Diamond Foundry Sues US Over Tariffs on Chinese Diamonds

March 30, 2022

On March 17th, lab-grown producer Diamond Foundry filed a lawsuit against the United States government over President Donald Trump's tariffs on Chinese goods. The Executive Memorandum, signed on March 22, 2018 by President Trump, ordered the Office of the United States Trade Representative (USTR) to provide a proposed list of products and any intended tariff increases.

On April 3, 2018, USTR announced a proposed list of 1,333 products that could be subject to an additional duty of 25 percent. Included on the list are diamonds cut and polished in China.

The Leonardo DiCaprio-backed Diamond Foundry filed the lawsuit at the U.S. Court of International Trade. Diamond Foundry's argument states the tariffs on diamonds cut and polished in China are too high.

Diamond Foundry offers direct insight on its website blog as to the reasoning behind the recent lawsuit:

When Trump introduced trade tariffs against China in four, ever more aggressive tranches, the polishing of diamonds in China was included with a penalty that exceeds the cost of the contract manufacturing service added in China.

This egregious amount stems from the fact that the tariff is applied as a percentage of the market value of the polished diamond re-imported — rather than the value of the polishing contract service (which itself turns out less than the tariff for diamonds).

The Biden administration adopted these Trump tariffs without revisiting them.

We do not believe that doubling the cost of a product or service of a peaceful country is appropriate for the United States government to effect overnight, or any good trade policy.

The blog post would go on to claim that "no diamond producer in India or Russia is exposed to these Trump/Biden tariffs."

The post ended with a mention of the new sanctions imposed on Russia, though it remains to be seen what happens with diamonds mined in Russia and then polished in India.

Diamond Foundry grows diamonds in the states of California and Washington, with plans to open a factory in Spain. It points toward a similar lawsuit filed by Tesla in 2020.

However, a veteran diamond cutter and former employee of Diamond Foundry published a Facebook post commenting that Diamond Foundry's position asking the US government for support is ironic because it outsources most of its work to cheaper labor in China.

Diamond Foundry CEO Marin Roscheisen responded via email to JCKOnline, stating that California-based gem polishing was not of sufficient quality.  "…[C]utting and polishing diamonds requires a degree of craftsmanship, quality commitment, and human organization that we were not able to staff for in the United States, regardless of cost," said Roscheisen.

Due to the amount of time the lawsuit will take to move through the courts, it is unlikely that Diamond Foundry's lawsuit will affect tariffs on Chinese diamonds in the short term.