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February 2014 • SMT Magazine 91 components are obtained by gray market com- panies, they should be subjected to a higher level of scrutiny than buying directly from an authorized source. Companies get into trouble when they purchase gray market material and use price as the determining factor on whom to purchase from. The gray market is made up of indepen- dent distributors and brokers who use their net- work of contacts throughout the world to locate and procure hard-to-find product. Some com- panies work out of their basements and simply buy from a supplier they find online, receive the parts in, count the quantity, and send the shipment off to the next supplier in the supply chain. Other, more reputable distributors have attained certifications that ensure procedures and policies detect, avoid, and dispose of sus- pect, fraudulent, or counterfeit parts. New Laws and Liability regarding Procurement On December 31, 2011, less than two months after the Senate Armed Services Com- mittee held their hearing, President Obama signed the National Defense Authorization Act (NDAA) for fiscal year 2012, into law. Section 818 of this act requires all DoD contractors and subcontractors to obtain electronic parts from original equipment manufacturers (OEMs), their authorized dealers, or from "trusted sup- pliers" that obtain parts exclusively from OEMs or their authorized dealers. By definition, Section 818 includes all "cov- ered contractors" who supply parts or products that include electronic components. All DoD contractors are required, whenever possible, to obtain electronic parts that are in production or currently available in stock from the original manufacturers of the parts or their authorized dealers. However, this is not a viable reality for many suppliers and manufacturers. Parts that are in shortage or have gone obsolete are not avail - able from these authorized suppliers. How does a company procure such a hard-to-find item? The Slippery Slope of "Trusted Suppliers" NDAA Section 818 references the term "trusted suppliers" in regard to what is consid- ered an acceptable source of supply for mate- rials that can only be procured from an other than authorized source of supply. Although the NDAA is silent in terms of defining "trusted supplier," one can infer that a trusted suppli- er is one that has been vetted by a third-party accredited certification body, has successfully completed a government audit, or has under- gone and passed an in-person and on-site audit performed by a qualified subject matter expert/ auditor. Once a company has been vetted for their procedures and processes to detect, avoid, and contain counterfeit material, then a sup- plier can be considered "trustworthy." SAE International (SAE), the internationally recognized standards association familiar to the aerospace, automotive, and commercial vehicle industries, has implemented new standards that specifically address counterfeit avoidance. Standards such as AS553A and AS6081 (issued in November 2012) provide guidance for imple- menting counterfeit avoidance for manufactur- ers and independent distributors. Both of these standards have been adopted by the DoD. Ac- cording to the Defense Standardization Office, "Adoption is analogous to the Good House- keeping Seal of Approval." This standard requires organizations in- volved with the purchase, acceptance, and dis- tribution of electronic components to have a quality management system in place, to com- municate and document contract provisions that establish purchasing controls, and to re- tain appropriate records for supply chain trace- ability. In addition, AS6081 requires products procured from the gray market to be verified through a series of tests, which are detailed and outlined within the standard. Further testing such as using X-ray, scanning electron micro- scope, or acoustic imaging is used to look inside the packaging of the product. While AS6081 covers distribution of com- ponents, AS5553A provides similar certification for manufacturers. Originally implemented in January 2013 in response to the increasing vol- ume of fraudulent and counterfeit parts enter- ing the aerospace supply chain, AS5553A was expanded to mitigate such risk on a global scale with regard to various sectors. Many of the re- quirements of AS5553A are similar to AS6081 and likewise aim to prevent the receipt and KrAMEr oN CoUNTErFEITS THe COuNTerFeIT ePIDeMIC THaT CaN KILL continues