in person

Precious problem

27.06.2014 | By Maksym Morhun

Head of the State Assay Chamber of Ukraine Oleksandr Ksenzhuk told KW in whose hands the stamps of jewelry products may end up, the scale of shadow jewelry market and why Finance Ministry is still in charge of expert evaluation of precious stones

KW: You have been appointed in spring. What were your first steps?

O.K.: The first steps were to restore the technical base of the authority. During the previous regime, the building of the Assay Chamber wasnt even commissioned. This, however, is only a part of the problem. In contradiction to the regulation on the Assay Chamber, the previous government removed 12 state-owned companies from our orbit and transferred them into management of the Precious Metals and Stones Department under the Finance Ministry. Bank metals form only a small area of application of our potential, let alone precious stones, which have completely different market logic. Even if you discard the mechanism of price formation, the issue of expert evaluation of the stones deserves special attention. For instance leucosapphire by physical properties is very similar to a diamond. Private and poorly equipped laboratories cannot tell the difference, particularly if the stone is a part of an item. There are two types of objective analysis: hydroscopic and optical, but we are unlikely to find such specialists among bank employees.

Today, we have compiled a package of proposals aimed at restoring the legal status of these companies and submitted it to the Cabinet for consideration.

KW: Is this enough for proper functioning of the industry?

O.K.: No, but we have to start with the basics. For instance, mandatory licensing of companies in the sphere of wholesale and retail turnover of specious metals and stones, which was cancelled in 2010 and replaced with a common state register, had irreversible consequences. In 2008 dynamics of annual stamping of jewelry products was at 110 t with the parity ratio of silver and gold. Now, this indicator stands at 35 t, of which gold accounts for 65% and silver for 35%. You must understand that such market could not have shrunk by two thirds under any circumstances. According, the remaining volumes are circulating in the shadow sector. (For comparison: in 2008, licenses were issued for 8,500 business entities operating in the sphere of wholesale and retail turnover of precious metals and stones, while at the moment the common register includes only 3,500 names).

It has recently been said in the parliament that the volume of souvenirs from precious metals and stones brought to Ukraine every year is UAH 10 bn. This statement is a signal for certain reaction. When an MP claims that this figure is only 10% of legal supplies of the volumes that are brought into the country, it is a serious ground for systemic actions.

During the last exhibition Jeweler Expo Ukraine, a comprehensive inspection was conducted together with the Interior Ministry. Even a superficial inspection provided the grounds for confiscation of around 5,000 items suspected of being falsely marked from three entrepreneurs.

KW: Will total licensing help in this case?

O.K.: It is a very important step. We need to sift out ashes from cinders. In conditions, when there is no legal platform for control and responsibility, the consumer is the one that suffers in the end. A person, who decided to keep their savings in jewelry products, is simply being robbed and his future is being depreciated. Practice showed that the items with a fake stamp practically always have some deviations in the quality of the alloy. That is why upon discovering such defect people may obtain negative attitude towards this kind of deposits. If this phenomenon becomes commonplace, everybody suffers: consumers, jewelers and the state.

Licensing may become a factor of objectivity, which balances interests of all interested market players. Standards have not been invented for nothing. You cannot sell jewelry products of unknown origin at a food store without any levers for returning poor quality product.

KW: Will this take everything into account? What about control?

O.K.: Legislatively envisaged notification about inspection ten days prior to it helps companies easily hide counterfeit products from inspectors. That is why the efficiency of such measures is close to zero. Naturally, the Assay Service is drafting a new bill on regulation of this issue.

In addition, our institution together with the Association of Jewelers and controlling bodies is creating a single data base with dossiers on entrepreneurs using non-market methods of competition.

KW: How did the recent events in Crimea and southeast of the country influenced the market?

O.K.: This is a very serious question that directly deals with national security issues. Earlier, there were 12 state-owned companies in Ukraine with the right to mark jewelry products. To date, the Crimean subsidiary is located on officially temporarily occupied territory, while Donetsk and Luhansk subsidiaries are located in the zone of political and economic instability. There have been signals from there about interference and pressure by armed people into their operation. Roughly speaking, even having in possession one our approved stamp any person can flood our market with counterfeit products and undermine our national wealth, taking into account the current legislation. During conflicts, the conflicting parties gladly undermine the opponents economy, including using counterfeit money and jewelry. This is a very sensitive issue and we will be considering it in the nearest future.

We will be initiating change of the stamp format in order to prevent or at least minimize negative consequences from the actions of the opponents. This issue needs to be settled soon and no matter what, because we are absolutely capable of settling it in the technical dimension.

Printable version
comments powered by Disqus