Rapnet Bans EGL Reports from Trading Network

[cflutist]

This from JCK:

EGL Int’l: No Single Diamond Grading Standard Exists

By Rob Bates, News Director

Posted on September 18, 2014.

There is no single international standard for diamond grading, said Israeli lab EGL International in a statement in response to recent actions by trading networks.

“With regard to the Rapaport Group’s decision to delist diamond grading reports of EGL and that it views GIA as the industry standard…the use of the term standard suggests that such a standard exists,” the statement said. “At this point in time there is no single, international standard for diamond grading that has national or international status or acceptance.”

It added that labs “consistently state that the results of diamond grading are, to a certain extent, subjective,” and that EGL International employs recognized graduate gemologists and uses the latest technology to detect HPHT and synthetics.

It also disputed a contention by EGL USA that there is a border ban that does not allow EGL reports to be sold the United States.

“There has never been and there is no USA border ban on diamond grading reports issued by EGL,” said the statement. “EGL certificates are legitimate and issued legally worldwide.” It argued a border ban would impede free trade.

In 2003, the Bureau of Customs and Border Protection accepted EGL USA’s application to record EGL USAas a registered service mark. That attempt at a so-called border ban is now the subject of litigation. EGL USA respondes that “any E.G.L.-named goods that are not EGL USA goods have been considered banned at the U.S. Customs border for over a decade.”

In related news, despite RapNet’s action—which bans all EGL reports—and an ensuing but narrower move from Polygon to no longer list stones graded by EGL International, the GemFind network says it will continue to list all reports.

“Diamond certificates are basically opinions of the labs,” says GemFind CEO Alex Fetanat. “I know EGL may not be as strict as AGS and GIA, but we as a service provider have to give that choice to our members to make that decision.”

IDEX has also said it will continue to list all reports.

 

[Texas Leaguer]

This is a fascinating event to witness. That is unless you are a dealer with alot of EGL goods, then I'm sure it is positively ulcer-provoking.

I hope that in the longrun only the real offenders are taken down. It is unfortunate that EGL USA is receiving the same treatment as they seem to be doing a reasonable job of holding to the GIA standard. Hopefully they will be able to weather the storm and re-emerge to continue serving the market.

But what do you think the short term effects will be? A huge marketing channel will dry up overnight for EGL diamonds. Some dealers have all or big parts of their inventory tied up in these stones. What will they do in response? Will they be desperate? I'm pretty sure I would be feeling that way. Will they slash and run or take a wait and see posture?

What will happen at the consumer level? Will even more over-graded diamonds suddenly flood into the hands of unsuspecting buyers, (albiet at deep discounts)? And will that compound the problem of confusion and loss of confidence?

What will happen at the lab level? GIA is already overwhelmed. Will it mean more business for the other labs. If so, which ones stand to gain the most?

I believe all of this will have a net positive effect on the consumer and on the industry in the long term. But I am not sure what to expect in the short term.

 

[denverappraiser]

This may have something to do with it.

http://www.raplab.com/

 

[Texas Leaguer]

This may have something to do with it.

http://www.raplab.com/

Interesting. I was not aware of this service. Is anyone using it?

I can see where one could look at the EGL ban with an eyebrow raised. It was probably much easier for Rap to take this action knowing that raplab stands to gain business as a result.

 

[denverappraiser]

I’m sure someone does. I don’t think I’ve ever seen a report issued by Raplab.

Rapnet currently specifically acknowledges 13 labs plus categories for ‘other’ and ‘uncertified’. Raplab is NOT one of the chosen ones. EGL-USA and EGL-other are two. There are, of course, hundreds of labs out there that are collectively in the category of ‘other’. It’s not clear to me if EGL stones are really being banned from the system or if they’re being lumped into that ‘other’ category along with unfavored or unknown labs.

It’s not so different from Pricescope’s list of 5 options for lab. GIA, AGS, HRD, IGI, EGL & EGLISR. Advertisers are required to list one and only one lab for each listing they make and buyers can apply a search filter if they wish.

The Raplab page promotes seamless listing on Rapnet as one of their benefits but I don’t think the system is entirely operational yet. I can’t find a single stone graded by them.

 

[Texas Leaguer]

I’m sure someone does. I don’t think I’ve ever seen a report issued by Raplab.

Rapnet currently specifically acknowledges 13 labs plus categories for ‘other’ and ‘uncertified’. Raplab is NOT one of the chosen ones. EGL-USA and EGL-other are two. There are, of course, hundreds of labs out there that are collectively in the category of ‘other’. It’s not clear to me if EGL stones are really being banned from the system or if they’re being lumped into that ‘other’ category along with unfavored or unknown labs.

It’s not so different from Pricescope’s list of 5 options for lab. GIA, AGS, HRD, IGI, EGL & EGLISR. Advertisers are required to list one and only one lab for each listing they make and buyers can apply a search filter if they wish.

The Raplab page promotes seamless listing on Rapnet as one of their benefits but I don’t think the system is entirely operational yet. I can’t find a single stone graded by them.

EGL stones are still listed. I think the ban is scheduled to go into effect on Oct 1. They will clearly allow the dealers to list the stones under the "uncertified" category. Putting them in "other" would be an interesting little backstep. I guess they could do that if they were feeling too much pushback from the dealers.

 

[Rockdiamond]

I just got off the phone with a major league sightholder- who does carry a tremendous amount of EGL graded stones.
He was actually pleased with Rap's move- and sees it as an opportunity.
He feels that more EGL graded diamonds are sold every day than GIA graded stones ( this is all anecdotal, but interesting nonetheless)
The stones are sold by in large at retail stores which will now have to actually buy the diamonds as they won't be as easily available.
Plus, he felt that prices would rise on these diamonds given the lesser transparency now offered by Rap.
None of this is good for the uneducated consumer of course.


A little mentioned addendum to this- Rap is also banning any and all green diamonds.

 

[geoffreysnow]

A little mentioned addendum to this- Rap is also banning any and all green diamonds.

Why is that?

 

[Garry H (Cut Nut)]

A little mentioned addendum to this- Rap is also banning any and all green diamonds.

Why is that?

Most are from Zimbabwae and they have a nasty regime
its Rap's and the US govt sanctions

 

[John P]

A little mentioned addendum to this- Rap is also banning any and all green diamonds.

Why is that?

Most are from Zimbabwae and they have a nasty regime
its Rap's and the US govt sanctions

Actually Belgian AML regulations also cover this, and diamantaires of integrity at all compass points are vigilant/resistant. Nevertheless, Rap is certainly aware that they enter through other channels...

Here is the systemic problem: The United Nations Kimberley Process Certification Scheme (2003) was enacted to defeat sales of diamonds used by rebel factions to fund conflict. This KPCS, strengthened by Belgian AML regs, the USA Clean-Diamonds act and the USA Patriot Act, became quite effective in killing funding of rebel and warlord uprisings in Africa... The problem now is that the legitimate government of Zimbabwe is involved in perpetuating HRVs - so it's nasty as Garry says - but the wording of the KPCS was designed to stop rebellions, not legitimate governments.

Belgian, Israeli and USA policies (maybe some others too) strongly buffer against these diamonds. Long-standing mining and polishing houses will have nothing to do with any of this...but there are no restrictions for import into China and India. Resultantly, Zimbabwe rough flows into the Asia-Pacific, gets polished, and comes into the USA or Europe though Eastern wholesalers. At present, slight green tint is a poor-man's way of identifying those goods.

 

[Karl_K]

Belgian, Israeli and USA policies (maybe some others too) strongly buffer against these diamonds. Long-standing mining and polishing houses will have nothing to do with any of this...but there are no restrictions for import into China and India. Resultantly, Zimbabwe rough flows into the Asia-Pacific, gets polished, and comes into the USA or Europe though Eastern wholesalers. At present, slight green tint is a poor-man's way of identifying those goods.

Any info on what percentage that would actually catch? I doubt it would be all.
How high is the false positive rate blocking goods from other areas?

 

[John P]

Belgian, Israeli and USA policies (maybe some others too) strongly buffer against these diamonds. Long-standing mining and polishing houses will have nothing to do with any of this...but there are no restrictions for import into China and India. Resultantly, Zimbabwe rough flows into the Asia-Pacific, gets polished, and comes into the USA or Europe though Eastern wholesalers. At present, slight green tint is a poor-man's way of identifying those goods.

Any info on what percentage that would actually catch? I doubt it would be all.
How high is the false positive rate blocking goods from other areas?

The most abundant and effective production is still coming from organized African output such as Bots, Nam, SA, etc. along with Australia and Canada. I hear estimates of less than 1% for the dubious stuff, though reporting by industry entities may not be wholly reliable; with all due respect. With added filtering done by western entities this could be seen as a tempest in a teapot. But the teapot is something a lot of people care about in the USA, and rightly so. Furthermore, Martin Rapaport has spent personal time with artisinal diggers in W Africa, and at every JCK "State Of The Union" I can recall he has dedicated significant time to the topic of HRVs in Africa. Therefore, he is steadfastly focused on this tempest, whether it's the size of a teacup or an ocean. I applaud and respect him for that.

Begin commercial.

The conflict diamond topic is a long-standing legitimate concern. As consumers and jewelers we can’t change governments or politics but we can create commerce and benevolence to help people in-need. To that end, while I don't have the power to intercede in Zimbabwe, my wife and I regularly contribute to the American Red Cross, which has feet on the ground where there is need. In the same spirit, our mothers both passed from cancer and I'm proud-to-bursting of the hundreds of hours my wife has invested raising incredible amounts for the ACS on various platforms. Maybe it's not directly-germane to your question, but I'm old enough that I don't worry if this paragraph takes a step aside - I believe those who have the ability to help should consider doing-so, particularly in spheres which have personal meaning. For many reading this, that may involve the world of diamonds - top to bottom.

https://www.redcross.org/donate/

End commercial.

 

[Karl_K]

Hi Sir John thanks for the info and a kewl commercial but I was less than clear I think in the way I asked. :}
Maybe I will ask a different way and it may be a question without an answer.
What percentage of Zimbabwe rough has the green tint?
How big is the issue going to be of false positives from green tint from other areas?

 

[Texas Leaguer]

Belgian, Israeli and USA policies (maybe some others too) strongly buffer against these diamonds. Long-standing mining and polishing houses will have nothing to do with any of this...but there are no restrictions for import into China and India. Resultantly, Zimbabwe rough flows into the Asia-Pacific, gets polished, and comes into the USA or Europe though Eastern wholesalers. At present, slight green tint is a poor-man's way of identifying those goods.

Any info on what percentage that would actually catch? I doubt it would be all.
How high is the false positive rate blocking goods from other areas?

The most abundant and effective production is still coming from organized African output such as Bots, Nam, SA, etc. along with Australia and Canada. I hear estimates of less than 1% for the dubious stuff, though reporting by industry entities may not be wholly reliable; with all due respect. With added filtering done by western entities this could be seen as a tempest in a teapot. But the teapot is something a lot of people care about in the USA, and rightly so. Furthermore, Martin Rapaport has spent personal time with artisinal diggers in W Africa, and at every JCK "State Of The Union" I can recall he has dedicated significant time to the topic of HRVs in Africa. Therefore, he is steadfastly focused on this tempest, whether it's the size of a teacup or an ocean. I applaud and respect him for that.

Begin commercial.

The conflict diamond topic is a long-standing legitimate concern. As consumers and jewelers we can’t change governments or politics but we can create commerce and benevolence to help people in-need. To that end, while I don't have the power to intercede in Zimbabwe, my wife and I regularly contribute to the American Red Cross, which has feet on the ground where there is need. In the same spirit, our mothers both passed from cancer and I'm proud-to-bursting of the hundreds of hours my wife has invested raising incredible amounts for the ACS on various platforms. Maybe it's not directly-germane to your question, but I'm old enough that I don't worry if this paragraph takes a step aside - I believe those who have the ability to help should consider doing-so, particularly in spheres which have personal meaning. For many reading this, that may involve the world of diamonds - top to bottom.

https://www.redcross.org/donate/

End commercial.

I would like to echo your comments about Martin Rapaport, John.

Also, will tack on a small diversion of my own with regards to worthwhile causes. As members of the United Nations Global Compact we recently received this message and have today made a contribution to the cause. Others may want to consider doing the same. The epicenter of the outbreak encompasses a major diamond mining region of West Africa.

Special Appeal: Support Ebola Emergency Response

Dear Global Compact Participant,
The Ebola outbreak in West Africa has caused over 2,000 deaths in Guinea, Liberia, Nigeria, Senegal and Sierra Leone. Transmission of the virus is intensifying in many affected areas, and the fatality rate of the current outbreak is estimated at between 60 and 70%. The United Nations and its humanitarian partners are increasing efforts to stop transmission of Ebola in West Africa and prevent further international spread of the virus. As part of a Global Response Strategy, greater international assistance will be critical to stopping the spread of Ebola. The global business community has an important role to play.
UN Global Compact participants wishing to support immediate relief efforts can make a financial contribution to the UN Central Emergency Response Fund.
Make a financial contribution
to the UN Central Emergency Response Fund »
In addition to encouraging financial support for relief efforts, the World Health Organization (WHO) stresses the importance of maintaining business continuity and economic activity in Ebola-affected countries. Airlines and shipping companies are urged to maintain transport links in affected countries to ensure continued flow of aid and medical resources and personnel. Isolating affected countries risks causing more harm and delaying efforts to stop the Ebola virus, rather than preventing its spread.
The UN Global Compact is working closely with the UN System Coordinator for Ebola Response and other partners to match the needs of UN organizations with the resources of the private sector. As relief efforts intensify in the days ahead, specific operational and in-kind needs in support of the Response Strategy will be shared with companies at business.un.org, the UN-Business partnership platform designed to connect UN needs with private sector resources and capacities, including in emergencies.
For more information on the Ebola response and how to help, please contact us.
https://secure.globalproblems-globalsolutions.org/site/Donation2;jsessionid=6A2680F942846D528E8D14BC3DF6F493.app244a?idb=1649881960&df_id=1240&1240.donation=form1
Sincerely,

Georg Kell
Executive Director
UN Global Compact

 

[heididdl]

If EGL and every other lab were required to formulate their own grading of color and clarity and then using nomenclature other than the GIA uses, provide certs graded to their specific standards, none of this would have happened. Mis-using GIA standards is at the heart of the problem. EGL could make a their colors 11, 12, 13, 14. 11 could be GIA D/E, 12 could be GIA F/G, 13 could be GIA H/I, 14 could be J/K. Any sort of system needs a reference to another standard system, but they would not be confused as being identical.

Explaining clearly on the report, on their website and on their printed publications how a non-GIA lab grades compared to GIA, in an open and honest way, would prevent the mis-use of grading reports. That would be utopia and I can't see that being acceptable to those who currently flog bad paper.

Still, there is no harm in buying a diamond with an EGL report so long as you just act like a diamond dealer and re-grade the diamond to GIA standards before buying it. Consumers can't do this easily, but dealers have little problem with EGL reports. Rapaport has really rocked the boat.

Let me start by saying this is a very emotional issue for me. Here are my beautiful EGL International 2.41 diamond studs. When I was looking for studs I wanted as close to 2.50 as I could with a budget of $10,000. (including trade in poorly cut 2.05 and had to sell other jewelry gold for cash which really prohibited online purchase) I had seen these studs in a B&M store and thought they were gorgeous but i knew they were EGL In F SI1 (14,000).. Bottom Line I hit up 4 different diamond individuals (wont use wholesalers) on 47th street that either used rapnet or who generally don't sell to public (upstairs in different buildings 5th ave .)
When I gave them my budget and ideal cut specs they all told me to stay under 2.00 tcw....Bottom line for $8,,000 and my old studs I ended up with earrings that I am very happy with....Are they F color SI1 I don't think so but I don't really care and listening to all this negativity only makes me feel bad about my purchase. Isn't the end result that the customer is happy and don't feel like they over paid.

The last two comments by industry dealers have a point. It is one issue if the customer is given bad information. The other is are EGL international stones all bad or just more loosely graded. I almost stopped coming to Pricescope as a lot of the posters make me feel like a bought a bad pair of stones and I have been second guessing myself for almost 2 years.

 

[heididdl]

I agree with most of what you are saying John, but might add that the REAL problem starts when the melting crying woman shows her stunning EGL International "F" color diamond (which in reality could be an I-J) and her friend Jen has a real GIA graded "F" colored diamond and why does mine appear faint yellow and hers whiter by comparison....and this happens alot of the time. There are so many facets (no pun intended) to this situation that one can only "speculate" what happens next. It is taking GM a decade to deal with their consumer issues.

Or worse that girl goes into a store to upgrade or shop in jewelry store and the owner says oh I can see from here those studs are I-J and not F...so they must be EGL international certified. That would kill her if she was unaware

 

[Garry H (Cut Nut)]

Update from Rap:
Dear Member

As announced on September 9, 2014 effective tomorrow, October 1, 2014, EGL will no longer be listed as a diamond grading report on RapNet.
This applies to all EGL grading reports regardless of origin.

The following is our response to frequently asked questions.

Q: I have diamond listings with EGL grading reports, what is going to happen?
A: The diamond listings will remain on RapNet. All that is going to change is that the laboratory name and report number will be removed from your listings. Your diamonds will be classified as ”uncertified” (ie with no grading report). As sellers are responsible for the accuracy of the diamond descriptions, we urge you to correct any gemological misrepresentations.

Q: Do I have to make changes to the way I upload diamonds to RapNet?
A: You need not make any changes. We will remove the EGL laboratory name and report number from your listings before adding them to RapNet. You may continue to upload these diamonds as you usually do and list these diamonds as uncertified.

Q: What about the report scan image , report check etc...
A: The diamond will be listed as uncertified, with no report scan or access to report website.

Q: I have other questions not answered here. What should I do?
A: We are here to help. Please email us anytime to [email protected] or call our US office at +1 702 893 9400. If you are nearer another Rapaport office, please see our list of offices and contacts numbers here.

Saville Stern
RapNet Chief Operating Officer

 

[kenny]

Classifying EGL-graded diamonds as 'uncerted'.

Brilliant! Perfect!

 

[heididdl]

Classifying EGL-graded diamonds as 'uncerted'.

Brilliant! Perfect!

on this we agree

 

[John P]

Update:

EGL Int’l Shutting Down as Network Reorganizes
https://www.pricescope.com/community/threads/egl-int’l-shutting-down-as-network-reorganizes.208588/

 

[TitanCi]

Bravo! I hate hearing from jewelers/sellers, EGL is just as good, but cheaper cuz it's not as known as GIA or whatever BS they tell me

 

[chikoo]

I almost don't feel bad for the consumer that knowingly purchases an EGL graded stone. Although color and clarify is literally set in stone, how they are represented is not. A consumer should know that a EGL graded diamond won't be graded in the same way as a GIA or AGS graded diamond. That's why EGL diamonds are usually cheaper. The consumer is under no compulsion to buy, but if they see the diamond and meets their expectations for what they want their diamond to look like at a price they like, it doesn't really matter which lab graded it.

However if the consumer is mindful of what's on the lab report, the onus is on them to educate themselves on how much faith to place on various reports. If a car buyer doesn't know that a 200hp Kia is not equivalent to a 200hp BMW, then a diamond buyer who thinks EGL grades are equivalent to GIA is just as ignorant. Not everyone is a savvy consumer and many of them live just fine.

I very seriously doubt 2 women, one who can afford a GIA certified 2CT diamond, and the other one an EGL would move around in the same circles. You know like a Kia or Porsche owners are not in the same party and comparing their apples and oranges!!!

 

[proto]

As a consumer, isnt this just going to raise prices because sellers have to go through additional hoops?

only people in the diamond trade see the rap anyway, and its indicative on price.

Trade entities already know not to take EGL on face value and do their own grading before buying based on rap prices.

This doesnt prevent an EGL grading report being shown to end consumers, which was the root of the problem.

Am i misunderstanding the effect of the ban?

 

[chikoo]

Funny thing is how one private organization is banning another private organization from the market.

 

[Texas Leaguer]

As a consumer, isnt this just going to raise prices because sellers have to go through additional hoops?

only people in the diamond trade see the rap anyway, and its indicative on price.

Trade entities already know not to take EGL on face value and do their own grading before buying based on rap prices.

This doesnt prevent an EGL grading report being shown to end consumers, which was the root of the problem.

Am i misunderstanding the effect of the ban?

I think Martin Rapaport is taking a stand on principle and doing what is in his power to do in terms of addressing the problem. He sees systemic grading abuse as bad for consumers and therefore a serious problem for the diamond industry.

By making it more difficult to trade in these certs on the wholesale level, there will be fewer hitting the retail market. And his bold step is calling attention to the problem, which is serving to motivate the industry to do some long overdue self-policing.

To whatever extent it raises prices for consumers it is only because it removes some of the illusion of lower prices due to overgrading.

 

[proto]

Not meaning to be argumentative, but for my more complete understanding. I am not in the trade so dont know the inner workings, although insight would be informative.

I agree it is a good move in principle to get rid of EGL [although feel bad for EGL USA].

I thought the whole point of getting the EGL paper was to mislead the end consumer and wholesale buyers inspect their diamonds anyway (and effectively do their own in-house grading) before purchasing following the rap report indicative price. Nobody gets the EGL papers for wholesale trading (this was my understanding), they just need some paper in order to sell to the consumer.

So you get a bunch of stones, lets say they are likely to be graded GIA J on colour. You would paper them EGL G on colour [lets assume]. These sell for a discount to a GIA G, but sell to consumers for more than a GIA J.

So the wholesaler sells them to a purchaser on the Rap price of a J, because both parties at the wholesale level understand these are J colour. You get EGL paper to show to the consumer as consumers want paper to "certify" their diamond.

Has there been any change in incentive to not use EGL to grade diamonds and to produce these reports to consumers to convince them they are getting a bargain?

I guess my query could be reformulated to "does anyone actually use EGL when buying/selling at the wholesale level"?

 

[WinkHPD]

Not meaning to be argumentative, but for my more complete understanding. I am not in the trade so dont know the inner workings, although insight would be informative.

I agree it is a good move in principle to get rid of EGL [although feel bad for EGL USA].

I thought the whole point of getting the EGL paper was to mislead the end consumer and wholesale buyers inspect their diamonds anyway (and effectively do their own in-house grading) before purchasing following the rap report indicative price. Nobody gets the EGL papers for wholesale trading (this was my understanding), they just need some paper in order to sell to the consumer.

So you get a bunch of stones, lets say they are likely to be graded GIA J on colour. You would paper them EGL G on colour [lets assume]. These sell for a discount to a GIA G, but sell to consumers for more than a GIA J.

So the wholesaler sells them to a purchaser on the Rap price of a J, because both parties at the wholesale level understand these are J colour. You get EGL paper to show to the consumer as consumers want paper to "certify" their diamond.

Has there been any change in incentive to not use EGL to grade diamonds and to produce these reports to consumers to convince them they are getting a bargain?

I guess my query could be reformulated to "does anyone actually use EGL when buying/selling at the wholesale level"?

You are making the assumption, erroneous in my opinion, that regular retailers all know that EGL is bogus. The sad thing, is that many have no clue. This is distressing to me, but I have seen so many proofs of the unprepared nature of so many of the retail jewelers that I am always appreciative of the well prepared ones rather than surprised by the poorly prepared ones. There are many good to great jewelers out there, but there are also way too many who have no real knowledge of their trade.

Those who aren't properly prepared are always happy to buy a "bargain" with EGL report and sell it as graded to their clients. What they do not realize is that the bargain that they bought, often still cost them more than a GIA diamond that was graded accurately that they could have bought had they known to completely disregard the EGL report and only buy diamonds graded by a reputable top tier lab. Thus, they may have over paid while thinking they were getting a bargain.

When you get an uneducated jeweler paying too much for his "bargains", then you are going to have the clients of that jeweler paying too much for their "bargain" diamond.

The really sad thing is, IT MUST BE WORKING for all the people who continued to have their diamonds papered by EGL, especially EGL offices outside of the United States who were becoming more and more egregious in their misgrading of the diamonds they issued reports on. If they had not been making more money doing this than in getting GIA or AGS reports, they would NOT HAVE CONTINUED TO DO IT!

Money talks! It was making money, or it would not have been done. It is an embarrassment to our industry and many of us have been talking about it for years. It is LONG overdue, but I am glad that someone with the clout to make a difference finally took up the fight.

Wink

 

[proto]

"You are making the assumption, erroneous in my opinion, that regular retailers all know that EGL is bogus. The sad thing, is that many have no clue."

oh my god.

okay this makes sense then and I can see how this acts as an incentive.

again. oh my god.

 

[Texas Leaguer]

Not meaning to be argumentative, but for my more complete understanding. I am not in the trade so dont know the inner workings, although insight would be informative.

I agree it is a good move in principle to get rid of EGL [although feel bad for EGL USA].

I thought the whole point of getting the EGL paper was to mislead the end consumer and wholesale buyers inspect their diamonds anyway (and effectively do their own in-house grading) before purchasing following the rap report indicative price. Nobody gets the EGL papers for wholesale trading (this was my understanding), they just need some paper in order to sell to the consumer.

So you get a bunch of stones, lets say they are likely to be graded GIA J on colour. You would paper them EGL G on colour [lets assume]. These sell for a discount to a GIA G, but sell to consumers for more than a GIA J.

So the wholesaler sells them to a purchaser on the Rap price of a J, because both parties at the wholesale level understand these are J colour. You get EGL paper to show to the consumer as consumers want paper to "certify" their diamond.

Has there been any change in incentive to not use EGL to grade diamonds and to produce these reports to consumers to convince them they are getting a bargain?

I guess my query could be reformulated to "does anyone actually use EGL when buying/selling at the wholesale level"?

I understand Proto. Trading dynamics are a little hard to understand for those not in the industry. Even people that have been in the jewelry business for a long time may not understand some of the upstream aspects. And it has been evolving for while now- quite different today than when I first got into the business. And there are plenty of things I do not know, of that I am sure!

One of the key things to understand is how much the business today revolves around consignment (aka "memo" in the trade). I think many people here may understand it to some extent having seen the development of "virtual inventories" online. This is essentially like getting a stone on memo. The retailer never really owns the stone. They procure it, sell it, then take the proceeds and pay for it retaining a percentage for themselves in the transaction.

With that as a backdrop, the rapaport listings offer retailers a way to find "bargains" for their customers in order to compete with other retailers. Because the cheapest stone with the highest grade looks good from that standpoint, systematically overgraded stones serve the purposes of many retailers. Even if the retailer recognizes that the grading is way off when they receive it, many will simply pass it along to the consumer, pointing to the "laboratory" report as their deferred authority.

There definitely is some actual buying and selling of EGL stones among traders. And they will be actually studying those stones carefully looking for the most favorably graded stones with which to create their profit delta. This is where the pressure comes from that motivates some labs to overgrade in the first place.

Does that make sense?

 

[denverappraiser]

The purpose of the EGL document, and to some extent the documents from GIA, IGI and AGS, is advertising. The lab’s client is the seller and the reason they bought it is because they thought it would sell better, faster, or for more money with paperwork of a particular branding. It's a big world and not all customers respond to the same pitch.

The pitch that accompanies EGL paper is that they’re bargains.
The pitch that accompanies GIA paper is that they’re ‘certified’.
The pitch that accompanies AGS paper is that they’re ‘ideal cut’.
Etc. etc. etc.

Obviously there are overlaps here but an important tidbit is that 3/4 of the business at the labs comes from fewer than 100 clients. This is the case across the board. These are giant companies who choose the lab strategically. Nearly every one of them is a customer of all 5 labs (and more) and which stone went to which lab as chosen for strategic reasons. They even get free do-overs. If they send it to EGL and don’t get the results they want they can still shred the paper and send the stone somewhere else. This process is completely invisible to both the jeweler and the end consumer.