19–010

Calendar No. 62

108TH CONGRESS REPORT " SENATE ! 1st Session 108–36

CLEAN DIAMOND TRADE ACT

APRIL 9, 2003.—Ordered to be printed 

Mr. GRASSLEY, from the Committee on Finance, 

submitted the following 

R E P O R T 

[To accompany S. 760] 

[Including cost estimates of the Congressional Budget Office] 

The Committee on Finance having considered the bill (S. 760), to 

implement effective measures to stop trade in conflict diamonds, 

and for other purposes, having considered the same, reports favorably thereon and recommends that the bill, as amended, do pass. 

BACKGROUND 

In several sub-Saharan African countries, rebel insurgent groups 

fund their military activities by mining and selling rough diamonds. Competition over the use and control of diamond wealth 

contributes significantly to the depth and longevity of these regional conflicts and to well-documented human rights violations 

against local populations. A group of diamond-trading nations, nongovernmental organizations (including humanitarian, human rights 

and faith-based organizations) and diamond industry groups involved in the rough diamond trade worked for many years to address the problem of ‘‘conflict diamonds.’’ These groups sought to 

create a voluntary international certification scheme to regulate 

the rough diamond trade in order to eliminate conflict diamonds 

from legitimate diamond trade. These efforts, supported by the 

United Nations General Assembly, culminated in the Kimberley 

Process Certification Scheme for Rough Diamonds, adopted by participating nations in the Interlaken Declaration of November 5, 

2002. 

In the Interlaken Declaration participating governments, including the United States, declared that they were, ‘‘committed to the 

simultaneous launch of the Certification Scheme beginning on 1 

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January, 2003.’’ The Certification Scheme sets out a rough diamond trade control and tracking system based on the use of import/

export certificates that certify that rough diamonds have been handled in accordance with the provisions of the Scheme. Countries 

participating in the Certification Scheme commit to import and export only properly documented rough diamonds. The purpose of the 

Certification Scheme is to curtail the trade in illegally exported 

conflict diamonds. 

The Preamble to the Certification Scheme and the Interlaken 

Declaration provide that the international certification scheme and 

measures taken to implement the scheme would be consistent with 

international trade rules. In January 2003, the United Nations Security Council passed resolution 1459 strongly supporting the Kimberley Process and the Interlaken Declaration. In addition, a group 

of Kimberley Process participants, including the United States, requested a waiver under the Marrakesh Agreement Establishing the 

World Trade Organization for certain measures taken to implement 

the Kimberley Process. On February 26, 2003, the WTO Council for 

Trade in Goods agreed by consensus to recommend approval of the 

waiver by the WTO General Council. The Council is expected to 

consider the waiver at its next meeting which will take place May 

15–16, 2003. 

The Clean Trade Diamond Act is intended to implement the 

Kimberley Process Certification Scheme in the United States. 

SUMMARY OF THE CLEAN DIAMOND TRADE ACT, AS 

AMENDED 

Short title (Section 1) 

This section provides that this Act may be cited as the ‘‘Clean Diamond Trade Act.’’ 

Findings (Section 2) 

Congress makes the following findings: 

(1) The sale of rough diamonds provides funds for the activities 

of rebel groups in Sierra Leone, Angola, and the Democratic Republic of the Congo in seeking to overthrow legitimate governments, 

destabilize the region, and commit atrocities against civilians. 

(2) These activities have caused the displacement and deaths of 

many civilians. 

(3) Human rights advocates, the legitimate diamond industry, 

and the United States have been working to block trade in conflict 

diamonds. 

(4) The United Nations Security Council has at various times 

adopted resolutions imposing embargoes with regard to the conflict 

diamond trade in Sierra Leone, Liberia, and Angola. 

(5) The United States has implemented these embargoes under 

domestic laws and regulations and is now taking further action 

with this legislation implementing the Kimberley Process. 

(6) The legitimate diamond trade and the economies of countries 

engaged in such legitimate trade could be severely damaged by a 

consumer backlash caused by concern about conflict diamonds. Accordingly, to protect legitimate trade, South Africa and other countries active in the diamond trade have devised a scheme to regulate 

the trade in diamonds in order to eliminate conflict diamonds, 

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known as the Kimberley Process. As the consumer of a majority of 

the world’s diamond supply, the United States has an obligation to 

implement an effective solution to the funding of regional conflicts 

through the sale of diamonds. 

(7) Failure to curtail the trade in conflict diamonds could have 

a severe impact on countries such as Botswana, Namibia, South Africa, and Tanzania. 

(8) The United States seeks to resolve regional conflicts in subSaharan Africa fueled by the conflict diamond trade.

(9) As stated in the Interlaken Declaration, the Kimberley Process is to be implemented in a manner consistent with international 

trade rules. 

Definitions (Section 3) 

Section 3 defines terms used in this bill, including: controlled 

through the Kimberley Process Certification Scheme, Participant, 

exporting authority, importing authority, Kimberley Process Certificate, and rough diamond. 

Measures for the importation and exportation of rough diamonds 

(Section 4) 

PRESENT LAW

No provision. 

EXPLANATION OF PROVISION

Section 4 requires the President to prohibit the importation or 

exportation of rough diamonds that have not been controlled 

through the Kimberley Process Certification Scheme. The prohibition may be waived with respect to a particular country for periods 

of not more than 1 year each if the President determines and reports to Congress that the country is taking steps to implement the 

Kimberley Process or the President determines and reports to Congress that the waiver is in the national interests of the United 

States. 

REASON FOR CHANGE

This provision implements the Kimberley Process Certification 

Scheme in the United States by establishing a system to ensure 

that rough diamonds are not imported into or exported from the 

United States, unless the shipment is accompanied by a valid Kimberley Process Certificate. Participants in the Kimberley Process 

undertake measures to ensure that rough diamonds are not imported from or exported to a non-participant, but at the same time, 

the Interlaken Declaration and the United Nations Security Council Resolution supporting the Kimberley Process both stress that 

the widest possible participation in the process is essential and 

should be encouraged and facilitated. The Section 4(b)(1) waiver is 

designed to facilitate this aim to encourage non-participants to implement the Process. Language in the bill requires the President to 

determine that the country being granted this waiver is taking effective steps to implement the Kimberley Process Certification 

Scheme. The Section 4(b)(2) waiver is similar to national interest 

waivers for various foreign assistance restrictions in Federal statutes, such as 22 U.S.C. §§2370, 2370a(g), 2377(b), 2378(b), and 

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7513(b)(2). The Committee intends that the national interest waiver under Section 4(b)(2) be judiciously exercised. It is not intended 

to be used to undermine the goals and objectives of the Kimberley 

Process Certification Scheme. 

Regulatory and other authority (Section 5) 

PRESENT LAW

No provision. 

EXPLANATION OF PROVISION

Section 5(a) authorizes, and requires as necessary, the President 

to issue such proclamations, regulations, licenses and orders, and 

conduct such investigations as may be necessary to carry out the 

Act. Section 5(b) requires any U.S. person importing into, or exporting from, the United States rough diamonds to keep a full 

record of any transaction covered by the legislation. Section 5(b) 

further provides that the President may require the person to provide this information under oath. 

Section 5(c) mandates the President to require the appropriate 

agency to conduct annual reviews of the procedures of any entity 

in the United States that issues Kimberley Process Certificates for 

exportation to determine whether they are in accordance with the 

Kimberley Process. The President is also required to transmit to 

Congress a report on each annual review. 

REASON FOR CHANGE

The record keeping requirement in Section 5(b) is consistent with 

Section III(b) of the Kimberley Process Certification Scheme, that 

provides that documents pertaining to the Kimberley Process Certificate be readily accessible. The oversight provision in Section 5(c) 

is designed to strengthen government oversight of the diamond industry’s issuance of the Kimberley Process Certificates. 

Importing and exporting authorities (Section 6) 

PRESENT LAW

No provision. 

EXPLANATION OF PROVISION

Section 6(a)(1) designates the Bureau of Customs and Border 

Protection within the Department of Homeland Security as the importing authority. Section 6(a)(2) designates the Bureau of the Census within the Department of Commerce as the exporting authority. Section 6(b) requires the Secretary of State to publish a list of 

all Kimberley Process participants and their exporting and importing authorities in the Federal Register. 

REASON FOR CHANGE

Section 6(a) is consistent with Section IV of the Kimberley Process Certification Scheme, which states that each participant in the 

KPCS should designate an importing and exporting authority. 

While the Bureau of the Census is designated as the exporting authority in the Act, the Committee anticipates and fully intends that 

other bureaus within the Department of Commerce, and other 

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agencies within the U.S. Government such as the Department of 

Homeland Security, the Department of Justice and the Department 

of the Treasury, will assist in enforcing this Act. 

Section 6(b) is consistent with the aims of Section V of the Kimberley Process concerning cooperation and transparency with respect to information on designated authorities and applicable laws 

and practices of each participant. 

Statement of policy (Section 7) 

PRESENT LAW

No provision. 

EXPLANATION OF PROVISION

Section 7 sets forth a statement of support for the policy that the 

President should promote and facilitate the adoption of the Kimberley Process by the international community. 

REASON FOR CHANGE

Section 7 is consistent with the Interlaken Declaration and the 

United Nations Security Council Resolution 1459 (2003) supporting 

the Kimberley Process which both stress that the widest possible 

participation in the Certification Scheme is essential and should be 

encouraged and facilitated. 

Enforcement (Section 8) 

PRESENT LAW

No provision. 

EXPLANATION OF PROVISION

Section 8 sets forth civil and criminal penalties for violations of 

the Act. Section 8(a)(1) provides that a civil penalty not to exceed 

$10,000 may be imposed on any person who violates, or attempts 

to violate, any license, order, or regulation issued under the Act. 

Section 8(a)(2) provides for a fine of not more than $50,000 or, if 

a natural person, imprisonment for not more than 10 years, or 

both, for willful violations, or willful attempts to violate, any license, order, or regulation issued under this Act. 

Subsection (b) provides that, in addition to the new penalties 

specified in subsection (a), other civil and criminal penalties, including seizure and forfeiture, under the customs laws of the 

United States shall also apply to importations of rough diamonds 

in violation of the Act. 

REASON FOR CHANGE

The civil and criminal penalties are intended to ensure compliance with the Act. 

Technical assistance (Section 9) 

PRESENT LAW

No provision. 

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EXPLANATION OF PROVISION

Section 9 permits the President to direct Federal agencies to provide technical assistance to countries trying to implement the Kimberley Process. 

REASON FOR CHANGE

This provision is consistent with Section V(d) of the Kimberley 

Process Certification Scheme which states that participants should 

favorably consider requests from other participants for assistance 

in improving their implementation of the Scheme. 

Sense of Congress (Section 10) 

PRESENT LAW

No provision. 

EXPLANATION OF PROVISION

Section 10 notes that the Kimberley Process is an ongoing process and affirms the importance of statistical analysis and sharing 

in monitoring the implementation of the Kimberley Process and its 

effectiveness in reducing and eliminating the trade in conflict diamonds. It provides that the President should work with participants on strengthening the Process through the adoption of measures to share statistics and that the Executive Branch should continue to maintain statistics on imports and exports of rough diamonds, share this data with other participants and interested parties, and take a leadership role in negotiating a standardized methodology for reporting statistics. 

REASON FOR CHANGE

Section 10 is consistent with the purposes of Annex III of the 

Kimberley Process Certification Scheme, concerning statistics, and 

also with Sections IV(e) and V(b) of the Process, providing for the 

collecting and sharing of statistics among participants. 

Kimberley Process Implementation Coordinating Committee (Section 

11) 

CURRENT LAW

No provision. 

EXPLANATION OF PROVISION

Section 11 establishes a Kimberley Process Implementation Coordinating Committee to coordinate implementation of this Act. 

The coordinating committee will be co-chaired by the Secretary of 

Treasury and the Secretary of State and composed in addition of 

the Secretary of Commerce, the United States Trade Representative, the Secretary of Homeland Security, and a representative of 

any other agency the President deems appropriate. 

REASON FOR CHANGE

Section 11 seeks to ensure effective implementation and congressional oversight of the Act, through creation of a coordinating comVerDate Jan 31 2003 17:13 Apr 11, 2003 Jkt 019010 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\SR036.XXX SR036
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mittee made up of all the agencies with substantive responsibilities 

under the Act. 

Reports (Section 12) 

PRESENT LAW

No provision. 

EXPLANATION OF PROVISION

Section 12(a) provides for annual reports to be submitted by the 

President to Congress on actions taken by countries that export 

rough diamonds to the United States to control the exports of diamonds through the Kimberley Process, and on the identification of 

such countries that also export rough diamonds not controlled 

through the Kimberley Process, where such uncontrolled exports 

significantly increased the likelihood that such uncontrolled diamonds would be imported into the United States. Section 12(a) requires the President to describe in the annual reports whether 

there is statistical information or other evidence that would indicate efforts to circumvent the Kimberley Process Certification 

Scheme, including cutting rough diamonds for the purpose of circumventing the Kimberley Process Certification Scheme. 

Under section 12(b) the President is also required to submit 

semi-annual reports to Congress for each country identified under 

section 12(a)(3) as having problematic non-Kimberley Process exports. These reports must explain what actions the United States 

and the identified countries have taken to ensure that non-Kimberley Process controlled diamonds are not being exported to the 

United States from those countries. These reports must continue 

until such a country is no longer identified under section 12(a)(3). 

REASON FOR CHANGE

Section 12 is intended to inform Congress regarding effective implementation of the Act and of the implementation and operation 

of the Kimberley Process Certification Scheme. 

GAO report (Section 13) 

PRESENT LAW

No provision. 

EXPLANATION OF PROVISION

Section 13 provides that, not later than 24 months after the effective date of the legislation, the Comptroller General is required 

to transmit a report to Congress on the effectiveness of this legislation in preventing the importation or exportation of rough diamonds prohibited under Section 4. The report shall include any recommendations on any modifications to the legislation. 

REASON FOR CHANGE

Section 13 is intended to inform Congress regarding effective implementation of the Act. 

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Effective date (Section 14) 

PRESENT LAW

No provision. 

EXPLANATION OF PROVISION

Section 14 provides an effective date for the Act. Specifically, 

Section 14 provides that the Act shall take effect on the date the 

President certifies to Congress that either (1) a waiver granted by 

the WTO is in effect, or (2) an applicable decision in a United Nations Security Council resolution adopted pursuant to Chapter VII 

of the United Nations Charter is in effect. 

REASON FOR CHANGE

Section 14 is consistent with the Preamble to the Kimberley 

Process Certification Scheme and the Interlaken Declaration which 

provide that the international certification scheme for rough diamonds and measures taken to implement the scheme will be consistent with international law governing international trade. 

VOTES OF THE COMMITTEE 

In compliance with section 133 of the Legislative Reorganization 

Act of 1946, the Committee states that the Clean Diamond Act, as 

amended, was ordered favorably reported with a quorum present, 

by voice vote, on April 2, 2003. 

BUDGETARY IMPACT 

In compliance with sections 308 and 403 of the Congressional 

Budget Act of 1974, and paragraph 11(a) and (b) of rule XXVI of 

the Standing Rules of the Senate, and section 423 of the Unfunded 

Mandates Reform Act of 1995 (P.L. 104–4), the following letter has 

been received from the Congressional Budget Office on the budgetary and regulatory impact of the legislation:

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

S. 760—Clean Diamond Trade Act 

S. 760 would prohibit the importation into and exportation from 

the United States of any rough diamonds (as defined in the bill) 

that have not been controlled through the Kimberley Process Certification Scheme (KPCS). The diamonds prohibited from trade are 

those that come from or go to countries and territories that do not 

participate in the Certification Scheme. The KPCS outlines a series 

of recommended standards, practices, and procedures for certification of rough diamonds through an international document that 

was agreed to by the United States and 47 other countries. In addition, S. 760 would impose civil penalties on individuals who engage 

in the trade of such diamonds. 

CBO estimates that prohibiting the trade of such diamonds 

would have no effect on federal revenues because the duty rate on 

such imports is zero. Also, any additional revenues resulting from 

the civil penalties contained in the bill would be less than $500,000 

per year. The bill would not affect direct spending. 

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S. 760 would impose a private-sector mandate, as defined by the 

Unfunded Mandates Reform Act (UMRA), on importers and exporters of certain diamonds. The bill would prohibit the importation 

into and exportation from the United States of rough diamonds 

that have not been controlled through the KPCS. According to government and industry sources, the diamond industry began such a 

prohibition voluntarily on January 1, 2003. Therefore the direct 

cost of the mandate would be minimal, if any, and would fall well 

below the annual threshold established by UMRA for private-sector 

mandates ($117 million in 2003, adjusted annually for inflation). 

CBO has determined that the bill contains no intergovernmental 

mandates as defined in the UMRA and would impose no costs on 

state, local, or tribal governments. 

The CBO staff contacts for this estimate are Annie Bartsch (for 

federal revenues), and Paige Piper/Bach (for the impact on the private sector). This estimate was approved by G. Thomas Woodward, 

Assistant Director for Tax Analysis. 

CHANGES IN EXISTING LAW 

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, the Committee finds no changes in existing 

law made by the bill S. 760, as ordered reported.

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