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56 SMT Magazine • October 2014 cOunterFeit eLectrOnic Parts aVOiDance: PrOFitabiLitY Or catastrOPhe continues krAMEr On COunTErFEiTS ters of consecutive growth! John's sales team was in for a big surprise: large bonus checks for everyone, and a special recognition award (the keys to the Porsche) for Mr. C., the China bro- ker. Mr. C. had used his elite connections with a mainland supplier to sole-source deep-discount, out-of-production electronic parts, ensuring consistent markup prices for resale and a steady flow of quarterly profits for XYZ. As John entered the hall- way to the party he was hand- cuffed, read his rights and es- corted out by federal agents. A military transport aircraft had recently crashed during a special operations mission in Iraq, killing all 20 service- men aboard. A counterfeit part in the navigation system had been identified as the cause. XYZ Company was the source. John Doe was held re- sponsible. XYZ Company was black- listed and forbidden from do- ing any future business with the federal government. The sales team was kicked off the supplier list and the business folded overnight. John Doe was staring down the double-barreled legal shotgun of civil and criminal liability, facing millions of dollars in fines and a several years in jail. His life was all but over. what went wrong? XYZ Company hadn't done its due diligence, and relied on an unvetted, suspect, mainland Chinese supplier who said his firm was compli- ant to AS6081 standards for counterfeit avoid- ance and detection. No one bothered to check if the foreign enterprise was actually certified. It wasn't. The upshot: an un-vetted, untrust- worthy supplier had slipped a counterfeit, mis- sion-critical part into the defense supply chain and American soldiers died. Certification could have prevented it. Unfortunately, John and his sales team failed to notice that the market for electronic parts had undergone a profound sea change. A host of new developments and flow-downs impacting financial liability, personal injuries and property damage had arrived—indeed, were transforming the global market—and XYZ Company was left woefully unprepared. With a bit of concerted effort, John Doe could have avoided failure and dramatically increased the chances of success for his sales team. A little bit of market awareness, com- mon sense and cost-benefit analy- sis would have shown the price of education and certification to be very inexpensive com- pared to potential business losses from not investing in a robust counterfeit detection and avoidance plan. You may be in the same position as John Doe and not even know it! Will your busi- ness have the foresight to make the right choices, before events overwhelm and over- take it? Right now electronics firms are being caught off guard and many are forced out of business, but yours doesn't have to be. A few cost-effective steps can help your enterprise remain competitive, profitable and current with requisite counterfeit detection regulations (flow downs), even as businesses around you begin to fail. why the change? Consider this. The defense industry itself re- quested the new, stringent requirements after a Senate Arms Services Committee investigation led by Committee Chairman Sen. Carl Levin (D-Michigan), and the ranking member Sen. John McCain (R-Arizona), discovered that more than 1 million counterfeit parts had infiltrated the defense supply chain, with the potential to wreak havoc through material destruction and loss of life. After the investigation, McCain and Levin offered an amendment to the FY 2012 Na- tional Defense Authorization Act to rectify vul- nerabilities in the defense supply chain through robust counterfeit avoidance policies by the de- fense industry and DoD. A revised version of the amendment was included in a bill signed by No one bothered to check if the foreign enterprise was actually certified. It wasn't. The upshot: An un-vetted, un- trustworthy supplier had slipped a counterfeit, mis- sion-critical part into the defense supply chain and American soldiers died. " "