Canada is a country with precious metals and gems industry, which is similar to Russian in its structure. In particular, this country has prolific diamond mines and lapidary workshops. More than one half of its raw products are exported to the world market. At the same time, Canadian processing industries consume less than 50% of domestic diamonds and are primarily oriented to the home market.
“Diamond legislation” of Canada
The federal legislation of Canada mentions diamonds in 5 federal laws:
1. Weights and Measures Act.
2. Proceeds of Crime (Money Laundering) and Terrorist Financing.
3. Export and Import of Rough Diamonds Act.
4. Competition Act.
5. Canada Mining Regulations.
Besides, in 1994 the Canadian business community adopted the Diamond Code of Conduct with amendments introduced in 2006.
1. Weights and Measures Act
The law stipulates to weight gems to an accuracy of 200 mg and to use carat as a unit of measurement.
In case of violation, this law makes provisions for the following punishments:
- in case of plenary confession by a defendant of his/her own guilt and “sincere repentance” there may be ordered a fine of 1 000 Canadian dollars or confinement for 6 months or both
- in case of a guilty verdict the court may order a fine of up to 5 000 Canadian dollars or confinement for up to 2 years or both;
- for opposing crime investigation and/or law enforcement – a fine of up to 1 000 Canadian dollars.
The law also rests personal responsibility on corporate chief executive officers, directors, managers or agents (representatives) notwithstanding whether the corporation (firm, company, society or organization) was found guilty or not.
The law is enforced by the Measurement Canada Agency.(http://strategis.ic.gc.ca/epic/site/mc-mc.nsf/en/h_lm02101e.html).
2. Proceeds of Crime (Money Laundering) and Terrorist Financing
This law is primarily dealing with financial instruments and casinos.
Jewellery is far from being mentioned in the first lines of the valuable property list to be arrested by court decision such as cars, yachts and dwellings. Nevertheless, there are quite strict punishments envisaged within the frames of this law for crimes connected with jewellery:
- in case of plenary confession by a defendant of his/her own guilt and “sincere repentance” there may be ordered a fine of up to 50 000 Canadian dollars or confinement for 6 months or both;
- in case of a guilty verdict the court may order a fine of up to 50 000 Canadian dollars or confinement for up to 5 years or both;
- for opposing crime investigation or law enforcement – confinement for up to 2 years.
3. Export and Import of Rough Diamonds Act
Of course, this law is of interest for Russia trying to modernize its own Law on precious metals and gems (see full text at http://laws.justice.gc.ca/en/ShowFullDoc/cs/E-18.5///en). Here are its main provisions:
). Here are its main provisions:- the Natural Resources Ministry enforces the law and bears responsibility in connection with it;
- to export diamonds one must have a Canadian Certificate;
- the ministry may cancel the Certificate in case of false information submitted;
- any exporter must inform the ministry of export operations;
- if an imported diamond container is found open the ministry has the right to send it back.
In the section of the law, dealing with inspection there are mentioned 7 possibilities for examinations and checks as well as 3 cases for use of computer and copiers.
If there are suspicions of possible violations of Canadian legislation, diamonds may be detained, arrested and confiscated.
- Detention is possible for not more that 180 days after which the commodities are to be released and returned to their proprietor.
- If diamonds are arrested but not confiscated, their proprietor may file a lawsuit to compensate for damage.
- Confiscation is possible only if there is an appropriate court order.
Confiscated diamonds are to be sold at a public auction announced by Canada Gazette and money is to be credited to the state budget. If there are no buyers, the ministry must destroy the diamonds.
The documents (copies of certificates, contracts, etc.) for each batch of exported or imported diamonds shall be kept in the course of 3 years.
There are strict punishments envisaged for crimes within the frames of this law:
- in case of plenary confession of one’s guilt and “sincere repentance” there may be ordered a fine of up to 25 000 Canadian dollars or confinement for 12 months or both;
- in case of a guilty verdict the court at its own discretion may order a fine or confinement for 10 years or both;
- for opposing crime investigation or law enforcement – confinement for up to 3 years.
4. Competition Act
This law regulates diamond mining, diamond cutting and jewellery manufacturing. The law describes the procedure of awarding the “Made in Canada” trademark. For example, the diamonds extracted in Canadian mines have the right to bear the “Made in Canada” trademark. However, foreign diamonds cut in Canada have no right for this trademark. The same regulations are introduced for the “Canadian diamond” trademark.
5. Canadian Mining Regulations
This Law applies to diamond mining regions. Section 58-69 describe the functions of the Government Diamond Valuator. It should be explained that in the Law this person is named as the Mining Royalty Valuer.
In 1998 the Canadian Government decided that it needed a conscientious and independent team of diamond valuers to supervise the current diamond mining. In particular, this was backed up by the necessity to accrue EXACT taxes and royalties. Since at that time Canada did not have its own diamond experts, they held an international bidding in 1998 won by the DICAN joint venture, one of the 8 (Martyn Marriott, David Elliott plus some firms from Antwerp) participants. In DICAN there were two partners: 51% of its stock belonged to Aboriginal Diamonds Group (ADG), a company of Canadian native population, and 49% to WWW International Diamond Consultants (founded by former employees of De Beers), a London-based company.
The Government Diamond Evaluator is responsible for establishing real price for diamonds extracted in Canadian mines (Ekati, Diavik, etc.) as well as for rendering other services. For this work, the joint venture receives certain royalties.
The contract is concluded by the Department of Indian and Northern Affairs (INAC). The usual pattern is a three-year contract with an option for 2 years. However, the contract with DICAN was being extended in the course of already 9 years.
Every month at Yellowknife, an administrative centre of the North-West territories of Canada, the Government Diamond Evaluator evaluates diamonds coming from ALL Canadian mines.
Besides, this person:
- evaluates diamond lots at diamond exchanges and in trade companies in Antwerp on government orders;
- evaluates rough diamond stocks at every mine at the end of financial year to certify their annual financial reporting;
- trains government personnel to sort out and evaluate diamonds;
- trains native population to facilitate finding jobs;
- provides analytic information on the diamond market to government agencies;
- briefs government agencies on current prices for rough diamonds and submits their price-list;
- accompanies government representatives in their business trips to diamond centers, including those in Russia;
- renders assistance to the government in accruing taxes;
- cooperates with the Canadian police and customs service in evaluation of confiscated diamonds;
- makes reports at diamond and mining conferences on behalf of the Canadian Government.
6. Canadian Diamond Code of Conduct
In 1994 Jewellers Vigilance Canada, Inc. (http://www.jewellersvigilance.ca/) together with Canadian Jewellers (http://www.canadianjewellers.com/) and Canadian Gemological Association worked out the Diamond Guidelines. By now they are reworked into the Canadian Diamond Code of Conduct.
) together with Canadian Jewellers () and Canadian Gemological Association worked out the Diamond Guidelines. By now they are reworked into the Canadian Diamond Code of Conduct.According to this document, identification of diamonds in Canada is performed according to the country of their origin. The document describes the rules for laser inscriptions and sets prices for identification of diamonds: $25+GST (Goods and Services Tax) for a jewellery piece containing 1 or 2 diamonds and $50+GST for a jewellery piece containing 3 or more diamonds.
A retail diamond jewellery seller is required to provide the following information to the buyer:
- the unique identification number of the diamond (for diamonds weighing more than 0.18 carats this number shall be inscribed by a laser);
- the certificate and invoice for the diamond bearing the gemologist’s name, the seller’s name and address as well as the date of buying.
The Canadian Diamond Code Committee is responsible for implementation of these rules. The committee is composed of representative of Canadian diamond mines, rough diamond sellers, Canadian diamond-cutters, diamond sellers, jewellery manufacturers, retail diamond jewellery sellers and representatives of consumer associations.
Canadian Jewellers Association is a consultant to the Government when new laws are being developed. Thus, from December 2003 they discuss the C-25 Draft Law to counteract terrorist activities by way of jewellery financing (Anti Money Laundering Requirements for the Jewellery Industry). Dealers in diamonds and diamond products are gathered into a separate financial group. In connection with this, there are envisaged three special measures:
1. Identification of clients (name, address, place of residence).
2. Accumulation of reports about diamond transactions in archives.
3. Reports about major cash transactions (exceeding $10,000).
Summary:
1. In Canada there is not a single SPECIAL government regulating agency supervising diamond circulation.
2. The Government Diamond Evaluator is chosen by way of an international competition; the government and the evaluator enter into a contract for 3-5 years.
3. A certain number of general and special laws are functioning within the frames of the judicial system meaning that government agencies may file a lawsuit in case of diamond transaction violations and the court will hear such a case in open proceedings.
4. Non-governmental organizations - Jewellers Vigilance Canada, Inc. together with the Association of Canadian Jewellers and Canadian Gemological Association - perform a certain number of inspecting functions.
Vladimir Teslenko
Special for Rough&Polished
