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DoD Issues Electronics Counterfeit Rule

Concern about counterfeit parts in the supply chain prompted the US Department of Defense to propose new and potentially costly requirements on electronics suppliers.

The rules would require contractors to detect and avoid counterfeit electronic parts. Contractors will have to implement counterfeit electronic part detection systems and they won't be able to pass these costs on to the government.

A 2010 report from the Department of Commerce on the defense industrial base found that “No type of company or organization has been untouched by counterfeit electronic parts. Even the most reliable of parts sources have discovered counterfeit parts within their inventories.” The International Chamber of Commerce estimates the global economic value of counterfeiting amounts to $600 billion per year.

Section 818 of National Defense Authorization Act for Fiscal Year 2012 required DoD to issue regulations on the definition, prevention, detection, and reporting of incidents actual or suspected counterfeit parts procured by or for DoD.

The proposed rule requires that DoD contractors and subcontractors at all tiers obtain electronic parts from only from “trusted suppliers” who themselves have proper anti-counterfeiting procedures in place. It also mandates that companies institute policies regarding the training of personnel, inspection and testing of electronic parts, traceability of parts, and reporting of counterfeit and suspect electronic parts.

The fact that the rule would apply to companies all the way down the supply chain means that it could impact contractors of all sizes, including many smaller companies. These policies and procedures are also subject to audit. Contracting officers are authorized to withhold payments if a contractor's anti-counterfeit system fails to meet requirements.

The rule establishes that a contractor or subcontractor must file a report with DoD within 60 days of becoming aware, or having reason to suspect, that any component or part purchased by DoD contains counterfeit electronic parts.

Return policy
A contractor program must include “processes to abolish counterfeit parts proliferation.” That means that you can't simply return suspect parts to your vendor where there is a risk it could be reinserted in the electronics supply chain.

The proposed rule also includes an expansive definition for the term “counterfeit electronic part.” Besides applying to unauthorized parts, it also covers “a new, used, outdated, or expired item from a legally authorized source that is misrepresented… as meeting performance requirements for the intended use,” a significant expansion of how industry now views the term.

The rule is also vague on what constitutes a misrepresentation and how “performance requirements for the intended use” would be measured.

So, it looks like the electronics industry will have another set of compliance requirements to work on. But don't worry, the requirements aren't yet set in stone. You might want to consider filing a comment on the rule, which DoD is accepting through July 15, 2013.

Comments can be submitted at the federal eRulemaking portal under DFARS Case 2012–D055 or by email to dfars@osd.mil. Include DFARS Case 2012 — D055 in the subject line of the message. Please also share your thoughts in our comment section below.

8 comments on “DoD Issues Electronics Counterfeit Rule

  1. SP
    June 13, 2013

    That would be fantastic. Yes ofcourse if counterfeit components are found, contractors must pay for it. But would this rule also apply for private companies? When you deal with Government, its very easy to set these kind of rules and also easy to ahere to it. But good portion of the counterfeit business is also in non defense or private sector. Counterfeit is a global problem, its time these kind of rules apply across all electronics business.

  2. Marianne
    June 13, 2013

    Thanks for this great article! 

  3. Hailey Lynne McKeefry
    June 13, 2013

    This strikes me as a quick turaround for this kind of requirement–with the deadline for comments only a month away. Of course, counterfit parts are a problem, and cause broad issues in the supply chain. At the same time, this type of ruling always leaves me asking “How will this be enforced?” and “How will this affect smaller organizations?”.  Often, these sorts of requirements fail to address both of these issues.

  4. Marianne
    June 13, 2013

    Haily, it was filed May 15, 2013, Two months, not one month, time. It can be enforced via DoD regulations, guidance, etc. I would add “counterfeiting” as another risk to be considered in addition to supplier defaulting, political and social issues, and supply chain disruption.

  5. elctrnx_lyf
    June 17, 2013

    These new rules are really necessary with more and more electronics are being used in defense equipment. The companies supplying subassemblies will have a big challenge to build counterfeit system. These systems require much more than simple inspection such as equipments, sample testing etc.

  6. SP
    June 18, 2013

    I was just wondering so much have been discussed on counterfeit across various forums, is there any well regulated and traceable effort being planned to combat counterfeit. Like if I am a simple small time electronics business guy and if some of the elctronics components that I get regularly have defects or I suspect are counterfeited, what should and must I do other than just complaining to the distributor.

  7. CaptJohn
    June 21, 2013

    Dear Peter, I enjoyed reading your blog.   It looks to me that the IEEE has tried to do something about counterfeit ICs in their latest IEEE 1149.1-2013 standard.  I read this on IEEE Today's engineer about a on-chip ECID, Electronic Chip Identification which, if specified by the buyer ( and perhaps DoD) would mitigate counterfeit or re-marked parts. http://www.todaysengineer.org/2013/Jun/ic-counterfeiting-IEEE-1149-1-2013.asp Seems like an easy way to meet the DoD rule for having a process in place to mitigate counterfeits.  The IEEE seems to be goiing after the DoD expanded definiion of counterfeits that you cite.  The ECID, Electronic Chip ID, includes IC grading information such as temperature grade, speed grades, date codes, pass/fail information which is stored on-chip at time of manufacturer.  This would thwart any one trying to re-mark a part as something different than is what is in the die.  And the technique to read the information out proposes to be easy/low-cost.Sincerely,John

  8. PaulChau
    October 11, 2018

    I wonder how many companies themselves are actually already implementing counterfeit components into their systems before this rule came along. You never know when these companies are trying to undercut the market and slice off the corners here and there just to make a quick buck. Hopefully the government will have a proper way to deal with these jokers with this new rule!

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