Legislation Tackling Counterfeit Parts in the Defense Supply Chain Continues to Evolve

Kristal Snider
ERAI, Inc.

On December 23, 2016, S.2943 National Defense Authorization Act for Fiscal Year 2017 was signed into law (Public Law No: 114-328). Section 815 revises requirements for the detection and avoidance of counterfeit electronic parts by eliminating the controversial phrase "trusted suppliers" and by replacing it with "suppliers that meet anticounterfeiting requirements".

SEC. 815. AMENDMENTS RELATED TO DETECTION AND AVOIDANCE OF COUNTERFEIT ELECTRONIC PARTS


Section 818 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112–81; 10 U.S.C. 2302 note) is amended—

(1) in paragraph (3) of subsection (c)—

(A) by striking the heading and inserting "SUPPLIERS MEETING ANTICOUNTERFEITING REQUIREMENTS.—";

(B) in subparagraph (A)(i), by striking "trusted suppliers in accordance with regulations issued pursuant to subparagraph (C) or (D) who" and inserting "suppliers that meet anticounterfeiting requirements in accordance with regulations issued pursuant to subparagraph (C) or (D) and that";

(C) in subparagraphs (A)(ii) and (A)(iii), by striking "trusted suppliers" each place it appears and inserting "suppliers that meet anticounterfeiting requirements";

(D) in subparagraph (C), by striking "as trusted suppliers those" and inserting "suppliers";

(E) in subparagraph (D) in the matter preceding clause (i), by striking "trusted suppliers" and inserting "suppliers that meet anticounterfeiting requirements"; and

(F) in subparagraphs (D)(i) and (D)(iii), by striking "trusted" each place it appears; and

(2) in subsection (e)(2)(A)(v), by striking "use of trusted suppliers" and inserting "the use of suppliers that meet applicable anticounterfeiting requirements".


H.R. 1540- National Defense Authorization Act for Fiscal Year 2012: Then vs. Now

If we apply all of the revisions made since H.R. 1540 Sec. 818 "DETECTION AND AVOIDANCE OF COUNTERFEIT ELECTRONIC PARTS" was first signed into law, we can see the evolution supplier selection has taken. The highlighted sections appearing in the "Now" column reflect the current language with all applicable revisions applied. The text appearing in the "Then" column is the original text as it appeared at the time H.R. 1540 was signed and became Public Law No: 112-81 on December 31, 2011.

NOW   THEN
(3) SUPPLIERS MEETING ANTICOUNTERFEITING REQUIRE-
MENTS.- The revised regulations issued pursuant to paragraph (1) shall—

(A) require that the Department and Department contractors and subcontractors at all tiers–

(i) obtain electronic parts that are in production or currently available in stock from the original manufacturers of the parts or their authorized dealers, or from suppliers identified as suppliers that meet anticounterfeiting requirements in accordance with regulations issued pursuant to subparagraph (C) or (D) and that'; obtain such parts exclusively from the original manufacturers of the parts or their authorized dealers;

(ii) obtain electronic parts that are not in production or currently available in stock from suppliers identified as suppliers that meet anticounterfeiting requirements in accordance with the regulations issued pursuant to subparagraphs (C) and (D); and

(iii) obtain electronic parts from alternate suppliers when such parts are not available from original manufacturers, their authorized dealers, or in accordance with the regulations issued pursuant to subparagraphs (C) and (D;

(B) establish requirements for notification of the Department, and for inspection, testing, and authentication of electronic parts that the Department or a Department contractor or subcontractor obtains from any source other than a source described in clause (i) or (ii) of subparagraph (A), if obtaining the electronic parts in accordance with such clauses is not possible;

(C) establish qualification requirements, consistent with the requirements of section 2319 of title 10, United States Code, pursuant to which the Department may identify suppliers that have appropriate policies and procedures in place to detect and avoid counterfeit electronic parts and suspect counterfeit electronic parts; and

(D) authorize Department contractors and subcontractors to identify and use additional suppliers that meet anticounterfeit-
ing requirements and provided that–

(i) the standards and processes for identifying such suppliers comply with established industry standards;

(ii) the contractor or subcontractor assumes responsibility for the authenticity of parts provided by such suppliers as provided in paragraph (2); and

(iii) the selection of such suppliers is subject to review, audit, and approval by appropriate Department officials.
 
(3) Trusted suppliers.--The revised regulations issued pursuant to paragraph (1) shall--

(A) require that, whenever possible, the Department and Department contractors and subcontractors at all tiers--

(i) obtain electronic parts that are in production or currently available in stock from the original manufacturers of the parts or their authorized dealers, or from trusted suppliers who obtain such parts exclusively from the original manufacturers of the parts or their authorized dealers; and

(ii) obtain electronic parts that are not in production or currently available in stock from trusted suppliers;

(B) establish requirements for notification of the Department, and inspection, testing, and authentication of electronic parts that the Department or a Department contractor or subcontractor obtains from any source other than a source described in subparagraph (A);

(C) establish qualification requirements, consistent with the requirements of section 2319 of title 10, United States Code, pursuant to which the Department may identify trusted suppliers that have appropriate policies and procedures in place to detect and avoid counterfeit electronic parts and suspect counterfeit electronic parts; and

(D) authorize Department contractors and subcontractors to identify and use additional trusted suppliers, provided that--

(i) the standards and processes for identifying such trusted suppliers comply with established industry standards;

(ii) the contractor or subcontractor assumes responsibility for the authenticity of parts provided by such suppliers as provided in paragraph (2); and

(iii) the selection of such trusted suppliers is subject to review and audit by appropriate Department officials.


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