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Partnerships, Transparency Offer the Solution for Synthetic Diamonds

May 12, 2014 4:38 AM   By Ya'akov Almor
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RAPAPORT... The following interview was conducted with Harry Levy, the president of the London Diamond Bourse, chairman of the International Diamond Council (IDC) and president of the Gemological Association of Great Britain (Gem-A), by veteran diamond industry consultant and spokesman Ya’akov Almor. 

Ever since gem-quality synthetic diamonds came into the market, Levy has been a powerful voice in the discussions about the need to recognize synthetic diamonds for what they are; why the diamond, gem and jewelry industry and trade should not fight them; and what terminology or nomenclature can be employed to name these stones other than synthetic diamonds.

Almor is IDC’s director of communications.


Almor (YA): Is the confusion -- and possibly panic -- about synthetic diamonds over, or are we still in a stage of denial when it comes to synthetic diamond s in the marketplace?

Levy (HL): There is still confusion and some denial, too, on a number of levels and in various sectors of the diamond and jewelry industry. It seems there are plenty of players in the polished diamond trade who still hope that synthetic diamonds are a passing phenomenon and that, as long as we do not talk about them, they will simply go away. Last year, the Israel Diamond Exchange (IDE) re-issued a directive that bans synthetic diamond from its trading floor, arguing that they may be confused with natural diamonds and mixed in or interchanged. In my 50 years of holding bourse membership, I have rarely known of stones being confused or changed. While the IDE has acknowledged that synthetic diamonds are a legitimate product, by banning these stones from their trading floor, they support the trade in natural diamonds, but at the same time hinder the trade in synthetic diamonds.

There is also still confusion and dispute over   what synthetic diamonds need to be called. A few months ago, The De Beers Group of Companies published a booklet, aimed at their sightholders, titled “Undisclosed Synthetics: what you need to know.” On the one hand, in the booklet the authors refer their readers to the nomenclature defined by CIBJO, the World Jewellery Confederation and the U.S.’ Federal Trade Commission (FTC). At the same time, however, they encouraged their readers not to use the term “synthetic diamond,” but only to use the descriptive adjective synthetic. As such the authors were in transgression of its own directives and advice, undermining “the integrity of the entire diamond supply chain, damaging both trade and consumer confidence in buying diamonds.” Of course, De Beers has since retracted the booklet, but I give this example because it illustrates the lack of resolve - and possibly understanding - what nomenclature is to be employed.

I’d like to give another example that illustrates the lack of consensus on -- or the acceptance of -- nomenclature. In April, a well-known trade press journalist, in a blog published on the website of Jewellery News Asia, wrote that “there’s no way around it, synthetic means fake,” and that he calls a synthetic diamond as such because he is “not ‘bound’ by any authoritative group.” Clearly, there is still a lot of work to be done.

YA:
This month, the congress of CIBJO, the World Jewellery Confederation and the Las Vegas conference of the Accredited Gemologists Association (AGA) will both have synthetic diamonds high on their discussion agendas and in mid-June the topic will also be discussed at the 36th World Diamond Congress in Antwerp. What will the point of departure be for a discussion on synthetic diamonds?

HL: We need to be frank and more resourceful. During the past months there have been several meetings in Antwerp and India, designed to prevent synthetic diamonds getting into the supply chain. In March, the World Federation of Diamond Bourses (WFDB) issued a six-page statement “the WFDB Charter on Disclosure of synthetic, treated natural and natural diamonds.” Among others, the charter recommends that we print statements on our invoices that all the goods sold are (guaranteed to be) natural and also untreated.

While this document was published in good faith, it also raises a lot of questions. For instance, I wonder how many undisclosed HPHT diamonds circulate in the supply chain. While I can fully trust my own supplier for his honesty, integrity, ethical standards, his knowledge of gemology is probably no greater than mine. So how would I know, and when?

A synthetic diamond will get into the supply chain when one person buys a synthetic diamond and knowingly sells it as a diamond without disclosure. Should this be discovered further down the supply chain, we are advocating to punish those people who show us a purchase invoice with the above statement, using it in their defense, i.e. that they bought the stone in good faith. This is not an excuse that would stand up in any court of law, anywhere in the world. It is hearsay evidence and the seller can be regarded as having acted without due diligence. Printing such a statement of disclosure solves very little as it is a positive statement which may later prove to be a lie. Therefore, without such a statement, the seller may be accused of ignorance, with it he will be probably be accused of fraud.


YA: What is the solution?

HL: The simple solution is to call diamonds natural diamonds. For years, the default position of the diamond trade has been that that a diamond is regarded as a natural diamond when the term is used without further qualification. However, this trade rule is not known among consumers.

But synthetic diamonds are also diamonds, the only difference being their origin, and this does not stop them from being called diamonds. I am not advocating that synthetic diamonds should be sold as diamond but they need disclosure, and this means that natural diamonds will be needing disclosure as well!

I think that we do not need to try and re-invent the wheel. Let’s look at how the colored gemstone trade has dealt -- and deals -- with synthetic gemstones and take a page out of their book. The colored gemstone industry has been coping with synthetic counterparts of their most important stones for a very long time, mostly because they are – contrary to synthetic diamonds – relatively easy to produce. A variety of synthetic rubies, sapphires, emeralds and a large group of other synthetic gemstones, have been around for more than a century and continue to be produced. Have these products killed the colored gemstone industry? Not really. Are they a problem? Sometimes. How do our colleagues in the colored gemstone business deal with them? They cope with it by getting educated and by insisting, by means of strict rules and regulations, that synthetic colored gemstones are disclosed properly and honestly when traded and sold. By the way, natural colored gemstones are more popular than ever before and their prices keep rising.

Also, let’s take a look at the pearl industry and trade. It is simply wrong to believe that cultured pearls have driven out natural pearls, or to conclude that a similar thing can or will happen to diamonds. Cultured pearls became popular because natural pearls became very rare and very hard to find. This came about because of overfishing of oysters and pollution from oil production in the Persian Gulf. Today natural pearls are rarely found, they fetch very high prices and usually can only be found in top market jewelry stores and at prestigious auctions. At present, there is a debate in the pearl business to drop the term cultured pearls -- as 99.9 percent of pearls traded are cultured pearls anyway – and call cultured pearls simply pearls and qualify the term for natural pearls and sell these as natural pearls.

Of course, there is no chance of a similar development happening to synthetic diamonds, as there are too many natural diamonds around and excellent prospects exist of finding many more through mining.

YA:
What is you recommendation to the industry leaders at these various gatherings?

HL: We need to try and reach agreement that our prime directive is to protect the trade in natural diamond and our industry leaders should produce arguments as to why natural stones are better than synthetic ones. One powerful argument is, of course, that natural diamonds are rare, can only be mined once and that each and every stone is unique due to its provenance and characteristics. Quartz is very abundant, hence it is cheap. The supply of synthetic diamonds is limitless! Natural diamonds have aesthetic, emotional and historic value, while synthetic diamonds have none of these.

To allay another fear often expressed in the market, we are not helping producers of synthetic diamonds to sell their products; we are protecting the trade in naturals by giving as much information as possible to consumers for them to make an informed choice. We will give the impression that synthetic diamonds are “better” than natural ones if we continue to hide them. Being transparent will help everyone, being invisible will help no one.

YA:
There are currently practical problems that need to be addressed such as the use of small, synthetic diamonds in jewelry. What are your views on this?

HL: You’re speaking of smaller stones, most often below 10 points. Here, positive detection will be difficult; the synthetic product will be better looking than the lower grade, natural stones and will be considerably cheaper when compared to similar looking natural stones. I envisage consumers will eventually demand some sort of guarantee and identification for larger stones, that they are in fact natural. The demand for such specific identification statements [concerning smaller diamonds] may very well outgrow the demand for grading reports of [larger] natural stones.

Up to this point in time, all the attempts of solutions advocated by the trade have looked downstream the distribution chain. Debates about terminology and how to disclose will probably go on for some years yet. But maybe we should look to the upper part of the supply chain for the solutions.

We must identify the synthetic diamond producers, not the cutters and distributors. We must identify those who produce the machines that make synthetic diamonds. I don’t know if we will get any resistance from them but it is essential we know who these people are and those who buy these machines. In the colored gemstone business, producers of synthetic gems are part and parcel of the community. They share their knowledge and inform their peers of what they do. We need to encourage the producers of synthetic diamonds to become part of our industry,  organize themselves as well. Only then, by becoming discussion partners, we can come to agreements with regard to all the above mentioned issues. Under no circumstances should they be allowed to remain underground. 





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