Secondary sanctions are penalties that the U.S. government can apply not just to companies directly doing business with restricted countries but also to those who work indirectly with them. For example, if a U.S.-based jewelry business buys gemstones or metals from a supplier linked to a restricted area like Russia or Burma (also known as Myanmar), it could still face penalties—even if that supplier isn’t based in a sanctioned country. These penalties might include fines, frozen assets, or losing access to banking services, making it difficult for U.S. companies to continue doing business.
For example, recently, a sale at Sotheby’s in Hong Kong included pieces with Burmese gemstones such as jadeite and rubies. Known for its high-quality rubies, sapphires, and jade, Burma faces international sanctions due to political instability and alleged human rights abuses, which affect the trade of its precious gems. Sotheby’s in Hong Kong can legally sell jewelry made with Burmese gemstones, because Hong Kong does not impose specific sanctions on Burmese jadeite and rubies.1 However, it’s important to note that while such sales are legal in Hong Kong, the importation of Burmese gemstones into other countries may be restricted due to international sanctions. For instance, the United States has imposed sanctions prohibiting the import of jadeite and rubies mined or extracted from Burma.2 Therefore, buyers outside Hong Kong should be aware of their own country’s regulations regarding Burmese jadeite and rubies to ensure compliance with local laws.
These sanctions can impact the entire supply chain, affecting access to both valuable international markets and everyday banking services within the U.S. Many banks choose to avoid clients with risky connections to sanctioned regions, so a U.S. jewelry business could lose access to loans or even basic banking if it unknowingly buys materials with ties to restricted countries. To avoid this, U.S. companies need to do thorough checks to understand exactly where their materials are sourced and who is involved along the supply chain.3
There’s also a strong focus in the U.S. on ethical and conflict-free sourcing. If a jewelry brand is found to be connected to a sanctioned area, even indirectly, it risks losing consumer trust. U.S. buyers increasingly care about where their jewelry comes from, wanting to avoid pieces linked to unethical practices or questionable sources. Any association with a sanctioned country could damage the brand’s reputation, impacting sales and long-term trust among American consumers.
To avoid these risks, U.S. jewelry businesses need strong compliance checks. This includes maintaining an active anti-money laundering program, reviewing suppliers carefully to confirm they’re not linked to restricted areas, working only with reputable sources, and staying informed on U.S. regulations. With these precautions, U.S. companies can avoid penalties, protect their reputations, and reassure customers that their jewelry meets high ethical and legal standards.
1 https://rapaport.com/news/6m-jadeite-necklace-to-lead-sothebys-hong-kong/ and https://rapaport.com/news/yellow-diamond-earrings-lead-60m-christies-jewelry-sale/?utm_campaign=NewsBrief%20and%20TradeWire&utm_medium=email&_hsenc=p2ANqtz-95F0l4Wdeg9yZYnsGMLauCQkkc8YYeSArVz4p0t6KolAbkd5EZ69zWeO2MbtxaBPfUv6HO7WhaBYODTi76FGkp8kvUOg&_hsmi=331711314&utm_content=331711314&utm_source=hs_email
3 Log into your Member Dashboard and watch the recording of JVC’s Fall 2024 Compliance briefing for the latest in legal and compliance, with summaries of JVC’s recent activity, updates on important jewelry industry topics, and a special presentation on conducting further risk evaluation of supply chain partners
