Diamonds and Conflict: Background, Policy, and Legislation
Released: 2003-07-16T00:00:00

Policies to Halt Trade in Conflict Diamonds

Regulatory Challenges

Effective policing of the illicit diamond trade faces difficult challenges. The world diamond trade is large, diamonds are a highly fungible and concentrated form of wealth, and the legitimateinternational diamond industry is historically insular, self-regulating, and lacks transparency. Thetrade in conflict diamonds takes advantage of these factors. Observers have concluded that conflictdiamonds regularly enter into the legitimate international market through illicit trading practices andactors. (31) The illicit diamond trade, of whichconflict diamonds are part, is also difficult to regulatefor reasons similar to those that make illegal drugs and arms smuggling difficult to control. Illicitdiamond trading has been linked to covert and sometimes violent business transactions, and isreportedly associated with international criminal activities, such as money laundering, smuggling,commercial fraud, and arms trafficking.

Magnitude of the Global Diamond Market

Trade in conflict diamonds, and regulatory proposals to end trade in such gems, are associated primarily with the rough diamond market. In 2001, world-wide diamond mine output, that is,production of rough diamonds, was estimated to be worth $7.885 billion, compared to $7.86 billionin 2000 and between $6.857 and $7.25 billion in 1999. (32) An industry trade group has reported thatworld exports of rough diamonds rose by 25.32% in carat terms and 20.8% in price in the first 8months of 2002. (33) In most years, more roughdiamonds -- a mix of new production plus pre-existinginventories -- are sold on world markets than are produced during a given year. In 2000, a total ofnearly $9 billion of rough diamonds was estimated to have come to market globally, of which $5.67billion was reportedly sold by the De Beers Diamond Trading Company (DTC, formerly called theCentral Selling Organization). (34)

U.S. Diamond Imports and Trade. U.S. market demand for diamonds is the largest in the world, and the vast majority of diamonds sold in theUnited States are imported. The value of rough diamonds imported into the United States totaled$597.38 million in 2001, $815.96 million in 2000, and $754.6 million in 1999. The value of workedbut unmounted diamonds imported into the United States is exponentially larger than that of roughdiamonds, amounting to approximately $9.17 billion in 1999, $11.28 billion in 2000, and $10.06billion in 2001. (35)

U.S. diamond imports bolster a large U.S. diamond retail jewelry market. Estimates of the total size of the jewelry market vary widely; one published source estimates that the total U.S. retailmarket for diamond jewelry was worth $11.71 billion in 2001 and $11.54 billion in 2000. The samesource estimated the aggregate market value for all U.S. retail jewelry sales as being worth $39.53billion in 2001 and $39.8 billion in 2000. (36) Othersources suggest that the U.S. jewelry market maybe smaller, worth an estimated $26 billion in 2000, an increase of about 6% over 1999, representingabout 48% of a global $57.5 diamond jewelry retail market in 2000, which had itself grown from anestimated $56 billion in 1999. (37)

Conflict Diamonds in Global Diamond Markets. De Beers/DTC, a large diamond mining and marketing business group, estimated that conflictdiamonds comprised approximately 3.7% of world diamond production in 1999. (38) That figure wasoften rounded up to 4% in press reports. Other estimates, cited by human rights and natural resourceactivist groups, suggest that the conflict diamond trade might have comprised as much as 15% of theworld trade in recent years. Some analysts, however, dispute such figures, asserting that they includeillicitly traded diamonds that are not associated with the funding of conflict.

Some press accounts in 2002 have continued to cite estimates that indicate that about 4% of diamonds are conflict diamonds, but such references do not appear to be based on new orindependently obtained and verifiable data. The current proportion of the world diamond marketcomprised of conflict-related stones is difficult to reliably estimate, but it may be smaller than it wasin 2000 or 2001. In an April 2002 presentation, Rory More O'Ferrall, Director Public & CorporateAffairs for the De Beers Group of Companies, stated that "conflict diamonds account for less than2% of world rough diamond production." (39) Thehypothesized decrease in the volume of trade inconflict diamonds may be attributable to the termination of wars in Angola and Sierra Leone,formerly two of the key sources of such gems. In addition, in the Democratic Republic of the Congo(DRC) an on-going war appears to be waning, and to the extent that this conflict was fueled bydiamond wealth, trade in conflict diamonds from the DRC may also be diminishing.

Reliability of Conflict Diamond Statistics: Discussion. As previously noted, many aggregate diamond trade statistics aremerely approximations, based on assumptions about mining methods, rates of extraction, tradevolume trends, and other market factors. Some estimates take into account only official productionfigures, which ordinarily reflect state-reported or sales and production, and which may or may nottake into account -- or may erroneously estimate -- artisanal and unofficial production. (40) Estimatesof annual diamond production and trade value in countries where conflict diamonds are mined, inparticular, vary widely because credible or detailed data during periods and in sites of conflict areoften unavailable. The volumes and value of unreported or unofficial trade and production fromconflict-affected areas are particularly difficult to estimate, and as a proportion of such categoriesthat comprised of diamonds that directly fund military or associated activities is especially difficultto measure. Differentiating conflict diamonds from other types of illicitly-traded diamonds isextremely difficult; both varieties tend to be traded in a covert manner, and many of the same marketactors may engage in unofficial or illicit transactions involving both conflict and non-conflictdiamonds. (41)

Conflict Diamonds as a Current Policy Challenge. Despite the paucity of current, independently verifiable data about the present extent of the conflictdiamond trade, advocates of diamond trade regulation maintain that regulatory efforts remainnecessary regardless of the current level of such trade. They stress that the regions that have beenaffected by diamond-related political unrest and conflict over the last decade remain volatile. Observers note that many of the same actors who were accused of being responsible for conflictsinvolving diamonds remain associated with diamond extraction and marketing operations. Inaddition, they note that diamonds continue to be the source of localized conflicts over control ofmining or trading rights. Advocates argue that bolstering states' ability to regulate the diamond trademay prevent future diamond-related conflict and, in addition, may enable countries to moreeffectively use their diamond wealth to fund national development efforts. Some industryrepresentatives broadly agree with such views. (42)

Regulatory Policy Proposals

Most proposals for curtailing the trade in conflict diamonds center around implementing systems to identify the origin of diamonds to ensure that diamonds sold by illicit sellers do not enterlegitimate international commerce. (43) Suchproposals provide the basis for laws and internationalactions, such as U.N. Security Council sanctions, that ban trade in conflict diamonds. Three primaryapproaches for determining the origin of diamonds have been proposed. (44)

1. Physical or "Geo-Chemical" Identification of Diamonds. Research on geo-chemical methods for identifying diamonds by typeor as individual units focuses on the comparative analysis of trace elements and impurities withindiamonds. Such information would be used to establish common characteristics of diamonds fromsimilar areas or to pinpoint unique characteristics, in a manner analogous to fingerprinting, ofindividual diamonds. This research employs plasma mass spectrometry and related technologies.

A related approach for purposes of tracking is to classify diamonds by their place of origin, and possibly on an individual stone-specific basis, by correlating surface, crystalline, and otherstructure-related features of rough diamonds. Such identification would be based on visualassessments and on the use of spectral refraction methods or optical, laser, x-ray, and other scanningtechnologies.

Geo-chemical and automated physical characteristic identification technologies have not yet been perfected, according to many experts, many of whom also assert that such technologies arelikely to remain prohibitively expensive in the short to medium term. Another limitation of suchtechnologies is that some of the physical characteristics upon which identification methods dependare permanently altered or destroyed when diamonds are cut or polished. A third challenge is thatalluvial (surface) diamonds are often carried far from their points of origin by water or movementsof geologic elements. This means, in many cases, that diamonds from a particular country or sub-region cannot bephysically differentiated from those found in neighboring countries or regions.

2. Tagging of Diamonds. This approach seeks to use laser and focused ion beam technologies to inscribe on individual diamonds identifyinginformation, such as microscopic bar codes, which can then be used to register and track stones.Several firms market such technology. Other firms offer technology that use laser scanningtechnologies to identify unique spectral features of individual, cut diamonds. The costs of taggingtechnology currently represent a barrier to their widespread use in diamond commerce, but expertopinion suggests that these prices may fall in the near to medium future. Critics point out that it maybe possible to cut off or otherwise physically alter or obliterate identifying marks that are cut ontodiamond surfaces.

3. Certificate of Origin Laws. This approach seeks to create a legally-binding chain of warranties from the point of mining origin to the countryof importation or, in some proposals, to the retail level. The objective is to create tradedocumentation that, based upon verification by the authorities of an exporting country, validates thelegal origin of diamonds. Such documentation would form the basis for findings of legal fact inefforts to track and monitor the diamond trade, and in determining the legitimacy of commercialdiamond transactions. The approach relies on diamond importing countries to implement effectiveadministrative processes and law enforcement procedures and adhere to shared regulatoryprocedures. This regulatory approach underlies the Kimberley Process Certification Scheme.

Industry Policy Initiatives

Diamond High Council. The Diamond High Council (HRD) is a formal trade organization representing the Belgian diamond industry. Antwerp,Belgium, where the HRD is headquartered, is one of the leading international diamond cuttingcenters, and is a major destination for exports of rough diamonds from Africa. The HRD has closeworking ties with the Belgian government. Beginning in late 1999, it assisted the Angolangovernment in designing a forgery-proof certificate of origin documentation system, and later enteredinto a joint export control regime and technical assistance agreement with the Angolan government.It later pursued similar efforts with the Sierra Leonean government , and has provided several otherAfrican governments with similar certificate of origin-related advice.

In addition to the Angola and Sierra Leone arrangements, the Belgian Ministry of Economic Affairs has since February 2, 2000, according to the HRD, required that diamond imports fromLiberia, Ivory Coast, Uganda, Central African Republic, Ghana, Guinea, Namibia, Congo(Brazzaville), Mali, and Zambia be licenced under the name of individual diamond dealers.Government certificate of origin systems of varying sophistication exists in several of thesecountries, according to the HRD and other sources. (45) The HRD has stated that if probable causeexists indicating that diamonds imported to Belgium do not originate in the country of export,Belgian government officials will attempt to determine the source of such stones.

World Diamond Council. In July 2000, during the World Diamond Congress in Antwerp, Belgium, the two largest international diamond tradeorganizations, the World Federation of Diamond Bourses (WFDB) and the International DiamondManufacturers Association (IDMA), jointly issued a resolution calling for:

A uniform, global export certification system, underpinned by national legislation in participating countries, establishing a range of export control mechanisms aimed atensuring the legitimate origin of internationally traded diamonds. Such legislation would require asystem of seals and registration for the export of diamond parcels, controlled and maintained bynational, internationally accredited export agencies; criminal penalties for illicit diamond trading;and a system for monitoring compliance with the system.

The mandatory establishment by diamond trade organizations of ethical codes of business practice aimed at ensuring transparency and adherence to legal requirements in diamondcommerce; and cooperation in monitoring compliance with such codes and germane trade law.

Acting under the Antwerp Resolution, which called for the creation of the World Diamond Council (WDC), the WFDB and IDMA chartered this organization. In September 2000 in Tel Aviv,Israel, the WDC held an inaugural policy planning meeting. According to testimony by Matthew A.Runci, President and Chief Executive Officer of the Jewelers of America, Inc., speaking on behalfof World Diamond Council before the House Committee on Ways and Means Subcommittee onTrade hearing on Trade in African Diamonds , September 13, 2000, (46) outlined a plan based ongovernment regulation of diamond trading, an international rough diamond import/exportcertification system, and industry-wide ethical codes of conduct and trade standards that prohibit thetrade in conflict diamonds.

The WDC called upon governments of diamond exporting and importing countries to enact legislation that would support the WDC's goals. Many elements contained in WDC policy proposalsare reflected in the recently negotiated Kimberley Process system. The WDC also attempted toinfluence the course of proposed legislation in Congress. In November 2000, the WDC reportedlyhired a law and lobbying firm, Akin, Gump, Strauss, Hauer & Feld, to draft model legislation onbehalf of the WDC. (47) The WDC has sincecontinued to be active in seeking to influence proposedcongressional legislation in Congress.

De Beers. As of March 27, 2000, under the trademark initials DTC (for the Diamond Trading Company Limited, the gem-quality diamond salesarm of the De Beers group of companies), De Beers guarantees that it does not purchase or sellconflict diamonds (see above). (48) DTC alsointroduced formal rules for its 125 "sight" holders, thetrade term for its wholesale rough diamond buyers, replacing a reported system of informal,unwritten criteria with which sight holders were previously required to comply. The systemreportedly includes provisions requiring that sight holders who are discovered to be purchasingdiamonds not guaranteed as being "conflict-free" lose their right to purchase from De Beers, whichreportedly controls a large proportion of the world rough diamond market. In 2000, a De Beersrepresentative reportedly stated that its efforts and those of the industry at large had caused anapproximate 30% price drop for conflict stones. (49)

Conflict Diamonds and the U.N. General Assembly

On December 12, 2000, the 55th Session of the U.N. General Assembly (UNGA) adopted a resolution titled "The role of diamonds in fueling conflict: breaking the link between the illicittransaction of rough diamonds and armed conflict as a contribution to prevention and settlement ofconflicts." (50) It was sponsored by 50 countries,including the United States. It called for measures toend the conflict diamond trade. The resolution recommended that a simple and workableinternational certification scheme for rough diamonds be created. Such a scheme, it stated, shouldbe transparent, consistent with international law, and based "primarily on national certificationschemes," that "meet internationally agreed minimum standards," and should not"impede...legitimate trade in diamonds or impose an undue burden on Governments or industry..."or compromise nations' sovereignty. UNGA also requested that Kimberley Process participantssubmit to the 56th UNGA session a report on progress made. Following receipt of the requestedreport, and a subsequent progress report, UNGA in March 2002 adopted a second resolution thatexpressed support for the Kimberley Process and placed the conflict diamonds issue on the agendafor the UNGA 57th session. (51) Observers expected a similar draft resolution, A/57/L.76, to be passedby the 57th UNGA session on April 11, 2003.

Kimberley Process

The Kimberley Process is an intergovernmental forum that was formed in order to create amechanism or process that would prevent trade in conflict diamonds. For over 2 years, throughconsensus-based negotiation, Process participants worked to create an import/export certificationsystem designed to govern the international trade in rough diamonds. These participants includedrepresentatives of the diamond industry and non-governmental organizations. A secondary objectiveof the Process is to help governments of diamond-producing countries to more effectively channeldiamond-related state revenue into national socio-economic development efforts by improving theirability to regulate diamond production and commerce and to collect taxes related to these activities.

The main product of the Process, the Kimberley Process Working Document, was finalized in November 2002 as the Kimberley Process Certification Scheme, by the signing of the InterlakenDeclaration. (52) Named after the Swiss town wherethe final meeting of the Kimberley Process washeld prior to implementation of the Scheme, the Declaration committed signatories, including theUnited States and 47 other participating governments, "to the simultaneous launch of theCertification Scheme beginning on 1 January 2003." (53) The Certification Scheme defines a diamondtrade control and tracking system based on the use of import/export certificates that establish thelegal origin of internationally traded rough diamonds. The purpose of the Scheme is to curtail tradein "conflict diamonds" and other illegally exported diamonds. In January 2003, the U.N. SecurityCouncil passed a resolution endorsing the Kimberley Process and the Interlaken Declaration. (54)

Background. First sponsored by South Africa, the Kimberley Process began as the Technical Forum on Diamonds, which met in May 2000 inKimberley, South Africa. Several technical and ministerial meetings followed in 2000. At a meetingin Pretoria, South Africa in September 2000, the forum considered the interim findings of itsTechnical Working Group. It determined that a practical, reliable, and cost effective technical systemfor physically identifying the origin of individual diamonds did not exist. As a result, itrecommended the establishment of an international export control regime, consisting of a system ofsealed, registered diamond export parcels accompanied by forgery-proof certificates of origin, to beissued by exporting state authorities.

Early proposals by Process participants suggested that the system might be overseen by a inter-governmental authority charged with monitoring and compliance, accreditation of nationalexport regimes, and standard-setting, and possibly could be organized under U.N. auspices. It wouldalso require the implementation of legal sanctions and penalties for violations of national-level legalexport controls. Participants noted a need for flexibility in any proposed system, especially vis-a-visalluvial diamond mining and small scale production and trading. It also recommended thatparticipating nations ensure that domestic diamond marketing and production operate on the basisof open market competition governed by a national system of transparency, disclosure and oversightof all diamond operations. Several early proposals, such as extensive Kimberley Process schemecompliance monitoring requirements and the creation of an inter-governmental authority wererejected by participants. Many key issues, such as the definition of "conflict diamond," remainedunsettled until the scheme was finalized. (55)

Kimberley-Plus. In 2001, the Process, dubbed the "expanded" Kimberley Process or "Kimberley-Plus," continued. At a meeting in Windhoek,Namibia, the initial technical and legal findings of the 2000 Kimberley meetings were reviewed anda 'roadmap' defining the future focus and schedule of the Process was produced, and a Task Forcewas created to coordinate and track the work and meetings of the Process. (56) These objectives werepursued throughout the year, with further meetings in Belgium, Russia, the United Kingdom,Angola, and Botswana. The findings and formal recommendations of the Kimberley-Plus Processwere presented in a report to the 56th Session of the U.N. General Assembly, which endorsed theKimberley process and requested that the Kimberley Process present to the General Assembly, aprogress report at the General Assembly's 57th session. (57) Further Kimberley Process meetings andnegotiations over the proposed Process scheme followed in 2002, culminating in the InterlakenDeclaration in November 2002.

Kimberley Process: Key Issues. The Kimberley Process brought together many competing commercial and political entities, and the negotiations thatproduced the Certification Scheme reflected their diverse interests and views. Key issues of debateduring the negotiations included:

The degree to which various elements of the scheme would be binding or voluntary on participating nations.

How to define "conflict diamond" for regulatory purposes.

How trade and production statistics, for use in"identifying any irregularities or anomalies which could indicate that conflict diamonds are entering the legitimate trade," wouldbe compiled, and how such statistics would be treated. According to non-governmental organizationsthat participated in the Kimberley Process, the Interlaken Declaration and the finalized scheme donot provide for an adequate "system of collation and dissemination" for production and tradestatistics. (58)

The degree to which monitoring of Process participants' compliance with the scheme would be necessary. Topics of debate included questions over what standards, if any, wouldbe used to assess compliance, and whether compliance monitoring would need be necessary, and ifso, whether it would be undertaken by an independent audit organization, by governmentsparticipating in the Process, or by industry actors. Non-governmental organizations involved inProcess consultations believe that the scheme adopted under the Interlaken Declaration does notprovide an adequate system for regular, independent monitoring of the diamond trade controlsystems of Interlaken signatory nations. They maintain that "the overall system remains open toabuse." (59)

The degree to which the scheme would comply with World Trade Organization rules and other relevant international trade law and agreements.

Whether a permanent administrative organization would need to be established to assist in the administration and implementation of the Scheme.

Implementation. Successful implementation of the KPCS, which officially began January 1, 2003, will require that individual signatory nationsenforce existing or prospective regulatory processes and legislation that comply with the Scheme,and that private actors involved in the trade comply with the scheme and national regulatoryframeworks. At the World Diamond Congress in October 2002, the International DiamondManufacturers Association (IDMA) and the World Federation of Diamond Bourses (WFDB) adopteda resolution that described an "Industry System of Self Regulation," that would comply withrequirements of the Kimberley Process.

The first post-implementation plenary session of the Kimberley Process is scheduled to convene in Johannesburg, South Africa, from April 28 to 30, 2003. Key issues likely to be the subject offurther negotiation or debate include:

Whether, and in what manner, if at all, the Kimberley Process would need to establish an independent monitoring system to ensure that participating states are living up to theircommitments and whether the whole Process is transparent and effective.

Whether there could, or should, be a system or basis for deciding on whether countries wishing to join the Kimberley Process actually qualify to do so. One idea is to establisha "credentialing Committee" within the Process, even though it is presently open to all states thatmeet certain minimal qualifications. Some observers fear that certain applicant states might onlyimplement in a nominal fashion the basic requirements required of participants. Such states might,meanwhile, engage in prohibited practices, or simply lack the resources to implement in practice therequired processes that they have committed to establishing.

How implementation of the Process as a whole will work in practice, and how, and to what extent, the national laws and authorities of participating countries are inter-operable andcompatible.

How and if a uniform system of statistical reporting of rough diamond import and export figures might be established, and how such statistics will be used anddistributed.

How, if, and in what fashion technical assistance might be provided to states lacking the organizational, financial, or other resources to meet the requirements of the KimberleyProcess.

U.S. Policy

Executive Branch

Executive branch efforts to end trade in conflict diamonds commenced during the Clinton Administration. Its efforts centered on the creation of a multi-lateral diamond trade regime backedby international sanctions aimed at curtailing such commerce. Clinton Administration officialsproposed a regime based on formal working partnerships between legitimate diamond producingstates; those that import, trade, and consume diamonds; the international diamond industry; and arange of non-governmental organizations. The Clinton Administration also sought to ensure that theindustries of legitimate diamond producing African democratic states, particularly Namibia,Botswana, and South Africa, would not be harmed by efforts to curtail the trade in conflictdiamonds. Many of the Clinton Administration's policy goals were encompassed by the policymaking meeting that later became known as the Kimberly Process, which increasingly became a keyfocal point of U.S. efforts to combat the conflict diamonds trade.

International and Multilateral Policy. Both prior to and after the formal establishment of the Kimberly Process, the Clinton Administration sponsoredconferences focusing on the war economies of conflict diamond-producing states, and held unilateralpolicy dialogues with these and non-conflict producing states, such as Botswana. It also consultedwith members of the American diamond industry. The Clinton Administration used U.S.membership on the U.N. Security Council to push for international sanctions banning the illicittrading of diamonds from Angola and Sierra Leone, and for the appointment of panels of experts tomonitor compliance with these sanctions. The Security Council also appointed a panel of experts toexamine the illicit exploitation of natural resources in the Congo. The Clinton Administration tookunilateral actions to isolate and penalize governments that abet the trade in conflict diamonds orviolate related U.N. resolutions. These included a October 10, 2000 presidential proclamationdenying entry into the United States of persons who assist or profit from the armed activities of theRevolutionary United Front (RUF) rebels fighting the government of Sierra Leone. The restrictionsapplied to President Charles Taylor, senior members of the Liberian government, their supporters,and their families, and represented an explicit sanction against the Liberian government for its failureto end its trafficking in arms and illicit diamonds with the RUF, thus fueling the Sierra Leoneanconflict.

The Clinton Administration also participated in multi-lateral diplomatic and policy-focused coordination initiatives, both at the inter-governmental level, and in forums involving participationfrom governments of producing and consuming nations, NGOs, and the international diamondindustry. One result of government-to-government dialogue was a major policy statement in July2000 by the Group of Eight (G8) on Illicit Trade in Diamonds. (60)

U.S. efforts to encourage the July2000 G8 joint statement were preceded by Secretary of State Madeleine Albright's December 1999G8 Berlin Ministerial presentation, in which she highlighted the connection between arms anddiamond trading.

On January 10, 2001, the White House Office of Science and Technology Assessment, in conjunction with the National Security Council, the State Department, the National ScienceFoundation, and the Treasury Department, held a White House Diamond Conference entitled Technologies for Identification and Certification . Nearly one hundred and fifty policy makers,scientists, engineers, and representatives of the world diamond industry and NGOs participated inthe forum. They assessed the technical methods of determining the origin of rough diamonds;technologies to support an origin certification regime; and associated policy issues.

Africa-Focused and Bilateral Policy. In addition to its multi-lateral efforts, the Clinton Administration encouraged diamond marketing reform andthe development of regulatory capacity in African diamond producing countries through unilateraldialogue and joint U.S.-African policy planning exercises. These efforts sought to assist Africanstates to create sound legal and administrative mechanisms in order to better regulate their domesticdiamond industries and to integrate these mechanisms with similar regulatory regimes in consumingand importing countries. The Office of Transition Initiatives of the Agency for InternationalDevelopment provided technical assistance to Sierra Leone, in partnership with other donorgovernments and industry officials, to develop an effective certificate of origin export system inSierra Leone. It also encouraged increased transparency, competition, and participation-broadeningreforms based on free market principles within Sierra Leone's domestic diamond industry.

Criticisms of Clinton Administration Policy. Those who criticized Clinton Administration policy on conflict diamonds generally charged that ithad been too slow to implement measures to curtail the conflict diamond trade, which many criticssaw as a pressing and immediate problem. In a statement before the House International RelationsCommittee Subcommittee on Africa during a May 9, 2000 hearing entitled Africa's Diamonds:Precious, Perilous Too? , Representative Wolf stated that "[w]hile the West lets the problem ofconflict diamonds fester, conditions where this illicit trade occurs, continue to worsen. ... I havewritten to the Administration several times about the problems in Sierra Leone and about the issueof conflict diamonds. ... To date, the Administration has done little or nothing on any of theserecommendations ..." (61) During a September 13,2000 hearing of the Trade Subcommittee of theHouse Ways and Means Committee entitled Trade in African Diamonds , several Members calledfor more active Administration engagement to curtail the trade in conflict diamonds. RepresentativeHall stated that "there is apparently not the sustained commitment from senior [Clinton]Administration officials [that] this issue merits." (62) At the same hearing, Representative CynthiaMcKinney stated that the United States "must show leadership and act more swiftly against all thecountries mentioned in the Fowler Report ." (63) The tone of critics' statements generally became moremuted as the Kimberley Process progressed, and as representatives of diamond industry trade groups,human rights and natural resource-focused activists, and interested congressional offices focusedtheir attention on crafting mutually acceptable legislation to end the conflict diamonds trade.

Clinton Administration Response. Clinton Administration officials responded to their critics by maintaining that they had actively worked tocurtail the conflict diamond trade, but also maintained that international consensus on how to haltthe trade in conflict diamonds -- which it saw as a prerequisite for successful policy making -- hadnot emerged. Testifying before the House Ways and Means Subcommittee on Trade on September13, 2000, William Wood, Principal Deputy Assistant Secretary of State for InternationalOrganization Affairs, cited Clinton Administration U.S. participation in the Kimberley Process andother policy forums, such as the G8. He noted that since 1998 the Clinton Administration hadsupported U.N. sanctions to prevent the trade in conflict diamonds, and described U.S. efforts toassist Sierra Leone and Angola to improve their diamond export certification systems. He welcomedlegislation expressing a sense of the Congress in support of administration efforts to curtail theconflict diamond trade, but cautioned against legislation that would mandate specific policies which,he stated, might not conform with the regulatory regime that was being produced through theKimberley Process. Clinton Administration officials also highlighted their support for Resolution56 of the 55th Session of the U.N. General Assembly. (64)

Bush Administration Policy on Conflict Diamonds. The Bush Administration has pursued policies to stem the flow ofconflict diamonds that are broadly similar to those of the Clinton Administration, and hasparticipated in the Kimberley Process. On January 25, 2001, in a statement to the U.N. SecurityCouncil during a review of the Panel of Experts Report on Sierra Leone Diamonds and Arms, ActingU.S. Representative to the U.N., Ambassador James B. Cunningham, stated that:

Controlling the flow of conflict diamonds and illicit arms is essential to end the fighting and destabilization in Sierra Leone and its neighbors. We areintent on ending the illicit trade in arms-for-diamonds that has caused so much devastation andhuman suffering in Sierra Leone and throughout West Africa. We welcome the upcoming visit ofECOWAS ministers. We will work hard with Council Members, the UN and countries in the regionto bring panel recommendations into being and to deal firmly with illegal trade and with sanctionsviolators (65)

The Bush Administration has supported U.N. Security Council resolutions that, among other measures, have prohibited the import of all rough diamonds from or through Liberia. In addition toU.N.-focused efforts, an Administration inter-agency group has reportedly met periodically tocoordinate the development of U.S. policy on conflict diamonds. In testimony delivered duringhearings before the House Committee on Ways and Means Subcommittee on Trade, in October2001, and before the Senate Governmental Affairs Committee Subcommittee on Oversight ofGovernment Management, Restructuring, and the District of Columbia, on February 13, 2002, BushAdministration officials described Bush Administration policy approaches to controlling conflictdiamonds. Administration witnesses at these two hearings expressed the Bush Administration'scommitment to working with the Congress to craft a legislative response to help end the conflictdiamond trade, as did U.S. Trade Representative Robert B. Zoellick in testimony before the SenateCommittee On Finance on February 6, 2002. (66)

On November 5, 2002, the Bush Administration signed the Interlaken Declaration. In doing so, the Administration agreed that the United States would abide by and implement the KimberleyProcess Certification Scheme. Administration officials are now initiating a consultation process withrelevant congressional committees in support of that goal.

Congressional Role

Members of the 107th Congress showed interest in ending the conflict diamond trade, as had some in the 106th Congress. Members' interest centered on the reported link between diamonds,human rights abuses, and threats to peace and security in affected regions and -- increasingly -- onpotential threats that the trade may pose to U.S. national security interests, especially in relation tothe possible role of diamonds in terrorist financing. Congressional policy makers' legislativeinitiatives generally sought to curtail the ability of rebel groups fighting established governments tofund their armed activities through diamond export sales. Allegations that diamonds may play a rolein financing of international terrorist groups have also drawn congressional attention. Severalcongressional committees have held hearings that have assessed the reported connection betweendiamonds and financing of terrorist groups.

Several hearings in both the House and Senate have directly addressed the conflict diamond trade. These hearings include:

Africa's Diamonds: Precious, Perilous Too? , hearing held before the House Committee on International Relations, Subcommittee on Africa on May 9,2000.

Trade in African Diamonds , hearing held before the House Ways and Means Committee, Trade Subcommittee on September 13, 2000.

Conflict Diamonds , hearing held before the House Committee on Ways and Means, Subcommittee on Trade on October 10, 2001.

Illicit Diamonds, Conflict and Terrorism: The Role of U.S. Agencies in Fighting the Conflict Diamond Trade , hearing held before the Senate Committee on GovernmentalAffairs, Subcommittee on Oversight of Government Management, Restructuring and the District ofColumbia on February 13, 2002.

Conflict diamonds have also been addressed in the context of hearings on U.S. policy on Sierra Leone, Angola, the Democratic Republic of the Congo, and with regard to U.N. activities in Africaand to terrorism financing. During a September 19, 2002 hearing on terrorist financing andimplementation of the USA PATRIOT Act before the House Committee on Financial Services, forinstance, Robert Mueller, Director of the Federal Bureau of Investigation, called for legislation thatwould allow for the pre-trial freezing of fungible assets linked to alleged criminal offense, includingdiamonds, gold and other precious metals, "without requiring strict tracing to the offense." (67)

In addition to addressing human rights and conflict-related concerns, conflict diamond hearings n the 106th and 107th Congresses highlighted congressional interest in ensuring thatproposals toregulate international trade in diamonds and any U.S. legislation to implement such proposals beconsistent with relevant World Trade Organization trade rules. Hearing witnesses called forlegislative solutions that would not penalize legitimate producers of diamonds, such as Botswanaand South Africa. Some witnesses expressed concern that a failure to enact legislation to curtail theconflict diamond trade and to introduce methods of separating legitimate diamonds from illicitdiamonds might lead to a consumer-driven decrease in market demand for all diamonds, thusdamaging the revenue base of legitimate diamond producing nations. In the October 2001 hearingbefore the Subcommittee on Trade of the House Committee on Ways and Means, industry and non-governmentalrepresentatives described growing consensus between their respective interest groupson the need to finalize the Kimberley Process.

Legislation: 107th Congress. As in the 106thCongress, several conflict diamond-related bills were introduced in the 107th Congress. Theseincluded H.R. 918 (Hall); H.R. 2500 (Wolf); H.R. 2722 (Houghton); H.R. 5410 (Kolbe); H.Con.Res. 410 (Hall); S. 787 (Gregg); S. 1084 (Durbin); S. 1215 (Hollings); and S. 2027 (Durbin). Among these bills, H.R. 2506 (Kolbe) [ P.L. 107-115 ] was the only onein which diamond-related provisions were included in the final version of legislation signed into law.It prohibited certain OPIC and Ex-Im Bank diamond-related projects in countries not implementinga system of rough diamond export and import controls, as defined in the Act. It also prohibited theuse of funds appropriated by the Act to assist countries that the Secretary of State determines,according to criteria outlined in the Act, to have actively destabilized the democratically electedgovernment of Sierra Leone or aided or abetted illicit trade in Sierra Leonean diamonds.

108th Congress. The 108th Congress, like the pasttwo Congresses, has demonstrated continuing interest in ending the conflict diamond trade.

H.J.Res. 2. Several conflict diamond-related provisions were included in H.J.Res. 2 , the ConsolidatedAppropriations Resolution, 2003 ( P.L. 108-7 ). These include Section 570, which imposes restrictionson assistance to governments destabilizing Sierra Leone, and Section 583, which imposes conflictdiamond-related restrictions on the use of Overseas Private Investment Corporation andExport-Import Bank funding allocations. Section 583 prohibits the use of such funds in connectionwith any project involving the mining, polishing or other processing, or sale of diamonds in acountry that fails to implement the Kimberley Process recommendations, obligations orrequirements, or fails to undertake other measures to effectively prevent and eliminate trade inconflict diamonds. The Resolution also recommended that "$2,000,000 should be made availablefor assistance for countries to implement and enforce the Kimberley Process ImplementationScheme" from allocated Economic Support funds.

The committee of conference managers' Joint Explanatory Statement for H.J.Res. 2 (see conference report, H.Rept. 108-10 ) also contains two provisions related to conflict diamonds.First, conferees stated their expectation that of funds provided to the Council of American OverseasResearch Centers, "necessary funds" would be granted for research to develop a diamondfingerprinting technology to facilitate monitoring of the international trade in conflict diamonds.Second, the Statement, reflecting the language of the Joint Resolution, as passed, recommended the$2,000,000 technical assistance, and noted that the Senate amendment to H.J.Res. 2 would have provided $3,500,000 for such a purpose, but that the House bill did not address thismatter. They also stated their support for the Kimberley Process and urged the diamond industry andnon-governmental organizations to help implement the certification scheme with financial assistanceand expertise.

U.S. Kimberley Process Scheme Implementation Legislation. In early January 2003, Representative Thomas, chairman of the HouseWays and Means Committee, announced that he would seek "to enact legislation as soon as possiblethat meets the Kimberley Process goals, is administrable, and complies with our World TradeOrganization (WTO) obligations." (68) SenatorGrassley also announced his intention to sponsorKimberley Process implementing legislation. (69)

Representative Thomas later tied the introduction of such legislation to receipt of an understanding from the European Union (EU) that it would not oppose a WTO waiver for theKimberley Process. According to Inside U.S. Trade , EU policy makers did not see a need for a WTOwaiver for the Kimberley Process, a position that reflected a "broad interpretation of which traderestrictions require a waiver from WTO obligations." (70) An Inside U.S. Trade source postulated thatif a broad interpretation were upheld "the EU would be free to invoke certain trade restrictions ofits own without first getting a waiver, which has become increasingly difficult." (71) Pendingindications from the EU that it would not oppose U.S. Kimberley Process legislation, RepresentativeThomas stated that he would not move U.S. legislation intended to bring the United States intocompliance with a ruling by the WTO on certain provisions of U.S. export tax laws relating to U.S.Foreign Sales Corporation (FSC) export tax benefits and related extraterritorial income replacementprovisions. (72) The concerns raised byRepresentative Thomas appear to have been resolved by theissuance of a February 26, 2003 WTO waiver for the Kimberley Process (see below), followingwhich he again stated his intention to introduce supporting legislation. (73)

In early February 2003, the Steering Committee of the Campaign to Eliminate Conflict Diamonds circulated on Capitol Hill a memorandum, entitled "Draft Proposals for DiamondLegislation for the 108th Congress" that suggests a range of policy issues that the group maintainsshould be incorporated into U.S. Kimberley implementing legislation. The Campaign is a coalitionof non-profit groups that have advocated strong regulation of the trade in conflict diamonds and haveparticipated in the Kimberley Process. (74)

H.R. 1415 and H.R. 1584. To prevent conflict diamonds from entering or exiting the United States, and to provide authority toimplement the Kimberley Process in this country, Representative Houghton introduced two bills, H.R. 1415 , on March 25, 2003, and H.R. 1584 , on April 3, 2003. Both billswere entitled the Clean Diamond Trade Act and were broadly similar, but differed on certain points,primarily relating to provisions specifying which agencies would have the duty and authority toadminister the law, if passed.

Among other provisions, both bills would have required the President to prohibit the import or export to or from the United States of "any rough diamond, from whatever source, that has not beencontrolled through the Kimberley Process Certification Scheme." Both would have allowed a waiverof such a prohibition for up to a year if the President determines and reports to Congress that a roughdiamond exporting or importing country is taking effective steps to implement the KimberleyProcess Certification Scheme or the President determines that such a waiver is in the nationalinterests of the United States, and reports such a determination and the reasons for it to Congress.Both bills also included a range of enforcement provisions and policy recommendations, some in"sense of Congress" language, as well as reporting requirements.

H.R. 1584 , as introduced, differed from H.R. 1415 primarily in that it specified additional reporting requirements and references the U.S. Trade Representative in astatement of policy. It also authorized the President to direct the Bureau of Customs and BorderSecurity, among other potential agencies, to assist countries seeking to export rough diamonds to theUnited States by providing them with technical assistance related to compliance with U.S. tradelaws.

On April 8, 2003, an amended version of H.R. 1584 was passed by the House. Key amendments to the bill included changes to the specification of appropriate committees ofjurisdiction ( viz. Section 3 of the bill) and to related reporting requirements. A statement of policyremoved reference to particular agencies and instead expressed support for "the policy that thePresident shall take"; similarly, another provision on potential technical assistance to third countriesseeking to implement the Scheme removed reference to the Bureau of Customs and Border Security.Expeditious Senate consideration of the amended bill was expected by some observers.

On April 9, 2003, H.R. 1584 , as amended, was received in the Senate. During Senate consideration of the measure on April 10, Senator Hatch proposed a substitute amendmentto H.R. 1584 , S.Amdt. 529 , on behalf of Senator Grassley. The Senate thenby unanimous consent passed S.Amdt. 529 , which reflected the language of S. 760 , as reported on April 9, 2003 by Senator Grassley (see below), and the measurewas sent to the House. The two chambers' versions of H.R. 1584 , which were largelysimilar, differed with regard to the wording of a shared provision, Section 11, that deals with theestablishment of a proposed Kimberley Process Implementation Coordinating Committee. On April11, 2003, Representative Thomas, speaking in favor of the bill, asked unanimous consent that theHouse agree to the Senate amendment, which was agreed to without objection. The enrolled bill wassigned into law by President Bush on April 25, 2003, and became P.L. 108-19 .

When President Bush signed H.R. 1584 into law, he did so after referring to several significant caveats relating to the manner in which he stated that he will construe the dutiesthat the law gives discretion to the president to carry out. Some may view these caveats as lendinga novel interpretation to the effective date on which the law is to take effect, and the manner in whichit is to be implemented. President Bush stated that:

Although under this Act I have discretion to issue regulations consistent with future changes to the KPCS, under the Constitution, the President cannotbe bound to accept or follow changes that might be made to the KPCS at some future date absentsubsequent legislation. I will construe this Act accordingly. [...] If section 15 imposed a mandatoryduty on the President to certify to the Congress whether either of the two specified events hasoccurred and whether either remains in effect, a serious question would exist as to whether section15 unconstitutionally delegated legislative power to international bodies. In order to avoid thisconstitutional question, I will construe the certification process set forth in section 15 as conferringbroad discretion on the President. Specifically, I will construe section 15 as giving the Presidentbroad discretion whether to certify to the Congress that an applicable waiver or decision is in effect.Similarly, I will construe section 15 as imposing no obligation on the President to withdraw anexisting certification in response to any particular event. Rather, I will construe section 15 as givingthe President the discretion to determine when a certification that an applicable waiver or decisionis no longer in effect is warranted. (75)

S. 760. On April 1, 2003, Senator Grassley introduced S. 760 , entitled the Clean Diamond Trade Act. The bill was referred to theCommittee on Finance, which on April 2 ordered it reported out favorably with an amendment( S.Rept. 108-36 ) offered by Senator Baucus. On April 9, 2003, S. 760 was reported bySenator Grassley with amendments (see S.Rept. 108-36 ) and placed on Senate Legislative Calendarunder General Orders, Calendar No. 62. S. 760 appears to be a companion bill to H.R. 1415 and H.R. 1584 ; most of its language is identical to that of theHouse bills, particularly H.R. 1584 , though some of its provisions are distinct anddifferent. In particular, it specifically requires the Secretary of State to publish in the FederalRegister certain information pertaining to countries and foreign authorities responsible for regulatingtrade in rough diamonds. The version of the bill passed out of the Finance Committee also amendedSection 10 (c) of the bill as introduced, which reflected the language in H.R. 1584 , byrequiring the establishment by the President of a U.S. Kimberley Process [interagency] CoordinatingCommittee and by specifying the officials and agencies that would comprise that panel. The versionof H.R. 1584 enacted into law (see discussion above) is virtually identical to S. 760 .

H.Con.Res. 239. On June 26, 2003, following the enactment of P.L. 108-19 , Representative Watson introduced H.Con.Res. 239 , the Conflict Diamonds Resolution , for herself, Representative Lantos, and RepresentativePayne. H.Con.Res. 239 proposes, in "sense of the Congress" language, that theinternational diamond industry, "as represented by the World Diamond Council," should provide"transition development assistance" to communities and specific groups in Sierra Leone, Angola,and the Democratic Republic of Congo. Specific groups that it proposes be assisted include ex-combatants, femalevictims of war-related sexual and gender-based violence, war-injured amputees,and African diamond industry workers. It proposes that an international diamond industry fund beset up to finance initiatives in these countries to assist these groups, as well as programs in supportof HIV/AIDS programs, economic development, social service provision, and political reconciliationprocesses in these countries. It also lays out a number of steps that the international diamondindustry should be encouraged to continue to take in support of the development and implementationof the Kimberley Process. These include the development and implementation of "a comprehensive,reliable, standardized, and auditable chain of warranty system to support the Kimberley Process."

Discussion. In contrast to some bills introduced in the 107th Congress, H.R. 1415 , H.R. 1584 , and S. 760 didnot attempt to regulate trade in polished diamond or jewelry provisions, primarily because these billsappear to be intended solely to provide authority to implement the Kimberley Process CertificationScheme (KPCS), which pertains only to rough diamonds.

Some groups who have sought a strict and more comprehensive regulation of the international diamond trade have criticized the KPCS for not including measures to control diamonds that havebeen rudimentarily processed, polished, or made into jewelry. They see the omission of suchrequirements in the KPCS as a "loophole," and assert that unscrupulous diamond traders might skirtthe spirit of the KPCS by:

Superficially altering a diamond to make it meet minimal standards qualifying it as polished or otherwise processed, and thus not subject to KPCS regulations or;

Setting a diamond in a temporary mounting, for purposes of export or import,thus qualifying it as jewelry.

To prevent the potential use of such alleged loopholes, these policy advocates generally call for all rough and loose polished diamonds, as well as mounted diamonds (i.e., diamond jewelry), to beaccompanied by a certificate of origin, in order to offer a consumers a more robust guarantee thata diamond being purchased is legitimate and not of conflict-related origin. (76)

Some in the diamond trade have generally argued against a more extensive certificate regime. They assert that the financial, administrative, and logistical costs of such an approach wouldoutweigh the benefits and might negate what are often described as marginal profit margins in thediamond industry generally. Some have also argued that the imposition of such costs might alsosharply cut revenues earned by developing nations, such as Botswana, Namibia, and South Africa,which rely significantly on diamonds to fund socio-economic development. Proponents of moreextensive certification approaches have generally maintained that the kinds of administrative andother overhead costs cited by the diamond industry are minimal and marginal when weighed againstthe social costs -- lost human lives, mutilated limbs, emotional damage, and social disintegration-- of not enacting strong laws to end the conflict diamonds trade.

Issues for Congress

Kimberley Process: U.S. Implementation. The Administration signified its intent to implement the KPCS by signing on to the InterlakenDeclaration (see section on Kimberley Process). President Bush's approval of the Clean DiamondTrade Act enacted that stated intention into law. The 108th and future Congresses are likely to closelyevaluate the relative success of U.S. implementation of the KPCS; the reporting requirements that H.R. 1584 imposes on the executive branch will likely play an important role in suchoversight activities. Both the legislative and executive branch policymakers are also likely toperiodically assess the efficacy of the KPCS in general.

WTO. A second area of potential future congressional concern is the possibility that the KPCS might be found to conflict with World TradeOrganization rules on trade. (77) That possibility haddrawn substantial attention during the negotiationprocess that produced the KPCS, and such debate had persisted after the signing of the InterlakenDeclaration.

In late February 2003, the Council for Trade in Goods of the World Trade Organization issued a draft waiver decision for the Kimberley Process. The issuance of the draft waiver appears to haveprovided adequate safeguards allowing for the establishment of the KPCS in the view of some policymakers who may have worried that the KPCS would conflict with WTO rules. Following the releaseof the waiver, Representative Thomas stated his intention to introduce U.S. KPCS implementationlegislation (see above). (78)

The waiver that was issued, however, contained certain caveats that could, in theory, provide the basis for a possible future challenge to the legitimacy of the KPCS under WTO rules. The draftwaiver gave WTO members the right to bring before the WTO General Council for review potentialfuture concerns related to "any benefit accruing ... under the GATT 1994" that is "impaired unduly,"as well as concerns related to a member's potential allegation that the KPCS was being "appliedinconsistently." The waiver also noted that its issuance would "not preclude the right of affectedMembers to have recourse to Articles XXII and XXIII of the GATT 1994."