Drilling Must Be Disclosed

New York- The ongoing debate on whether or not jewelers need to disclose laser-drilled diamonds and other treated gems is over.

Last month, the Federal Trade Commission (FTC) amended its disclosure guidelines on treated stones to require disclosure of any treatment that affects the value of treated diamonds and gems.

Until recently, the guidelines only required the disclosure of treatments that either require special care or that are not permanent.

The former guidelines listed specific treatments, which are covered under the FTC's new requirements for disclosure, especially clarity enhancement, which employs lasers to drill channels through diamonds to fill fractures with a glass-like substance.

As new treatments emerged in the last three years, the Jewelers Vigilance Committee (JVC) requested that the FTC amend the guidelines to include all treatments that significantly affect value, according to Cecilia Gardner, JVC general council.

Three new disclosure guidelines, listed in Section 23.22 , include the following:

When the treatment is non-permanent: The seller should disclose that the gemstone has been treated and that the treatments, or may not be, permanent.

When the treatment requires special care: The seller should disclose that the gemstone has been treated and has special care requirements. It is also recommended that the seller disclose the special care requirements to the purchaser.

When the treatment significantly affects the value of the stone "Instead of listing specific treatments, we decided to include the three standards, so that if you invent something new tomorrow and it applies to any of these three guidelines, it would require disclosure," said Gardner.

The FTC first began looking at adopting disclosure guidelines in November 1998, when JVC petitioned the organization on behalf of the jewelry industry to mandate disclosures on treatments to diamonds and gems.

While the amendment takes effect in April, the JVC is on the move to inform the trade of the new requirements through the trade press, the JVC membership newsletter and through announcements made at trade events.

Gardener said the new amendment is likely to improve the consumer confidence in treated gemstones, now that there is a clear description of disclosure requirements.

The three main players n the arena of clarity-enhanced diamonds, Yehuda Diamond Co., Oved Diamond Co. and Goldman Diamond Co. , all located in New York, have incorporated strict disclosure practices into their businesses right from the start.

"We've disclosed everything about our product, and we make sure our retailers disclose to the customer what they are getting, otherwise we wouldn't be in business," said Dror Yehuda, co-president of Yehuda Diamond Co. "I'm very happy that the JVC and FTC are doing this, even though it's not really necessary in our case."

Yehuda's retailers tell customers that, while the treatment enhances the clarity of the stone and thereby adds value, treated diamonds are sold for about 30% less than the price of similar, but untreated diamonds.

Jonathan Oved, co-president of the Oved Diamond Co, said the amendments are a good addition for the clarity-enhancement industry. His company also has a rigid set of disclosure standards which retailers are expected to follow. "We demand from retailers to disclose to the customer. If no, we immediately rectify the situation," said Oved.

Humie Leshem, co-president of the Goldman Diamond Co. requires his retailers to disclose treatments with certificates and special care information with brochures emphasizing that treated diamonds should be kept away form extreme heat which could cause the glass-like filler to leak. "We work with thousands of stores from high-end, small to mid-sized chains, and mom-and-pops, and they all disclose everything to the customer," said Leshem.