Chinese Counterfeit Parts

Counterfeiting is a problem worldwide, but it is particularly acute in China due to the volume of electronic parts made there.

On Nov. 8, 2011, the Senate Armed Services Committee held a hearing on counterfeit parts in the defense supply chain, including electronic parts used to manufacture weapons and other defense department equipment. Investigators found that counterfeit or suspect electronic parts were installed or delivered to the military for several weapons systems, including military aircraft such as the Air Force’s C-17 and the Marine Corps’ CH-46 helicopter, as well as the Army’s Theatre High-Altitude Area Defense (THAAD) missile system. US legislation is pending to require defense contractors to certify all parts for authenticity. This will place a tremendous burden on defense supply chains in terms of authentication process verification. One of my clients, a defense contractor in Southern California, has taken aggressive action to pro-actively manage procurement of electronics from Chinese vendors and other electronic distributors.

But of course, counterfeiting is not limited to defense goods. Any electronic gadget or equipment, automotive parts, industrial goods and other products might include some counterfeit parts, and the counterfeiters are getting better and better at it. It is so difficult to tell counterfeit from legitimate parts, that industrial buyers are often fooled. Even the price of counterfeits may be equivalent or close to legitimate parts, thus eluding suspicion about parts origins. Counterfeit parts may cause your iPOD, laptop or car brakes to fail early or not work properly at all. The only way to control counterfeiting is to maintain control over your entire worldwide supply chain. This means verifying and monitoring all parts suppliers, distributors, subcontractors and manufacturers, a daunting task where you will need to partner with your Sourcing and Procurement department.

Where do these counterfeit parts come from? China is the largest source of counterfeit items.

Trade figures show approximately 80 percent of bogus items across all industries come from China, where there are few legal restraints to control counterfeiting. In fact, reverse engineering, copying and selling counterfeits are common practices. Eastern Europe, South America and the Middle East are also known sources of counterfeits. Using the latest manufacturing and printing technologies, counterfeiters are able to duplicate finishes, stenciling, print boxes, labels and security codes that mimic those on the genuine products. Many fakes are undetectable to the average person.

The only way to control counterfeiting is to maintain control over your entire worldwide supply chain. This means verifying and monitoring all parts suppliers, distributors, subcontractors and manufacturers. Go to China often and review the production of parts. Take nothing for granted. Know your supply chains from start to finish. Verify and monitor every step of the way.

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