Prohibitions and Conditions on the Importation and Exportation of Rough Diamonds, 40627-40630 [2013-15972]

Agencies

• DEPARTMENT OF HOMELAND SECURITY
• U.S. Customs and Border Protection
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 78, Number 130 (Monday, July 8, 2013)]
[Rules and Regulations]
[Pages 40627-40630]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15972]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Part 12, 163, and 178

[USCBP-2012-0022; CBP Dec. 13-10]
RIN 1515-AD85


Prohibitions and Conditions on the Importation and Exportation of 
Rough Diamonds

AGENCIES: U.S. Customs and Border Protection, Department of Homeland 
Security; Department of the Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This document amends the U.S. Customs and Border Protection 
(CBP) regulations to set forth the prohibitions and conditions that are 
applicable to the importation and exportation of rough diamonds 
pursuant to the Clean Diamond Trade Act, as implemented by the 
President in Executive Order 13312 dated July 29, 2003, and the Rough 
Diamonds Control Regulations (RDCR) issued by the Office of Foreign 
Assets Control of the U.S. Department of the Treasury. In addition to 
restating pertinent provisions of the RDCR, the amendments clarify that 
any U.S. person exporting from, or importing to, the United States a 
shipment of rough diamonds must retain for a period of at least five 
years a copy of the Kimberley Process Certificate that currently must 
accompany such shipments and make the copy available for inspection 
when requested by CBP. The document also requires formal entry for 
shipments of rough diamonds.

DATES: Effective August 7, 2013.

FOR FURTHER INFORMATION CONTACT: Brian Barulich, Regulations and 
Rulings, Office of International Trade, (202) 325-0059.

SUPPLEMENTARY INFORMATION: 

Background

I. Purpose

    In response to the role played by the illicit trade in diamonds in 
fueling conflict and human rights violations in certain areas of the 
world, and to differentiate between the trade in conflict diamonds and 
the trade in legitimate diamonds, the United States and numerous other 
countries announced in the Interlaken Declaration of November 5, 2002, 
the launch of the Kimberley Process Certification Scheme (KPCS) for 
rough diamonds. Under the KPCS, participating countries prohibit the 
importation of rough diamonds from, or the exportation of rough 
diamonds to, a non-participant and require that shipments of rough 
diamonds from or to a participating country be controlled through the 
KPCS. The U.S. Secretary of State is responsible for providing an up-
to-date listing of all participants in the KPCS. Swaziland was added to 
the list of participants in the KPCS and the addition was announced in 
the Federal Register (77 FR 27831) on May 11, 2012, and Cambodia, 
Cameroon, Kazakhstan, and Panama were added to the list of participants 
and announced in the Federal Register (78 FR 12135) on February 21, 
2013.

II. Clean Diamond Trade Act and Executive Order

    The Clean Diamond Trade Act (the Act), Public Law 108-19, 117 Stat. 
631 (19 U.S.C. 3901 et seq.), was enacted on April 25, 2003. Section 4 
of the Act requires the President, subject to certain waiver 
authorities, to prohibit the importation into, or exportation from, the 
United States of any rough diamond, from whatever source, that has not 
been controlled through the KPCS. Section 5(a) of the Act authorizes 
the President to issue such proclamations, regulations, licenses, and 
orders, and conduct such investigations, as may be necessary to carry 
out the Act. Section 5(b) of the Act sets forth the general 
recordkeeping requirements that apply to persons seeking to export from 
or import into the United States any rough diamonds. Section 5(b) 
specifically provides that any United States person seeking to export 
from or import into the United States any rough diamonds shall keep a 
full record of, in the form of reports or otherwise, complete 
information relating to any act or transaction to which any prohibition 
imposed under section 4(a) of the Act applies. Section 5(b) further 
provides that such person may be required to furnish such information 
under oath, including the production of books of

[[Page 40628]]

account, records, contracts, letters, memoranda, or other papers, in 
the custody or control of such person. In addition to CBP having the 
authority to apply the customs laws to import violations of the Act, 
section 8 authorizes CBP and U.S. Immigration and Customs Enforcement 
(ICE), as appropriate, to assess penalties and enforce the export laws 
and regulations. See also 15 CFR 30.70. Therefore, pursuant to section 
8, CBP may assess penalties for export recordkeeping violations. 
However, CBP notes that the penalties issued pursuant to section 19 
U.S.C. 1509(g) for failure to comply with 19 U.S.C. 1509(a)(1)(A) do 
not apply to recordkeeping requirements for export documents.
    On July 29, 2003, the President issued Executive Order 13312 
(published in the Federal Register (68 FR 45151) on July 31, 2003) to 
implement the Act, effective for rough diamonds imported into, or 
exported from, the United States on or after July 30, 2003.

III. Existing Regulations and Requirements

    CBP notes that persons importing into or exporting from the United 
States a shipment of rough diamonds must comply with the requirements 
of CBP, the Office of Foreign Assets Control (OFAC) of the Department 
of the Treasury (31 CFR part 592), and the U.S. Census Bureau (15 CFR 
part 30). Such persons should also be aware of any relevant Internet 
postings, guidance documents, or Federal Register notices issued by the 
U.S. Department of State. Also, it should be noted that ICE can take 
enforcement action on illegally imported and exported rough diamonds. 
See 19 U.S.C. 3907. Examples of the other government requirements are 
provided below. OFAC, acting pursuant to Executive Order 13312 and 
other authorities, published in the Federal Register (69 FR 56936) the 
Rough Diamonds Control Regulations (RDCR) (31 CFR part 592) on 
September 23, 2004. To be controlled through the KPCS, the RDCR require 
that all shipments of rough diamonds imported into, or exported from, 
the United States must be accompanied by an original Kimberley Process 
Certificate. See 31 CFR 592.301(a)(1). The RDCR also require that all 
importers and exporters of rough diamonds file an annual report with 
the U.S. Department of State regarding their import and/or export 
activity and stockpile information. See 31 CFR 592.502.
    The U.S. Census Bureau issued notices on December 12, 2005, and 
April 3, 2007, respectively entitled ``Notice of Request for Faxed 
Submission of Kimberley Process Certificates'' and ``Revised Notice of 
Request for Faxed Submission of Kimberley Process Certificates,'' 
requiring importers, brokers, and parties involved in the export of 
rough diamonds to immediately fax their Kimberley Process Certificates 
(including voided certificates) to the U.S. Census Bureau upon 
clearance of their shipments into the commerce of the United States by 
CBP or upon export of their shipments from the United States, as 
applicable.
    On August 15, 2012, CBP published a proposed rule in the Federal 
Register (77 FR 48918) proposing to amend title 19 of the Code of 
Federal Regulations (19 CFR) to restate pertinent provisions of the 
RDCR issued by OFAC. The document also proposed to make amendments to 
clarify that any U.S. person exporting from or importing into the 
United States a shipment of rough diamonds must retain for a period of 
at least five years a copy of the Kimberley Process Certificate that 
currently must accompany such shipments and make the copy available for 
inspection when requested by CBP. CBP solicited public comments on the 
proposed rule.

Discussion of Comments

    Two commenters responded to the solicitation of public comments in 
the proposed rule. The comments are discussed below.
    Comment:
    One commenter applauded the purpose of the Clean Diamond Trade Act 
but stated that it has not been effective in helping people determine 
whether they are purchasing ``blood'' diamonds.
    CBP Response:
    The Clean Diamond Trade Act implements the Kimberley Process 
Certification Scheme (KPCS) for rough diamonds. The KPCS is a process, 
based on international cooperation and on the commitment of the entire 
supply chain, to prevent the importation, or exportation, of conflict 
diamonds. One purpose of this rulemaking is to make the Clean Diamond 
Trade Act as effective as possible.
    Comment:
    One commenter questioned the necessity of this proposed rule given 
the existing U.S. Census Bureau regulations (15 CFR part 30) and the 
OFAC regulations (31 CFR part 592) on rough diamonds, section 161.2 of 
the CBP regulations (19 CFR 161.2), the Clean Diamond Trade Act (19 
U.S.C. 3901 et seq.), section 127.4 of the U.S. Department of State 
regulations (22 CFR 127.4), and section 758.7 of the U.S. Export 
Administration regulations (15 CFR 758.7). The commenter also noted two 
CBP rulings and asserted that through these rulings, CBP is instructing 
the public to mount rough diamonds to escape regulatory controls. 
Finally, the commenter requested information on the amount of time and 
money that was spent to develop the proposed rulemaking.
    CBP Response:
    While some of the proposed amendments restate the pertinent 
provisions of the RDCR and cross-reference other agency regulations 
related to rough diamonds (e.g., 15 CFR part 30), CBP has made 
substantive changes to its regulations through the other proposed 
amendments. For example, the proposed amendments clarify that any U.S. 
person exporting from or importing into the United States a shipment of 
rough diamonds must retain for a period of at least five years a copy 
of the Kimberley Process Certificate that currently must accompany such 
shipments and make the copy available for inspection when requested by 
CBP. CBP also proposed to amend its current regulations to require 
formal entry for shipments of rough diamonds pursuant to the authority 
provided in 19 U.S.C. 1484 and 1498(a)(1)(B). The restatements of the 
other agency regulations and the cross-references are made for the 
convenience of the importing public who use the CBP regulations as a 
resource.
    The particular existing regulations cited by the commenter do not 
affect the necessity of the amendments made in this document. 
Specifically, section 127.4 of title 22 of the CFR (22 CFR 127.4), is 
not directly related to the importation or exportation of rough 
diamonds as it relates to defense articles, technical data, or defense 
services; section 161.2 of title 19 of the CFR (19 CFR 161.2) states 
that CBP enforces the laws of some other government agencies and 
provides examples of those agencies; and the Department of Commerce 
regulation, section 758.7 of title 15 of the CFR (15 CFR 758.7), 
requires, in relevant part, that CBP take appropriate action to comply 
with the Export Administration Regulations.
    CBP also disagrees with the commenter's description of CBP 
administrative rulings, New York Ruling Letter (NY) N018792 and 
Headquarters Ruling Letter (HQ) H173035. CBP notes that HQ H173035 
modified NY N018792 and notification of the modification was published 
in the Customs Bulletin, Vol. 46, No. 46, on November 7, 2012 after a 
notice of the proposed action was published in the Customs Bulletin, 
Vol. 46, No. 13, on March 21, 2012. In its

[[Page 40629]]

modified ruling, CBP clarified that jewelry set with tumbled diamonds 
imported from Zambia are not rough diamonds and therefore are not 
subject to the KPCS and are not prohibited from importation under the 
U.S. Clean Diamond Trade Act (19 U.S.C. 3901); however, CBP noted that 
loose tumbled diamonds from Zambia are not admissible into the United 
States because tumbled diamonds are considered rough and Zambia is not 
a member of the KPCS. Please note that rulings are binding on the 
ruling requester and are tailored to the specific facts and 
circumstances of the particular case at issue.

Conclusion

    After review of the comments and further consideration, CBP has 
decided to adopt as final the proposed rule published in the Federal 
Register (77 FR 48918) on August 15, 2012.

Executive Order 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule is not a ``significant regulatory action,'' 
under section 3(f) of Executive Order 12866. Accordingly, OMB has not 
reviewed this regulation.
    This rule increases CBP's ability to verify whether importations or 
exportations of rough diamonds are in compliance with the KPCS. OFAC 
published the RDCR requiring the ultimate consignee to retain the 
original of the Kimberley Process Certificate. The amendments clarify 
that any U.S. person exporting from or importing into the United States 
a shipment of rough diamonds must retain a copy of the Kimberley 
Process Certificate for a period of five years and make this copy 
available for inspection at the request of CBP or face penalties 
pursuant to 19 U.S.C. 1509 or 3907. CBP believes the costs of retaining 
a copy of the Kimberley Process Certificate for five years and 
producing the copy to CBP upon request to be negligible.

Regulatory Flexibility Act

    This section examines the impact of the rule on small entities as 
required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as 
amended by the Small Business Regulatory Enforcement and Fairness Act 
of 1996. A small entity may be a small business (defined as any 
independently owned and operated business not dominant in its field 
that qualifies as a small business per the Small Business Act); a small 
not-for-profit organization; or a small governmental jurisdiction 
(locality with fewer than 50,000 people).
    CBP has considered the impact of this rule on small entities. As 
discussed in the NPRM, this rule clarifies that any U.S. person 
exporting from or importing into the United States a shipment of rough 
diamonds must retain a copy of the Kimberley Process Certificate for a 
period of five years and make this copy available for inspection at the 
request of CBP or face penalties, that may be greater than $500 (in 
1980 dollars), pursuant to 19 U.S.C. 1509 or 3907. CBP believes the 
costs of retaining a copy of the Kimberley Process Certificate for five 
years and providing the copy to CBP upon request to be negligible. 
Additionally, as discussed in the NPRM, CBP subject matter experts do 
not believe this rule will increase noncompliance with the KPCS for 
small entities. During the comment period of the NPRM, CBP did not 
receive any comments that would amend these conclusions. Thus, CBP 
certifies that this rule will not have a significant impact on a 
substantial number of small entities.

Paperwork Reduction Act

    Under the Paperwork Reduction Act, an agency may not conduct or 
sponsor, and an individual is not required to respond to, a collection 
of information unless it displays a valid OMB control number. The 
collections of information contained in these regulations are provided 
for by OMB control number 1505-0198, to cover the requirements 
concerning CBP Form 7501, and by OMB control number 1651-0076, to cover 
the recordkeeping requirement.

Signing Authority

    This document is being issued in accordance with Sec.  0.1(a)(1) of 
the CBP Regulations (19 CFR 0.1(a)(1)) pertaining to the authority of 
the Secretary of the Treasury (or his/her delegate) to approve 
regulations related to certain customs revenue functions.

List of Subjects

19 CFR Part 12

    Customs duties and inspection, Economic sanctions, Entry of 
merchandise, Foreign assets control, Exports, Imports, Prohibited 
merchandise, Reporting and recordkeeping requirements, Restricted 
merchandise, Sanctions.

19 CFR Part 163

    Administrative practice and procedure, Customs duties and 
inspection, Exports, Imports, Penalties, Reporting and recordkeeping 
requirements.

19 CFR Part 178

    Administrative practice and procedure, Imports, Reporting and 
recordkeeping requirement.

Amendments to the CPB Regulations

    For the reasons set forth above, parts 12, 163, and 178 of title 19 
of the Code of Federal Regulations (19 CFR parts 12, 163, and 178) are 
amended as set forth below.

PART 12--SPECIAL CLASSES OF MERCHANDISE

0
1. The general authority citation for part 12, CBP regulations, 
continues, and a new specific authority citation for Sec.  12.152 is 
added, to read as follows:

    Authority:  5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 3(i), 
Harmonized Tariff Schedule of the United States (HTSUS)), 1624.
* * * * *
    Section 12.152 also issued under 19 U.S.C. 1484, 1498; the Clean 
Diamond Trade Act (Pub. L. 108-19, 117 Stat. 631 (19 U.S.C. 3901 et 
seq.)); Executive Order 13312 dated July 29, 2003.


0
2. Section 12.152 is added to read as follows:


Sec.  12.152  Prohibitions and conditions on the importation and 
exportation of rough diamonds.

    (a) General. The Clean Diamond Trade Act (Pub. L. 108-19) requires 
the President, subject to certain waiver authorities, to prohibit the 
importation into, or exportation from, the United States, of any rough 
diamond, from whatever source, that has not been controlled through the 
Kimberley Process Certification Scheme. By Executive Order 13312 dated 
July 29, 2003, published in the Federal Register (68 FR 45151) on July 
31, 2003, the President implemented the Clean Diamond Trade Act, 
effective for rough diamonds imported into, or exported from, the 
United States on or after July 30, 2003. Pursuant to Executive Order 
13312 and other authorities, the Office of Foreign Assets Control 
(OFAC), Department of the Treasury, promulgated the Rough Diamonds 
Control Regulations (see 31 CFR part 592). Any persons importing into 
or exporting from the United States a

[[Page 40630]]

shipment of rough diamonds must comply with the requirements of CBP, 
OFAC, and the U.S. Census Bureau (15 CFR part 30).
    (b) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Controlled through the Kimberley Process Certification Scheme. 
``Controlled through the Kimberley Process Certification Scheme'' means 
meeting the requirements set forth in 31 CFR 592.301;
    (2) Kimberley Process Certificate. ``Kimberley Process 
Certificate'' means a forgery resistant document that meets the minimum 
requirements listed in Annex I of the Kimberley Process Certification 
Scheme, as well as the requirements listed in 31 CFR 592.307;
    (3) Rough diamond. ``Rough diamond'' means any diamond that is 
unworked or simply sawn, cleaved, or bruted and classifiable under 
subheading 7102.10, 7102.21, or 7102.31 of the Harmonized Tariff 
Schedule of the United States;
    (4) United States. ``United States'', when used in the geographic 
sense, means the several states, the District of Columbia, and any 
commonwealth, territory, or possession of the United States; and
    (5) United States person. ``United States person'' means:
    (i) Any United States citizen or any alien admitted for permanent 
residence into the United States;
    (ii) Any entity organized under the laws of the United States or 
any jurisdiction within the United States (including its foreign 
branches); and
    (iii) Any person in the United States.
    (c) Original Kimberley Process Certificate. A shipment of rough 
diamonds imported into, or exported from, the United States must be 
accompanied by an original Kimberley Process Certificate.
    (d) Formal Entry Required. Formal entry is required when importing 
a shipment of rough diamonds. Formal entry procedures are prescribed in 
part 142 of this chapter.
    (e) Report of Kimberley Process Certificate Unique Identifying 
Number. Customs brokers, importers, and filers making entry of a 
shipment of rough diamonds must either submit through CBP's Automated 
Broker Interface (ABI) system the unique identifying number of the 
Kimberley Process Certificate accompanying the shipment or, for non-ABI 
entries, indicate the certificate number on the CBP Form 7501, Entry 
Summary, on each applicable line item.
    (f) Maintenance of Kimberley Process Certificate--(1) Ultimate 
consignee. The ultimate consignee identified on the CBP Form 7501, 
Entry Summary, or its electronic equivalent filed with CBP in 
connection with an importation of rough diamonds must retain the 
original Kimberley Process Certificate for a period of at least five 
years from the date of importation and must make the certificate 
available for examination at the request of CBP.
    (2) Importer. The U.S. person that imports into the United States a 
shipment of rough diamonds must retain a copy of the Kimberley Process 
Certificate accompanying the shipment for a period of at least five 
years from the date of importation and must make the copy available for 
examination at the request of CBP.
    (3) Exporter. The U.S. person that exports from the United States a 
shipment of rough diamonds must retain a copy of the Kimberley Process 
Certificate accompanying the shipment for a period of at least five 
years from the date of exportation and must make the copy available for 
examination at the request of CBP.

PART 163--RECORDKEEPING

0
3. The specific authority citation for part 163 is revised and the 
general authority citation continues to read as follows:

    Authority:  5 U.S.C. 301; 19 U.S.C. 66, 1484, 1508, 1509, 1510, 
1624.
* * * * *
    Section 163.2 also issued under 19 U.S.C. 3904, 3907.
* * * * *

0
4. In Sec.  163.2, paragraph (c) is revised to read as follows:


Sec.  163.2  Persons required to maintain records.

* * * * *
    (c) Recordkeeping required for certain exporters--(1) NAFTA. Any 
person who exports goods to Canada or Mexico for which a Certificate of 
Origin was completed and signed pursuant to the North American Free 
Trade Agreement must also maintain records in accordance with part 181 
of this chapter.
    (2) Kimberley Process Certification Scheme. Any U.S. person (see 
definition in Sec.  12.152(b)(5)) who exports from the United States 
any rough diamonds must retain a copy of the Kimberley Process 
Certificate accompanying each shipment for a period of at least five 
years from the date of exportation. See 19 CFR 12.152(f)(3). Any U.S. 
person who exports from the United States any rough diamonds and does 
not keep records in this time frame may be subject to penalties under 
19 U.S.C. 3907.

0
5. The Appendix to part 163 is amended by adding a new listing under 
section IV in numerical order to read as follows:

Appendix to Part 163--Interim (a)(1)(A) List

* * * * *
    IV. * * *


Sec.  12.152  Kimberley Process Certificate for rough diamonds.

* * * * *

PART 178--APPROVAL OF INFORMATION COLLECTION REQUIREMENTS

0
6. The authority citation for part 178 continues to read as follows:

    Authority:  5 U.S.C. 301; 19 U.S.C. 1624, 44 U.S.C. 3501 et seq.


0
7. Section 178.2 is amended by adding a new listing to the table in 
numerical order to read as follows:


Sec.  178.2  Listing of OMB control numbers.

------------------------------------------------------------------------
    19 CFR Section            Description            OMB Control No.
------------------------------------------------------------------------
 
                                * * * * *
Sec.   12.152.........  Certificate and          1505-0198 and 1651-
                         recordkeeping            0076.
                         requirements for the
                         entry of rough
                         diamonds.
 
                                * * * * *
------------------------------------------------------------------------


Thomas S. Winkowski,
Deputy Commissioner, Performing the duties of the Commissioner of U.S., 
Customs and Border Protection.
    Approved: June 28, 2013.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 2013-15972 Filed 7-5-13; 8:45 am]
BILLING CODE 9111-14-P