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Industry News: Buyer Beware – Green Diamonds

Image courtesy of Reuters -  Philimon Bulowayo

Image courtesy of Reuters – Philimon Bulowayo

Wholesalers have to be extra cautious when dealing in green diamonds or risk violating U.S. sanctions against Zimbabwe.
By Shaun Sim of Rapaport

Wholesalers attending a seminar at the Natural Color Diamond Association (NCDIA) in NewYork City expected to find out whether Zimbabwe green diamonds bearing Kimberley Process (KP) certification made them legal to trade. Instead, they learned that U.S. sanctions against the country made all diamonds from Zimbabwe not just the green off limits, regardless of whether or not they were KP certified. As the majority of the country’s diamond production came under Mugabe’s control, the sanctions effectively stopped diamond trading between Zimbabwe, the EU and the U.S. About ten years later, the EU, pushed by Belgium, lifted the bans on Zimbabwe’s diamond mining firms. However, the U.S. kept its sanctions in place.

In 2003, then-President George W. Bush signed an executive order for economic sanctions against Zimbabwe President Robert Mugabe, other individuals and companies. The sanctions were a response to the human rights violations by the Mugabe government, suspected money laundering and alleged funding of terrorist activities. Around that time,the European Union (EU) had imposed similar sanctions against Zimbabwe.

As the majority of the country’s diamond production came under Mugabe’s control, the sanctions effectively stopped diamond trading between Zimbabwe, the EU and the U.S. About ten years later, the EU, pushed by Belgium, lifted the bans on Zimbabwe’s diamond mining firms. However, the U.S. kept its sanctions in place.

Many seminar attendees asked speakers Cecilia Gardner, president,chief executive officer (CEO) and general counsel of the JewelersVigilance Committee (JVC),and Tom Gelb, educational director of NCDIA, what they could do to protect themselves.“The first thing is to ask for a certificate,” said Gardner. The onus is on the buyer to make sure that

not only is the green diamond KP compliant,as the U.S. is a member of the agreement, but that the buyer should also ensure that the stone did not come from Zimbabwe.

RARE BUT INCREASINGLY POPULAR

Green diamonds are exceedingly rare. According to Gelb, Zimbabwe accounts for as much as half of global green diamond production.There has also been a dramatic increase in production because of increased activity in Zimbabwe’s Marange region. Guyana and Brazil are the other large producers of green diamonds.

Green diamonds started to take off in late 2014, when celebrities were seen sporting emeralds on the red carpet. “Diamond dealers started thinking that if emeralds were popular,why not green diamonds? We started having people asking us where to source for green diamonds and for the price range,” said Gino Di Geso, director of NCDIA.

Over time, industry players became aware of the issues involved in dealing in green diamonds: Namely, the fact that green diamonds were likely to have come from Zimbabwe and that they were illegal.“NCDIA members would ask,‘Are we allowed to deal with these goods?’and ‘Are they okay if they were KP certified?’”said Gelb, adding that the members mostly asked about the KP process. He said that knowledge of the U.S. sanctions against Zimbabwe was scant.“You have to go searching for it to even know about it,” said Gelb.

HARSH PENALTIES

Many dealers did not know about the consequences of possessing Zimbabwe green diamonds.“I sort of knew about the issues concerning Zimbabwe and I knew about the sanctions, but the seminar showed me the details of the regulation,” said attendee Ishay Ben-David, owner of Ishay Ben-David Corp., a wholesaler of natural colored diamonds. The seminar explained that the U.S. government could do what is called a“claw back,”where the government could simply go into a dealer’s bank account and take money out of it for the value of the diamond or profits derived from the sale of it.The government could also indict an individual for criminal conduct or sue civilly for violating sanctions,according to Gardner.

Wholesalers were not pleased to learn how easy it was to fall afoul of the law.“It seems that there is not much you can do to protect yourself,” said Kushal Sacheti, CEO of Galaxy USA Inc. in NewYork City.“The law is so vaguely defined and nobody can prove or disprove if a diamond is from Zimbabwe,”he said.

Once a diamond is cut,it is very hard to prove its origins. Furthermore,as green diamonds receive their color from radiation, which penetrates the stone to varying depths, it is possible for a green diamond to end up appearing like a D flawless stone when cut and polished, making it difficult to pinpoint its origin, said Gelb.

This presents a problem for traders, who only have the guarantee from sellers that their diamonds did not originate in Zimbabwe. “The government, which is tracking these stones, knows they are from Zimbabwe but we don’t,” said Sacheti.“Even if we ask and are told they are not from Zimbabwe, if they end up being from Zimbabwe, there’s nothing we can do.”

Some wholesalers believe that their experience helps them identify Zimbabwean green diamonds.“They have a sort of grayish yellow tint to them,” said Ben-David. However, Gelb felt that such anecdotal practices are not foolproof. “This may be the standard practice for diamond dealers, but from the point of view of science, any diamond that came from Zimbabwe could certainly look like it could have come from some where else,”hesaid.

RISKY MARKET AHEAD

Currently, the availability of green diamonds is still so low that it remains mostly a collector’s market, though that might change in the future.“It is certainly the fastest- growing color aside from pink and blue,” said Di Geso.

While demand for that color grows, the politics hanging over Zimbabwe diamonds are not likely to change in the near future, according to Gardner. “The Zimbabwe government hasn’t really changed much,”she said.“I guess we just have to be extraordinarily careful,” concluded Sacheti. ✦.

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The Secret Slang of the Diamond District – NYTimes.com

By Ben Schott – NY Times
The public face of New York’s diamond district is Diamond and Jewelry Way, a block of 47th Street between Fifth and Sixth Avenues lined with dazzlingly lit shops and exchanges and cluttered by hawkers, hustlers, cops and couriers. But beyond these street-level operations, in back rooms, upper floors and looming towers, toils an army of cutters, blockers, polishers, sorters, appraisers, graders, designers and dealers — most of whom the diamond-buying public never sees.

Or hears. The street has its own vocabulary, honed over generations and still used today. The prevalence of Yiddish reflects the historic influence of Jewish craftsmen and dealers. But the diamond business is international, and on Diamond and Jewelry Way it is not uncommon to hear Russian, Indian, Dutch, French, Belgian, Korean and other accents enunciating the mame-loshn (literally, “mother tongue”) of Eastern European Jewry, and a few non-Yiddish phrases as well.

Diamond sellers, or diamantaires, deploy an extensive nomenclature of technical terms to describe their wares — not just the famous Four C’s of color, clarity, cut and carat weight, but also dimensions, fluorescence, inclusions (flaws), polish and symmetry. Traders will instantly know what the description “round G 4.18 VVS₂ TRIP X” means, as well as the diamond’s value. On examination, they can judge if that stone’s color is a “good G” or “low G” and whether its clarity is actually the inferior VS₁. These terms may be tricky to decipher (and trickier still to apply commercially), but they are widely known. In the business, however, there are many other words to describe what really matters about a given stone, or shteyn(Yiddish), steen (Dutch), pierre (French), almaz (Russian) or hira (Hindi).

Unless otherwise noted, all non-English terms are Yiddish or are derived from Yiddish and are rendered using the transliteration system developed by the YIVO Institute for Jewish Research.

ILLUSTRATION BY ANDREW RAE

QUALITY

Carat or CT · A carat (200 milligrams) is divided into both 100 points and fourgrains. A “20-pointer” weighs one-fifth of a carat (or 40 milligrams), and a “six-grainer” weighs 1.5 carats (or 300 milligrams). Dealers say “light” to indicate weights shy of a common fraction; a “light-half” can weigh from 0.45 to 0.49 carats.

Rough · Uncut and unpolished stones.

Strop · A stone that won’t sell; a bad buy. Some dealers are anxious to unload their strops, even at a loss, to release capital or just to dispose of a dud. Others reckon that strops are not actually costing them anything, so they let them “sit in the back of the safe,” literally or metaphorically, for years (generations, even). Sometimes forgotten stones surge back into fashion, hence the saying “People get rich on strops.”

Khazeray · Junk; trash.

Links-shtivl · “Left-footed boots”; a parcel of khazeray in which nothing matches. “I can’t find a pair of stones to make earrings in this links-shtivl.” Also, linker: left; awry; illegitimate; illegal.

Shlok · Junk; rubbish; fake; second-rate merchandise.

Shvimers · “Swimmers”; especially impressive stones that seem to “swim across the surface” of loose diamonds, improving the appearance of lesser ones. Also,floaters.

Mame-zitser · “Mother sitter”; a very large diamond.

Tam · “Flavor”; appeal. When comparing diamonds, an expert will instinctively sense which has the greater tam.

Trip(le) (e)x · Any stone with an “excellent” grading for cut, polish and symmetry.

Fisheye · An unappealingly flat stone. Also, pancake.

Roval · A nearly round, fat oval; ugly; undesirable; unsalable.

Matzo · A stone made to look larger by cutting it flat at the widest spot.

Fir-kantike eyer · “Four-cornered eggs”; an impossible request; a stone (or price) that doesn’t exist. “You’re looking for fir-kantike eyer — go down to the Smithsonian.”

Bluff stone · An impressive looking (bluffy) diamond that is not as valuable as it appears.

Estate jewelry · Secondhand. The term post-consumer has recently been adopted to appeal to those concerned about the humanitarian and ecological costs of newly mined stones.

Melee · From mêlé, French for “mixed”; small cut-and-polished diamonds (often 0.18 carats or less) used as accent stones or in dense pavé settings, where many stones cover an area of metal. Melee is commonly sold in parcels or lots, for which the price rises as the buyer becomes more selective:

Whole/lot price: entire parcel
Cut price: unsorted division
Sort/pick price: hand-selection

EQUIPMENT

Brivke or parcel-paper · A folded wrap of paper used to store stones.

Cachet · A small, plain (often Manila) envelope used in deals mediated by a broker. A seller lends a broker a selection of stones to show potential buyers. If a buyer likes a stone (or stones), he wraps it in a brivke, seals it in a cachet and writes his name, offer price and payment terms along the flap. This ensures that the stone can’t be shown to anyone else. The broker returns the cachet to the seller, who accepts the deal or makes a counteroffer. The broker takes the cachet back to the buyer, who can agree to the sale, strike out the counteroffer and write in a new price, or tear the cachet open — releasing the stone back to the market and ending the negotiation. Brokers usually take commish or C.O. (commission) of around two percent from the seller on any sales they close.

Loupe · A hand-held magnifying lens, usually with a magnification power of 10. An informal clarity grading rank of diamonds is: loupe clean (no inclusions visible under a loupe) > eye clean (no inclusions visible to the naked eye) >center clean (no inclusions visible in the stone’s center).

Sieve set · A shaker barrel with graduated sieves, used to sort melee by size.

Safes or vaults · There is no firm distinction between the two, except that you can usually walk into a vault.

Shmate · A cloth for cleaning shmutz from stones.

BUSINESS

Gesheft · Business. Also, luft gesheft: “business founded on air”; an enterprise without a solid foundation.

Bren · “Burn”; on fire. “This holiday season was a bren.” The opposite is shtil, “quiet,” or shvakh, “weak.”

Gornisht · “Nothing.” From this comes the phrase gornisht mit gornisht(“nothing with nothing”) or G.M.G., which is used to describe inferior goods or the trade’s being especially shvakh.

Mekhule · Bankrupt.

MAZL AND LUCK

The most significant phrase on the street, and perhaps in the global trade, is mazl un brokhe — “good luck and a blessing” — which is commonly abbreviated to “mazl.” It is hard to overstate the power of this oral handshake, which seals million-dollar deals without lawyers, witnesses or contracts. In “making mazl,” diamantaires stake their honor (and that of their family), and the term garners near-universal respect.

It is said that the “mazl un brokhe” formula has two symbolic elements: The seller has luck in selling (mazl), and the buyer has a blessing for future success (brokhe).

One interpretation of the Hebrew word mazl (מזל) is that it is an acronym encompassing the three elements that determine our good fortune:

מקום = מ = makom = place
זמן = ז = zman = time
לימוד = ל = limmud = learning

So to have mazl, you need to be in the right place, at the right time, with the right wisdom to know how to act.

The overlap of faith, luck and superstition is evident in several ways. Some Jewish dealers will instinctively deprecate their business fortunes, both out of modesty and to avert any bad luck incited by boasting. The phrase ken eyne hore(“without the evil eye”) is the Yiddish equivalent of saying “knock on wood” after tempting fate. Hindu and Sikh dealers may bless loupes, scales and other tools of the trade during Diwali, the fall festival. And it is not uncommon to see traditional Hindu swastikas painted on the vaults and safes of Indian dealers, just as some Jewish dealers affix mezuzot to their doorjambs.

Bashert · “Destined”; something that is meant to be; when good fortune falls into your lap. Some believe that profit will follow if a diamond falls to the floor when a brivke is opened (assuming, of course, that it’s found). Others kiss a stone that has been dropped, for luck.

Good hand · To have luck and skill in finding, understanding and dealing stones. A trader with a good hand is also one with the wisdom and integrity to “leave a little profit in the deal” so everyone makes their parnose (“livelihood”). Dealers will say of a lucrative and lucky trading partnership, “We have a good hand together.”

THE DEAL

Metsiye · A great deal; a bargain; a stone bought cheap. Some dealers complain that because diamonds are increasingly listed online, there are no metsiyes anymore. Others hunt for M&M’s — mistakes (underpriced stones) and metsiyes.

Ganeyve · A “steal.” Even better than a metsiye.

Oysshis · Rejects; leftovers. Hence the saying “One man’s oysshis is another man’s metsiye.”

Shatsn · To price or give an opinion on a diamond. “Hey, shats this stone for me.”

Chap lagna · From “to stamp” in Hindi; to value something accurately. Indian traders also have a range of terms for bargains: halwa, a traditional sweet, but also a good deal; muft, “free,” but also used to describe a great bargain; and malai, a term for “cream,” which describes a deal that will be profitable.

Hondl · To bargain, haggle or trade.

Nem di gelt · “Take the money”; an encouragement to “make mazl.” The sense that business must keep moving is also evident in phrases like “No one died for an offer” and “No one went broke taking a profit.”

Shlep · To drag; to pay late and make someone carry your debt. “You’re shlepping — we said 30 days.”

Shmir · To grease the wheels or bribe. “Sure, I shmired the guy a little.”

Touch · Profit. “I got a little touch.”

Keystone or key · A markup of 100 percent. Also, double or triple key.

ON MEMO

On memo is the process by which dealers routinely borrow and lend diamonds to try to match stones to buyers.

The memorandum (in Gujarati, jangad) is a slip of paper that itemizes each stone and the memo price for which it can be sold (usually higher than a firm sale price). Technically, the receiver of diamonds on memo has no rights of ownership and no right to sell. It is understood, however, that if a buyer is found at (or, after agreement, near) the memo price, the owner will consent to the transaction.

Even as Internet sales rise, the memo business remains central to the trade, because buyers want to assess the stones with their own eyes. That said, the curiously casual nature of trading on memo can result in disputes — for example, when payment becomes long overdue, when already-on-memo stones are sent on memo to a third party or when stones are returned late or not at all.

It is not uncommon for dealers to have large stones or important pieces out on memo with big-name stores, which have the clientele to afford them.

REFERENCES

The trust that underpins business on the street is hard won and jealously guarded. Untested dealers who want the privilege of borrowing stones on memo are expected to provide references from respected dealers. These dealers are asked how long a prospective client has traded, what credit they have, how much debt is unpaid and whether they are shlepping. “It’s normal to owe money; it’s not normal to be behind.”

Only if satisfied will a dealer allow diamonds out on memo — but the value and terms of the memo will be kept in check until a personal bond of trust is established over time. Time also allows dealers who have erred in some way (even into bankruptcy) to incrementally trade their way back into trust.

A small footnote on trust: The private Diamond Dealers Club has a lost-and-found board that details mislaid stones.

PEOPLE

Several traditional Yiddish terms are used to describe people in the trade, frommensch (good guy) and meyvn (expert) to ganif (thief) and khazer (pig).

And just as a diamond has its Four C’s, Yiddish has Three S’s for irksome dealers:

The schnorer who begs for deals.
The shleper who pays late.
The shtinker who never pays.

Faynshmeker · A “fine sniffer”; a connoisseur with expensive taste or excellent merchandise or both. Conversely, a perfectionist: “Don’t be such a faynshmeker . . . nem di gelt!

Hawks · Street-level operatives who coax pedestrians toward a specific retailer in return for C.O. on any transaction.

Jalebi · An intricately spiraled Indian sweet; used to describe a hustler. “He is straight like a jalebi.”

Good eye · One who can spot quality.

RETAIL CODES

Salespeople across 47th Street use a range of codes to speak in front of privates(the public) and secure a diamond’s journey across the last 18 inches (the shop’s glass counter). Not all of these are widely used, and some are increasingly of only historic interest.

2-10 · A warning to keep “two eyes on 10 fingers” when serving a suspicious customer. This code dates to at least the 1860s and was widely used in retail.

Gee or g · A general term for a customer. There are several possible etymologies: It might stand for gooch (auction slang for a buyer), geek (“grotesque” carnival acts who bit the heads off live animals) or, simply, guy. A range of street phrases use the term.

Sherry the gee · Get rid of the customer. From “sherry”; to go, sheer off or run away. “Hey, your wife Sherry called.”

Kitty with the gee · Keep the customer occupied with small talk.

Good gee · A favorite customer.

Tee the gee · Follow the customer; ensure that a client who has just left a deposit for a piece to be made is not persuaded by another retailer to transfer his business. The “tee” may be for “trail” or “tail.” A hawk will tee the gee until the client is seen safely off 47th Street — after which the jeweler can build the new piece, confident that the gee will be back to pay and collect. To avoid alerting a private, the hawk might also be asked to “get a cup of tea.”

Cost marks · Many dealers still use traditional retail ciphers, substituting letters for numbers when writing out price tags or discussing prices in public. Dealers select a 10-letter keyword in which no character is repeated, like:

C = 1
A = 2
S = 3
H = 4
P = 5
R = 6
O = 7
F = 8
I = 9
T = 0

Here, “$150” becomes the unintelligible “CPT.” To add complexity, additional letters are used as repeaters (“$1,500” might be “CPTX”) or for distraction (“YYCPTYY”). These ciphers are also used to encode other codes; for example, “2-10” would become “ACT,” and “56” would communicate “PR” — slang for “profit.”

Low liner or high liner · Bad and good customers or prospects.

Send them (or goto the A.P. · When high-pressure salespeople dispatch wavering clients to consult a far-from-independent appraiser (A.P.). To keep the momentum of sale and avoid B.O. (backing out), a hawk (or an A.P. runner) escorts diamond and buyer to the same appraiser — a hustle known as ringbox,go.

D-line · An easy, no-nonsense deal; when a customer sees a ring, pays for it and leaves. “I just d-lined that VS₁.”

SECURITY

Security on the street is tight. A constant presence by the New York Police Department is augmented by uniformed and undercover guards and armed patrols by retired police officers. The area is also surveilled by a network of cameras that, according to the 47th Street Business Improvement District, is partly funded by the Department of Homeland Security.

Inside shops, security is no laxer. Display cases can be fitted with burglar-resistant glass, surveillance cameras record some audio as well as video, panic buttons are available to alert the police and some retailers carry firearms. Lunch hours, delivery times and opening and closing procedures are regularly varied to confound anyone casing the joint. And every night, window displays are cleared of merchandise to prevent smash-and-grab raids.

To foil shoplifters, staff members show only one or two pieces at a time. And to quickly spot if any merchandise is missing, retailers lay out jewelry symmetrically, keep diagrams or maps of display cases and insert placeholders (pennies, for example) when removing rings from a tray.

Off the street, most businesses are protected by man-traps — double-door vestibules that allow visitors to be checked before entry and exit, with packages delivered through a hatch. When dealers walk stones out of these secure spaces (for inspection, manufacture, grading), they usually just wrap them in brivkes and slip them into a pocket — though some use money belts, ankle pouches or underarm cases to foil pickpockets. Most insurance policies for diamond dealers specify acarry limit for stones that are walked. Dealers who need to transport diamonds above this limit will first clear it with their insurers or divide the stones and make several journeys. Some take circuitous, zigzag routes or hire security guards to accompany them.

PRICING

Because there are thousands of diamond categories and the tam of each stone is subjective, there is no price index for diamonds as there is for, say, gold. The most popular pricing benchmark is the Rapaport Price List, established by Martin Rapaport in 1978. Updated each Thursday at midnight, the rap (or sheet) reflects the company’s opinion of “high cash asking prices” for a range of “fine-cut, well-shaped” stones, and it is widely used as a basis for quoting and negotiating prices.

What’s the rap? · “What’s the list price? ”

I’ll pay 10 back (or below) or I want 10 over indicate a 10 percent discount or a 10 percent premium on the Rapaport price.

On condition rap · Assuming that the rap doesn’t change during the course of a negotiation.

Magic sizes · Certain sweet spots in weight (0.5, 0.75, 1 carat) at which stones jump in desirability and price. Diamonds just light of these sizes can be bargains.

Terms · In addition to price, payment terms are central to the deal. Asking for 30, 60 or 90 days to pay is often essential to bridge situations of limited liquidity, especially when sales are predicated on a chain of transactions, much like real estate. Untested (or distrusted) buyers will be asked to pay C.O.D. (nowadays the “C” usually stands for “check,” not “cash”) or with cleared funds up front.

CERTIFICATION

As consumers go online and become better informed, the independent certification of diamonds has become an increasingly crucial part of the trade.

The most respected certs are those issued by the Gemological Institute of America (G.I.A.) — not least because some other organizations have been accused of over-grading (or bumping).

Although certs don’t offer valuations, they detail and grade the technical specs on which valuations and comparisons are based.

Despite a range of security measures, including laser-inscribed serial numbers, the fraudulent mismatching of stones and certs is not unheard of. While consumers are urged never to buy naked (ungraded) stones, the dealer’s rule is “Buy the diamond, not the paper.”

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