The Politics Of Pearl Grading

Since ancient times, pearls have been admired for their mystery. People have marveled for centuries at the silky gem miraculously appearing inside the murky oyster. A perfect pearl’s considerable value partly comes from this elusiveness, wooing consumers with the romantic prospect of owning an enigma of nature.

Mystery, however, means bad business for some members of the cultured pearl industry. Though most pearl dealers in the world use personalized grading systems, there is no internationally accepted standard to communicate quality between companies and countries. Some in the pearl world want a universal quality classification system for cultured pearls.

The call came most adamantly at a meeting of the World Cultured Pearl Organization directors in May in Kobe, Japan. Facing government deregulation and disbanding of their government-operated Pearl Export Inspection Offices in spring 1998, Japanese pearl exporters planned the international forum to discuss possibilities for privatized quality control and promotional funds once the government has given up the responsibility.

Currently, exporters are required to submit their goods to the government office, which applies a grade of “H” (high quality) or “L” (low quality) to each pearl. Only the H-quality pearls are eligible for export. At the time the pearls are graded, exporters pay an inspection fee, part of which goes to promote pearls overseas. Once the office is disbanded, exporters will be asked to participate in optional inspections. But some exporters fear too many won’t participate, possibly sacrificing quality and hurting the stability of Japanese pearl promotion.

As a result, some delegates at the World Cultured Pearl Organization meeting pushed for a universal classification system. “If we don’t take charge, somebody else will eventually do it,” says Pierre Akkelian of Gemme Canadienne P.A. in Montreal, Quebec, a WPO director from Canada. “The world needs a common language. There is no internationally accepted terminology that would be meaningful to you in any way.”

Akkelian and other delegates in favor of the idea met strong opposition. The issue was dismissed without a vote, but it continues to arise throughout the pearl industry. “There are two camps,” says Roy Katsuyama of Pearls Katsuyama Co. in Scarborough, Ontario, another WPO delegate from Canada. Those who favor a universal classification system foresee better business relations and more confident customers, he says. Opponents fear complication and commoditization.

Regardless of opinion, some members of the industry believe consumers, especially those who are used to buying cultured pearls with a certificate of quality from Japanese pearl makers, eventually will demand a grading system that will provide them with confidence in the product.

Convenient, protective & fair: The concept of quality that’s not quantified is a problem for many pearl dealers. “If I get an order from Europe requesting a certain number of A-, B- and C-grade pearls, nobody understands exactly what that means,” says Hiroshi Norioka, president of Daiichi Trading Co. Ltd. in Kobe.

This variance also confuses consumers. Most pearl makers and dealers use their own grading system when communicating quality to their retailer customers. The retailers, in turn, explain quality to consumers using the same system or a vague interpretation. But consumers have no way to compare pearls from one retailer with those from another who uses a different system.

Many people believe an educated customer is a comfortable customer. “Whatever is good for the consumer is good for the industry,” Akkelian says.

Luigi Di Luca, a WPO delegate with Di Luca Bros. in Torre del Greco, Italy, agrees that the more informed consumers are about a product, the more likely they are to buy it. Di Luca and others point out that with pearls now being produced in more countries, a common standard is important to ensure quality worldwide. China’s entry into the world of pearl production, for example, has resulted in an overabundance of quickly produced akoya pearls that sell for about half the price of Japanese akoyas.

A universal classification system would help to shield the industry from complaints about poor-quality pearls, says DiLuca. “If the world demand shifts toward quality pearls, we would altogether bypass the problem,” he says. “Quality sea-cultured pearls [pearls that have a lengthy cultivation period, regardless of shape, color and size] can never be overproduced.”

Complicated system: Instituting a universal classification system would be challenging. Most dealers evaluate pearls using at least six factors: luster, orient, shape, size, color and nacre thickness. Therefore, it would be hard to divide pearls into neat categories of quality. “A classification system would be a major undertaking for pearls,” says Avi Raz of A&Z Pearls in Los Angeles, Cal. “The challenge is finding a simple system. If it gets very complicated, people won’t understand the technicalities.”

Hiroshi Norioka doesn’t think the number of quality factors would be as much trouble as convincing companies that a classification system would benefit them. Large pearl companies with huge inventories may have hundreds of pearl grades, says Norioka, while smaller companies with smaller supplies may use only several. Companies use personalized codes and terminology to characterize each grade. Devising a system that works efficiently for all companies would be a difficult compromise of each company’s interests.

Many members of the pearl industry who oppose a universal classification system believe it’s impossible to avoid varying standards. “One dealer’s AAA may not be the same as my AAA,” says Stanley Schechter of Honora in New York, N.Y., the WPO director for the United States. Schechter, who opposed the issue at the board meeting in Kobe, says his highest quality grade for a pearl could never be as good as a top grade from a producer such as Mikimoto. There are also matters of taste and fashion. “A strand of yellow pearls would sell for a lot of money in South America, but I couldn’t even sell a yellow strand in the United States,” he says.

William Boyajian, president of the Gemological Institute of America, disagrees with the argument that discrepancies in quality classification would be impossible to avoid. “They all look at the same basic things,” he says. “It’s how they evaluate the pearls that may be different.” The differences may be based on market or fashion variances, he says, but standards of quality can remain the same despite personal preference.

Diamonds & pearls: It’s impossible to avoid the comparison of cultured pearls to diamonds when considering quality classification. Both camps in the pearl controversy look toward the diamond industry’s system of grading the four C’s as an example of the direction pearls could take. The more optimistic hope for the convenience and quality assurance that resulted from diamond grading. Others dread the threat of commoditization.

“People are afraid that if there is a universally adopted system, there is going to be a cut in profit margins,” says Richard Liddicoat, chairman of the GIA. So far, the cultured pearl industry has avoided the creation of a reputable price list like the diamond industry’s Rapaport List by using so many different grading systems. But if a classification system is adopted industrywide, says Liddicoat, consumers will use it to compare quality and price. Pearl dealers also foresee consumers skipping the established distribution channels to obtain certified high-quality pearls directly from the source, as is becoming more prevalent in the diamond industry. It is this fear that sways some potential supporters of the classification system.

“I don’t know if I should be for it or against it,” says Roy Katsuyama, voicing the internal conflict that many WPO delegates feel because of personal business responsibilities. “It is a system that can be abused, and it could lessen the profitability of pearls.”

But Liddicoat and other industry members think the profit issue may not be as big of a problem as with diamonds because the industry is so much smaller. “I don’t think people are as heavily involved with pearls for this to be a specter that will be frightening,” says Liddicoat. “I think it will be helpful to the industry more than anything else.”

Other concerns among exporters and importers include the cost of the inspection, says Devin Macnow, executive director of the Cultured Pearl Information Center in New York, N.Y., and spokesperson for the Japan Pearl Exporters’ Association. Some cite the complex machinery and computers used in grading pearls as a further complication. Avi Raz says that to be extremely accurate in pearl grading, pearls must be X-rayed, an expensive and time-consuming process.

All talk, no action? Everybody has an opinion on establishing an industrywide classification system for pearls, but little concrete action has been taken. With so many interests involved, most discussions have ended with members throwing up their hands. The JPEA and the Japan Pearl Promotion Society have established committees and are working together to research the possibility of a private grading office, says Macnow.

In the meantime, Macnow says JPEA has sent out feelers to determine whether members of the industry would be in favor of a grading system. The responses prove that yet another conflict is at hand: how specific should a classification system be?

JPEA found that many importers favor a loose classification system that would avoid precise evaluation and be more generally descriptive. “We are not interested in and not proposing a classification system per se,” says Luigi Di Luca. “Our target is to reach the end consumer with a user-friendly basic classification chart.” Di Luca believes that by avoiding a technical grading system, the industry would avoid price lists and lower margins. “The system we have in mind is completely different [than diamond grading] and is intended for completely different purposes,” he says.

Still, the Japanese seek a grading system that officially classifies pearls based on quality. Macnow says JPEA has made no major decisions and that industry members around the world will be asked to contribute to the discussion in the final planning stages.

As the battle wears on, the disagreement has led to frustration. “We really wish that all the producing and non-producing countries would sit at the same table to cooperate without any political reservations in mind,” says Di Luca. “After all, it is in the common interest of the whole industry.”