ERAI -Counterfeit Awareness-Avoidance Training

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ERAI -Overview Founded in 1995 Mitigate Risk of Parts, Customers & Vendors Provide up to date information on Counterfeit, Faulty & High-Risk Parts Real-time Industry Monitoring & Reporting Services Real-time High-Risk and Counterfeit Part Reporting Bill of Material / Assembly Cross Checking against High-Risk Parts Database Vendor & Customer Analysis Proactively Prevent Losses & Reoccurring Problems Access to Search Risk Mitigation Tools Fair & Impartial Investigation Services Stay Informed on Current Issues Affecting the Supply Chain © 2011 ERAI Inc.

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Counterfeit Awareness and Avoidance Training. An overview of industry efforts to combat counterfeit parts.

Transcript of ERAI -Counterfeit Awareness-Avoidance Training

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ERAI-Overview

• Founded in 1995• Mitigate Risk of Parts, Customers & Vendors• Provide up to date information on Counterfeit, Faulty & High-Risk

Parts• Real-time Industry Monitoring & Reporting Services• Real-time High-Risk and Counterfeit Part Reporting• Bill of Material / Assembly Cross Checking against High-Risk Parts

Database• Vendor & Customer Analysis• Proactively Prevent Losses & Reoccurring Problems• Access to Search Risk Mitigation Tools• Fair & Impartial Investigation Services• Stay Informed on Current Issues Affecting the Supply Chain

© 2011 ERAI Inc.

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Counterfeit-Definition

a. Parts which do not contain the proper internal construction consistent with the ordered part. (die, manufacturer, wire bonding, etc.)

b. Parts which have been used, refurbished or reclaimed, but are represented as new product.

c. Parts which have different package style or surface plating/finish than the ordered parts.

d. Parts which have not successfully completed the Original Component Manufacturer’s (OCM)’s full production and test flow, but are represented as completed product.

e. Parts sold as upscreened parts which have not successfully completed upscreening.

f. Parts sold with modified labeling or markings intended to misrepresent the parts’ form, fit, function, or grade.

*Parts which have been refinished, upscreened, or uprated and have been identified as such, are not considered counterfeit.

© 2011 ERAI Inc.

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Counterfeit-Origin

2001 – China Admitted to WTO

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Counterfeits-Origin

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Counterfeit-E-Waste

• The vast majority of product being sold in the China Open Market originates from e-waste.

• Unknown quantities of e-waste are exported from China to component buyers around the world.

• Nearly 75 million dollars in revenue is generated for the local Chinese Government in the city of Shantou alone.

• What incentive does the government have to control the import or export of this product?

• Much of the e-waste is remarked and counterfeited.

• Most of the distributors operating in and around Shenzhen have no experience in handling, storing or selling electronic components.

© 2011 ERAI Inc.

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Counterfeit-E-Waste

Laborer de-soldering circuit boards over a coal-fired grill.  Rock in the box is where boards are hit to remove solder.  Pliers are used to pluck off chips which go into various buckets.  The boards are then tossed into a pile for open burning.

© Basel Action Network 2006.

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Counterfeit-E-Waste

Workers extract plastics from discarded electronics in Guiyu, a few hours' drive northeast of Hong Kong. The city has 5,500 family workshops handling e-waste.

© 2006 The Seattle Times Company

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Counterfeit -Portals of Entry

• Rapid access to millions of parts

• Minimal membership requirements

• Quick & easy access to a large audience of buyers

• Burn customer and re-register using a new name

© 2011 ERAI Inc.

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Counterfeit-Portals of Entry

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All types of components are being counterfeited, even passives.

% of reported counterfeits from ERAI database, 2004 to present

Counterfeit-What is Being Counterfeited?

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Counterfeit -Impact

Counterfeiting accounts for more than 8% of global merchandise trade and is equivalent to lost sales of as much as $600B and will grow to $1.2T by 2009.

Source: Dept of Commerce

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Counterfeit - Impact

Impact of using counterfeit parts or materials• Potential loss of life• Espionage• Monetary loss• Liability• Lack of availability of products for customer use• Loss of customer/public trust• Brand damage

© 2011 ERAI Inc.

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Counterfeit -Impact

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Counterfeit Overview-Impact

Dangerous FakesHow counterfeit, defective computer components from China are getting into U.S. warplanes and ships By Brian Grow, Chi-Chu Tschang, Cliff Edwards and Brian Burnsed

The American military faces a growing threat of potentially fatal equipment failure—and even foreign espionage—because of counterfeit computer components used in warplanes, ships, and communication networks. Fake microchips flow from unruly bazaars in rural China to dubious kitchen-table brokers in the U.S. and into complex weapons. Senior Pentagon officials publicly play down the danger, but government documents, as well as interviews with insiders, suggest possible connections between phony parts and breakdowns.

In November 2005, a confidential Pentagon-industry program that tracks counterfeits issued an alert that "BAE Systems experienced field failures," meaning military equipment malfunctions, which the large defense contractor traced to fake microchips. Chips are the tiny electronic circuits found in computers and other gear.

The alert from the Government-Industry Data Exchange Program (GIDEP), reviewed by BusinessWeek (MHP), said two batches of chips "were never shipped" by their supposed manufacturer, Maxim Integrated Products in Sunnyvale, Calif. "Maxim considers these parts to be counterfeit," the alert states. (In response to BusinessWeek's questions, BAE said the alert had referred erroneously to field failures. The company denied there were any malfunctions.)

In a separate incident last January, a chip falsely identified as having been made by Xicor, now a unit of Intersil in Milpitas, Calif., was discovered in the flight computer of an F-15 fighter jet at Robins Air Force Base in Warner Robins, Ga. People familiar with the situation say technicians were repairing the F-15 at the time. Special Agent Terry Mosher of the Air Force Office of Special

Investigations confirms that the 409th Supply Chain Management Squadron eventually found four counterfeit Xicor chips.

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Counterfeit -Impact

It is estimated, “as many as 15% of all the spare and replacement microchips the Pentagon buys are counterfeit.”

Robert P. Ernst Naval Air Systems Command's Aging Aircraft

Program Patuxent River, MD

"What we have is a pollution of the military supply chain."

Retired four-star General William G.T. Tuttle Jr Defense Industry ConsultantFormer Chief of the Army Materiel Command

Source: Business Week

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Counterfeit -Impact

EE-A-06-01 Test failures at a defense contractor were found to be microcircuits containing many different chips

EE-A-06-03 Supplier of military hardware found suspect counterfeit microcircuits having dual part number markings

EE-A-06-04 Microcircuits that failed product testing were found to have chips from another source

M9-A-07-01 During manufacturing of a military product, suspect counterfeit transistors were functional failures

6E-P-07-01 Memory device supplier confirmed parts marked with their name did not contain their chips

UY7-P-07-01 Microcircuits, that failed electrical testing, were found to contain chips from another manufacturer

NB4-P-07-01 Suspect counterfeit microcircuits, from an unauthorized distributor, found during testing at an aerospace supplier

J5-A-07-01 Independent distributor supplied suspect counterfeit parts (not available from original supplier) to defense plant

J5-A-07-02 Microcircuits, supplied by an independent distributor, were suspect counterfeit (device markings not authentic)

A2W-A-07-01 Suspect counterfeit transistors failed electrical tests; found to have many different chips

J5-A-07-06 Programmable logic devices found to be suspect counterfeit (lot code was after manufacturer discontinued parts)

J5-A-07-09 Microcircuits found to be suspect counterfeit as the lot date code was after the manufacturer stopped production

UE-A-07-01 Suspect counterfeit microcircuits failed electrical tests; contained chips from another manufacturer

AAN-U-08-052 A government entity reported counterfeit circuit breakers in nuclear power plants

CE9-P-08-02 Military parts manufacturer reported U. S. authorities have recently intercepted many counterfeit parts shipments

UL-P-08-01 Distributor unable to provide test reports on suspect counterfeit microcircuits that failed during factory testing

D4-A-09-01 Military hardware manufacturer found suspect counterfeit programmable devices showed part remarking

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Counterfeit-Method Uncovered

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Counterfeit-Where the industry has fallen short

• Lack of dialogue between all organizations in the U.S. supply chain.

• Companies and organizations assume that others in the supply chain are testing parts.

• Lack of traceability in the supply chain.

• Insufficient chain of accountability within organizations.

• Recordkeeping on counterfeit incidents by organizations has been limited.

• Stricter testing protocols and quality control practices for inventories are required.

• DOD organizations have not had policies in place to prevent counterfeit parts from infiltrating their supply chain.

© 2011 ERAI Inc.

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G-19

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Formation of G-19 (Sept. 2007)

-Industry Working Together To Craft A Solution

OrbitalSciences

ArrowElectronics

Northrop Grumman

Integra Technologies

Honeywell

Boeing

Jabil

SMTAERI

ERAIIDEAAIA

NASAJPL

G-19

© 2011 ERAI Inc.

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SAE G-19A Sub-Committee Members

US Government Members …• DCMA• Defense Logistics Agency, DSCC• MDA• NASA/JPL• Navy-Crane• NSWC Crane• SUBMEPP• Tinker Air Force• US Army – AMRDEC

Industry Members …• 3M• Boeing• General Dynamics• Honeywell• L-3 Communications• Lockheed Martin• PerkinElmer• Plexus• Raytheon

Participating Industry Associations …• AIA• ERAI Inc.• Independent Distributors of Electronics Association (IDEA)

Participating Test Laboratories …• Center for Advanced Life Cycle Engineering (CALCE)• Evans Analytical Group• Hi-Reliability Microelectronics• Integra Technologies• Premier Semiconductor Services• Process Sciences• Silicon Cert Laboratories• White Horse International

Representation from Government, Aerospace, Military, & Commercial

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SAE G-19 Organization Chart

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G-19 -A Multilayered Counterfeit Risk Mitigation Initative

© 2011 ERAI Inc.

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BrokersIndependent

Franchise

CommercialDefenseSpace

InspectionTest

G-19 -Why A Three Pronged Attack?

© 2011 ERAI Inc.

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G-19-The standard is applicable to Government and Industry

Committee CharterSAE G-19Counterfeit Electronic Components CommitteeNovember 2007Scope:

The G-19 Counterfeit Electronic Components Committee is chartered to address aspects of preventing, detecting, responding to and counteracting the threat of counterfeit electronic components.

Objective:The objective of the SAE G-19 committee is to develop standards suitable for use in aeronautic, space, defense, civil and commercial electronic equipment applications to mitigate the risks of counterfeit electronic components. In this regard, the standard will document recognized best practices in component management, supplier management, procurement, inspection, test/evaluation methods and response strategies when suspect or confirmed counterfeit components are detected.

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G-19G-19-AS5553 and Risk-AS5553 and Risk

• Risk in the Aerospace Supply Chain– Design Responsible Organizations– Manufacturing Responsible Organizations– Warehousing and Distribution Organizations

• Common Areas of Risk– Source Selection– Obsolescence– Loss of Traceability– Piece Part Configuration Changes without Notification– Many Others

• Risk Model in AS5553 – Categorization of Risk– Hierarchy of Risk Inputs & Mitigations per Category– Application of Mitigations Based on Risk Input Hierarchy

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Counterfeit Parts Control Plan:

… The organization shall develop and implement a counterfeit electronic parts control plan that documents its processes used for risk mitigation, disposition, and reporting of

counterfeit parts…

SAE AS5553 Implementation

Requirements

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SAE AS5553 Implementation

Counterfeit Parts Control Plan:-Parts Availability

Requirements

… The process shall maximize availability of authentic, originally designed … parts throughout the product’s life cycle, including management of

part obsolescence…

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SAE AS5553 Implementation

Counterfeit Parts Control Plan:-Purchasing Information & Verification

Requirements

…The documented process shall assure detection of counterfeit parts prior to formal product acceptance…

…This documented process shall specify contract/purchase order quality requirements …

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Solutions

Example Procurement Clause

…The seller shall establish and implement test and inspection activities necessary to assure the authenticity …

SAE AS5553 Implementation

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G-19

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AS5553 Adopted By DoD

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Organizations Adopting Policies:Counterfeit Parts Control Plan

Flow Down will Invoke Requirements

• NASA Policy Directive 8730.2C

• MDA Policy Memo and PMAP

• DOD adopts AS5553 August 2009

• Other companies with plans:• BAE Systems• Orbital Sciences Corp.• Lockheed Martin• Honeywell• Ball Aerospace

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G-19-ERAI Involvement

ERAI Serves On:• Original Member of

G-19 (AS5553)• Member of G-19D

(AS6081)• Member of G-19DR• Member of G-19CI

(Continuous Improvement/AS5553 Rewrite to ensure document is applicable in both US and Foreign Markets

Meeting Schedule:Tuesday 10:00am–12:00pm EST

G-19CI – AS5553 Re-write

Bi-Weekly

Thursday 11:00am-1:00pm EST

G-19D – AS6081 Development Team

Weekly

Other

G-19DR – Distributor Assessment Manual/Survey Team

As Required

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Industry Reports

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Industry Initiatives

AIA Counterfeit Parts Integrated Project Team Statement

Counterfeit parts and materials can jeopardize the performance, reliability and safety of aerospace, space and defense products. Over the last several years, increasing amounts of counterfeit material have been introduced into the supply chain. Due to diminishing manufacturing source issues, the aerospace, space and defense industries may have difficulty in continuing to obtain manufactured products designed years ago to support fielded and new systems. The challenge of avoiding counterfeit parts and materials occurs when defense contractors and the government are obliged to purchase both electronic and non-electronic parts and materials to support fielded and new systems from independent distributors/brokers.

Note: This document is in balloting

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Industry Initiatives

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Industry Initiatives-US Chamber of Commerce Coalition Against Counterfeiting and Piracy

To fight the growing threat of counterfeiting and piracy to the economy, jobs, and consumer health and safety, the business community, led by the U.S. Chamber of Commerce's Global Intellectual Property Center, organized itself through a broad-based business coalition, the Coalition Against Counterfeiting and Piracy (CACP).

Formed in 2004, the CACP has grown to more than 650 members, making it the largest business coalition of its kind. The coalition is committed to increasing the understanding of the negative impact of counterfeiting and piracy and to finding real solutions by working with governments, industry, opinion leaders, the media, and consumers. This year, the CACP is focusing on a few primary goals, which we believe will make a measurable impact in the fight against counterfeiting and piracy.

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G-12-History

• Task Group formed May 2006

• A comprehensive Standard is outside of their charter

• G-12 efforts evolved into an Engineering Bulletin (EB)

• Meetings held to investigate problem

• Draft EB published TB-0003 - February 2009

• G-12 has no intention of continuing effort

• G-12 willing to support other anti-Counterfeit efforts and rescind EB when replaced by an Industry Standard

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G-12TechAmerica Engineering Bulletin (TB-0003)

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S.3941-Combating Military Counterfeits Act of 2010

• 11/15/2010--Introduced.

• Combating Military Counterfeits Act of 2010 - Amends the federal criminal code to impose criminal penalties on persons who traffic in counterfeit goods or services identified as meeting military standards or that are intended for use in a military or national security application. Directs the United States Sentencing Commission to review and amend federal sentencing guidelines and policy statements to reflect the intent of Congress to increase penalties for trafficking in counterfeit goods or services, including military good or services.

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Outcome of Efforts

• Defense Supply Center Columbus has initiated procedural changes

• DOD Action Plan (which includes adoption of 5553)• AS5553 Requirements are being flowed down• Additional quality assurance/counterfeit avoidance

training • Anti-Counterfeit Trade Agreement negotiations• Proposed Senate Bill to enact harsher penalties

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Moving Forward

• Establish a Federal reporting mechanism and database• Clarify FAR and DFAR procurement requirements• Increase inspections, coordination, and prosecutions• Address deficiencies related to electronic parts

information, standards and training• Development international agreements• Address procurement obsolescence issues

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Supply Chain Awareness

-Key Industry Associations

• Aerospace Industries Association (AIA) Counterfeit Parts Integrated Process Team (IPT)

• ERAI

• Independent Distributors of Electronics Association (IDEA)

• Semiconductor Industry Association (SIA) Anticounterfeiting Task Force (ACTF)

• US Chamber of Commerce Coalition Against Counterfeiting and Piracy (CACP)

© 2011 ERAI Inc.