Counterfeit parts and Conflict minerals

First published: October 17th, 2018
Author: Dr David Scrimshire
Company: TEC Transnational Ltd
Original article: https://www.linkedin.com/pulse/counterfeit-parts-conflict-minerals-david-scrimshire/

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Counterfeit parts and Conflict minerals

Introduction

Counterfeiting has a long and ignoble history, ranging from art and literature to manufactured goods. Unlike other industries, counterfeiting in the aerospace, defence and automotive industries may have life or death consequences.Although it is clear that counterfeit parts do enter the supply chain, the time and place of their entry is unpredictable.Managing this uncertainty has become more important due to the recent rise in the incidence of counterfeit reporting.

Most of us are aware of ‘blood diamonds’ (also called conflict diamonds) which are diamonds mined in a war zone and sold to finance an insurgency, an invading army's war efforts, or a warlord's activity!What may be less well-known are conflict minerals which share a similar pedigree and may inadvertently enter the supply chain.They include tin, tantalum, tungsten and gold (referred to as ‘3TG’).Recent legislative and regulatory initiatives by the OECD and EU seek to keep such ‘contaminated minerals’ out of the industrial supply chain by requiring organizations to prove that such minerals are either not from conflict-affected areas or that their production and trade have not contributed to conflict financing and human rights abuses.

What are counterfeit parts?

The following definitions are common to all standards and regulations relating to counterfeit parts –

  • Counterfeit Part – a fraudulent part that has been confirmed to be a copy, imitation, or substitute that has been represented, identified, or marked as genuine, and/or altered by a source without legal right with intent to mislead, deceive, or defraud
  • Fraudulent Part – any suspect part misrepresented to the customer as meeting the customer’s requirements (includes Fraudulent recycled – sold as new “unused”!)
  • Suspect Part – a part in which there is an indication that it may have been misrepresented by the supplier or manufacturer and may meet the generic definition of fraudulent part or counterfeit part

Examples of a counterfeit part can include, but are not limited to, the false identification of marking or labelling, grade, serial number, date code, documentation, or performance characteristics.Although most of the focus is on ‘EEE’ (Electrical, Electronic, and Electromechanical) parts, the principles and practices are applicable to other commodity types, including –

  • raw materials
  • outsourced special processes
  • mechanical components
  • standard and COTs parts
  • IT and communications technology

...... and all types of ‘matériel’ – i.e. the aggregate of ‘things used’ or ‘needed’ by any organization for the production of its products – distinguished from personnel.For example, the most commonly counterfeited ‘non-electronic’ parts encountered in the aerospace/defence sector are –

Air pressure regulators

  • Drum lids
  • Pipe trees
  • O-rings
  • Hex nuts
  • Dust plugs
  • Rotor blades
  • Brackets, Spacers, Screws & Faucets
  • Raw materials/Special processes
    (Note: ‘raw materials’ include – chemicals, steel & titanium, plastics & composites, solder & weld rods, etc.)
  • Fuel oil


What are Conflict minerals?

In conflict-affected and high-risk areas of the world, organizations involved in mining and trade in minerals have the potential to generate income, growth and prosperity, sustain livelihoods and foster local development.Unfortunately, they may also be at risk of contributing to, or being associated with, significant adverse impacts including serious human rights abuses and conflict.The minerals that pose the greatest threats are tin, tantalum, tungsten and gold, collectively known as 3TG.

For example, conflict minerals have for some years been a particular problem in minerals sourced from conflict-affected areas of the eastern DRC (Democratic Republic of Congo).The DRC’s mineral wealth is enormous.It is estimated that this country contains between 65-80% of the world’s columbite-tantalite (coltan) reserves, 49% of its cobalt reserves, and 3% of its copper reserves.

Organizations can, knowingly or unknowingly, be affected by the risk of supply chain ‘contamination’ with conflict minerals.This can occur at a number of stages, whether mining or trading in the eastern provinces of DRC, in an adjoining country, or further along the chain.

Meeting customer and international requirements

At this time the following three standards contain requirements relating to counterfeit parts (matériel) –

  • AS5553:2016 Rev B
  • IEC TS 62668-1:2016
  • AS9100:2016 Rev D

These documents may be augmented by ‘customer-specific’ requirements.Additional guidance for AS5553:2016 Rev B are now included in ARP6328.

Organizations must plan, implement, and control processes, appropriate to their operations and the product, for the prevention of counterfeit or suspect counterfeit parts use and their inclusion in product(s) delivered to the customer.Such processes should consider –

  • training of appropriate persons in the awareness and prevention of counterfeit parts;
  • application of a parts obsolescence monitoring program;
  • controls for acquiring externally provided product from original or authorized manufacturers, authorized distributors, or other approved sources;
  • requirements for assuring traceability of parts and components to their original or authorized manufacturers;
  • verification and test methodologies to detect counterfeit parts;
  • monitoring of counterfeit parts reporting from external sources;
  • quarantine and reporting of suspect or detected counterfeit parts

To minimize the risk of counterfeit matériel the golden rule is to only use authorized suppliers!Preferably use stockists, which are AS9120:2016 certified.

Recent guidance and regulatory initiatives seeking to keep conflict minerals out of the industry supply chain include –

  • OECD Due Diligence Guidance (available now!)
  • European Union adopted Regulation (EU) 2017/821 (in force 2021)

The OECD Due Diligence Guidance booklet contains the OECD Council Recommendation.The current (3rd Edition) was published in April 2016 and clarifies that the guidance provides a framework for detailed due diligence as a basis for responsible supply chain management of 3TG, as well as all other mineral resources.It is adhered to by 35 OECD Members plus 8 non-Members to date.

In May 2017, the European Union Regulation (EU) 2017/821 was adopted and published.The Regulation lays down supply chain due diligence obligations for EU importers of ‘3TG’ and accords with the 5-steps of the OECD Guidance.The EU Regulation will enter into force on 1st January 2021 and will require companies
(and individuals) to check where the minerals (i.e. ‘3TG’) and metals they import have been mined and processed responsibly.

The term ‘due diligence’ means acting with reasonable care and investigating an issue before making a decision on procurement.In other words, it is an on-going, proactive (and reactive) process through which organizations put in place actions to make sure they are able to identify, manage and report on 3TG risks in their supply chain.

Organizations are advised to formulate their own supply chain policy to conform to the OECD Due Diligence Guidance outlining the ‘3TGrisks of significant adverse impacts of conflict minerals.The policy may be embedded into their existing policies on corporate social responsibility, sustainability, or other alternative equivalent (e.g. Quality policy).

Once the policy has been documented, the organization must adopt, and clearly communicate to suppliers and interested parties, up-to-date information on the policy.

Next actions

Counterfeit parts and Conflict minerals pose a clear and present danger to organizations, their customers and the end-user of products. To ensure that organizations are empowered to meet the challenge, TEC Transnational have developed a 2-day course which covers in detail everything that is needed to develop, document and implement the necessary processes to address Counterfeit parts plus the legislation and regulations associated with Conflict minerals (‘3TG’).

The demand has been very high. The next public course with available places will be held on 30 - 31 January 2019. We can, of course, run the course as an on-site event at any time. Full details at our web page.We have also created a LinkedIn ‘Group’ specifically focused on Counterfeit parts & Product safety – feel free to join.