The Kimberley Process, the system that will govern how diamonds cross borders, this month graduates from discussion to reality. In some ways, the industry’s work on conflict diamonds is over. In other ways, it’s just begun.

The Process creates new obligations for all segments of the diamond pipeline, including retailers. Kimberley ties in with an industry-run “system of warranties” that has been okayed by the major diamond associations (see sidebar) and groups like Jewelers of America and the Jewelers Vigilance Committee.

Although retailers don’t have many obligations in the new system, not complying with the ones they do have can get a company bounced from an association or even subject it to criminal prosecution. But the system also has benefits for retailers, because it lets them assure customers—and themselves—that their diamonds have nothing to do with bloodshed in Africa.

To understand the system, let’s track the typically convoluted path of a hypothetical diamond. A trader buys a parcel of rough stones in South Africa and ships it to Antwerp, where it’s mixed with gems from other countries. The new parcel is then sent to Ramat-Gan for polishing, Bangkok for setting, and the United States for wearing. This is the chain through which the Kimberley Process and the “system of warranties” aims to track diamonds.

Using our hypothetical example, it works like this:

To export the parcel from South Africa, the buyer must prove it was purchased from a legitimate source. The government then issues a forgery-proof “Kimberley” certificate that certifies the stones’ origin. The diamonds are then locked in a sealed, tamper-proof container, attached to a certificate listing their origin as South Africa, and sent to Antwerp.

Before the diamond can enter Antwerp, Belgian authorities check for the Kimberley certificate. If it doesn’t have one, the parcel could be confiscated or returned to its sender.

An Antwerp dealer receives the stones and separates them into smaller groups, eventually creating a mixed-and-matched parcel that includes not only the South African stones but also gems from Brazil and a local sightholder. Because all these stones entered Belgium with Kimberley certificates, the entire parcel can be certified conflict-free.

The parcel is now ready to be sent to Israel. But before the stones can legally leave Belgium, the trader must fill out a Kimberley “re-export” certificate that warrants all the diamonds are conflict free. This warrant is a legal document, and if the trader has copies of the original Kimberley documents he must keep them for backup. The parcel departs Belgium but is again checked for a “re-export” certificate before entering Israel.

The preceding rules for rough are mandated by international trade agreements that have the force of law. Once the rough becomes polished, the industry’s “system of warranties” kicks in.

The system is designed to do for polished diamonds what the Kimberley Process does for rough—create a “system of warranties” that follows a diamond down the chain. This system, however, is enforced by industry rather than government. (If the government were involved, buying stones would require a license—something few want.)

Continuing our example, the “self-regulation” plan for polished works likes this:

The stones have been cut. The Israeli manufacturer can guarantee they are conflict free because of the re-export certificate he received with the rough. In fact, he can guarantee all the stones in his factory are from legitimate sources because, if everything goes according to plan, only certified conflict-free stones can enter the country.

When the manufacturer ships the diamonds to Bangkok, he includes the following note on his invoice: “The diamonds herein invoiced have been purchased from legitimate sources not involved in funding conflict and in compliance with United Nations resolutions. The seller hereby guarantees that these diamonds are conflict free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds.”

With this declaration, the Bangkok jewelry manufacturer can state that his jewelry is conflict free, too. When he ships his pieces to an American trade show, he includes the conflict-free declaration on the invoice.

The jewelry is now at an American trade show, where it’s eyed by a U.S. retailer. The retailer knows that, because he’s a JA member, he can buy only diamond pieces with an invoice that notes they’re conflict free. The retailer can then assure concerned customers their jewels have no connection to the atrocities they’ve seen on television.

If all this works as it should, it will be possible to trace a diamond through the entire chain. So if a particularly insistent customer wants proof his diamond is conflict free, the retailer can show him the declaration from Bangkok and follow it back through Israel, Belgium, and, ultimately, South Africa.

Logging the stones. One of the keys here is enforcement. The “system of warranties” requires each link of the chain—from Antwerp trader to American jeweler—to log the Kimberley certificates or conflict-free declarations in their record books. At year’s end, the company’s regular auditors will ensure the declarations that come in correspond to those that go out.

Despite the hoped-for safeguards, Jewelers Vigilance Committee executive director Cecilia Gardner, who helped design the system for the World Diamond Council, admits it may be possible for smugglers to circumvent it. But to do so would be risky, since many of these provisions are now part of U.S. law. “No system is foolproof,” she says. “Heroin is illegal and yet people still sell it. If you illegally transport diamonds across the border, you are exposing yourself to criminal prosecution.”

The one blind spot here is the supply of pre-Kimberley stones—basically, any stone purchased before this year. The Kimberley Process cannot certify the integrity of diamonds purchased before it was put into place, so, with a few exceptions, there is no way a pre-2003 stone can legally be labeled conflict free.

Gardner says that while retailers selling those stones cannot warrant them as conflict free, “they can say that we’ve made our best efforts to ensure the diamonds are conflict free, which is basically the same assertion people have been making for the last two years.”