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Honest Grading

Saturday, December 27, 2014 12:36:40 PM America/Chicago

COVER STORIES

Honest Grading

Overgrading is not just a legal issue, it is an ethical issue facing the diamond and retail industry.

By Martin Rapaport

Martin Rapaport Statement Regarding Overgrading Of Diamonds
   
“The Rapaport Group is opposed to the misrepresentation of diamond quality. The overgrading of diamonds is an unfair practice that destroys consumer confidence and the legitimacy of the diamond industry. Retailers who sell overgraded diamonds using GIA terminology and non-GIA grading standards are at great risk. When consumers try to resell their diamonds or send them to the GIA for regrading and discover significant quality differences, there will be hell to pay. The diamond trade must prioritize the protection of consumers above profits,” said Martin Rapaport, Chairman of the Rapaport Group.

RapNet Announcement
   
Effective October 1, 2014, EGL will no longer be listed as a diamond grading report on RapNet. This notice applies to all EGL grading reports, including EGL International, as stated in our previous notice.

Background Statement
   
RapNet is concerned about the misrepresentation of diamond quality through the abuse of the GIA grading standard. We oppose the misuse of GIA terminology by applying alternative grading standards that overstate the quality of diamonds. We support the GIA standards as defined by the GIA grading laboratory to its diamond grading reports.
   
RapNet recognizes that some EGL grading reports are more consistent with GIA grading standards than others. In our opinion, there is confusion and inconsistency among the various EGL grading reports and we have therefore decided not to list any EGL grading reports on RapNet.
   
RapNet recognizes that GIA and other laboratory diamond grading is based on human evaluation and is therefore subjective. We recognize that a difference of one color and one clarity between diamond grading reports from the same or different laboratories is within a reasonable tolerance range. We reject the idea that there is no diamond grading standard and caution RapNet members not to use GIA grading terminology to describe diamonds that are below a reasonable tolerance range of the GIA standard.
   
RapNet members using GIA terminology are required to honestly communicate diamond quality based on the GIA standard.

 

Is it okay to sell a diamond as a G color when the color is really an N? How about if the G is really an L? Shockingly, a lot of the people in the diamond trade think that it’s perfectly okay to use third-party diamond grading reports to overstate the color and clarity of the diamonds they sell.
   Diamond grading reports labeled EGL International (EGLI) commonly use Gemological Institute of America (GIA) terminology to describe diamonds as four or more color/clarity combination grades higher than what the GIA would give the same stones. Overgrading has become institutionalized. Hundreds of thousands of diamonds worth billions of dollars have been sold to consumers with overgraded reports in the past few years. 
   Remarkably, the dealers selling overgraded reports are not ashamed of their actions. Some buy diamonds with GIA grading reports conditioned on the seller’s obtaining three, four or even five color/clarity combination upgrades from EGLI. Retailers seeking greater profits are active buyers of overgraded reports. After all, it’s easier to sell an EGLI G at a low price than a GIA G at a much higher price. It’s also easier to sell an EGLI G at the same price as a GIA K color. Consumers don’t understand the nuances of color grading or the differences between GIA and EGLI reports, but they can certainly tell the 74 percent difference in cost from $4,200 to $7,300 for a 1-carat SI1 diamond. From dealers to retailers, an entire industry has emerged based on overgrading.
   While the profit motivations are easy to understand, the cynical justifications for the unethical behavior are often just as crooked as the sellers themselves. The obvious negative ramifications of overgrading and misrepresenting diamond quality to hundreds of thousands of consumers are clear. The damage to the diamond industry by the establishment, acceptance and support of a culture that promotes systematic misrepresentation of diamond quality and the outright cheating of consumers destroys the diamond trade from within. It is as insidious as an undetected cancer eating away at the essential moral fiber of the diamond trade. 
Frankly, are we an industry of liars and cheaters? And if not, what are the good people in our trade doing about the gross misrepresentations of diamond quality going on right under our noses? I believe that most of the people in our industry are honest and reputable. But I now question all of these good people, as well as our important trade organizations: Why are you 
turning a blind eye to the large-scale rampant misrepresentation and cheating that is going on? Hundreds of thousands of diamond consumers have been and are being cheated. Why are you not speaking up against this injustice?

CROOKED JUSTIFICATIONS
1- NO GRADING STANDARDS, say the gemological anarchists. EGLI, a primary source of overgraded diamond reports, states in its press release of September 18, 2014, “there is no single, international standard for diamond grading that has national or international status or acceptance.” According to EGLI, it’s okay to call an N color a G color, since anybody can say anything they want in a world with no standards.
   The GIA created its gemological standards and related terminology in 1953 and began issuing diamond grading reports in 1955. Ever since, it has continuously and consistently supported its standards by issuing grading reports for millions of diamonds. This directly counters the false EGLI claim. Let us be perfectly clear on this: The GIA is the global diamond grading standard accepted by the international trade and the legal systems of the United States and other countries. 
   One has to question the integrity and honesty of EGLI’s claim. After all, if there are no internationally recognized GIA standards and EGLI maintains different non-GIA standards, then why is EGLI using GIA terminology on its grading reports? Why is its best color a D and not an A? Could it be that EGLI is using GIA terminology in a way that is designed to fool consumers into thinking that they are getting a better grade of diamond than they are actually getting?
   Furthermore, consider the ramifications of such gemological anarchy. If the trade accepts EGLI’s claim and allows it to destroy our industry’s internationally accepted GIA standard, then how will we honestly communicate diamond quality to consumers and to each other? If we can’t differentiate quality, we can’t differentiate price, and this will result in a collapse of diamond prices.
   The false claim that there are no grading standards is a frontal attack on the very foundation of our industry. It is an attempt to destroy the language of our trade and the life’s work of great people like GIA’s Richard Liddicoat and others who have created standards that honest people live by. 
   I am shocked that industry leaders have not publicly spoken out against this brazen attempt to destroy the credibility of our industry. I call upon the leaders of our industry to issue public statements confirming the existence of GIA standards. I also urge our trade organizations to condemn and expel from our legitimate trade those who grade and sell diamonds using GIA terminology while applying alternative grading standards that willfully and consistently overstate the quality of diamonds.


2- DIAMOND GRADING IS SUBJECTIVE. Since diamond grading is subjective, there are no standards, say the overgraders. This is false. Diamond grading is only subjective to a degree. For example, 100 out of 100 trained gemologists can tell the difference between a G and a J color. The systematic grading of a diamond by multiple gemologists yields diamond grading results that are almost always consistent within a one color or one clarity range. At the very most, in rare, exceptional circumstances, there might be an error with a gemological difference of two colors or two clarities. In any case, when using GIA standards, there is no justification for the consistent overgrading of diamonds by more than one color or clarity grade.

Definition: Overgraded Diamond

   An overgraded diamond is a diamond graded using GIA terminology that when verified by the GIA is more than one color or one clarity lower than the original grade.

3- IT’S NOT ME, IT’S EGLI. Many sellers of overgraded EGLI reports think that they are not personally responsible for overstating the quality of diamonds. Some make the claim that they never said the diamond was a G, it was EGLI, not them, who overgraded. Essentially, they believe they can hide behind the EGLI report.
   When we examined prices on RapNet, we found that diamonds graded independently by sellers without any third-party grading report were offered at higher prices than EGLI graded diamonds of the same quality. It appears that RapNet members did not want to personally lie about the quality of the diamonds they were offering for sale but did feel comfortable offering EGLI diamonds for sale at lower prices because they were of lower qualities. The takeaway is that overgrading reports have become a license to lie about quality.

 

   So what will happen when consumers try to resell their diamonds or send them to the GIA for regrading and then find out that their Gs are really Ks or worse? Who will be held responsible for the overgrading misrepresentation? Will it be the EGLI laboratory in Hong Kong or Israel? The dealer who sold the diamond to the retailer? The retailer who sold the diamond to the consumer?
   While there may be uncertainty about the legal responsibility of EGLI and dealers who sell overgraded diamonds to retailers, one thing is for sure: Retailers will be held 100 percent accountable for any and all misrepresentations of diamond quality to consumers. U.S. law differentiates between transactions between “experts” such as dealers or jewelers and the sale of products to consumers. Experts are expected to have a high level of product knowledge. They are expected to look at the diamond and know that their EGLI G is in fact a GIA K. Therefore, it is unlikely that retailers will be able to make any claims against dealers when the consumer returns the diamond and demands a 
   It will get even more interesting when consumers demand triple the damages they are entitled to from retailers who have sold them misrepresented, overgraded diamonds. It appears that retailers are the ultimate suckers in this game. The financial and reputational risk is all theirs.

   Some dealers take the position that if they are not legally responsible for selling overgraded diamonds to retailers, then there is no problem in doing so. After all, if it’s legal, why shouldn’t they do it? 
   This raises the important question of ethics in our industry. Most ethical people would agree that it is wrong to sell overgraded diamonds to consumers. They would also agree that it’s wrong to institutionalize a business that sells overgraded diamonds to retailers who may end up going bankrupt when consumers find out about the misrepresentation. Do we or should we have any ethical constraints? Or are we only bound by legalities? Is our trade ethical?
   In my view, it is important to separate ethical products and people from unethical products and people. While we can’t stop companies from legal unethical activities, we can decide who to do business with. And if our industry does not have a sufficient critical mass of ethical companies, then at the very least we should refuse to trade legal but unethical products that are used to mislead people.
   The bottom line is that overgraded diamond reports are poison. Ethical people should not deal in them.

4- BUT THE PRICE WAS LOW. Some suppliers think that it is okay to misrepresent quality as long as the price is low. They further maintain that the consumer somehow knows that the quality is overstated because the price is so low. In fact, there is no ethical or legal justification for such misrepresentation. Consumers are incentivized to buy because they think they are getting a “good deal” when in fact they are not getting as “good a deal” as they think because the quality has been exaggerated more than they realize. It’s illegal.
   Consider the case of Rick Chotin, a St. Louis retailer with a 40-year-old store. In the early 1990s, he was one of the first U.S. jewelers to offer Yehuda-treated fracture-filled diamonds for sale to consumers. He charged significantly lower prices than prices for similar nontreated stones, but he failed to tell his customers that the diamonds were fracture-fill treated. He thought he was simply giving them a “good deal.”

   One day one of his customers visited the local appraiser, who upon observing the telltale rainbow effect, informed the consumer that her engagement ring was treated. She was shocked. A local TV station picked up the story and soon there were hundreds of consumers lining up outside the appraiser’s office determined to find out if their diamonds were also treated. According to the appraiser, some 90 percent were indeed treated. refund. Essentially, the retailer will be 100 percent solely responsible for the refund with no legal recourse to the supplier.    In spite of the low prices Chotin charged, he was investigated and ordered by the Missouri attorney general to refund money to his customers and pay penalties. Chotin tried to do what was right and used his life savings of $1,000,000 to provide refunds to his customers. But there wasn’t enough money. Finally on March 7, 1994, Rick Chotin killed himself by drinking a dose of “jeweler’s cocktail” — a cyanide solution used for cleaning gold. He was 44 years old.

   Is there nothing for us to learn from Rick Chotin’s death? Did he die for nothing?
   Does anyone still think it’s okay to misrepresent quality if you are selling at a low price?

5- SALESPEOPLE MAKE FULL DISCLOSURE. Some people say salespeople always tell the customer that EGLI uses a non-GIA standard that overgrades diamonds. In fact, if all salespeople honestly tell the customer that EGLI diamonds are overgraded compared to GIA standards, then that might be a good retailer defense. However, given the use and abuse of GIA terminology on the EGLI grading reports, there must be honest communication about the extent of overgrading. If EGLI calls a diamond a G, what is it really? Is it a GIA K, GIA N or what? It’s hard to believe the salesperson will know the true GIA grade, let alone communicate it. 
   Here is a quote from the James Wells v. Genesis Diamonds LLC lawsuit filed on July 22, 2014, in Nashville, Tennessee. The quote is from a TV station undercover report on the sale of EGLI diamonds by Genesis: 
   “Back at Genesis at least one dissatisfied customer was told that there was only one difference separating GIA stones from EGL International: the price…. The Genesis employee goes on to tell Michael the difference in GIA and EGL certification wouldn’t be the quality of the stone, but rather its price.”
   Frankly, I do not believe that it is standard industry practice for retailers to show an EGLI grading report and then fully disclose to the consumer what the actual GIA grades are. Even if consumers are told different standards are used, they still do not know the extent of the overgrading.

GIA Grading System Background
When was the Gemological Institute of America (GIA) created? Who created it? And why?   
   
GIA was created in 1931 by Robert M. Shipley, Sr. to “professionalize the jewelry trade through education.” Through his personal experience in the jewelry business, Shipley realized how little he actually knew about gems. He got the idea for GIA after enrolling in correspondence courses at Britain’s National Association of Goldsmiths while studying in Europe and decided to bring that same type of education back to the states. 

What about the American Gem Society (AGS)? 
   The AGS was also founded by Shipley in 1934 as a professional guild of knowledgeable jewelers. The goal of the AGS was to create an organization that could help protect consumers from fraud and false advertising. 

When was the GIA diamond grading system created? And who created it? 
   Prior to 1933, there were no instruments specifically used for diamond grading, so jewelers had to rely on tools, such as microscopes, from other fields to gauge the quality of diamonds. That’s why Robert Shipley, Jr.’s invention of the “Diamond Eye Loupe,” “Polariscope” and “DiamondScope” between 1934 and 1937 was so revolutionary. 
   Richard Liddicoat created the GIA diamond grading system in 1953, though he had been working on the system as early as the 1940s and was using it as a teaching tool at the GIA. 
   He introduced the International Diamond Grading System™, based on Robert Shipley, Sr.’s 4Cs — color, cut, clarity and carat weight. Until then, there had not been a universal, objective standard of measurement in place for grading diamonds. Due to the inconsistency of descriptions used, dealers would often disagree among themselves about the quality of specific stones. Liddicoat wanted a consistent system of grading diamonds that dealers could agree on.
   Liddicoat used the letters D-Z to describe color, with D as a starting point, because prior to the creation of the grading system,dealers were using A, AA, AAA to describe color and “A” had become misused and tarnished. He wanted a fresh perspective and starting point.

 

CONSEQUENCES
   The rampant misrepresentation of diamond quality by those selling overgraded diamonds has ramifications well beyond specific fraudulent transactions. The continuation of such unfair business practices undermines the integrity and legitimacy of the diamond industry as it destroys consumer confidence in diamonds and the diamond trade. Diamond quality misrepresentation threatens the sustainability of the entire diamond industry and must be stopped.
   The following are some of the consequences.

6- THE UNLEVEL PLAYING FIELD. What about ethical jewelers who refuse to sell overgraded diamonds? How are they to compete with the jeweler across the street who is selling EGLI Fs at $4,200 against GIA Fs at $7,300? How much time and money can be spent trying to educate consumers about the differences in grading standards? What about consumers who are more interested in shopping than education? Over time, ethical jewelers will lose price-sensitive customers to competitors who use unfair business practices. Should being ethical mean that you have to go out of business? 
   The sad fact is that many jewelers feel that they have no choice but to offer diamonds with overgraded reports. If everybody is doing it they believe they have to do it to stay in business. The introduction of overgraded diamonds into a consumer market forces other jewelers to compete with their own overgraded diamonds. And so a culture that promotes the systematic misrepresentation of diamond quality grows.
   The insidious thing about overgrading is that it promotes more overgrading until the extent of unethical activity overwhelms the reputation of the entire industry. The solution is for the diamond trade to bifurcate. Separate the good products from the bad products, the good labs from the bad labs. That is what the GIA was designed to do (see GIA Grading System Background box to right).
   Those who seek to maintain an all-inclusive diamond trade that mixes ethical and unethical people, good and bad standards, honest and dishonest products, are destroying our industry by creating an unlevel playing field that rewards bad at the expense of good.
   The lesson here is that the diamond industry cannot survive without a level playing field. The good people in our industry can, should and must create their own level playing field with ethical, honest standards.

7- WHAT ABOUT CHRISTMAS? Some retailers are concerned that the disclosure of the overgrading problem to consumers may have a negative impact on the upcoming holiday season. Upon learning of overgrading, some consumers may not want to buy any diamonds at all. 
   The rampant misrepresentation of diamond quality to hundreds of thousands of consumers poses a significant threat to the sale of legitimately graded diamonds. Until such time as there is clearly communicated differentiation between honestly graded and overgraded diamonds, the industry faces catastrophic reputational risk. Yet if disclosure is made and consumer alerts are issued, legitimate retailers may suffer. It looks like a lose-lose situation. What to do?
   Whenever I don’t know what to do, I err on the side of truth and transparency. In this case, there is even greater reason to broadcast the situation. Consider the position of the consumers who buy an overgraded diamond. What about the terrible feeling they will get when they learn that the quality of their diamond is lower than they thought? Should they be buying overgraded diamonds this holiday season because we failed to warn them? As an industry, should we be more concerned about the lost sales and profits of diamond dealers and jewelers than the lost money and trust of consumers?

 Our industry is facing exponentially increasing reputational risk as well as an important ethical challenge, which demands that we tell consumers the truth. As an industry, we must embrace the values of truth and honesty and make them more meaningful than short-term gains. The bottom line is that our trade must prioritize the protection of consumers above profits.
   As an industry, I don’t think we can or should hide the truth about overgrading. Aside from the more important ethical obligation, we must recognize that this elephant is much too large to sweep under the rug. Consumers must be warned about grading reports that overgrade diamonds and the legitimate market of diamonds graded to GIA standards must be protected.

8- SHOW ME THE MONEY. What will happen when consumers find out about the massive overgrading situation? Will consumers say, “Oh, I knew that EGLI was using a different lower grading standard and I paid a fair price, so no problem?” Or will EGLIs become the new Yehuda fracture-filled diamonds of the twenty-first century? Will consumers who have been sold diamonds without fair disclosure line up waiting for appraisers to tell them the GIA quality of their diamonds? Will the eager beaver, class action lawyers smell opportunity? Will consumers and attorneys general demand refunds? If so, who will pay?
   We are not just talking about theoretical abstract reputational risk. No, we are talking about cold, hard cash. Something tangible that everyone in our trade understands.
   While I don’t want to create panic, I do want to warn everyone about the serious risk we are facing. Well over a billion dollars of overgraded diamonds are out there and some of them will come back to retailers from consumers demanding a full retail refund. If retailers take back the diamonds and provide a full refund, things may not get too messy. However, if retailers do not take back the diamonds, they will be offered for resale on the open market and/or sent to the GIA for regrading. Consumers will find out that they have been taken for a ride. 
   If a critical mass of consumers is made aware of the overgrading of their diamonds and they are unable to get their money back, things may get frighteningly interesting. We can expect a publicly driven social media blast against diamonds, the likes of which we have never seen or can barely imagine.
   If you are a retailer trading in overgraded diamonds, you had best be prepared to buy them back or go out of business. Considering the possibility that your legally minded supplier may not back you on purely ethical grounds, you should probably get a written guarantee from your supplier that he will take back any overgraded diamonds sold to you. You should also consider that even if you agree to buy back the diamonds from consumers, an enterprising lawyer might still claim that you defrauded clients by not providing full disclosure of quality and subject you to a lawsuit demanding triple damages. Consider that you will be expected to refund the full retail price rather than wholesale price.

ISSUES
9- WHAT ABOUT THE GOOD EGLS? While I am not sure about how “good” the good EGLs are, there is a clear difference between two types of laboratories. 
   There are the good laboratories that use GIA terminology and declare that they grade according to GIA standards, producing diamond grading reports that are reasonably consistent within one color and one clarity grade of GIA. And then there are the overgrading laboratories that use GIA terminology and grade according to different standards that regularly overstate the quality of the diamonds and produce grading reports that are more than one color or one clarity grade higher than GIA’s grades.
   Rapaport policy is to not work with overgrading laboratories and work with good laboratories. RapNet lists GIA, AGS, HRD, IGI and other grading reports that we believe meet our good laboratory description. In the case of GIA and HRD, we operate take-in windows that assist clients in obtaining their reports. 
   We recognize that some EGL grading reports are more consistent with GIA grading standards than others. 
   The problem with EGL is that the brand is out of control, lacking any common ownership or standards. There is great confusion and inconsistency among the various EGL laboratory standards and reports. Every EGL does what it wants with different yet similarly named grading reports scattered across the globe. EGLI is an overgrading laboratory while EGL USA subscribes to GIA standards and claims not to overgrade. Yet they both carry the EGL brand name.
   A huge problem is that each EGL laboratory promotes its brand name under the same EGL banner. They all tell the world they are good labs, while some clearly are not. Consumers, jewelers and even dealers cannot be expected to tell the difference between the grading standards of EGL International, EGL Israel, EGL USA, EGL Hong Kong, EGL China, EGL India, EGL Israel, EGL Turkey, EGL Canada, EGL Miami, EGL Platinum and EGL Antwerp. Furthermore, new EGLs pop up like mushrooms, some of which have outrageous standards or even no standards at all. All of this amid reports that some clients at some EGLs get highly preferential grading results, blank grading reports and can even provide labs with suggestions of what the color and clarity should be. With all due respect to the good EGLs, this hodgepodge mixed brand of good, not good and who-knows-what labs is entirely unacceptable.
   An even greater problem is the way branding works. EGLI gets a free ride on EGL USA’s branding. The more EGL USA promotes its brand as a good laboratory, the more opportunities there are for unethical jewelers to mislead consumers with EGLI reports. EGLI would not be as large and successful as it is in the U.S. today without EGL USA’s better reputation.

   We have to ask how many consumers have been sold overgraded EGLI reports due to EGL USA? Do the good EGLs share responsibility for supporting the overgrading EGLs? In my view, it is time for the good EGLs to stop aiding and abetting the not-good EGLs with their brand confusion. The ethical thing for the good EGLs to do is to change their name. 
   Finally, let us consider the confusion that consumers are being subjected to. First, they must confront multiple grading standards. One lab’s G color is another’s N color. But that’s not enough. Let’s also confuse them with the brand name of laboratories all under the same EGL name but using different standards. A consumer doesn’t know the difference between EGLI, EGL USA and EGL Turkey. Buying diamonds should not be like buying an EGL lottery ticket. The idea that if you can’t beat consumers out of their money, you can confuse them out of it, is over.

10- IF GIA IS THE STANDARD, WHAT ABOUT SI3S AND OTHER GEMOLOGICAL INFORMATION? We define SI3 as an intermediate grade between SI2 and I1. Many in the trade, including this writer, believe that the clarity and price spread between SI2 and I1 is too large. Furthermore, the diamond trade commonly sorts diamonds into SI2, SI3 and I1 grades. 
   An additional issue related to the SI3 grade is the inability of the current GIA diamond grading system to differentiate between eye-clean and not-eye-clean diamonds. The eye-clean issue is important because it has great relevance when selling a diamond to a consumer. There is also concern that the GIA is much too lenient when grading black imperfections and much too strict when grading feathers and nonblack inclusions.
   And then there are numerous higher-level technical aspects that are often provided by companies listing diamonds on RapNet but not provided in the GIA grading report. This might include the color tint, inclusion size, color and location of inclusions, photos of diamonds and other items.
   In general, the trend is for RapNet to provide as much information as possible so that buyers can trade online without seeing the stone. Or if buyers require inspection, sufficient information is provided so as to significantly limit returns. Furthermore, diamond manufacturers commonly sort diamonds to higher levels of differentiation so as to optimize pricing.
   Since we have made a strong argument in this article that GIA is the standard and that if you use GIA terminology you must use the GIA grading standards, there is an obvious question about why the Rapaport Price List quotes SI3 prices.

   The issue before us is if it is okay to add to GIA standards without replacing them. Obviously there is no problem with a lab or dealer describing a diamond using GIA standards and adding information such as the color of the inclusion or if the diamond is eye-clean. Also, it’s not a problem if someone does not use GIA terminology such as TLB (top light brown) or PQ2 (imperfection 2) to describe a diamond. A lab or company might also want to grade a diamond as an F- or VVS2+.
   The question regarding SI3 is interesting. While we are not technically using GIA terminology, I would hate to see companies using SI3 to describe I2 diamonds. Therefore, our RapNet policy will be that if you grade a diamond as SI3, it will have the same overgrading condition as if you graded it SI2. In other words, an SI3, like an SI2, should not come back from the GIA as an I2. If it does, it is overgraded.
   We are communicating with the GIA regarding the need for an SI3 grade as well as about other gemological grading concerns described above. At some stage, we hope that the GIA will extend its grading system to modify or add additional information to its reports. 
   We must recognize that while the GIA grading system is not perfect or all-inclusive, it is the standard that must be used when using GIA terminology.

11- LABORATORY COMPETITION. Our strong support of the GIA standard does not imply that we do not support competition among laboratories. While we believe that the GIA is the sole custodian of its diamond grading terminology and standards, we also believe that there should be healthy competition among companies and laboratories that use GIA terminology and standards to grade diamonds. The GIA does not have a monopoly on the use of its terminology or standards.
   GIA has given the diamond industry a great gift of language, incorporating not just the terminology but also defining what the letters mean in the form of live standards provided by an active GIA grading laboratory. We must ensure the GIA has the exclusive right to manage the language it has given us so that we can maintain honest communication and standards in our trade.
   The fact that GIA controls one set of terminology and associated grading standards does not prevent other companies or laboratories from establishing their own different standards using their own different terminology. It’s a freely competitive market and likely to become more so as new technology enables diamond grading standardization and differentiation. Nothing stops anyone from creating a different or better grading system.

RAPAPORT SOLUTIONS
   Having discussed the problem of overgrading, the key issue before us now is what to do about it. Specifically, what policies and procedures should the diamond industry adopt so as to ensure fair and honest communication regarding diamond quality? This can be accomplished by applying two rules and one definition.

RAPAPORT RULES 
   
Rule1: It is an unfair business practice to communicate the grade of a diamond using GIA terminology while applying non-GIA standards that systematically overgrade the quality of the diamond. 

   
Definition: An overgraded diamond is a diamond graded using GIA terminology that when verified by the GIA is more than one color or one clarity point lower than the original grade.

   
Rule 2: Diamond suppliers are responsible for the quality of the diamonds they sell. If a supplier communicates the quality of a diamond using GIA terminology, the buyer may at his option and expense, within ten business days of receiving the diamond, send the diamond for grading verification to the GIA. Upon return, if the diamond is graded more than one color or one clarity grade lower than the quality represented by the seller, then the seller shall accept the return of the diamond and provide the buyer with a full refund as well as a refund of the GIA grading verification fee. In the event that the buyer is a consumer, the buyer shall have 30 business days to send the diamond for grading verification to the GIA.

DISCUSSION ABOUT RAPAPORT RULES FOR HONEST GRADING
12- SELLERS ARE RESPONSIBLE FOR WHAT THEY SELL. The foundation of the diamond business is based on the honesty and integrity of diamond traders. The oldest rule in the business is that sellers have to stand behind the products they sell. Diamond reports that overgrade diamonds are now being used as an excuse by sellers to avoid their responsibility to buyers. It’s time to shift responsibility for the accuracy of diamond grading back to the suppliers and away from the laboratories. Once sellers are forced to take full responsibility for what they sell, the overgrading misrepresentation game will end. Selling an overgraded diamond should be like selling a treated diamond requiring full disclosure. “Give me my money back” will become the new language of overgrading.

13- BUYER BEWARE. In the new world of seller responsibility, the buyer will have to get the supplier to commit to written quality assurances on the invoice. Some sellers might say, “I’ve got an EGLI, I do not guarantee any quality, buy it if you like.” And so, indeed, if you buy it, everything is now the buyer’s responsibility. The game now becomes about who is promising what to whom, not what some third-party lab is saying. It will be interesting to see how careful sellers become about what they promise when they have to put their money where their mouth is.

14- LABORATORY HARMONIZATION.The harmonization of laboratory standards is a good idea and deserves support. So does transparent testing. However, given the competitive market situation, the complexity of international law, antitrust issues and enforcement problems, I don’t think our industry can wait around long enough for this to be a realistic solution for the current situation.

Important Rapaport Disclosure

 

    The Rapaport Group provides a broad range of added-value services to the diamond trade. These services include GIA LabDirect service that provides take-in and delivery window access to GIA diamond grading laboratories for clients in Israel, Belgium and India. Similar services are provided to HRD Antwerp. Rapaport has worked with GIA for over 20 years and has handled millions of GIA diamonds for clients.
   Additional Rapaport services include independent RapLab gemological services as well as Rapaport Magazine and Diamonds.Net editorial and information services, the RapNet diamond trading network and Rapaport Trading Services, which include Rapaport Auctions and Tenders.

CONCLUSION
   The misrepresentation of diamond quality by laboratories that overgrade diamonds poses a significant threat to the diamond industry. Hundreds of thousands of consumers have purchased more than one billion dollars of overgraded diamonds. While there does not appear to be any imminent threat of consumers returning these diamonds en masse, a few lawsuits have already commenced. Failure by jewelers and the diamond trade to provide fair refunds to consumers seeking to return overgraded diamonds could encourage other consumers to question the quality of their diamonds. Should consumers find that a significant number of diamonds have been overgraded, a run of refund requests to jewelers is possible. If this occurs, it is unlikely that retailers will have the necessary funds to provide refunds. In any case, there would be significant damage to overall consumer confidence for all diamonds.
   The diamond trade must address the issue of overgraded diamonds in a timely manner. Consumers should be warned about overgrading and directed toward grading reports that provide fair grades. Trade organizations should implement rules that make suppliers responsible for the accuracy of the grading information they provide with the diamonds they sell. Use of third-party grading reports that overgrade diamonds should be discouraged with mandatory disclosure requirements to all buyers, including consumers. In all instances, jewelers should be fully informed of the risks they take when buying and selling overgraded diamonds.

 

Article from the Rapaport Magazine - November 2014. 


Posted By Michael S. George

The Truth About Diamond Certificates

Saturday, December 27, 2014 12:34:10 PM America/Chicago

The Truth Revealed about Certificated Diamonds from an Industry Leader.

After more than a decade of fighting this battle of bogus diamond certificates,  and teaching our clients the TRUTH, Martin Rapaport, the diamond price guy internationally, has come to his senses and written an indepth article about this most  serious and vagrant abuse to YOU, THE RETAIL CONSUMER.

The following article is a reproduction in part from the November issue of the trade publication “Rapaport Diamond Report.  The more exhaustive article, which will be available at www.msgjewelers.com goes further into details you may find of interest.

 

At MSG Jewelers, Inc. we have been fighting the good fight regarding diamond certificates that will call a diamond Color Grade upto 6 color grades higher than the actual quality. You may have picked up our TRUTH REVEALED article or read about it in our GemTalk articles. The article below will explain in detail about the blatant scandalous misrepresentation we have been informing you about. Even this shortened version is long yet, I hope you may find it interesting and informative reading. Please contact me with any questions you may have regarding this or any  other jewelry question at 314.353.9488 or info@msgjewelers.com. As I have said so many times before “ IF YOU DON’T KNOW JEWELRY, KNOW YOUR JEWELER “. 


Honest Grading

Overgrading is not just a legal issue, it is an ethical issue facing the diamond and retail industry.

By Martin Rapaport

Is it okay to sell a diamond as a G color when the color is really an N? How about if the G is really an L? Shockingly, a lot of the people in the diamond trade think that it’s perfectly okay to use third-party diamond grading reports to overstate the color and clarity of the diamonds they sell.
   Diamond grading reports labeled EGL International (EGLI) commonly use Gemological Institute of America (GIA) terminology to describe diamonds as four or more color/clarity combination grades higher than what the GIA would give the same stones. Overgrading has become institutionalized. Hundreds of thousands of diamonds worth billions of dollars have been sold to consumers with overgraded reports in the past few years. 
   Remarkably, the dealers selling overgraded reports are not ashamed of their actions. Some buy diamonds with GIA grading reports conditioned on the seller’s obtaining three, four or even five color/clarity combination upgrades from EGLI. Retailers seeking greater profits are active buyers of overgraded reports. After all, it’s easier to sell an EGLI G at a low price than a GIA G at a much higher price. It’s also easier to sell an EGLI G at the same price as a GIA K color. Consumers don’t understand the nuances of color grading or the differences between GIA and EGLI reports, but they can certainly tell the 74 percent difference in cost from $4,200 to $7,300 for a 1-carat SI1 diamond. From dealers to retailers, an entire industry has emerged based on overgrading.
   While the profit motivations are easy to understand, the cynical justifications for the unethical behavior are often just as crooked as the sellers themselves. The obvious negative ramifications of overgrading and misrepresenting diamond quality to hundreds of thousands of consumers are clear. The damage to the diamond industry by the establishment, acceptance and support of a culture that promotes systematic misrepresentation of diamond quality and the outright cheating of consumers destroys the diamond trade from within. It is as insidious as an undetected cancer eating away at the essential moral fiber of the diamond trade. 
Frankly, are we an industry of liars and cheaters? And if not, what are the good people in our trade doing about the gross misrepresentations of diamond quality going on right under our noses? I believe that most of the people in our industry are honest and reputable. But I now question all of these good people, as well as our important trade organizations: Why are you turning a blind eye to the large-scale rampant misrepresentation and cheating that is going on? Hundreds of thousands of diamond consumers have been and are being cheated. Why are you not speaking up against this injustice?

CROOKED JUSTIFICATIONS
1- NO GRADING STANDARDS, say the gemological anarchists. EGLI, a primary source of overgraded diamond reports, states in its press release of September 18, 2014, “there is no single, international standard for diamond grading that has national or international status or acceptance.” According to EGLI, it’s okay to call an N color a G color, since anybody can say anything they want in a world with no standards.
   The GIA created its gemological standards and related terminology in 1953 and began issuing diamond grading reports in 1955. Ever since, it has continuously and consistently supported its standards by issuing grading reports for millions of diamonds. This directly counters the false EGLI claim. Let us be perfectly clear on this: The GIA is the global diamond grading standard accepted by the international trade and the legal systems of the United States and other countries. 
   One has to question the integrity and honesty of EGLI’s claim. After all, if there are no internationally recognized GIA standards and EGLI maintains different non-GIA standards, then why is EGLI using GIA terminology on its grading reports? Why is its best color a D and not an A? Could it be that EGLI is using GIA terminology in a way that is designed to fool consumers into thinking that they are getting a better grade of diamond than they are actually getting?
   Furthermore, consider the ramifications of such gemological anarchy. If the trade accepts EGLI’s claim and allows it to destroy our industry’s internationally accepted GIA standard, then how will we honestly communicate diamond quality to consumers and to each other? If we can’t differentiate quality, we can’t differentiate price, and this will result in a collapse of diamond prices.
   The false claim that there are no grading standards is a frontal attack on the very foundation of our industry. It is an attempt to destroy the language of our trade and the life’s work of great people like GIA’s Richard Liddicoat and others who have created standards that honest people live by. 
   I am shocked that industry leaders have not publicly spoken out against this brazen attempt to destroy the credibility of our industry. I call upon the leaders of our industry to issue public statements confirming the existence of GIA standards. I also urge our trade organizations to condemn and expel from our legitimate trade those who grade and sell diamonds using GIA terminology while applying alternative grading standards that willfully and consistently overstate the quality of diamonds.

2- DIAMOND GRADING IS SUBJECTIVE. Since diamond grading is subjective, there are no standards, say the overgraders. This is false. Diamond grading is only subjective to a degree. For example, 100 out of 100 trained gemologists can tell the difference between a G and a J color. The systematic grading of a diamond by multiple gemologists yields diamond grading results that are almost always consistent within a one color or one clarity range. At the very most, in rare, exceptional circumstances, there might be an error with a gemological difference of two colors or two clarities. In any case, when using GIA standards, there is no justification for the consistent overgrading of diamonds by more than one color or clarity grade.

Definition: Overgraded Diamond

   An overgraded diamond is a diamond graded using GIA terminology that when verified by the GIA is more than one color or one clarity lower than the original grade.

3- IT’S NOT ME, IT’S EGLI. Many sellers of overgraded EGLI reports think that they are not personally responsible for overstating the quality of diamonds. Some make the claim that they never said the diamond was a G, it was EGLI, not them, who overgraded. Essentially, they believe they can hide behind the EGLI report.
   When we examined prices on RapNet, we found that diamonds graded independently by sellers without any third-party grading report were offered at higher prices than EGLI graded diamonds of the same quality. It appears that RapNet members did not want to personally lie about the quality of the diamonds they were offering for sale but did feel comfortable offering EGLI diamonds for sale at lower prices because they were of lower qualities. The takeaway is that overgrading reports have become a license to lie about quality.

 

   So what will happen when consumers try to resell their diamonds or send them to the GIA for regrading and then find out that their Gs are really Ks or worse? Who will be held responsible for the overgrading misrepresentation? Will it be the EGLI laboratory in Hong Kong or Israel? The dealer who sold the diamond to the retailer? The retailer who sold the diamond to the consumer?
   While there may be uncertainty about the legal responsibility of EGLI and dealers who sell overgraded diamonds to retailers, one thing is for sure: Retailers will be held 100 percent accountable for any and all misrepresentations of diamond quality to consumers. U.S. law differentiates between transactions between “experts” such as dealers or jewelers and the sale of products to consumers. Experts are expected to have a high level of product knowledge. They are expected to look at the diamond and know that their EGLI G is in fact a GIA K. Therefore, it is unlikely that retailers will be able to make any claims against dealers when the consumer returns the diamond and demands a refund. Essentially, the retailer will be 100 percent solely responsible for the refund with no legal recourse to the supplier.

   It will get even more interesting when consumers demand triple the damages they are entitled to from retailers who have sold them misrepresented, overgraded diamonds. It appears that retailers are the ultimate suckers in this game. The financial and reputational risk is all theirs.
   Some dealers take the position that if they are not legally responsible for selling overgraded diamonds to retailers, then there is no problem in doing so. After all, if it’s legal, why shouldn’t they do it? 
   This raises the important question of ethics in our industry. Most ethical people would agree that it is wrong to sell overgraded diamonds to consumers. They would also agree that it’s wrong to institutionalize a business that sells overgraded diamonds to retailers who may end up going bankrupt when consumers find out about the misrepresentation. Do we or should we have any ethical constraints? Or are we only bound by legalities? Is our trade ethical?
   In my view, it is important to separate ethical products and people from unethical products and people. While we can’t stop companies from legal unethical activities, we can decide who to do business with. And if our industry does not have a sufficient critical mass of ethical companies, then at the very least we should refuse to trade legal but unethical products that are used to mislead people.
   The bottom line is that overgraded diamond reports are poison. Ethical people should not deal in them.

4- BUT THE PRICE WAS LOW. Some suppliers think that it is okay to misrepresent quality as long as the price is low. They further maintain that the consumer somehow knows that the quality is overstated because the price is so low. In fact, there is no ethical or legal justification for such misrepresentation. Consumers are incentivized to buy because they think they are getting a “good deal” when in fact they are not getting as “good a deal” as they think because the quality has been exaggerated more than they realize. It’s illegal.
   Consider the case of Rick Chotin, a St. Louis retailer with a 40-year-old store. In the early 1990s, he was one of the first U.S. jewelers to offer Yehuda-treated fracture-filled diamonds for sale to consumers. He charged significantly lower prices than prices for similar nontreated stones, but he failed to tell his customers that the diamonds were fracture-fill treated. He thought he was simply giving them a “good deal.”
   One day one of his customers visited the local appraiser, who upon observing the telltale rainbow effect, informed the consumer that her engagement ring was treated. She was shocked. A local TV station picked up the story and soon there were hundreds of consumers lining up outside the appraiser’s office determined to find out if their diamonds were also treated. According to the appraiser, some 90 percent were indeed treated.
   In spite of the low prices Chotin charged, he was investigated and ordered by the Missouri attorney general to refund money to his customers and pay penalties. Chotin tried to do what was right and used his life savings of $1,000,000 to provide refunds to his customers. But there wasn’t enough money. Finally on March 7, 1994, Rick Chotin killed himself by drinking a dose of “jeweler’s cocktail” — a cyanide solution used for cleaning gold. He was 44 years old.
   Is there nothing for us to learn from Rick Chotin’s death? Did he die for nothing?
   Does anyone still think it’s okay to misrepresent quality if you are selling at a low price?

5- SALESPEOPLE MAKE FULL DISCLOSURE. Some people say salespeople always tell the customer that EGLI uses a non-GIA standard that overgrades diamonds. In fact, if all salespeople honestly tell the customer that EGLI diamonds are overgraded compared to GIA standards, then that might be a good retailer defense. However, given the use and abuse of GIA terminology on the EGLI grading reports, there must be honest communication about the extent of overgrading. If EGLI calls a diamond a G, what is it really? Is it a GIA K, GIA N or what? It’s hard to believe the salesperson will know the true GIA grade, let alone communicate it. 
   Here is a quote from the James Wells v. Genesis Diamonds LLC lawsuit filed on July 22, 2014, in Nashville, Tennessee. The quote is from a TV station undercover report on the sale of EGLI diamonds by Genesis: 
   “Back at Genesis at least one dissatisfied customer was told that there was only one difference separating GIA stones from EGL International: the price…. The Genesis employee goes on to tell Michael the difference in GIA and EGL certification wouldn’t be the quality of the stone, but rather its price.”
   Frankly, I do not believe that it is standard industry practice for retailers to show an EGLI grading report and then fully disclose to the consumer what the actual GIA grades are. Even if consumers are told different standards are used, they still do not know the extent of the overgrading.

CONSEQUENCES
   The rampant misrepresentation of diamond quality by those selling overgraded diamonds has ramifications well beyond specific fraudulent transactions. The continuation of such unfair business practices undermines the integrity and legitimacy of the diamond industry as it destroys consumer confidence in diamonds and the diamond trade. Diamond quality misrepresentation threatens the sustainability of the entire diamond industry and must be stopped.
   The following are some of the consequences.

6- THE UNLEVEL PLAYING FIELD. What about ethical jewelers who refuse to sell overgraded diamonds? How are they to compete with the jeweler across the street who is selling EGLI Fs at $4,200 against GIA Fs at $7,300? How much time and money can be spent trying to educate consumers about the differences in grading standards? What about consumers who are more interested in shopping than education? Over time, ethical jewelers will lose price-sensitive customers to competitors who use unfair business practices. Should being ethical mean that you have to go out of business? 
   The sad fact is that many jewelers feel that they have no choice but to offer diamonds with overgraded reports. If everybody is doing it they believe they have to do it to stay in business. The introduction of overgraded diamonds into a consumer market forces other jewelers to compete with their own overgraded diamonds. And so a culture that promotes the systematic misrepresentation of diamond quality grows.
   The insidious thing about overgrading is that it promotes more overgrading until the extent of unethical activity overwhelms the reputation of the entire industry. The solution is for the diamond trade to bifurcate. Separate the good products from the bad products, the good labs from the bad labs. That is what the GIA was designed to do (see GIA Grading System Background box to right).
   Those who seek to maintain an all-inclusive diamond trade that mixes ethical and unethical people, good and bad standards, honest and dishonest products, are destroying our industry by creating an unlevel playing field that rewards bad at the expense of good.
   The lesson here is that the diamond industry cannot survive without a level playing field. The good people in our industry can, should and must create their own level playing field with ethical, honest standards.

7- WHAT ABOUT CHRISTMAS? Some retailers are concerned that the disclosure of the overgrading problem to consumers may have a negative impact on the upcoming holiday season. Upon learning of overgrading, some consumers may not want to buy any diamonds at all. 
   The rampant misrepresentation of diamond quality to hundreds of thousands of consumers poses a significant threat to the sale of legitimately graded diamonds. Until such time as there is clearly communicated differentiation between honestly graded and overgraded diamonds, the industry faces catastrophic reputational risk. Yet if disclosure is made and consumer alerts are issued, legitimate retailers may suffer. It looks like a lose-lose situation. What to do?
   Whenever I don’t know what to do, I err on the side of truth and transparency. In this case, there is even greater reason to broadcast the situation. Consider the position of the consumers who buy an overgraded diamond. What about the terrible feeling they will get when they learn that the quality of their diamond is lower than they thought? Should they be buying overgraded diamonds this holiday season because we failed to warn them? As an industry, should we be more concerned about the lost sales and profits of diamond dealers and jewelers than the lost money and trust of consumers?
   Our industry is facing exponentially increasing reputational risk as well as an important ethical challenge, which demands that we tell consumers the truth. As an industry, we must embrace the values of truth and honesty and make them more meaningful than short-term gains. The bottom line is that our trade must prioritize the protection of consumers above profits.
   As an industry, I don’t think we can or should hide the truth about overgrading. Aside from the more important ethical obligation, we must recognize that this elephant is much too large to sweep under the rug. Consumers must be warned about grading reports that overgrade diamonds and the legitimate market of diamonds graded to GIA standards must be protected.

8- SHOW ME THE MONEY. What will happen when consumers find out about the massive overgrading situation? Will consumers say, “Oh, I knew that EGLI was using a different lower grading standard and I paid a fair price, so no problem?” Or will EGLIs become the new Yehuda fracture-filled diamonds of the twenty-first century? Will consumers who have been sold diamonds without fair disclosure line up waiting for appraisers to tell them the GIA quality of their diamonds? Will the eager beaver, class action lawyers smell opportunity? Will consumers and attorneys general demand refunds? If so, who will pay?
   We are not just talking about theoretical abstract reputational risk. No, we are talking about cold, hard cash. Something tangible that everyone in our trade understands.
   While I don’t want to create panic, I do want to warn everyone about the serious risk we are facing. Well over a billion dollars of overgraded diamonds are out there and some of them will come back to retailers from consumers demanding a full retail refund. If retailers take back the diamonds and provide a full refund, things may not get too messy. However, if retailers do not take back the diamonds, they will be offered for resale on the open market and/or sent to the GIA for regrading. Consumers will find out that they have been taken for a ride. 
   If a critical mass of consumers is made aware of the overgrading of their diamonds and they are unable to get their money back, things may get frighteningly interesting. We can expect a publicly driven social media blast against diamonds, the likes of which we have never seen or can barely imagine.
   If you are a retailer trading in overgraded diamonds, you had best be prepared to buy them back or go out of business. Considering the possibility that your legally minded supplier may not back you on purely ethical grounds, you should probably get a written guarantee from your supplier that he will take back any overgraded diamonds sold to you. You should also consider that even if you agree to buy back the diamonds from consumers, an enterprising lawyer might still claim that you defrauded clients by not providing full disclosure of quality and subject you to a lawsuit demanding triple damages. Consider that you will be expected to refund the full retail price rather than wholesale price.

ISSUES
9- WHAT ABOUT THE GOOD EGLS? While I am not sure about how “good” the good EGLs are, there is a clear difference between two types of laboratories. 
   There are the good laboratories that use GIA terminology and declare that they grade according to GIA standards, producing diamond grading reports that are reasonably consistent within one color and one clarity grade of GIA. And then there are the overgrading laboratories that use GIA terminology and grade according to different standards that regularly overstate the quality of the diamonds and produce grading reports that are more than one color or one clarity grade higher than GIA’s grades.
   Rapaport policy is to not work with overgrading laboratories and work with good laboratories. RapNet lists GIA, AGS, HRD, IGI and other grading reports that we believe meet our good laboratory description. In the case of GIA and HRD, we operate take-in windows that assist clients in obtaining their reports. 
   We recognize that some EGL grading reports are more consistent with GIA grading standards than others. 
   The problem with EGL is that the brand is out of control, lacking any common ownership or standards. There is great confusion and inconsistency among the various EGL laboratory standards and reports. Every EGL does what it wants with different yet similarly named grading reports scattered across the globe. EGLI is an overgrading laboratory while EGL USA subscribes to GIA standards and claims not to overgrade. Yet they both carry the EGL brand name.
   A huge problem is that each EGL laboratory promotes its brand name under the same EGL banner. They all tell the world they are good labs, while some clearly are not. Consumers, jewelers and even dealers cannot be expected to tell the difference between the grading standards of EGL International, EGL Israel, EGL USA, EGL Hong Kong, EGL China, EGL India, EGL Israel, EGL Turkey, EGL Canada, EGL Miami, EGL Platinum and EGL Antwerp. Furthermore, new EGLs pop up like mushrooms, some of which have outrageous standards or even no standards at all. All of this amid reports that some clients at some EGLs get highly preferential grading results, blank grading reports and can even provide labs with suggestions of what the color and clarity should be. With all due respect to the good EGLs, this hodgepodge mixed brand of good, not good and who-knows-what labs is entirely unacceptable.
   An even greater problem is the way branding works. EGLI gets a free ride on EGL USA’s branding. The more EGL USA promotes its brand as a good laboratory, the more opportunities there are for unethical jewelers to mislead consumers with EGLI reports. EGLI would not be as large and successful as it is in the U.S. today without EGL USA’s better reputation.

   We have to ask how many consumers have been sold overgraded EGLI reports due to EGL USA? Do the good EGLs share responsibility for supporting the overgrading EGLs? In my view, it is time for the good EGLs to stop aiding and abetting the not-good EGLs with their brand confusion. The ethical thing for the good EGLs to do is to change their name. 
   Finally, let us consider the confusion that consumers are being subjected to. First, they must confront multiple grading standards. One lab’s G color is another’s N color. But that’s not enough. Let’s also confuse them with the brand name of laboratories all under the same EGL name but using different standards. A consumer doesn’t know the difference between EGLI, EGL USA and EGL Turkey. Buying diamonds should not be like buying an EGL lottery ticket. The idea that if you can’t beat consumers out of their money, you can confuse them out of it, is over.

10- IF GIA IS THE STANDARD, WHAT ABOUT SI3S AND OTHER GEMOLOGICAL INFORMATION? We define SI3 as an intermediate grade between SI2 and I1. Many in the trade, including this writer, believe that the clarity and price spread between SI2 and I1 is too large. Furthermore, the diamond trade commonly sorts diamonds into SI2, SI3 and I1 grades. 
   An additional issue related to the SI3 grade is the inability of the current GIA diamond grading system to differentiate between eye-clean and not-eye-clean diamonds. The eye-clean issue is important because it has great relevance when selling a diamond to a consumer. There is also concern that the GIA is much too lenient when grading black imperfections and much too strict when grading feathers and nonblack inclusions.
   And then there are numerous higher-level technical aspects that are often provided by companies listing diamonds on RapNet but not provided in the GIA grading report. This might include the color tint, inclusion size, color and location of inclusions, photos of diamonds and other items.
   In general, the trend is for RapNet to provide as much information as possible so that buyers can trade online without seeing the stone. Or if buyers require inspection, sufficient information is provided so as to significantly limit returns. Furthermore, diamond manufacturers commonly sort diamonds to higher levels of differentiation so as to optimize pricing.
   Since we have made a strong argument in this article that GIA is the standard and that if you use GIA terminology you must use the GIA grading standards, there is an obvious question about why the Rapaport Price List quotes SI3 prices.
   The issue before us is if it is okay to add to GIA standards without replacing them. Obviously there is no problem with a lab or dealer describing a diamond using GIA standards and adding information such as the color of the inclusion or if the diamond is eye-clean. Also, it’s not a problem if someone does not use GIA terminology such as TLB (top light brown) or PQ2 (imperfection 2) to describe a diamond. A lab or company might also want to grade a diamond as an F- or VVS2+.
   The question regarding SI3 is interesting. While we are not technically using GIA terminology, I would hate to see companies using SI3 to describe I2 diamonds. Therefore, our RapNet policy will be that if you grade a diamond as SI3, it will have the same overgrading condition as if you graded it SI2. In other words, an SI3, like an SI2, should not come back from the GIA as an I2. If it does, it is overgraded.
   We are communicating with the GIA regarding the need for an SI3 grade as well as about other gemological grading concerns described above. At some stage, we hope that the GIA will extend its grading system to modify or add additional information to its reports. 
   We must recognize that while the GIA grading system is not perfect or all-inclusive, it is the standard that must be used when using GIA terminology.

11- LABORATORY COMPETITION. Our strong support of the GIA standard does not imply that we do not support competition among laboratories. While we believe that the GIA is the sole custodian of its diamond grading terminology and standards, we also believe that there should be healthy competition among companies and laboratories that use GIA terminology and standards to grade diamonds. The GIA does not have a monopoly on the use of its terminology or standards.
   GIA has given the diamond industry a great gift of language, incorporating not just the terminology but also defining what the letters mean in the form of live standards provided by an active GIA grading laboratory. We must ensure the GIA has the exclusive right to manage the language it has given us so that we can maintain honest communication and standards in our trade.
   The fact that GIA controls one set of terminology and associated grading standards does not prevent other companies or laboratories from establishing their own different standards using their own different terminology. It’s a freely competitive market and likely to become more so as new technology enables diamond grading standardization and differentiation. Nothing stops anyone from creating a different or better grading system.

RAPAPORT SOLUTIONS
   Having discussed the problem of overgrading, the key issue before us now is what to do about it. Specifically, what policies and procedures should the diamond industry adopt so as to ensure fair and honest communication regarding diamond quality? This can be accomplished by applying two rules and one definition.

RAPAPORT RULES 
   
Rule1: It is an unfair business practice to communicate the grade of a diamond using GIA terminology while applying non-GIA standards that systematically overgrade the quality of the diamond. 

   
Definition: An overgraded diamond is a diamond graded using GIA terminology that when verified by the GIA is more than one color or one clarity point lower than the original grade.

   
Rule 2: Diamond suppliers are responsible for the quality of the diamonds they sell. If a supplier communicates the quality of a diamond using GIA terminology, the buyer may at his option and expense, within ten business days of receiving the diamond, send the diamond for grading verification to the GIA. Upon return, if the diamond is graded more than one color or one clarity grade lower than the quality represented by the seller, then the seller shall accept the return of the diamond and provide the buyer with a full refund as well as a refund of the GIA grading verification fee. In the event that the buyer is a consumer, the buyer shall have 30 business days to send the diamond for grading verification to the GIA.

DISCUSSION ABOUT RAPAPORT RULES FOR HONEST GRADING
12- SELLERS ARE RESPONSIBLE FOR WHAT THEY SELL. The foundation of the diamond business is based on the honesty and integrity of diamond traders. The oldest rule in the business is that sellers have to stand behind the products they sell. Diamond reports that overgrade diamonds are now being used as an excuse by sellers to avoid their responsibility to buyers. It’s time to shift responsibility for the accuracy of diamond grading back to the suppliers and away from the laboratories. Once sellers are forced to take full responsibility for what they sell, the overgrading misrepresentation game will end. Selling an overgraded diamond should be like selling a treated diamond requiring full disclosure. “Give me my money back” will become the new language of overgrading.

13- BUYER BEWARE. In the new world of seller responsibility, the buyer will have to get the supplier to commit to written quality assurances on the invoice. Some sellers might say, “I’ve got an EGLI, I do not guarantee any quality, buy it if you like.” And so, indeed, if you buy it, everything is now the buyer’s responsibility. The game now becomes about who is promising what to whom, not what some third-party lab is saying. It will be interesting to see how careful sellers become about what they promise when they have to put their money where their mouth is.

14- LABORATORY HARMONIZATION.The harmonization of laboratory standards is a good idea and deserves support. So does transparent testing. However, given the competitive market situation, the complexity of international law, antitrust issues and enforcement problems, I don’t think our industry can wait around long enough for this to be a realistic solution for the current situation.

CONCLUSION
   The misrepresentation of diamond quality by laboratories that overgrade diamonds poses a significant threat to the diamond industry. Hundreds of thousands of consumers have purchased more than one billion dollars of overgraded diamonds. While there does not appear to be any imminent threat of consumers returning these diamonds en masse, a few lawsuits have already commenced. Failure by jewelers and the diamond trade to provide fair refunds to consumers seeking to return overgraded diamonds could encourage other consumers to question the quality of their diamonds. Should consumers find that a significant number of diamonds have been overgraded, a run of refund requests to jewelers is possible. If this occurs, it is unlikely that retailers will have the necessary funds to provide refunds. In any case, there would be significant damage to overall consumer confidence for all diamonds.
   The diamond trade must address the issue of overgraded diamonds in a timely manner. Consumers should be warned about overgrading and directed toward grading reports that provide fair grades. Trade organizations should implement rules that make suppliers responsible for the accuracy of the grading information they provide with the diamonds they sell. Use of third-party grading reports that overgrade diamonds should be discouraged with mandatory disclosure requirements to all buyers, including consumers. In all instances, jewelers should be fully informed of the risks they take when buying and selling overgraded diamonds.

 

Article from the Rapaport Magazine - November 2014. 

Posted By Michael S. George

So You Think You Know Diamonds?...Think Again!

Monday, June 24, 2013 5:57:38 AM America/Chicago


There’s a new kid in town, and his name is Lab Created Diamond. That’s right a Lab Created Diamond that is colorless, and gem quality is now available for sale. It’s so good you won’t be able to see the difference, not even your Jeweler will be able to tell the difference, as of this writing, because as a follower of Gemtalk you probably already know that Lab Created  means “Chemically Identical to the Natural,” the only difference is it was grown in a laboratory instead of mined out of the ground. 

 

A Lab created Diamond is still Carbon, it has the same cubic structure of growth, it has the same refractive index, dispersion, hardness, and density. So all of the present tools in the common Gem Lab will identify this Lab Created Diamond as a Diamond, which it is; however we won’t know that it is Lab Created as opposed to mined from the ground. Now some of you might be thinking WOW that’s great, it’s probably going to be cheaper  too, and it may actually seem like a deal at first, if it’s certified as being Lab Created, and you bought it under that premise. The selling point will be that it’s a real Diamond, that it’s more affordable, it’s guaranteed to be conflict free, environmentally friendly, and socially responsible. It’s the responsibility part that has me nervous. 

 

You may remember that when Moissanite first came on the scene, in less than 30 days stores in Florida were selling them as natural Diamonds, instead of  Lab Created alternatives. Many flocked to buy them, at greatly reduced prices, thinking they were buying real Natural Diamonds, only to find out later on, with our sophisticated equipment that they had been duped. The problem this time is that, with Lab Created Diamonds they are identical, there is no fingerprint that I know of at this time, and no equipment that I know of at this time, that can be put into our lab. It can only be found by sending it to a Lab such as a GIA Lab, where they can  look for a fingerprint they may see under high magnification. 

 

So what’s the problem you may ask? The problem  is that these Lab Diamonds may be sold, and certified as Lab Diamonds to the first initial retail buyer, but unscrupulous people out there may begin to sell them for fast cash at these “We Buy Gold, and Jewelry” places, or on the internet, only to find out that their selling them as Natural Mined Diamonds. Eventually that could get into the common inventory of many Jewelry stores, retail, and wholesale, and eventually into your jewelry. Now imagine the horror of buying a beautiful, magnificent Diamond as an heirloom piece, for a special anniversary, or a special someone in your life, handing it down generationally only to find out that it was Lab Created, and not mined from the ground. 

 

Now some of you are thinking if it looks like a duck, if it walks like a duck, if it sounds like a duck, it is a duck, and so it is a Diamond, but because it’s grown in a laboratory what value does it really have? How rare is it truly? We buy Diamonds, not only because they are beautiful, but because they are rare. In fact recently, there was a statistic that came out that said if you took all the Diamonds that have ever been mined in all of the world, and you tried to put them into one place they would not fill up an Olympic sized swimming pool. That’s true rarity! 

 

You’ll hear about how pure these Diamonds are, and how they are type 2A Diamonds, and only 1.8% of the worlds mined Diamonds are truly type 2A, which means that they don’t have nitrogen in them, impurities generally found in Diamonds. They’ll tell you about how you can have a higher quality Diamond, at the pricing that would only be available to the very wealthy, and how it’s affordable to all. That may give some comfort, but it scares this Jeweler, to the core. You’ve heard me say many times before if you don’t know jewelry, know your jeweler, well it’s never been more important than it is right now. It’s never been more profound than it is right now! 

 

You’ve heard me tell stories of Lab Created Opals, and Lab Created Tanzanites being sold in the islands around the world, and they are being sold to customers around the globe as Genuine, Natural Gemstones. Well I’ve seen it, with my own eyes, and I know that what I’m telling you is factual, and actual. It’s because of this, that I say BUYER BEWARE. Now, this isn’t something new that just happened upon the market place, but something that’s been in development for quite some time. 

 

This Jeweler has spoken to many of the principals in the Lab Created industry, asked, pleaded, and begged that they put a fingerprint for us to identify these Lab Created Gems, to which they resoundingly said “No”. So until specialized equipment has been found, and manufactured for the local Jeweler to know whether a Diamond is Lab Created or not it will be necessary to not only know your Jeweler, but when making a substantial purchase that you verify that the Diamond is NATURAL, and not LAB CREATED. I recommend the American Gem Society (AGS) as the lab with the most credibility. 

 

Don’t panic yet, there’s plenty of time before the market becomes saturated with these Lab Created Diamonds. Know that this Jeweler will be LOOKING, DIGGING, and INVESTIGATING to find the way to indentify these Gems for your peace of mind, and mine. Now once we find the fingerprint, and make it identifiable to the average well-educated Jeweler, this could have a good place in the market, and in society to save people money, and allow you to splurge in beauty, size, and scintillation. 

 

So remember our slogan , “MSG Jewelers helps you buy Diamonds with confidence, Guaranteed”. I hope that makes you feel better. Know that we will always do our best, and utmost to keep you educated, and informed about the Jewelry industry. Stay tuned to Gemtalk for much, much more on this topic! 

 

 

Posted By © Copyright 2013 by Michael S. George

Holiday Shopping Made Easy

Friday, April 27, 2012 9:37:57 AM America/Chicago

 

In this issue, we will be discussing "Holiday Shopping Made Easy." When doing your holiday shopping, most retailers are expecting you to shop impulsively. They set their positions up in the kiosks of malls and have their locations in mall stores based upon demographics – how may people and what age group. This is done so that when you pass by and see the right price for the right item, you will stop and purchase that item even if you had no intention on doing so. And that is an important factor when your are doing your holiday shopping. If you are a frugal shopper, what you will want to do is to make sure that you’re buying what you need when you need it; not just buying because it is on sale or because it caught your eye.

 

When shopping for jewelry or any other item, the most important thing is to be an informed customer. It’s the informed customer that is the wise customer. How can you be informed about jewelry? One way is by reading this article, of course! But more importantly, it is finding a jeweler who you are comfortable with and who will answer your questions and who is knowledgeable. And one who is willing to impart that knowledge to you without using big, fancy terms – but putting it into layman’s terms. My suggestion is if you do not have a jeweler who you know and trust, is to go from place to place, shopping between the big guild stores at the mall, as well as the small independent stores, for the same item asking questions. Once you are informed, the test (in my opinion) is to ask the question as though you are uninformed and see if you get the correct answer. You can price compare many times by just looking at the inserts in your newspapers. But remember when it comes to jewelry buying, that the same style ring or pendant or size of diamonds, doesn’t necessarily mean that it’s the same quality. And the value is really based upon the clarity, cut, color, carat weight, and along with the fifth and sixth C’s – which are cost and care.

 

Now by cost, remember that we mean not just the dollars and cents paid, but also the overall value. Here is the equation: a good value means fine quality at an affordable price, with a good selection to choose from, and service, service, service. If service is not part of the equation, then you did not get a good value, no matter how inexpensive that jewelry item may have been. And the care, the final C that I referred to, is being imparted with the knowledge on how to take care of that piece of jewelry you just bought. What good is getting a good value on a piece of jewelry if you’re not sure what idiosyncracies there may be regarding that item. Whether, for example, and opal should not have to endure extreme heat or cold, because it could damage the stone. That it needs to be moistened and kept in a mineral oil or water-type environment so that the pores stay moist. Or, such as emeralds, that cannot take intense heat and should be lubricated from time to time. Or information on pearls, like wiping them off with a cotton cloth after being worn. Or that being worn up against the skin that the natural body oils enhance the luster and the beauty of those pearls. It’s these little bits of information that can be imparted to you, as a client or customer, that will make all the difference when keeping that jewelry item cared for in the appropriate manner. Or, having it get lost or damaged, having to spend money to replace it as opposed to buying another jewelry item.

 

When you are doing your holiday shopping, write a list down of what it is that you are looking for. Have that list in front of you and knowing where you are going to go and who you are going to price comparison shop with. By having this list in front of you, you will aid yourself in not being that impulsive buyer and spending two to three times the amount your budget allows. A budget is important and should be set prior to going out and shopping. When you have made up your list, put down the approximate price you expect to pay for that item. Or give your self a budget range for each of those items and tally them up at the finish line so you know what your total is expected, making sure that is within your budget, and you’re comfortable with spending that for this season.

 

Now, if you have gotten an excellent value and have saved some money – GREAT – all the more for your pocketbook. Or you can use that if you have found that you’ve had to go over in a particular area. It is important that you go in thinking, "This is what I’m looking for. This is what my budget will allow. And I will keep within those means." You’ll be surprised that when you have a well thought out plan that you execute with your list, how much fun shopping can be. And, how much less stress is on you when your are being approached by those high pressure sales people who are trying to force their products on you. Price won’t be an issue, beauty won’t be an issue. Enjoy trying it on, saying to yourself, "This is pretty, but I am not buying today. It is not on my list." Make that clear when you are talking to the sales representative. And if the pressure gets to be too high, you shouldn’t buy there anyway - now or in the future. Go where you are comfortable and where shopping is fun. When shopping for jewelry and other fine items, make sure that an appraisal is part of

the package and is no additional charge. Find out up front what it is going to take and how long it is going to take to get a ring sized, or have adjustments made after the fact. If something needs to be shipped, see if they can ship if for you. That would make life easier and take that much less of your personal time – as long as the price is right. You should expect to pay an additional fee for shipping and handling. Jewelry should be registered and insured.

 

Most importantly, when you are out shopping, remember it’s your hard earned money that you’re spending and spend it with the people you want to spend it with. Spend it with people you feel confident with; with those who recognize that it is your hard earned money. You’re the boss, you’re in control. Now, go out and tackle the challenge, stay within your budget.

 

Posted By © Copyright 1997 by Michael S. George

Jewelry Care

Friday, April 27, 2012 9:25:52 AM America/Chicago

 

Today I would like to talk to you about jewelry care – a much forgotten area of the jewelry industry that can make a huge impact on the longevity of your fine jewelry and not to mention your pocketbook in cost for repairs and replacements. When you apply some very basic rules, you may find that you can wear all your jewelry for many years with little or no investment in preventive maintenance.

 

Preventive maintenance are the key words here, and preventive maintenance begins as soon as you purchase fine jewelry. It is important that you have the jewelry protected when it is not being worn and stored in a proper compartment of a jewelry box - that you properly clean the jewelry that you have when it is not appropriate to wear fine jewelry. And that you can identify difficulties before they get out of control. Finally what to do when once you have identified a problem to get it corrected appropriately and with the least amount of risk and investment on your behalf. If you employ these five simply rules, you will enjoy your jewelry much more and with little to no expenditure. With the money that you will be saving, you be able to invest that into more jewelry!

 

Follow me here for just a moment and let’s take this step by step. First of all, when jewelry is sold it is typically put into some type of display box or container. It is delivered to you so that when you take it home, or wrap it up as a gift, the jewelry is in a proper container. Not only is the container aesthetically pleasing, but it helps to keep jewelry free from damage and dirt. If you do not have a jewelry box, the boxes being used at jewelry stores are great to store your jewelry in when it is not being worn. My recommendation is that

you have a fine jewelry case to store your jewelry in one compact area. This makes it easily accessible to you to retrieve and store your jewelry. And let’s face it, in the busy world in which we live in today, convenience is the key objective at times. And this convenience may be costly at first, but you will find that it will keep your jewelry in fine condition if you purchase the right jewelry box. There are so many to choose from ranging from wood to plastic, to marble and carved designs, to the simplest design – cardboard. When purchasing a jewelry box the thing to keep in mind is that you want something that will allow you to lay your chains and bracelets out flat, as well as your watches. Have your rings stored where they will not be rubbed or abraded by the top of the jewelry box. It should be large enough to expand with your purchases of fine jewelry, yet compact enough to be easily stored or hidden away if you should travel away from home.

 

If you should go on vacation, and have a large amount of fine jewelry, you might consider a bank vault or safety deposit box to store your jewelry and collectibles in when you are away. But of course, this is still not to be in lieu of insurance – a rider policy on your homeowner’s insurance is always an excellent idea. For your piece of mind and security in knowing that if a jewelry item is lost, stolen, damaged, or any other peril, that is will be repaired or replaced at the cost of the insurance company – not from your pocket. If you are not familiar with the rider type insurance policy, please refer back to a previous issue of GemTalk regarding insurance or give us a call at (314) 353- 9488 and we will be happy to send you a copy. Insurance is a very key and important aspect that we don’t want you to overlook. Many have thought that they were insured under a blanket policy and have discovered that they were covered for certain things with very small limits and very high deductibles. A rider policy usually has no deductibles and covers the jewelry item in full for most every peril.

 

Cleaning is the next topic I would like to deal with. The simplest and easiest thing to do that most people aren’t aware of is the proper procedure and what to use to clean their fine jewelry. Let’s talk about what cleaning solutions can be used and how to clean, because proper technique is eminently important. There are jewelry cleaners in the marketplaces that clean predominantly with soap and ammonia and they work great on diamonds, gold, and most gemstones. However, they can be harsh on items such as pearls, emeralds, and opals and you must refrain from dipping these items into these solutions. For home use, there are non-ammoniated cleaners available. But the simplest, quickest, and easiest solution to use whether at home or while traveling is toothpaste. It’s a great cleaner. If you want to mix your own cleaner, a great recipe is: in a mason-type jar, mix 1 teaspoon Spic ‘n Span, 1 ounce Mr. Clean, 1/4 cup of ammonia or Windex (this is optional), and 1 pint of warm water. Mix the solution thoroughly and use it as a dip for your jewelry. If you choose to add the ammonia, do not put emerald, opals, or pearls in the solution. This is not a solution that you should soak your jewelry in for long periods of time. Dip your jewelry into the solution and with a very small, soft toothbrush gently clean the intricate sections of your jewelry. Make sure that you are doing this over a stopped up sink that has some water in it. Let the bristles of the brush do the work, whether you are using toothpaste or a solution. Make sure that you do not scrub the jewelry as it can loosen the prongs of the gemstones. Allow the bristles to do the work under the gemstone using a gently twist of the wrist to allow the bristles to clean. Thoroughly rinse the jewelry with warm water, shake the excess water off and with a fine, lint free cloth, and dry your jewelry. There are ultra-sonics on the market and they are excellent. They vibrate the dirt off the jewelry and deposit in at the bottom of the machine. These are wonderful tools to use with their cleaning and rinsing compartments. They must be used appropriately and your jewelry must never be left in the ultrasonic for more than 3 to 5 minutes. Always read the instructions before using this piece of equipment.

 

There are times it is not appropriate to wear jewelry. These times are generally when you are doing manual labor with your hands where your jewelry might get scratched or bumped. When you are sleeping at night, believe it or not, your jewelry is rubbing up against sheets and pillowcases. Bed linens are great offenders to the prongs that hold your gemstones in place. We recommend removing your rings from the sides of the shank for leverage, not the top, at night or when doing manual labor. We believe that if you follow this precaution you will eliminate 90-95% of your chances of losing or loosening your gemstones. Think of your fine jewelry items as a mink coat that costs tens of thousands of dollars. You would never wear a mink while gardening or cleaning your house. So as a rule of thumb, wear your fine jewelry as you would your mink.

 

There are problems that can occur when jewelry is worn consistently over a period of time. Let’s identify what some of those problems are. Remember that gold is a very malleable, soft item, and does have a tendency to have the shank of a ring conform to the shape of your finger. This type of repair is something that can be easily taken care of by your jeweler by putting the ring on a mandrel and rounding it out. Another concern that should be addressed is worn, broken, and/or bent prongs. Most of the time this happens without your knowledge. But there are signs that you can be aware of and identify and correct this problem. For example, careful inspection of your jewelry items after cleaning will identify if the prong head has been damaged. If the prong tip is missing, it will most likely be catching on everything from nylons to shirts and blouses. It pays to inspect your jewelry on a regular basis; probably weekly or at the very least, monthly. It might be a good idea to invest in a magnifying glass so you can look at the intricacies of your jewelry and can readily notice if something is amiss.

 

Once you have identified a problem, such as a broken prong, you should have it properly repaired. Take the item to your jeweler. Be sure that you know what the cost of the repair will be and that no unnecessary work will be done. Jewelry such as diamonds, rubies, and sapphires can accept heat without fear of damage to the gemstones. Many other gemstones can not accept heat and must be removed in order to repair a prong. Your jeweler should be able to properly explain the technique that needs to be done with your jewelry, whether it needs to be retipped or repronged. Retipping is adding gold to the tops of the prongs that may have worn flat. Repronging is where that tip is entirely missing and the gemstone is exposed. Repronging is generally a most labor intensive and costly process. Depending upon if the gemstone needs to be removed, fees can range from $15 per prong and up. Retipping can be a much easier process if the gemstone can take heat. It may be a fee of $10-12 or less, with the price going down for each additional tip, provided that the gemstones do not need to be removed. If they must be removed for retipping or repronging, generally there is an additional fee to remove the gemstones, retip or reprong, and then to reset the gemstone. Fees to remove the gemstone should range from $5-10 per gemstone and up, depending upon their size and type. For instance, opals and emeralds are much softer stones and require special handling and pose a greater risk and liability for the jeweler. Some jewelers may charge a little more to remove these soft gems. You may have seen a commercial about up front pricing. A reputable jeweler should be more than happy to provide you with an estimate of up front pricing for the work to be done. Be sure that you are educated an informed before you say, "Yes." Don’t be afraid to ask questions.

 

Posted By © Copyright 1997 by Michael S. George

"Wholesale to the Public"

Friday, April 27, 2012 9:14:58 AM America/Chicago

 

I am sure that you have heard the expression "Wholesale to the Public" and maybe even seen ads or signs on windows for jewelry offering the same. But let me share with you today that that is a total misnomer. Wholesale is a term that, according to Webster’s Collegiate Dictionary, means "relating to or engaged in the sale of items or commodities in quantity for resale." Example: a grocer. "A wholesaler is a merchant middle man who sells cheaply to retailers, other merchants, institutions, industrial, or commercial users mainly for resale

or business use." Now that’s Webster’s definition of wholesale and wholesaler, not just mine.

 

Many times we have been given a misunderstanding into thinking that wholesale means any price less than retail. People who advertise "We Wholesale to the Public" are people whom, in my opinion, are deceiving the

public. Many jewelry stores are doing something that has become rather popular over the last decade and a half. That is to offer incentive pricing to draw clients into their doors. And that is fine and is very appropriate as long as the retail price has not been adjusted or made inflated in any manner. This does not mean that the general public is buying wholesale. When you see "wholesale to the public" on a sign or in an ad, I say "buyer beware." The public is the end user and the end user is the retail client. Because sales tax is being charged,

whether you see it on the invoice or not, the retailer is responsible for paying to pay the city, state, and federal governments taxation based upon that particular sale. So, truly the end user is someone who is buying something at retail.

 

Let’s think about this from another perspective. Wholesale means "cost." And no matter how good a friend, or the illusion of friendship you may have with someone in business (in this case with jewelers and jewelry) you’re going to be paying a fee over and above the wholesale cost. This just makes sense because we are all in business to be able to make a profit and to take care of our families and to grow in our social standard. So when you see a sign that says, "Wholesale to the Public" - buyers beware. Recognize that if you are in business, whether it is jewelry or any other business, that you have to take the item that you purchased and have to make a profit on it in order to pay the lights, rent, your staff, your insurance, and all the multiplicity of expenses that

come along with doing business in America today.

 

When shopping for jewelry, it is important that you find a jeweler who is honest, who has a good reputation, and is accountable to you. Not just during the sale, but most importantly, that they are accountable after the sale. Many times we find that people will have someone who works out of their basement, garage, or briefcase only to find that it appears that they are getting a good deal only to find that it is a poor value because when there is service needed after the sale, that the salesman can not be found.

 

Let’s give a definition of value. Value equals at least these three things: quality products given with a fine selection with service before, during, and after the sale. Please remember that if one of these components is not present during the sale, you have not received a good value. Should you purchase something and think that you have received a good price, and believe that the quality is good for the price that you paid, but you don’t get the service that you need after or during the sale, or you’re not comfortable because you’re not sure if you are getting the straight scoop: buyer beware. Go somewhere where you can ask the questions and get a straight answer and know that they care about you, and not just your money and give you the service that you deserve.

 

Posted By © Copyright 1997 by Michael S. George

Watches

Friday, April 27, 2012 8:56:28 AM America/Chicago

 

In this issue I would like to explore watches. Many have been intrigued by watches these days as is evident in the diversity of designs and sheer numbers sold. For example in the month of December in 1998 more watches were sold than the combined total for the previous 11 months in our store.

 

I believe that fashion has set the pace for the explosion of watch designs as well as sales. If you think about it you probably have more than one watch and if you are like most of us you have four or more watches. There was a day when having one watch was all you needed and then two were needed; one for daily wear and one for Sundays and good wear. Today we need a watch to match our outfit or to tell us when our next appointment is or give our pulse rate while running just to mention a few. So now that we have become so sophisticated

we find it necessary to have our watch become a sophisticated tool also, thus the entrance of the quartz accurate movement in our modern watches today. Many of these are guaranteed to be accurate to a minute per year, and generally they are, but did you know that there are only two types of quartz chips? (The brains behind the movement.) The best can cost a whopping $ .25, that’s right twenty-five CENTS. So why the high cost of some watches?

 

The answer is simple, 1) plastic versus metal, 2) gold versus stainless steel and 3) jewels or not. Allow me to explain:

 

The movement may be made of plastic or metal parts and it is obvious that metal will hold up to wear and tear much longer and better than plastic. This is a factor in the value of a watch as is the place of origin of the movement. A movement from China, Hong Kong or Japan may be functional, but are not as recognized as the

Swiss movements for quality and endurance. When buying a watch ask where the movement was made. ETA movements are the most recognized and typically the finest brand of watch movements in the industry.

 

Another major factor affecting the price of a watch is the material the case is made of. Plastic, pot metal, stainless steel, silver and gold are the most widely used, with gold plating over stainless steel being the most common today. When gold is employed, the karat of gold used is relevant of course. The typical fine watch today is one with a mineral crystal, which makes it scratch resistant, water resistant so if immersed in water will not rust and gold plated over stainless steel with 5 to 20 microns of gold. 10 to 20 microns of plated gold will keep your watch looking good for a period of 5 years or more, depending on your body chemistry and wear habits.


Many of the finer watches today have jeweled movements and the purpose of this is to reduce friction where metal might be touching metal in a moving part of the mechanism. The jewels that are used the most are genuine and synthetic rubies known as corundum. This is due to the fact that corundum is so hard.

 

When purchasing a watch be aware of these above-mentioned factors and remember that "you get what you pay for". Try not to overpay for a watch because of its style, but place more value on the quality of the mechanism remembering that this is brains behind the beauty and isn’t that why we wear a watch in the first place?

 

Mechanical movement watches are making a comeback, due to the Swiss and their love of quality craftsmanship in watch making. The last 20 years have been depressing for them with regards to watches, because there is so little that can be done when a quartz watch needs repair except to replace the movement, but with a mechanical watch adjustments can be made and parts can be replaced allowing the craftsman the opportunity to maintain a fine watch for many years. Soon you will be seeing more on the self-winding, automatic style watch. This watch employs a mini generator inside the watch-case that stores energy in a cell and is capable of being quartz accurate (from what they tell us. The proof is in the pudding.) Time will tell. Ha ha!

 

Posted By © Copyright 1997 by Michael S. George

Tsavorites: A Green Species of Garnet

Friday, April 27, 2012 8:26:49 AM America/Chicago

 

In this article we will be discussing the tsavorite, a green species of garnet. The word garnet comes from a Latin word "granatus" which means seedlike. This is due to the fact that garnet crystals in rock form have the appearance and shape of pomegranate seeds, which was a staple in the regions of the world where they were mined. It is available in a variety of colors, which include brown, orange-brown, red, pink, and green - the color of tsavorite. In fact garnet is available in every color except blue. Garnet is the birthstone for those born in the month of January and many believe that it is fine to wear any color as a birthstone.

 

The tsavorite garnet has a very short history since it was only discovered in the early 1970's and first put into jewelry by Tiffany's & Co. in the mid 70's.

 

It is truly a rare gemstone and many consider it a collector's stone due to the fact that it is found only in Kenya and Tanzania. It is believed that tsavorite derives its name due to being found in the Tsavo National Park in Kenya. The color is available from pale green to very intense forest green colors with the intense color mixed with bright, well cut properties being the important aspects to look for in fine quality tsavorit  gemstones. It is rare to find gem quality specimens of this gemstone in sizes above two carats. Due to its beauty, durability, and clarity it is in many cases more desirable than emerald, having characteristics that are similar as beautiful.

 

Before cutting, gemstones go through a process known as cobbing, which consists of the removal of large fractures which are present in the rough stone. When tsavorite garnets are cobbed, they release a very distinct sulfur-like odor. The green color in tsavorite garnets is due to the presence of the mineral vanadium in the crystal while it is forming. There is no known enhancement process for tsavorites, so what you see is what you get. Although this is a fairly hard gemstone, its durability is not much more than emerald and so care should be taken when cleaning and wearing, since it will abrade easily.

 

Tsavorites are typically cut into round, pear, oval, and marquise shapes. They are generally used in rings, earrings, pendants, and bracelets when set in jewelry, however there is no limit to what use they will have given your imagination and a quality jeweler's ability. It is this jeweler's opinion that tsavorites as well as all colored gemstones will be more optically appreciated when accented by very white diamonds. By doing this the intensity of the green color is brought out and sometimes magnified to bring out the beauty and elegance associated with this rare gemstone.

 

The cleaning method recommended for home use is a nonabrasive cleaner such as toothpaste in the absence of a professional cleaner or commercial liquid jewelry cleaner. Remember when using toothpaste to make sure everything is wet before touching it to another surface, and to rinse thoroughly with warm tohot water, being sure to stop the sink up before starting the process.

 

Posted By © Copyright 1997 by Michael S. George

Tanzanite: The Marvelous Blue-Violet Gemstone

Friday, April 27, 2012 8:20:01 AM America/Chicago

 

In this article we will be discussing the ever-popular tanzanite gemstone. Tanzanite is a new stone in the marketplace, having been discovered in 1967 in the country of Tanzania. This marvelous blue-violet colored gemstone was named by Tiffany's in 1969 in honor of its only known source. Its color can range from very pale purple to a majestic royal blue with a purple flash. The more intense the color, the more valuable the stone. Large, intense colored tanzanites of 25 carats or more can easily sell for $50,000.00 or more.

 

Tanzanite is a soft stone, therefore it is rather fragile and will crack if it is exposed to extreme temperatures or sudden changes in temperature. It is not recommended to use an ultrasonic cleaner on this gemstone due to its low tolerance of ultrasonic vibrations.

 

The color is obtained by heat treatment of the rough stone. This is a process that is rather common today in our industry. The raw uncut tanzanite is put in a furnace or oven and brought near its melting point, then held there at that temperature for a period of time, inducing the stone to darken in color as it would in the earth if left to its own. This process may sound simple, but it is far from being an easy or foolproof technique. It is quite possible in this heat treatment process to have the tanzanite melt or overcook, leaving you with a worthless pile of rubble.

 

When purchasing a tanzanite, it is important to know what to look for and to be familiar with price. This is a gemstone that has taken the market by storm and in a bull market, mistakes can easily be made due to inaccurate information or assumptions being made by inexperienced consumers. As a rule of thumb, when purchasing any gemstone, not just tanzanite, it is imperative that the stone is well cut. A well cut stone will radiate with brilliance and life from within the stone in most lighting conditions. Stay away from dull, lifeless gems. Look for well proportioned stones that are pleasing to the eye, remembering that if it is beautiful to you it will be beautiful to others also. You will want to work with a well educated jeweler who has a reputation for honesty and integrity as well as the desire to educate you. This will enhance the chances of you receiving a

good value at the time of purchase. Look through a wide selection of qualities of tanzanite to assure yourself of the best opportunity of choice based upon variety. By doing this you will forego the bad experience others have had of choosing a stone from a small selection, then soon after finding one that is more fitting to their taste and budget. Remember that your opinion is the most important one at this time because you are the one who will wear the tanzanite, not to mention the person paying for it, so make yourself happy with this

purchase using all the information that is available to you in your decision making process.

 

Tanzanite is generally available with only minor inclusions that are not visible to the naked eye. Please keep in mind that color is the most important value factor in the purchase of this gemstone, so you want the emphasis to be on intense color and brilliance.

 

When purchasing fine quality gemstones try to keep the focus on the characteristics you most like in a stone and not just on the technical aspects, which can sidetrack you from what you really want.

 

Posted By © Copyright 1997 by Michael S. George

Sapphires: September's Birth Stone

Friday, April 27, 2012 8:15:04 AM America/Chicago

 

Let's talk today about sapphires. The birthstone for those who are born in the month of September has a variety of colors and is known in the jewelry world as corundum. According to the MOHS hardness table, sapphire is rated as a 9, which is second only to diamonds.

 

Sapphires have been priced for their beauty since 800 BC, when they were considered the symbol of the heavens. Legend has it that the earth rested on a sapphire and the sky reflected its color. It was also believed to be the symbol of truth.

 

Sapphires have been found in riverbeds in sizes from 1 carat to 10 carats. Generally they originate from Burma, Sri Lanka, Thailand, and Australia. Available in many colors, sapphires may be yellow, orange, green, pink, colorless, purple, black, and violet. Often they are heat treated to enhance their color by raising the temperature up to nearly their melting point, which is approximately 1600 degrees Celsius. This form of treatment is done regularly in the jewelry industry and is permanent, so no need to be concerned if yours has been treated this way.

 

Another form of treatment or enhancement that is commonly done to sapphires includes dye impregnation, which is the coloring of a stone with dye under pressure. This form of treatment is not necessarily permanent and should be avoided if at all possible.

 

Inclusions and color zoning are a common occurrence in sapphires and unless extreme in either case, does not impact the beauty of the stone. Color zoning is when the sapphire displays dark and light zones of color running parallel to each other. Inclusions are the presence of foreign materials inside the gemstone that are trapped during the crystal growing stage. Although inclusion in sapphires effect the value of the stone, it is not as reprehensible as being present in diamonds. Inclusions are identifying characteristics, which also proves the genuine nature of the gem.

 

There are several synthetic manufacturers of corundum gaining popularity today. The process is generally taking seed crystals of sapphires and placing them into an ideal environment in an autoclave-like oven that is under tremendous pressure inside, along with a growing agent called flux. After 6 months or longer the crystal formations, which have now grown, are removed and cut into faceted gemstones. These sapphires rival the naturals and in some cases, special equipment is needed to identify one from the other. It is important to note that the term synthetic here means having the identical chemical composition, but not grown naturally, or needing man's intervention. The resulting sapphire is a genuine sapphire, but not a natural one. This process is far removed from the flame fusion process or other simulated gemstone growing types, which produce a stone that has the same color, but not the identical chemical composition. This difference is extremely important for the consumer to understand so as to know what type of value you are receiving when making a purchase since the synthetic is much more valuable than the simulated stone, which in some cases may be glass or even plastic. Remember that synthetic is having the identical properties of the natural, but grown with man's intervention. The logical comparative is the pearl. Natural pearls occur when a grain of sand or some other foreign element gets into an oyster and irritates it to secrete a coating around it called nacre. Cultured pearls are the same basic elements, but with man not nature supplying the foreign element, which is usually a glass or plastic bead. It is nearly impossible to identify the difference between the two without X-rays or drilling.

 

Many believe that the darker the sapphire the finer the quality, however this isn't always the case. Australia has always been known for their fine quality sapphires, yet because the veins they are presently mining are old and very deep, the color is very dark on most of the rough. There have been many times that the stones have been almost black, and that is not what is considered fine quality by any standard. A fine quality sapphire should be a rich royal blue which is translucent and brilliant. In the case of Ceylon sapphires, which come From Sri Lanka, a lighter shade of blue is very acceptable. The reason these sapphires are lighter in color is due to the fact that they are newer deposits and the heat from the core of the earth has not had the opportunity to darken them yet. This Ceylon sapphire gemstone is quickly growing in acceptance and prices are rising as supply is limited.

 

Man has tried to duplicate what happens in nature to enhance the gemstones that were inferior in the rough. In many cases, man has actually exceeded nature in his ability to make a beautiful gemstone from a rough unattractive crystal sapphire.

 

Sapphires have also been a gemstone that many have purchased as a hedge against inflation. The typical investment sapphire is over 5 carats with a cashmere or cornflower blue color that is nearly free of any inclusions and is brilliantly cut proportionately. It is recommended that if you are interested in investment grade sapphires to purchase only certified sapphires from a reputable dealer who is knowledgeable, established, and honest. The author recommends only AGS (American Gem Society) certifications to insure reliable and accurate grading information. With the proper guidance, an informed investor can realize strong profits when investing in fine quality sapphires given enough time for the investment to grow.

 

Posted By © Copyright 1997 by Michael S. George
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