What To Do When You Receive A Counterfeit Part

With increased complexity in the authorized and independent  supply chain, it is highly likely you will run across counterfeit electronic components at some point. Here are some important steps to take as well as questions to consider when you do receive counterfeit parts.

1. Should you keep the supplier on your approved list? When receiving a counterfeit part, our tendency may be to immediately terminate the supplier. Although that is likely the correct course of action, consider their role in the event. Could they have performed the proper inspection to detect the counterfeits if your organization had paid extra for in depth testing (X-ray, XRF, decapsulation, etc.)? If so, perhaps a probationary period with some changes to your test requirements would make sense as opposed to wholesale elimination.
2. Can you, or should you return the counterfeit electronic components back to the supplier? It is illegal to ship counterfeit goods, whether you are the buyer returning them or the original seller. The parts should be permanently destroyed to avoid future use. However, you may want to keep some of the counterfeit parts for future reference and comparison, especially if you need them for legal purposes. If you decide not to return the parts, you want to ensure the supplier will not charge you, as they were unusable. Hopefully your organization did not pay for the parts in advance. If the supplier demands that the parts to be returned and you decide to send them back, you should do your best to confirm that the supplier is not intending to put them back in the marketplace, potentially harming another organization.
3. Is the rest of your supply chain safe from counterfeits? Once you have had your eyes opened to the reality and implications of counterfeits in your products, you will likely want to look at which of your other suppliers may also be a risk for your organization.  The first group of suppliers to audit would be your non-authorized distributors.  Are they certified to counterfeit mitigation standards, do they have the proper test equipment and engineers to use the detection tools, and if a counterfeit did get through in the future, would their warranty and insurance policy cover the costs? Next to on the list to audit would be the authorized channel.  There are a growing number of authorized distributors going outside of their manufacturer direct channel to supply parts to their customers.
4. Could the same supplier have shipped you counterfeits in the past? Upon receiving counterfeit parts from a supplier, it’s a good time to go through and audit your inventory for parts previously received from the same supplier. If they are already on boards and in the field, are you having a high failure rate? Counterfeits may be the culprit.  
5. At what point were the counterfeits detected? Depending on when and where the counterfeits were detected, you can evaluate how your counterfeit avoidance program is performing. If they were caught at your distributor, your program gets an A+.  If they were found in products already in the field, you better get to work to bring your up your F or you are going to fail. 
6. Should you engage or inform the end-use customer or does it not affect them? There is a lot of value sharing detected counterfeits with your customer. If they actually received the product, there is no question that they must be informed.  If not, the information is still helpful for the customer so they can consider re-designing, adding test parameters to mitigate risk, and enlightening them so they don’t buy the same parts from another supplier in the future.
7. Does your company or a government entity require you to report the counterfeits to the broader industry? If your organization is supplying the U.S. government with products, it is highly likely that there is a requirement in your contract to report the information to GIDEP or other relevant reporting agencies. By doing so you are helping the broader industry avoid the dangers of counterfeits as well.
8. Do you have procedures in place to catch similar counterfeit electronic components next time? If you have found one counterfeit, who knows how many others have made it through to your products. There is no time like the present to put an end to the possibility of receiving more. This can be a fairly pain free process if you use the right partner to shield your company. Niche distributors, like AERI, do much of the counterfeit risk mitigation work for free when purchasing your products from them. Alternatively, you can send your QC team to conferences and training seminars in an attempt to gain the necessary knowledge that the niche distributors already have. 

These are tough questions that our team wrestles with on a regular basis. We have answered these questions and more for countless companies who have found themselves in this unfortunate position. It is important to continually vet your suppliers and work only with those who maintain the highest standards and reputation. There are many factors involved to avoid the receipt of counterfeit parts. Make sure you consider all the aspects, and most importantly, contact known experts if you need help navigating the challenges.