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Tiny Parts With Massive Lethal Power

Are we contributing to the counterfeit epidemic?

Published: Wednesday, July 24, 2013 - 08:59

Every time a missile misses its target, a train derails, or a faulty airbag fails to save a life, we wonder whether these failures, which can sometimes reach catastrophic proportions, are caused by a counterfeit part that may have infiltrated the supply chain.

Every time we buy a fake Rolex watch or Gucci purse, do we think about the reasons behind the “affordable” price? Are we contributing to the unprecedented increase of counterfeit parts and products without even knowing it?

A newly released study by Immigration and Customs Enforcement (ICE) indicated that counterfeiting of technology and goods quadrupled from 2009 to 2011. The Department of Homeland Security said that consumer electronic counterfeits topped the pirated goods list last year, beating out counterfeit shoes for the top spot. A few years ago, the FBI seized more than $70 million counterfeit CISCO routers, which are commonly used both at home and at work for accessing the Internet.

According to a recent ABC7 News investigation in Chicago, the profit margin on fake goods is so high that gang members have started selling fake electronics instead of drugs. During the investigation, as an example, the reporter and a UL expert took a “normal looking” extension cord and plugged it in. Soon thereafter, the cord started smoking heavily and burned through its insulation. Cords like these as well as countless other electronic components create unnecessary danger for both consumers and military personnel, bringing new levels of liability and risk for manufacturers in a wide range of industries.

If an entity buys components over the Internet blindly without qualifying the source, it may be guilty of buying, selling, or using counterfeit electronic or mechanical parts, and these actions could possibly result in the responsible parties heading to jail.

On Nov. 8, 2011, the United States Committee on Armed Services held a hearing regarding an investigation of counterfeit electronic parts in the defense supply chain. Materials used to make counterfeit electronic parts, known as e-waste, are shipped from the United States and other countries. The e-waste is sent to cities like Shantou, China (as well as other places all over the world), where it is disassembled by hand, washed in dirty river water, and dried on city sidewalks. Parts are then sanded down to remove the existing part number or other markings that indicate its quality or performance and new ones are put on to the components that lead the average person to believe they are new or high-quality parts.

The problem is not just limited to those who supply government agencies. Recent reports show that consumer and industrial businesses lose approximately $250 billion each year because of international and domestic counterfeit components. The automotive industry alone lost $3 billion in sales, while the semiconductor industry takes a $75 billion annual hit.

Counterfeits can slip into the international parts supply via the authorized supply chain. However, reports indicate that the highest instances are found when product must be procured on the “open” or “gray” market. These situations occur when a part has become obsolete, or stock is unavailable through its authorized distribution channels.

One company’s story

Secure Components LLC is an ISO-9001, AS9120-A, and AS6081 certified independent electronics distributor based in Norristown, Pennsylvania, specializing in supporting the aviation, space, and military sectors. Secure Components offered this example of a successful interception of counterfeit components destined for a military application. Secure’s mitigation techniques prevented a counterfeit from being passed on to its customer and ultimately a U.S. warfighter:

On July 9, 2012, Secure Components accepted a purchase order from a customer, a Florida-based contract manufacturer serving the aerospace, defense, and medical industries. The purchase order was received with a Defense Priorities and Allocation System (DPAS) priority rating level issued by the U.S. Dept. of Defense, heading for a military application. The company ordered 1,700 capacitors, and contractual language indicated “counterfeit avoidance measures apply” on the purchase order. Secure Components had procured the material from a supplier in Singapore. On July 10, 2012, a purchase order was sent to the vendor specifying that the condition of the parts must be “new surplus.”

When procuring new surplus, it’s expected that complete paperwork traceability back to the original manufacturer isn’t possible. One of the risk-mitigation techniques used by Secure Components is to perform Mil Std 883A testing on the parts before accepting the components. Secure Components prepared a purchase order to a third party testing facility in the United States. However, upon delivery of the parts from Singapore, Secure Components’ own component quality engineer performed an initial visual inspection and deemed that the parts looked suspect. Following further research and assistance from the original component manufacturer (OCM), the parts were confirmed to be counterfeit. These capacitors were destined for a prime defense contractor that was working on a radar system with a DPAS priority level of D0A7.

This is simply one instance of many similar situations and illustrates the reasons why counterfeit electronics present a serious concern to all aspects of our global economy. Who knows what disaster could have occurred if these parts were not caught in time?

“This near-catastrophic event was an example of the kinds of things that happen often when dealing with obsolete and hard-to-find components,” says Todd Kramer, CEO of Secure Components. “It also reinforced our company’s desire to promote the need for clients to spend additional money on authentication testing for components that are procured from other-than-authorized sources.” 

Certifying against counterfeits

As a respected, independent distributor to the Aviation and Space industries as well as the U.S. Military, Secure Components has been pursuing measures that would demonstrate confidence to its clients, mitigate counterfeit components, and protect the supply chains. After months of investigating the best option to pursue, SAE AS608—“Counterfeit Electronic Parts Avoidance—Distributors” appeared to be the best choice.

SAE AS6081 was created to address the U.S. Senate Armed Forces Committee’s investigation into the $6 billion counterfeit electronic parts pandemic. Recently adopted by the U.S. Department of Defense, the standard aims to provide uniform requirements, practices, and methods to mitigate the risk of distributors purchasing and supplying counterfeit electronic parts throughout the aerospace supply chain. According to the Defense Standardization Office, “Adoption is analogous to the ‘Good Housekeeping Seal of Approval.’”

To solve an international epidemic, we need an effective international assessment system. Stan H. Salot, president and CEO of the U.S.-based ECC Corp., and coauthor of this article, recognized the need to begin developing an international Counterfeit Avoidance Program (CAP) certification scheme based on the AS6081 draft. Salot met with Kramer during an AIA conference in Baltimore, Maryland, where Salot was speaking about the necessity of creating an international CAP certification system based on the AS5553A, AS6081, and AS6174 standards. Secure Components decided to become involved in developing the CAP as part of its own preparations to comply with the upcoming regulations from Section 818 of the National Defence Authorization Act (NDAA).

As a result of this collaboration, Secure Components became the first company in the world to undergo the International Electro-technical Commission Quality Assessment System (IECQ), Counterfeit Avoidance Program Registration Assessment. In March and April of 2013, DNV performed its first AS6081 third-party registration quality assessments of Secure Components’ Counterfeit Avoidance Plan. On June 18, 2013, the 14 member countries of the IECQ approved the CAP Certification program. Additionally, they approved DNV’s status as an approved Certification Body for the IECQ CAP Scheme. Secure Components became the first independent distributor to demonstrate compliance with AS6081.

CAMA

Although this is a great first step, it is only valuable if the global supply chain seeks and achieves compliance to the newly released SAE AS6081. ECC Corp. has formed the International Counterfeit Avoidance Mark Alliance (CAMA) to provide an international not-for-profit organization dedicated to eliminating the proliferation of counterfeit components, materials, and products. Working together with industry, ECC, Secure Components, and other founding members of CAMA are creating an international community of third-party certified organizations that design, manufacture, distribute, and repair military, aerospace, avionic, automotive, railway, medical device, and building and consumer products.

Following Secure Components’ certification, Kramer said that he believes that AS6081 certification provides an actionable framework for staying ahead of the counterfeiters. When asked about the reasons Secure Components decided to take this action, he said; “As an independent distributor, our clients rely on us to procure their obsolete and hard-to-find components,” he says. “We are forced to deal with a global market that is polluted with counterfeit components. We wanted to raise the bar for the electronics industry and provide clients the proof they need to show compliance with the expectations mandated by Section 818 of AS5553A and other internal requirements, which they would ultimately be forced to comply with as the market evolved to address the counterfeit issue. We believe strongly that third-party international certification to AS6081 provides a significant mitigation tool for clients truly committed to quality. Additionally, it ensures that as a certified company, we are in fact performing the quality measures that we are promoting. Now that we have achieved certification, we are doing our part to ensure that others follow our lead and demonstrate their compliance by achieving third-party certification as well. This is invaluable, particularly to an independent distributor dealing with clients that serve a clientele in which failure is not an option, because lives are at stake.”

The authors would like to thank the following people for contributing to this article: Todd Cramer, CEO of Secure Components; Travis Thoman, VP of sales at Secure Components; and Matthew R. Shindell, special counsel with Goldberg Segalla.

Discuss

About The Authors

Stanley H. Salot Jr.’s picture

Stanley H. Salot Jr.

Stanley H. Salot, Jr., is the founder and president of HSF Mark Alliance. He is an acknowledged expert in business and quality process management and is active in U.S. and international industry standards development bodies. He serves as president of the Electronic Component Certification Corp. (ECCC), the U.S. representative of the International Electrotechnical Commission Quality Assessment System for Electronic Components (IECQ). Salot co-authored the international standard for electronic components, QC 080000—Hazardous substance process management system requirements.

Julia Kocs’s picture

Julia Kocs

Julia Kocs is secretary of the USCN/IECQ Distributors Advisory Group, which works closely with the Center for Counterfeit Avoidance (CAMA) to develop and implement a set of industry-based distributor-certification requirements for counterfeit avoidance, detection, mitigation, and disposition. She is also the CMO of Kocs B+C, a brand marketing and communications consultancy.

Comments

Reshoring Can Help counterfeit, low quality parts

Reshoring domestic manufacturing can solve this problem and the dangers associated with counterfeit, low quality parts.

A declining U.S. manufacturing base poses risks for the entire nation, making the U.S. vulnerable on many fronts. The most obvious of the problems is that the U.S. is dependent on other nations for vital products and parts.

Reshoring U.S. manufacturing also encourages technology, innovation and know-how because as research shows, they follow production. As manufacturing is outsourced to other countries, the key technologies, many of them crucial to national security, go with them.

Reshoring U.S. Manufacturing also plays a critical role in the U.S. economy:

  • It will be extremely difficult for the U.S. to balance the trade deficit without a robust manufacturing sector.
  • Domestic manufacturing is vital to U.S. security. 
  • Manufacturing is the principal source of R&D and innovation

 

Much of the offshoring occurred because companies looked only at wages or prices and not total cost. The not-for-profit Reshoring Initiative’s free Total Cost of Ownership software helps corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.com/TCO_Estimator.cfm

Current research shows many companies can reshore about 25% of what they have offshored and improve their profitability. Reshoring is far from the whole solution to the trade deficit problem, but it is one important and growing part.

You can reach Harry Moser, founder/president of The Reshoring Initiative, at harry.moser@reshorenow.org

www.reshorenow.org

 

There's more to counterfeit lethality

Let's think of generic drugs, of high volume foodstuff, of garments and detergents, for a start. When Economy goes slack, it's only normal to look for lok cost items and services. But - please - I simply cannot think as reasonable a 10 USD price for a 500 miles flight when driving from home to the airport costs ten times as much. In the US, I bought at a very cheap price a 500 pills box Paracetamol - it's the only analgesic I'm not allergic to: the pills didn't kill me but they didn't sweep my headache away. A few months later I bought even cheaper Paracetamol pills in Belgrade, and they were effective, indeed. In the generic drugs business we have to be very careful with eccipients, and with the trace substances left in active ingredients by the synthesis process. This holds true for foodstuff, too: water is not the same all the world, its cleaning processess, too. In the food business, may be in good faith, organic food is priced and sold as organic, which very seldom is, despite any registration or recognition. If an airplane crash can kill hundreds, food or drugs pandemies can kill tens of thousand.

I hope this works

I am typically skeptical of registration schemes because they in no way guarantee excellence.  Perhaps you can summarize the key points of the standards you listed? Nowhere in your article did you explain why that company thought it was a good idea to buy non-traceable components from an Asian country (yes I know that sounds bigoted) nor why anyone sends e-waste to China. Stupid is as stupid does.