Yellowknife (Mar 26/03) - The federal government's definition of a Canadian diamond "endangers" the industry by misleading consumers, says the president of a Yellowknife cutting and polishing plant.

Doreen Liske turns a rough stone into a polished gem. Only a fraction of NWT diamonds are cut and polished locally, but all can be sold as 'Made in Canada' under current federal rules - NNSL file photo

Sirius Diamonds' Stephen Ben-Oleil said under current rules, rough diamonds from NWT that are finished outside the country can later be sold as a Canadian product.

"Going by the federal government's definition, a diamond mined in this country could be cut and polished anywhere in the world, even by child-labour, and then sold as Canadian," said Ben-Oleil.

"That is ridiculous. It endangers confidence in our product and endangers the future of this industry."

The Competition Bureau of Canada defines a Canadian diamond as "mined in Canada."

That differs from Canada Customs' definition, Ben-Oleil points out.

"If a rough Canadian diamond is finished in Belgium, it is taxed on its return to Canada as a product of Belgium.

"But it can be sold as a Canadian product. That is pretty contradictory."

The government of NWT, supported by Yellowknife polishing plants, has been pressing Ottawa without success for two years to have the ruling changed.

The GNWT's Martin Irving said the government wants the definition to read: 'mined, cut and polished in Canada.'

The Competition Bureau has refused to reconsider its 2001 ruling, however, nor will it agree to another review.

Irving said the existing definition sets the industry up for a potential public relations disaster.

All it will take is one US media report of 'blood' or 'conflict' diamonds being sold as 'Made In Canada', he said.

"The potential damage to the Canadian diamond industry is considerable, whether the mining side or the polishing side.

"You have the potential, if not the reality, of Canadian diamonds being sold that aren't.

"They could be blood diamonds, or they could be mined here but cut and polished in India."

The GNWT also hopes to minimize the migration of polishing plant jobs to cheaper-labour jurisdictions, he said.

There is currently no way to determine the origin of a diamond, by technology or lab testing.

Before its 2001 ruling, the Competition Bureau commissioned two Angus Reid consumer surveys on what constituted a Canadian product.

More than 75 per cent of Canadian consumers considered that meant the diamond was "mined, cut and polished" in this country.

Irving said the GNWT will continue to press its case.

BHP Billiton spokesperson Denise Burlingame said the company is satisfied with the federal definition of a Canadian diamond.

A spokesman for the Competition Bureau wasn't available for comment.