Counterfeit Goods DIsclosure

Kristal Snider
ERAI, Inc.

The steady stream of GIDEP and ERAI Alerts along with a growing number of federal indictments serves as evidence that counterfeit part proliferation isn’t slowing down. Reporting and analyzing suppliers and suspect parts can be overwhelming and may lead to unexpected twists and turns. Take for example the recent indictment against Hao Yang, a 25 year old Chinese national residing in the U.S. on a student visa that admitted to selling counterfeit goods in the open market. As is often the case, Yang and his associates operated as an Independent Distributor using multiple company names including, but not limited to: MS Technologies Inc., (aka MST, aka MST Chip, aka MSTI) and Aone Electronics in Baltimore; A-Best Technologies in China; and Arrcord Group, LLC, SMC Group and Smooth LLC. In addition to the named entities, ERAI records link these operations to a string of companies not named in the indictment with global footprints in the US, Canada and China. It is not known how many military grade integrated circuits infiltrated the supply chain or the number of organizations affected by Hao Yang’s actions but there are steps that can be taken that could lessen the risk posed by MS Technologies and others.

It's difficult to completely eliminate risk but when you have the name of a known problematic source of supply, an organization can view all purchases made from that source and identify who those parts were sold to. To disclose, not disclose, how and when is something every organization needs to discuss both internally and with legal counsel.
  1. Should an organization be required to notify its customer if they sold them parts that originated from a source later identified as high risk?
  2. On what basis should a supplier be viewed as a high risk source? Should action be restricted to individuals and/or companies indicted by the Federal Government or applicable to any person or company found to have shipped a suspect counterfeit or counterfeit part (e.g. named in a GIDEP or ERAI Alert)?
  3. Is an organization’s liability increased if they do become aware of a risk and they fail to forward that to their customer?
  4. What do your customers expect and/or want?
The bottom line is: There could be parts sitting on the shelf of a stocking Independent Distributor, contract manufacturer, or government prime contractor right now that originated from MS Technologies or one of its known affiliates. Now what?

ICE Press Release: Man pleads guilty to selling counterfeit goods, including military-grade circuits