The majority of the discussion as it relates to counterfeit parts has centered on avoidance. Defense and aerospace contractors are spending time and money developing counterfeit avoidance procedures and evaluating their approved vendors. With good reason the emphasis has been placed on preventing counterfeit parts from ever entering the supply chain.
Perhaps less talked about is what to do if there is an escape and a counterfeit part ends up on your dock. How do you handle that scenario? What are your obligations upon discovering that a counterfeit has made its way into your facility? Who do you notify?
How do you notify them?
What Are Your Responsibilities
We’ll get into a discussion of exactly what your responsibilities are in the event you receive a counterfeit part, but prior to engaging in any such discussion we should first have working definitions of some key relevant terms. The following definitions come from SAE’s AS6081 (By way background, the Department of Defense adopted AS6081 in June of 2013):
3.1 Suspect Part
A part in which there is an indication that it may have been misrepresented by the supplier or manufacturer and may meet and may meet the definition of fraudulent part or counterfeit part provided below.
3.2 Fraudulent Part
Any suspect part misrepresented to the Customer as meeting the Customer’s requirements.
3.3 Counterfeit Part
A fraudulent part that has been confirmed to be a copy, imitation, or substitute that has been represented, identified, or marked as genuine, and/or altered by a source without legal right with intent to mislead, deceive, or defraud.
For the purposes of this post I am making the assumption that you and your company have incorporated a counterfeit avoidance plan into your quality management system. If not, you absolutely need to formalize a process and policy whereby you spell out in clear terms how your organization will implement a counterfeit avoidance plan. If you do not yet have a formal policy in place then I suggest you purchase a copy of SAE’s AS5553A “Counterfeit Electronic Parts; Avoidance, Detection, Mitigation and Disposition” as a reference.
Just To Clarify
To clarify, AS5553A pertains to manufacturers and OEM’s. AS6081 is applicable to distributors. Ideally, if you are a manufacturer or an OEM you are complying with the requirement of AS5553A and are purchasing the parts you are unable obtain from an original component manufacturer or franchise distributor from an AS6081 certified company or a company who adheres to the best practices outlined in that standard.
So a part arrives on your dock and your receiving and quality personnel immediately determine that the part is suspect. The markings on the part and the logo of the manufacturer are clearly doctored. Quality performs a resistance to solvents test and residue from the blacktopping is readily apparent. Whatever the reason may be, and strictly for the purposes of this post, we are proceeding as if the part you received is 100% counterfeit.
What next? You should immediately tag or mark the parts as counterfeit. The key is to make certain that anyone from your facility who happens to come across the part will plainly see that the part is counterfeit. Next, you must quarantine the parts so they are not confused with or somehow end up commingling with the authentic parts you have at your facility.
After marking and segregating the parts you then need to make contact with the vendor who supplied the parts to you and notify them that the parts are counterfeit. If the vendor contests your determination that the parts are counterfeit then they may request that the parts are sent to an agreed upon independent third-party test house. If the parts are confirmed to be counterfeit then under no circumstances is the purchaser to return the parts to the vendor for replacement or credit – you’d simply be reintroducing counterfeits into the supply chain.
At this point, after the parts have been confirmed as counterfeit, you have 60 days to report the receipt of counterfeits to “applicable Government authorities, Government reporting organizations (e.g. GIDEP or equivalent), industry supported reporting programs (e.g., ERAI or equivalent) and Authority Having Jurisdiction” (see Appendix G of AS5553A for more information regarding “Authority Having Jurisdiction”).
Section F.1.1 (“Scrap Product”) of AS5553A addresses what you should do next in terms of destructing the confirmed nonconforming parts. Specifically, the parts should be “rendered unusable by physical destruction (e.g., grinding, breaking, or crushing) prior to disposal”.
One overlooked aspect of the reporting requirement of AS5553A and AS6081 is the fallout associated with doing the right thing. What do I mean by that? It is reasonable to suggest that some firms do not report counterfeits for fear of being stigmatized as a less than trustworthy source. I would submit that the opposite is true and you should feel incentivized to report. Putting aside the fact that it is the right thing to do, under §818 (c)(4) of the 2012 National Defense Authorization Act you have a legal obligation to do so. If you are uncertain or unclear of exactly what is appropriate to report to GIDEP (military vs. COTS) then
I suggest you review Section 7.5 of the GIDEP Operations Manual. Developing a reputation for having a robust counterfeit avoidance plan is good for business.
Counterfeit Avoidance Mark Alliance
If you are a distributor and are worried about the perceived stigma of reporting a counterfeit and the potential effects on your business reputation then you have an alternative reporting method at your disposal. The Counterfeit Avoidance Mark Alliance (“CAMA”) has developed a repository program where you would be able to ship the counterfeit parts to them and they’d take care of the reporting, warehousing and eventual destruction of the parts.
In conclusion, your responsibilities after receiving a counterfeit part are fairly straightforward. You need to clearly mark that the part is counterfeit so that everyone in your organization is on notice that the part is counterfeit. Next, you need to quarantine to prevent it from commingling with your authentic parts. After quarantining the part(s) you should contact your vendor to advise them that the part(s) they shipped to you are counterfeit. They may request that a mutually agreeable third-party test facility confirm that they are indeed counterfeit. Pending the result of that testing you must then report the part(s) to GIDEP, industry supported programs and appropriate government agencies.
At the end of the day the AS5553A and AS6081 standards requires vigilance, transparency and a level of cooperation and communication which to date is foreign to the vendor-buyer dynamic. Creating a counterfeit avoidance plan is key towards the goal of keeping counterfeits out of the supply chain.
If you have any questions, comments or would like to discuss your firm’s counterfeit avoidance strategy in more detail then please contact me by phone (484-222-5195) or by email (firstname.lastname@example.org).
If you are interested in reading more about the subject of counterfeit avoidance I highly recommend you the following resources:
“Counterfeit Parts – Discussions from a defense and aerospace community perspective” - blog is maintained by Henry Livingston, who is Technical Director and Systems Engineering Fellow at BAE Systems.
“Supply Chain Security & Counterfeit Parts” – a fantastic resource of articles written by attorney and prolific author Robert S. Metzger.
“DOD Supply Chain: Suspect Counterfeit Electronic Parts Can Be Found on Internet Purchasing Platforms” – You can access a 23-page report detailing how the Government Accountability Office “created a fictitious company and gained membership to two Internet platforms providing access to vendors selling military-grade electronic parts. GAO requested quotes from numerous vendors to purchase a total of 16 parts from three categories: (1) authentic part numbers for obsolete and rare parts; (2) authentic part numbers with postproduction date codes (date code after the last date the part was manufactured); and (3) bogus, or fictitious, part numbers that are not associated with any authentic parts.”
These are just a few resources that I use. Please feel free to add your own in the comments section of this post.
 SAE AS6081, Section 4.2.9 “Reporting”