Appendix 1 S.I. 2004/686: memorandum from
the Foreign and Commonwealth Office
Kimberley Process (Fees) Regulations 2004 (S.I. 2004/686)
1. The Committee has requested a memorandum on the
following point:
Explain the reasons for the sharp fee increases
made by this instrument, given that the previous fees were prescribed
with effect from 1 October 2003.
2. The present draft Regulations increase the fees
in order to achieve full cost recovery in the present financial
year.
3. When fees were first introduced for the issue
of certificates for diamond shipments, by the Kimberley Process
(Fees) Regulations 2003 (S.I.2003/2327) with effect from 1 October
2003, the FCO argued that the impact of the Kimberley Process
on the legitimate diamond industry in the UK should be kept as
minimal as possible. This reflected a fundamental principle of
the Kimberley Process itself, enshrined in the relevant EC Regulation.
In addition, the UK industry is composed almost exclusively of
small firms employing no more than 10 people each. Advice from
the DTI was to minimise the financial and administrative burden
placed on such companies. This was reflected in the Regulation
Impact Assessment. HMT consented to the initial regulations on
condition that fees were increased in order to achieve full cost
recovery in the next financial year, and also that any interim
costs were met from within the FCO's existing Departmental Expenditure
Limit.
4. The Government Diamond Office has kept in regular
touch with the UK diamond industry about the level of fees and
the rationale behind them. In particular the GDO has explained
on more than one occasion in the past twelve months why the fees
have to rise as from 1 April 2004 (namely, in order to achieve
the full cost recovery required by HMT) and what the new level
was likely to be; this included during the consultation process
leading up to the fees first being charged from October 2003.
Confirmation of the rise and expected fee structure was last notified
formally to industry by the GDO on 25 February. There has been
a single response, proposing that the sliding scale of the fees
structure be extended from three to four points, retaining the
proposed lower charge but increasing substantially the proposed
higher charge. On further investigation it was clear this proposal
would lead to cross-subsidisation. The proposal was therefore
rejected.
21 April 2004
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