(thediamondloupe.com) - In the latest installment of the Diamond Intelligence Briefing (DIB), diamond industry analyst Chaim Even-Zohar presents a searing indictment of the rough diamond trade in the United States, "The world's most convenient and 'uncontrolled' rough transfer market", claiming that, "The main justification for the overwhelming bulk of the (U.S.) rough trade is pure transfer pricing*." This rough diamond 'stopover' in the U.S. also "endangers the integrity of the legitimate U.S. diamond trade - which is mainly polished and diamond jewelry." Furthermore, Even-Zohar claims that NGO watchdogs turn a blind eye to the United States in this regard, while the Kimberley Process (KP) administration is well aware of it - and has been for a long time - while U.S. governmental KP officials "seem to quietly condone it".
* To clarify, transfer pricing is "the biggest tax avoidance scheme of all", according to The Guardian's 2009 series "The Tax Gap": "The name of the game is to shift profits to low tax jurisdictions and avoid taxes in countries where corporations have substantial trading operations." This works in two ways when it comes to diamonds: 1) Assume $100,000 worth of rough diamonds are imported from an associated party overseas. The importer shifts $50,000 of the value to an offshore account, and re-exports the diamonds to a legitimate diamond manufacturing country for $50,000. Official U.S. figures presented in the DIB provide ample evidence of this gross undervaluation of rough diamond exports from 2003-2011. Such figures would only be justifiable if the U.S. was a significant diamond manufacturer, which it is not: 2) Assume $100,000 worth of rough diamonds are imported, representing the price paid to the source. Once inside a tax-free trade zone, these diamonds are revalued to match the market price, and re-exported for $150,000, making the importer/exporter a handsome profit. DIB demonstrated this 'overvaluation' process taking place in the U.S. in the years 2012-2015, but in this case, it was a matter of low-quality/low-price industrial diamonds somehow being "reborn" as gem-quality diamonds.
