Too Good To Be True?A Counterfeit Story…

18 July 2019

Mike McRandall and Don McFarland – NSF-ISR, LTD

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Introductions

2

Mike McRandallBusiness Unit Manager, Aerospace

mmcrandall@nsf.org

Don McFarlandTechnical Manager, Aerospace

dmcfarland@nsf.org

Registration Management Committee – July, 2019 - Torrance, CA

What is Counterfeit?

An unauthorized copy, imitation, substitute, or modified part (e.g., material, part, component), which is knowingly misrepresented as specifiedgenuine part of an original or authorized manufacturer.

Note: Examples can include, but are not limited to the false identification of marking, labeling, grade, serial number, date code, documentation, or performance characteristics.

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Seem Legit…

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What is a Suspect Unapproved Part?

A part for which there is objective and credible evidence indicating that the part is likely an unapproved or counterfeit part.

Note: This includes articles shipped to an end user by an external provider who does not have direct delivery authorization from the approved production organization; new articles that do not conform to the approved design / data; articles that have not been manufactured or maintained by an approved source; articles that have been intentionally misrepresented, including counterfeit parts; and articles with incomplete or inappropriate documentation.

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I Didn’t See That Fix In The Manual

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Activity – Part 1

• On the next slide, 100 samples will be provided (Blue square only)

• In the allotted inspection time (20 seconds), you will quietly count the number of “different” items in the sample area (based on text color only)

• Keep your answer to yourself

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Count the different colored items

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Activity – Part 1

• How did it go?

• How many did you catch?

THERE ARE 21

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Some Items Are Easier To Catch

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Some Are More Difficult

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Some Even Require (Expensive) Testing…

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We Need To Acknowledge…

…this is NOT just a problem with electronic components

• Based on 2017 US CBP data, >2% of global trade is in counterfeit from one country

This is only what was caught…

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It Is NOT Just Electronics.

Registration Management Committee – July, 2019 - Torrance, CA 14Source: Conde Nast Traveler – John Grimwade

Historically, On Aircraft…

Detection Is The Last Line of Defense…

Verification and test methodologies to DETECT (not prevent) counterfeit parts:

• Visual external inspection (resurface, remarking, etc.) –e.g. IDEA-STD-1010

– Independent Distributors of Electronics Association’s Inspection Standard

• X-ray Inspection

• Metallurgical Analysis (e.g. XRF, Spark/Arc, etc.)

• De-capsulation and Cross-section

• Advanced microscopy (e.g. SA, SE, etc.)

• Leak testing

• Functional testing

• Performance testing (e.g. sheer, flammability, solderability, etc.)

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Once It Is Found…

• Segregate and control suspected or known counterfeit

• Ensure the products are not re-introduced into the supply chain– Legal aspects of keeping

parts that you wont pay for?

• Report through appropriate government and industry systems

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Activity – Part 2

• Same as before…

• In the allotted inspection time (5 seconds), you will identify the number of “wrong” item(s) in the sample area

• Keep you answer to yourself

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Find the “wrong” item(s)

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Activity – Part 2

• How did it go?

• How many “wrong” items did you catch?

In case you missed it, only 1 this time

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Activity - Debrief

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Activity – Debrief, cont.

• Fewer defects allows inspection to be more capable

• Prevention is more effective than inspection

• With respect to counterfeit, we (auditors) tend to focus heavily on “detection” / inspection programs

– Ignorance to other “prevention”- centric aspects?

The real reason for this activity is…

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…For the record

• That makes 4 meetings in a row

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Interesting…

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“An ounce of prevention is worth a

pound of cure”

- Benjamin Franklin

An Example We All Care About…

• US Secret Service created to “suppress counterfeit currency” (among others)

– Signed on 14 April 1865

– 7000+ in 135+ offices

• “Detection” prioritized

– Not everything (~$20+)

– Detection pens ineffective

– Daily detection through banks / carriers

• Engineering changes

– Design improvements for high denominations are more common / frequent

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Also Interesting…

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“An ounce of prevention is worth a

pound of cure”

- Benjamin Franklin

“An ounce of prevention is worth more than a

pound of cure.”

- Warren Buffett

Is This “Prevention”?

• Controls for acquiring parts; from original manufacturers, authorized / franchised distributors, or other approved sources.

• Assuring traceability of parts and components to their original manufacturers:

– Original Equipment Manufacturer (OEM) or

– Authorized manufacturer (e.g. incase of PMA, direct delivery authorization)

Good enough?

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Even from the OEM / Source…

27

Suzhou New Hongji Precision

Parts Co Ltd (NHJ)

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Risk-Based Thinking

• Supply issues drive risk

– Expensive, High Demand, Low Supply

• Obsolescence monitoring, design decisions and parts selection / monitoring to be appropriate for service life of product

– Relationship with supply chain, to provide better visibility to market demands / changes

• Monitoring external sources (Access to databases, information letters from OEM):

– GIDEP – Government/Industry Data Exchange Program

– ERAI - Subscription service for supplier

– FAA / CAA notifications – SUPS Notifications

– OASIS (Through “watchlist”)

– News / “Google”

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Once Defined, People Need To Know

• Engineering personnel for risk and obsolescence management

• Purchasing / EP personnel in trusted source selection and requirements

• Inspection personnel for detection of counterfeit items (visual / test)

• All in program aspects, OPSEC and risk identification

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AS91XX – Clause 8.1.4

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AS91XX – Clause 8.1.5

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AS91XX – Clause 8.4.3

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AS91XX – Clause 8.1

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AS91XX – Clause 8.3.3

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The Standard Is Generic, but…

• The customer contract dictates “the requirement”– AS5553 - Counterfeit Electronic Parts; Avoidance, Detection, Mitigation and

Disposition

– AS6462 - Verification Criteria for AS5553

– AS6081 - Fraudulent / Counterfeit Electronic Parts: Avoidance, Detection, Mitigation, and Disposition - Distributors

– AIR6273 - Terms, Definitions and Acronyms – Counterfeit Materials or Electrical, Electronic and Electromechanical Parts

– ARP6178 - Fraudulent / Counterfeit Electronic Parts; Tool for Risk Assessment of Distributors

– ARP6328 - Guideline for development of counterfeit electronic parts; Avoidance, detection, mitigation and disposition systems

– AS6496 - Fraudulent / Counterfeit Electronic Parts: Avoidance, Detection, Mitigation and Disposition

– AS6171 - Test Methods Standard; General Requirements, Suspect/Counterfeit (SC) Electrical, Electronic, and Electromechanical (EEE) parts

– AS6810 - Requirements for Accreditation Bodies when Accrediting Test Laboratories Performing Detection of Suspect / Counterfeit IAW AS6171

– DFARS 252.246-7007 - Contractor Counterfeit Electronic Part Detection and Avoidance System

Lots of documents / standards, but same basic underpinnings

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Common Program Elements Include:

• Uses detection as a necessary component, but not the most effective one

• Is based on the organization’s context

• Is defined, but dynamic, and multi-functional

• Minimizes opportunity of deception, through prevention

• Uses a risk-based approach – high value, obsolescence issues, lead time / supply issues, etc.

• Improves awareness, to relevant interested parties

• Evaluates and improves controls of external purchases to prevent fraud

• Positively controls suspect / counterfeit parts, to prevents re-entry into the supply chain

• Confidential – “they” only have to get it right once

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As An Auditor…

• IAQG Evaluation Guidance Material includes:

PREVENTION MATTERS, so focus on it!

And, please don’t over emphasize detection…

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Thank You!References: AS91XX Standards, IAQG SCMH,

IAQG Evaluation Guidance Material, ERAI, IDEA, Conde, US Customs, US Treasury

Please contact us:

Mike McRandallAerospace Business Unit Manager

m. 734-904-0491

mmcrandall@nsf.org

Don McFarlandAerospace Technical Manager

m. 734-645-8139

dmcfarland@nsf.org

Registration Management Committee – July, 2019 - Torrance, CA