[Senate Report 108-36]
[From the U.S. Government Publishing Office]
Calendar No. 62
108th Congress Report
SENATE
1st Session 108-36
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CLEAN DIAMOND TRADE ACT
_______
April 9, 2003.--Ordered to be printed
_______
Mr. Grassley, from the Committee on Finance, submitted the following
R E P O R T
[To accompany S. 760]
[Including cost estimates of the Congressional Budget Office]
The Committee on Finance having considered the bill (S.
760), to implement effective measures to stop trade in conflict
diamonds, and for other purposes, having considered the same,
reports favorably thereon and recommends that the bill, as
amended, do pass.
BACKGROUND
In several sub-Saharan African countries, rebel insurgent
groups fund their military activities by mining and selling
rough diamonds. Competition over the use and control of diamond
wealth contributes significantly to the depth and longevity of
these regional conflicts and to well-documented human rights
violations against local populations. A group of diamond-
trading nations, non-governmental organizations (including
humanitarian, human rights and faith-based organizations) and
diamond industry groups involved in the rough diamond trade
worked for many years to address the problem of ``conflict
diamonds.'' These groups sought to create a voluntary
international certification scheme to regulate the rough
diamond trade in order to eliminate conflict diamonds from
legitimate diamond trade. These efforts, supported by the
United Nations General Assembly, culminated in the Kimberley
Process Certification Scheme for Rough Diamonds, adopted by
participating nations in the Interlaken Declaration of November
5, 2002.
In the Interlaken Declaration participating governments,
including the United States, declared that they were,
``committed to the simultaneous launch of the Certification
Scheme beginning on 1 January, 2003.'' The Certification Scheme
sets out a rough diamond trade control and tracking system
based on the use of import/export certificates that certify
that rough diamonds have been handled in accordance with the
provisions of the Scheme. Countries participating in the
Certification Scheme commit to import and export only properly
documented rough diamonds. The purpose of the Certification
Scheme is to curtail the trade in illegally exported conflict
diamonds.
The Preamble to the Certification Scheme and the Interlaken
Declaration provide that the international certification scheme
and measures taken to implement the scheme would be consistent
with international trade rules. In January 2003, the United
Nations Security Council passed resolution 1459 strongly
supporting the Kimberley Process and the Interlaken
Declaration. In addition, a group of Kimberley Process
participants, including the United States, requested a waiver
under the Marrakesh Agreement Establishing the World Trade
Organization for certain measures taken to implement the
Kimberley Process. On February 26, 2003, the WTO Council for
Trade in Goods agreed by consensus to recommend approval of the
waiver by the WTO General Council. The Council is expected to
consider the waiver at its next meeting which will take place
May 15-16, 2003.
The Clean Trade Diamond Act is intended to implement the
Kimberley Process Certification Scheme in the United States.
SUMMARY OF THE CLEAN DIAMOND TRADE ACT, AS AMENDED
Short title (Section 1)
This section provides that this Act may be cited as the
``Clean Diamond Trade Act.''
Findings (Section 2)
Congress makes the following findings:
(1) The sale of rough diamonds provides funds for the
activities of rebel groups in Sierra Leone, Angola, and the
Democratic Republic of the Congo in seeking to overthrow
legitimate governments, destabilize the region, and commit
atrocities against civilians.
(2) These activities have caused the displacement and
deaths of many civilians.
(3) Human rights advocates, the legitimate diamond
industry, and the United States have been working to block
trade in conflict diamonds.
(4) The United Nations Security Council has at various
times adopted resolutions imposing embargoes with regard to the
conflict diamond trade in Sierra Leone, Liberia, and Angola.
(5) The United States has implemented these embargoes under
domestic laws and regulations and is now taking further action
with this legislation implementing the Kimberley Process.
(6) The legitimate diamond trade and the economies of
countries engaged in such legitimate trade could be severely
damaged by a consumer backlash caused by concern about conflict
diamonds. Accordingly, to protect legitimate trade, South
Africa and other countries active in the diamond trade have
devised a scheme to regulate the trade in diamonds in order to
eliminate conflict diamonds, known as the Kimberley Process. As
the consumer of a majority of the world's diamond supply, the
United States has an obligation to implement an effective
solution to the funding of regional conflicts through the sale
of diamonds.
(7) Failure to curtail the trade in conflict diamonds could
have a severe impact on countries such as Botswana, Namibia,
South Africa, and Tanzania.
(8) The United States seeks to resolve regional conflicts
in sub-Saharan Africa fueled by the conflict diamond trade.
(9) As stated in the Interlaken Declaration, the Kimberley
Process is to be implemented in a manner consistent with
international trade rules.
Definitions (Section 3)
Section 3 defines terms used in this bill, including:
controlled through the Kimberley Process Certification Scheme,
Participant, exporting authority, importing authority,
Kimberley Process Certificate, and rough diamond.
Measures for the importation and exportation of rough diamonds (Section
4)
PRESENT LAW
No provision.
EXPLANATION OF PROVISION
Section 4 requires the President to prohibit the
importation or exportation of rough diamonds that have not been
controlled through the Kimberley Process Certification Scheme.
The prohibition may be waived with respect to a particular
country for periods of not more than 1 year each if the
President determines and reports to Congress that the country
is taking steps to implement the Kimberley Process or the
President determines and reports to Congress that the waiver is
in the national interests of the United States.
REASON FOR CHANGE
This provision implements the Kimberley Process
Certification Scheme in the United States by establishing a
system to ensure that rough diamonds are not imported into or
exported from the United States, unless the shipment is
accompanied by a valid Kimberley Process Certificate.
Participants in the Kimberley Process undertake measures to
ensure that rough diamonds are not imported from or exported to
a non-participant, but at the same time, the Interlaken
Declaration and the United Nations Security Council Resolution
supporting the Kimberley Process both stress that the widest
possible participation in the process is essential and should
be encouraged and facilitated. The Section 4(b)(1) waiver is
designed to facilitate this aim to encourage non-participants
to implement the Process. Language in the bill requires the
President to determine that the country being granted this
waiver is taking effective steps to implement the Kimberley
Process Certification Scheme. The Section 4(b)(2) waiver is
similar to national interest waivers for various foreign
assistance restrictions in Federal statutes, such as 22 U.S.C.
Sec. Sec. 2370, 2370a(g), 2377(b), 2378(b), and 7513(b)(2). The
Committee intends that the national interest waiver under
Section 4(b)(2) be judiciously exercised. It is not intended to
be used to undermine the goals and objectives of the Kimberley
Process Certification Scheme.
Regulatory and other authority (Section 5)
PRESENT LAW
No provision.
EXPLANATION OF PROVISION
Section 5(a) authorizes, and requires as necessary, the
President to issue such proclamations, regulations, licenses
and orders, and conduct such investigations as may be necessary
to carry out the Act. Section 5(b) requires any U.S. person
importing into, or exporting from, the United States rough
diamonds to keep a full record of any transaction covered by
the legislation. Section 5(b) further provides that the
President may require the person to provide this information
under oath.
Section 5(c) mandates the President to require the
appropriate agency to conduct annual reviews of the procedures
of any entity in the United States that issues Kimberley
Process Certificates for exportation to determine whether they
are in accordance with the Kimberley Process. The President is
also required to transmit to Congress a report on each annual
review.
REASON FOR CHANGE
The record keeping requirement in Section 5(b) is
consistent with Section III(b) of the Kimberley Process
Certification Scheme, that provides that documents pertaining
to the Kimberley Process Certificate be readily accessible. The
oversight provision in Section 5(c) is designed to strengthen
government oversight of the diamond industry's issuance of the
Kimberley Process Certificates.
Importing and exporting authorities (Section 6)
PRESENT LAW
No provision.
EXPLANATION OF PROVISION
Section 6(a)(1) designates the Bureau of Customs and Border
Protection within the Department of Homeland Security as the
importing authority. Section 6(a)(2) designates the Bureau of
the Census within the Department of Commerce as the exporting
authority. Section 6(b) requires the Secretary of State to
publish a list of all Kimberley Process participants and their
exporting and importing authorities in the Federal Register.
REASON FOR CHANGE
Section 6(a) is consistent with Section IV of the Kimberley
Process Certification Scheme, which states that each
participant in the KPCS should designate an importing and
exporting authority. While the Bureau of the Census is
designated as the exporting authority in the Act, the Committee
anticipates and fully intends that other bureaus within the
Department of Commerce, and other agencies within the U.S.
Government such as the Department of Homeland Security, the
Department of Justice and the Department of the Treasury, will
assist in enforcing this Act.
Section 6(b) is consistent with the aims of Section V of
the Kimberley Process concerning cooperation and transparency
with respect to information on designated authorities and
applicable laws and practices of each participant.
Statement of policy (Section 7)
present law
No provision.
EXPLANATION OF PROVISION
Section 7 sets forth a statement of support for the policy
that the President should promote and facilitate the adoption
of the Kimberley Process by the international community.
REASON FOR CHANGE
Section 7 is consistent with the Interlaken Declaration and
the United Nations Security Council Resolution 1459 (2003)
supporting the Kimberley Process which both stress that the
widest possible participation in the Certification Scheme is
essential and should be encouraged and facilitated.
Enforcement (Section 8)
PRESENT LAW
No provision.
EXPLANATION OF PROVISION
Section 8 sets forth civil and criminal penalties for
violations of the Act. Section 8(a)(1) provides that a civil
penalty not to exceed $10,000 may be imposed on any person who
violates, or attempts to violate, any license, order, or
regulation issued under the Act. Section 8(a)(2) provides for a
fine of not more than $50,000 or, if a natural person,
imprisonment for not more than 10 years, or both, for willful
violations, or willful attempts to violate, any license, order,
or regulation issued under this Act.
Subsection (b) provides that, in addition to the new
penalties specified in subsection (a), other civil and criminal
penalties, including seizure and forfeiture, under the customs
laws of the United States shall also apply to importations of
rough diamonds in violation of the Act.
REASON FOR CHANGE
The civil and criminal penalties are intended to ensure
compliance with the Act.
Technical assistance (Section 9)
PRESENT LAW
No provision.
EXPLANATION OF PROVISION
Section 9 permits the President to direct Federal agencies
to provide technical assistance to countries trying to
implement the Kimberley Process.
REASON FOR CHANGE
This provision is consistent with Section V(d) of the
Kimberley Process Certification Scheme which states that
participants should favorably consider requests from other
participants for assistance in improving their implementation
of the Scheme.
Sense of Congress (Section 10)
PRESENT LAW
No provision.
EXPLANATION OF PROVISION
Section 10 notes that the Kimberley Process is an ongoing
process and affirms the importance of statistical analysis and
sharing in monitoring the implementation of the Kimberley
Process and its effectiveness in reducing and eliminating the
trade in conflict diamonds. It provides that the President
should work with participants on strengthening the Process
through the adoption of measures to share statistics and that
the Executive Branch should continue to maintain statistics on
imports and exports of rough diamonds, share this data with
other participants and interested parties, and take a
leadership role in negotiating a standardized methodology for
reporting statistics.
REASON FOR CHANGE
Section 10 is consistent with the purposes of Annex III of
the Kimberley Process Certification Scheme, concerning
statistics, and also with Sections IV(e) and V(b) of the
Process, providing for the collecting and sharing of statistics
among participants.
Kimberley Process Implementation Coordinating Committee (Section 11)
CURRENT LAW
No provision.
EXPLANATION OF PROVISION
Section 11 establishes a Kimberley Process Implementation
Coordinating Committee to coordinate implementation of this
Act. The coordinating committee will be co-chaired by the
Secretary of Treasury and the Secretary of State and composed
in addition of the Secretary of Commerce, the United States
Trade Representative, the Secretary of Homeland Security, and a
representative of any other agency the President deems
appropriate.
REASON FOR CHANGE
Section 11 seeks to ensure effective implementation and
congressional oversight of the Act, through creation of a
coordinating committee made up of all the agencies with
substantive responsibilities under the Act.
Reports (Section 12)
PRESENT LAW
No provision.
EXPLANATION OF PROVISION
Section 12(a) provides for annual reports to be submitted
by the President to Congress on actions taken by countries that
export rough diamonds to the United States to control the
exports of diamonds through the Kimberley Process, and on the
identification of such countries that also export rough
diamonds not controlled through the Kimberley Process, where
such uncontrolled exports significantly increased the
likelihood that such uncontrolled diamonds would be imported
into the United States. Section 12(a) requires the President to
describe in the annual reports whether there is statistical
information or other evidence that would indicate efforts to
circumvent the Kimberley Process Certification Scheme,
including cutting rough diamonds for the purpose of
circumventing the Kimberley Process Certification Scheme.
Under section 12(b) the President is also required to
submit semi-annual reports to Congress for each country
identified under section 12(a)(3) as having problematic non-
Kimberley Process exports. These reports must explain what
actions the United States and the identified countries have
taken to ensure that non-Kimberley Process controlled diamonds
are not being exported to the United States from those
countries. These reports must continue until such a country is
no longer identified under section 12(a)(3).
REASON FOR CHANGE
Section 12 is intended to inform Congress regarding
effective implementation of the Act and of the implementation
and operation of the Kimberley Process Certification Scheme.
GAO report (Section 13)
PRESENT LAW
No provision.
EXPLANATION OF PROVISION
Section 13 provides that, not later than 24 months after
the effective date of the legislation, the Comptroller General
is required to transmit a report to Congress on the
effectiveness of this legislation in preventing the importation
or exportation of rough diamonds prohibited under Section 4.
The report shall include any recommendations on any
modifications to the legislation.
REASON FOR CHANGE
Section 13 is intended to inform Congress regarding
effective implementation of the Act.
Effective date (Section 14)
PRESENT LAW
No provision.
EXPLANATION OF PROVISION
Section 14 provides an effective date for the Act.
Specifically, Section 14 provides that the Act shall take
effect on the date the President certifies to Congress that
either (1) a waiver granted by the WTO is in effect, or (2) an
applicable decision in a United Nations Security Council
resolution adopted pursuant to Chapter VII of the United
Nations Charter is in effect.
REASON FOR CHANGE
Section 14 is consistent with the Preamble to the Kimberley
Process Certification Scheme and the Interlaken Declaration
which provide that the international certification scheme for
rough diamonds and measures taken to implement the scheme will
be consistent with international law governing international
trade.
VOTES OF THE COMMITTEE
In compliance with section 133 of the Legislative
Reorganization Act of 1946, the Committee states that the Clean
Diamond Act, as amended, was ordered favorably reported with a
quorum present, by voice vote, on April 2, 2003.
BUDGETARY IMPACT
In compliance with sections 308 and 403 of the
Congressional Budget Act of 1974, and paragraph 11(a) and (b)
of rule XXVI of the Standing Rules of the Senate, and section
423 of the Unfunded Mandates Reform Act of 1995 (P.L. 104-4),
the following letter has been received from the Congressional
Budget Office on the budgetary and regulatory impact of the
legislation:
CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
S. 760--Clean Diamond Trade Act
S. 760 would prohibit the importation into and exportation
from the United States of any rough diamonds (as defined in the
bill) that have not been controlled through the Kimberley
Process Certification Scheme (KPCS). The diamonds prohibited
from trade are those that come from or go to countries and
territories that do not participate in the Certification
Scheme. The KPCS outlines a series of recommended standards,
practices, and procedures for certification of rough diamonds
through an international document that was agreed to by the
United States and 47 other countries. In addition, S. 760 would
impose civil penalties on individuals who engage in the trade
of such diamonds.
CBO estimates that prohibiting the trade of such diamonds
would have no effect on federal revenues because the duty rate
on such imports is zero. Also, any additional revenues
resulting from the civil penalties contained in the bill would
be less than $500,000 per year. The bill would not affect
direct spending.
S. 760 would impose a private-sector mandate, as defined by
the Unfunded Mandates Reform Act (UMRA), on importers and
exporters of certain diamonds. The bill would prohibit the
importation into and exportation from the United States of
rough diamonds that have not been controlled through the KPCS.
According to government and industry sources, the diamond
industry began such a prohibition voluntarily on January 1,
2003. Therefore the direct cost of the mandate would be
minimal, if any, and would fall well below the annual threshold
established by UMRA for private-sector mandates ($117 million
in 2003, adjusted annually for inflation). CBO has determined
that the bill contains no intergovernmental mandates as defined
in the UMRA and would impose no costs on state, local, or
tribal governments.
The CBO staff contacts for this estimate are Annie Bartsch
(for federal revenues), and Paige Piper/Bach (for the impact on
the private sector). This estimate was approved by G. Thomas
Woodward, Assistant Director for Tax Analysis.
CHANGES IN EXISTING LAW
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the Committee finds no changes in
existing law made by the bill S. 760, as ordered reported.