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New guidance reveals what will happen to businesses trading in rough diamonds in no-deal Brexit scenario

INDIA-ECONOMY-DIAMONDS

New guidance from the Government reveals what the jewellery industry professional working with rough diamonds can expect on day one of a no-deal Brexit scenario.

The international trade in rough diamonds is regulated by the Kimberley Process Certification Scheme (KPCS), which imposes extensive requirements on its members to enable them to certify shipments of rough diamonds as ‘conflict-free’ and prevent conflict diamonds from entering the legitimate trade.

At present, businesses in the UK can trade in rough diamonds within the EU and to participating KPCS countries. Currently, however, the EU represents the UK within the Kimberley Process (KP) and its Council (EC) Regulation No 2368/2002 implements the KP in the UK.

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How processes will change

If the UK leaves the EU on March 29 2019 without a deal, the UK will need to become an independent participant in the Kimberley Process immediately in order for businesses to continue trading in rough diamonds with countries in the scheme, including EU countries.

The UK government will bring in new laws for the KPCS in the UK, and a new UK KP certificate will replace the EU one.

If the UK government has not secured a way to participate in the KPCS independently by 29 March 2019, the UK trade in rough diamonds will be frozen.

Trading in rough diamonds with the EU: Companies will require KP certification for trading in rough diamonds with countries in the EU, in the same way as trading with the other KPCS countries. This means:

  • All rough diamond exports from the UK (including to the EU) will require UK KP certification
  • All rough diamond imports from the EU will require EU KP certification.

Trading if the UK is not a member of the Kimberley Process: Companies will not be able to trade internationally in rough diamonds if the UK is not a member of the KP until the UK secures independent participation in the scheme.

If the UK were to exit the EU with no deal, the Government says it is already taking steps to secure independent participation in the KP for the UK.

The report says: “We are preparing the secondary legislation necessary to enact the KP in the UK and a new UK KP certificate will replace the EU one. KP certification would be required for trading in rough diamonds with countries in the EU as it is now with the other KP countries. This would allow business to continue with some changes (for example, it would introduce a requirement for KP certification for transfers between the UK and the EU).

“If businesses have any rough diamonds on consignment or loan in the EU they should consider taking action to avoid any delays on or after March 30 2019 should this scenario materialise.”

Traders should consider the effect of the new KP arrangements with their EU customers and plan accordingly for future trading with minimal disruption after EU exit.

If the UK does exit the EU in March 2019 neither with a deal nor immediate independent participation, businesses will not be able to trade internationally in rough diamonds until the UK secures it participation.

To prepare for this scenario, businesses should consider whether they wish to make arrangements to have any rough diamonds on consignment or loan to countries in the KP (including the EU) returned to them before the UK has left the EU to avoid delays until the Government secures independent participation.

Tags : BrexitKimberley processrough diamonds
Stacey Hailes

The author Stacey Hailes

Editor, Professional Jeweller

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