As non-residents, the alien refugees were permitted by law to bring all of their personal jewelry into the country without paying a customs duty. But if they intended to sell any of the jewelry within a period of three years from the date of their arrival, then the jewelry had to be declared and duty paid on it.
There was, and still is, a provision in the law which allowed these people to manipulate their jewelry and to take advantage of the lowest customs rate in cases where they intended to sell the gems. They could do this by removing the stones from their settings.
Gems imported in their settings automatically become subject to a 30 per cent duty, based on the total value of the gems and the settings. But if the stones were separated from the mountings, then the importer paid only a 10 per cent tax on the stones and a 30 per cent tax on the mountings. Since most of the value of jewelry was in the stones, the refugees were able to reduce the duty roughly 20 per cent by this manipulation.
Americans travelling abroad today may take advantage of this law when they bring home a fine piece of jewelry. They are permitted to separate gems from setting and then have them appraised separately.
The flight of jewelry to the United States from Europe was great before the war, but it was even greater in the years immediately following the conflict. Pipino’s office handled a record-breaking 10,000 packages of gems in 1947. And the rise in diamond shipments was a gauge of Europe’s economic desperation.
In the postwar years, Europe’s economy was shattered. Factories were in ruins. People were digging out of the debris of war to repair the ravages of the long struggle. They needed money not only to rebuild, but to survive.
Men and women took their gems from vaults, cupboards, and from secret burial places and forwarded them to the United States to exchange them for U.S. dollars. The demand for diamonds and other precious stones was strong in the United States and prices were high. The flow of gems became a flood.
The weakness of Britain’s pound sterling in the postwar years also had a strong influence on the movement of diamonds. Countries with a large accumulation of sterling were willing to give discounts of up to 10 per cent on diamonds if the purchasers agreed to pay for them in dollars. And in this juggling of currencies and discounts, diamonds were moving about the world in strange patterns.
Diamond shipments would leave South Africa and go to Holland, for example. There they would be re-addressed and shipped to the United States so that payment could be made to Holland. Holland would accept dollars in payment and transfer pounds sterling to South Africa. The same thing was happening in Japan and other countries in the Far East where the currencies were weak.
Black market operators also found ways to evade currency controls. Some of them shipped their diamonds to Switzerland and then used that country as their base of operations to take advantage of Switzerland’s total secrecy in banking operations. In this manner they were able to mask the origin of the diamonds.