The Canadian Diamond Code of Conduct Annual Report to the Commissioner of the
Competition Bureau

Annual Report 2006

Date of Report: February 6, 2007

Review Period: January 1, 2006 - December 31, 2006

In 2006 the Canadian Diamond Code of Conduct Committee (CDCC) consisted of the following representatives:

Number of registered Signatories to the Code as of December 31, 2006 is 45 non-retailers (including 15 International Signatories) and 58 retailers (totaling 217 stores).

These Signatories comprise of the following:

5 Mining Companies
1 Marketing Company
27 Traders
15 Cutters and Polishers
14 Jewellery Manufacturers
58 Retailers (representing 217 stores)
1 Other

121 Total (some companies registered in more than one category)

Code Committee Meetings:

In 2006 the CDCC held nine meetings. Annually the CDCC attempts to hold a meeting with the majority of the Committee members present in person. One face-to-face meeting took place in Gatineau on January 31, 2006 and an additional face to face in Gatineau on July 6, 2006 with the Centre Canadien de Valorisation du Diamant (CCVD) and the Bureau de Normalisation du Québec (BNQ).

The Committee engaged in the following activities to create awareness of the Code outside the Signatory base:

- Completed the revision and the printing of the revised Code and brochures
- Distributed 420 copies of the revised Code and 1550 copies of the new consumer brochure
- Maintained a Code website
- Posted Practices/ Operating Procedures manual on the web site
- Posted on the Code website The Canadian Diamond Code of Conduct Annual Report to the Commissioner of the Competition Bureau 2005
- Representatives of the CDCC participated in trade shows and industry events including Prospectors and Developers Association of Canada trade show, 2 U.S. jewellery tradeshows, 3 Canadian jewellery trade shows, the World Jewellery Confederation (CIBJO) annual congress and the Israel Diamond Institute.
- Made presentations to law enforcement and Government agencies including the RCMP, Department of Finance and FINTRAC as well as the US Government Accountability Office (GAO).
- The CDCC members actively recruit signatories from the trade through their day-to-day activities

Industry Issues

The CDCC met with the CCVD and BNQ in July to state their objection to the misrepresentation of the Code and the CDCC with regard to the CCVD's pilot project of a diamond certification program in Matane, Québec.

The CDCC's objections were:

• An overstated representation of the CDCC's cooperation, collaboration and support for the project.
• The CCVD's certification program is contingent upon membership in the Code.
• The expansion of the CCVD's mandate to include a national diamond certification program without broad industry support and participation from the Federal Government.
• The CCVD's perceived authority to develop a national standard.
• The CCVD's claim of support from the Standards Council of Canada leading to consumer confusion.

In a letter to the CCVD dated October 13, 2006, the CDCC requested that all references to the Code and the CDCC be removed from the CCVD's Book of Specifications Certification Program- Diamonds of Canadian origin, cut and polished in Canada September 4, 2006.
The CCVD replied in a letter dated October 18, 2006 stating they would comply with the CDCC's request.

Complaints:

The CDCC did not receive any consumer complaints in 2006.

Authentications

The CDCC received 4 consumer requests for authentication with the following results:

3 completed with confirmed Canadian origin;
1 completed without confirmation of Canadian origin;

The one that could not be confirmed as Canadian was due to the fact the original rough invoice from the mining company did not certify Canadian origin.

Initiatives:

With the support of Code Signatories, the CDCC began an annual Active Monitoring Program. It consists of randomly choosing a number of signatories to supply from their inventory five Diamond Identification Numbers (DINs) to be authenticated by the CDCC. Our experience has shown that authentications failed between the mines and the retailers. In the fall of 2006 five retail Code Signatories, one chain retailer and four independent retailers, were requested to participate. As of the end of 2006 twelve of the DINs were successfully authenticated. The balance is still being pursued in 2007. The delay with these authentications surrounds the bankruptcy of one of the cutting and polishing factories in Yellowknife.

The CDCC explored the possibility of gem laboratories participating in the Code. The discussion is ongoing.

The CDCC explored the advertising of Brands by Code Signatories for a fee on the Code web site. The suggested benefits were improved consumer confidence when choosing brands and an improved profile for the Code. Some concerns were that the Code may be moving beyond its mandate, the perception that the Code is a brand promotion vehicle versus an authentication tool and the perception that the CDCC (and indirectly the Competition Bureau and CIBJO) is promoting certain brands. The feedback from Signatories who responded to the CDCC inquiry indicated that the majority was not in favour of brand advertising. The sentiment was that this went beyond the Code's mandate and possibly creates a conflict of interest situation. The CDCC reviewed the initiative and decided to go back to the Signatory base with a more refined option of a straight brand list with no advertising fee attached. This would allow for the transparency of brands associated with the Code. In 2007 the CDCC will continue to explore a “registration” of Canadian brands which could strengthen the “regulatory” and “protective” role of the Code.

Changes to the Code

As the Code revision was completed in January 2006 no further changes were made in 2006.

Support from the Competition Bureau

The CDCC wishes to thank the Bureau for its support for the translation and printing of the new Code and consumer brochure and also for the continued technical support through the participation of an advisor on the CDCC.