The Russian war against Ukraine has created numerous supply chain issues for jewelers around the world.
Among countries that are not observing sanctions, India, Turkey, and China are major diamond trading and jewelry production hubs. But jewelers in countries honoring the sanctions are now walking a tightrope, including asking a lot of questions about purchases from companies that continue to trade with Russia.
The Jewelers Vigilance Committee (JVC) has issued strong warnings to all jewelers to carefully monitor their supply chains and have compliance programs (like an anti-money laundering program or participation in a voluntary standards program) in place to protect them in the event that they are challenged by a regulatory authority regarding the source of their goods.
In the early days of the conflict, Alrosa, the leading producer of diamonds in the world and 33% owned by the Russian Federation, was sanctioned. Its CEO was sanctioned individually. These sanctions prevented Alrosa from participating in certain financial transactions, but continued to allow the sale of their diamonds. On Friday, Mar 11, 2022, President Biden announced a ban on the importation of certain Russian Federation products, including diamonds.
According to JVC, ”The ban on importation of diamonds from Russia is limited to the U.S. harmonized tariff codes 7102.31.00 and 7102.39.00, which are the tariff codes for “unworked or simply sawn, cleaved or bruted” diamonds, or what the trade generally refers to as “rough diamonds”. Under U.S. Customs regulations and interpretation based on the OFAC FAQs, rough diamonds from the Russian Federation which are cut and polished in a second country are “substantially transformed” by the cutting and polishing, becoming a product of that second country. Under this guidance, rough diamonds imported from Russia into a country that has not implemented sanctions or a ban and then cut and polished are currently legal to import into the U.S. as they will fall under a separate harmonized tariff code.”
A lot of attention is being paid to the issue of Russian diamonds and Russian gold at this time, including communications going out to consumers. It is important that jewelry businesses pay close attention to their supply chain management.
Even if sanctions are not tightened further, consumer backlash regarding Russian diamonds could hurt individual jewelry brands. This awareness alone is causing diamond trading companies to proceed with caution regarding their sourcing and selling activities. You can expect some disruptions in diamond supplies as all these changing details work themselves out.
You can read more about JVC’s most recent guidance and find links to important training/learning opportunities at this article in Southern Jewelry News: https://southernjewelrynews.com/latest-news/other-news/jewelers-vigilance-committee-releases-updated-guidance-on-russian-diamond-ban-and-sanctions/