Responsibilities of the Customs Appraising Office-Deputy Director (Gem)

By Dilip Kumaratilake MSc ,FGA-Deputy director (Gem),Sri Lanka Customs Department.

This article is reproduced with kind permission from the National Gem and Jewellery Authority.

Responsibilities of the Customs Appraising Office.

This includes the adminstration of customs law and the collection of duties,taxes, levies and other charges at importation,exportation, movement and storage of  “precious cargo” {among other goods falling under chapter 71 of the Harmonized Commodity Description and Coding System (HS)}.

Articles on Appraising (Chapter 71)

1) Imports:

Procedure is 3 fold; appraiser identifies the article, classifies according to provisions of HS and values based on details declared in goods declaration .His opinion is independent, impartial and supported by training,equipment and experience in gemmology, precious metals and other related sciences. He can offer an opinion of value only for adequately described piece of pearl/diamond/gem/gold/other article of a specific date ,and his opinion must be supported by presentation and analysis of relative market information in accordance with customs ordiance .To arrive at the CIF (Cost+ Insurance+ Freight) price he generally replaces subject article with the overseas wholesale marketprice and adds up the insurance and freight replacement values.

2)Exports of Local Goods:

Follows a parallel procedure to that of 1 above.Appraiser replases subject article with likekind from local wholesale market place (FOB-Free on board) and adds up insurance and freight components (CIF). Traditionally there is a tolerance of +/- 25% of FOB , and prices falling outside this range should be forwarded to superiors for instructions .For lot parcels such as rough geuda, he selects a sample representing the lot , estimates average yeild of weight, estimates its enhanced value after heat treatment and extrapolate this value to the entire lot to arrive at the total value.

3) Re-exports of goods imported for “Inward processing”

This means goods imported conditionally relieved from payment of import duties and taxes, for manufacturing, processing or repair and subsequent exportation).

Appraiser adds values of inputs to the values of import materials and may include profit margin,insurance and freight thereafter (CIF).

4)According to the commodity codes:

4.1 Pearls -HS 71.01

Weight of pearls is measured in units of “grains” and “momme” 1 grain=0.25 carats= 0.05 grams

1 momme=18.75 carats= 3.75grams =75grains.

Price charts are available for wholesale prices of cultured pearl strands of both graduated and uniform sizes and per pearl pieces of loose ,undrilled cultured pearls. Pearl price of a loose pearl is considered as 100% and equation (1) is applied to arrive at X mm diameter pearl;

Price of X mm diameter pearl =(USD base rate from chart )X (size factor %) X(quality factor %)……………..1

The size factor depends on diameter and the quality factor on colour ,luster, surface blemishes, and nacre thickness.

Key terms of HS to be familiar with: Unworked/worked, graded but not strung and “temporarily strung for convenience of transport.

4.2 Diamonds-HS 71.02

The procedure started at 4.3 applies mutails mutandis .Most appraisers encounter rough diamonds for inward processing ,where he should estimate the yeild of weight result in processing and records for monitoring of stock inventories.

Key terms of the HS to be familiar with are : unsorted, industrial, unworked or simply sawn and cleaved or bruted.

4.3 Gemstones- HS 71.03

Identification

Appraiser

Identifies accurately the subject gemstone as to the species -beryl, corundum,grossularite,etc. Variety-emerald (beryl),etc. group- (alamandine, spessartite,grossularite, etc).

Determines if the gemstone is natural or synthetic

Determines weather the gemstone has been treated for enhancement of colour and stability of colour. For eg was the gem bleached,coated, dyed,cavities filled,heated, impregnated,lasered, oiled,stabilized,irradiated, surface diffused or subject to a combination of these processes.

Description

Appraiser describes accurately the shape,cut,carat weight,measurement of size, colour grade,tonal grade, type of light source used,clarity grade ,cutting grade, and brilliancy grade and when positively known the country of origin.

Setting a value

Appraiser assesses the 4c’s of the stone and estimates a price, based on the wholesale market price of the geographical region .

4c’s of value are:

Colour: It is the dominant colour which is most prominent.Other colour or colours resulting from change of colour, pleochroism,absorption of colour ,window,designed zoning and unintentional zoning are considered additional colours.

Clarity: Clarity is the gemstones relative freedom from inclusions(included crystal,pinpoint, cavity, liquid inclusions, needle, fingerprint, feather, growth zoning, cloud, dendrite, and percussion mark or bruise etc). and blemishes are considered in terms of their size, number, position, natural colour and relief.

Cut: Includes the proportions and finish of a gemstone . For proportions -face up outline balance ,length to width ratio ,appeal, profile balance, total depth percentage, crown height/pavilion depth ,bulge, table size, crown area seen from top,girdle thickness -sharp/medium/thick edge, brilliance-windowing, extinction ,and light return are considered .Whilst polish, rough girdle,polish lines ,scratch,pit,chip/nick, abrasions and symmetry -misshapen facets,irregular facet junctions ,alingment and culet size are considered for finish.

Carat weight: The metric carat (=1/5th of a gram= 100points) is the standard unit of weight for gemstones.Generally, the larger the stone, the more rare it is and becomes more expensive. But when it exceeds the size that is attractive and relatively easy to mount ,its price per carat begins to drop. Aquamarine, topaz and quartz are likely to occur in large sizes ,while rubie’s are rare in sizes over 3-carats.

Phenomenal stones:

Along with the 4c’s, the quality of the phenomenum determines the price.

Collectors stones:

Along with 4c’s ,rariety determines the price .For example 18.65 carats 12-ray star spinel, shown in the figure fetches an unparalled price as it is the only stone reported over a decade (Kumaratilake 1997).

Key terms of HS to be familiar with: Natural precious or semi-precious stones ,unworked, simply sawn, roughly shaped and worked.

4.4 Synthetic Gemstones-HS 71.04

The appraiser should be aware of the synthetic production process and the prices of rough material. The labour cost of fashioning and other inputs must also be added to get the prices of the finished stones.

Key terms of HS to be familiar with : synthetic or reconstructed precious or semi-precious stones.

4.5 Silver, Platinum,Gold and their alloys.- HS 71.06 to 71.12

Appraiser should be aware of current precious metal prices fixed by the relevant precious metal exchanges.

Bullion -means precious metals in bars or wafers with a minimum finess of 995.

Key terms of HS to be familiar with: scope of “platinum”, alloy rule, metal clad with precious metal, electroplating, in-laid with p-met, powder, unwrought , semi-manufactured, monetary waste and scrap.

4.6 Jewellery- HS 71.13

Assess values of gemstones and precious metal content as stated above,add labour cost: Handmade-expensive, die struck-moderate cost and lost wax casting -low cost. Include other inputs such as machine depreciation ,etc as well as profit.

Key terms of HS to be familiar with: definition of jewellery articles and jewellery findings.

4.7 Articles of HS 71.14, 71.15 and 71.16

Assess values of gemstones and/or precious metal content as stated above. Add labour cost and include other inputs as well as profit.

Key terms of HS to be familiar with: definitions of goldsmiths or silversmiths wares,articles for technical or laboratory use and articles of gems.

4.8 Imitation Jewellery HS 71.17

Procedure stated at 4.6 applies mutatis mutandis.

Key terms of HS to be familiar with: definition of “imitation jewellery and imitation jewellery findings.

4.9 Coins HS 71.18

The appraiser should know the following relating to gold coins: From 1850 AD eg old sovereign 1 pound/double eagle 20 dollars/vreneli 20 and 10 francs ; loosely linked to gold price (high premiums) and bullion coins(from 1957) er Krugerrand/chervonetz 10 roubles /new sovereign 1 pound ; closely linked to gold price (low premiums) fall under this heading and “numismatic” (7 BC to 1804AD; eg Greek/Roman Coins,fetches individual prices) and “semi-numismatic(1804 AD to 1850 ,Napoleon -120 francs/Charles. Felix 20 lir fetches individual prices. Coins are classified elsewhere in the HS. “Premium” is the difference between gold series/commemorative pieces; fetches individual prices.Counterfeits set in jewellery are classified under 71.13 and 71.14 and therefore treated under 4.6 and 4.7 above.High competancy is required to identify genuine from counterfeit. The internet is a useful tool to get current prices of gold coins and medals.

Key terms of HS to be familiar with: Legal tender, medal, and counterfeit.

The appraiser should also be aware of local coinage which is tabulated below:

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References:

Kumaratilake W.L.D.R.A (1997) .Gems of Sri Lanka.A list of cat’s eyes and stars.

The journal of gemmology. Volume 25 no7, pp474 to 482.