Living Room Session: Understanding Legal Requirements for Jewelers with Jewelers Vigilance Committee

aml carbon reporting due diligence ftc guides green guides hallmarking handmade jewelers vigilance committee jewelry guides jvc kyc living room sessions made in the usa sec Nov 30, 2022

The Living Room session “Understanding Legal Requirements for Jewelers with Jewelers Vigilance Committee” includes a really informative slideshow presented by Tiffany Stevens, President, CEO and General Counsel of the Jewelers Vigilance Committee (JVC) and Sara Yood, Deputy General Counsel of JVC. We encourage you to watch or listen to the presentation for the best explanation of legal requirements for jewelers, as well as what you need to know about marketing terms to stay in compliance with the rules and guidelines of the Federal Trade Commission of the United States. Here are the key topics discussed, with brief summaries.

Anti-Money Laundering (AML) & Know Your Customer (KYC)

Jewelry businesses that make over $50,000 in the purchase and over $50,000 in the sale of precious metals and/or precious stones must have an Anti-Money Laundering program in place for their business. If your company falls within this category and does not have an AML program in place, penalties are aggressive. 

The five parts of an AML program:

  • A compliance officer
  • Risk assessment
  • Policy document, including KYC policy
  • Employee training
  • Periodic testing & continuous monitoring

Because jewelry businesses are at high risk for unknowingly being used in money laundering by others, Know Your Customer (or Counterparty) laws require gathering information about those you do business with including a government issued ID number. Beyond being a requirement for some jewelry businesses, having an AML program in place is one way to operationalize your responsible sourcing practices and create more trust in your relationship with your supplier.

Advertising Claims and FTC Guides

Jewelers should understand the FTC’s Jewelry Guides to make sure they are not making any advertising claims that are considered deceptive. The JVC has put together an explanatory guide to the FTC document. 

Though not jewelry industry specific, the FTC’s Green Guides also cover jewelry company claims that are related to environmental impacts. One of the main takeaways here is that all environmental marketing claims a company makes need to be substantiated, or provable. A recent example of action from the FTC was a warning letter sent to eight lab-grown diamond companies which were making claims of eco-friendliness informing them they need to change their marketing language to avoid further repercussions. 

Keep in mind: broad claims are hard to substantiate or prove. Make more specific claims which you can qualify with data and facts.

Also note: all necessary disclosures about a product have to be made before the “add to cart” button for online shopping. For example, rhodium plating for white gold must be disclosed, or the fact that a synthetic diamond is “lab-grown” or created by a specific company. (Words like “real”, “genuine”, or “precious” cannot be used in relation to synthetic gemstones)

“Handmade” Claims

When it comes to advertising something as “handmade” or “handcrafted” specifically, the FTC requires that: “the entire shaping and forming of such product from raw materials and its finishing and decoration  were accomplished by hand labor and manually-controlled methods which permitted the maker to control and vary the construction, shape, design, and finish of each part of the individual product.” (Raw materials include: “bulk sheet, strip, wire, precious metal clays, ingots, casting grain, and similar items that have not been cut, shaped or formed into jewelry parts, semi-finished parts, or blanks.”)

The use of Computer-Aided Design is one thing that would rule out jewelry from this category. The use of other machinery, such as a flex shaft, was brought up as a question as well. In answer, Sara noted that the safest bet would be to say that the use of any machinery would rule out an item from the “handmade” category but that it is likely that the FTC does not have knowledge of the specifics of jewelry tools and conversations can be had in the future to further clarify the reading of this rule and what it’s meant to include or rule out. You could safely describe a gemstone ring as “hand-set” or an engraved piece as “hand-engraved” if it was indeed done by hand with simple gravers tools. 

“Made in the US” Claims

This claim can only be made if “all or virtually all components” of a product originate in the United States. It is also an FTC rule, rather than a guideline, which means that the FTC has more enforcement capability of this rule.

With the global nature of the jewelry supply chain, this is rarely the case. Instead, jewelry companies could make statements such as: “Made in the USA with the world’s finest materials” or “Designed in California”.

Varietal Claims

This one is a simple but notable rule: “It is unfair or deceptive to use the incorrect varietal name for a product”. For example, a yellow beryl cannot be called a yellow emerald.

Hallmarking

Hallmarking law is one of the areas where we see a difference between the United States and other countries.

In the United States, jewelry is not required to be stamped with a quality stamp (ie: 18k or 925). However, if you do mark your piece for quality, it must also be accompanied by your federally registered trademark. You may, however, mark your piece with just a makers mark even if it is not federally registered. 

For questions about hallmarking in Europe, the Birmingham Assay office is a good resource.

Securities and Exchange Commission (SEC) Carbon Reporting Rules 

The presentation also touched on the upcoming (as they are not actively in place yet) rules from the SEC for publicly traded companies to report climate change risks of their operations. Disclosure categories will include material climate impacts, greenhouse gas emissions, and target goals or plans. While the rule is currently held up with a Supreme Court case and applies directly to only publicly traded companies, it is important to keep in mind as the reporting that will be required of these companies will require that they gather information from their stakeholders, which can include private companies as well. 

We’d like to extend a big thank you to Tiffany Stevens and Sara Yood for their very informative presentation. If you’d like more information about becoming a JVC member, please visit their website.

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