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New Rules of Procuring Electronic Components. Are you Protected from Counterfeits?

Posted by Dawn Gluskin on Nov 5, 2014 8:51:00 AM



In recent years, the counterfeit component epidemic has fueled ever-changing government regulations and evolving best-practices in the world of electronics. It’s no surprise that many electronic manufacturing companies are left feeling unsure or confused about how the new rules around procurement and testing apply to their businesses. Unfortunately, by not knowing and complying with these rules, even if unintentional, one can still be held liable, subject to penalties, and even face potential debarring from working within the government supply chain.


Let’s take it back several years…

A lengthy investigation by the US Senate revealed that counterfeit components had deeply infiltrated the supply chain with over 1800 cases of bogus parts threatening national security and safety of our troops.


This called for a hard look at how contractors were procuring their components and revealed many risky practices and short-cuts some businesses were doing. Some were taking the cheap route with purchasing from the lowest bidder. Whereas, some were just cutting corners by sourcing from the open market through suppliers who were not incorporating the best of practices, buying from businesses without a process in place that was internationally accepted and/or certified to mitigate risks, and not taking initiative to find out the original source of supply, thus unknowingly purchasing from the high-risk region of Shenzhen, China.


So the government stepped in…

The National Defense Authorization Act was signed into effect by President Obama in December, 2011. Section 818 of this law states that defense contractors are now fully responsible for all costs and remedies associated with supplying counterfeit components (even if accidentally and regardless of where the parts entered the supply chain). Those who fail to detect and avoid counterfeit parts or who do not practice due diligence can now be debarred from contracting with the government. Further, there are now some intense criminal penalties if found to be intentionally trafficking in these counterfeit parts. A first offense for an individual can call for a $2 million fine or a jail term of up to 10 years, or both! A company could be fined up to $5 million!


Then there was AS6081…

With a strong need for DoD contractors to protect themselves and the department they are contracted with, the AS6081 standard for detecting and avoiding counterfeit components was developed for electronic component distributors. This serves as a sister-standard to the AS5553, which has been widely adopted by aerospace and military manufacturers. These industry-best standards were collectively agreed upon over years of masterminding with engineers, quality personnel, and executives from some of the top electronic manufacturing and distribution companies in the world.


The highlights of AS6081 include:

  • Full transparency (supplier must reveal their source of supply, protected by an NDA, at the time of quote, allowing contractor to make an informed buying decision)
  • Risk-mitigation (via certified best processes and procedures)
  • Flow down of AS5553 requirements (compliance specifically with sections B.1.2.7 & B.1.3.2 of the AS5553A counterfeit avoidance standards)
  • and Minimum test standards (parts must go through the minimum required testing set forth by the AS5553A including visual inspection, resistance to solvency/part-marking test, X-ray, decapsulation, and XRF, with optional electrical testing available).



What this means for you, the contractor…

For those working directly or indirectly with the Department of Defense, the AS6081 certification is in alignment with the DFARS regulations Electronic-Aerospacerecently set forth stating that contractors must: establish and maintain systems to detect and avoid counterfeit parts, improve the traceability of electronic parts so that history and chain of custody becomes transparent, and improve training to stay current with industry standards. Furthermore, additional testing & inspection is required on parts which are not procured from a franchised or authorized source. And, when counterfeit parts are identified, it is pertinent that are quarantined and reported to proper authorities, like GIDEP and ERAI.


It is important to note that contractors must flow down each of these requirements to all levels of the supply chain. Therefore, every level of the supply chain is conscious of the heavy consequences when they are not in compliance with the regulations and evolving best-practices set forth.


While saying “go to Authorized sources” is unquestionably the best and most logical advice to give to those purchasing high-reliability products for military, aerospace, medical or other life-critical end-use, the reality is that components are not always readily available from these sources, especially when it is necessary to maintain older equipment and designs. To prevent major contracts from shutting down, it is sometimes necessary to source parts from the open-market. This is still a viable option, but it must be done properly and in a way that the great risks of doing so can be mitigated.


The rules of procuring obsolete electronic components have changed forever, especially if your work involves a U.S. Government contract. What have you done to adjust your supply to assure compliance? Or, better yet, what have your suppliers done? In choosing to work with an open-market distributor, it is imperative to partner with one whose processes are certified to the highest standards and who stay up-to-date on all of the latest regulations and requirements. The legal and financial implications are far too risky to do otherwise.


Always compare the price of the part versus its cost. The price of a part may be lower in the open market from the uncertified source, but the cost of buying a counterfeit part could be devastating.


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