Establish a Counterfeit Detection Program
Counterfeit parts cost businesses to lose profits, decrease consumer confidence, and increases costs through increased warranty claims and returns. Mitigate and lessen your risk by establishing an effective counterfeit detection program you can incorporate TODAY.
As a self proclaimed efficiency fanatic, I avoid reinventing the wheel whenever possible (unless I can make the proverbial wheel smoother/faster/better). I like to use practical and time-proven strategies that work, then tailor them for my own needs. One such tool, pivotal to my suggested Counterfeit Detection Program, is the Defense Federal Acquisition Regulation supplement (DFAR) clause 252.246-7007 Contractor Counterfeit Electronic Part Detection and Avoidance System.
This Government contracting clause details criteria and 
requirements that need to be followed to establish an adequate counterfeit detection program. If this requirement is good enough for billion dollar defense contractors, it’s probably good enough for our small business.
Before we dive into best practices and suggestions, lets checkout some recent examples of counterfeit parts making it to established and reputable supply chains.
Over 2,000 fake toner cartridges were seized by Malaysian law enforcement officials. TheRecycler.com
Customs officers at Schiphol airport confiscated more than 5,500 counterfeit football uniforms NLTTimes.nl
Singapore Customs seized more than 2,300 trademark-infringing goods -channelnewsasia.com
Millions of fake condoms sold by a gang across China have been seize – Dailymail.co.uk
No matter the industry in which you compete, counterfeiting is likely to pollute part of the supply chain. Additionally, electronic parts are often the most counterfeited parts your business may battle against. How does YOUR business stack up against counterfeiters? Would you leave your reputation to the hands of your suppliers? Keep reading to learn industry leading practices to help you mitigate the risk of procuring counterfeit parts.
What is a counterfeit part?
Counterfeit parts are substitutes without legal authority, or one whose material, performance or characteristics have been misrepresented. An example can be misrepresenting a used part and selling it as new.
Where does it come from?
Reduce, Reuse, Recycle… and Enable? Much of our Electronic Waste 
(e-waste) such as printers, computers, transmitters, radios, etc. are shipped overseas. The great nation of China receives 90% of the Asian recycling market. Guess what country is accountable for most of the counterfeit electronic products detected by our defense contractors… yup, China.
Why is it dangerous?
e-Waste is cannibalized, stripped, sanded, painted, re-branded and sold as new parts. These parts can be embedded unto higher level assemblies (imagine a transmitter or a computer chip added to a brand new laptop or power unit) in an uncontrolled and careless manner. Physical damage to the product may cause mechanical damage and compromise the integrity of the higher-level assembly. In certain cases, counterfeit parts have caused serious harm to consumers, costly lawsuits , and more importantly, loss of life.
How Can We Reduce and Identify Counterfeit Products?
- Establish a Counterfeit Prevention
program (you’re here!) - Conduct visual checks upon receipt
- Establish approved supplier process
- Conduct contractor and subcontractor audits
Related Content: Internal Audits, Why Bother?
Three Myths about Counterfeit Electronic Parts
1. Counterfeit electronic parts will be detected at electrical test.
2. Counterfeit parts can be avoided if you buy only from suppliers in the U.S.
3. Independent (unauthorized) distributors will detect the parts before shipment to you.
Anti-Counterfeit Rules
- Always buy product from authorized
suppliers, whenever possible. - Assess your unauthorized suppliers on-site.
- Require minimum inspection and test for all purchases from unathorized suppliers
- Flow down counterfeit parts requirements to your suppliers.
Recommended Inspection/Tests, Industry Standards
Test/Inspection
Documentation Check
(indicators) spelling and grammatical errors, inaccuracies, omissions
Bar Code Check
Discrepancy between bar code label and human-readable equivalent
Visual Inspection
Inconsistencies in appearance, poor quality, defects, multiple lot date codes
Marking Permanency
Removal of ink Marking
Surface Finish Permanency
Removal of coating from part, sanding marks. Removal of ink marking is not cause for rejection.
Click here to download my free Counterfeit Detection Program QuickStart Checklist.
Weak Counterfeit Systems Trends to Avoid
Supplier approval Weaknesses
Failure to differentiate authorized vs approved
Authorized = manufacturer has authorized to sell with full support
Approved = contractor has approved to sell
Lower tier contractors lack assessment procedures for independent distributors
Authorized and unauthorized suppliers mixed together on same list with no differentiation
Training Weaknesses
Failure to train all affected organizations and departments. Examples include:
- program management
- purchasing
- engineering
- quality technicians
- inspectors
Failure to schedule new hires for training
- Training is specific to only one part of the problem
- detection but not avoidance
- avoidance but not detection
- awareness in general
Subcontractor Control
Supplement your subcontractor control (part of your company’s Asset/Property Management System) to include checks and balances that screen/seeks to identify counterfeit parts entering its supply chain. Flow down terms and conditions, where possible, requiring your suppliers follow similar risk mitigating steps.
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