U.S. tariffs are the biggest threat to the colored gemstone industry the American Gem Trade Association (AGTA) has ever seen, the group’s CEO John Ford said at a seminar titled “Talking Tariffs,” which took place July 23 in New York City.
AGTA has been speaking with members of Congress and the Trump administration about exempting colored stones from current levies, Ford said.
“Loose colored gemstones are a little different from diamonds in that we are a net export,” he noted. “That distinguishes us from other parts of the jewelry industry.”
Panelist Frank Phifer, senior vice president of Hecht, Latham, Spencer & Associates, AGTA’s lobbying firm, said that as most critical minerals are exempt from tariffs, the association wants colored gemstones added to the roster of duty-free products.
“Loose colored gemstones are not geologically available in the United States,” Phifer said. “Without the availability, these tariffs become punitive and disrupt the supply chain.”
Not only are the goods not found here, but the United States lacks the ability to cut them, Ford noted.
“An example is the Montana sapphire,” he said. “They have to be cut overseas because the industry to cut that melee economically does not exist here.”
Until gemstones are exempted from tariffs—which is hardly a given—gemstone importers can use a “duty-deferral mechanism,” said Phifer.
“If you bring a good into a Customs-bonded warehouse at a 50% [tariff rate] from Brazil and you store the goods without paying duty, if the tariff rate drops in two years, you can import it to the United States and pay the lower duty,” he said. “A temporary importation under bond [TIB] can be used [to bring in] commercial samples to take orders on merchandise, though there’s a caveat that they have to be either imported or exported within a year. Your Customs brokers and your attorneys can figure out what kind of duty-deferral mechanism would be good for your specific product.”
It’s also possible that since some of the buildings on 47th Street—Manhattan’s Diamond District—have been designated free trade zones, the importer can defer the tariff payment until the item leaves the premises.
“We have 18 members in this building [580 Fifth Ave.], which is typically a free trade zone,” Ford said. “We have an AGTA member that’s volunteered to be the test case for us. We’re going to make application for the designation, and then we’re going to go through the process of importing some goods and see how it all works. Then we’re going to share [the information] not only with our AGTA members but our brothers in the diamond business.
“Unfortunately, if you’re not in a free trade zone, that doesn’t help you. But what we’re trying to do is find different ways to mitigate things where different AGTA members can work together,” Ford continued. “While we want to get rid of the [gemstone] tariffs, we also have to live with them while they’re here.”
The panelists answered questions from AGTA members:
– Noam Gerber, manager of sales for shipper Malca-Amit, said companies like his have two options for charging tariffs. “One is that our broker would issue the invoice for the tariff and the duties. The other option is you deal directly with Customs. We would issue the entry, and Customs bills you.”
– Customs views a stone’s “country of origin” as where it was cut, not where it was mined. It also typically bases tariffs on an item’s value, not on the cost of labor done overseas, Gerber said. However, if a piece has already been cast and then is sent overseas for further work, its tariff is generally calculated based on additional labor costs, explained panelist Roland Krainz, president and CEO of jewelry manufacturer Krainz Creations.
– Currently, TIBs are used for sending goods to trade shows and grading labs, Gerber noted, but Malca is examining other applications.
– If an item is imported into the United States and then reexported somewhere else, shippers generally have three years to reimport the goods into the United States duty-free, Gerber said. That requires declarations from both the foreign shipper and importer.