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Cablegate: Most Rubies Smuggled Into Thailand and Come With

VZCZCXRO0585
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #3703/01 3540924
ZNR UUUUU ZZH
P 190924Z DEC 08
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC PRIORITY 5450
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHAN/AMEMBASSY ANTANANARIVO 0052
RUEHBJ/AMEMBASSY BEIJING 6628
RUEHLM/AMEMBASSY COLOMBO 3607
RUEHDR/AMEMBASSY DAR ES SALAAM 0319
RUEHDBU/AMEMBASSY DUSHANBE 0020
RUEHHI/AMEMBASSY HANOI 7221
RUEHIL/AMEMBASSY ISLAMABAD 3336
RUEHBUL/AMEMBASSY KABUL 0926
RUEHKT/AMEMBASSY KATHMANDU 7454
RUEHTO/AMEMBASSY MAPUTO 0078
RUEHNE/AMEMBASSY NEW DELHI 5410
RUEHCHI/AMCONSUL CHIANG MAI 5993
RUEHHK/AMCONSUL HONG KONG 4881

UNCLAS SECTION 01 OF 02 BANGKOK 003703

SIPDIS

DEPT FOR EEB/ESC/TFS (JMARSHALL)
DEPT FOR EAP/MLS (LSCHEIBE)

E.O. 12958: N/A
TAGS: PGOV PREL EFIN ECON ETRD BM
SUBJECT: MOST RUBIES SMUGGLED INTO THAILAND AND COME WITH
NO CERTIFICATES

REF: A. A. SECSTATE 127059 DEMARCHE REQUEST)
B. B. BANGKOK 6239 (A BURMESE ROCK BECOMES A THAI
RUBY)
C. C. BANGKOK 3207 (ORIGIN OF THAI RUBY EXPORTS
HARD TO DOCUMENT)

BANGKOK 00003703 001.2 OF 002


1. (SBU) Summary. Thailand's ruby processing industry
does not formally document the country of origin of the raw
stones. Industry sources say that most rubies are smuggled
in from either Burma or Africa. None of the smuggled goods
come with certificates of origin, although it may be possible
for dealers to develop an informal certification system. The
Government has expressed interest in creating a certification
scheme to comply with the JADE Act, but has no concrete plans
at this time and has concerns about how to certify a country
of origin for raw stones with confidence absent expensive
testing. They have also said that should the U.S. ban the
import of rubies processed in Thailand, they would "have no
choice" but to bring a case against the U.S. at the WTO for
violation of country of origin rules. End Summary.

2. (SBU) Comment: Thai gem industry sources are
surprisingly frank about the undocumented nature of their
inputs. They continue in a state of denial, despite our
explanations of what the JADE Act will require of U.S.
importers and consequently of them. It appears that they
believe that their frank explanations of how difficult it
would be to create a paper trail will discourage us from
enforcement of what in their view is a pointless law that
will have little if any impact on the Burmese regime. The
Government understands better the possible consequences for
Thai gem exports to the United States, but has a hard time
imaging how a certification system, absent forensic testing,
would ever be reliable given the informal, mom and pop nature
of the industry. .
,
3. Per reftel A, post has gathered information on
Thailand's ruby industry and keyed responses to reftel's
queries as follows:

4. (SBU) Ascertain from local industry representatives the
typical chain of custody of a ruby from mine to point of
export, or from import to export, including any controls
private entities maintain to ensure authenticity and protect
against smuggling:

Based on conversations with the Thai Gem and Jewelry Traders
Association (TGJTA) and the Chantaburi Gem and Jewelry
Traders Association (CGJTA), Thailand,s largest gem industry
groupings, Thailand no longer mines a significant amount of
rubies. Most rubies processed in Thailand come from Burma,
Madagascar, and Tanzania. For African rubies, Thai dealers
or their agents go directly to Africa, purchase the rubies,
and hand-carry them back to Thailand. Most of these
transactions are done under the table. TGJTA states that no
strict controls are in place to prevent smuggling. The vast
majority of rubies from Madagascar and Tanzania are smuggled
to avoid paying taxes and because the government of
Madagascar has restricted the export of rubies.

3. (SBU) Determine what, if any, documentation for this
process already exists:

According to TGJTA no formal documentation exists to record
imports of rubies from Madagascar, Tanzania, or Burma since
they are often smuggled. TGJTA believes it is possible for
the governments of African countries to issue certificates,
but this rarely happens since the sales would have to be
reported to the governments. For rubies legitimately
imported into Thailand, Royal Thai Customs documents would be
available to show the rubies entry into Thailand. However,
TGJTA believes a significant amount of rubies are not
declared and are hand carried or shipped via airfreight
undeclared into Thailand to avoid VAT and duties. As a

BANGKOK 00003703 002.2 OF 002


result of the JADE Act, TGJTA is informing members that they
should keep records of transactions and be prepared to
demonstrate country of origin. However, these documents would
be generated by the smugglers or Thai gem dealers themselves.
TGJTA believes African dealers will develop some kind of
certificate of origin scheme backed by the African
government, but TGJTA says that African rubies are generally
not bound for the U.S. market due to their lower quality.
TGJTA is also considering issuing country of origin
certificates to their members. However, these would
essentially be self-certifying and not backed by lab tests.
Conducting actual gemological tests on rubies would be
prohibitively expensive according to TGJTA (see reftel B).

4. (SBU) Report on the major export markets, whether
intermediary or final, for rubies extracted from or finished
in the host country:

TGJTA states that 25-30 percent of their ruby exports are
bound for the U.S. market. In general, the rubies are in
finished form and are often embedded in larger jewelry
pieces. TGJTA believes most of the rubies bound for the U.S.
originate in Burma because these stones tend to be of higher
quality. The remainder of higher quality ruby exports go to
the European Union while lower quality rubies from Africa are
exported to neighboring countries or sold in Thailand.

5. (SBU) Engage host government officials to ascertain the
level of government involvement in the gem industry,
including but not limited to: control of mines, licensing,
taxing authority, and issuance of any certificates of origin
of rubies for export:

The RTG is not aware of significant ruby mining in Thailand
and does not own or control ruby mines. The RTG exercises
basic customs authority over rubies officially imported or
exported, but does not issue certificates of origin. Any
determination of a ruby,s country of origin would depend on
the individual gem dealers declaration. The RTG also
believes most raw rubies to be smuggled into Thailand.
(Note: The RTG believes Thailand is the country of origin,
under WTO rules, for products whose last substantial
transformation occurred in Thailand. That would apply to all
rubies processed here. The Government has told us that if
Thai ruby exports are banned from the U.S., they will "have
no choice" but to bring a case against us in the WTO. End
note.)

6. (SBU) Discuss with industry and government
representatives what possibilities exist for creating
certificates of origin and/or a chain of custody paper trail
for rubies, particularly focusing on the possibilities for
credible documentation in which enforcement officers in the
United States could maintain a high degree of confidence:

The Thai Ministry of Commerce (MOC) and Ministry of Foreign
Affairs (MFA) are open to the idea of creating government
issued certificates of origin. Both MOC and MFA state they
are concerned about the JADE Act's impact on Thailand's
economy and are in close contact with Thai gem associations.
TGJTA also says they have approached the RTG about creating a
government backed certification scheme. While all parties
seem interested in such a system, there are no immediate
plans for implementing a government certificate. MFA
officials have also questioned whether such certificates
would have to be backed up by laboratory tests to be
credible.
JOHN

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