Due diligence

Position paper on sustainable sourcing of minerals

The EFJ calls for the concerted and coherent implementation of the European regulation establishing a due diligence system for minerals supply. The Federation reiterates the need to build a support system for SMEs to help them adapt to the new EU framework.

Key points:

  • The European Federation of Jewellery welcomes the adoption of the European regulation on a due diligence system for responsible sourcing of minerals as well as the Delegated Act setting the methodology and criteria for the assessment and recognition of voluntary due diligence schemes.
  • The alignment of the European legislation with the OECD framework is of paramount importance for a simple and workable implementation as of the 1st of January 2021.
  • SMEs, which are the backbone of the jewellery sector, should be proactive and show their willingness to adapt to the new framework. However, an appropriate support mechanism needs to be put in place to help them comply with the rules.
  • The Federation is committed to remaining fully involved in the ongoing process designed to create the tools to support SMEs in the implementation.

The European Federation of Jewellery (EFJ) has always advocated ethical and responsible business conduct in the supply chain of the jewellery sector. The EFJ therefore considers the adoption of the European regulation on a due diligence system for a responsible sourcing of minerals as a step forward and advocates broad implementation by all actors provided they are duly supported.

The jewellery sector is fragmented, and consists mainly of Small and Medium Sized Enterprises (SMEs). It is therefore important to draw inspiration from existing private and public certification schemes and to adopt a streamlined approach for appropriate enforcement of the regulation on all levels and branches.

In this regard, the fact that the European Union (EU) opens up the possibility for private systems to be recognised as compliant with the European regulation is key. This is notably the case of the Responsible Jewellery Council’s (RJC) Code of Practices and Chain of Custody Standard, which integrate the OECD guidelines into a special framework for companies to handle and trade gold and platinum-group metals in a way that is fully traceable and responsibly sourced. It should be stressed that the RJC has recently reinforced its activities by launching its renewed Code of Practices, where the OECD’s five-step framework on due diligence has been aligned with the diamond supply chain. Other systems, such as the London Bullion Market’s (LBMA) responsible Gold Guidance, also implement the OECD gold delivery due diligence guidance to the “Good delivery refiners.”

These existing due diligence schemes are largely inspired by the OECD framework, and the EFJ considers as positive the fact that the European regulation and the Delegated Act 2019/429 align with the OECD system. The Federation is particularly satisfied with the uniform approach adopted regarding the criteria and methodology to assess voluntary supply chain due diligence schemes which pursue the same objectives as the European regulation. The equivalence criteria put in place by the EU will allow companies which comply with another due diligence model to obtain a certificate of equivalence. The EFJ also welcomes the future collaboration between the European Commission and the OECD services regarding reports that will seek to assess whether the private scheme fulfils the conditions for public recognition. The alignment between the EU and the OECD system will strengthen the coherence and will ease the steps of the private operators. However, the EFJ will remain vigilant that the implementation of the EU regulation is smooth, understandable, practicable and will not lead to administrative burden for companies. Furthermore, it is essential to protect an equal level playing field.

Moreover, the EFJ hereby reaffirms its commitment to continue to be fully involved in the ongoing process regarding the creation of tools to help SMEs reach the objectives set in the regulation. As the jewellery sector is mainly comprised of SMEs, the current 100kg threshold set by the EU legislation on gold imports, above which the mineral must be traced, means that most companies fall outside of the scope of the current regulation. However, the EFJ thinks that all the actors in the jewellery sector should be proactive and should have compliance with the rules as a medium-term objective. To accompany the sector in this venture, it is essential to put in place solid support measures. The EFJ is therefore happy to be a member of the Advisory Board set up by the European Commission to provide input to the project aiming at creating an online tool to help SMEs implement the due diligence system. This tool will be launched in November 2019.

The EFJ is also convinced that the EU should rely on the numerous actors of the sector, and especially the professional associations in each country. They can play a key role in disseminating the information and answering questions. In turn, it would also allow the European Commission to have active and productive feedback from the jewellery sector, which will eventually lead to adequate and carefully-studied measures being taken. A proactive and collaborative approach between governments and industry has already proven to be very constructive, efficient and successful in the process of the renewal of the RJC Code of Practices and its subsequent implementation, and could serve as a blueprint for future similar undertakings in this respect.

Finally, the EFJ would like to urge the European Commission to refrain from extending the scope of the European regulation on due diligence systems for minerals supply to diamonds as the international trade in rough diamonds is already certified by the Kimberley Process Certification Scheme (KPCS). Although the EFJ recognises that more can be done to make the Kimberley Process stronger and more efficient, we believe that the system has also many strengths that cannot be underestimated. In addition to this regulatory framework, the worldwide diamond industry is proactive in ensuring responsible mineral sourcing through the implementation of several voluntary tools:

  • The RJC’s renewed Code of Practices where the OECD due diligence framework has been aligned with the diamond supply chain;
  • The reinforced System of Warranties (SoW) of the World Diamond Council (WDC), a tool that supports the actors of the diamond industry in complying with the Kimberley Process Certification Scheme[7] and requiring adhering parties to conduct a self-assessment to ascertain whether they meet universally-accepted principles on human and labour rights, anti-money laundering and anti-corruption.

Moreover, the EFJ would like to underline that the diamond trade is highly competitive and internationally organised. Hence, a unilateral application of the European regulation will put the EU diamond industry at a competitive disadvantage vis-à-vis its competitors, which are all located in third countries outside the EU. Furthermore, it should be considered that the diamond supply chain fundamentally differs from other mineral supply chains due to the non-uniform nature of the product. As Europe’s strongest presence in the supply chain is to be found in the midstream, which characterises the uniqueness of the diamond supply chain, a unilateral application of EU Regulation 2017/821 on the diamond supply chain would be detrimental to Europe’s economic interests, but also to the sustainability standards the EU would aim to pursue in case industry players would decide to shift operations away from the EU. Since the EU, both at governmental level and industry level, has always been the forerunner of diamond transparency and sustainability initiatives, the extension of the scope of EU Regulation 2017/821 to diamonds would likely have the opposite effect of the desired policy objective with regard to the global diamond value chain.

Download: EFJ position paper – Sustainable sourcing of minerals

International trade

Position paper on trade relationships with Third countries

The EFJ advocates reciprocity in the trade relationships with Third countries in order to unlock the export potential of the European jewellery sector. 

Key points:

  • The export potential of the EU jewellery sector is hampered by high customs duties and non-tariff trade barriers. Both of them currently prevent European jewels from reaching over 60% of potential consumers in the world.
  • The European Federation of Jewellery (EFJ) calls for the reciprocity in the access to Third country markets.
  • The EFJ strongly supports an ambitious European trade policy with the negotiations of free trade agreements with countries and regional areas. Both OECD and non OECD countries should be covered.
  • The jewellery sector should be systematically included in EU trade negotiations.
  • The adoption of measures allowing free market access would strengthen the competitiveness of the European jewellery

Jewellery is one of the flagships of creative European industries and the European know how is recognized worldwide. Largely based on small and medium-sized enterprises, it generates €30 billion in sales annually. €6.3 billion of the jewels imported in the EU territory are manufactured in Third countries, mainly Switzerland, Thailand, India and China. According to the Eurostat data, in 2015, the EU ranked 5th for the exports of jewellery products and silversmith behind India, US, China and Hong-Kong. In 2016, the EU imported €6.3 billion in jewellery products and exported €10.7 billion.  It is worth noticing that the EU trade balance for jewellery products is generally positive but imports from countries who apply high custom duties such as China and India are growing rapidly and that the trade balance with these countries as well as with Brazil was negative in 2016 according to Eurostat.

The growth of the European jewellery sector on the International scene and its trade potential are clearly hindered by the lack of reciprocity in the trade relationships with non EU countries. It is even impossible to penetrate some countries as such trade obstacles are numerous. In concrete terms, it is estimated that current customs duties and non-tariff trade barriers prevent European jewels from reaching over 60% of potential consumers in the world.

This analysis of lack of reciprocity is truth for both the OECD and non OECD countries.

For non OECD countries, the access to their market is highly hampered by the application of high customs duties, taxes on luxury goods and the difficulties to get authorisations and licenses. For instance, to trade with China, a European exporter has to pay a custom duty of 20% on gold and silver articles and of 35% for platinum and other metal articles. Moreover, the exporter has to pay a luxury tax amounting to 20% of the price of the product. On top of this, non-tariff barriers which differ from one province to another are applied such as the engraving of the weight of stones inside the rings.  The loss of competitiveness of the European sector regarding the non OECD countries is twofold: first, it is extremely difficult to reach their domestic market; second, they have become new producers and as a result, new competitors in several exporting countries. In the US, Canada, Japan and the European countries, they have already acquired significant market shares. This is due to favorable conditions that they benefit for accessing rich markets, namely lower production costs, better supply conditions for gems, pearls and accessory products as well as attractive trade conditions. Countries which benefit from the Generalised System of Preferences can export almost freely to the EU and some EU export markets like the US.

For OECD countries, customs duties applied to EU exports are generally higher than the European import duties. Despite the different rounds of negotiations under the World Trade Organisation, we can notice a deterioration of the situation. For instance, with the US, which represent 30% of the Italian exports, the difference between the two duties amounted to 2,7% in 1995 while it is now 3% – US import duties: 5,5% / EU import duties: 2,5% -.

Comparison between customs duties

Country Import duties on EU products EU import duties
Brazil 18% 2,5%
Russia 10%-18% 2,5%
India 15% 2,5%
China 20%-35% 2,5%
US 5,5% 2,5%

Concrete examples showing the impact of the difference between customs duties on the final price of a bracelet

A European 2000 € bracelet exported to the following countries will cost:

US 2110,00€
China 2400 -2700,00€
Russia 2240,00€

The mentioned prices can further increase if the country applies other barriers such as luxury taxes (e.g. China).

While a 2000 $ bracelet produced in one of these countries, once imported to Europe, will cost:

US 2050,00$
China 2050,00$
Russia 2050,00$

For jewellery products made of gold, the price of the raw material is high compared to the added value brought by the manufacturing part. As a result, custom duties from 5% on the final product shrink drastically the gain of European companies. And in a worse scenario with customs duties above 10%, the legal trade of gold jewellery products is highly compromised.

Table illustrating the impact of import duties on gold jewellery products

Posts Price in euro/gram
Fine gold per gram 36
Fine gold content per product having a fineness of 585 or 14ct (fine gold price x % of gold content in an article of 585/1000 or 14ct) 21.06
Manufacturing (average) 2
Price after manufacturing 23.06
US import duties 5,5 (average) 1.27
Impact of the customs duties on the company’s added value (manufacturing part) 63% (1.27×100/2)

 For European manufacturers and especially SMEs, all these trade obstacles make difficult and even often impossible to penetrate some markets and, when they trade, to operate without economic loss. Unlike famous brands, SMEs can hardly include these additional costs in their final price because they can’t value their name in the same way.

As underlined by the President of the European Commission, Jean-Claude Juncker, in its State of the Union speech delivered in September 2017 in the European Parliament, “Europe is open for business. But there must be reciprocity. We have to get what we give. Trade is not something abstract. Trade is about jobs, creating new opportunities for Europe’s businesses big and small.”

The European Federation of Jewellery (EFJ) fully agrees with Mr Juncker and strongly supports the current EU ambitious trade agenda with the negotiations of free trade agreements with both countries and regional areas. This proactivity is an opportunity to achieve reciprocity in the access to Third countries markets. Furthermore, the EFJ calls on the EU for the systematic inclusion of the jewellery sector in the trade negotiations with Third countries.

The elimination of tariff and non-tariff barriers to trade for jewellery products will bring multiple benefits:

  • More markets opened to European products;
  • Increased competitiveness for the European jewellery sector;
  • Fairer competition among producing countries;
  • More jobs in the EU;
  • Promotion of the European know how.

Download the EFJ position paper on international trade

Mutual recognition

Position paper on the mutual recognition of goods

The jewellery sector is one of the non-harmonised sectors in the EU and thus the free circulation of its products is not completely free. The European Federation of Jewellery demands that the principle of mutual recognition is fully applied to jewellery products and hopes that the future EU initiatives on mutual recognition will help the sector to overcome the existing barriers.

Key points:

  • The jewellery sector is one of the non-harmonised sectors in the EU and thus the free circulation of jewellery products in the single market is not guaranteed.
  • The countries which apply the hallmarking system demand further checks and the application of an additional mark on jewellery products lawfully produced and marketed in another Member State. This creates obstacles to the free circulation of goods and represents a major economic burden for EU economic operators.
  • The European Federation of Jewellery (EFJ) demands that the principle of mutual recognition is fully applied to jewellery products and thus urges the European Commission to intervene in order to standardize and harmonise all technical and methodological rules for jewellery products (fineness, soldering, etc.) in the EU.
  • The EFJ also demands that the fineness and identification marks are directly mutually recognised among EU countries.

The EFJ was founded in 2013 to represent the jewellery sector at the European level. The EFJ supports free trade among EU Member States and with third countries as a mean to increase the competitiveness of the sector while contributing to the creation of growth and jobs. In this respect, the EFJ warmly welcomes the adoption early 2019 of the Regulation on the mutual recognition of goods lawfully marketed in another Member State.

Despite the principle of ‘mutual recognition’ enshrined in Article 28 and 30 of the TFEU, jewellery products are still partially excluded from free circulation in the EU internal market. In fact, the jewellery sector is one of the non-harmonised sectors in the EU and despite the efforts made by the European Commission with the support of some Member States, it has not been possible to reduce the obstacles to the free circulation of jewellery products until now. As a matter of fact, many Member States demand further checks, the so-called preventive control, on their own territory and the placement of an additional mark on jewellery products even when the products have been legally marketed in another Member State.

It must be mentioned that there is no effective ‘mutual recognition’ even among the Member States that decided to adopt the ‘hallmarking’ system while, according to the Court case 293/93 (Houtwipper case), this should not be the case. The hallmarking system requires that all products made of precious metals need to be checked and marketed by a third independent body which received an authorisation by the State, generally the Assay Office, before being put on the market. These operations represent an additional cost for the economic operators as they are supposed to pay to perform these additional checks. Furthermore, the only international recognised method of analysis is a destructive one entailing such damages that the analysed products are completely ruined and cannot be sold. To deal with this problem, verifications are done only on a sample of the presented batch but this system does not have any statistical value.

To partially overcome these obstacles, many countries which adopted the hallmarking system, decided to sign a specific international treaty: the Vienna Convention. The Convention establishes the Common Control Mark (CCM) which allows to market goods among the Members of the Convention without further testing and marking.

While the Convention is sufficient to allow free circulation of jewellery products between the parties, many important EU countries that apply preventive controls are not members of it such as France and Spain. For this reason, the EFJ would rather support the establishment of an EU system aimed at reinforcing the mutual recognition principle in order to overthrow the anachronistic and costly barriers that make jewellery products less competitive on the internal market.

The EFJ generally supports all initiatives aimed at deepening and completing the EU Single Market. With particular regard to the new Regulation on mutual recognition, the EFJ is pleased with the introduction of the ‘mutual recognition declaration’ which should make easier for the economic operators to demonstrate that their products are lawfully marketed in one Member State.

However, in order to allow free circulation of jewellery products in the EU, the EFJ urges the European Commission to intervene in order to standardize and harmonise all technical and methodological rules for jewellery products (fineness, soldering, etc.) in the EU. Furthermore, the EFJ demands that the fineness and identification marks are directly mutually recognised among EU countries.

Finally, the EFJ believes that market surveillance instruments would be much more appropriate to check the products compliance with EU legislation and technical rules than preventive controls. According to the EFJ, a system based on market surveillance would guarantee consistency across the EU and would ensure better consumer protection.