The Tourist Trap Debate

(via Gem Market News, Jan/Feb 2007, Vol 26, Issue 1) Richard B Drucker, GG writes:

Every year, tourists purchase jewelry from port town shops, major city tourist areas, and even from cruise ships, either on board or at a recommended local store. The vacation is a great memory until they return home, only to be told by a local jeweler or appraiser that they have been ripped off. Are they really a victim of a devious tourist trap, or has the local jeweler or appraiser low-balled the value in an attempt to make a sale themselves or discredit the tourist industry?

The truth is that when tourists leave their home country, they are definitely at a disadvantage when shopping for any item, not just jewelry. Tourist stores know that they are dealing with clients with discretionary income and impulsive spending behavior when away from home. If they have a change of heart for any reason when they get home, exchanges or refunds are unlikely due to the difficulty related to the distance. There might be guarantees but once home, the guarantees may be hard to invoke. Since cruise lines often get commissions from jewelry stores they recommend, they may be helpful in assisting the passenger in a dispute. Credit card companies historically helped out and are good advice for tourists to use, however, they too, are becoming reluctant to help out because there are so many claims and few are warranted.

When there is a dispute, the consumer will probably be directed to get an independent appraisal and that is one reason that Gemworld sees so many of these purchases. In fairness to the tourist stores and cruise ships, we do see many cases where the purchase price is legitimate, so this is not just about the tourist trap.

Most of the time, when a client comes to us for the independent appraisal thinking they are overpaid, we substantiate the price paid. The problem starts when the jeweler says they overpaid and their store could sell it for less. Although they could sell it for less, this may also be an unfair statement. There are different markets to buy jewelry in and different markets have different pricing. Some markets get higher markups due to overhead, location, advertising, and yes, even the fact that they may be giving commissions to cruise operators. Someone can always sell something for less, but that is not what is at issue. The only thing that is important is whether the tourist received what they expected at a fair price for the location in which they made the purchase.

Appraising in the Appropriate Market
Appraising in the appropriate market means research and due diligence by the appraiser. It means finding out what similar items sell for in similar stores. In the Sept/Oct 2006 issue of GMN, an article on markets appeared by Joseph Tenhagen. In it he identifies 14 separate and stratified markets in which jewelry can be purchased. It is our opinion that the appraiser should identify the market and research prices accordingly. We always ask where an item was purchased and value accordingly.

Occasionally, there may be reason to appraise an item in a different market than the one in which it was purchased. In the tourist examples, one may use the argument that if the item were lost, it would not be replaced in the same market. Appraisers may ask the question, “Where would you most likely replace this item if it were lost?” Since the tourist is unlikely to hop aboard the plane and return to the place of purchase, nor would the insurance company go to that store either, could it be appraised for a lower value in a different market? The answer is maybe.

First, if it is trademarked or branded from that store or location, it may likely have to be replaced only by that store. Then, you could not transfer the appraisal to a generic local replacement center. The opportunity to use a different market for replacement comes from the fact that most replacement type insurance policies state that they have the right to replace at their cost or to settle for the price that they could actually buy the item for, then one would argue that a low value is always appropriate. However, this will be the case with most purchases from all retail markets, and I am not sure that is where appraising should go. No jeweler would ever make a fair profit if this started to happen.

Sometimes a discussion may ensue regarding replacement and the client may request a lower value for insurance. Without going into a full discussion here about the appraisal methodology and valuation science, I will simply say that if a lower value is used for any reason, that reason should be clearly stated on the appraisal report. Something such as this could be added: Client purchased item at XYZ Jewelers, St.Thomas, for $4000.00. Although a fair price for that location, replacement value here in local markets has been determined to be $3200.00 and that value is being used at the request of the client.

Now, I know that appraisers love to debate methodology and appraising. There are many that would disagree with the above statement and procedure. One subscriber/appraiser recently emailed us regarding problems with a Caribbean purchase. While the heart of the issue was in some false claims, we also discussed valuation methods. He wrote the following. “My position is that it really doesn’t matter what the seller or buyer think the appraisal value of any item should be. It is what the market says it is. The client and/or seller can have absolutely no influence on an ethical appraisal. And, as an appraiser, I can’t really have an opinion on whether the price paid was too high or too low. There is no mention in the purpose and function statements of the appraisal being intended as a purchase price justification. As such, there is really no reason to identify the purchase price or to justify either the seller’s or the buyer’s position in a transaction. As appraisers, we are not in the business of taking sides (not should we be).”

While there is truth to much of this, other issues are at hand here. His position is that nothing influences what he ultimately appraises an item for. He states that the market dictates price, but what market? Market activity dictates value. Market location is an important factor in examining this activity. Disparaging terms such as rip off, etc., should be avoided. Appraisers are no more immune from civil recourse stemming from interfering in the commerce of others than anyone else. A purchase price is a valid indicator of value. If a comparable can be purchased in a different market for less, this might be noted. However, do not allow this to suggest that the original price was an unfair price for the market the consumer chose to shop within.

Appraisals of jewelry purchased in tourist markets present a challenge in that the appraiser must reconcile the role of market influence on value. Often these assignments blend two distinct tasks. One is assigning an insurance replacement value to aid the client in obtaining insurance. In this case, the purchase price may not be a significant consideration because the issue becomes not what was paid, but what would be paid to make the client whole again in case of a loss. However, this should not be done in a way that dismisses the legitimacy of an established tourist market.

Another example clearly illustrates this with real estate. Suppose a real estate appraiser were appraising a house. The appraiser finds that the builder of the home has built this exact home in a different city in another part of the country and it sold there for a lower price. The appraiser uses this price stating that this is all it would cost to replace the home with this builder. While the materials may be the same, the market value varies with location. The house does not cost the same in all locations, yet the appraiser would never say to the client that they were ripped off by paying the higher price in the place in which they chose to buy.

When the Gloves Come off
While we have defended many cases as the independent arbitrator, these cases have strictly involved the question of price. A bigger problem in our opinion is the misinformation and use of reports that inflate the grading of gems being sold. The value may be OK for what is sold or it may be high. In both cases, we will not defend the sale.

Origin Determination Of Rubies, Sapphires And Emeralds

The lecture was delivered on the 8th December, 2004 at AIGS by Dietmar Schwarz and Christian Dunaigre, Gubelin Gem Lab, Switzerland.

In brief:

Historical data: The concept of country of origin determination started 60+ years ago in Switzerland by Dr. Eduard Gubelin who did methodical studies on internal features of gemstones originating from important gem localities around the world. During 1950s and 1970s the number of important gem deposits were restricted due to political and economic reasons. Some of the major deposits include:

Ruby: Ratnapura/Elahera in Sri Lanka
Mogok Stone Tract / Mong Hshu / Namya in Burma
Trat province in Thailand
Magari / Umba valley in East Africa
Different localities in Vietnam
Different localities in Madagascar

Sapphires: Ratnapura / Elahera in Sri Lanka
Mogok Stone Tract in Burma
Kanchanaburi / Chantaburi in Thailand
Different localities in Australia
Different localities in Madagascar
Different localities in the USA

Emeralds: Muzo / Chivor in Colombia
Different localities in Zambia
Sandawana in Zimbabwe
Ural mountains in Russia
Different localities in Brazil
Different localities in Afghanistan
Different localities in Pakistan

In today’s gem market, traders like to submit a ruby, sapphire or emerald for origin determination due to its high value. Inclusions do affect prices. There are number of reasons why inclusions alone are unreliable for determining the origin of gemstones. The current gemological knowledge of inclusions for various ruby + sapphire + emerald + other important colored stone occurrences are incomplete. Study of inclusions is a relatively new science and there is so much that remains to be learned + so many inclusions that have yet to be identified and catalogued. The key areas to be studied are:
- variation of the inclusion parameters within samples from a given locality
- similarity of inclusion populations in samples from different localities
- what sort of diagnostic origin information can we collect from a cut gemstone
- limitations in the determination of origin
- chemical fingerprinting
- advanced instruments such as UV, VIS-NIR, FTIR, Raman +++

During the 80s and 90s many new gem deposits were discovered. It was found that the mineralogical-gemological properties of the new sources were quite similar or even identical to those observed from the traditional sources. For instance blue sapphires from Madagascar displayed features that resembled sapphires from Sri Lanka, East Africa, Burma or even Kashmir. At the same time gemstones even when found in similar geological environments still showed some locality-specific features which allowed a clear separation from gems originating from a deposit of the same generic type such rubies from the Mogok and Mong Hshu.

Today gemological laboratories dealing with origin determination of colored stones are confronted with the gem production of an increasing number of mining areas all over the world. Some of the traditional sources are not producing gems consistently. Without any doubt the island of Madagascar has enormous potential for almost all gemstone species located in different regions of the country and related to different types of host rocks. Advanced + proprietary treatment techniques in rubies, sapphires and emerald may result in the elimination of characteristic features and make origin determination more difficult.

Kashmir sapphire

On April 25, Christies auction house also set a record for the highest per carat price ever paid for a cushion cut 22.66 carat Kashmir sapphire, which was sold to an anonymous buyer for $3.064 million.

Useful link:
www.christies.com

Baroda Pearls

Christies auction house sold a two strand natural pearl necklace with matching earrings, brooch and ring to a private Asian buyer for $7.096 million. The necklace features 68 of the finest and largest pearls from the seven strand natural pearl necklace that once belonged to The Royal Treasury of the Maharaja of Baroda.

Useful link:
www.christies.com

Sapphire With Yellowish Orange Surface Coating

(via ICA Early Warning Flash, No.46, August 16, 1991) GIA GTL writes:

Description
The stone is a transparent oval mixed cut weighing 0.98 carat and measuring 6.80x4.90x3.36mm. It is medium yellowish orange in color which to the unaided eye appears uniform in distribution.

Gemological properties
Standard gemological testing identify the stone as a natural corundum. It exhibits no distinct absorption features when examined with a desk-model spectroscope and is inert to both long and short wave ultraviolet radiation. Interestingly, it exhibits no pleochroism when viewed through a calcite dichroscope, something that would be expected in a corundum of this hue and depth of color.

Magnification
Diffused transmitted lighting reveals that the stone has been surface coated. Irregularities in the coating—scratches and pits on pavilion facets as well as abrasions on facet junctions---indicate that this is an essentially colorless stone. Examination in surface reflected lighting reveals a predominantly purple iridescence on pavilion facets.

Additional testing
The ultraviolet visible absorption spectrum was found to be similar to that of natural color yellow sapphire with features related to Fe3+. A qualitative chemical analysis performed by EDXRF reveals the presence of iron as the dominating trace element, with small amounts of potassium, calcium, titanium and gallium. Neither ultraviolet visible absorption spectroscopy nor X-ray fluorescence helped to detect or characterize the coating.

Discussion
The microscope features of this stone show it to have been coated, with the coating being responsible for both the apparent body color and superficial iridescence. It is important to note that this is a surface coating and not a diffusion treatment.

‘Aqua Aura’ is the trade name used for a type of coated gem seen for some time now. This consists of such materials as unfashioned rock crystal specimen as well as faceted rock crystal and colorless topaz to which a thin layer of gold has been applied. The treatment produces a greenish blue apparent body color (the transmission color of the gold coating) and superficial iridescence. Treated gems of these type exhibit microscopic features like those described above. It is possible that the corundum described herein has been subjected to a similar coating but of a different substance.

Dyed Natural Corundum As A Ruby Imitation

(via ICA Early Warning Flash, No.50, December 11, 1991) SSEF writes:

The following observations were made in the SSEF laboratory and further during examination of stones by Dr K Schmetzer and Mr F J Schupp, Germany.

Submitted stone chains and faceted stones were consisting of a heavily fractured type of natural corundum material, probably stained during quench cracking. They were sold as originating from India. The flattened beads were up to 15mm in diameter, the faceted oval stones between 5 and 8 carats.

Closer examination under the microscope reveals that the red color is deposited on irregular fracture planes only. The material is colored by a violetish red stain, the result of an artificial fracture treatment. The color is similar to the color of somewhat dark ruby and makes a convincing ruby imitation.

The stones show natural inclusions which consist of sets of parallel twin lamellae in one or two directions, forming straight intersection lines. Boehmite particles are confined to these intersection lines. Small double refractive mineral inclusions forming clusters were also observed. Stones with similar properties are known by us to come from East Africa. In immersion, light yellow or greenish yellow portions are forming areas between the fractures, showing the original color of the material. The red color is only seen in fractures. In thick pieces, the artificial treatment (i.e the stained fractures) is more difficult to see.

Beside of the above, the treated material can be recognized by a yellow fluorescence under long wave UV radiation. The red artificial color is said to fade after exposure of some weeks to daylight. Also the rather uneven color distribution on the fractures, as seen under magnification, is diagnostic.

The chromophore element of ruby is chromium. The easiest way to prove its presence in corundum is by observing the absorption spectrum with a pocket spectroscope. Chromium causes a prominent set of absorption lines and a fluorescence doublet in the red part of the spectrum. These characteristics are not visible in the dyed corundum since they lack chromium and therefore are not ruby.

Vietnamese Ruby Salted With Synthetic Ruby

(via ICA Early Warning Flash, no.22, March 27, 1992) Grahame Brown writes:

Background
Following the discovery of alluvial ruby in Vietnam in the late 80s, small parcels of distinctively colored purplish pink to purplish red rough, as well as some cut stones, became available for purchase in Australia in early 1990. Initially the major sellers of this ruby appeared to be Vietnamese residents of Australia. Subsequently, Australian gem merchants purchased parcels of Vietnamese ruby, in Bangkok, for resale in Australia.

Over the last year I have been requested to examine several parcels of Vietnamese ruby rough, as well as some small parcels of faceted Vietnamese ruby, to establish the natural origin of this ruby. This alert has been issued in response to my findings.

Observed features
The rough examined appeared to be water worn, and sometimes displayed visually convincing evidence of external crystal forms, and parting planes. The few unabraded fracture surfaces and parting planes on the surface of this rough allowed very limited visual access to its interior.
Suspicious were immediately raised when some of the rubies, faceted from allegedly Vietnamese ruby rough, displayed:
- diffused curved color banding
- curving empty surface reaching fractures
- profiled gas bubbles and closely associated whitish granular masses

Of these inclusions, the curved color banding was most difficult to detect. Visibility of this curved color banding was enhanced when the immersed ruby was rotated in diffused transmitted light generated from a laterally directed fibre optic wand.

As diffused curved color banding and curving surface reaching fractures characterize heat treated Verneuil synthetic ruby, and profiled bubbles and whitish granular partly melted alumina powder are not uncommonly found in the sintered area of attachment between the Verneuil boule and the ceramic pedestal of the chalumeau……a hypothesis that some parcels of Vietnamese ruby rough were being salted with rough shaped, tumbled, heat treated Verneuil synthetic ruby seems possible.

As some of these inclusions were also observed in small parcels of faceted Vietnamese ruby, buyers of this new exciting should exercise caution.

Blue Diffusion Treated Synthetic Sapphires

(via ICA Early Warning Flash, No.55, June 2, 1992) GIA GTL writes:

Background
Recently the GIA Gem Trade Laboratory, Inc facilities in both Santa Monica, California, and New York, received for identification parcels of faceted stones that were determined to have been diffusion-treated to produce a blue coloration. In one instance, gemological investigation revealed that all three treated stones were synthetic sapphires. In a second instance, a parcel of about 40 stones was determined to consist of approximately 2/3 natural corundums and 1/3 synthetic corundums.

Visible observations/magnification
Examination using immersion with diffused transmitted illumination revealed features characteristic of stone color enhanced through diffusion treatment; for a summary of diagnostic properties, see ‘The Identification of Blue Diffusion Treated Sapphires’ (Kane et al) in the summer 1990 issue of Gems & Gemology.

Using magnification and darkfield illumination it was possible to detect the presence of various inclusions in a number of the stones that identified these hosts as being of natural origin. In other specimens, the presence of gas bubbles proved the hosts to be synthetic. Some stones, however, exhibited no diagnostic features through microscopic examination.

Plato test
The Plato test was also used in the determination of natural vs synthetic origin. A positive Plato test, further substantiating synthetic origin, was obtained with most of the stones identified as synthetic by virtue of diagnostic inclusions, as well as with those specimens without any such internal features. It should be noted, however, that characteristic positive Plato test appearance was generally more subtle than what we are accustomed to seeing.

Ultraviolet luminescence
Examination under both long and short wave ultraviolet radiation revealed some additional potentially useful information. In many cases, the diffusion treated stones exhibited some small areas where there was no blue diffused color, most likely due to this having been removed in repolishing after diffusion treatment. Under long wave UV radiation, these areas on a number of the blue diffusion treated natural sapphires fluoresced reddish orange, a reaction often associated with colorless to light blue corundum from Sri Lanka. When exposed to short wave UV, these same areas fluoresced a chalky whitish blue, a reaction associated with some sapphires that have been exposed to high temperature treatments.

The synthetic sapphires, however, were are all completely inert to long wave UV radiation, including areas where the blue diffusion treated coloration was absent; these areas fluoresced a chalky whitish blue to short wave UV. Such luminescent reactions may be exhibited by colorless synthetic sapphires. While the short wave reactions of both natural and synthetic sapphires were similar in these cases, the effect was slightly stronger with the synthetic samples. It should be noted, however, that the strength of fluorescent reactions in natural, synthetic, and treated sapphires can vary considerably.

Discussion
Immersion used in conjunction with diffused, transmitted illumination is generally quite effective in detecting the presence of diffusion treated color in corundum. Detecting this enhancement, however, does not prove or even indicate whether the treated gem material is of natural or synthetic origin. In the above examples, a combination of magnification and Plato test were used to make this determination.

Ultraviolet luminescence provided some additional, potentially useful information. In this regard, it should be noted that the presence of the reddish orange long wave reaction may be considered a good indication that the starting material is natural; although the absence of such a reaction indicates neither natural nor synthetic origin.