Professional Jeweler Archive: Grasping the Canadian Pedigree

October 2002


Grasping the Canadian Pedigree

How Canada tracks and certifies its diamond bonanza will dictate how the gems are perceived around the world

The allure of “Made in Canada” has caused some U.S. manufacturers, dealers and retailers to line up for Canadian diamonds (see Professional Jeweler September 2002, p. 21). “Canada is producing great colors in the qualities we need,” says Norbert Steinmetz of E. Schreiber, a New York City diamond firm. And then there’s the guarantee.

E. Schreiber sells diamonds certified by a program established by Canada’s Northwest Territories. The NWT government guarantees the diamonds are mined, cut and polished in Canada, using the logo Canadian Arctic.™ Under the program, each diamond is tracked from the mine through the cutting factory. In fact, the local cutting factories that are part of the program signed agreements allowing the government to audit and inspect their facilities and cutting process at any time.

Once cut and certified, each diamond is accompanied by the NWT certificate and is laser-engraved with a Canadian maple leaf logo and the certificate number. The diamonds also receive a unique “fingerprint” through the Gemprint identification system, and NWT scans each polished diamond, portrays it on the certificate and stores the information in a central database.

Much of the attraction to the diamonds lies in Canada’s history as a peaceful country, unlike nations where conflict diamonds are traded. Canadian diamonds also are thought of as diamonds for good, like those from Botswana, Namibia, South Africa or Australia, where mining profits are used to elevate living standards.

Growing Pains

Currently, however, only 10% of Canadian diamond production (by value) is cut and polished in the Northwest Territories, and only these diamonds can get the NWT certificates. That’s because the only commercially functioning diamond producer to date, BHP-Billiton’s Ekati mine, sells one-tenth of its production to the NWT’s three local factories.

This means the 90% of Canada’s rough diamonds cut outside the country have no government certificates. Some in the industry fear this could lead to diamonds from other sources being passed off as Canadian. “No one can differentiate uncertified Canadian diamonds from other diamonds, especially once they are cut,” says Oren Sofer of Beny Sofer & Sons LLC of New York City, who sells the NWT-certified diamonds through his Canadia brand.

As early as 1999, the Calgary Herald reported world markets were selling as “Canadian” far more diamonds than could have been mined in Ekati’s short life span.

Some experts hope the Kimberley Process will help Canada sort out its tracking and certifying issues. Kimberley has created a numbers-in-equals-numbers-out system of controls for all producing countries and cutting centers to bar conflict diamonds from the legitimate trade. The Kimberley system is scheduled to go into effect in November.

The Coming Paper Trail

Canada wants to encourage free competition and engage domestic and foreign companies to develop the diamond business. It proposes that any diamond mined in Canada – even those cut and polished elsewhere – be allowed to carry a Canadian pedigree. But it also wants to make sure the Canadian diamond designation is not misrepresented. A tracking system to guarantee pedigree is in the works.

The Canadian Competition Bureau document detailing the proposed system says all diamonds would be tracked via a paper trail that starts at the mine and continues at sorting, marketing and cutting facilities and then carries on to jewelry manufacturers and retailers. All paperwork would have to be kept on file for seven to eight years.

“If transparency of the diamond business prevails and consumers don’t have to worry about country of origin, a Canadian pedigree will be a value-added icing on the cake for Canadians,” says one observer who asked not to be identified by name. “However, customers will always pay most attention to whether they find a diamond beautiful and irresistible.”

Canada’s challenge to track its diamonds will increase as production ramps up at BHP-Billiton’s Misery pipe, the Rio Tinto/Aber Diamond Diavik mine (coming online in 2003) and De Beers’ Snap Lake project (scheduled to open in 2006). Other diamond exploration is taking place in various locations across Canada as well. In all, Canadian experts believe the country will be the world’s third largest producer of diamonds within the decade after Botswana and Russia.

– by Robert Weldon, G.G.

Struggling with ‘Da Bears’

Two of the three cutting factories in Canada’s Northwest Territories have signed onto the NWT government’s certification program guaranteeing their diamonds as Canadian in origin. The third factory, Sirius Diamonds Ltd., doesn’t participate – yet. Instead, it offers jewelers its own guarantees, which are symbolized by a polar bear logo.

A dispute over use of the polar bear image as a brand remains the subject of litigation between Sirius and the NWT government. NWT has used a polar bear as a trademark since the 1960s on items as diverse as stationery and license plates (though not on its certified diamonds). Sirius says it has a right to use a polar bear on its diamonds. “In addition to pending applications for polar bear images in connection with diamonds and diamond cutting, polishing and marketing, which are on file in Canada and the U.S., Sirius has rights at common law to these marks, gained through the extensive use and promotion of polar bears and diamonds,” says Sirius attorney Susan Ben-Oliel.

The NWT government sought an injunction to stop Sirius from using a polar bear logo as a brand, but a Canadian judge dismissed the request in June 2001. “Our position is that the polar bear is a registered trademark,” says Martin Irving, director of diamond projects for the NWT government. “We license use of the trademark, and the concern is that others would want to use it as well. But the court has so far ruled that Sirius can use its polar bear design until a final decision is made.”

Litigation in Canadian courts is pending, but Sirius says it expects the matter to be resolved soon. Sirius also hopes to begin taking part in the NWT certification program.

New York diamond company E. Schreiber told Professional Jeweler it signed a letter of intent in August proposing to buy a stake in Sirius. Schreiber promotes NWT certified diamonds and would welcome Sirius’ participation in the NWT program.

– R.W.

Copyright © 2002 by Bond Communications