Counterfeit parts have real consequences

By Matt Hartzell, Smith & Associates

Counterfeit components pose a growing problem in the electronics supply chain -- the same supply chain that brings us everything from our personal phones and tablets, to workplace computers, to crucial military electronic equipment used in combat situations or to fly commercial jets. These fraudulent parts can not only cause significant inconveniences when your equipment fails, but also lead to very costly recalls for companies, and even jeopardize lives. Conservative reports identify well over 100 incidents of counterfeit components per month.

In response to this growing threat, various steps are being taken to combat counterfeit parts. For example, last year the U.S. Government passed the National Defense Authorization Act (NDAA). Section 818 of this Act requires defense contractors to tighten supply chain traceability and parts procurement to minimize counterfeit risk. The penalties and punishments in NDAA send a clear message of deterrence to encourage tighter quality management processes by engaging and defining "Trusted Suppliers" by their level of testing, sourcing, and quality management procedures for anti-counterfeiting. The crux of this deterrence though rests in how counterfeit parts are defined, and this issue will challenge the technology industry for a while to come.  

What's in a name: The NDAA intervenes

What defines a counterfeit part? NDAA Section 2320, defines counterfeit as a "spurious designation" intended to deceive and infringe on US trademark law.  Under the most basic definition of the concept, counterfeits are parts that are "marked" or "remarked" as something that they are not. But the new NDAA Section 818 goes further and directs the Department of Defense to establish a definition for counterfeit which must include parts that are previously used and then resold as new parts.   

This latter aspect of counterfeiting has become important because of the high number of obsolete or end-of-life (EOL) parts needed to replace components in older systems, such as in aerospace, defense, oil and gas, and other industries with long-life machinery. EOL and obsolete components are prime targets for counterfeiters because of the high value return from these high mix, high demand but low volume parts.

More precise definitions of what counterfeit means are needed to improve detection and removal of these illegal parts. Definitions focus on testing and properly classify parts. For instance, "remarking" covers at least the following three types of parts:

  1. Used, recycled or refurbished parts removed from old products and falsely presented as new;
  2. Product revisions, where the original component manufacturer (OCM) has authorized certain distributors and others to remark;
  3. Parts which may have been wholly fabricated or contain similar product and remarked illegally in a criminal facility to look like authentic parts.

This fine distinction is a critical first step to knowing how to agree on what is counterfeit so that government and industry can take steps to adeptly identify and remove counterfeiters. These definitional problems are real world issues; they inform how we evaluate parts as well as the companies who are selling these parts..

Some bad parts have big consequences

In fact, the real world impact of these definition issues is startling. Earlier this year, the U.S. Missile Defense Agency discovered that a military contractor had delivered parts containing 84,000 counterfeit components. The Agency had installed these defective components in the mission computers for its ballistic missile defense system, in missiles, and in military aircraft. Further investigation uncovered that the suspect parts had never been tested for quality and authenticity before being delivered to the Agency.

Testing is crucial but it requires having professional, financial, and quality management resources. One common solution is to turn to third party, high-tech, and accredited labs. These labs offer industry-recognized tools, qualified professionals, and standardized procedures to validate the authenticity and functionality of components. The NDAA's more stringent reporting requirements and increased liabilities mean that government contractors must engage labs with certain certifications. These include:

  • ISO/IEC 17025 a laboratory facility is accredited to perform standard, non-standard, and laboratory-developed methods for testing and calibration of the products handled; 
  • AS9120, an example of a quality management system accreditation, this one designed specifically for the aerospace industry, to ensure quality and safety from suppliers; and
  • CCAP-101 a strict set of procedures for mitigating the incidence of counterfeits, authenticating electronic components, and ensuring product integrity.

Progress is being made

Recent government initiatives move us closer to tightening supply chains by further defining what comprises counterfeit parts and ensuring that counterfeiters are held accountable. It is crucial for those who use and purchase government and military technology to be aware of the fine lines of the counterfeit issue so that they can make appropriate decisions about the technologies they use. Counterfeiting is unlikely to abate, but we can certainly continue to make it harder for counterfeiters to succeed.

Matt Hartzell, chief operating officer at Smith & Associates, oversees the global distributor’s operations and quality assurance program. Matt also represents Smith at the SAE Aerospace G19 Counterfeit Electronic Components Committee.

Copyright © 2012 IDG Communications, Inc.

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