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

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.

Wild, wild Web

One contributor is Internet-based businesses that routinely sell millions of dollars worth of equipment and enable the smallest shop to market and deliver items worldwide. These speedy, global transactions can be helpful, but participants reportedly don’t conduct as much verification and certification as traditional manufacturer-to-distributor channels.

“We haven’t personally identified any counterfeit items, but our customers report seeing many items on eBay for more than 30% off list prices,” says David Stock, a system integrator at Innovative Control Inc. (ICI, www.innovativecontrolinc.com), Crystal Lake, Ill. “If someone else wants to purchase equipment that way it’s fine with me, but I think buying in an environment without distributors and traceability is a serious risk.”

Some purchasers accept counterfeiting and knowingly buy fake devices. “Some people actually choose to purchase counterfeit products, assuming they’re paying less for products that are equal in value to the legitimate products they mimic,” states the OSHA-ACIL report. “People who deliberately choose to buy counterfeit products aren’t victims. Instead, they support the criminally deceptive practices of counterfeiters by creating a built-in market for their goods. If consumers stopped using counterfeit products, counterfeiting wouldn’t disappear. However, in many cases, counterfeiting would be less profitable and more risky without these easy sales.”

Anthony Todarian of the Canadian Standards Association (CSA, www.csa.ca) adds that it and other agencies regularly issue product alerts and recalls when it finds counterfeit products, and that eBay and other online sellers have promised to remove them when they’re notified.

Pauley adds it’s one thing to buy a contractor’s leftover 10-pack of circuit breakers on eBay, but sellers that indicated they have large numbers of breakers for purchase raise significant questions about where they’re coming from. “When you see higher volumes and a supplier saying it can deliver any amount, you have to ask if this is a legitimate source,” says Pauley. “This is why you can’t just run to the Internet to buy circuit breakers. You have to know your sources and start further up the food chain. If you wait until a product is delivered, it’s probably too late.”Dangerous deceit

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 isn’t 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 might not realize this until years later, when those fake devices are called on to work and fail instead.

We expect parts to fit, function and endure. But counterfeits generally use cheaper and less safe materials, such as flammable plastics, less durable alloys, loose tolerances and inadequate electroplating. Copiers cut production costs by not respecting quality and safety standards, imitating external appearances with no knowledge or understanding of the technologies needed to produce functional, durable parts.

In the case of gearboxes, “We’ve seen direct knock-offs that look the same from six feet away,” says Bill Engle, plant manager, Dodge Gear, Greenville, S.C. “You’ll save about 40%, but after 150 hours they catch fire.” Some of the knock-offs came back from distributors as “warranty returns.” Engle doesn’t know how the end users get the knock-offs, but until they get back to the factory, everybody is under the impression they’re genuine Dodge gearboxes.

Poorly-made bearings contribute to excess friction and wear that cause overheating. “We’re seeing some counterfeit bearings from China,” says Bill Bayliss, business manager-aftermarket at FMC FoodTech (www.fmctechnologies.com/foodtech). “Some bearings are very sophisticated and, as a result, very expensive. But there’s a reason they’re so expensive. Some customers are finding out the hard way.”

Some fake bearings are obvious on inspection. Visible clues can include packaging differences, alternate countries of origin or oddball serial number formats or differences in the look of subcomponents. Names and logos might be misspelled. Increasingly however, the more sophisticated fakes are essentially identical under routine inspection or testing. The hidden differences, determinable only by experts, may have serious consequences.

These nonvisible differences can include nonhardened races, alloys without adequate corrosion or wear resistance, unserviceable seals or defective lubrication, suggests Shaeffler KG, maker of INA and FAG bearings. In some cases, the fakes can look “more real” than the legitimate product, according to reports from major bearing manufacturers. In most cases, the final determination can only be made by an authorized distributor or the manufacturer.

Falsification of bearing identity has reached such proportions that manufacturers, major customers and testing and certification organizations worldwide are discussing a “Global Bearing Code of Conduct,” and the Japanese Bearing Manufacturers Association has published a poster showing a pair of handcuffs whose one side is a large ball bearing. The poster says, “Counterfeit bearings are illegal. They can cause injury or death. Don’t produce them. Don’t sell them. Don’t buy them.”

Can’t judge by appearance

Close visual inspection of devices and documentation is supposed to help find counterfeits, but several sources say the external appearance of many fakes is so good that they’re almost indistinguishable from their genuine counterparts. “You can’t identify counterfeit products by physical appearance,” says Snyder. “The counterfeits we are seeing today are indistinguishable in outside appearance – I cannot see the difference.”

“We work with the government and customs. We give them brochures on what to look for and the next shipment has fixed it. We say to look for grease on the contactor jaws, they put grease on the jaws.”

Even newer identification technologies, such as RFID chips and laser etching, can be quickly adopted by counterfeiters.  “Many counterfeits look pretty much like the real thing. They may even have duplicate die marks and moldings that serve no purpose. We have seen situations where manufacturers have added holographic labels to their products, and then the counterfeiters copied it nine months later,” says Pauley. “Sometimes our engineers have to take apart devices to compare the legit and counterfeit version, and the fakes ones quickly fail if their performance is tested.”

Still, the battle for positive identification starts with the naked eye. “We work with the OEMs for a way to authenticate a product,” says Jack Walsh, director of sales, Videojet (www.videojet.com). “The first way is by quality – a high-quality product and packaging so you can tell by looking. But counterfeiters are clever, and there isn’t always packaging, so we do track and trace. At the low level, it’s covert marking on the product itself. The high level is using RFID or other markings as a license plate that travels with the product.” Every product move in the supply chain is recorded, and authorized distributors must be able to show traceability back to the source.

Covert identification
Covert identification
One of the simpler tools in the battle for authentication is hidden marking, such as this code visible only under ultraviolet light. (Image source: Videojet)

“An unauthorized supplier won’t be able to provide the history,” Walsh says. “This is going on in the automotive industry right now. It’s called serialization, and it’s being used on safety-critical and high-cost items.” Registered part IDs can be accessed through the Internet. “If a distributor gets a suspect part, or Customs sees a load of suspect parts or a warranty claim is questionable, they can call the supplier and check it out,” he adds. “We’re supplying end-to-end turnkey systems for this.

“You can’t penalize the distributors and shut them down when they say they didn’t know the part was counterfeit. Now the manufacturers have a way for them to know.”

Know your suppliers

Perhaps the best way to avoid counterfeit devices is to buy from manufacturers and distributors that are well known to your own company and its engineers. However, it’s also vital to maintain frequent personal contact with authorized suppliers because counterfeiters can set up false representatives and corporations to support their fake products and documentation.

“When you’re in a rush, you might not check some certifications as close as possible,” says Bartlett. “So, besides checking that documents aren’t bitmapped images and telephoning to confirm suppliers’ claims and identities, buyers also must be responsible for their devices’ audit trails, and make sure where, when and who makes these products.