The Truth About Gem Smuggling

The term evokes pictures of swashbuckling pirates and trench-coated international spies. The reality is far more gritty and physically dangerous on an individual level. Real smugglers, known as "mules," often carry stones from the mine over treacherous terrain by foot, horse, or motor scooter to gem brokers in bordering countries who sell to international buyers. Those international buyers may themselves become smugglers, bringing the gems into their home country illegally.

One of the most confusing questions surrounding international gem smuggling is what it means to smuggle a stone. The answer is not as straightforward as one might think.

From the U.S. perspective, an item smuggled into the United States is one that is not officially declared. That definition may seem obvious, but it's a little-understood facet of the customs process that only gemstones that are not declared on entry are considered smuggled. Even if a gem left its country of origin illegally, it can still be legally imported into the United States through simple declaration of its value.

Imports from some countries are outright prohibited. The United States currently embargoes items from Myanmar (formerly Burma), Cuba, Iran, Iraq, North Korea, and those which specifically benefit terrorists, members of the government of Zimbabwe, and some former Balkan leaders. In terms of colored stones, the only prohibited country of origin is Myanmar, so most smugglers bring gems in illegally for other reasons.

Ironically, one of the biggest reasons is ignorance. The United States has no import duties on loose gemstones, and yet gems are often smuggled by people who believe the duties exist, according to representatives from the customs office in Miami, Florida. In some cases, the importer brought the gems out of the country of origin illegally and wants to avoid scrutiny at the border.

How big is the problem? The U.S. government has no official statistics — or official estimates — on the number or value of colored stones which enter the United States illegally every year. They simply do not exist. The reason, according to a former government employee speaking off the record, is that gem smuggling simply is not a high-profile problem. "You're talking about a total annual market of about $788 million, and illegal gems don't hurt anyone. How many resources would you allocate to the problem?"

Law enforcement cares about gem smuggling when it is linked to terrorism, money laundering, drug smuggling, or organized crime. Smuggled gems are sometimes discovered in connection to one of these activities, but gem smuggling by itself is a relatively low priority.

The situation is compounded because of the inability to ascertain the origin of stones. Customs agents are incapable of differentiating a Myanmar ruby from a Thai ruby, for example. Because they are not gem experts, they also have very little ability to estimate the value of a stone, so importers can vastly under-declare the value of an item to avoid the import taxes that are applied to all merchandise.

All this means that, while gem smuggling into the United States undoubtedly takes place daily, the U.S. government lacks both the capability and the political will to stop it, or even track it.

Ring Around the Government

Producing countries have a much different view of smuggling. For them, gems bleed from every possible fissure, at every level. They are smuggled out of countries, in some cases, because it is illegal to own or sell them; to avoid export fees; because obtaining a permit to sell them is extraordinarily difficult; or because they are stolen from the mines in the first place. They are smuggled at every level: by individual miners, by mine owners, by members of the military, and by rebel groups.

Estimates on the amount of stones smuggled out of producing countries vary wildly, depending on the source. In 1996, the Colombian government officially valued its emerald exports at $180 million and said illegal exports — i.e., those for which no taxes or royalties were paid to the Colombian government — were more than 10 times that amount. According to a 2001 report funded by the U.S. Agency for International Development, 45 percent of Tanzania's colored gem production is smuggled out of the country, and legal exports were undervalued by 50 percent. Pakistan estimates illegal gem sales at "more than 100 times" legal gem sales, and it is impossible to make any serious estimate of smuggling out of Myanmar or Afghanistan.

In every case, attempts by the producer-country governments to reduce illegal smuggling through tighter controls actually increase the amount of colored gems illegally exported. The smuggling routes exist because they are cheaper and easier than exporting through legal channels. Once smuggling routes have been established, they are difficult to disrupt — especially in cultures with widespread corruption, where officials are paid to look the other way.

Who, Why, and How?

The only real prerequisites for smuggling to occur are for a country to produce stones and for there to be an external demand for those stones. If there are high import or export duties, tightly controlled ownership, a culture of smuggling, or an enforcement system that is easily avoided or seriously flawed, it's a prime recipe for smuggling.

Illicit gem trafficking often occurs at the individual level, but it also involves large syndicates. According to the Federal Bureau of Investigation, Russian, Chinese, Italian, and African organized crime groups illegally move colored gems across international borders to avoid customs duties or taxes. Russian organized crime, for example, extracts and sells more than 300 metric tons of amber a year — worth more than $1 billion — according to international law enforcement. India's long and porous coastline allows criminal operations there to smuggle drugs, gemstones, and other prized contraband.

Two of the largest sources of smuggled gems are Myanmar and Afghanistan. Both countries have an entrenched history of smuggling, a culture which supports it, well-established smuggling routes, a wildly corrupt enforcement system, and a large contingent of processors and buyers in bordering countries.

Most Afghanis don't think of taking emeralds, rubies, lapis, or other precious stones from Afghan mines, through treacherous mountain terrain, and across the border as "smuggling." It is the way items have moved for centuries, along the same trails, and it is simply the way things are done. Many individual "mules" claim not even to know that what they are doing is illegal, or that there are any alternatives. In a country without an educational system, railway, commercial air service, national mail delivery, power grid, functioning banks, national police, army, civil service, tax collection, or judiciary, it is difficult to explain that to legally transport gems, one must have a permit from the government.

One professional gem smuggler explained that to get a permit, it would take him at least five days to get to Kabul and up to six months to actually get a document from the government. In the process, he would have to bribe multiple government officials, some of whom probably have little to do with the actual process, and he will eventually receive a piece of paper. He would then return to the mine and would still have to cross the mountains, stave off attacks from warlords, rebels, and criminals, and bribe different government officials. The government document gives him nothing, and costs him both time and money.

Currently, gems are moved from mines in the northern Hindu Kush region to Peshawar, Pakistan. To reach Pakistan, the smuggler will cross mountains of 7,000 to 14,300 feet. There also are likely to be attacks by armed criminals — either affiliated with local warlords or "independents" — which require paying bribes or judiciously avoiding certain areas. Moreover, the Pakistan border is now difficult for Afghanis to enter, often requiring additional bribes or stealth to get into Peshawar.

Once in Peshawar, the gems are purchased by brokers or dealers. Most buyers are Asian or European. They take the gems back to centers in Hong Kong, Antwerp, or elsewhere, and the country of origin is rarely mentioned. According to U.S. gem analysts, many Afghani emeralds are purchased by Polish buyers, who sell them as Colombian emeralds. There are even unconfirmed reports of Colombian emerald mine owners paying international purchasers of high-quality Afghani emeralds to classify them as Colombian emeralds.

Ask a Myanmar contraband smuggler about the U.S. embargo against Myanmar goods, and he likely will have no idea what you are talking about. Myanmar goods, including colored stones, are smuggled out of Myanmar to Thailand to avoid ridiculously high government taxes, to skirt government control, and because it is the way goods have moved for literally hundreds of years. The U.S. embargo has almost nothing to do with the Myanmar side of smuggling. Gems are smuggled by individual miners, private companies that partner with the government, army officials, drug dealers, and rebels.

Gem smuggling from Myanmar to Thailand is even more dangerous than from Afghanistan to Pakistan, but it is also one of the only ways many Myanmar citizens have to break out of extreme poverty. The two primary starting points for colored stones are Mogok and Mong Hsu. "Mules" move a few gems at a time by hiding them on themselves. They then take a two-day trip by foot, motor scooter, or horse to deliver the gems to a dealer in a Thai border town. During the trip, the "mule" — usually a woman — will have to cross several official border crossings, where lackadaisical government officials will conduct a cursory inspection. The smuggler pays a bribe to the official and is waved through; whether an individual is carrying contraband or not is irrelevant.

They also likely will face renegade members of the army, armed rebels, security forces of drug lords, mine fields, and wild animals. U.S. officials describe the journey as going through "a completely lawless frontier," where there is every imaginable danger. If a relatively wealthy individual wants to smuggle gems without taking the dangerous trip, he can hire one of the smuggling syndicates to transport the gems. For approximately $80, a courier will make the trip and meet the buyer in a Thai border town which brokers gem sales.

Once in Thailand, Myanmar smugglers, Thai brokers, and international buyers meet to sell gems. Only known purchasers can do business there; strangers are not included in any serious transactions. Most gems then go to Bangkok, where they are cut, treated, and sold to international purchasers.

Although Myanmar gems are embargoed by the United States, the reality is that it is almost impossible to spot a Myanmar gem or for customs agents to take any action to stem the flow. Even in Thai border areas, Myanmar stones are mingled with gems from Africa, India, Cambodia, Australia, Thailand, and elsewhere. There is no certificate of origin at this stage. Once the stones have moved to Bangkok, they are further mingled. This is where the certificate of origin or authenticity often appears. By that time, only a practiced gemologist can offer an opinion on where the gemstone originated.

In many cases, stones are set in cheap metal settings in Bangkok so they can be brought in to the United States and other countries without attracting any attention from customs officers. Again, the practice springs more from ignorance of the rules than a genuine need to avoid tariffs. As one former customs agent put it, "People are idiots, and they like to think they're doing something sneaky."

The culture surrounding gem mining, government attempts to control it, and individual attempts to avoid government control create a situation which almost assures that as long as gems are mined, some will be smuggled. The deplorable economic conditions of many of the gem-producing countries exacerbate the problem, as do the almost complete inability on the part of customs officers to spot a smuggled stone, limited U.S. government resources, and lack of political will to stop illegal imports. So, chances are that at some point along the line, some of those prized gems in your collection were smuggled.

By Lisa M. Ruth

© Colored Stone – 2004

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