“There’s never been a time when it’s been so relevant for jewelers to know how legal issues apply to their business,” said Cecilia Gardner, executive director and legal counsel of the Jewelers Vigilance Committee, during a Thursday seminar.

“Your sales counter is the front line,” she said. “All liabilities connected to legal compliance with jewelry laws happen there. And your customers are sophisticated and are asking questions. So you must be well prepared. What you and your employees say at the counter does matter.”

In a session called “Your Legal Responsibilities in Retail Law,” Gardner, a former U.S. Justice Department attorney, covered a number of legal issues affecting jewelers. Two of special interest, she noted, concern “conflict diamonds” and alleged links between gem and gold trading and terrorism. “It’s a shame these issues have entered the lexicon of our business,” said Gardner, “but we can’t stick our head in the sand and pretend they aren’t there.”

“Conflict diamonds” are diamonds illegally obtained and sold to fund conflicts in Africa. Gardner noted that jewelers should be getting warranties from their diamond and diamond jewelry suppliers stating that their polished diamonds weren’t traded to support conflicts in Africa. Jewelers can show the warranties to any customers who ask about conflict diamonds.

“This is legally enforceable,” Gardner said of the warranties. “Every diamond you get should be accompanied by a warranty. If your supplier doesn’t do so, demand it from them—as they should from their suppliers.” For pieces in stock before 2003, ask the supplier for a cover letter saying that they didn’t knowingly deal in conflict diamonds, she said.

Allegations about links between gem and gold trading and funding for terrorism are unsubstantiated, noted Gardner. Nevertheless, the USA PATRIOT Act (October 2001) requires “dealers” in precious metals and gems—such as jewelers and gem dealers—to establish programs to prevent their businesses from being exploited for criminal purposes. Those programs must include written policies and procedures, a compliance officer, employee training, and regular testing of the programs. The key, said Gardner, is to know your customer. “Be aware of new customers, suspicious transactions, offers to pay in large amounts of money, inability to supply identification information, and usual payment methods,” Gardner stressed. “And tell employees to report any suspicious conduct immediately.”

JVC has compiled a PATRIOT Act Compliance Kit for the jewelry trade, which will be available later this summer after final government review of the regulations. Other legal issues affecting jewelers include:

* Applicable federal laws on karat gold and identification. For example, fine gold jewelry must not only bear a trademark but also be stamped with its quality mark.

* Gem treatment must be disclosed to customers. “It’s an affirmative obligation, not simply answering questions,” said Garner. Disclosure must be “clear, conspicuous, and in simple (i.e., non-technical) language so a customer can understand what has happened or can happen to the gemstone.”

* Synthetic gemstones must be disclosed. Terms like “lab created” or “lab grown” are allowable, but a term like “cultured diamond” must be more specific (e.g., “lab created” or “lab grown” diamonds). Disclosure, said Gardner, should be made “at the point of sale,” so a consumer can use the information in making purchasing decisions, and “in writing on the receipts.”

* Sales receipts are contracts. They should specify what is sold and include the customer’s name and address, date of sale, and customer’s signature, which acknowledges their awareness of the store’s policies. All terms, including return and refund policies, should be on the receipt.

Warranties, Garner reminded her audience, are “promises to stand behind products you sell, that they perform as represented.”

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