Select Committee on European Scrutiny Fortieth Report


16. TRADE IN ILLICIT ROUGH DIAMONDS


(23743)
11764/02

Draft Council Regulation Implementing the Kimberley Process Certification Scheme for the International Trade in Rough Diamonds.


Legal base:Article 133 EC; qualified majority voting
Document originated:8 August 2002
Deposited in Parliament: 29 August 2002
Department:Foreign and Commonwealth Office
Basis of consideration: EM of 23 October 2002
Previous Committee Report: None
Discussed in Council: 5 November 2002
Committee's assessment:Politically important
Committee's decision:Cleared


Background

  16.1  The trade in illicit rough diamonds from rebel-held areas is thought to be fuelling conflict in parts of Africa and undermining UN Security Council sanctions. As a way of preventing this trade, more than 30 governments, the European Community, the diamond industry and representatives of civil society came together for what is known as the Kimberley Process, to establish minimum acceptable international standards for national certification schemes relating to trade in rough diamonds. The Kimberley Process, which is chaired by South Africa, had its origins in the decision of southern African countries to take action to stop the flow of "conflict" or "blood" diamonds to the markets and help protect the legitimate diamond industry. The UN endorsed the work of the Kimberley Process through General Assembly resolutions of December 2000 and March 2002.

  16.2  The centrepiece of the Kimberley Process is a global certification scheme for rough diamonds — the International Certification Scheme — which when launched will act as an export and import control regime. In his Explanatory Memorandum of 23 October 2002, the Minister for Europe (Mr Peter Hain) says

    "Producer countries will control the production and transport of rough diamonds from mine to first point of export. Shipments of rough diamonds will be sealed and a Kimberley Process certificate issued by government officials or other authorised personnel for each shipment. Countries will ensure that only rough diamonds accompanied by a Kimberley Process certificate will be imported, exported or re­exported.

    "The diamond industry will introduce a system of voluntary self­regulation to support government efforts. The main features of this self­regulation are a system of warranties to accompany each invoice, certifying that the goods in question are conflict free; and a separate section in the annual report of independent company auditors on rough diamond transactions. Governments will use the warranties when certifying diamonds for export or re­export. Importing countries will inspect the certificate at the time of import. Imports and exports of rough diamonds not accompanied by a certificate issued by a Kimberley Process participant will be prohibited."

  16.3  The main features of the International Certification Scheme were announced on 29 November 2001. Since then participants in the Kimberley Process have been focussing on ways of implementing the scheme nationally with a view to the schemes becoming fully operational by the start of 2003. An announcement about the launch of the schemes is expected to be made at the Kimberley Process ministerial meeting on 5 November.

The document

  16.4  The Council Regulation will implement the Kimberley Process certification scheme in the EC. The Minister says:

    "Essentially the Regulation provides for an export and import prohibition on rough diamonds into and out of the EC unless they are accompanied by a Kimberley Process Certificate. The Regulation also allows Member States to establish an implementing authority (to be known in the UK as the Government Diamond Office) to process the import and export of rough diamonds into and from that Member State."

The Government's view

  16.5  The Government welcomes the draft Regulation, although there are some points the Government is addressing in the relevant EU working groups. The Minister adds that Member States have already agreed most of the substantive changes to the draft that will allow for effective implementation of the certification scheme. The Minister says:

    "We have agreed changes to Articles 4 and 14 to the effect that the final Regulation will set out two methods for inspecting diamonds, either to physically inspect every package of rough diamonds or to use selective inspection based upon a risk­analysis system. The UK preference is to use existing Community Customs procedure i.e. inspections that take place on a selective basis, based upon risk­analysis and intelligence. We envisage in the UK that this would be underpinned by selective, no­notice inspections by the Government Diamond Office. This would allow for industry to self­regulate, on the basis of documentation presented to Customs and other relevant authorities as set out in the Regulation. We believe that this is the most effective and efficient way to implement the Kimberley Process, which is meant to be a 'light but effective' regime.

    "Another issue is that the provisions set out in the Regulation represent a ban on trade with non­participants, and this remains the subject of continuing debate within the Kimberley Process itself in respect to compatibility with WTO rules. The Commission and the British Government are content that existing exemptions under GATT (for actions undertaken for peace and security) plus the ease of entry into the Kimberley Process would provide sufficient defence against the minor chance of an objection being lodged. This is the view of the majority of Kimberley Process participants. However some participants such as Canada are intending to apply for a WTO waiver. WTO implications are also linked to the participation of Taiwan, a member of the WTO, and a trader of rough diamonds, but not a member of the Kimberley process at China's insistence."

Conclusion

  16.6  We welcome efforts to combat the trade in illicit rough diamonds and hope to see the certification scheme successfully launched on 1 January 2003. The potential for abuse of the certification scheme is obvious and in our view the schemes can function effectively only if participants provide good risk­analysis and intelligence.

  16.7  We are content to clear the document.



 
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