The next round of EU sanctions on Russia — the 12th package of sanctions, due to be announced soon — could have a significant impact on the luxury and fashion industry and specifically on importers of Russian and non-Russian diamonds into the EU and potentially on imports of jewelry, watches, or articles of clothing that incorporate diamonds.
The proposed 12th package of EU sanctions against Russia calls for a ban on the import of Russian diamonds into the EU. The proposal is expected to include import bans on diamonds originating from Russia, and on diamonds from Russia that are processed (cut and polished) in third countries such as India. Import bans could also be imposed on finished products that incorporate Russian diamonds, like watches, jewelry and articles of clothing.
To limit any adverse consequences, it is prudent for businesses to immediately identify any Russian diamonds in their products and supply chains and explore sourcing alternatives. Businesses should also be prepared to provide proof to customs officials that the goods they are importing do not contain any Russia-originating sanctioned diamonds.
The 11th package of EU sanctions against Russia introduced the requirement that importers present evidence of compliance, which might also be contained in the new sanctions in respect of Russian diamonds. This means that imported goods will be blocked at the border until satisfactory evidence is provided to show that they do not contain Russian diamonds.
Thus, in addition to impacting importers of Russian-origin diamonds and potentially of articles incorporating such diamonds, the new sanctions package could also significantly affect manufacturers and suppliers of non-Russian diamonds who will also need to provide such evidence and may see an increase in imports/demand (and compliance burdens) as a result of this ban.
Non-compliance with the new sanctions package could result in major delays that will impact revenues and affect supply and procurement chains. It could also result in administrative penalties, criminal charges, and potential litigation exposure from regulatory authorities in the countries of import.
The proposed timeframe for the phasing in of Russian diamond sanctions is understood to be:
- From 1 January 2024 for Russian diamonds & jewelry made from Russian diamonds.
- From March 2024 for Russian diamonds of certain higher weight processed in third countries (based on a G7-coordinated traceability mechanism that would prevent imports of Russian gems processed in third countries).
- From September 2024 for smaller Russian stones processed in third countries.