Q3 2014
Dear Members & Colleagues:

I was once asked by someone if I was familiar with the term "big data".  Google offered up Doug Laney’s definition:  "Big data" is high-volume, -velocity and -variety information assets that demand cost-effective, innovative forms of information processing for enhanced insight and decision making.

While ERAI does not process the volume of data intended by the definition, we did see the applicability of the idea that data requires much more than just flat out reporting. There is a distinct difference between data and information.  Foresight, planning and many hours of programming are required to turn data into useable information that we, in turn, can provide to our Members to help them make more informed decisions.

Needless to say, this has resulted in quite a busy summer for us.  Our first step was to redesign our website with a new and modern look and color scheme and improve how our data and tools were grouped in the navigation. Our next and more important step was to increase the usability of our High Risk and Counterfeit Parts data. The new changes will allow Members to access part data and nonconformance descriptions as a result of a high risk part search and will also act as training and reference tool by allowing searches for specific nonconformances found within the part reports.

In tandem, we have taken large strides into restructuring the data and image tags which have resulted in the creation of our new Nonconformance Photo Library – an industry first! This unique tool searches through images found in the High Risk and Counterfeit Parts Database and is searchable by nonconformance type. In one search, our library quickly provides photographic examples of more than 75 different nonconformances from suspect counterfeit and high risk parts.

Damir's article provides further details on these functions which will be a part of the new site's launch in November - stay tuned! Feel free to send us your ideas and comments as well as your feedback about our new tools and website changes. I can always be reached at anne@erai.com.


Anne-Liese Heinichen

Tips for Online Verification of Suppliers
Terry Lively, ERAI

What are the dangers lurking behind a well-designed website or a friendly email? Unfortunately we don't always know until a problem causing irreversible damage occurs.

In an effort to limit your exposure to potential problems in this ever-changing and somewhat volatile global electronics supply chain, it is imperative that any and all steps possible are taken to verify the legitimacy of the organization you are considering doing business with.

Modern technology has brought the days of the old-fashioned "gentlemen's agreement" to an end. Human-to-human contact is scarce in this industry leaving it very easy for someone to hide behind a computer. However, if used to its potential, modern technology can also make it a little easier for us to do our due diligence to vet our customers and suppliers.

While onsite inspections are ideal, they can be costly and are not always feasible. As such, we have to rely upon other sources to help us. Sadly, there is no fool-proof way to guarantee a successful transaction; however, there are relatively simple steps that can be implemented into your vetting process to minimize the risks of doing business with an unknown source.

ERAI: ERAI is an excellent resource to see if any alerts are linked to your potential customer or supplier. Members can search company profiles in the ERAI website or call our office directly.

Checking references: While references are typically requested as a normal procedure, they are not always verified. Invest the time to contact trade references and see what others say about the company’s performance history.

Secretary of State websites: Secretary of States’ websites provide you with corporate information belonging to each company that is registered in that state. With the exception of a few, this information is available free of charge. Often times the records will divulge the date of incorporation, officers, registered agents, etc. The ERAI website has links to all Secretary of State websites including the UK and Hong Kong.

Google Earth: In addition to verifying the address, Google Earth can often times show a satellite picture of the location that can show you if their “3000 foot warehouse” is actually a house or strip mall.

The UPS Store website: If you have reason to be suspicious of a company's address, you can go to the UPS Store location search (www.theupsstore.com/Pages/index.aspx) and input the address to make sure they are not using this as their shipping address.

Online searches are also an option. By simply inputting the company name and/or address, phone number, etc. into your web browser, you can find multiple resources for information, including if a company is using a "virtual" office. Bear in mind, you can’t believe everything you read. Websites including online trading portal comment sections can be useful; however, they are not always accurate. Do your best to verify the information you read...good or bad.

Pay attention to their self-proclaimed accolades. It’s better to resort to the "if it sounds too good to be true…" theory than to find out later you have been fooled. If they claim to be an authorized distributor, it's easy enough to go to the OCM's website as they often times will identify their distributors. ISO certifications, ASA certifications, etc. can most often be verified online through registrars.

If you stumble across an organization that is misrepresenting information (e.g. false certifications, falsely claiming to be an ERAI Member, etc), let us know. Email us at eraiinfo@erai.com.

If you have any additional methods your company uses to safeguard against fraudulent or problematic companies or individuals, please share them with us. The more information you share with ERAI, the more information is available to your fellow ERAI Members.

Articles You Can’t Afford To Miss

ERAI’s escrow services are now available to both Members
and Non-Members

ERAI's escrow services are now available to all companies in the electronics supply chain. ERAI membership is not required.

New Rates Now In Effect

eraiESCROW's rates are as follows based on the dollar amount of your transaction:

Up to $25,000.00 = 1.5% transaction fee ($125.00 minimum – maximum $250.00)
$25,000.01 - $100,000.00 = 1.0% transaction fee ($250.00 minimum – maximum $500.00)
Over $100,000.00 = 0.5% ($500.00 minimum – maximum $1,500.00)

To start an escrow simply email a copy of the purchase order and invoice to eraiescrow@erai.com. If you have any questions regarding the service, please contact our office at 239-261-6268. A specially trained escrow agent will be happy to speak with you.

SPECIAL OFFER - First escrow FREE for first time users of our service (please note wire fees apply).  Call the escrow department at 239-261-6268 to cash in.

Step 1

The terms of purchase and sale are agreed upon and the escrow is initiated.
Both the buyer and seller must register or be registered to use eraiESCROW. Once registered, either the buyer or seller begins a transaction.

ERAI collects a copy of the purchase order and the proforma invoice.

The length and nature of the inspection is documented (e.g. how long will the buyer have to inspect the material, will the parts be visually inspected, electrically tested or both and/or will the inspection or testing be performed in-house or by a third party?).
Step 2

Payment is wired to eraiESCROW.
Payment for the cost of goods plus any applicable fees is wired to the escrow account.

eraiESCROW verifies payment is received and the Authorization to Ship is sent to the Seller.
Step 3

The seller ships product(s) to the buyer.
Upon receipt of the written Authorization to Ship notification, the seller is instructed to ship the goods in accordance with the written agreement. The seller is required to submit a tracking number so the goods may be tracked while in-transit.

eraiESCROW will verify the date and time of delivery at which time the inspection period begins.
Step 4

The buyer accepts or rejects the material.
At the conclusion of the inspection period, the buyer must accept or reject the product.
Step 5

At the conclusion of the inspection period, the buyer must accept or reject the product.
If the goods are accepted, payment will be released to the Seller.

If the goods are rejected, the Seller will be provided with written notification outlining the reason for rejection and will be asked to provide a Return Merchandise Authorization (RMA) and tracking number so the goods can be returned.

Once the goods are paid for or returned, the transaction is complete.

Website Redesign
We have a new look and feel. More importantly, we made improvements to the navigation and the site is now compatible with larger monitors as well as mobile devices.
All companies in the supply chain can now enhance their risk management process with eraiESCROW. eraiESCROW’s services are available to all companies in the supply chain, regardless of ERAI membership status. You can easily start an escrow through our website and still receive ERAI’s personalized service at competitive rates.
Nonconformance Photo Library
An ERAI exclusive - the Nonconformance Photo Library consists of photographs contained within part reports culled directly from ERAI’s High Risk & Counterfeit Parts Database and is searchable by nonconformance type. In one search, our library quickly provides photographic examples of more than 75 different nonconformances from suspect counterfeit and high risk part reports.
High Risk & Counterfeit Parts Advanced Search
ERAI’s High Risk & Counterfeit Parts Database can now be searched using multiple criteria: part number, manufacturer, a date range during which a part was reported and/or specific nonconformance(s) (one or more from a list of over 75 different nonconformances amassed in the ERAI High Risk & Counterfeit Parts Database) contained in the report. Filters for suspect counterfeit and nonconforming parts and reports containing images can also be used to refine your search results.
Profile Updates
You can now update your personal settings, download your company’s ERAI Smart Logo and post an inventory file to the ERAI Part Sourcing Database in one convenient location.
Check out our new blog! We'll be posting items of general interest in an effort to better keep our Members (and non-Members) in the know with current industry events, best practices and reports from ERAI staff.
ERAI Toolbox
A resource center, the ERAI Toolbox features a variety of resources regarding counterfeit parts, government regulations, ERAI’s INSIGHT newsletter, our new blog, glossary of commonly used industry terms and industry news. The toolbox will soon be expanded to include other industry-related topics and aims to provide data and information combed from different sources to provide a reference guide and training tool for the latest supply chain issues.
Report a Part Submission Enhancements
When submitting a part, companies can now view ERAI’s list of nonconformances commonly identified in our High Risk Parts & Counterfeit Database. Part submissions can now easily be tagged with the nonconformance(s) contained therein by simply selecting the relevant nonconformances from a list, attaching relevant photos and test reports if available and clicking on the submit button.
ERAI Executive Conference 2015 Portal
Check back often as we update the 2015 Conference portal with agendas, speaker bios, venue and travel information, sponsorship and advertising opportunities and registration.
Part Sourcing for all Members
All members can now access the ERAI Member-only part sourcing database. Further your relationship-driven model by sourcing from companies also using ERAI’s services.

Q3 Important Industry Announcements

July 10, 2014 - UK Ministry of Defense (MOD) released Defense Standard 05-135 (DEF STAN 05-135) Avoidance of Counterfeit Materiel. The standard, devised solely for the use of the MOD and its suppliers, defines the arrangements that a supplier is required to establish to demonstrate they are actively planning and managing the risk of counterfeit materiel in their supply chain.

ERAI INSIGHT: The UK MOD finally acknowledges the threat posed by counterfeit parts to their defense systems through the release of this standard. Suppliers now have requirements to show they are proactively mitigating risk for materiel supplied to the MOD.

Access (requires registration): http://www.dstan.mod.uk

July 29, 2014 - SAE International released industry standard AS6174 Revision A - Counterfeit Materiel; Assuring Acquisition of Authentic and Conforming Materiel. This SAE Standard standardizes practices to: a. maximize availability of authentic materiel, b. procure materiel from reliable sources, c. assure authenticity and conformance of procured materiel, including methods such as certification, traceability, testing and inspection appropriate to the commodity/item in question, d. control materiel identified as fraudulent/counterfeit, e. and report suspect or confirmed fraudulent/counterfeit materiel to other potential users and Authority Having Jurisdiction.

ERAI INSIGHT: Revision A was generated to correct a ‘significant error’ in AS6174’s material traceability requirement.

Learn more and purchase: http://standards.sae.org/as6174a/

August 20, 2014 – SAE International published industry standard AS6496 -Fraudulent/Counterfeit Electronic Parts: Avoidance, Detection, Mitigation, and Disposition - Authorized/Franchised Distribution.

ERAI INSIGHT: Although there have not been many reports of counterfeit parts making their way through authorized distribution channels, SAE recognized the need to develop a standard to address specific anti-counterfeiting requirements for franchised/authorized distributors.

Learn more and purchase: http://standards.sae.org/as6496/

Defense Logistics Agency (DLA) announces it will no longer issue solicitations requiring suppliers to provide DNA marked FSC5962 microcircuits. Instead, DLA’s Electronics Test Laboratory in Columbus, Ohio will DNA mark the parts themselves.

ERAI INSIGHT: As of December 15, 2014, DLA is removing the onus from suppliers to contract with AppliedDNA Sciences to tag parts with their ‘own’ DNA mark, greatly reducing up front costs to do business with the Government. Traceability documentation will still be required; however, if not available, a supplier must be on DLA’s QTSL list.

Read the announcement: http://www.erai.com/customuploads/img-912094631-0001.pdf

White Paper Reviews

Counterfeit Integrated Circuits: A Rising Threat in the Global Semiconductor Supply Chain

Why you should read it: Read a thorough report on various counterfeiting detection and avoidance techniques, their benefits, shortfalls and development of new methods.

ERAI Insight: This paper provides a concise summary of the different types of counterfeit parts, counterfeit detection methods and their capabilities followed by a description of available counterfeit avoidance measures. The authors then state that new testing techniques need to be developed for the proactive detection of counterfeit components, including the expansion of new methods to track and trace components in the supply chain, the development of anti-counterfeiting mechanisms during IC design and new data collection mechanisms to monitor and analyze trends and new threats.

Download PDF

You Don’t Have To Report Counterfeits to DOD IG

Why you should read it: Read a legal perspective on the latest government-mandated reporting requirements and why reporting to the DOD IG should not be required.

ERAI Insight: Robert Metzger provides critique on the DOD IG's assertion that contractors should report to the DOD IG upon the discovery of counterfeit electronic parts. Mr. Metzger states that the requirements that arose out of Section 818 of the 2012 National Defense Authorization Act and subsequent FAR and DFARS requiring reporting only to the contracting officer and the Government-Industry Data Exchange Program (GIDEP) offer sufficient disclosure. The DOD IG has admittedly acknowledged that there is coordination between them and GIDEP, therefore adding the IG as an entity to which contractors must report to is unnecessary and burdensome. The IG should only be notified in "limited circumstances where a company subject to the disclosure obligation has credible evidence that there has been a violation of federal criminal law involving fraud or a violation of the False Claims Act."

Download PDF

ERAI Reported Parts Database Quarterly Report
Damir Akhoundov, ERAI, Inc.

ERAI High Risk and Suspect Counterfeit Part data continues to be compiled and analyzed. This quarter’s issue provides a side-by-side comparison of Q2 and Q3 reporting numbers.

The Reporting Trend

The number of parts reported to ERAI has decreased during Q3. A total of 273 parts were reported this quarter, a 14% decline from Q2 during which a total of 315 parts were reported. When compared to Q1 where 279 parts were reported, the numbers show stability with an increase occurring only during Q2.

Testing Data Comparison

Number of Tests Conducted

The number of tests/methods performed to detect a nonconformance has not changed significantly from Q1 to Q2 to Q3. 61% of parts reported to ERAI during Q3 underwent only one or two testing methods as opposed to 56% in Q1 and 72% in Q2. It still remains that the majority of parts reported to ERAI have undergone only one or two test methods. The number of parts undergoing three or more tests remains low at 39% during Q3 compared to 28% during Q2 and 44% during Q1.

Testing Techniques Used

Q3 shows a continuation of the trend noted in Q1 and Q2 where the majority of the parts reported to ERAI were identified using three main testing techniques:
  • Device Package External Visual Inspection
  • Lead External Visual Inspection
  • Remarking & Resurfacing Testing
As repeated from Q2, these three test and inspection methods were responsible for the detection of twice as many nonconforming parts as the next eleven techniques combined.

Types of Parts Reported

The types of electronic components that were reported to ERAI in Q3 were largely similar to those reported in Q1 and Q2 of 2014. The overall distribution of the types of components has been consistent between Q1, Q2 and Q3 with the majority of the parts reported to ERAI being active components. ICs continue to dominate at 84% of parts reported during Q3 (81% during Q2).


The numbers from Q3 of 2014 indicate that the overall trends observed in Q1 and Q2 remain largely unchanged. The number of parts reported to ERAI has fluctuated somewhat over the course of three quarters but has not shown any significant changes in either the numbers or types of parts reported, types of detection techniques employed or number of testing techniques used to detect the nonconformances.

With the publishing of the new DFARs reporting requirements on May 6, 2014, we anticipated an industry-wide uptick in the reporting of suspect counterfeit and high risk parts; however, the numbers from Q2 and Q3 do not support this expectation and no significant increases have been observed. As GIDEP is the entity to which counterfeit parts are required to be reported to by government contractors, we examined the number of alerts posted since May 6, 2014 (the date DFARs requirement was published) in GIDEP’s suspect counterfeit part database and found that the overall number of alerts issued on a monthly basis also did not show any significant increase (with the exception of September 2014 when GIDEP issued 26 suspect counterfeit part alerts).

It should be noted however that 22 of 26 reports from GIDEP during September 2014 were submitted by one reporting entity, a testing laboratory, and only 5 reports had a document date of 2014.

It appears that despite new legislation, the industry has not yet embraced mandatory reporting requirements. Is the lack of increase because the DFARs requirements apply only to CAS-covered contractors? Is the overall incidence of counterfeit and suspect counterfeit parts on a decline? Are independents and other brokers identifying and mitigating counterfeit risk deeper within the supply chain? Share your thoughts with us.

What do you think? Contact us at eraiinfo@erai.com

ERAI Training and Events

ERAI is pleased to announce the 2015 ERAI Executive Conference will be held in San Diego, California at the Hilton San Diego Bayfront Hotel on April 22 and 23, 2015. We are currently welcoming abstracts for presentations and various sponsorship opportunities are available.

Call for Abstracts

ERAI welcomes proposals for panels, roundtables or individual presentations. Don’t miss the opportunity to bring exposure to you and your organization and position yourself as an industry leader by sharing your research, expertise, observations, and understanding of key issues affecting the supply chain.

Abstract Submission & Deadlines
CLOSES: Monday, December 1, 2014

Sponsorship, Exhibiting and Advertising Opportunities

ERAI’s Executive Conference lets you reach critical influencers and key decision-makers throughout the global supply chain of electronics. These exclusive opportunities are offered on a first come, first served basis, so act now and reserve your place! This year we are increasing exhibitor-attendee face time by adding a Meet and Greet Exhibitor Crawl on April 21 in the exhibit hall as a complement to our Networking Social on April 22.  Please contact Anne at 239-261-6268 if you are interested in a sponsorship opportunity or have questions regarding the planned activities.

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