Last Friday, the White House said that some diamonds, gemstones, and natural pearls may be imported into the United States tariff-free. While that’s good news for the industry, the key words there are some and may.
For the moment, it doesn’t look as if anything has changed, and gem imports will continue to be tariffed. Those duties may eventually be dropped, but when and if that happens is largely outside the industry’s control. The people I spoke to said the industry needs to be patient and wait for a formal notice.
Regardless, this executive order is a significant development that could give the industry a much-needed boost. Here are answers to some frequently asked questions on this topic, based on what we know now:
What happened, and why?
An executive order, issued Sept. 5, said that items listed on the newly created Annex III can “potentially” be imported tariff-free. The list includes rough and polished diamonds, natural pearls, and rough and polished colored stones. (You can see a full list of jewelry-related products at the end of this article.)
As far as why, after months of lobbying from the industry, the administration agreed with its argument: Since diamonds, gemstones, and pearls are natural products that aren’t found in the United States in significant quantities, they shouldn’t be hit with duties. That’s why agricultural products like coffee and avocados are also on the list, but watches aren’t—because it’s still theoretically possible to manufacture timepieces in the United States.
Does that mean the diamond tariffs are gone?
Nope—unless you’re importing gold bars (which we’ll get to). The new executive order removes the duties only for products coming from trading partners that have concluded deals with the United States.
The White House statement said that deals are in the works with the European Union, the United Kingdom, Japan, Vietnam, the Philippines, and South Korea. Big exporters like India, as well as major diamond producers like Botswana, don’t appear to be currently in the mix.
In any case, a possible deal isn’t the same as a final one. The White House has said that a deal exists with Japan—but other reports have cast doubt on that.
Theoretically, if the European Union signs a final deal soon, diamonds cut in Belgium could be imported duty-free—which would be nice news for the industry in Antwerp. But it’s probably best to wait for official word from Customs and Border Protection (CBP) or the U.S. Treasury—because the way the EO is phrased, even if deals are signed with the exporting country, those items may still be subject to tariffs.
Hold it. Why’s that?
Annex III is subtitled “Potential Tariff Adjustments for Aligned Partners,” and the important word there is potential. The order stipulates that the president will make the final determination about which products receive which duties at his discretion. It says that he “may” drop the tariffs on the items in question if deals are signed, and that his decision could vary from deal to deal.
Also, please pay attention to the narrow range of goods listed on that annex: unset rough and polished diamonds, unset gemstones, and natural pearls. That list doesn’t include lab-grown diamonds or cultured pearls, which have different harmonized tariff codes.
Why were cultured pearls left off?
I don’t know. There isn’t much U.S. pearl farming, and I am told that labor costs and environmental restrictions make it very difficult to scale.
So how does this affect diamond and gemstone jewelry imports?
It doesn’t. It only covers unset (i.e., loose) diamonds and gemstones. If you produce a piece of diamond jewelry in a country besides America, it will still be subject to a tariff based on its full value, because it was “substantially transformed” overseas. And no, you can’t deduct the cost of the stone.
I’ve already paid tariffs on certain items. Will I get my money back?
No. That will happen only if the U.S. Supreme Court, which recently agreed to look at these new tariffs, strikes them down.
Is it likely that will happen?
I can’t speculate. Two courts have already said that the president doesn’t have the power to issue such wide-ranging import taxes, but given that the Supreme Court has repeatedly ruled in Trump’s favor, I wouldn’t bet on it. If the court does strike tariffs down—which again is a big if—it’s possible that all the money paid will be refunded to U.S. importers. But we’re a long way from that.
What about the gold bar thing?
Gold bars have long been ineligible for tariffs. However, this summer a customs official ruled a certain kind of gold bar could receive duties. That’s now been rectified. And since gold bars are on a different annex than the other items we’re talking about, the exemption is effective immediately and includes countries without a trade deal.
It seems there are a lot of things still up in the air.
Correct. People in just about every country all around the world are trying to understand what’s happening with tariffs. And it’s safe to say that no one really knows anything except the people in the White House. And it’s possible that they don’t either.
LIST OF JEWELRY PRODUCTS ON ANNEX III
These can be found on pages 83 and 84
7101.10.30 Natural pearls, graded and temporarily strung for convenience of transport
7101.10.60 Natural pearls, not strung, mounted, or set
7102.10.00 Diamonds, unsorted, whether or not worked
7102.31.00 Nonindustrial diamonds, unworked or simply sawn, cleaved, or bruted
7102.39.00 Nonindustrial diamonds, worked, but not mounted or set
7103.10.20 Precious stones (other than diamonds) and semiprecious stones, unworked
7103.10.40 Precious stones (other than diamonds) and semiprecious stones, simply sawn or roughly shaped
7103.91.00 Rubies, sapphires, and emeralds, worked, whether or not graded, but not strung, mounted, or set
7103.99.10 Precious or semiprecious stones, nesoi [not elsewhere specified or indicated], cut but not set, suitable for use in the manufacture of jewelry
7103.99.50 Precious or semiprecious stones, nesoi, worked, whether or not graded, but not strung, mounted, or set
7110.11.00 Platinum, unwrought or in powder form
7110.19.00 Platinum, in semi-manufactured forms
7110.21.00 Palladium, unwrought or in powder form
7110.29.00 Palladium, in semi-manufactured forms
7110.31.00 Rhodium, unwrought or in powder form
7110.39.00 Rhodium, in semi-manufactured forms