail trade in conflict

diamonds abroad. Domestically, State, the Treasury, Homeland Security, 

Results in Brief 

 6

Pub. L. 108-19. The act directs the President to prohibit imports and exports of rough 

diamonds that are not controlled through KPCS. The act defines the term “controlled by the 

Kimberley Process Certification Scheme” to include any system that substantially meets 

standards, practices, and procedures of KPCS. 

Page 3 GAO-06-978 Conflict Diamonds
Commerce, and USKPA are responsible for preparing and sharing 

statistics on the U.S. trade of rough diamonds, and for controlling U.S. 

imports and exports of rough diamonds. State and the Treasury coordinate 

and lead U.S. agency efforts by convening and co-chairing regular 

interagency meetings, as well as ongoing informal discussions with other 

U.S. agencies, in which CDTA and KPCS-related implementation issues are 

discussed. For example, State and other U.S. agencies recently met to 

discuss, among other things, U.S. plans for providing additional diamondrelated technical assistance; U.S. comments on recommendations made to 

KPCS on the preliminary results of the 3-year review of the certification 

scheme that is currently under way on issues such as creating and 

financing a KPCS Secretariat; and the issues raised at the June 2006 KPCS

intersessional meeting in Gaborone, Botswana, including enhancing KPCS 

monitoring and statistics. State is also responsible for overseeing USKPA, 

which, through 17 licensed private entities, issues the Kimberley Process 

certificates that must accompany U.S. export shipments of rough 

diamonds. Internationally, State leads U.S. participation in KPCS. State 

and USAID have helped Sierra Leone’s efforts to comply with KPCS. State

has recently worked with USGS to help Liberia become a member of 

KPCS. 

Domestically, the U.S. systems for reporting rough diamond statistics and 

for controlling imports and exports of these diamonds have improved but 

are still vulnerable to illicit trade of rough diamonds. Through Census, the 

United States has enhanced the accuracy and reporting of its rough 

diamond trade data, but work remains to be done. Despite improving the 

accuracy of its trade data on rough diamonds, resulting in a significant 

reduction in the excess of exports over imports—from almost 3 million 

carats in 2003 to less than 300,000 carats in 2005—the United States does 

not know what factors, such as diamond stockpiles, account for the 

remaining excess in exports. The United States does not periodically or 

regularly inspect rough diamond imports or exports, a control feature that 

allows participants to match the contents of the rough diamond parcels 

and Kimberley Process certificates and deters illicit trade in rough 

diamonds. The United States does not have an effective system for 

confirming the receipt of rough diamond import shipments, a control 

feature that allows participants to track shipments and prevent their 

diversion. For example, by relying on importers to confirm imports and 

having no U.S. agency to track these confirmations, the United States did 

not confirm most import shipments originating from four key U.S. trading 

partners—Canada, Belgium, Israel, and the United Kingdom—in 2004 and 

2005, and it does not know the extent to which it has not confirmed 

imports with other countries. Despite recent U.S. efforts to improve the 

Page 4 GAO-06-978 Conflict Diamonds
process for confirming receipt of imports, the percentage of confirmations 

remains low. The United States has not implemented a plan for overseeing

the activities of USKPA and its licensees but, according to State officials, 

the department is developing and testing such a plan—a control feature 

that would allow the United States to conduct periodic or regular, 

independent, and systematic oversight of USKPA activities to make sure 

that they conform with KPCS standards. 

Internationally, the United States has helped to strengthen KPCS by 

participating in KPCS activities and providing assistance to help Sierra 

Leone and Liberia in their efforts to comply with KPCS; however, donor 

assistance to these countries faces challenges. The United States has 

helped strengthen KPCS by participating in the activities of its working 

groups and committees, such as the working groups on monitoring and 

statistics. For instance, U.S. officials including geological experts have 

participated on several Kimberley Process peer review teams to help 

monitor implementation of the certification scheme among participants. 

Also, the United States has recently assumed lead roles within KPCS by 

leading a peer review visit to Brazil and offering to identify and coordinate

donor assistance to countries seeking to implement or strengthen KPCS. 

The United States has provided approximately $7.57 million in assistance 

to support Sierra Leone ($6.13 million) and Liberia’s ($1.44 million) efforts 

to implement systems for controlling their trade in rough diamonds. The 

United States has helped Sierra Leone develop and implement a system for 

controlling rough diamond exports. The United States is currently helping 

Liberia to, among other things, build and equip a secure facility and train 

personnel for the Liberian authority that will be responsible for controlling 

the rough diamond trade. The effectiveness of donor assistance in both 

countries is constrained by their limited capacity and resources for 

implementing KPCS, and the need to harmonize diamond policies among 

these countries and other countries in the region vulnerable to illicit crossborder trading. For example, officials in both Sierra Leone and Liberia 

noted their lack of resources for monitoring large mining areas and highly 

porous borders, which contributes to illicit mining and trading. Donors 

and diamond producers are considering a regional approach to help 

enhance the effectiveness of donor assistance. This regional assistance 

would complement country-specific assistance provided to diamondproducing countries within a region.

This report contains recommendations to the Secretaries of State, 

Homeland Security, the Treasury, and Commerce. Specifically, it 

recommends improvements in (1) the accuracy of U.S. rough diamond 

trade data to improve the effectiveness of these data as a tool for detecting

Page 5 GAO-06-978 Conflict Diamonds
illicit trade in rough diamonds; (2) the processes for importing and 

exporting rough diamonds, including conducting physical inspections 

periodically or regularly and confirming rough diamond import receipts 

with foreign exporting authorities; (3) the oversight of the activities of 

USKPA and its licensees; and (4) U.S. diamond-related assistance by 

developing and implementing a regional approach for providing some of 

this assistance. 

We received written comments on a draft of this report from State, the

Treasury, Homeland Security, Commerce, and Interior (see apps. VI, VII,

VIII, IX, and X) indicating that they concurred with our recommendations. 

We also received technical comments on this draft from State, the 

Treasury, USAID, and USTR, which we have incorporated where 

appropriate.

KPCS participants produce and trade the vast majority of rough diamonds 

in the world. However, the nature of diamonds and the lack of effective 

control systems create opportunities for illicit trade, including trade in 

conflict diamonds. By deterring potential illicit trading, effective control 

mechanisms could help prevent illicit diamonds from entering the 

legitimate trade. For example, without systems to accurately capture and

analyze rough diamond trade data, KPCS participants cannot readily 

identify anomalies in imports and exports that could indicate illicit 

activity. Also, without effective systems for inspecting imports and exports

or confirming import receipts, illicit rough diamonds could enter the 

legitimate trade. 

Background 

On November 5, 2002, 37 ministers and heads of official delegations 

launched KPCS, which contained elements for participants to consider in 

establishing control systems for monitoring the production and trade in 

rough diamonds. These elements included, among other things, systems 

for collecting and sharing data on production and trade of rough 

diamonds, inspecting the contents of import and export shipments to 

verify the details declared on the Kimberley Process certificate, and

Page 6 GAO-06-978 Conflict Diamonds
confirming import receipts with the foreign exporting authority.7

Implementation of KPCS began on January 1, 2003. Currently, 46 

participants, including the European Community, voluntarily participate in

KPCS and account for approximately 99.8 percent of the global production 

of rough diamonds. (See appendix IV for a timeline of KPCS and CDTArelated events and appendix V for the list of KPCS participants.) 

Consistent with KPCS provisions, the United States enacted CDTA on 

April 25, 2003, to establish an institutional structure for controlling and 

monitoring U.S. imports and exports of rough diamonds.8

Kimberley Process 

Certification Scheme 

The structure of KPCS includes a Chair and Vice-Chair, a Secretariat 

serving under the Chair, working groups, and committees; KPCS 

participants also hold an annual plenary meeting. Figure 1 depicts KPCS’s 

structure and the responsibilities of the Chair, Secretariat, working 

groups, and committees. In addition to participants, only applicants and 

official observers—including representatives from the diamond industry, 

non-governmental groups, and international organizations—can 

participate in KPCS meetings and activities. 

 7

To complement worldwide KPCS implementation efforts, the international diamond and

jewelry industry initiated a voluntary system of warranties. This system requires that for 

every diamond transaction—rough, polished, or diamond jewelry—the seller must affirm

on the invoice that the diamonds have been purchased through authorized channels that

are not involved in funding conflict. While the system is voluntary, the industry views the

system as a requirement for all its members involved in the diamond trade. Noncompliance 

with the system of warranties can result in expulsion from diamond trade organizations. 

The U.S. industry adopted this system of warranties.

8

Several KPCS participants, including the United States (through the U.S. Trade 

Representative) obtained a 4-year waiver needed for implementing KPCS and CDTA from

the World Trade Organization (WTO) in 2003. These participants are currently trying to

obtain a 6-year waiver extension from WTO and expect to get it in November 2006, 

according to USTR officials. In the absence of a waiver, WTO could impose sanctions on

KPCS participants if WTO deemed the certification scheme an unauthorized trade barrier.

Also, without a waiver, CDTA might lapse because the act requires that the President 

certify the existence of either a WTO waiver or a binding resolution of the UN Security 

Council for its provisions to remain in effect. See Pub. L. 108-19, sec. 15. 

Page 7 GAO-06-978 Conflict Diamonds
Figure 1: KPCS Structure and Responsibilities 

Chair (Botswana)

Secretariat

• Oversees implementation of KPCS.

• Oversees the operations of the working groups and committees.

• Oversees the general administration of the Kimberley Process. 

• Schedules meetings of the working groups. 

• Circulates documents between participants and maintains the Kimberley Process web site.

• Performs all other duties designated by the Chair.

Working groups

Committee 

• Monitors and assesses the implementation of the KPCS by all participants.

• Ensures timely reporting and analysis of statistical data on the production and trade 

of rough diamonds in order to identify anomalies, and to ensure the effective 

implementation of the certification scheme.

• Identifies solutions to technical problems in the implementation of the KPCS.

• Assists the Chair of KPCS in handling the admission of new participants in the KPCS.

• Reviews and assesses the credentials of the candidates for the Vice-Chair position 

and submits findings to the Chair of KPCS. The KPCS Plenary selects the Vice-Chair. 

When the Chair’s term expires, the Vice-Chair becomes the new Chair. The European 

Community is the current Vice-Chair. 

Source: GAO analysis of KPCS information.

Monitoring - Chair, European Community

Statistics - Chair, Canada

Diamond experts - Chair, World Diamond Council

Participation Committee - Chair, Russian Federation

Selection Committee - Chair, Botswana

The Chair is responsible for overseeing the implementation of KPCS, 

leading the annual plenary meeting, overseeing the operations of three 

working groups and two committees, and the general administration of the 

Kimberley Process. Under the Chair, a Secretariat is responsible for 

scheduling meetings, circulating documents among participants, 

maintaining the KPCS Web site, and all other duties the Chair designates. 

The Secretariat does not have permanent staff. The country chairing the 

certification scheme is responsible for staffing the Secretariat. Currently, 

Page 8 GAO-06-978 Conflict Diamonds
Botswana chairs KPCS and the Vice-Chair is from the European 

Community. 

KPCS holds a plenary meeting normally once per year, in which 

participants and official observers typically discuss and assess the 

implementation of the certification scheme. KPCS participants and official 

observers work together in monitoring, statistics, and diamond experts 

working groups, and in the Participation Committee and the Selection 

Committee, to strengthen the certification scheme. 

KPCS’s key provisions require participants to: 

• enact or amend appropriate laws or regulations to implement and enforce

the certification scheme, and maintain dissuasive and proportional 

penalties for transgressions; 

• designate importing and exporting authorities; 

• establish control systems designed to eliminate the presence of conflict 

diamonds from the rough diamond trade, such as systems for physically 

inspecting rough diamond import and export parcels; 

• ensure that a Kimberley Process certificate accompanies each import and 

export shipment of rough diamonds; 

• acknowledge the receipt of rough diamond import parcels to the foreign 

export authority; 

• ensure that rough diamonds are imported and exported in tamper-resistant 

containers; and 

• collect and maintain rough diamond data on production, imports, and 

exports; and collate and exchange such data with KPCS. 

CDTA provides the institutional structure for implementing its domestic 

and international provisions. 

Regarding domestic implementation, key CDTA provisions 

Clean Diamond Trade Act 

• designate importing and exporting authorities, 

Page 9 GAO-06-978 Conflict Diamonds
• establish an interagency Kimberley Process Implementation Coordinating 

Committee for coordinating U.S. implementation efforts, 

• give the U.S. government responsibility for overseeing any entity involved 

in the issuance of the certificates that must accompany each shipment of 

rough diamonds exported from the United States,

• impose civil and criminal penalties to enforce implementation of CDTA, 

and 

• support the collection and exchange of U.S. import and export data on 

rough diamonds. 

Regarding international implementation, key CDTA provisions 

• urge the U.S. government to strengthen KPCS by monitoring the 

effectiveness of the certification scheme and by sharing statistics, and 

• allow U.S. agencies to make technical assistance available to countries 

seeking to implement KPCS. 

Consistent with the provisions of CDTA, the United States has used 

several U.S. agencies and USKPA to implement the domestic and 

international provisions of the act. 

State, the Treasury, Commerce, Homeland Security, and USKPA have had

responsibilities for implementing the domestic provisions of CDTA. State 

and the Treasury have led these U.S. implementation efforts.9

Several U.S. Agencies 

and USKPA Have 

Implemented CDTA

U.S. Agencies and USKPA 

Have Implemented CDTA’s

Domestic Provisions 

• State: The department co-chairs the U.S. interagency group for 

implementing CDTA. State is responsible for reviewing the activities of 

USKPA and its licensees and for annually reporting to the Congress the 

results of its review.10

 9

Controlling imports and exports of rough diamonds involves at least four entities in the 

United States. A number of countries, including some of those we visited (Belgium, 

Canada, and Sierra Leone) have used a single government entity for controlling their trade

of rough diamonds. 

10State has submitted three reports on USKPA activities to the Congress covering 2003, 

2004, and 2005 respectively. 

Page 10 GAO-06-978 Conflict Diamonds
• The Treasury: The department co-chairs the interagency group for 

implementing CDTA. OFAC is responsible for promulgating the rough 

diamond regulations to implement CDTA. One of these regulations 

designates the final recipient of the shipment (i.e., the ultimate consignee) 

with the responsibility of confirming, with the foreign exporting authority, 

the receipt of a rough diamond import shipment.11

• Homeland Security: Under CDTA, Homeland Security’s CBP is the 

importing authority responsible for regulating U.S. rough diamond 

imports. The department’s Bureau of Immigration and Customs 

Enforcement is responsible for pursuing criminal investigations related to

violations of CDTA and its regulations. 

• Commerce: Under CDTA, Census is the exporting authority responsible for 

regulating U.S. rough diamond exports. Also, Census is responsible for 

collecting and analyzing data on the U.S. trade of rough diamonds and 

reporting it to KPCS. 

• USKPA: Unlike most KPCS participants, the United States has assigned the

responsibility of issuing Kimberley Process certificates to a private entity

rather than to a government agency. USKPA produces these certificates 

and currently relies on 17 licensees for issuing them. 

• Interagency Coordination Committee: State and the Treasury co-chair an

interagency committee, the Kimberley Process Implementation 

Coordinating Committee, that CDTA created for coordinating U.S. 

government activities on rough diamonds. Aside from convening and 

leading committee meetings, State and the Treasury have no formal 

authority over the actual activities of the other agencies in carrying out 

their assigned CDTA roles. Nevertheless, U.S. officials noted that the 

formal and informal interagency coordination processes have effectively

addressed many operational issues. For example, State and other U.S. 

agencies recently met to discuss topics such as U.S. options for providing

additional diamond-related technical assistance; U.S. comments on 

recommendations made to KPCS on the preliminary results of the 3-year 

review of the certification scheme that is currently under way on issues 

such as creating and financing a KPCS Secretariat; and the issues raised at

 11In the United States, issuing Kimberley Process certificates and confirming import

receipts involves private entities (USKPA and the ultimate consignee). These activities are 

a government responsibility in a number of countries, including the three countries we 

visited (Canada, Belgium, and Sierra Leone).

Page 11 GAO-06-978 Conflict Diamonds
the June 2006 KPCS intersessional meeting in Gaborone, Botswana, 

including enhancing KPCS monitoring and statistics. 

State, Census, USAID, and USGS are involved in implementing the 

international provisions of the act. See table 1 for a brief description of the 

responsibilities of these agencies. Consistent with KPCS, the key 

international provisions of the act cover the United States’ participation in

KPCS and the U.S. technical assistance to participants seeking to 

implement KPCS. 

Table 1: U.S. Agency Responsibilities for Implementing CDTA’s International 

Provisions

U.S. Agencies Have 

Implemented the 

International Provisions of 

CDTA 

Agency Unit Responsibilities

State Economic Affairs Bureau 

Africa Bureau 

Leads U.S. efforts in KPCS. 

Funded technical assistance to 

support Sierra Leone and Liberia’s 

KPCS-related efforts. 

Census Foreign Trade Division Analyzed rough diamond data for 

KPCS Statistics Working Group. 

USAID Office of Transition Initiatives/Bureau 

for Africa 

Funded technical assistance to 

support Sierra Leone’s KPCS-related 

efforts. 

USGS Middle East and Africa Section Under an agreement with State, 

provided KPCS-related technical 

assistance to Liberia. 

Analyzed rough diamond data for 

KPCS Monitoring Working Group. 

Source: GAO analysis of U.S. agency information. 

State leads U.S. efforts in KPCS and works with other U.S. agencies to,

among other things, strengthen KPCS by monitoring its effectiveness in 

preventing trade in rough diamonds. State and other U.S. agencies 

participate in various aspects of KPCS, including attending annual (and 

other) KPCS meetings, and serving on KPCS working groups and 

committees. For example, State serves on the KPCS working group on 

monitoring, which is mandated to monitor and assess implementation of 

KPCS by all participants. Also, State and Census serve on the KPCS 

statistics working group and USGS has done statistical analysis of rough 

diamond trade data for the monitoring working group. 

The CDTA authorizes federal agencies to provide technical assistance to 

countries seeking to implement KPCS. Thus far, State and USAID have 

Page 12 GAO-06-978 Conflict Diamonds
provided diamond-related assistance to Sierra Leone, and State and USGS

have provided this assistance to Liberia. Specifically, through Management 

Systems International,12 USAID has provided technical assistance to Sierra 

Leone to help the country gain control of its trade of rough diamonds. 

State has recently funded USGS to provide, through Constella Futures 

International,13 technical assistance to Liberia for implementing KPCS. 

U.S. entities responsible for implementing the domestic provisions of 

CDTA have improved the system for collecting and sharing U.S. trade data

on rough diamonds and have established systems for controlling the U.S. 

trade in these diamonds, yet these systems are still vulnerable to illicit 

trade. Because most of these vulnerabilities involve limited government 

monitoring or oversight, U.S. control systems cannot help deter illicit 

rough diamonds from entering the legitimate trade.14

Since the enactment of CDTA in 2003, Census has steadily improved its 

system for capturing and reporting U.S. rough diamond trade statistics in 

response to KPCS concerns. However, this system needs further 

improvement to assure that the rough diamond trade does not include 

illicit diamonds. CDTA recommends that the executive branch keep and 

publish statistics on rough diamond imports and exports, recognizing that 

reliable and comparable data on the international trade in rough diamonds 

are an essential tool to effectively implement the certification scheme. 

These data can help to identify any irregularities or anomalies that might 

indicate the presence of conflict diamonds in the legitimate trade in rough 

diamonds. For example, because the Republic of Congo was not able to 

explain its reports of rough diamond exports that were far in excess of its 

U.S. Agencies Have 

Improved Systems for 

Implementing CDTA’s

Domestic Provisions 

but Are Still 

Vulnerable to Illicit 

Trade

Census Has Improved 

Collection and Reporting 

of Rough Diamond Data, 

But Some Work Remains 

to Be Done 

 12Management Systems International is a USAID contractor. 

13Constella Futures International, formally known as Futures Group International, is a

USGS contractor. 

14Monitoring is an internal control standard that focuses on assessing— through ongoing 

monitoring activities and separate evaluations—the quality of performance over time to 

ensure that the government promptly identifies and addresses any problems. See Internal 

Control Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.: Aug. 2001). 

Page 13 GAO-06-978 Conflict Diamonds
known production capacity or imports, KPCS decided to ban this country 

from participation in the certification scheme in 2004. 

KPCS has expressed several concerns about the trade data the United 

States has submitted. Subsequent to the enactment of CDTA, Census 

reported U.S. rough diamond trade data to KPCS that contained a greater 

volume of exports than imports. For example, it reported that the United 

States had exported about 3 million carats more than it imported in 2003.

As a non-producing nation, this excess in exports was not plausible and 

raised concerns about the accuracy of the U.S. trade data and the potential

laundering of rough diamonds through the United States. In fact, because 

the United States does not produce rough diamonds and cuts and polishes 

some rough diamonds, exported carats should, on average, be lower than

imported carats. In 2005, the KPCS peer review visit to the United States 

recommended that Census identify all anomalies within the systems for 

recording data and correct them as necessary, that the United States 

provide explanations for the large differences between exports and 

imports in 2003 and 2004 to the KPCS Working Group on Statistics, and 

that the group follow up on this issue with the U.S. authorities. 

To improve the quality of its data and to comply with KPCS data 

requirements, Census made a number of changes, including the following: 

• Census officials indicated they had identified anomalies that affected the

accuracy of the data, including the misclassification of shipments by 

individual filers and the Census’ use of a method that altered some 

shipments by recalculating quantities of exports or imports based on 

historical price data. 

• Census continues to pursue potential causes of inaccuracy in U.S. rough

diamond import and export data. Specifically, Census officials told us of 

their efforts to determine how many carats of rough diamonds are entering

the United States under the generic U.S. Goods Returned Code.15 In 

addition, Census officials also reconcile U.S. trade data bilaterally with 

 15According to officials at Census, the U.S. Goods Returned code may be used when 

diamonds that were exported from the United States are returned, for example, following a 

trade show or a failed transaction. Since this generic code is used for a variety of 

commodities, it is difficult to identify rough diamond imports classified under this code,

which could bias the level of imports down. 

Page 14 GAO-06-978 Conflict Diamonds
other trading partners, as this can also help to identify any data

anomalies.16

• In early 2006, Census started collecting and reporting data from Kimberley 

Process certificates. This change harmonized the U.S. system for data 

collection with the vast majority of other KPCS participants. Before this 

change, Census used data from its traditional customs-based method to 

report to KPCS, which can be different from data collected based on 

Kimberley Process certificates.17

• Census now checks its own data against the monthly data it receives from 

USKPA on the disposition of certificates issued each month. This extra 

step has helped Census to identify errors involving quantities or shipments 

that were misclassified as rough diamonds. 

• Census and CBP modified the Automated Export System (AES) and the 

Automated Broker Interface (ABI), so that these computer systems, 

through which filers enter export and import shipment data, require 

Kimberley Process certificate numbers when entering information on 

rough diamond exports and imports. With these changes, filers will now 

receive an error if they do not provide a Kimberley Process certificate 

number after entering a rough diamond tariff code. Prior to these 

modifications, polished diamonds and diamond jewelry could be (and 

were) misclassified as rough diamonds. 

• Census stopped estimating the quantity for shipments that fell outside of a 

reasonable price range.18

 16If Census detects differences in bilateral trade data, it will ask the trading partner to send 

information on specific shipments. Then Census can check if it has the Kimberley Process

certificate for the shipments in question and can also check ABI to see if the shipment was

filed at all. However, Census is constrained by Title XIII, which prohibits it from discussing 

individual shipments with other countries; this makes it more challenging to perform these 

reconciliations.

17The Kimberley Process Working Group on Statistics conducted a study comparing 2004

KPCS-based data with non-KPCS-based data. They found fewer differences between export 

and import transactions derived from KPCS-based data than non-KPCS-based data. 

18This method, which used historical prices to estimate a new quantity, relied on 

assumptions that could bias the quantity estimate. The procedure, known as imputation, 

assumes that the quantity was recorded incorrectly, and that the shipment value was 

recorded correctly. However, if the shipment value was incorrect, scaling it by a historical 

price will not produce the correct quantity. 

Page 15 GAO-06-978 Conflict Diamonds
As figure 2 shows, Census’ actions resulted in a significant reduction in the

reported discrepancies between U.S. rough diamond export and import 

data. Compared to the nearly 3 million carat discrepancy reported 

between imports and exports in 2003, by 2005 Census reported an excess 

in exports of less than 300,000 carats compared to imports. However, 

Census has not determined whether this annual excess of U.S. exports 

compared to imports is reasonable for a non-mining country and, thereby,

does not involve illicit rough diamonds. Factors that might contribute to 

this annual excess include the levels of inventories held and the volume of

cutting and polishing done in the United States. 

Page 16 GAO-06-978 Conflict Diamonds
Figure 2: Discrepancy in U.S. Rough-Diamond Trade Volume and Census Data Improvements 

6

5

4

3

2

1

Customs begins

requiring Kimberley 

Process certificate 

number upon import.

Census begins

double-checking all 

exports with the U.S. 

KPA.

Census begins

requiring Kimberley 

Process certificate 

number upon export.

Census begins

collecting data

directly from 

Kimberley Process

certificates.

Census stops deriving 

quantity based on 

historical prices.

Census begins

double-checking exports

with the U.S. KPA if they 

are outside of historical 

price ranges.

2003 2004 2005 2006

0

5

10

15

20

25

U.S. Exports (carats)

U.S. imports (carats)

Jan.-

Mar.

Oct.-

Dec.

JulyS

Apr.-

ept.

June

JulyOct.-

Dec.

Jan.-

Mar.

S

Apr.-

ept.

June

Jan.-

Mar.

Oct.-

Dec.

JulyS

Apr.-

ept.

June

Jan.-

Mar.

Source: GAO analysis of Census and CBP information.

Carats (in hundreds of thousands)

CBP’s System to Control 

Rough Diamond Imports 

Has Weaknesses 

CBP has established a system for controlling U.S. rough diamond imports 

through documentation review and physical inspections. However, 

because these physical inspections do not occur periodically or regularly,

the system cannot ensure that illicit shipments of rough diamonds are not

entering the country. Furthermore, since 2003, U.S. importers have failed 

to confirm rough diamond import receipts with foreign exporting 

authorities, resulting in U.S. non-compliance with this KPCS standard. See 

Page 17 GAO-06-978 Conflict Diamonds
figure 3 for a graphic depiction of the import control process and 

weaknesses in U.S. government oversight. 

Figure 3: U.S. Import Control Process and Weaknesses 

Source: GAO analysis of CBP and OFAC information.

Areas of process weakness

Broker or importer enters

import data into Customs

and Border Protection 

(CBP) system

CBP system flags all rough 

diamond shipments for 

document review or 

physical inspection

CBP detains/seizes parcel

Yes: 

released

No: detained

Passes document 

review/physical inspection

CBP releases parcel

Final recipient confirms

receipt of import

Foreign exporting authority

CBP physically inspects

rough diamond

imports, but not 

periodically or regularly

CBP reviews all rough 

diamond import 

documentation

No U.S. agency

tracks confirmations

Page 18 GAO-06-978 Conflict Diamonds
CDTA prohibits the importation into the United States of any rough 

diamond that has not been controlled through KPCS, which details a 

number of requirements to control imports of rough diamonds. For 

example, the United States must: 

CBP’s Import Control Process 

Involves Documentation 

Review of All Imports and 

Physical Inspections 

• require imports to contain a valid Kimberley Process certificate; 

• ensure that no shipment of rough diamonds is imported from a nonparticipant; 

• ensure that rough diamonds are imported in tamper-resistant containers; 

and 

• establish a system of internal controls designed to eliminate the presence

of conflict diamonds from rough diamond import shipments. 

To implement CDTA import provisions, CBP created a system that selects 

all rough diamond import shipments for documentation reviews. 

Depending on the approach CBP uses for physical inspections, the system 

might choose all or some of these shipments for physical inspections, 

although not periodically or regularly. CBP controls about 300 ports of 

entry into the United States. Although rough diamonds come into the 

United States through multiple ports of entry, about 85 percent of them 

come through one port of entry—John F. Kennedy (JFK) Airport in New 

York City. Under the current system, after a rough diamond import arrives 

at a port of entry, the customs broker sends the hard-copy entry 

documentation to the CBP office at the port, at which time the information 

is entered into CBP’s computer system for review. 

All rough diamond shipments must, at least, receive a document review by

an import specialist, who verifies that the Kimberley Process certificate is 

authentic and ensures that the information on the certificate (such as the 

certificate number, and the value and quantity of the rough diamonds) 

matches the information on the invoice accompanying the shipment. If the

reviewing import specialist detects a problem with the documentation, the 

shipment is detained until CBP obtains the necessary documentation to 

release the shipment. The shipment may be seized if the information is not 

obtained within a certain time frame. 

CBP has used four approaches to select imports of commodities for 

physical inspections. In the case of rough diamonds, this means physically 

opening and examining the content of import parcels. First, given the large 

number of imports arriving into the United States every day, CBP uses an 

Page 19 GAO-06-978 Conflict Diamonds
approach to identify high risk import shipments for physical inspections. 

According to CBP documentation, this approach enables CBP to balance 

its efforts to enforce CDTA with the agency’s Priority Trade Issues and 

other responsibilities.19 Second, CBP has a compliance measurement 

program that randomly selects shipments for physical inspection across all 

ports. Less than 1 percent of rough diamond shipments each year are 

selected for a physical inspection through this program, according to CBP. 

Third, physical inspections occur at the discretion of the ports. At JFK, for 

instance, CBP physically inspects shipments for different reasons, 

including (1) intelligence information entered into CBP’s computer system 

before the shipment arrives at port; (2) suspicious discovery in the 

documentation review; (3) shipments from unknown importers; or (4) 

other information. Finally, CBP inspected all rough diamond imports that 

came into JFK on two occasions in 2004 and 2005. According to CBP 

documentation, on these two occasions, inspections found a high rate of 

importer compliance with U.S. requirements regarding declaration of 

rough diamond imports. 

Since 2003, CBP has seized seven shipments for violations of CDTA. One 

case involved a rough diamond import without a valid Kimberley Process 

certificate that was not packed in a sealed tamper-resistant container. Of 

the remaining six cases, three closed cases were resolved through the 

administrative process, with one resulting in a fine. Three cases are open

and proceeding through the administrative process. 

Although CBP has used four approaches for selecting rough diamond 

import shipments for physical inspections, none of these approaches 

results in periodic or regular physical inspections. According to accepted 

government internal control standards, control activities such as 

periodically or regularly reviewing assets—in this case, rough diamond 

shipments—should be evaluated periodically or regularly to ensure that 

they are still appropriate and working as intended.20 While the total 

inspection of rough diamond imports at JFK, referred to above, helped 

CBP to assess the effectiveness of its import control systems during two 

periods of time, the agency has no policy or plan for conducting these total 

CBP Does Not Have a Policy or 

Plan for Conducting Physical 

Inspections Periodically or 

Regularly 

 19CBP’s Priority Trade Issues include risks to the economic interests of the United States or 

the health and safety of the American public. Specifically, these issues include Penalties, 

Revenue, Antidumping/Countervailing Duties, Agriculture, Intellectual Property Rights, and 

Textiles. 

20See Internal Control Management and Evaluation Tool, GAO-01-1008G.

Page 20 GAO-06-978 Conflict Diamonds
inspections periodically or regularly in any of its ports of entry. 

Furthermore, CBP has no policy or plan for conducting other physical 

inspections periodically or regularly. Without these types of physical 

inspections, the United States cannot ensure that its import control system 

deters illicit rough diamond shipments. 

The United States has not fully complied with the KPCS standard that 

requires KPCS participants to confirm rough diamond import receipts to 

the relevant foreign exporting authority. The 2005 KPCS peer review 

reported that the implementation of this requirement has been sporadic 

and recommended that the United States take steps to ensure that it 

enforces this provision. During our fieldwork, we found that the United 

States had not confirmed receipt of most import shipments to foreign 

exporting authorities of four KPCS participants, which are key U.S. trading 

partners, and the United States did not know the extent to which it had not

confirmed import receipts with the rest of the participants. For example, 

the United States confirmed receipt of 2 percent of rough diamond import 

shipments from Belgium in 2004, and 18 percent of these shipments in 

2005. All other countries confirmed receipt of 95 percent of rough 

diamond import shipments from Belgium in 2004, and 97 percent of these 

shipments in 2005. See table 2 for U.S. confirmation of import receipts to 

four countries, and all other countries’ confirmation of import receipts to 

three of these four countries in 2004 and 2005. 

The United States Has 

Confirmed Few Import 

Receipts with Foreign 

Exporting Authorities 

Page 21 GAO-06-978 Conflict Diamonds
Table 2: U.S. Import Confirmations to Select Countries Compared to All Other Trading Countries, 2004 and 2005 

2004 2005

Country

reporting KPCS participant 

Number of 

certificates

 sent

Number of 

imports

confirmed

Percentage

confirmed

Number of 

certificates 

sent 

Number of 

imports

confirmed

Percentage

confirmed

Canada United States 32 7 22% 44 7 16%

All other trading countries 139 126 91% 149 134 90%

United Kingdom United States 224 35 16% 262 132 50%

All other trading countries 1,523 1,415 93% 1,490 1,370 92%

Belgium United States 1,466 36 2% 1,333 236 18%

All other trading countries 3,1778 30,191 95 31,722 30,710 97%

Israel United States 235 3 1% 286 41 14%

All other trading countries 7,476 N/AaN/Aa7388 N/AaN/Aa

Source: GAO analysis based on data from Canada, the United Kingdom, Belgium, and Israel. 

a

Israel could not provide specific numbers, but indicated that all other countries confirm most imports 

from Israel. 

The United States has delegated the responsibility for confirming rough 

diamond import receipts to importers. Through OFAC, the Treasury 

clarified this requirement in its September 2004 revisions to the Rough 

Diamond Control Regulations by making the ultimate importer (i.e., the 

ultimate consignee instead of the importer-of-record) responsible for 

confirming rough diamond import receipts to the relevant foreign 

exporting authority. The revised regulation also requires that the ultimate 

importer send the confirmation within 15 calendar days of the import’s 

arrival at the U.S. port of entry, and clarifies that the confirmation may be 

in any form and may be submitted electronically, by mail, or by courier. 

The regulations include civil and criminal penalties for any person who 

violates, or attempts to violate, any order or regulation issued under 

CDTA. 

The United States has not made any U.S. agency responsible for tracking 

these import confirmations, and has only learned about the U.S. failure to 

confirm import receipts when exporting authorities from other countries 

have complained about this problem. In response to these complaints, the 

United States has recently taken steps to improve the compliance of U.S. 

importers with this KPCS requirement. Between April and June 2006, State 

sent letters to about 150 U.S. importers reminding them of the requirement 

under the rough diamond control regulations to confirm receipt of rough 

diamond imports to foreign exporting authorities. Based on information 

provided by State to OFAC, in August 2006, OFAC opened investigations 

Page 22 GAO-06-978 Conflict Diamonds
and started to issue administrative subpoenas to importers who had not 

confirmed import receipts. If any importer continues to fail to confirm 

import receipts, that is, fail to comply with the regulation, civil penalties 

may result. 

These enforcement efforts have had a positive effect on U.S. compliance 

with this requirement, but the United States is not yet fully compliant. As 

of June 2006, for instance, Belgium reported receiving confirmations of 

import receipts for 35 percent of its shipments to the United States, 

compared to 18 percent in 2005. Likewise, Canada reported receiving

confirmations of import receipts for 33 percent of its shipments to the 

United States compared to 16 percent in 2005. Despite these 

improvements, the United States is far from fully complying with this 

requirement. Because the United States has not assigned an agency to 

track confirmation of import receipts by importers, it cannot monitor the 

compliance of importers with this KPCS standard and also is not able to

detect possible diversions of rough diamond import shipments. See figure 

3 for a depiction of the rough diamond import process and existing 

weaknesses. 

U.S. System to Control 

Rough Diamond Exports 

Shows Weaknesses 

State, Census, and USKPA have established a system for controlling U.S. 

rough diamond export shipments. However, the system shows weaknesses 

because it involves little direct U.S. government monitoring, thereby 

preventing the United States from being sure that illicit shipments are not 

leaving the country. See figure 4 for a depiction of the export control 

process and weaknesses in U.S. government oversight. 

Page 23 GAO-06-978 Conflict Diamonds
Figure 4: U.S. Export Control Process and Weaknesses 

Information submission

Source: GAO analysis of CBP and USKPA information.

AES validates the 

shipment information and 

assigns an internal 

transaction number (ITN)

Under license from the USKPA,

17 licensees issue KP certificates

Filer attaches the 

KP certificate to the parcel

Carrier sends parcel to 

foreign country 

Filer submits revised 

shipment information

Foreign importing authority

confirms receipt of import 

from the United States

Fail Pass

Exporter submits KP certificate application to 

USKPA licensee

Filer (Exporter Forwarder/Courier) submits

the shipment information with the 

KP certificate number electronically to AES

Data goes through AES edits checks

AES Automated Export System 

CBP Customs and Border Protection

USKPA U.S. Kimberley Process Authority 

Census, USKPA, and the 

USKPA licensees do not 

periodically or regularly 

physically inspect export parcels

CBP does not periodically 

or regularly physically 

inspect export parcels

Areas of process weakness

Page 24 GAO-06-978 Conflict Diamonds
CDTA requires exportation of any rough diamond from the United States 

to be substantially consistent with KPCS, which details a number of 

requirements to control rough diamond exports. For example, the United 

States must: 

Census, State, and USKPA 

Have Established System to 

Control Rough Diamond 

Exports 

• ensure a Kimberley Process certificate accompanies each shipment of 

rough diamonds on export, and that the certificates meet the minimum 

requirements set out by KPCS; 

• ensure that no shipment of rough diamonds is exported to a nonparticipant; 

• ensure that rough diamonds are exported in a tamper-resistant container;

and 

• establish a control system designed to eliminate the presence of conflict 

diamonds from export shipments of rough diamonds. 

Under the oversight of State, USKPA, through its licensees, issues 

Kimberley Process certificates. According to a State report to Congress, 

USKPA, which is comprised of representatives of the diamond industry, 

was established in 2003 to issue and control Kimberley Process certificates

for rough diamond exports from the United States.21 To issue U.S. 

Kimberley Process certificates, USKPA subcontracted out to 17 licensees.

These licensees represent companies that ship on behalf of third parties, 

as well as companies engaged in the business of buying and selling rough 

diamonds that agree to fulfill the requirements of KPCS and all relevant

U.S. laws and regulations.22 Each licensee also agrees, through contractual

agreements, to a set of fixed procedures in order to qualify to obtain and 

use Kimberley Process certificates when exporting rough diamonds. 

Under these procedures, licensees agree to maintain a supply of Kimberley 

Process certificates in safekeeping, keep records for 5 years for each 

shipment where a Kimberley Process certificate is issued, and submit to an 

 21The USKPA has three directors who serve without compensation, selected by consensus 

by representatives of the diamond industry. The directors are persons familiar with the

requirements of KPCS, and are not engaged in the buying or selling of diamonds or jewelry 

containing diamonds. The activities of the USKPA are funded through fees paid by USKPA 

licensees. The USKPA designed and produced the Kimberley Process certificate in 

consultation with the U.S. government.

22According to the 2004 USKPA annual report to State, in order to qualify as a licensee each 

entity has to be authorized as a “known shipper” under AES.

Page 25 GAO-06-978 Conflict Diamonds
audit by USKPA. Also, licensees/shippers agree to complete an application 

form.23

Licensees submit monthly and annual reports to USKPA with all of the 

certificates issued in that period. These reports are forwarded to State and

Census. See table 3 for the number of certificates issued by the United 

States from 2003 to 2005. 

Table 3: Number of U.S. Kimberley Process Certificates Issued, 2003–2005 

Year Number of U.S. certificates issued

2003 1,516

2004 1,864

2005 1,970

Source: GAO analysis of State data. 

CDTA requires that State conduct an annual review of the standards, 

practices, and procedures of USKPA to determine whether these activities 

are in accordance with KPCS, and that State report the results of the 

review to Congress. State has reported as required; however, the content 

of the annual report is more descriptive than evaluative. According to 

State, it has not used a formal plan for overseeing USKPA and its 

licensees. State is currently developing this plan and has tested some of its 

elements in 2006, according to State officials. The implementation of this 

plan would help State to conduct periodic or regular, independent, and 

systematic oversight of USKPA and its licensees to make sure that they

conform with KPCS standards. 

The U.S. government monitors the export process using electronic data 

checks rather than physical inspections of rough diamond shipments. 

While USKPA reviews licensees, it does not have a plan for conducting 

these reviews. Finally, KPCS participants reported to us that they had

U.S. Export Process Involves 

Limited U.S. Government 

Monitoring 

 23The application form that licensees/shippers complete must contain: the names, 

addresses, and tax identification numbers of the applicant, exporter, and importer; the 

carat weight of the shipment; the value in U.S. dollars; the number of parcels in the

shipment; and the relevant Harmonized Commodity Description and Coding System 

number. In addition, the following warranty statement must appear on the application: 

“The applicant hereby asserts that the rough diamonds intended for export referenced in

this application have been handled in accordance with the provisions of the Kimberley 

Process International Certificate Scheme for Rough Diamonds.” 

Page 26 GAO-06-978 Conflict Diamonds
received U.S. Kimberley Process certificates that did not comply with the 

certification scheme requirements. 

Direct government involvement in the operational export process is 

limited to Census’ electronic data checks through AES. Once Census 

validates a shipment for export based solely on data submitted through 

AES, no other government agency reviews the shipment. The contents of 

the parcels are never physically inspected by any government agency, 

USKPA, or its licensees. According to a senior official at CBP, no one at 

CBP physically inspects rough diamond export shipments before they are 

sent, and no requirement exists for submitting a Kimberley Process 

certificate to CBP for these export shipments.24 In its final report, a peer 

review team sent by KPCS to the United States to assess implementation 

of the certification scheme found that the U.S. export regime would 

benefit from a more hands-on approach by the government and 

recommended conducting physical inspections of exports periodically or 

regularly to ensure that, among other things, the description on the 

certificate matches the contents of the shipment. 

The private sector, through USKPA and its licensees, plays a significant 

role in the U.S. export process, yet these private entities do not verify the 

contents of rough diamond exports either. According to a co-director of 

USKPA, the agency takes no responsibility for the information on the 

certificate; the licensee and exporter assume this responsibility. Likewise, 

a senior official from State maintained that the licensees are responsible 

for providing truthful data—thus ensuring that the contents meet the 

information on the documentation. 

However, according to two USKPA licensee freight forwarders responsible 

for issuing about half of the U.S. Kimberley Process certificates in 2005, 

they also do not examine the contents of rough diamond parcels they ship. 

For rough diamonds, they rely on the warranty the exporters sign on the 

application attesting that the shipment has been handled in accordance

with KPCS. The licensees maintain that the exporters are responsible for 

collecting and retaining documentation showing that the diamonds were

legally imported into the United States. Without an effective monitoring 

strategy that includes a plan for conducting physical inspections 

Monitoring of Export 

Operations Limited to

Electronic Data Checks with 

No Physical Inspections 

 24According to other CBP officials, CBP uses an approach for exports that focuses on 

inspecting high-technology items that could be used by potential U.S. enemies. Under this 

approach, rough diamond shipments do not get flagged for inspection. 

Page 27 GAO-06-978 Conflict Diamonds
periodically or regularly, the United States cannot be assured that its 

internal controls for exports sufficiently prevent export of illicit 

shipments. This weakness of the U.S. export process could allow illicit 

diamonds to enter the legitimate trade. 

Under its licensing agreement, USKPA can review a licensee’s books, 

records, and other documents to verify compliance with the agreement. 

According to a USKPA co-director, USKPA has visited five licensees. 

However, USKPA does not have a plan to conduct these monitoring visits, 

nor does it have any protocol for selecting which licensees will receive a 

visit. The visit might include a review of the security measures used to 

store the certificates, packing procedures, and record-keeping for every

application received, as well as interviews with the employees involved in

these processes and those who prepare monthly or annual reports. USKPA 

gave us visit summaries from its annual reports to State. USKPA did not 

give us any other documentation regarding these reviews. Without an 

established monitoring strategy, plan, criteria, and documentation, USKPA 

cannot be sure that its licensees are meeting their requirements to prevent 

illicit exports of rough diamonds from the United States. 

Some countries have reported quality control problems with U.S. 

Kimberley Process certificates. For example, in 2005, one country reported

receiving 26 U.S. Kimberley Process certificates with corrections 

(correction fluid such as Liquid Paper or Wite-Out had been used to amend

errors on them). Also, 10 certificates had typographical errors, and 5 had

incorrect dates. In the same year, another country reported receiving 21 

U.S. Kimberley Process certificates with typographical errors and 5 

certificates with correction fluid. These quality issues raise the possibility 

that the certificates have been tampered with and, thus, do not meet KPCS 

requirements. In the absence of physical inspections of U.S. rough 

diamond exports, foreign importing authorities have alerted U.S. officials

of these problems. In response, these officials began conducting outreach

efforts to exporters to address these issues. 

USKPA does not have a plan to 

conduct reviews of licensees 

U.S. Trading Partners Report 

Problems with U.S. Kimberley 

Process Certificates 

Page 28 GAO-06-978 Conflict Diamonds
Internationally, the United States has helped to strengthen KPCS by 

participating in KPCS activities and providing assistance to help Sierra 

Leone and Liberia comply with KPCS, but this assistance faces challenges. 

The United States has helped strengthen KPCS by participating in the 

activities of its working groups and committees and assuming lead roles; 

for instance, the United States led a peer review visit to Brazil and offered

to identify and coordinate donor assistance to countries seeking to 

implement or strengthen KPCS. Also, the United States has provided 

approximately $7.57 million in assistance to the diamond producing 

countries of Sierra Leone and Liberia to implement systems for controlling 

their trade in rough diamonds. However, the effectiveness of assistancerelated efforts in Sierra Leone and Liberia is constrained by the limited 

capacity and resources of these countries to implement KPCS and the 

need to harmonize diamond policies among these countries and other 

countries in the region. Donors and diamond producers are considering a 

regional approach to help enhance the effectiveness of donor assistance. 

With State leading U.S. efforts, the United States has helped strengthen 

KPCS by regularly attending KPCS-related meetings and serving on the 

three KPCS working groups and the two KPCS committees. CDTA 

expresses the sense of the Congress that the United States should 

strengthen KPCS by monitoring the effectiveness of the certification 

scheme in stemming trade in rough diamonds not controlled by KPCS. To 

this end, the United States has taken the following actions: 

The United States Has 

Helped to Strengthen 

KPCS Internationally, 

but AssistanceRelated Efforts Face 

Challenges 

The United States Has 

Participated in KPCS 

Activities and Recently Led 

Two of Them 

• The United States regularly attends KPCS meetings, which aim to 

strengthen the certification scheme and assess its effectiveness. According

to U.S. officials, the United States has regularly participated in KPCS 

meetings, including the annual KPCS plenary and intersessional meetings, 

to discuss and assess KPCS implementation. Also, it crafted compromises 

and negotiated solutions to disagreements among KPCS participants. 

• The United States serves as a member of the Statistics Working Group 

and, according to U.S. officials, through diplomatic channels has 

encouraged and assisted several participants to provide required statistical 

reports to KPCS in a timely manner. Also, the United States, through 

Census, has analyzed production and trade data for the Statistics Working 

Group and, through USGS, has done it for some of the KPCS peer review 

teams. 

• The United States serves as a member of the Monitoring Working Group, 

which monitors how individual participants implement KPCS. The primary 

Page 29 GAO-06-978 Conflict Diamonds
activity of the Monitoring Working Group has been to conduct peer 

reviews, which include peer review visits to examine participants’ efforts 

to implement KPCS. Since the first peer review visit to the United Arab 

Emirates in May 2004, KPCS has conducted 31 review visits, including the

KPCS peer review visit to the United States in 2005. Officials from State 

and other U.S. entities have participated in KPCS peer review visits to the 

following ten participants: United Arab Emirates, Russia, Guinea, India, 

Sierra Leone, Sri Lanka, Ghana, Togo, Brazil, and Guyana. The United 

States also participated in the recent Kimberley Process special mission to 

Liberia. 

• The United States serves on two KPCS committees: the Participation 

Committee, which assists the Chair of the Kimberley Process in handling 

the admission of new participants to KPCS; and the Selection Committee, 

which reviews and assesses the credentials of candidates for the position 

of Vice-Chair. 

• The United States has recently led two KPCS activities. Specifically, the 

United States offered to identify and coordinate donor assistance for 

implementing KPCS at the plenary meeting in Moscow, Russia, in 

November 2005. Also, the United States led the KPCS peer review visit to 

Brazil in April 2006. 

The United States has provided about $7.57 million in assistance to help 

Sierra Leone ($6.13 million) and Liberia ($1.44 million) implement KPCS, 

but the limited capacity and resources of these two recipient countries and 

the need to harmonize diamond policies with other countries in the region 

have restricted the effectiveness of this assistance. Donors, including the 

United States, are considering using a regional approach to enhance the 

impact of diamond-related assistance. Table 4 shows the U.S. diamondrelated assistance to these two countries. 

The United States Has 

Helped Two Countries in 

Their Efforts to Implement 

KPCS and Is Considering a 

Regional Approach to 

Enhance the Impact of Its 

Diamond-Related 

Assistance 

Page 30 GAO-06-978 Conflict Diamonds
Table 4: U.S.-Funded Diamond-Related Projects Supporting the Implementation of KPCS in Sierra Leone and Liberia 

Implementing U.S. agency/contractor Country/program title 

Amount of

disbursement

a

(dollars in millions)

Sierra Leone

USAID/Office of Transition Initiatives/Management 

Systems International 

Diamond Management Program $1.26

Subtotal $1.26

USAID/Management Systems International Diamond Project $0.06

Diamond Policy and Management Project 

(DIPAM) 

$0.94

Peace Diamond Alliance Support Project 

(PDA) 

 $1.08

Integrated Diamond Management Program 

(IDMP) 

 $2.79b

Subtotal $4.87

Total for Sierra Leone $6.13

Liberia 

USGS/Constella Futures International Kimberley Process Implementation Program $1.44b

Total for Liberia $1.44

Total for Sierra Leone and Liberia $7.57

Source: GAO analysis of USAID and USGS data.

a

Disbursements are outlays for programs completed. State has provided $2 million and USAID 

provided $0.79 million. 

b

These amounts represent obligations for programs not yet completed. State has fully funded this 

program. 

The United States, as part of its support to the Lome Peace Accord in 1999, 

helped Sierra Leone initiate diamond policy reform. From September 1999 

to March 2007, USAID, through five rough diamond-related projects, plans 

to provide about $6.13 million in assistance to support Sierra Leone’s 

efforts to control rough diamonds at the national and local level. Between 

1999 and 2001, USAID’s Office of Transition Initiatives (OTI) provided, 

through Management Systems International (MSI), about $1.26 million in

funding under one project to support government efforts to gain control of

its production of and trade in rough diamonds. Between 2002 and 2007,

USAID plans to provide, again through MSI, about $4.87 million in 

assistance under four projects to further enhance the country’s efforts to 

gain control over its rough diamonds. The specific programs are outlined 

below. 

U.S. Diamond-Related 

Assistance Helped Sierra Leone 

Comply with KPCS 

Page 31 GAO-06-978 Conflict Diamonds
Between 1999 and 2002, OTI, through MSI, provided about $1.26 million, 

under the Diamond Management Program, to support Sierra Leone in its 

efforts to develop and implement diamond policies and a system for 

controlling the trade in rough diamonds. The two primary objectives of the 

program were to (1) help Sierra Leone bring diamonds under control of 

the government and (2) cut the trade in conflict diamonds to diminish this 

trade’s financing of warfare. According to a USAID-sponsored evaluation, 

the primary achievement of the program was to assist the government in 

establishing a Certificate of Origin system that the country needed to have 

in place to be able to export rough diamonds. Although this program was 

largely advisory, it also included providing training and equipment to the 

Ministry of Mineral Resources’ monitoring staff. The evaluation considered 

the program a success because legitimate exports of rough diamonds 

increased from $1.2 million in 1999 to $26 million in 2001. 

Diamond Management 

Program 

At the end of the OTI-funded Diamond Management Program, USAID 

granted about $62,000 to MSI, under the Diamond Project, to continue 

working on rough diamonds from August 2002 to November 2002. This 

funding helped MSI get ready to start a larger program, called the Diamond 

Policy and Management (DIPAM) program. 

The Diamond Project 

From 2002 to 2004, USAID, through MSI, provided $940,000, under the 

DIPAM program, to further help Sierra Leone control its rough diamonds 

at both the national and local level. According to MSI’s project closeout 

report, DIPAM had five policy objectives, and successfully implemented 

programs in support of each of them:

Diamond Policy and 

Management Project 

• Legitimize policy reform. MSI, through DIPAM, worked with the 

government of Sierra Leone to apply economic incentives to shape the 

behavior of both domestic and international actors in the diamond sector, 

and promote legitimate mining and marketing. For example, the project 

explored ways to reward citizens for mining rough diamonds legally and 

for ensuring that their neighbors also did so. 

• Increase community benefits from mining. DIPAM focused on increasing 

community benefits in two ways: by maximizing direct income within the 

country from the production and sale of rough diamonds, and by 

encouraging the government to return a portion of rough diamond export 

tax revenues to communities through the Diamond Area Community 

Development Fund (DACDF). DACDF distributes one-fourth of revenue 

earned from export taxes on rough diamonds to communities holding 

mining licenses. In 2005, over $900,000 in DACDF funds were turned over 

Page 32 GAO-06-978 Conflict Diamonds
to these communities. In one community we visited, these funds helped to

build a police facility and a town hall. 

• Engage civil society with government in mining policy deliberations 

and monitor the government’s performance. DIPAM worked to 

strengthen community-based institutions to help them more explicitly 

represent community interests with respect to diamond mining and 

alternative development activities. 

• Establish dialogue among communities, the government, and the private 

sector in industrial mining. DIPAM established forums where 

community voices could be heard. For example, project officials worked 

directly to help property owners express their grievances regarding the 

mining practices of a large mining company. 

• Improve environmental management of artisanal mining. In September 

2004, DIPAM succeeded in getting the government of Sierra Leone to 

release funds to reclaim land at an illegal mining site that was shut down. 

The government had set aside a portion of the revenue that it had received 

from selling mining licenses to pay for environmental reclamation. 

However, the government had never released it before. 

From 2003 to 2004, USAID, through MSI, provided about $1.08 million, 

under the Peace Diamond Alliance Support Project (PDA), to help Sierra 

Leone establish a public/private partnership for mining rough diamonds. 

MSI implemented this project in an integrated manner with the DIPAM 

cooperative agreement discussed above. The approach of the PDA has 

been to remove diamonds from the smuggling chain by providing 

incentives for legal export, chiefly by increasing benefits at the local level. 

Specifically, PDA worked to improved diamond management in mining 

communities by encouraging cooperation among government, businesses, 

and civil society. 

The PDA offered training for members of mining cooperatives (which are 

largely made up of unskilled workers) on a number of issues, such as 

valuing stones and improving environmental and safety practices. Figure 5 

shows diggers working at a diamond mining site in Sierra Leone. In 

addition, the PDA helped to organize 35 mining cooperatives between 2003

and 2004, mainly in the Kono District, which is one the main diamond 

mining areas in Sierra Leone. However, only five of these cooperatives 

mined rough diamonds in 2005 and only one of them continues to mine 

rough diamonds in 2006.

Peace Diamond Alliance 

Support Project 

Page 33 GAO-06-978 Conflict Diamonds
The measure of success for the DIPAM/PDA programs was the degree to 

which legal diamond exports increased and the degree to which benefits 

were returned to communities. By the above measures, the DIPAM/PDA 

projects were successful, according to MSI’s project closeout reports. For 

instance, legal diamond exports have increased from $10 million in 2000 to

over $140 million in 2005. U.S. and Sierra Leone government officials view 

the increase in legal diamond exports as an indicator that more diamonds 

are being traded licitly. 

Figure 5: Diamond Mining Site in Sierra Leone—A Recipient Country of U.S.

Assistance 

From 2004 to 2006, USAID, through MSI, has implemented the Integrated

Diamond Management Program (IDMP), to support Sierra Leone efforts to 

improve the management of Sierra Leone’s diamond sector at both the 

national and local levels. State has provided about $2 million to support 

this program. In July 2006, USAID approved about $790,000 in additional 

funding to extend this program until March 2007. At the national level, 

IDMP continues to help the High-Level Diamond Steering Committee 

(HLDSC) and its ad hoc Technical Committee in their efforts to support 

the government of Sierra Leone formulate diamond-related policy. At the 

local level, IDMP continues to support the PDA, described above, and 

other local initiatives. 

Sierra Leone agreed to create HLDSC to advise the government on the 

effective management and control of the country’s rough diamond 

Source: GAO.

Integrated Diamond 

Management Program

Page 34 GAO-06-978 Conflict Diamonds
resources. HLDSC members include Sierra Leonean government ministers 

as well as the U.S. Ambassador and equivalent representatives from the 

United Kingdom, the European Community, and the UN. The committee 

formed a technical advisory group to address issues raised by the 

government or donors in early 2004. The committee and its ad hoc 

technical committee serve as key policy forums for enhancing national

diamond-sector policy development and implementation. They analyze 

strategic policy issues and advise the government on important diamondsector policy. For example, recent discussions focused on the 

establishment of diamond cutting and diamond polishing legislation and 

procedures, and policies for transparent land allocation to diamond 

companies. MSI serves as the secretariat for both committees. For this 

reason, these committees have relied on U.S. assistance for guidance,

recommendations, and support, according to recent program status 

reports. 

In 2005, State asked USAID to transfer funds to USGS for developing and 

implementing a program to help Liberia move toward compliance with 

KPCS.25 With this funding, from September 2005 to December 2006, USGS, 

under an agreement with State and through Constella Futures 

International, plans to provide about $1.44 million in rough-diamondrelated assistance under one project to help Liberia in its efforts to comply 

with KPCS. 

The U.S. assistance focuses on developing and implementing a capacitybuilding and a technical training program in a broad range of rough 

diamond activities, such as improving the government capacity for 

controlling the production and trade in rough diamonds and related 

geological and commercial activities. For instance, this program includes 

funding for building a secured annex behind the Ministry of Lands, Mines, 

and Energy to house Liberia’s rough diamond exporting and importing 

authority, as well as for buying vehicles and equipment needed to support 

this authority and the ministry’s efforts to monitor rough diamond mining

activities. 

In Monrovia, Liberia, we observed a subcontractor working on the secured 

annex that will house the exporting and importing authority. Figure 6 

U.S. Diamond-Related 

Assistance Is Helping Liberia in 

Its Efforts to Comply with 

KPCS 

 25 The UN Security Council imposed sanctions on the export of rough diamonds from

Liberia in 2001 for its role in the armed conflict in neighboring Sierra Leone. Compliance 

with KPCS is one of the key conditions for lifting the sanctions on diamond exports.

Page 35 GAO-06-978 Conflict Diamonds
shows the secured annex under construction. Recent status reports on the 

U.S.-funded assistance effort in Liberia indicate that the U.S program is 

helping Liberia make progress in different areas. For example, the 

construction of the annex is almost finished, Kimberley Process 

certificates are under development, and training of different staff needed

to implement KPCS is under way. 

Figure 6: Liberian Ministry of Lands, Mines, and Energy Building and Secured

Annex under Construction for Housing Liberia’s Rough Diamond Exporting and 

Importing Authority

U.S. and program officials noted that, despite the progress made through 

the support of the U.S. assistance program, Liberia still does not have an 

effective system for controlling its production and trade in rough 

diamonds, which is needed to comply with KPCS. In May 2006, the UN 

completed an assessment of the status of Liberia’s efforts to comply with 

KPCS and a second Kimberley Process Expert Mission visited Liberia to 

independently assess the status of these efforts.26 The UN reported that 

Source: GAO.

 26In February 2005, the first Kimberley Process Mission to Liberia found that, while Liberia 

had enacted the necessary law to implement KPCS and designated the Ministry of Lands, 

Mines, and Energy as the focal point for national implementation, this country lacked the

means to enforce internal controls, including monitoring the activities of diamondproducing regions. 

Page 36 GAO-06-978 Conflict Diamonds
Liberia still did not comply with KPCS. The UN report, for instance, noted 

that the components needed for a credible, internationally-accredited 

certification scheme for rough diamonds were still some months away. In 

June 2006, the UN decided to extend its rough diamond-related sanctions

on Liberia for another 6 months, with the option of assessing the country’s

efforts to comply with KPCS again in another 4 months. In August 2006, 

the Kimberley Process Expert Mission to Liberia reported that Liberia had 

made some progress towards establishing a system of internal controls, 

which is crucial to the effective implementation of KPCS. However, it also

noted that Liberia still lacks, for instance, a system of internal controls 

that will ensure that conflict diamonds are not entering its production. 

Sierra Leone and Liberia’s limited capacity and resources to fully 

implement KPCS, and the countries’ need to harmonize diamond policies 

with other countries in the regions, constrains the effectiveness of donor 

assistance. Although U.S. assistance has provided training, equipment, and 

vehicles to help Sierra Leone monitor diamond mining areas and borders 

to prevent illicit activities, government officials told us during our visit to 

that country that they did not have enough capacity and resources to 

accomplish their mission. For instance, these officials emphasized that 

they did not have enough vehicles for monitoring large diamond mining 

areas under their jurisdiction. Because these vehicles included many 

motorcycles, these officials also noted that they faced many difficulties 

reaching many mining areas given the bad conditions of the roads and 

remoteness of mining sites. According to U.S. and Liberian officials, 

without the U.S. and other donor assistance that is providing training, 

equipment, and vehicles to help Liberia comply with KPCS, the country 

would not be able to implement the control systems needed for monitoring 

trade in rough diamonds, large mining areas, and highly porous borders. 

Also, the UN Mission in Liberia (UNMIL) in March 2006 noted that the 

problem of porous borders and insecurity in the Mano River Basin area—

which includes Liberia, Sierra Leone, Guinea, and Cote d’Ivoire—has 

contributed to difficulties in effectively dealing with illicit trading of 

diamonds. 

Donors and diamond producers are considering a regional approach to 

help enhance the effectiveness of donor assistance because this assistance 

is constrained by the limited capacity and resources of these countries and 

the need to harmonize diamond policies among countries vulnerable to 

illicit cross border diamond trading. In February 2006, at a meeting of 

alluvial diamond producers, participants encouraged regional and 

subregional cooperation by harmonizing and reinforcing mechanisms to 

fight more efficiently the illicit cross border trade of diamonds. Also, the 

Donor Assistance Faces 

Challenges, But a Regional 

Approach for Providing Some 

Assistance Would Enhance 

Impact of This Assistance 

Page 37 GAO-06-978 Conflict Diamonds
reports of the KPCS peer review visits to Sierra Leone and Liberia stress 

the importance of harmonizing diamond-related policies of these (and 

other) countries in the Mano River region to avoid the illegal transfer of 

rough diamonds across borders. For instance, when Sierra Leone 

significantly raised its diamond-related tax rate above the tax rate of other 

countries in the region in early 2006, it experienced a drop of rough 

diamond exports that led it to rescind the tax rate increase. Public and 

private officials have stated that employing a regional approach for some 

rough diamond-related assistance would improve the impact of this 

assistance, thereby further deterring illicit diamond trading. These officials 

have noted that harmonization of taxation and other laws among countries 

within a region is needed to dissuade people from illegally moving 

diamonds across borders. In June 2006, representatives from Sierra Leone, 

Liberia, Guinea, and Cote D’Ivoire, along with representatives from the 

United States and other donors, met to discuss rough diamond-related 

issues—including policy areas for potential regional harmonization. 

According to U.S. officials, the conference highlighted the importance of 

regional harmonization, as well as the complexity—given the differences 

in national laws—of trying to find common positions that could be 

adopted by all the countries within a region. The United States is 

considering using a regional approach to enhance the impact of some of 

its diamond-related assistance. This regional assistance would

complement country-specific assistance provided to diamond-producing 

countries within a region. 

A system for controlling the trade in rough diamonds will be effective only 

if it has control mechanisms designed to curtail or deter the trade in 

conflict diamonds. The United States has established a multi-agency 

system aimed at controlling trade in rough diamonds (thereby curtailing 

trade in conflict diamonds) but, because of weaknesses of the system, the 

United States cannot ensure that illicit rough diamonds are not traded. To 

succeed, KPCS depends on all participants having strong control systems 

and procedures for collecting and sharing trade data on rough diamonds, 

for inspecting imports and exports of these diamonds, and for tracking 

confirmations of import and export receipts. 

Since implementing CDTA, the United States has made significant 

improvements to its system and procedures for collecting and sharing data 

and for controlling the rough diamond trade. However, a continual excess 

of exports over imports raises concerns because the United States is not 

expected to have such excess of exports over time (it does not produce 

rough diamonds and polishes some rough diamonds domestically) and

Conclusions 

Page 38 GAO-06-978 Conflict Diamonds
because U.S. agencies have not conducted an analysis that might help to

explain a persistent excess of exports. Also, the United States has not had 

a policy and plan for periodically or regularly physically inspecting 

imports and exports of rough diamonds to ensure that illicit rough 

diamonds do not enter the legitimate U.S. trade of these diamonds. In 

addition, the United States has failed to confirm most rough diamond 

import receipts to foreign export authorities, thereby failing to comply 

with a KPCS standard. The United States relies on the ultimate recipients 

to confirm import receipts, but it has not tracked whether these recipients 

do so. Moreover, although State and Census have received annual activity 

reports from USKPA, and State has reported to Congress on USKPA 

activities, State has not had a plan for overseeing the activities of USKPA 

and its licensees, who issue the U.S. Kimberley Process certificates. 

Although USKPA has reviewed the activities of 5 of its 17 licensees, it has 

not had a plan and protocols for conducting these reviews. These 

weaknesses diminish the effectiveness and deterrent effect of the U.S. and 

international systems for controlling imports and exports of rough 

diamonds. 

The United States has helped to enhance KPCS by, among other things, 

participating in the decision making and operational aspects of the 

certification scheme, and has supported the adoption of KPCS by 

providing technical assistance to two African diamond-producing 

countries, Sierra Leone and Liberia. The United States has participated in

KPCS since its inception, and has recently assumed leadership roles, by 

identifying and coordinating donor assistance to diamond producing 

countries, and leading a peer review visit to Brazil. The United States has 

helped Sierra Leone and Liberia in their efforts to meet the minimum 

KPCS requirements, but the limited capacity and resources of both 

countries—and the need to harmonize diamond policies among these 

countries and other countries in the region—has presented a major 

challenge to U.S. assistance efforts and the countries’ ability to control 

their trade in rough diamonds and monitor large mining areas and highly

porous borders. To enhance the impact of its diamond-related assistance 

and further curtail illicit rough diamond trading, the United States, other 

donors, and diamond producers are considering using a regional approach 

for providing some diamond-related assistance, which would help to 

address diamond issues of a regional nature. 

Page 39 GAO-06-978 Conflict Diamonds
To help the United States ensure that it has a more effective system for 

preventing the importation or exportation of conflict diamonds, we are 

making seven recommendations. 

Recommendations for 

Executive Action 

• To improve the accuracy of U.S. rough diamond trade data—if U.S. rough

diamond exports continue to exceed imports—-we recommend the 

following: 

• The Secretaries of State and the Treasury direct the U.S. Kimberley 

Process Implementation Coordinating Committee to perform such 

analysis as is necessary to determine what constitutes a normal excess 

of exports over imports based on a variety of factors, including market 

factors such as rough diamond stockpiles and domestic diamond 

cutting and polishing capacities. 

• To enhance the U.S. process for inspecting rough diamond imports and 

exports, we recommend the following: 

• The Secretary of Homeland Security direct the Commissioner of CBP 

to develop and implement a plan for conducting physical inspections of 

both imports and exports of rough diamonds periodically or regularly,

including inspecting the quality of U.S. Kimberley Process certificates. 

• To enhance the U.S. process for confirming the receipt of U.S. imports 

with foreign exporting authorities, we recommend the following: 

• The Secretaries of State and Homeland Security develop and 

implement a plan for confirming the receipt of imports—currently the 

responsibility of individual importers—and for tracking these 

confirmations. The system for tracking import confirmation receipts 

would help enhance Census’ data on rough diamond imports and 

exports. 

• The Director of OFAC revise the pertinent rough diamond trade 

regulations to reflect the above change. 

• To enhance the U.S. process for reviewing the activities of USKPA and its 

licensees who issue Kimberley Process certificates, we recommend the 

following: 

• The Secretary of State direct the Assistant Secretary, Bureau of 

Economic and Business Affairs, to implement a plan for reviewing the 

activities of USKPA and its licensees. 

Page 40 GAO-06-978 Conflict Diamonds
• The Secretary of State direct the Directors of USKPA to develop and 

implement a plan for reviewing the activities of its licensees. 

• Finally, to enhance the impact of U.S. diamond-related technical 

assistance and further curtail illicit rough diamond trading, we 

recommend the following: 

• The Secretary of State direct the Assistant Secretary, Bureau of African 

Affairs, to develop and implement a plan for providing some of the 

diamond-related assistance using a regional approach so that countries 

within a region can harmonize aspects of their systems for controlling 

the rough diamond trade across porous borders. 

We provided a draft of this report to State, the Treasury, Homeland 

Security, Commerce, Interior, USAID, and USTR. We obtained written 

comments from State, the Treasury, Homeland Security, Commerce, and 

Interior (see apps. VI, VII, VIII, IX, and X). They concurred with our 

recommendations. We also received technical comments on this draft 

from State, the Treasury, USAID, and USTR, which we have incorporated 

where appropriate. 

We are sending copies of this report to interested congressional 

committees, State, the Treasury, Homeland Security, Commerce, Interior, 

USAID, and USTR. We will also make copies available to others upon 

request. In addition, the report will be available at no charge on the GAO 

Web site at http://www.gao.gov. 

If you and your staff have any questions about this report, please contact 

me at (202) 512-4347. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

GAO staff who made major contributions to this report are listed in 

appendix XI.

Loren Yager, Director 

International Affairs and Trade 

Agency Comments 

and Our Evaluation 

Page 41 GAO-06-978 Conflict Diamonds
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

As mandated by the Clean Diamond Trade Act (CDTA), this report focused 

on (1) describing the institutional framework the U.S. government has 

created to implement CDTA, (2) examining how the United States has 

implemented the provisions of CDTA domestically and what principal 

challenges it faces, and (3) examining how the United States has helped to

strengthen the Kimberley Process Certification Scheme (KPCS) and what 

principal challenges it faces. 

To address all of these objectives, we interviewed key officials from 

multiple U.S. agencies and the U.S. Kimberley Process Authority (USKPA). 

The agencies we interviewed included: 

• the Department of State (Bureau of Economic Affairs and United States 

Mission to the United Nations), 

• the Department of the Treasury (Office of Foreign Assets Control), 

• the Department of Homeland Security (Bureau of Customs and Border 

Protection and Bureau of Immigration and Customs Enforcement), 

• the Department of Commerce (Bureau of the Census), 

• the Department of Interior (U.S. Geological Survey), 

• the U.S. Agency for International Development, and 

• the Office of the U.S. Trade Representative. 

To address our first objective of describing the institutional framework the 

U.S. government has used to implement CDTA and our second objective of 

examining how the United States has implemented the provisions of CDTA 

domestically and what principal challenges it faces, we reviewed 

documents from the U.S. government and USKPA, including relevant laws, 

regulations, reports, and briefing documents. Also, we interviewed 

representatives and collected documentation from diamond industry 

organizations and non-governmental groups that have been involved in the 

implementation of CDTA. In addition, we interviewed representatives from 

private organizations that have been involved in trading rough diamonds 

to and from the United States. We analyzed Census’ rough diamond import 

and export flows in conjunction with data collection improvements to 

determine the factors contributing to excess exports. These data have 

limitations, as discussed in the report. We assessed the quality of data the 

Census, the UN, and the KPCS used to describe international trade in 

Page 42 GAO-06-978 Conflict Diamonds
Appendix I: Objectives, Scope, and 

Methodology 

diamonds, and determined that they were sufficiently reliable for our 

purposes. Finally, we used data provided to us by foreign governments to 

analyze U.S. import receipt confirmations. Based on interviews with 

foreign government officials we determined that these data were 

sufficiently reliable to support our findings. 

To address our third objective of examining how the United States has 

helped to strengthen KPCS and what principal challenges it faces, we 

reviewed UN, KPCS, and U.S. and foreign government documents, 

including relevant legislation, reports, and briefing documents. Also, we 

interviewed officials and collected documentation from the UN and other 

international organizations, KPCS, diamond industry organizations, nongovernmental groups, and the U.S. and foreign governments involved in 

the development and implementation of KPCS. In addition, to identify, 

describe, and assess U.S. diamond-related assistance efforts, we 

interviewed U.S., UN, and foreign government officials and nongovernmental groups and private organizations representatives involved in

the development and implementation of the diamond-related assistance 

the United States has provided to Sierra Leone and Liberia. We did not 

independently verify the U.S. assistance data. 

We conducted our work in Washington, D.C.; New York, New York; 

Moscow, Russia; Ottawa, Canada; Brussels and Antwerp, Belgium; 

Catania, Italy; Freetown and Koidu, Sierra Leone; and Monrovia, Liberia.

We conducted our work from September 2005 through September 2006 in

accordance with generally accepted government auditing standards. 

Page 43 GAO-06-978 Conflict Diamonds
Appendix II: U.S. and Global Trade In Rough Appendix II: U.S. and Global T Diamonds rade In Rough 

Diamonds 

Tables 5 to 8 show information related to the U.S. and global trade in 

rough diamonds, including the top destinations for U.S. rough diamond 

exports, top sources of U.S. rough diamond imports, top (non-mining) 

rough diamond exporting KPCS participants, and the economic

importance of diamond mining for selected countries. We assessed the 

quality of data from the Census, the UN, and the KPCS, and, despite 

limitations, we determined that they were sufficiently reliable for our 

purposes. 

Table 5: Top Destinations for U.S. Rough Diamond Exports, 2005 (value > 1 percent 

of U.S. exports) 

KPCS participant Value of exports Percent of U.S. exports

Israel $204,486,572 40.0%

European Community $157,386,752 30.8%

United Arab Emirates $42,320,452 8.3%

South Africa $32,243,114 6.3%

India $19,648,240 3.8%

Switzerland $14,578,528 2.8%

China $13,116,880 2.6%

Japan $8,786,284 1.7%

Namibia $6,805,390 1.3%

Mauritius $6,032,302 1.2%

Source: GAO analysis of Census data. 

Table 6: Top Sources of U.S. Rough Diamond Imports, by Exporting Participant, 

2005 (value > 1 percent of US imports) 

KPCS participant Value of imports Percent of U.S. imports

European Community $581,379,013 64.7%

Israel $215,579,636 24.0%

South Africa $33,102,427 3.7%

United Arab Emirates $21,775,428 2.4%

Canada $12,305,324 1.4%

Guyana $10,803,495 1.2%

Source: GAO analysis of Census data. 

Page 44 GAO-06-978 Conflict Diamonds
Appendix II: U.S. and Global Trade In Rough 

Diamonds 

Table 7: Top (Non-Mining)aRough Diamond Exporting KPCS Participants, 2003

(exports > $200 million)

KPCS participant Value of rough diamond exports

European Community $9,760,320,078

Israel $2,948,141,887

United Arab Emirates $1,006,991,024

Switzerland $795,914,964

Armenia $486,569,182

Japan $299,162,740

United States $227,286,017

Thailand $225,365,729

Source: GAO analysis of KPCS data.

a

The KPCS did not record diamond mining for these countries in 2003. 

Table 8: Economic Importance of Mining for Selected Countries, 2003

Country

Value of 

mining

Mining as a 

percentage of gross 

domestic product 

Mining as a 

percentage of

exports

Botswana $2,225,275,390 29% 65%

Democratic Republic of 

Congo $910,833,462 16% 64%

Namibia $421,312,014 9% 24%

Sierra Leone $76,700,000 8% 44%

Angola $788,100,104 6% 8%

Guyana $20,626,850 3% Not available.

Source: GAO analysis of KPCS, United Nations, World Bank, and U.S. Geological Survey data.

Note: Shares of gross domestic product and exports rounded to the nearest percent.

Page 45 GAO-06-978 Conflict Diamonds
Appendix III: Top Polished D

Exporting a

iamond 

nd Top Diamond Mining Countries

Page 46 GAO-06-978

Appendix III: Top Polished Diamond 

Exporting and Top Diamond Mining 

Countries 

Figures 7 and 8 depict the top polished diamond exporting countries and 

the top diamond mining countries. 

Figure 7: Top Polished Diamond Exporting Countries, 2004 (estimated exports > $200 million) 

Belgium

India

China

Russia

Switzerland

Thailand

United Arab

Emirates

United

Kingdom

South Africa

United States

Israel

less than $1 billion

$1 billion to $5 billion

$5 billion or more 

Sources: GAO analysis of UN data and MapArt (map).

Note: Exports are estimated as the sum of partner imports. China’s estimated exports include Hong 

Kong. 

Conflict Diamonds
Appendix III: Top Polished Diamond 

Exporting and Top Diamond Mining Countries

Figure 8: Top Diamond Mining Countries, 2003 (mining value > $50 million) 

Less than $500 million

$500 million to $1 billion

More than $1 billion

Botswana

Democratic

Republic

of Congo

Canada

South Africa

Russia

Australia

India

Namibia

Sierra

Leone

Sources: GAO analysis of KPCS and US Geological Survey data, media reports, and MapArt (map).

Page 47 GAO-06-978 Conflict Diamonds
Appendix IV: T -

Related E

imeline of KPCS and CDTA

vents

Page 48 GAO-06-978

Appendix IV: Timeline of KPCS and CDTARelated Events 

J O OJA J J O JA JO JA JO JA JO JA JO JA JO J A

1999 2001 2002 2003 2004 2005 2006 2000

September

U.S. diamond-related 

assistance program to 

Sierra Leone begins

September

U.S. diamond-related 

assistance program 

to Liberia begins

November

Participants launch 

KPCS at Interlaken, 

Switzerland

May 

Governments, NGOs, 

and the diamond 

industry launch KPCS

negotiations at 

Kimberley, South Africa

July 

Diamond industry 

establishes World 

Diamond Council

December

UN General Assembly 

issues Resolution 55/56 

supporting KPCS

January

Participants begin 

implementation of KPCS

UN Security Council 

issues Resolution 1459 

supporting KPCS

May

KPCS obtains 4-year 

WTO waiver.

April

U.S. President signs

CDTA into law

KPCS Plenary Meeting, 

Johannesburg, South 

Africa

July

President signs Executive 

Order #13312 implementing 

CDTA

August

The U.S. Treasury issues

Rough Diamond Control 

Regulations

October

KPCS Plenary 

Meeting, Sun City, 

South Africa

Source: GAO analysis of UN, WTO, KPCS, diamond industry, and U.S. government information.

September

The U.S. Treasury issues

revised Rough Diamond 

Control Regulations

Among other things, 

Plenary Meeting will 

consider a report on the 

3-year review of the KPCS

(planned)

November

KPCS Plenary Meeting, 

Moscow, Russia

June-July

KPCS review team 

visits the United States

October

KPCS Plenary 

Meeting, Gatineau, 

Quebec, Canada

KPCS obtains 6-year 

WTO waiver 

extension

(planned)

November

KPCS Plenary Meeting, 

Gaborone, Botswana

(planned)

Conflict Diamonds
Appendix V: List of KPCS Participants Appendix V: List of KPCS Participants 

States and regional economic integration organizations who have met the 

minimum requirements of KPCS are: 

1. Angola 

2. Armenia 

3. Australia 

4. Belarus 

5. Botswana 

6. Brazil 

7. Bulgaria 

8. Canada 

9. Central African Republic

10. China, People’s Republic of 

11. Congo, Democratic Republic of 

12. Cote D’ Ivoire 

13. Croatia 

14. European Community 

15. Ghana 

16. Guinea 

17. Guyana 

18. India 

19. Indonesia 

20. Israel 

21. Japan 

22. Korea, Republic of 

23. Lao People’s Democratic Republic 

24. Lebanon 

25. Lesotho 

26. Malaysia 

27. Mauritius 

28. Namibia 

29. New Zealand 

30. Norway 

31. Romania 

32. Russian Federation 

33. Sierra Leone 

34. Singapore 

35. South Africa 

36. Sri Lanka 

37. Switzerland 

38. Tanzania 

39. Thailand 

40. Togo 

41. Ukraine 

Page 49 GAO-06-978 Conflict Diamonds
Appendix V: List of KPCS Participants 

42. United Arab Emirates 

43. United States of America 

44. Venezuela 

45. Vietnam 

46. Zimbabwe 

Source: GAO analysis of KPCS information. 

Note: The rough diamond-trading entity of Chinese Taipei has also met the minimum requirements of 

KPCS. 

Page 50 GAO-06-978 Conflict Diamonds
Appendix VI: Comments from the Department Appendix VI: Comments from the of State 

Department of State 

Page 51 GAO-06-978 Conflict Diamonds
Appendix VI: Comments from the Department 

of State 

Page 52 GAO-06-978 Conflict Diamonds
Appendix VI: Comments from the Department 

of State 

Page 53 GAO-06-978 Conflict Diamonds
Appendix VI: Comments from the Department 

of State 

Page 54 GAO-06-978 Conflict Diamonds
Appendix VII: Comments from the Appendix VII: Comments from the Department of the Treasury 

Department of the Treasury 

Page 55 GAO-06-978 Conflict Diamonds
Appendix VII: Comments from the 

Department of the Treasury 

Page 56 GAO-06-978 Conflict Diamonds
Appendix VIII: Comments from the Appendix VIII: Comments from the Department of Homeland Security 

Department of Homeland Security 

Page 57 GAO-06-978 Conflict Diamonds
Appendix VIII: Comments from the 

Department of Homeland Security 

Page 58 GAO-06-978 Conflict Diamonds
Appendix IX: Comments from the Department Appendix IX: Comments from the of Commerce 

Department of Commerce 

Page 59 GAO-06-978 Conflict Diamonds
Appendix IX: Comments from the Department 

of Commerce 

Page 60 GAO-06-978 Conflict Diamonds
Appendix X: Comments from the Department Appendix X: Comments from the Department of Interior 

of Interior 

Page 61 GAO-06-978 Conflict Diamonds
Appendix XI: 

A

GAO Contact and Staff 

cknowledgments 

Page 62 GAO-06-978

Appendix XI: GAO Contact and Staff 

Acknowledgments 

Loren Yager, (202) 512-4347 

Zina Merritt served as Assistant Director responsible for this report, and 

Juan Tapia-Videla was the Analyst-in-Charge. In addition to those named 

above, the following individuals made significant contributions to this 

report: Kate Blumenreich, Leah DeWolf, David Dornisch, Mark Dowling, 

and Michael Hoffman. The team benefited from the expert advice and

assistance of Joe Carney, Randall Cole, Karen Deans, Etana Finkler, 

Chanetta Reed, Kendall Schaefer, Jena Sinkfield, and Mark Speight. 

Conflict Diamonds

GAO Contact 

Staff 

Acknowledgments 

(320351) 
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