Counterfeits pose big risks: 3 steps to safeguard your business

Rocel Juntura, Global Director of Quality

March 27th, 2019

When counterfeit electronic parts are everywhere, where do you begin to address this threat?

Counterfeits are ubiquitous in today’s global economy. With the added pressure of a shortage market for many electronic components, procurement professionals must stay vigilant in their search for components. Consider these three steps to safeguard your business against the threat of counterfeit parts.

1. Know the risks.

What exactly are we talking about with counterfeit electronics risk? Counterfeits pose health and human safety risks, of course, but they also bring the risk of legal jeopardy for your organization.

Depending on your market, you may be tasked with ensuring counterfeit detection and avoidance, as with the United States defense market. The 2012 National Defense Authorization Act (NDAA) regulates counterfeit parts detection and avoidance, giving contractors responsibilities for detecting, avoiding, and mitigating the impacts of counterfeit parts.

Working with qualified suppliers for mil-spec parts is critical. The NDAA places the onus on contractors to establish means of identifying trusted providers and procuring electronics from authorized suppliers. Financial penalties and criminal sanctions are tied to violations of the NDAA, making this a very serious matter for contractors.

Regardless of your vertical, counterfeits present legal risks. The United States has an active criminal system for prosecuting all manner of counterfeit electronics. For example, a recent prosecution in the Southern District of Texas focused on the distribution of counterfeit computer networking gear: the same technology used in banks, hospitals, air traffic control, power plants and other critical infrastructure.

Use of counterfeit components in your products could create untenable risks to health and human safety, while also threatening your company’s reputation and bringing the specter of legal action in the event of product failure.

2. Stay on top of updates.

The last two decades have seen wide growth in development and circulation of counterfeit parts. The best way to stay on top of risks is to pay attention to industry leaders who closely monitor the range of threats posed by counterfeit and nonconforming parts.

Industry organizations like ERAI provide timely information on counterfeit risks. ERAI experienced the emergence of counterfeit electronics on the global market and responded accordingly, from the first nonconforming part complaint sent to ERAI in 2001. In 2002, ERAI launched its High Risk/Suspect Counterfeit Part Database and Industry Advisory Committee, foreseeing the beginning of a global threat from counterfeit and non-conforming electronic parts. From there, ERAI has grown as an industry leader in responding to the threat of counterfeit electronics.

Prompt reporting is critical to ending counterfeit circulation. If you encounter counterfeit or non-conforming parts, ensure that the documentation is sent to a database that allows other organizations to benefit from that information. This information is invaluable to the health of supply chains worldwide.

3. Screen your partners.

You can take control of your supply chain security by engaging with trusted suppliers. As we’ve said before, effective mitigation of counterfeit electronic components starts with the supplier. Conformance with AS6081, the SAE standard for avoidance, detection, mitigation and disposition of fraudulent/counterfeit parts, is imperative.

Inquire about the technologies your partners use to identify counterfeits. Continuous growth and improvement in counterfeit detection is critical to combating the well-funded world of counterfeit electronics.

For example, DARPA launched SHIELD (Supply Chain Hardware Integrity for Electronics Defense) in 2017. The SHIELD program is developing dielets, microscopic tags embedded within integrated circuits, to act as a form of identification.

Tagging parts with dielets would act as a deterrent by making it harder to counterfeit electronic parts while at the same time making it easier to identify compromised components. This technology shows promise for the future, but for now, you will need to do the hard work to source electronic components from trusted suppliers.

With ongoing pressure in a shortage market, counterfeits are a guarantee. This threat requires vigilance. Stay on top of updates on our news site to hear our latest take on trends in electronic components sourcing.

Related posts:

Effective Counterfeit Electronic Components Mitigation Starts with the Supplier: What to Look For

How to Avoid Counterfeit Electronic Components: 4 Warning Signs

Global Electronic Parts Procurement Requires a Global Strategy: Does Your Supplier Have What it Takes? (Video)

 

" Working with qualified suppliers for mil-spec parts is critical. The NDAA places the onus on contractors to establish means of identifying trusted providers and procuring electronics from authorized suppliers. "

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