Tough Ride to the Great Wall of China

China's position as a significant player in the consumer market for diamonds is unquestionable. Many diamond dealers conduct their trade in Hong Kong for the convenience of its proximity to China, but lately there has been a tendency to operate in China itself, directly and formally. Despite the potential, the diamond and jewellery trade in China is complex and encounter much bureaucracy.

Fool-proof Vigilance : Legal Hassles Galore

First of all, it must be emphasized that diamonds and jewellery must be imported into China legally. If caught with merchandise brought in otherwise, Chinese officials ‘shoot first’ - metaphorically - and ask questions later. Punishments are very stiff and are likely to result even in jail terms. Authorities carry out spot checks in jewellery stores from time to time to see if they have documentation for all the diamonds in stock.

Marginal Options for non SDE Members :

Only companies registered at the Shanghai Diamond Exchange (SDE) are permitted to bring diamonds and jewellery into China to sell. This process requires paperwork of one or two days. However, for the non-members of SDE who wish to sell despite the legal setbacks, the options available are few. Diamonds in China regardless, there are a few options available. There are companies registered with the SDE that offer administrative services for selling diamonds in China. The service will cost between 1-2% of the sale price, depending on the type of merchandise.

Delivery companies Brink's and Malca Amit offer administrative services before and after a sale. They will take care of the entire bureaucratic process for the transport of the diamond or jewellery and dealings with the customs officials. The merchandise enters China legally, and the diamond dealer can travel throughout China in order to sell the diamonds for a period of four months.

All the paperwork is in the name of the delivery company. And after the sale is made, the delivery company takes care of the rest of the paperwork, including paying the required taxes, and transferring funds between the local buyer and the seller outside the country. Rappaport offers a similar after sale service.

Ensuring Timely Delivery :

Extensive precautions and care must be taken when delivering diamonds. Nothing can be added to a package of diamonds, not even tiny tweezers or anything else connected to diamonds. However, if the back of the delivery documents lists the serial number of the document that is sent to the SDE, this document must then be included in the package. Chinese officials are very strict and any small deviation will result in delay in delivery plus fines.

Time Consumed for Gemological Verification :

When the merchandise goes through customs, it is analyzed by a local gemologist. Every single diamond is checked separately with its documentation. There are negotiations with the local gemologists over the classification of the diamonds. This process takes several hours. Releasing the merchandise from customs takes about two to three business days. If the diamonds are arriving for the purposes of an exhibition, a longer waiting period should be taken into account, approximately four to five business days.

Although it is possible to deal in diamonds without documents, in these cases, the SDE gemologists tend to judge harshly and assign a lower valuation to the diamonds. GIA documents are recognized everywhere, as are documents from large international labs such as HRD, IGI and EGL. Legally, it is possible to sell diamonds without a Chinese document, but many consumers trust them and see it as a safety net.

For all polished stones brought into China one must pay a 0.3% transaction fee, minimum US$45, and a stamp duty of 0.06% when it is released from the SDE customs office. These fees must be paid in any case, regardless of whether the diamonds are sold (no refunds). As well, one must pay a 4% deposit in advance (equal to VAT) which is returned in the event that no sale takes place. Note the difference between a sale to a private individual and a sale to a company (with a registration number), when selling to companies, taxes reach almost 6%, whereas selling to a private individual, taxes reach almost 18% (6% plus 11% tax for selling to a private individual). It's possible to bring diamonds and jewellery into the country without paying customs fees (though you must leave a deposit of 4%), but if their trading will only occur within the SDE building.

Duty on Rough Diamonds :

Regarding rough diamonds, one must distinguish between rough diamonds for polishing purposes and rough diamonds for trading purposes. Rough diamonds for polishing purposes enter the factories directly by way of permitted ports to each specific factory - Shenzhen, Shanghai, Beijing, etc. After polishing, the factory must provide the authorities with documentation certifying that everything that entered the factory exited it (the polished diamond and the residue). Rough diamonds for trading purposes must enter via the SDE, although no taxes are required. They require only a stamp duty and a transaction fee.

The Chinese Card Chakker !

Diamonds can be sold outside the diamond exchange, in stores. It is recommended that one makes appointments in advance, but it is not necessary. It is advisable to arrive dressed in appropriate clothing, with many business cards. The custom is to exchange business cards right away at the beginning of a meeting, to hand the card over using both hands, with the text facing the right direction so that the person receiving the card can read it. The cards will sit in front of you for the duration of the meeting. You cannot write on it, and you cannot put it into your wallet. The card represents the person it describes and any slight to the card is considered an insult to the person concerned.

There are several areas in Shanghai with a concentration of jewellery stores. In addition to the Pudong area, where the SDE is located, the stores are centered around the city center called Chenghuang Miao. Another area is the Yu-Yuan Gardens and Nan-Jing Street, a long street with stores along its length. In Beijing, the stores are centered around Xidan, and in Guomao, in the city center, where the World Trade Center is located.

Language Hurdle :

It must be kept in mind that most locals speak no English and there are almost no street signs in English. Therefore it is advisable to move around with notes and signs in Chinese, or with a local translator. In large Chinese cities, many students work as translators, and a quick internet search will provide you with their list. Their rates vary around 800 Yuan per day.