Cablegate: Origin of Thai Ruby Exports Hard to Document

DE RUEHBK #3207/01 2981002
R 241002Z OCT 08




E.O. 12958, AS AMENDED: DECL: 10/24/2018

REF: A) RANGOON 61 (Financing the Regime with Jade, Not Gems)
B. RANGOON 62 (Auctioning off Burma's Riches)
C. RANGOON 750 (Burmese Gem and Jade Exports on the Rise)
D. BANGKOK 5927 (Thai Gem Industry Believes Anti-Burma Legislation
Would Do More Harm Than Good)
E. BANGKOK 6239 (A Burmese Rock Becomes a Thai Ruby)
F. CHIANG MAI 114 (Thai Market Turns to African Rubies as Smuggling
of Burmese Stones Declines)

1. (SBU) Summary. Thai jewelry dealers say that while African rubies
are increasingly imported for processing in Thailand, the rubies
headed for the U.S. market have traditionally been higher quality
stones that are likely to have come from Burma. Rubies are typically
shipped to the United States in small express-mail envelopes on an
as-needed basis. Most of the raw stones currently in Thai
inventories have no documentation as to their country of origin.
Ruby prices have dropped 15-20 percent in the past month, but Thai
dealers believe that drop may largely be due to global financial
uncertainty. Once current inventories are sold and the full impact
of implementation of the JADE Act has been felt, Thai jewelry dealers
will have a better idea of the JADE Act's effect on prices. End

2. (SBU) Comment. Thai jewelers do not yet seem to have come to
grips with the implications of the JADE Act for their industry. In
our conversations this past week with both the Chantaburi Gem and
Jewelry Traders Association (CGJTA) and the Thai Gem and Jewelry
Traders Association (TGJT), which together represent the majority of
large Thai jewelry dealers and processors, Thai dealers seem to be
clinging to a hope that the JADE Act might somehow be altered or
struck off the books, instead of focusing on ways to document their
rubies' country of origin. The two organizations believe that the
JADE Act hurts Thailand far more than the Burmese government and that
fact should cause the U.S. to re-think implementation of the law.
Once Thai jewelry dealers face strict enforcement of the JADE Act, it
seems inevitable they will try to ship higher quality rubies to
non-U.S. markets and sell documented African rubies to the U.S.
market. (Note: Gem and jewelry exports from Thailand totaled $5.6
billion in 2007, Thailand's fifth largest export by value. Of that
amount approximately $935 million went to the U.S. Thai customs data
is not precise enough to determine how much of that was rubies or
jewelry that contains rubies.) End comment.

Where Rubies Come From and Where They Go
3. (SBU) Sales to the United States account for 25-30 percent of
Thai jewelers' ruby market according to the TCJTA and CGJTA. Most
rubies going to the U.S. probably originate in Burma, but precise
figures are unknown since to this point no particular attention has
been paid to the origin of raw stones that come into Thailand for
treating, heating, cutting and polishing. (See ref E.) This
processing typically multiplies many times over the value of the raw
stones, and Thai craftspeople have all but cornered the market on the
specialized skills involved with Burmese as opposed to African
rubies. Mr. Phuket Khunprapakorn, Secretary General of CGJTA, told
us that Burmese rubies tend to be of higher quality and value than
African rubies and that quality makes them the ruby of choice in the
U.S. market. Currently, African rubies tend to be sold to other
Asian countries. Gem merchants along the Burma-Thailand border
reported similar views.

4. (SBU) In recent years, African gems have gained an increasing
foothold in Thailand (see ref F.) According to Thai customs
statistics---keeping in mind the numbers do not reflect smuggled
Burmese goods---Thailand was already importing more gems from
Tanzania than from Burma in the first half of 2008, before the U.S.
JADE Act was passed. Apart from the official customs data, TGJTA
claims 80 percent of the rubies they import come from Madagascar,
Kenya, Tanzania, Nigeria, India, and Brazil with the remaining 20
percent from Burma.

5. (SBU) Mr. Vichai Assarasakorn, President of TGJTA, and Mr.
Anthony Brooke, First Deputy Director of Public Relations for TGJTA,
claim most Burmese rubies in Thailand are smuggled across the porous
Burmese-Thai border and are sold at markets in Mae Sai and Mae Sot.
However, comments from ruby vendors in these border towns suggest
that the Burmese government has been tightening control over
high-quality rubies mined in Burma, reducing both the quality and
number of stones smuggled into Thailand. Vendors have told us that
they are increasingly dealing in African rubies because of lower
cost. (see ref F.)

6. (SBU) The TGJTA says there is no standard practice with regard to
how rubies are shipped to the United States. However, in general,
dealers mail their goods via commercial airfreight, often using

BANGKOK 00003207 002 OF 002

express mail services. Dealers package unset rubies in business-size
envelopes and place these envelopes inside larger flat or padded
envelopes. TGJTA states that companies mail shipments on an
as-needed basis. Larger dealers may ship once or twice a month while
smaller dealers may ship goods every few months. Less frequently,
American buyers come to Bangkok to purchase directly and hand-carry
the products home. Rubies exported from Thailand are generally sold
loose but may be set into jewelry as a finished product such as a
necklace or ring prior to shipment.

Small Market for Jade
7. (SBU) The TGJTA says Thailand is no longer a major player in
Burmese jade as Chinese have taken over the field. In addition, only
a small portion of jade exported from Thailand is bound for the U.S.
market. TGJTA claims approximately $12 million worth of jade was
exported to America in 2007. The majority of this jade was finished
jade that originated from Hong Kong. A large jade dealer in Chiang
Mai supported this statement, claiming his business is moving away
from Burmese jade in favor of procuring raw material from Hong Kong.

Thai Dealers say they rarely buy from Burmese Auctions
8. (SBU) While CGJTA and TGJTA claim their members do not as a
practice purchase rubies at Burmese government auctions, many readily
acknowledge having participated in them out of curiosity. According
to CGJA and TGJTA members, the Burmese auction organizers send out
invitations by various methods, including advertising the upcoming
sales in newsletters and sending emails. Lists of stock to be sold
are distributed and passed informally among jewelers in Thailand.
CGJA and TGJTA say that anyone can attend the auctions so long as
they register in advance and paid a registration fee. Transactions
at the auctions are conducted in Euros and to purchase a lot, one has
to pay ten percent down with the remainder being paid on delivery of
the goods. One vendor we spoke with did admit to purchasing at
Burmese emporiums once or twice a year, bringing back mainly polished
loose stones.

The Price of Rubies
9. (SBU) CGJA and TGJTA members say the price of Burmese rubies has
dropped 15-20 percent over the last month. However, they believe the
current global financial crisis may be the main cause for the price
drop. CGJA notes that they will better be able to determine the
effect of the JADE Act on the price of rubies in about three months
when jewelers hope to have cleared their existing stock of Burmese
rubies and start purchasing more inventory.

10. (SBU) CGJTA and TGJT claim their members have over $40 million
worth of Burmese rubies already in Thailand, much of it intended for
the U.S. market. They note jewelers have no documents attesting to
the current inventory's country of origin. If forced to provide a
paper trail demonstrating a ruby's country of origin, some members of
TGJT believe that jewelers may seek to obtain fraudulent documents.

11. (U) Consulate Chiang Mai and the United States Customs and
Border Protection cleared this cable.

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