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SAE Anti-Counterfeit Standard Adds Teeth to Legal Protection

A new SAE International standard should help to serve as legal protection for distributors and buyers when counterfeit parts show up in the supply chain, while helping to mitigate an alarming increase in electronic component counterfeiting. The AS6496 standard (Fraudulent/Counterfeit Electronic Parts: Avoidance, Detection, Mitigation, and Disposition — Authorized/Franchised Distribution) was drafted to outline requirements for approved distributors in the aerospace sector. It details policies and practices for authorized distributors to follow.

One of the main takeaways of the standard is that it formalizes many standard policies and practices for authorized distributors. Previously, these procedures were often outlined in the terms of contracts distributors signed with buyers, but adhering to an official standard bears more legal weight.

“In a lot of the contracts with distributors, much of this language has flowed down to become a standard,” says Keith Gregory, a partner attorney at Snell and Wilmer who serves on the SAE International AS6081 committee. The standard thus helps to mitigate buyers' liability when counterfeit components have entered the supply chain. “If an authorized distributor fails to comply with the standards, then it will be much easier to place liability on them.”

Prior to AS6496's creation, distributors already, of course, invariably had to undergo stringent reviews in order to become qualified distributors. “It was a matter of a distributor being able to develop a relationship with a manufacturer so that the manufacturer might say 'Hey, we want you to be one of our authorized distributors.' I would think that before you would gain that kind of credibility with a manufacturer, you would have had to have shown the manufacturer that you had AS6081-like policies and procedures in place already.”

Distributors and buyers have more validity to protect themselves when fraudulent components show up in the supply chain in the aerospace sector when the distributor has adhered to the AS6081 standard. “It is much harder for anyone to prevail on a claim against a buyer and their distributor if they have met the requirements of the AS6496 standard. It also helps buyers assure the quality of the product.”

The adoption of AS6496 follows recent US government initiatives to prevent counterfeiting. The US Department of Defense, for example, has implemented stricter requirements and more stringent quality controls to prevent counterfeit parts from entering the US military's supply chain. The Defense Federal Acquisition Regulation Supplement (DFARS) lists additional purchasing requirements for suppliers to the US government to follow in addition to the policies resulting from the National Defense Authorization Act and the Senate Armed Services Committee Investigation in 2012.

Prosecutors in the United States have also begun to enforce criminal proceedings more aggressively against those accused of counterfeiting. Earlier this year, for example, a Massachusetts man pleaded guilty to charges of conspiracy to traffic in counterfeit military goods and faced up to 46 months in a federal penitentiary. He had confessed to selling counterfeit semiconductors to the US Naval Submarine Base in Connecticut. Other cases like this one should follow.

However, these government initiatives remain too US-centric compared to an SAE standard, Gregory says. In the case of DFARS, for example, “there are companies overseas that may not necessarily agree with the National Defense Authorization Act supplement.”

“Many companies are not even subject to US jurisdictions, whereas the SAE standard is more international-centric. On some of these committees, there are representatives from other countries in addition to the United States.”

AS6496 and other standards that the SAE will likely create ultimately help end-users the most. It is sometimes easy to forget that human lives are at stake when counterfeit components enter the supply chain. “I once saw a picture of a father standing next to his son who was in the US Air Force in front of a plane. If there was a counterfeit part in that airplane, then that son would die.”

2 comments on “SAE Anti-Counterfeit Standard Adds Teeth to Legal Protection

  1. _hm
    November 11, 2014

    What I have closely observed is that buyer is to blame for 50% of time for this counterfeit part purchase. How do you prevent this when buyer himself is not committed?

  2. Daniel
    November 13, 2014

    “What I have closely observed is that buyer is to blame for 50% of time for this counterfeit part purchase. How do you prevent this when buyer himself is not committed?”

    Hm, there are different set of customers in market, for everybody affordability is the key factor. I know about certain customers, who are only looking for counterfeit components; the reason is they want to sell the product at dam cheap price and quality is not an issue.  Other set of customers are looking only original components where strictly following quality.

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