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New Regime on the Trade of Rough Diamonds in Macau

Earlier this month, Law 15/2019 on the application of the Kimberley Process Certification System (KPCS) for the international trade in rough diamonds came into force in Macau.

September 26,2019

by: Nuno Sardinha da Mata & Gonçalo Figueiredo

The KPCS was established in 2003 after the United Nations General Assembly Resolution A/RES/55/56 recommended the creation of an international certification scheme for rough diamonds. This scheme aims to prevent diamonds mined in war zones (often used do subsidise insurgent and rebel movements) from entering the rough diamond market.

According to the new law, imported rough diamonds become illegal in Macau if they derive from a country or region that doesn’t participate in the Kimberley scheme. When importing/exporting rough diamonds, a certification issued by the competent authority of each participant country is needed. A request must be submitted to obtain that certification and an export license in Macau, including a list of required documents. The origin of the rough diamonds must be certified, as well as the compliance of the transaction with the KPCS.

The trade of diamonds within this new regime entails a somewhat lengthy process to be followed and particular requirements to be complied with. Some voices have been raising, stating that the KPCS has been highly fallible. In theory, though, that certification is enough to ensure that no rough diamonds are imported from non-participating countries. Without that certification, the import of rough diamonds will not be allowed in Macau. Additionally, the customs services can deny the import of diamonds that don’t observe the newly imposed conditions.

There is a need for both a certification and a license to export rough diamonds, and the diamonds should match the information described in those documents. The designated entity to issue the certification in the territory is the Macau Economic Bureau (DSE).

When the diamonds are in transit (meaning that they are only passing by Macau to the next destination), solely a “transit license” is required. In this case, if the containers remain sealed, there is no need to verify the certification issued by the country of origin.

Whomever imports, exports, transits, buys, sells or transports rough diamonds must keep, for at least five years, an informatic database, with all the registry data of those activities. Failing to comply with these new rules can lead to administrative fees and criminal responsibility. Administrative fees applied could range between MOP$10,000 and MOP$5 million, depending on the type of document lacking on the process or the violation incurred. Additionally, there is the possibility of accessory sanctions. These can be the loss of the diamonds to the MSAR, the revocation of certificates already issued or being unable to receive new certificates within the maximum period of two years. Besides that, some cases could also be subject to criminal procedures.

Last year, Macau signed an agreement with the Shanghai Diamond Exchange (SDE), which aims to turn the city into the centre of diamond commerce between China and the Portuguese speaking countries.  The doors will now be open for diamond trade with the countries that have already adopted KPCS. With this new legislation, and adhering to KPCS, Macau positions itself against “blood diamond” trades. At the same time, new business opportunities are created in the rough diamond commerce sector, as a way to diversify its economy. To be well prepared can define the success of the business, and at C&C Lawyers, we are ready to assist you in any step of the way.

 


Nuno Sardinha da Mata
Partner
sardinha@ccadvog.com

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