New York--Jewelers of America (JA) is warning retailers about a piece of legislation designed to clamp down on trade in "conflict" gold and minerals that the organization predicts could be a "nightmare" for the jewelry industry if enacted.

In an alert sent to National Jeweler and addressed to the chief executive officers of firms using gold as well as the minerals coltan, cassiterite and wolframite, JA warned that the "Dodd-Frank Wall Street Reform and Consumer Protection Act," legislation that is designed to bring sweeping changes to Wall Street, includes a section that would have a big impact on the jewelry industry. The addendum to the bill is meant to ensure minerals aren't subsidizing conflicts in the Democratic Republic of Congo, as well as nine surrounding countries: Angola, Zambia, Tanzania, Burundi, Rwanda, Uganda, Sudan, the Central African Republic and Congo.

According to JA, the provision, section 1502, dictates that companies using gold or any of the other minerals mentioned above will have to file annual reports with the Securities and Exchange Commission (SEC) regarding the source of those materials, a step that the organization believes will surely require companies to hire a third-party firm to audit and validate the reports.

"We cannot imagine making a disclosure to the SEC if you didn't do an audit to know for a fact it would stand up," said JA Chief Operating Officer Robert Headley.

If a company's gold or minerals did originate from one of the 10 African countries included in the bill, then that company would have to show what steps they took to trace their materials back to their source.

Headley said that while JA is against materials of any kind that support conflict, it views the bill--which would impact a large number of industry players, including retailers--as "impractical" as written now given the current lack of traceability in the supply chain.

"How would anyone know [where their gold is coming from] unless you're buying it from a particular mine only?" he says. "Bottom line, it's too hard to trace."

In addition, the provision dictates that the materials information be placed on the company's Web site for public review; there is no allowance in the bill for those companies that may not have Web sites.

The Dodd-Frank bill already has passed the U.S. House of Representatives and is now being readied for a final vote in the Senate. Senators, who have been on a break, are slated to return to their offices on Tuesday.

Headley said that the provision that could potentially impact the jewelry industry, Section 1502, was "quite recently" introduced and is a random add-on to the bill, which is a piece of financial regulatory reform legislation.

"I think we would all acknowledge this has nothing to do with this bill," he says.

In the alert, JA recommends members of the jewelry industry contact their U.S. senators to ask them to defeat this provision of the bill (Section 1502) or the entire bill if the provision cannot be defeated. Contact information for each senator can be obtained here.

To download a PDF of the Dodd Frank Wall Street Reform and Consumer Protection Act, click here.

To download a PDF of the portion of the bill containing Section 1502 that could impact the jewelry industry, click here.