Current Strategies for Mitigating Counterfeit Components

Estimated reading time: 5 minutes

It’s well known that counterfeiting has been linked to organized crime throughout the world. Counterfeiting has been shown to support terrorism and something we need to absolutely take full notice. Reported by the U.S. News & World Report, counterfeiting of the Disney animated film The Lion King helped finance a terrorist group with ties to the Irish Republican Army. A counterfeit T-shirt operation paid money to an Egyptian sheik to help pay for the 1993 attack on the World Trade Center in New York City. In Lebanon, a terrorist group was funded by counterfeiting computer software. Currently documented by the U.S. Department of Commerce, counterfeit electronic components have now infiltrated 40% of the Pentagon’s supply chain. No longer can we turn a deaf ear or look the other way.

Companies have nothing to be ashamed or embarrassed about if counterfeit material invades their immediate supply chain. This has reached an epidemic level worldwide, and the effects are astonishing; in our research, 98% of the organizations ProSkill CTG has worked with in one form or another have been affected by counterfeit electronic components. We don’t speculate to state every major and minor contract manufacturer in the world has had a “run-in” with suspected counterfeit electronic components. The problem has escalated over the past few years, with astronomical product sales from counterfeiting; it is estimated that over $100 billion a year is earned worldwide from the sale of counterfeit electronic components.

You might be asking yourself, what can I possibly do to insure and prevent my business from being a victim of counterfeit components? The answer is that you must implement a mandatory and aggressive Counterfeit Component Prevention Procedure. Start by strengthening controls on internal purchasing procedures and supplier approval requirements, including a tightened supplier flow-down process.

All processes related to suspect counterfeit material must be governed by a solid standard/guide such as the SAE AS5552, and Certificate Training programs like PRO-STD-001. This is a current industry standard and certificate course used in the prevention of counterfeit components, and a formative and useful tool in used in the mitigating process. PRO-STD-001 trained and certified counterfeit component inspectors use a current and thorough counterfeit component checkpoint inspection system. This system affords traceability and demonstrates due diligence to your customer and/or government officials such as the Defense Criminal Investigation Service (DCIS).

The terms and conditions of a contract must state in detail information regarding a “no value-add” counterfeit component clause. The T/C must equivalently state that no-value-add counterfeit material will be impounded upon OEM verification that it is counterfeit. OEM-validated counterfeit material shall not be returned to the supplier under any circumstances.

An escrow accounting process is strongly recommended per contract terms and conditions. You must offer a guarantee to your customer that continuous and current counterfeit component inspection training is your prime objective in seizing and mitigating counterfeit material. This is an important preventative process preventing the invasion counterfeit components into your supply chain. A due diligent and best practice approach.

It can’t be stressed enough that currently trained and certified suspect counterfeit component inspectors are your best weapons to guard against becoming a victim of counterfeit material. A  PRO-STD-001 certified and trained counterfeit component inspector is a prime countermeasure in the prevention of counterfeit material, especially as counterfeiters improve their techniques.

Attending and participating in local trade organizations and sharing knowledge regarding counterfeit material is highly recommended. GIDEP or an equivalent industry data exchange program like IHS is helpful in reducing the risk of counterfeit material entering your supply chain. End-of-life and long-lead material is normally listed in this type of database, affording the benefit of what can be expected.

The new U.S, counterfeit component law HR1540 Section 818 was signed into law on December 31, 2011 by President Barack Obama. Training organizations such as ProSkill can help explain what this law actually means to you and your company.

Are you paranoid and tired of being defrauded by counterfeit parts ending up in your products? Quality contract manufacturing that includes a robust counterfeit parts protection program is an absolute must. The more information presented, the more you will know about counterfeit components.

The greatest concern globally is a compromised national and international security or loss of life as counterfeit electronic components continue to saturate the supply chains around the world.

Electronic manufacturing companies need to work together and commit to mitigating the risk of counterfeit components. An open conversation between industry, customers, and suppliers is critical to the identification and management of the risks associated with counterfeit components.

Improved incoming inspection tools and procedures are crucial and must be in place for enhanced counterfeit component detection. Internal component lot traceability systems should be used to track components through the manufacturing process to the top level product/system.

The chance for infiltration of counterfeit components into the supply chain increases every step away from the component manufacturer. OEMs rely upon the counterfeit prevention of their EMS partners. But the OEM’s exposure to risk is directly tied to their EMS provider’s commitment to preventing counterfeit components from entering their supply chain. Selecting a well informed and subject-educated EMS provider is critical in the prevention of counterfeit electronic components ending up in your military, medical, or commercial equipment.

In closing, due diligence is paramount as a strong defense against counterfeit material; never leave anything to chance. Maintaining your guard is a keen strategy for mitigating risk. Preventing a counterfeit component invasion into your supply chain is absolutely possible, providing that a systematic reduction of exposure to risk is maintained.

Adhering to the points mentioned here will help you and your company reach a zero tolerance level for counterfeit material.

Richard T. Stanton is Corporate VP of Quality and Instructor-Course Director for ProSkill CTG (Consulting and Training Group). He can be reached at rstanton1@cfl.rr.com. ProSkill is a counterfeit component detection and prevention training company, and a Certified IPC Trainer for IPC 610 and J-STD-001. Visit www.pro-skillgroup.com or call 321-610-3763 for more information.