The U.S. government has issued updated guidelines allowing the import of certain diamonds and diamond jewelry from Russian sources, provided the purchases were made before the sanctions were implemented on March 1, 2024.
The guidelines, released by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), aim to clarify regulations for diamond importers and jewellers.
OFAC’s New Licenses for ‘Grandfathered’ Diamonds
OFAC introduced General License No. 103 and General License No. 104 to clarify the handling of diamonds purchased before the sanctions took effect. These guidelines apply to diamonds of Russian or unknown origin, providing direction on diamonds that were already in the supply chain but had not yet reached the U.S.
General License No. 103 allows the import of diamond jewelry that was outside Russia before March 1, 2024. While this facilitates the entry of items that were already in transit or awaiting shipment, the government highlighted that existing reporting and compliance obligations remain in place.
General License No. 104 applies to nonindustrial loose diamonds. Diamonds of 1 carat or larger located outside Russia before March 1 are eligible for import, while diamonds between 0.50 and 1 carat are eligible as long as they were outside Russia by September 1, 2024.
Impact on Diamond Supply Chains
The clarification offered by these licenses helps address issues in the diamond trade, where diamonds purchased before the sanctions were left in limbo. Many rough diamonds had been sent to India for cutting and polishing, and U.S. importers were unsure whether these could enter the country under the new sanctions framework.
OFAC’s ruling allows diamonds purchased before March 1 to enter the U.S. market. However, questions remain about what proof will be required to show that the diamonds were outside Russia by the specified dates. The government has not yet provided clear guidelines on this matter, leaving some uncertainty for jewellers and traders.
Compliance with Existing Sanctions
Despite these allowances, the U.S. sanctions on Russian diamonds remain in place for any purchases made after March 1, 2024. These rules also cover diamonds that have been “substantially transformed” in another country, such as those polished in India. From September 1, 2024, the sanctions will extend to diamonds of 0.50 carats and larger, increasing the importance of compliance with OFAC regulations.
Industry Impact
For the jewelry industry, the new guidelines clarify the status of pre-sanction purchases, allowing businesses to proceed with goods that were in legal limbo. However, the rules also require jewelers to verify that their diamonds meet OFAC’s criteria, potentially necessitating additional documentation to confirm the origin and location of diamonds.
