Some time ago FreightGuard received a really intriguing claim. A customer of one of our carrier clients had submitted a claim when that carrier vehicle had been hijacked and their consignment was missing.
The claim was for a diamond valued at R500k. The customer who is a dealer in diamonds admitted that they had not asked our carrier to insure the diamond but wanted a commercial settlement on the basis that they had been a long standing customer of the carrier.
FreightGuard was asked to assist although the claim was not one that would have been paid out under the FreightGuard Service Guarantee as we do not respond to insurable events such as hijackings.
The Precious Metals and Diamond Act (2005) sets out strict rules and regulations governing the buying, selling, and dealing in diamonds. While there is no blanket insurance requirement explicitly stated in the legislation, most dealers will be required to maintain adequate insurance as part of their business operations to mitigate risks associated with the nature of their trade. The Act mandates strict documentation and record-keeping of the movement of diamonds in and out of the country. This is intended to combat the trade of illicit diamonds and ensure compliance with international trade regulations. If the diamond was accompanied by any other certificates, such as a certification of ethical sourcing or from a conflict-free supply chain, this would have also helped to substantiate the diamond’s value and authenticity.
The first question that we asked therefore, was had the dealer submitted the claim to their own insurer under their Goods in Transit policy.
The dealer stated that the diamond was not yet part of their stock and was therefore not insured under their insurance policy. According to him,(let’s call him Mike) he had been contacted by a private individual who wanted him to buy the diamond for his company (Lets call them Blue Star Diamonds). Blue Star wanted the diamond to be appraised so according to Mike, he had instructed the private seller to give the diamond to a local jeweller (Diamond Dynasty)who would sent the diamond to Johannesburg where Blue Star would have the diamond appraised.
So the sequence of events was as follows, the private individual deposited the diamond with Diamond Dynasty who arranged for it to be collected by our carrier. On the way to JHB the vehicle was hijacked and the diamond stolen.
The sales and transfer of diamonds worldwide is heavily regulated as they can be used as a form of currency and as a means of hiding ill-gotten gains. For this reason Diamond Dynasty would have requested of the private individual proof of ownership and authenticity. Without this they would not have been able to arrange for its insurance under their insurance policy.
Diamonds must be accompanied by certification that verifies their authenticity, origin, and characteristics (e.g., cut, clarity, colour, and carat weight). Certification is often provided by internationally recognized gemmological laboratories. Dealers are obligated to follow proper valuation processes, and the transaction details must be recorded accurately. In certain cases, independent valuation may be required.
According to Mike ,the private individual did not have insurance on the diamond and therefore his company Blue Star Diamonds had already paid the private individual the full value of the diamond (sight unseen) and seeing as Diamond Dynasty had arranged for the consignment to JHB, they would wait to see how much Diamond Dynasty would receive once they claimed from their own insurers under their Jewellery policy and try to recover that from them. Mike stated that Diamond Dynasty only had about R150,000 cover on the diamond under their policy and he was therefore hoping that our customer (the Courier) would make good on some of the shortfall.
The courier was reluctant to lose Blue Star as a customer, but also did not want to make a commercial settlement way out of proportion to Blue Star’s freight spend. FreightGuard communicated with Mike and stated that we would like to assist them with this claim . We then requested a copy of the claim form submitted to Diamond Dynasty’s insurer.
If the claim was legitimate, then Diamond Dynasty’s insurer would have had the full valuation of the diamond including its authentication certificate . It was at this point that the conversation went silent and we were subsequently able to cancel the claim. A diamond may be a very valuable commodity, but having the right knowledge outshines it.
Conclusion:
Consigning diamonds between states or provinces in South Africa involves strict adherence to the Precious Metals and Diamond Act of 2005 as well as other relevant regulations. Dealers must ensure they have the proper licenses, documentation, and security measures in place to comply with both local and international standards. Compliance with the Kimberley Process, ensuring proper documentation, maintaining security during transport, and following all regulatory reporting requirements are all critical elements for diamond dealers when consigning diamonds within South Africa.
**South African law requires all businesses dealing with precious metals, diamonds, and gemstones to comply with the Diamond and Precious Metals Regulator (DPMR) under the Department of Mineral Resources and Energy (DMRE).The Precious Metals and Diamond Act (2005) sets out strict rules and regulations governing the buying, selling, and dealing in diamonds.