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Jewellers Beware: EU Imposes Strict Sourcing Norms For Gold Import

New European Union rules will usher in a European version of the US’s Dodd Frank Act. They follow guidelines for responsible supply chains originally established by the Organization for Economic Cooperation and Development. At present, the rules will only apply to the minerals of tin, tantalum, tungsten and gold.

Despite the European Parliament’s request for the new rule to apply to both upstream and downstream operators, the European Commission has succeeded in ensuring that only the importers of commodities will be affected by the new regulations.

According to the timeline, legislation will be in place by autumn and will allow a two-year transition period before compliance is required.

Quite ambiguously, the Commission also states that it will be working on a review clause to develop reporting tools (as opposed to regulation) for both large and small EU downstream companies — potentially effective during 2018.

Several issues becomes evident with this, chief among them:

  • How will transhipment centres like Dubai provide upstream audit trails for minerals that have come through it?
  • How will the EU rules align themselves to US regulation?

A recent report released by Global Witness highlighted the issue of a Chinese mining company allegedly giving armed groups in Eastern DRC AK-47s for access to gold worth $17 million. This gold was then being exported to Dubai and entered the international manufacturing supply chain and investment markets.

Similar incidences have seen Eastern DRC gold follow a trail from Burundi and Uganda to Dubai.

As one who has witnessed gold deals in Dubai at first hand where suitcases of cash are regularly transported out of the Old Souq on flat-bed trolleys for the sale of gold, it will now be the case that a commodity importer or dealer from an EU country who in turn buys from a secondary source will not be able to trade without fully determining that the original country of origin for the gold is not designated as an area of conflict. 

Whilst the Dubai Multi-Commodities Centre (DMCC) has come under intense scrutiny and works towards continuing sourcing improvement (as a UN report for DMCC reform and the recent Kaloti case demonstrates) it should not be taken for granted that their “legitimising” of gold trading matches the more exacting standards of the US and EU. We really do need to wait and see how robustly the new EU rules will be implemented.

And whilst the European Commission is currently focussing on gold, how long before diamonds are included in the new directive? The old issue of transfer pricing of diamonds where miners undervalue their goods when exporting from the mining country to Dubai and then quoting the full market rate when re-exporting to the end use would then face serious barriers.

Where the new directive differs from the Dodd Frank Act is that the new EU rules will cover conflict minerals from anywhere in the world, meaning they go further in geographic scope than the US legislation, which currently focuses on minerals sourced from the Democratic Republic of the Congo and nine surrounding countries. It is worth pointing out that in the US, only SEC-registered companies have to comply with the Dodd Frank Act which includes the whole jewellery supply chain – importers, manufacturers and retailers. 

What is immediately evident is that the EU potentially looks a tougher market to export to than the US.

From a US perspective, commodity dealers wishing to supply the EU will now have to extend their supply chain protocols to include the EU’s definition of an area of conflict and from the EU point of view.

 I suspect a collective sigh of relief from downstream operators knowing that they will be currently exempt from the new rules. But it would be good for jewellers not to get complacent, thinking the primary importers would have taken care of the sourcing audit. The downstream rules will follow shortly and everyone needs to take responsibility. The downstream reporting tools now under consideration could eventually form part of the more impactful regulations restricting the use of minerals from areas of conflict.

And in this respect, there has to be a greater voluntary personal and corporate adherence in taking responsibility for the materials businesses use to make jewellery in addition to being able to understand what the right answers should be when asking questions of suppliers. In other words, a need to design and implement robust ”know your supplier” processes supported by greater access to industry information, education and training

As a positive example, greater knowledge would allow retailers to understand the benefits of buying British Made jewellery on the basis that over 85 percent of products produced use recycled gold (exempt from the EU directive), thereby negating many sourcing concerns and creating a positive consumer narrative. It could even be sold at a premium! 

Thankfully, there are organisations out there who the supply chain can reach out to for greater information and in this respect the work of such entities as Fairtrade, RJC, World Diamond Mark Foundation and CIBJO need to be highlighted.

In an age where the whole consumer dynamic has changed, if companies are unable to adapt to greater understanding and sourcing responsibility, customers will choose to shop where their questions can be answered and where they are comfortable in knowing that what they buy has a clearly explained provenance. 

In the real world, consumers have little knowledge or interest of the Dodd Frank Act or EU Directives. What matters, is the assurance and proof that a retailer understands their needs, has products to meet these needs, sells with integrity, demonstrates honesty, generates trust and can provide tangible, credible evidence on demand. 

So while the onus right now is on those higher up in the supply chain, it should be clear that not taking responsibility for sourcing cannot be deemed acceptable in today’s market. Consumers deserve more.  They demand  more. We need to avoid complacency and be able to plan better for the future.


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This sounds like both a curse and a blessing. Adding bureaucracy is rarely a good thing, with increasing costs and delaying supply lines. But reducing conflict minerals could be a good global result. Yes, I am worried for my own income and how it affects me, but how can we ignore the lives it can improve in various countries that are less fortunate than us?