Fake parts can cause real problems

There’s more evidence than ever before that fake products and parts are detrimental to those who purchase them.

By Jim Montague, Editor at Large, and Paul Studebaker, CMRP, Editor in Chief

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We who live and work in societies with long, strong histories of industrial responsibility and regulatory compliance are accustomed to choosing freely among a variety of sources for components and replacement parts.

“Original” or “factory” parts come from the company that built the machine and are understood to be the same as those used on the production line. Original equipment manufacturer (OEM) components are expected to be made by the company that supplies the factory, and therefore equivalent to factory parts in every way but the name. Aftermarket parts come from a variety of sources and are trusted according to the brands under which they are built or sold.

We’ve chosen our parts based on real or perceived quality, value, supplier reputation or support, and suitability for intended purposes. Some prove better than others, but we’ve rarely been surprised by nonfunctioning or dangerous parts. Maybe this is because it traditionally has taken a significant investment in manufacturing equipment and the supply chain to establish a brand, make the parts and bring them to market.

That, plus the requirements of certification agencies such as Underwriters Laboratories (UL), have largely kept low-quality and non-functional components out of our plants.

But not anymore.

A growing pain

Moving beyond Rolex watches, low-quality bolts and brand-name auto parts, counterfeiters are producing fake industrial equipment and components complete with bogus marks, packaging, documentation and certifications. Also creeping into the supply chain are imitations or knock-offs that wear their own brands (or none) but deliberately mimic the appearance of famous-maker products.

The International Chamber of Commerce (ICC, www.icc.cca.org) estimates that trademark counterfeiting accounts for about 6% of world trade. It’s worth an estimated $350 billion annually, according to the white paper, “The Threat of Counterfeit Product Approval Marks Warrants Aggressive Detection and Enforcement Action,” by a recent alliance between U.S. Occupational Safety and Health Administration (OSHA, www.osha.gov) and the American Council of Independent Laboratories (ACIL, www.acil.org).

“In its mid-year 2005 report, the U.S. Department of Homeland Security’s Customs and Border Protection division reported that customs seized more than $64 million worth of counterfeit products in 3,693 seizures. Electrical equipment, much of it intended for the U.S. workplace, alone accounted for more than $6 million,” the paper says.

“The International Anti-Counterfeiting Coalition (IACC, www.iacc.org) reports the majority of counterfeit products come from Asia, primarily China, and that Eastern Europe also has become a significant source. The manufacture and distribution of counterfeit products has been linked to organized crime. Counterfeit approval marks have been found on electrical products built with substandard materials and exhibiting compromised electrical spacing – both of which pose potential shock and fire hazards to U.S. employees.”

Jim Pauley, vice president, industrial and government relations for Schneider Electric (www.us.schneider-electric.com), received a phone call from the U.S. customs office in San Francisco a couple of years ago. “They found a person trying to get through from China with a suitcase full of circuit breakers with our Square D logo and UL labels on them,” Pauley says. “All of them were counterfeit. This has led to several ongoing litigations, and six settled lawsuits, but we think the overall state of the problem is still much worse than people realize or are willing to admit that it is.”

Schneider Electric has uncovered counterfeit activity, but it is difficult to estimate how widespread the issue is. “This is what we know, and there are probably more,” Pauley says. “Customs usually inspects about 2% of all cargo, and the rest can’t all be crystal clean.

The British Valve and Actuator Association’s (www.bvaa.org.uk) technical director reports there was very little counterfeiting of mainstream valves just five or 10 years ago, but now there’s more anecdotal evidence than ever before about fake products and parts, coming mostly from Asia and specifically China, says Rob Bartlett, director of the organization. “Everyone has a story.”

Typically, a defective part will be returned to the manufacturer, often through an authorized distributor. “We find out which contractor returned it, find out where he got it, trace down the source and refer it to the Consumer Product Safety Commission,” says Bill Snyder, vice president, channel development, Square D. “It gets traced back to one or two factories in China, which get raided and shut down. But they reopen a few days later, a couple of miles away."

Pauley points out that the parts being copied were never manufactured in China. “Don’t misunderstand,” he says. “People think this is what happens when you manufacture in China, but these products are not made by us in China. They have counterfeit ‘Made in USA’ labels on them. This is not a 'manufactured in China' problem, it’s a different group. These are criminals under U.S. law.

It would be one thing if counterfeiting only compromised patents, copyrights and sales revenues. But in the case of industrial components, it’s also a matter of functionality.  “They put on fake Square D and UL labels, and the parts don’t work. A counterfeit breaker subjected to a fault current that any breaker would be expected to clear just blows up,” says Snyder. “And this is not limited to Schneider or Square D – our competitors are seeing the same thing with products from wiring devices to cords to allegedly explosion-proof boxes and fittings.” Users may not realize this until years later, when those fake devices are called on to work and fail instead.

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