Monthly Archives: May 2013

“Consequences of Counterfeit” – ECIA

From ECIA’s May 2013 newsletter…

“Risk of counterfeit product remains an industry hot button, and getting even hotter in the aerospace and medical sectors. ECIA is actively engaged in the government’s effort to mitigate the risks by defining new parameters for the term “authorized”. Learn what’s happening and how you can participate.”

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An Imbalanced Approach to Counterfeit Prevention – Proposed DFARS rule on “Detection and Avoidance of Counterfeit Electronic Parts”

Section 818 of National Defense Authorization Act for Fiscal Year 2012 [1] calls for DoD to implement a risk based approach to counterfeit prevention and to establish regulations for contractors to “eliminate counterfeit electronic parts from the defense supply chain”. DoD Instruction 4140.67, DoD Counterfeit Prevention Policy [2], describes a realistic approach to counterfeit prevention. DODI 4140.67 states it is DoD policy to “Not knowingly procure counterfeit materiel” and calls for DoD to “employ a risk based approach to reduce the frequency and impact of counterfeit material”. Furthermore, DODI 4140.67 identifies “prevention and early detection” as the “primary strategy in eliminating counterfeit materiel within the DoD”. This strategy is consistent with recommendations the defense industry has communicated to DoD on several occasions over the past few years. Rather than extending this risk based approach to contractors, however, the strategy within the proposed DFARS rule on “Detection and Avoidance of Counterfeit Electronic Parts” [3] seeks to address the counterfeit electronic parts threat through (a) the purchasing systems of prime and upper tier contractors; (b) DoD approval of these purchasing systems; and (c) the withholding of payments to contractors. While definitive countermeasures can be applied by contractors to manage this problem more effectively, the global nature of the supply chain and current U.S. Government policies, including requirements described within this proposed DFARS rule, continue to present significant barriers to eliminating counterfeit products from the supply chain altogether.

Here are examples of the imbalanced approach to counterfeit prevention described within the proposed DFARS rule on “Detection and Avoidance of Counterfeit Electronic Parts”:

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FAR / DFAR Case Update (17 May 2013)

Status updates from the 17 May ‘Open Cases Reports’ …

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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’)

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A Disparity within the FR Notice for Proposed DFARS Rule on Detection and Avoidance of Counterfeit Electronic Parts (“Unallowable Costs”)

Some may be misled by the ‘supplementary information’ within the Federal Register Notice describing the proposed DFARS Rule on “Detection and Avoidance of Counterfeit Electronic Parts”. A disparity exists between the description of allowable cost exceptions and the wording of those exceptions within the proposed rule itself.

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New DoD Counterfeit Prevention Policy: Resolves Responsibilities Within DoD But Leaves Many Contractor Questions Unresolved — Robert S. Metzger

This new paper by Bob Metzger, of Rogers, Joseph O’Donnell, discusses DODI 4140.67. Bob compares the policy to NDAA2012§818 and the Kendall guidance memo, and presents observations on key responsibilities assigned to departments and DoD Components. …

New DoD Counterfeit Prevention Policy: Resolves Responsibilities Within DoD But Leaves Many Contractor Questions Unresolved

Bob observes the “receptive” rather than “prescriptive” nature of this new policy. DoD, however, did not extend this “receptive” approach to the proposed DFARS rule on “Detection and Avoidance of Counterfeit Electronic Parts”. Though this paper was prepared before the publication of the proposed DFARS rule, Bob’s observations are relevant and worthy of study.

Bob Metzger has written a number of other papers on supply chain security and counterfeit parts. He is also a member of The Task Force on Counterfeit Parts of the Committee on Acquisition Reform and Emerging Issues of the American Bar Association Section of Public Contract Law.

A Proposed Rule re “Detection and Avoidance of Counterfeit Electronic Parts”

DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) in partial implementation of a section of the National Defense Authorization Act for Fiscal Year 2012, and a section of the National Defense Authorization Act for Fiscal Year 2013, relating to the detection and avoidance of counterfeit electronic parts. …

Detection and Avoidance of Counterfeit Electronic Parts (2013-11400)

Example of Counterfeit Prevention for Bare Die Products

When describing counterfeit prevention for microelectronic products, literature and standards tend to focus on packaged products. After the original release of AS5553, G19 committee participants discussed the need for counterfeit avoidance and detection protocols directed toward bare die products.

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Counterfeit Prevention Clauses and Certification Expectations

A colleague recently approached me on the subject of counterfeit prevention clauses and certification expectations specified by many Government prime contractors and subcontractors within their standard terms and conditions.

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