19. Counterfeit Overview -Impact Dangerous Fakes How 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.
25. What We Know • There is a 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 is commonplace. • There is an insufficient chain of accountability within organizations. • Recordkeeping on counterfeit incidents by organizations is very limited. • Stricter testing protocols and quality control practices for inventories are required. • Most DOD organizations do not have policies in place to prevent counterfeit parts from infiltrating their supply chain.
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27. Supply Chain Awareness AIA Counterfeit Parts Integrated Project Team Statement Issue 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.
29. Supply Chain Awareness 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.
32. Industry Working Together G-19 Orbital Sciences Arrow Electronics Northrop Grumman Integra Technologies Honeywell Boeing Jabil SMT AERI ERAI IDEA GIDEP AIA NASA JPL G-19
49. Brokers Independent Franchise Commercial Defense Space Inspection Test The Way Forward - Accreditation/Certification
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56. Risk Charts SAE AS5553 Guidance ?? How Can This Approach Be Applied in AS 9100b/c ?? Lowest Risk Highest Risk Supplier with GIDEP/ERAI Alerts _ _ _ OCM Source of Supply Small % _ _ _ _ _ 100% 1X Visual Inspection _ _ _ _ _ _ Life Test In Business < 1 Year & Unknown Financials _ _ Supplier Audited & Approved Life Dependent _ _ _ _ _ Non-Critical Test / Insp Population Level of Test & Inspection Supplier Assessment Product & Application
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68. Linking AS9100c to AS 5553 Attribute AS9100 AS 5553 Planning of Product Realization 7.1.a - Object & Requirements for the product 7.1.c – Req’ts for V,V,M,M,I,T of product 4.1 – CP Parts Control Plan 4.1.1 – Obsolescence Control Plan 7.1.2 – Process for managing Risk App A.1-Parts Availability App A.2 - Obsolescence Management 7.1.3 – CM appropriate to the Product Review of Req’ts 7.2.1.a – Req’ts Stated by Customer 7.2.1.b – Req’ts not stated but necessary for intended use 7.2.1.c – Statutory/Regulatory 7.2.2.a – Product Requirements are determined 7.2.2.e – Risks have been Identified App A.1-Parts Availability App A.2 - Obsolescence Management 7.2.2.d – SR of the product are determined
69. Linking AS9100c to AS 5553 Attribute AS9100 AS 5553 Design 7.3.1 – D&D planning shall consider ability to produce, inspect, test and maintain product App A.1 – Design, proposal and Program planning 7.3.3.b – Provide info for Purch, & Prod. 7.3.3.d – Specify product Characteristics essential for safe & proper use 7.3.3.e – Specify CI, KC and specific actions to be taken for these items 7.3.3 – Drawings, Part lists and Specs. Necessary to define config. 7.3.3 – material, process, manufact, & Assembly data needed to ensure conformity of product
70. Linking AS9100c to AS 5553 Attribute AS9100 AS 5553 Purchasing 7.4.1 – org shall ensure that product conforms……. The type and extent of control applied…. Dependent upon effect……. 4.1.3 – specify quality req’ts to minimize risk of being provided CP App B – Procurement Approach 7.4.1 – The org shall evaluate & Select suppliers based on their ability to supply… 4.1.2.a – Assess sources to determine risks of receiving CP App B – Procurement Approach 7.4.1.f – Determine & Manage risk when selecting & using suppliers 4.1.2.a – Assess sources to determine risks of receiving CP 4.1.2.d – Assure that sources are maintaining effective processes for mitigating risks of supplying CP 4.1.2.e – Assess and mitigate risks of procuring CP from Sources other than ECM or Auth. Suppliers 4.1.2.g – If supplier/intermediaries do not have CP control plan, a risk analysis is req’d. App B – Procurement Approach 7.4.2.a – Req’ts for approval of prod, procedures, processes & Equip. 7.4.2.c – QMS req’ts Identification 4.1.2.f – Specify Supply Chain Traceability through all supplier intermediaries App C – Supply Chain Traceability 7.4.2.g – Flowdown of applicable reqt’s including customer req’ts 4.1.2.g – flow down applicable req’ts for CP Control to contractor/sub contractors. App D – Procurement Contract Requirements 7.4.2 – Org shall ensure adequacy of purch req’ts prior to comm. w/supplier 4.1.2.e – Assess and mitigate risks of procuring CP from Sources other than ECM or Auth. Suppliers Verif of Purch Product 7.4.3 – Establ & Implement inspect. Activities necessary for ensuring that product meets req’ts 4.1.4 – The rigor of verification process shall be commensurate with product risk 7.4.3 – obtain evidence of conformity of product from supplier & review documentation App C – Supply Chain Traceability 7.4.3 – Inspection of product upon receipt App E.1.1 – Documents and Packaging Inspection
71. Linking AS9100c to AS 5553 Attribute AS9100 AS 5553 Production Planning 7.5.1.a – The availability of information that describes characteristics of product 7.5.1.h – evidence that all production I&V have been completed 7.5.1.k – Criteria for workmanship 7.5.1 – Establish, impl, & maintain process for managing CI/KC Production 7.5.3 – The org shall maintain the ID of the Config of product…… 7.5.3 – Where traceability is a req’t, the org shall control the unique ID of product and maintain records. 4.1.2.f – If traceability is purchased parts is unavailable/suspect, a documented risk assessment is required. Inspection 8.2.4 – The org shall M/M the characteristics of the product to verify that prod. req’ts are met. App E – Product Assurance 8.2.4.a – Criteria for Accept/Reject 8.2.4 – Where CI/KC are ID, org shall ensure control and monitoring 8.2.4 – Where org uses sample inspection……
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73. Counterfeit Part Prevention Counterfeit Known Good Part Which Device Do You Want In The Airplane you are flying on? Questions?
Editor's Notes
So what is a counterfeit component? As defined by SAE Standard AS5553 a counterfeit is a copy or substitute altered or made by someone who does not have the legal right or authority to do so. Counterfeit material is material whose physical or performance characteristics have been knowingly misrepresented. Examples of counterfeit parts include, but are not limited to: 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 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 part’s form, fit, function, or grade. *Parts which have been refinished, upscreened, or uprated and have been identified as such, are not considered counterfeit.
The vast majority of counterfeit parts can be traced back to China. Unfortunately, the supply chain has become so polluted a part’s lineage (including counterfeit parts) is often-times unverifiable. This is only one of the many hurdles law enforcement must contend with.
In 2007 I wrote a white paper titled A Time For Change – The NOT so Hidden Truth Behind the Chinese Open Market. The objective of this paper was to shed light on the exportation of E-Waste which is often times the product that is collected, sorted and is then subsequently remarked and resold as genuine product. You might be wondering what E-Waste has to do with counterfeit parts.
Many if not most of the counterfeits that are detected originate from salvaged materials. Each year the majority of the world’s electronic waste is illegally transported to China, India and other parts of Asia. This ‘trash’ is transformed into millions of dollars in profits for China. These pictures fairly and honestly depict how electronic components are quite literally plucked from circuit boards. These same parts are then refurbished and are often times remarked and are sold throughout the global supply chain as new and genuine parts.
These pictures fairly and honestly depict how electronic components are quite literally plucked from circuit boards. These same parts are then refurbished and are often times remarked and are sold throughout the global supply chain as new and genuine parts.
Seg Market Place Material Sorting – Prepping for resurfacing / refurbishing / resale The consequences of failing to identify nonconforming product could be catastrophic.
After 15 years of diplomatic struggle, China became a fully-fledged member of the international trading system in 2001. The amount of counterfeit electronic components has arisen alongside the rise of international trade. Organized and petty criminals alike have taken advantage of open trade agreements to move money and goods freely across borders in a minimum amount of time by moving illegal goods through the same channel as legal goods. Both developed and developing countries have been unable to sufficiently monitor their borders to combat counterfeit trade. Counterfeiting is not viewed as a serious problem on its own; it is only when public health and safety are endangered that the threats of counterfeiting are taken seriously. Public awareness of the dangers of counterfeiting needs to be combined with improved efforts to enforce trade policies. This graph demonstrates the rapid rise of Chinese Exports between 2000 - 2006
Here you can see the rapid rise of Counterfeit instances reported to GIDEP (Government-Industry Data Exchange Program) between 2000 - 2008
So how do these parts make their way China to the US? The vast majority of counterfeit parts are sold by Brokers and Independent Distributors. While most of these resellers do not intentionally trade in counterfeit material some do and others simply do not have the quality standards in place to weed out nonconforming material.
Online trading platforms like these open the doors for anyone to sell anything with few rules or regulations. China has taken full advantage of these open trading portals and as a result the counterfeit component trade has flourished.
This data compiled by the US Department of Commerce Bureau of Industry and Security shines a bright light on the seriousness of the counterfeiting issue. “The number of incidents rose dramatically, more than doubling from 3,369 incidents in 2005 to 8,644 incidents in 2008. BIS stated this large increase can be attributed to a number of factors, such as a growth in the number of counterfeit parts, better detection methods, and/or improved tracking of counterfeit incidents.
Please note the number of incidents involving Critical Safety, High Reliability Industrial & Automotive & QPL QML and QPL parts are typically used in defense and national security systems. Counterfeits could therefore impact critical defense end-users and infrastructure. The rise of counterfeit parts in the supply chain is exacerbated by demonstrated weakness in inventory management, procurement procedures, recordkeeping, reporting practices, inspection and testing protocols, and communication within and across industry and government organizations. So where do counterfeits coming from?
In an October 2008 article published by Business Week Special Agent Terry Mosher of the Air Force Office of Special Investigations confirmed that the 409 th Supply Chain Management Squadron found four counterfeit Xicor Chips located in the flight computer of an F-15 fighter jet.
It's very difficult to determine whether tiny fake parts have contributed to particular plane crashes or missile mishaps, says Robert P. Ernst, who heads research into counterfeit parts for the Naval Air Systems Command's Aging Aircraft Program in Patuxent River, Md. Ernst estimates that as many as 15% of all the spare and replacement microchips the Pentagon buys are counterfeit. As a result, he says, &quot;we are having field failures regularly within our weapon systems—and in almost every weapon system.&quot; He declines to provide details but says that, in his opinion, fake parts almost certainly have contributed to serious accidents. When a helicopter goes down in Iraq or Afghanistan, he explains, &quot;we don't always do the root-cause investigation of every component failure.&quot;
According to the survey conducted by the US Department of Commerce: all elements of the supply chain have been directly impacted by counterfeit electronics; • there is a 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 is commonplace; • there is an insufficient chain of accountability within organizations; • recordkeeping on counterfeit incidents by organizations is very limited; • most organizations do not know who to contact in the U.S. Government regarding counterfeit parts; • stricter testing protocols and quality control practices for inventories are required; and • most DOD organizations do not have policies in place to prevent counterfeit parts from infiltrating their supply chain
Numerous Agencies and Industry Associations are addressing the issue of Counterfeit Components in the Supply Chain.
In 2008 The Aerospace Industry Association formed the AIA Counterfeit Parts IPT Plan of Action The Objectives of the IPT are to: 1. Engage the U.S. government in discussions concerning acquisition and procurement policies to avoid introducing counterfeit parts and materials into aerospace, space and defense products; 2. Create a set of standards for government and industry to ensure that the risk of introducing counterfeit parts and materials is minimized, is consistent with risks accepted by the customer and implementable without sacrificing the benefits of buying commercially available products; 3. Engage the U.S. government in discussions concerning enforcement of policies to avoid the introduction of counterfeit products into the U.S.
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.
Established in June 2006 The SIA worked with the U.S. Customs and Border Protection to raise awareness among customs officers and within the industry on the semiconductor counterfeiting problem. As a result, the U.S. and European customs authorities launched “Operation Infrastructure” late in 2007, resulting in the seizure of over 360,000 counterfeit ICs that were destined for U.S. and European markets. In the summer of 2008, U.S. Customs engaged in a second &quot;Operation Infrastructure II&quot; and seized 426,000 counterfeit ICs.
Since 2004 Brian Hughitt has served as the Manager of Quality Assurance for NASA’s Office of Safety and Mission Assurance. He is responsible for Quality Program policy and requirements; he chairs NASA’s Quality Leadership Forum and Joint Audit Planning Committee; and manages the Agency’s Supplier Assessment System. It was Brian’s vision to rally representation from all sectors of the supply chain in an effort to counteract the threat of counterfeit electronic components. In 2007 Industry Associations, Independent Distributors, Authorized Distributors, OEM’s, Test labs and Government Prime Contractors all came together to form the SAE G-19 Counterfeit Electronic Parts Technical Committee.
The objective of G-19 is to develop industry best practices in component management, supplier management, procurement, inspection, test/evaluation methods and response strategies when suspect or confirmed counterfeit components are detected.
The outcome of this initiative was the development and subsequent release of SAE Aerospace Standard AS5553 which was published by in April 2009.
It was quickly adopted by the Department of Defense August 31, 2009.
AS5553 is Step 1 in a multilayered counterfeit risk mitigation process.
I would like to urge all of you to read the report released by the U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology’s evaluation. A copy of this report is available on the BIS website as well as on the public portion of the ERAI website.
Discuss the industry Supply Chain Model Discuss the Needs of the Industry Discuss the Roles of System Integrator Design Responsible Middle Tier Organizations Non Design Responsible Middle Tier Organizations Distributors
Risk Terminology Much More Prevalent in AS9100c As Appropriate and Criticality Based Terminology also supports this process
Not Much Risk from the distribution Point Risk From Design Change with No Part Number Changes Material Substitutions With No Part Number Changes OCM Discontinuing Production of Specifically Qualified Component Audit Focus OCM Engineering Procurement Manufacturing Inspection & Test Parts Control (Segregation, Bonded Storage, etc.) Lot Traceability Lot Storage (Segregation by Lot Code) Part Handling & Packaging X X Procuring Organizations Part Specification-Engineering determination of Part meeting Design Need (Current Need, Future Need, Obsolescence, Etc.) Part Qualification Approach (Reliability, Material Baselining, etc.) Procurement Strategy (Current Need, Future Need, Obsolescence, Etc.) Procurement Flowdowns for CM, Change Notification, Sub Tier Supplier Sources, etc.) X X
Not Much Risk from the distribution Point Risk From Design Change with No Part Number Changes Material Substitutions With No Part Number Changes OCM Discontinuing Production of Specifically Qualified Component Audit Focus Franchise Distributor Parts Control (Segregation, Bonded Storage, etc.) Lot Mixing Part Handling & Packaging X X Part Specification-Engineering determination of Part meeting Design Need (Current Need, Future Need, Obsolescence, Etc.) Part Qualification Approach (Reliability, Material Baselining, etc.) Procurement Strategy (Current Need, Future Need, Obsolescence, Etc.) Procurement Flowdowns for CM, Change Notification, Sub Tier Supplier Sources, etc.) X X