Consignment is a commercial arrangement widely used throughout the coloured-gemstone and jewellery trade in which a supplier — whether a cutter, wholesaler, or dealer — places goods with a retailer or secondary dealer without transferring legal ownership. The receiving party, known as the consignee, pays only for items that are actually sold, returning all unsold stock to the supplier (the consignor) at the end of an agreed period. Because title to the goods remains with the consignor throughout, consignment occupies a distinct legal position from an outright purchase and carries specific obligations for both parties.

How Consignment Works in Practice

A typical consignment arrangement is governed by a written memorandum — sometimes called a consignment memo or, in North American trade parlance, simply a memo — that sets out the duration of the arrangement (commonly 30, 60, or 90 days), the agreed valuation or wholesale price of each item, the payment schedule upon sale, and the allocation of insurance responsibility. Because the consignor retains ownership, it is standard practice for the consignment memo to specify that the consignee must maintain adequate insurance coverage for the full stated value of the goods while they are on the premises or in transit.

At the end of the consignment period, the consignee remits payment for any items sold and returns the remainder. Extensions may be negotiated, but allowing consignment goods to remain on hand indefinitely without accounting is considered poor trade practice and can create legal complications regarding constructive ownership.

Relationship to Memo and Approval Goods

In everyday trade usage, consignment, memo, and approval are closely related concepts and are sometimes used interchangeably, though distinctions exist. Memo goods are typically sent for a short inspection or showing period — often a matter of days — whereas consignment implies a longer-term placement intended to facilitate retail sale. Approval goods are sent specifically so that a buyer or end client may examine them before committing to purchase. All three arrangements share the defining characteristic that ownership does not pass until payment is made.

Why Consignment Matters in the Gem Trade

High-value coloured gemstones and bespoke jewellery pieces can represent very substantial capital commitments. A retailer who purchased every piece outright would tie up working capital in slow-moving inventory and bear the full risk of market fluctuations, changes in taste, or the simple difficulty of matching a rare stone to the right buyer. Consignment redistributes this risk: the retailer gains access to a broader and often finer range of goods than their purchasing budget would otherwise permit, while the supplier reaches retail markets and clientele that would otherwise be inaccessible.

For suppliers — particularly cutters and dealers working with important single stones or high-value parcels — consignment is a means of maintaining market presence without the need for a permanent retail operation. A Burmese ruby dealer, for instance, may place a significant unheated stone on consignment with a specialist retailer in a major market, retaining ownership and the right to recall the stone if a better opportunity arises, subject to the terms of the memo.

Risks and Responsibilities

Consignment is not without risk for the consignor. If the consignee becomes insolvent, consigned goods may be subject to claims by creditors unless the consignor's ownership interest is properly documented and, in some jurisdictions, registered. Theft, loss, or damage while goods are in the consignee's possession raises questions of insurance liability that must be clearly addressed in the consignment agreement. Reputable trade bodies, including the American Gem Trade Association (AGTA), publish guidelines on memo and consignment documentation that are widely followed as best practice.

For the consignee, the principal obligations are the safekeeping of the goods, timely return of unsold items, and prompt payment for items sold. Mixing consigned goods with owned inventory without clear record-keeping is a common source of disputes and is strongly discouraged.

Further Reading

• American Gem Trade Association — Trade Resources and Best Practices