EXCLUSIVE: Industry groups disagree over changes to Canadian diamond code

by eyetee | December 19, 2011 1:32 pm

Proposed changes to the Canadian Diamond Code of Conduct are outside the scope of the document and will cause confusion among consumers and industry alike.

That’s the position of the Canadian Jewellers Association (CJA) following a Nov. 15 e-mail broadcast by the Canadian Diamond Code Committee (CDCC) to its signatories. In it, the committee attached a copy of the voluntary code with the proposed changes, which includes references and extracts from the Competition Bureau’s Made in Canada guidelines.

The CJA says the purpose of the code is to provide a minimum standard to authenticate Canadian diamond claims, and no references to the guidelines should be embedded in it. Instead, signatories’ responsibilities as they relate to the guidelines ought to be included in the preamble.

CJA president and chief executive officer (CEO) David Ritter says part of the problem is in being clear about what the code can and can’t do. By embedding the guidelines, he says, the implication is the code can enforce them.

“We believe the code should only address the authentication of the origin of diamonds mined in Canada and should not be confused with the Competition Bureau’s guidelines, which are subjects that are outside its scope,” Ritter said in an exclusive interview.

“It is up to all signatories and all members of the industry to follow the guidelines when it comes to ‘Product of Canada’ or ‘Made in Canada.’ But it is not up to the code to have the Competition Bureau’s guidelines embedded in the body of the code. The bottom line is this should be an industry code, not a government code. The industry should rally around the code to ensure it is workable for all.”

The Made in Canada guidelines are blanket regulations that apply to every industry in Canada.

For its part, the CDCC says it is proposing these changes to simplify the work of its signatories and to help them remain in compliance of the guidelines. It also notes the CJA recommended proposed changes of its own, some of which have been incorporated.

“We feel the recommendations we made to change the code address most, if not all, the concerns that are out there in terms of ‘Product of Canada’ and ‘Made in Canada’ language in the code, and still meet the letter and the intent of the MIC guidelines,” said CDCC interim chair Pierre Leblanc. “We don’t want to do anything that would place our signatories in a position where they may find themselves in contravention of Canadian law.”

Leblanc says the recommendations e-mailed to signatories included notice that if the code is changed, it would no longer be endorsed by the Competition Bureau, which he says is a valuable element to ensuring consumer confidence. The loss of the bureau’s endorsement would also likely mean losing the backing of CIBJO. The committee says if the changes are accepted, it would attempt to maintain the bureau’s endorsement.

Although a deadline of Nov. 30 was initially proposed for signatories to vote to accept or reject the changes, Leblanc says the response was mixed, with no clear-cut majority on which to act. A conference call with signatories is in the works for next month.

The definition of a Canadian diamond for the purposes of the code is also under scrutiny. The CJA says the definition in the code’s current version should remain, which simply states a Canadian diamond is a natural diamond mined in Canada. Instead, the committee is proposing a 122-word definition, which also includes ‘Product of Canada’ and ‘Made in Canada’ language. The CJA says the definition should not be changed, since the code includes no mechanisms for tracking and auditing these claims. That’s up to the Competition Bureau to do.

Authenticating ‘Product of Canada’ and ‘Made in Canada’ claims is based on complex calculations. For a diamond to be considered a ‘Product of Canada,’ at least 98 per cent of the total direct costs of producing or manufacturing it must be incurred in Canada. This suggests all diamonds mined, cut, and polished in Canada are designated a ‘Product of Canada.’

To be ‘Made in Canada,’ a diamond must meet a 51 per cent threshold. According to the CDCC, the Competition Bureau has indicated the use of the words ‘Canadian diamond’ to be at least the equivalent of a ‘Made in Canada’ claim, and may require a qualifying statement, such as ‘Mined in Canada and polished in China.’

Currently, three companies are officially cutting and polishing in Canada, and a fourth is planning to open a facility in Toronto in February. Additionally, the Northwest Territories government is in the process of selling two diamond manufacturing plants in Yellowknife.

Leblanc says the possibility of finding a middle ground exists by modifying the language in some areas, although he acknowledges the end result will probably be close to what is presently being proposed.

Despite the appearance of a showdown given the exchange of various e-mail broadcasts to the industry stating opposing positions, both sides are quick to point out they are committed to working together to resolve the issue.

CDCC secretary Howard Shanfield says the difficulty is to come to agreement as to how to stay within the law and create a workable document.

“For the sake of the industry, we’re not interested in having a war between one group and another,” Shanfield says. “We’ve been listening to the CJA’s position, we’ve had our own view on things, and we’ll continue to work and talk and hopefully, have a consensus not just within our signatory group, but within also the CJA, and all other interested parties. Ideally, we need to have something that everyone’s comfortable with and everyone can live with.”

Ritter agrees, adding the CJA has proposed delegations from both groups meet next month to work toward a resolution.

“We’re going to continue to communicate to the code committee to hopefully achieve a positive outcome,” he says. “We are working very diligently to ensure all parties have a living, workable document that is going to be beneficial for the Canadian diamond industry.”

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