A Problematic Definition of ‘Counterfeit Part’ within the Proposed DFARS Rule on Detection and Avoidance of Counterfeit Electronic Parts

The proposed definition of “counterfeit part” within the proposed DFARS Rule on “Detection and Avoidance of Counterfeit Electronic Parts” introduces a number of inconsistencies and problems.

(updated 2013/05/23 re definition of ‘legally authorized source’)

Counterfeit part means—

(1) An unauthorized copy or substitute part that has been identified, marked, and/or altered by a source other than the part’s legally authorized source and has been misrepresented to be from a legally authorized source;

(2) An item misrepresented to be an authorized item of the legally authorized source; or

(3) A new, used, outdated, or expired item from a legally authorized source that is misrepresented by any source to the end-user as meeting the performance requirements for the intended use

Inconsistencies

A comparison of this definition to those found in DoD Instruction 4140.67, DoD Counterfeit Prevention Policy, and in the proposed addition to the NASA FAR Supplement reveals a number of inconsistencies.

Subparagraph ‘1’ is nearly identical to the definition within DODI 4140.67. The proposed rule adds the word ‘part’ after ‘substitute’, reinforcing that this proposed rule is confined to ‘electronic parts’ and does not apply to ‘materiel’ in general as DoD specified for its own policy.

Subparagraph ‘1’ in the proposed rule is also similar to a definition in the proposed addition to the NASA FAR Supplement, but differs with respect to ‘misrepresentation’ (i.e. ‘misrepresented to be from a legally authorized source’ vs. ‘misrepresented to be an authorized item of the legally authorized source’).

Subparagraph ‘1’ also includes the term ‘legally authorized source’ which is also used in DODI 4140.67 and in the proposed addition to the NASA FAR Supplement. The definition of this term within the proposed DFARS rule is identical to that found in the proposed addition to the NASA FAR Supplement. Though used within DODI 4140.67, the term ‘legally authorized source’ is not defined.

Subparagraph ‘2’ is not clear in its distinction from the latter part of ‘1’, but ‘1’ seems to be associated with the supplier of the item, where ‘2’ seems to focus on the item itself. This subparagraph does not appear in the definition within DODI 4140.67 nor does it appear in the proposed addition to the NASA FAR Supplement.

A problematic addition

Subparagraph ‘3’ of the definition within the proposed rule is highly problematic. Rather than representing counterfeits as a subset of fraudulent items, subparagraph ‘3’ is very broad and indicates that a fraudulent item or a nonconforming item that is unintentional would be considered counterfeit or suspect counterfeit. This subparagraph does not appear in the definition within DODI 4140.67 nor does it appear in the proposed addition to the NASA FAR Supplement. Here are specific issues I find with subparagraph ‘3’ …

Misrepresentation

Subparagraph ‘3’ encompasses items “misrepresented by any source to the end-user as meeting the performance requirements for the intended use” which could include an out of spec item due to a temporary lapse of manufacturing and testing process control. Such escapes could well be unintentional and unobserved by the supplier and the product represented to the customer “as meeting the performance requirements for the intended use” which, according to government contract law subject matter experts, could expose the supplier to False Claims Act liability (see Federal Contracts Report, “DOD Issues Proposed Counterfeiting Rule; Analyst Calls Rule ‘Opaque,’ Too Broad”).

New, used, outdated, or expired item

Subparagraph ‘3’ includes “[a] new, used, outdated, or expired item”. While this appears to incorporate the expectations of NDAA2012§818 to include “previously used parts represented as new” in a Department-wide definition of the term “counterfeit electronic part”, it also includes “outdated” or “expired” items without offering a definition for these terms. Is an obsolete part carried in distributor inventory an “outdated” or “expired” item?

Intended use

Subparagraph ‘3’ use of the terms “intended use” and “end-user” could also introduce problems. In the case of an original manufacturer or distributor supplying electronic parts, who determines “intended use”? Would that be the supplier, the contractor that has design application knowledge for the “intended use” for the electronic part, or would that be the DoD “end-user”? A component supplier generally does not know what equipment the electronic part will be used in let alone its “intended use” within that equipment. A component supplier of other than a mil-spec item might argue that the item supplied was not intended for use in military equipment at all; this is a common assertion of SIA member companies. The DoD “end-user” would certainly have knowledge for the “intended use” of the equipment containing the electronic part, but would likely not have design application knowledge for the “intended use” for the electronic part within the design of the equipment.

An omission within the definition of ‘legally authorized source’

The definition of ‘counterfeit part’ within the proposed DFARS Rule introduces the term ‘legally authorized source.’

“Legally authorized source means the current design activity or the original manufacturer or a supplier authorized by the current design activity or the original manufacturer to produce an item.”

The definition of this term, however, does not include ‘authorized distributors’ who are identified as a key element of a trusted supplier concept specified in NDAA2012§818(c)(3)(A).

Recommendation

Modify the definition of ‘counterfeit part’ with the proposed rule as follows:

Counterfeit part means n unauthorized copy or substitute part that has been identified, marked, and/or altered by a source other than the part’s legally authorized source and has been misrepresented to be from a legally authorized source, including previously used parts represented as new.

Modify the definition of ‘legally authorized source’ with the proposed rule as follows:

Legally authorized source means the current design activity or the original manufacturer or a supplier authorized by the current design activity or the original manufacturer to produce or distribute an item.”

Henry Livingston

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2 thoughts on “A Problematic Definition of ‘Counterfeit Part’ within the Proposed DFARS Rule on Detection and Avoidance of Counterfeit Electronic Parts

  1. Cynthia Gordon says:

    the real question here is, it’s open for public comment, to verify if further scrutiny is needed. Did you send your concerns on during the public commentary period, Henry?

    • A number of us, I am sure, will be engaged in preparing and submitting comments during the review period.

      My purpose here is to identify and socialize issues to consider when preparing responses to the proposed rule and to prepare for implementation of the final rule.

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