Unprecedented Ruling on Rough Diamond Transaction in Israel

Grading
21/12/2016 13:29

Avi Krawitz of Rapaport News details a decision by the Israel Diamond Exchange (IDE) to enforce a new rule compelling a dealer to cancel the sale of a rough diamond after he failed to disclose that a stone underwent value analysis using a Sarine Galaxy machine. Krawitz has been informed it is the first ever enforcement of new guidelines the World Federation of Diamond Bourses (WFDB) adopted in May aiming to keep a level playing field between both parties trading rough diamonds. "According to the WFDB bylaws, sellers must inform buyers if a rough diamond has undergone inspection using the Galaxy machine, or any similar system that indicates the stone’s value. Failure to do so could annul the transaction and the seller could be subject to further claims." Sarine's Galaxy inclusion scanning technology provides rough diamond traders with the means to quickly and automatically inspect, evaluate and determine the value of a rough stone by comprehensively mapping its inclusions, regardless of their type, size and location.

Krawitz explains that, "Disclosure is required when using the Galaxy 2000 model, which scans the diamond but without physically marking where the inclusions are, thus leaving no record of the analysis on the stone. Marking is part of the process with the Galaxy 1000 system, which is predominantly used by manufacturers." Failure to disclose undermines the level playing field of transactions, putting the buyer at a disadvantage. A source told Krawitz that the IDE determined a transaction occurred in which the rough supplier failed to disclose his use of the Galaxy 2000, and once it was proven the stone had undergone screening, the seller was ordered to reclaim ownership and provide a full refund for the diamond. “Full disclosure and transparency is of utmost importance to us,” said Yoram Dvash, president of IDE. “The WFDB decision especially benefits the smaller manufacturers who form the base of Israel’s manufacturing pyramid.”