Dear ERAI Members and Colleagues,

In my review of this quarter’s newsletter, I couldn’t help but notice the increased amount of indictments against individuals accused of violating US export laws. While it seems that some organizations risk getting caught in order to make a fast buck, other cases have more sinister undertones of violence and terrorism. Security remains a key goal, not just within your own organization, but throughout the supply chain straight through to the end user, be it in the public or government.

In response to the recent tragic shooting at the Stoneman Douglas High School in Parkland, Florida, our local school board has adopted a slogan of “See it? Say it! Don’t spread it. Report it.” Through the school board’s website, the administration and law enforcement have teamed up to provide students, staff and the general public with a reporting mechanism to alert the police of potential threats and suspicious activity with the hope of thwarting future violence.

Reporting in our industry plays a similar role. Each organization is a link in the chain. Alerting ERAI of a company’s activities benefits many organizations throughout the supply chain, not just your own. Providing input on your experience with an organization might help someone else who, in turn, may later provide data that helps your organization mitigate risk.

If you have encountered a company with questionable ethics, received suspect counterfeit parts, believe an organization may be the victim of identity theft, or even have concerns regarding an organization’s management, reach out and let ERAI know. Help us investigate and warn others of potential liabilities by reporting your experiences.

Anne-Liese Heinichen

Bulgarian Citizen Detained in his Home Country for Violations of U.S. IEEPA and EAR

Zhelyaz Andreev, a Bulgarian national and former employee of AW-Tronics in their Sofia, Bulgaria office, was detained by police in Dobrich, Bulgaria at the behest of the Miami Prosecutor’s office pursuant to an Interpol Red Notice. Andreev was indicted and an arrest warrant was issued in October of 2016 for Andreev along with 10 other employees of AW-Tronics and Syrian Arab Airlines for one count of alleged conspiracy to export items in violation of the IEEPA (International Emergency Economic Powers Act) and defraud the United States and 6 counts of attempted export of goods in violation of the Syria sanctions. The indictment alleges that Andreev was involved in a conspiracy to supply Syrian Arab Airlines (Syrian Air) with aircraft parts and other goods identified as dual-use and disregarded federal bans on the export of these goods by the US Government.

The Council of the European Union banned Syrian Arab Airlines from all EU airports in October of 2012.i The US Government had imposed sanctions against Syrian Arab Airlines in May of 2013 in Executive Order 13224 by listing the company as a Specially Designated Nationalii as the airline had been identified as allegedly providing weapons and ammunition from Iran that were used against civilians in Syria.

Andreev faces maximum penalties of 5 years’ imprisonment, 3 years of supervised release and a $250,000.00 fine for the first count and 20 years’ imprisonment, 5 years of supervised release and a $1,000,000.00 fine for counts 2-7 in the United States.

Read the indictment against Zhelyaz Andreev at:


Andreev and AW-Tronics

In December 2017, three AW-Tronics’ employees were sentenced to jail by U.S. courts and are currently incarcerated. Ali and Arash Caby pleaded guilty to one count of conspiracy to violate the IEEPA and each was sentenced to 2 years’ imprisonment. Marjan Caby was sentenced to one year’s imprisonment.

According to Bulgarian news outlets, Andreev, 29, claims that he was a low-level contracted employee at the Bulgarian office of an American company and that there are other unnamed individuals who are probably using him as a scapegoat. He maintains that Syrian Arab Airlines was an existing customer prior to his employment at AW-Tronics and that he merely performed his sales duties as required by the company’s management. His claims are being supported by Milena Zdravkova, his girlfriend who is also a former employee of AW-Tronics in the sales department.iii

Per Bulgarian law, Andreev could only be detained for 72 hours. Andreev was released by the regional court, having been deemed a low flight risk as he is under a permanent employment contract with a customs company and allegedly appeared voluntarily when summoned by police. The Bulgarian courts will make a decision on the extradition request from the Miami Prosecutor within the next 60 days.

The Bulgarian Ministry of Foreign Affairs has invited the US Ambassador to Bulgaria for a meeting and the Bulgarian Ambassador to the US has asked to meet with representatives from the US Secretary of State. Bulgaria and the US have a ratified extradition treaty in effect.iv Andreev’s arrest has been the source of public debate. A protest was held in Sofia against Andreev’s extradition to the United States.

Four Additional Bulgarian Citizens Sought

The Bulgarian Ministry of the Interior later announced that documents requesting the arrest of four more Bulgarians, Mihaela Nenova, Lyubka Hristova, Iskren Georgiev and Ivan Sergiev, had been received in 2016 from the U.S. Government.v The Chief Prosecutor stated that the Bulgarian citizens would not be detained while the request for extradition was being decided.

Alleged Industry Links

In early March of 2018, ERAI was contacted by a former employee of AW-Tronics who alleges that Arash Caby’s wife, Catherine Caby, along with former AW-Tronics’ employees are operating a new company in Miami, Florida by the name of Buttenberg & MP, LLC.

Buttenberg & MP, LLC’s managing director is Maryam Payro, who lists an address in Encino, California. The business is registered at 1560 South Dixie Hwy, Suite 202, Coral Gables, FL 33146.vi Another organization, Cig, LLC, registered and managed in Florida by Catherine Caby, shares the exact same Coral Gables address as Buttenberg & MP.vii A recent visit to the address showed that CIG LLC and Buttenberg & MP are listed in suite 202 of the building’s office directory, but only Buttenberg & MP’s name is listed on the office door:

The registered agent for Buttenberg is Guy Giberson, an attorney in Ft. Lauderdale, FL. In April of 2017, ERAI was contacted by Mr. Giberson and his law firm, Giberson Law, on behalf of the Cabys in response to an article posted on the ERAI website informing subscribers of the proceedings against the Cabys and their associates at AW-Tronics.

According to the Greffe du Tribunal de Commerce de Paris (Registry of the Commercial Court of Paris), Catherine Kafi Keramati, a French citizen born in Tehran, Iran, is the managing director of Buttenberg & MP SAS with an address of 49 rue de Ponthieu, Paris 75008, France.viii

If you have information about Buttenberg & MP, suffered a financial loss, or received counterfeit or nonconforming goods from Buttenberg & MP, please contact anne@erai.com.

i http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/132847.pdf
ii https://www.treasury.gov/press-center/press-releases/Pages/jl1947.aspx
iii http://www.focus-news.net/news/2018/04/11/2510010/osvobodiha-ot-aresta-zhelyaz-andreev-izdirvan-ot-sasht-po-podozr...
iv https://www.congress.gov/110/cdoc/tdoc12/CDOC-110tdoc12.pdf
v http://www.balkaninsight.com/en/article/us-wants-the-extradition-of-a-bulgarian-charged-with-subverting-syria-sanctions...
vi http://search.sunbiz.org/Inquiry/corporationsearch/SearchResultDetail?inquirytype=EntityName&directionType=Initial&searchName...
vii http://search.sunbiz.org/Inquiry/CorporationSearch/SearchResultDetail?inquirytype=EntityName&directionType=Initial&search...
Viii http://www.erai.com/customuploads/Buttenberg_MP_SAS.pdf

Two California Men and Canadian Man Arrested for Conspiracy to Violate the IEEPA

Yi-Chi Shih, I-shiang Shih, a Canadian and brother to Yi-Chi Shihi, and Kiet Ahn Mai, a naturalized US citizen from Vietnam, were charged on January 16, 2018 with conspiracy to violate the International Emergency Economic Powers Act (IEEPA). Yi-Chi Shih and Kiet Ahn Mai were also charged with mail fraud, wire fraud, unauthorized access to a protected computer to obtain information and money laundering.

The charges outline a scheme between Yi-Chi Shih and Mai, both of whom previously worked together at a US defense contractor, to defraud a company that manufactured monolithic microwave integrated circuits (MMICs) of its proprietary technology. MMICs have military applications and can be used in electronic warfare, communications, guidance systems and radars. In order to do so, the defendants allegedly gained access to the victim company’s computer systems through their web portal by pretending to be a US customer interested in custom MMCIs for domestic use. The true intent was to transfer the company’s technology and product to China.

US Attorney Nicola T. Hanna stated, “the very sensitive information would also benefit foreign adversaries who could use the technology to further or develop military applications that would be detrimental to our national security.”

Yi-Chi Shih, a naturalized US citizen from Taiwan, was the president since 2011 of Chengdu GaStone Technology Company (CGTC) aka Chengdu Jiashi Technology Company Ltd, a China-based semiconductor manufacturer who also produces MMICs. In 2014, the US Government placed CGTC on the Entity List with a presumption of denial meaning, a license is required, but would probably be denied, to export any items subject to the Export Administration Regulations (EAR) to CGTC from the United States. Shih also was listed in the state of California as the registered agent and member of Pullman Lane Productions, LLC. Mai registered a consulting and engineering company, L2kontemporary, Inc. dba MicroEx Engineering in California in 2010. I-shiang Shih registered a company in Canada by the name of JYS Technologies.ii

It is the contention of the government that Yi-Chi Shih received funds from entities in China through his company, Pullman Lane, which were then used to finance the manufacture of custom MMICs by the victim company while posing as MicroEx Engineering. Funds were also allegedly sent by JYS Technologies to MicroEx Engineering.

In order to gain access to the victim company’s web portal, MicroEx fraudulently stated that the MMICs they were ordering would be used solely for domestic purposes and signed corresponding export compliance questionnaires provided by the victim company. After the MMICs were manufactured and delivered within the US, Yi-Chi Shih arranged for their export without a license to China. Samples of the shipments were also delivered to JYS Technologies.

If convicted, Yi-Chi Shih could face a maximum of 25 years in prison; Mai could face a maximum of 5 years in prison.iii

Click here to read the criminal complaint against the defendants

i http://montrealgazette.com/news/local-news/mcgill-professor-denies-fbi-claim-he-stole-military-technology-report
ii http://montrealgazette.com/news/local-news/mcgill-professor-denies-fbi-claim-he-stole-military-technology-report
iii https://www.justice.gov/usao-cdca/pr/2-los-angeles-area-men-charged-conspiring-illegally-obtain-technology-and-computer

A: ANYONE. Membership to ERAI is not required.

We have made the process as simple as possible by offering two ways to report parts:

1. Report a part online at: http://www.erai.com/SubmitHighRiskPart
2. Or even simpler, email your report to reportparts@erai.com

We require: 1) the part information, manufacturer, part number, date code, lot code; 2) a text description of the non-conformance or findings and; 3) digital images that support the findings.

Ideally, you can send all archived data you have and make reporting future cases routine by including a report to ERAI in your existing inspection process.

Please note that you can report parts anonymously. We will not include your company name on an alert. You do not have to report the supplier that shipped you counterfeit devices unless you choose to. The major benefit to the industry at large is knowing there is a suspect counterfeit part out there.

Husband and Wife Sought for Export Violations by US Government

Antoine “Tony” Ajaka, Anni Beurklian aka Anni Ajaka, and their company, Top Tech US, Inc. were indicted by the US Government in March of 2018 on multiple counts including: conspiracy to commit export violations; conspiracy to defraud the US; illegal provision of services to Syria, smuggling, mail fraud and obstruction of justice. Anni Beurklian is a naturalized US citizen who was born in Lebanon and Antoine Ajaka, also born in Lebanon, is a US Permanent Resident.

The US Government alleges that the Ajakas and their company, Top Tech US and subsequently also called Top Zone, operated out of their Waltham, Massachusetts home and conspired to violate US export control and embargo laws by knowingly sending electronic goods destined for Syria. Specifically, the indictment states that starting in 2012, the Ajakas were sending shipments of US origin goods to Amir Katranji, who managed EKT Electronics, a Syrian company with offices in Lebanon. Notably, EKT and its founder, Mohammed Katranji (Amir Katranji’s father), were placed on the US Department of Commerce’s Entity List in June of 2007 because, “it had determined that EKT was involved in the acquisition or attempted acquisition of electronic components and devices capable of being used in the construction of Improvised Electronic Devices (‘IEDs’)…that may continue to be employed in IEDs or other explosive devices used against Coalition Forces in Iraq and Afghanistan.”i Therefore, the Ajakas were required to seek export licenses to provide goods to EKT according to US law.

In 2016, Customs and Border Patrol seized four shipments headed out of the country containing electronic toggle switches that were significantly undervalued in an attempt to skirt export requirements. In response to the seizure notice, Anni Beurklian provided falsified documents to impede CBP’s investigation. The indictment also alleges that the Ajakas provided false information to their suppliers with regard to the end user and country of destination for other purchases intended for ultimate delivery to Lebanon and Syria and by further transshipping the goods through alternate ports such as Hong Kong and UAE. Among the list of goods procured were Fluke electronic testing equipment, Alcoswitch toggle switches, Rabbit Core programmable modules (RCM), toggle switches including K Model toggle switches that have military applications, and other electronic components.

The Ajakas fled the United States in January of 2018 after preliminary plea negotiations between the Government and their legal counsel. The couple is believed to be in Lebanon after leaving the US through the Canadian border.

The Ajakas face a maximum of 20 years’ imprisonment for conspiring to violate US export laws and a fine of $1 million. For conspiring to defraud the US and conspiring to obstruct justice, each charge carries a maximum sentence of 5 years’ imprisonment and a fine of $250,000. For smuggling goods out of the US, the Ajakas face a maximum of 10 years’ imprisonment and a fine of $250,000. For violations of the Syrian embargo and mail fraud, the maximum sentence is 20 years’ imprisonment and $1,250,000 fine.

Click here to read the indictment against the Ajakas

i Indictment, United States of America v. Antoine Ajaka, Anni Beurklian, Top Tech US, Inc. and Amir Katranji, March 21, 2018.

Recent EAR Violations Highlight Importance of Export Compliance Programs

In January of 2018, MHz Electronics, Inc., an independent distributor based in Phoenix, Arizona entered into a settlement agreement with the US government for two alleged violations of the Export Administration Regulations (EAR). The order by the US Bureau of Industry and Security states that on two occasions in 2013, MHz Electronics sold controlled pressure transducers, which are, “controlled for nuclear nonproliferation reasons and can be of significance for nuclear explosive purposes”,i to entities in Taiwan and China without the required licenses. Both of these sales, totaling $1,380.00, were facilitated through eBay.

MHz Electronics allegedly did not attempt to determine if a license was required for the export of the controlled items; did not determine the ECCN (Export Control Classification Number) of the products; and did not have an export compliance program in place, despite having been previously warned by the FBI in October of 2012 that other items in their eBay marketplace required export licenses. MHz Electronics implemented an export compliance program in 2014, one year after the violations occurred.

MHz faced maximum penalties of up to $289,238.00 per violation or twice the value of the transaction, denial of export privileges, exclusion of practice before BIS, and other liabilities, sanctions and penalties. For these violations, MHz Electronics agreed to pay a $10,000.00 civil penalty, which is waived upon completion of a two-year probationary period, and undergo a third party audit of its export control program.

In another recent example, Trilogy International Associates, Inc. and William Michael Johnson, Trilogy’s President and General Manager, allegedly committed three violations of the EAR when they exported an explosives detector and various shipments of analog-to-digital converters through the use of a freight forwarder to Russia. The controlled products were sold between January and May of 2010 to TAIR R&D Co., Ltd, a company located in Russia, whose employee was Alexander Volkov, a former co-founder of Trilogy International along with William Johnson.

In late February 2018, Trilogy International and William Johnson, with addresses in Altaville and Angels Camp, California, were each fined a civil penalty of $100,000.00 and are both prohibited from directly or indirectly exporting any commodity outside of the United States for a period of 10 years from February 26, 2018.ii

These cases highlight the importance of determining a product’s ECCN number prior to exporting controlled items out of the country, especially for smaller organizations that may not have dedicated export compliance staff. In order to determine whether an export license is needed, an organization must determine if the product intended for export has an ECCN or Export Control Classification Number. The ECCN is an alpha numerical designation listed in the Commerce Control List, or CCL, that identifies and categorizes products by categories and technical parameters. It should be noted that ECCNs are not the same as a harmonized tariff code, which is used for the classification of imported products. Most commercial products generally are not listed on the CCL; however, organizations must also keep in mind that licenses are required for exports for non-listed items to embargoed/sanctioned countries, denied persons, parties on the BIS Entity List, unverified list or consolidated screening list and goods that support a prohibited end use.

The Bureau of Industry and Security, U.S. Department of Commerce provides helpful information on their website at https://www.bis.doc.gov/index.php/licensing/commerce-control-list-classification to assist organizations in obtaining ECCNs as well as tips on establishing an export compliance program at https://www.bis.doc.gov/index.php/compliance-a-training/export-management-a-compliance/24-compliance-a-training/export-management-a-compliance/227-core-elements-of-an-effective-export-management-and-compliance-program-emcp.

i United States Department of Commerce, Bureau of Industry and Security Order Relating to MHz Electronics, Inc

ii United States Federal Register, Vol. 83, No. 43, Monday, March 5, 2018, Notices.

2017 ERAI Reported Parts Analysis

By: Damir Akhoundov

Please note: The data contained in this report for 2017 includes parts reported to ERAI from January 1, 2017 through December 20, 2017.

ERAI reported a total of 771 suspect counterfeit and nonconforming parts in 2017, which shows a marked decline from the last several years, despite an increase in global semiconductor sales. The decline, while interesting in itself, cannot be considered a change in the overall trend without taking into consideration data from future years. Factors that could cause this decline include better anti-counterfeiting procedures taken by organizations during the procurement process, more counterfeit parts being prevented from entering the supply chain through customs seizures and detentions, lack of enforcement of industry and government reporting requirements, and perhaps, some counterfeiters have reduced their activities due to improved and new counterfeit detection techniques. On the other hand, it may also indicate that more sophisticated counterfeiting techniques are resulting in fewer counterfeit parts being detected and, therefore, reported to ERAI. It will be interesting to see if this trend persists through 2018 or whether the decline was only temporary.

We then looked at the types of parts that were reported to ERAI in 2017 and compared it to last year’s data as well as the last 10 years’.

Nonconforming (NC) – A part that displays one or more nonconformance(s).
Suspect Counterfeit (SC) - A part that displays one or more nonconformance(s) and shows evidence of counterfeiting.
Suspect Counterfeit/Nonconforming (SC/NC) - A part that displays one or more nonconformance(s) and shows evidence it is a used part sold as new.

We observed that, as in the past, the number of parts considered "suspect counterfeit" (SC) remains high (55% in 2017 and 50% in 2016 and slightly higher overall in the last 10 years). The increase in parts classified as SC/NC in comparison to NC observed in 2016 did not continue to 2017 so we cannot conclude that it was the beginning of a trend related to more stringent regulations and standards that make parts previously designated as nonconforming to be marked as SC/NC.

The types of electronic components reported in 2017 largely followed the overall trend when the most commonly reported parts were integrated circuits:
  • Programmable Logic IC
  • Microprocessor IC
  • Analog IC
  • Memory IC
These four component types accounted for 63% of all parts reported.

When examining the manufacturer’s brand marked on parts reported to ERAI, we once again see that Xilinx remains the brand most frequently targeted by counterfeiters and totals 13.49% of the parts reported to ERAI in 2017. The list of the manufacturers most frequently targeted by counterfeiters remains largely unchanged from previous years.

Analysis of parts previously reported by ERAI has revealed that although the number of parts that were reported more than once has increased (33% vs. 20.9% in 2016), the majority of the parts reported in 2017 (67%) were new occurrences that had not been reported to ERAI. Of the 33% of previously reported parts, almost half were reported two or more times, with five (5) parts reported ten or more times.

Suspect/counterfeit parts that have not been previously reported are constantly entering the electronic supply chain and the threat of encountering one of these parts remains very high. Reporting suspect/counterfeit parts is a crucial step in counterfeit prevention. We highly encourage everyone to report all suspicious parts to ERAI to ensure all organizations in the electronics industry are aware of potential threats.

The next data set we examined was the geographic location of the suspect parts’ suppliers in cases where the supplier information was available. The data supports the previously noted fact that more than half of the known suppliers of suspect parts were located in the USA with China being a distant second. However, it should be taken into account that this statistic may not be a reliable measure as it only takes into consideration reports where the supplier was identified. One possibility that reporting entities do not provide the identity of their suppliers is because the supplier is located in a high risk area such as China and do not wish to disclose their purchasing strategies to ERAI. So if the identity of all suppliers would be known, the distribution graph may have looked quite different.

As always, we would like to thank those organizations that routinely share data with ERAI. If you have any questions or would like to see any statistical data that has not been covered in this report, please contact Damir Akhoundov at damir@erai.com and we will do our best to provide the information to you.

Use Caution to Avoid Counterfeit Nichia Laser Diode Products

Nichia Corporation published a press release alerting customers that a “large number” of counterfeit Nichia laser diode products have entered the supply chain.

“Nichia Corporation (hereinafter, Nichia) is aware that a large number of counterfeit Nichia laser diode (LD) products have been present within the market; much of this volume has been bought/sold and traded in China. According to a Nichia investigation, one of the examples of this is an LD model with the part number as “NDB7B77” is being sold on the internet as a genuine Nichia LD model. However, this part number is not a legitimate Nichia LD part number and this LD has not been designed/produced by Nichia.

Customers should be aware that such counterfeit LDs have not undergone Nichia’s rigorous quality inspections and may not meet Nichia’s quality standards. Low-quality counterfeit LDs may cause negative consequences (e.g. damage to the system or in some cases, unknowing/unintentional involvement in illegal activities). If this occurs, Nichia will not be responsible for any loss or damage resulting from use of counterfeit Nichia products. Customers are advised not to purchase/use counterfeit Nichia LD products under any circumstances.”

How to Spot a Counterfeit: Fourier-Transform Infrared Spectroscopy

By: Damir Akhoundov

A relatively recent addition to the counterfeit electronic components detection arsenal is Fourier-transform infrared spectroscopy (FTIR)1, a technique used to obtain an infrared spectrum of absorption or emission of a solid, liquid or gas. An FTIR spectrometer simultaneously collects high-spectral-resolution data over a wide spectral range and offers quantitative and qualitative analysis for organic and inorganic samples. FTIR identifies chemical bonds in a molecule by producing an infrared absorption spectrum. The spectra produce a profile of the sample; a distinctive molecular fingerprint that can be used to screen and scan samples for many different components. FTIR is an effective analytical instrument for detecting functional groups and characterizing covalent bonding information.

The fact that FTIR spectrometer simultaneously collects high-spectral-resolution data over a wide spectral range confers a significant advantage over a dispersive spectrometer which measures intensity over a narrow range of wavelengths at a time.2 FTIR can be used to evaluate the integrity of an organic mold compound.

When a blacktopping process is used to remark previously used parts, FTIR provides the ability to distinguish between two different materials. The materials that comprise the component body and any blacktopping material used to hide evidence of counterfeiting are all organic polymers. The procedure can be used to compare the composition of the part in question to that of a known good sample or to simply compare the composition of the two sides of the same mold in order to see if blacktopping material is present.

As indicated by the spectroscopy measurement in the figure below, there is a clear difference in response between parts. Using a known good part purchased from authorized distribution as the baseline, the response from the sample tested parts suggests a different material is present. Blacktopping material was added to the baseline material and therefore created a different response from the baseline.3

Another approach would be to conduct FTIR analysis of the surfaces of multiple devices from the same lot. In the below examples, Fourier Transform Infrared analysis of the surfaces of the five devices tested showed that composition of the top surfaces were all the same and those of the bottom surfaces were also the same. However, there were differences between the tops and bottoms indicating that either the tops or bottoms of the parts had been altered. The first figure shows the FTIR curves of the tops of the parts:

While the below figure shows the results for the bottom of the parts:

As you can see the composition of the top of the parts is different than the composition of the bottom of the parts. Normally the composition of the top and the bottom of the parts should be more closely related.

With counterfeiters’ techniques constantly evolving, new blacktopping compounds may emerge that will not be readily identified by solvents applied during resurfacing test methods.

As FTIR is considered, in most cases, a non-destructive test method, adding  FTIR spectroscopy may provide another level of security in your organization’s quality control.

1 https://en.wikipedia.org/wiki/Fourier-transform_infrared_spectroscopy#cite_note-Griffiths-1
2 Griffiths, P.; de Hasseth, J.A. (18 May 2007). Fourier Transform Infrared Spectrometry (2nd ed.). Wiley-Blackwell. ISBN0-471-19404-2.
3 Martin Goetz and Ramesh Varma, Northrop Grumman Corporation, Linthicum, MD. Counterfeit Electronic Components Identification: A Case Study.

New InterCEPT Classes Launched

InterCEPT has launched two new classes to supplement your organization’s training requirements. Each class features handouts of the course material, quizzes, a final exam, and a certificate of completion that can easily be verified by an auditor or customer on ERAI’s website.

CF-02: Understanding the Global Electronics Supply Chain and How Counterfeits Enter the Supply Chain

A supply chain is a network between a company and its suppliers to produce and distribute a specific product. In the electronics industry, the supply chain represents the steps it takes to get the product from the original manufacturer to the customer. Supply chain activities include production, distribution, logistics and sourcing. Companies in a supply chain are often referred to as tiers. In this class we will examine the various tiers that make up the global semiconductor supply chain. From organizations who manufacture components (OCMs and Aftermarket Manufacturers), to authorized distributors and independent distribution, electronic parts can change hands several times, increasing the risk of encountering a counterfeit part.

This class:
  • Explains the vital role each tier plays.
  • Demonstrates the movement of parts through the use of real-world scenarios.
  • Identifies vulnerabilities that may contribute to the introduction of a counterfeit part, which has the potential to seriously compromise the safety and operational effectiveness of products.
The course covers:
  • Definition of the tiers of suppliers in the electronic supply chain (OCM, AD, ID, Broker)
  • Electronics supply chain statistics from the Bureau of Industry and Security study
  • Risk levels associated with each tier
  • Definition of the tiers of customers in the electronic supply chain (OEM, CM)
  • Supply chain transactions and their vulnerabilities
Students completing the class will be able to:
  • Understand the vital role of each tier of the electronic supply chain.
  • Distinguish the risk levels associated with different tiers of the supply chain.
  • Identify vulnerabilities that may contribute to the introduction of a counterfeit part.

ST-05: Industry Response to Counterfeits: SAE AS9100D Requirements for Counterfeit Part Control

The International Aerospace Quality Group (IAQG) released SAE AS9100D - Quality Management Systems - Requirements for Aviation, Space, and Defense Organizations in September of 2016. Although counterfeit parts have been a concern in the military and aerospace industries for years, this version of SAE AS9100 includes requirements for counterfeit parts prevention. The class will provide background information and statistics about counterfeit electronic parts, discuss the requirements of SAE AS9100D as they relate to counterfeit parts and review several options for meeting those requirements. In addition, this class discusses several best practices including a documented counterfeit mitigation program, obsolescence management, the GIDEP (Government Industry Data Exchange Program) and ERAI databases which are repositories of counterfeit part information, and the InterCEPT training modules which can be used to meet the training requirements for SAE AS9100D.

The course covers:
  • General statistics about counterfeit electronic parts
    • ERAI statistics
    • Defense Industrial Base Assessment: Counterfeit Electronics
    • Committee on Armed Services Senate Hearings: Inquiry into Counterfeit Electronic Parts in the Department of Defense Supply Chain
    • GAO-12-375 - Suspect Counterfeit Electronic Parts can be Found on Internet Purchasing Platforms
  • Overview of counterfeit parts requirements in AS9100D
  • Relevant industry standards with a focus on counterfeit mitigation
  • Best practices in counterfeit mitigation
    • Documented policy
    • Obsolescence management
    • GIDEP database
    • ERAI database
    • InterCEPT web-based training
Students completing the class will:
  • Become familiar with the issue of counterfeit electronic parts.
  • Understand the requirements in SAE AS9100D regarding counterfeit electronic parts.
  • Become familiar with the relevant industry standards developed to address counterfeit electronic parts and materials.
  • Identify best practices in the mitigation of counterfeit electronic parts in the supply chain.
  • Review several options for handling the requirements of SAE AS9100D in your organization’s quality management system.
  • Understand how the GIDEP database and the ERAI database are used to reduce the risk of purchasing or supplying a counterfeit part.
  • Understand how InterCEPT web-based training can meet the requirements for training in AS9100D.
The class has been developed for individuals with auditing, contracting, management, purchasing, sales, quality and engineering roles.

Launching soon – InterCEPT class TM-02: Counterfeit Inspection and Testing of Electronic Parts: Visual Inspection and Criteria for Acceptance or Rejection
This class will provide an in-depth discussion of external visual inspection associated with detecting counterfeit electronic parts. It will reference both the IDEA 1010B standard and the SAE AS6171 requirements for external visual inspection. The class includes video footage and images from a test lab to help the student understand how the visual inspection is performed. Device images will be reviewed so that the student can recognize the indicators of counterfeit or substandard electronic components and understand the criteria for acceptance and rejection.

The course covers:
  • External visual inspection
    • Equipment needed, equipment costs
    • How to perform the test including on-site video and step-by-step instructions
    • Criteria for acceptance
    • Criteria for rejection
  • Content of test reports
  • Training considerations
  • Outsourcing visual inspection
Students completing the class will:
  • Understand the terminology for external visual inspection and surface testing of electronic parts.
  • Understand how to perform the tests.
  • Understand the criteria for acceptance and rejection.
  • Understand the general format of the test report for external visual inspection.
  • Assess additional considerations including equipment needed, equipment cost, training and outsourcing options.
The class is best suited for individuals with quality, inspection and testing, purchasing, and sales responsibilities. Students taking TM-02 are expected to have a working knowledge of what a counterfeit part is and where counterfeit parts come from. If you do not have sufficient background knowledge, InterCEPT recommends completion of CF-01: A Historical Overview of Counterfeit Electronic Part Activity: The Risk, Response, and Solution.

This class will be added shortly to InterCEPT’s class offerings addressing the detection of counterfeit electronic components.

GAO Report Analyzes CBP and ICE Enforcement of Counterfeit Imports

The Government Accountability Office (GAO) was asked to analyze the enforcement efforts made by U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE) of counterfeit goods entering the United States with regard to the enforcement of intellectual property rights and the extent of the agencies’ collaborative efforts between themselves and the private sector. The results, contained in a report entitled, “Intellectual Property – Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market”, was released in January of 2018.

The GAO relied on CBP seizure data and interviewed relevant agency officials and intellectual rights holders to obtain information on imported goods that violated intellectual property rights. The report cites the substantive growth of e-commerce purchases by the public leading to an increase of 38% in counterfeit seizures from 2012 to 2016, especially in smaller packages sent through the mail and private carriers. Most of these counterfeit goods were found to originate primarily from China (nearly 50%) and Hong Kong (more than 30%) during this time frame.

By conducting their own sample investigation, the GAO found that 20 out of 47 items, or 43% of goods, purchased from third-party sellers on popular consumer websites were counterfeit. The items included popular brand sneakers, insulated mugs, cosmetics and UL-certified phone chargers. In order to determine a product’s authenticity, CBP is dependent upon product information provided by the rights holder and often consults with the rights holder during the examination process. However, the report found that legal and agency restrictions on data sharing limit the information that CBP can provide to the rights holders and third-party commerce websites, limiting the IPR holder’s ability to protect their intellectual property rights. Additionally, although CBP and ICE generally collaborate on IPR enforcement through compatible policies and procedures, refinements need to be made to data sharing systems which currently affect the processing time for seizures.

The GAO also found that while both agencies engage in IPR enforcement by detecting counterfeits, conducting special operations, engaging with international partners and undertaking localized pilot programs and initiatives, assessments have been performed by ICE but CBP has only conducted limited evaluations of their efforts, making an analysis of the effectiveness of CBP’s efforts difficult.

The report concluded by providing recommendations to CBP to evaluate their IPR enforcement efforts and recommending that the Commissioner of CBP should analyze what additional information would be beneficial to share with the private sector.

Click here to read the GAO report.

The Battle Continues Against Unregulated E-Waste

By: Kristal Snider

In the Q2-2016 edition of INSIGHT, readers were encouraged to become familiar with and support H.R. 5579, the Secure-E-waste Export Recycling Act (SEERA), a bill that was introduced to control the export of electronic waste in order to ensure that such waste does not become a source of counterfeit goods that may reenter military and civilian electronics supply chains. Along with two previous bipartisan bills, H.R. 2284 and H.R. 2791, Responsible Electronics Recycling Act, H.R. 5579 fell short of becoming a law or “died” in the 114th Congress. A bill must be passed by both the House and Senate in identical form and then be signed by the President to become law. Legislation not enacted by the end of a Congress is cleared from the books. On February 7, 2017 H.R. 917: Secure E-Waste Export and Recycling Act, picked up where H.R. 5579 left off and was introduced into the 115th Congress where it was referred to the House Committee on Foreign Affairs.

The Coalition for American Electronics Recycling (CAER), the voice of the emerging e-waste recycling industry on Capitol Hill, continues to work feverishly to keep nonworking e-waste from becoming essential raw materials for counterfeiters. In December 2017, President Trump unveiled the National Security Strategy of the United States. In March 2018, CAER leaders met with Congressional leaders to demonstrate how H.R. 917 directly supports the Trump Administration’s National Security Strategy (NSS), which focuses on issues such as building America’s military strength, protecting critical infrastructure and stopping chronic trade abuses.

Here are how the President’s national security goals are undermined by counterfeit electronics that are fueled by e-waste exports.i
  • “We will rebuild America’s military strength to ensure it remains second to none.” No matter how much we invest in our defense, counterfeit electronic components originating from China create serious concerns about the reliability of military hardware. The Armed Services Committee report notes that with counterfeit chips “there is no way to predict how well they will perform, how long they will last, and the full impact of failure.”

  • “America will no longer tolerate chronic trade abuses and will pursue free, fair and reciprocal economic relationships.” Many of these counterfeits are used electronic parts – culled from e-waste exported into China from the United States and other countries – made to look new and be sold as new. These unethical trade practices undermine our security, and the Department of Commerce must act to restrict the export of untested, unprocessed e-waste that provides low-cost feedstock for counterfeiters.

  • “We will redouble our efforts to protect our critical infrastructure and digital networks, because new technology and new adversaries create new vulnerabilities.” Counterfeit electronics provide a platform for hackers and cyber terrorists to launch attacks. Malware added to counterfeit microchips could steal information or prevent a device from operating as designed. Given the stakes, we must enact an all-of-the-above strategy to thwart counterfeiters, including e-waste export limits.

  • “We will rejuvenate the American economy for the benefit of American workers and companies, which is necessary to restore our national power.” By combating counterfeits through e-waste export restrictions, U.S. policy will support the growth of the domestic e-waste recycling industry and create up to 42,000 quality jobs.

  • “We will protect our national security innovation base from those who steal our intellectual property and unfairly exploit the innovation of free societies.” Counterfeit electronics are a good example of how “every year, competitors such as China steal U.S. intellectual property valued at hundreds of billions of dollars.” The Semiconductor Industry Association states in a white paper “Semiconductor companies spend tens of billions of U.S. dollars per year developing, manufacturing, and supporting products that will operate reliably for many years in customer applications. In contrast, counterfeiters spend minimal money developing and ‘manufacturing’ products.”

  • “We will evaluate the strengths and weaknesses of our defense industrial base… including contingencies that could affect supply chains.” Measures enacted to date against counterfeiters share an important shortcoming – they detect fake microchips once they are in supply chains. By limiting exports, we will choke off an important source of raw materials to make it harder for parts to ever reach our shores.

Industry support remains critical if this bill is to pass. Here is how you can support H.R. 917 (SEERA):
  • Forward this newsletter to your business partners, customers and employees. Let them know this is an important issue for your company
  • Encourage other companies engaged in the purchase, sale or integration of electronic parts to join the cause by becoming a CAER member
  • Develop and distribute a news release or blog post on the issue
  • Write a letter to your Congressional representative
For more information, visit ERAI’s E-Waste Knowledge Center

i http://americanerecycling.org/images/CAER_NatSec_Fact_Sheet_January_18.pdf

University of Massachusetts Assistant Professor Receives Grant to Study Supply Chain Security

Daniel Holcomb, an assistant professor in the engineering department at the University of Massachusetts Amherst, was awarded a grant by the National Science Foundation Early Career Development totaling $596,160.00 over a period of five years.

The grant will permit Holcomb to study supply chain security through three proposed tiers. The first tier involves a new design style for chips involving programmable logic to prevent malicious actors from understanding a design in order to manipulate it. The second seeks to understand hardware Trojans inserted at a foundry and design side aspects of the supply chain. The third tier takes aim at distribution and the use of an economical authentication framework to mitigate counterfeit parts.

The goal of Holcomb’s research is securing hardware for critical embedded systems such as those used by healthcare, defense and infrastructure organizations.

While a student at UMASS Amherst, Holcomb had previously co-designed a method for improving security in RFID tags by encrypting data sent by the tags into unique messages resulting in safer and more reliable tags.

Read more at: http://www.umass.edu/newsoffice/article/umass-amherst-engineer-daniel-e-holcomb

White Paper Reviews

Security and the Internet of Things

Why you should read it: Robert Metzger’s article describes the rewards of how the U.S. Government can leverage the IoT (Internet of Things) to improve national security and defense capabilities and describes the inherent risks associated with doing so.

ERAI Insight: Just as Internet of Things, or IoT, has made everyday life more convenient, IoT-enabled systems can enhance and increase defense logistic capabilities by increasing efficiency, provide better information on hardware status and asset disposition, and can heighten asset disposition, availability and readiness. Along with these benefits come inherent risks as illustrated by cybersecurity attacks by the “Stuxnet” virus on Iran’s nuclear facilities in 2010 and the “Mirai” botnet DDoS (distributed denial of service) attack in October of 2016 which affected multiple systems. As Mr. Metzger points out, “because of the scale of systems potentially dependent upon IoT elements that share common or single-point vulnerabilities, successful IoT attacks could cripple vital national capabilities or compromise government ability to plan and act.” He continues by highlighting the need for government to actively address IoT threats by leveraging legislative and regulatory powers to increase the security of critical infrastructure.

Click here to open

Cybersecurity for Defense Manufacturing: New Threats Demand Heightened Response

Why you should read it: In light of recent accusations that the Russian government is responsible for cyberattacks on US power plants, Robert Metzger outlines the Department of Defense’s current measures of protection and provides additional recommendations.

ERAI Insight: Despite regulations such as DFARS 252.204-7012, NIST Special Publication (SP) 800-171, and DoDI 5000.02, Metzger outlines measures that should be implemented by the US Government to further protect defense manufacturing systems. Threats posed by cyberattacks may not just slow or stop production, but can result in physical damage, substandard product or adverse product performance. Metzger recommends that the DoD should do more to protect defense manufacturing by performing risk assessments, monetary assistance to key contractors to meet security goals, and improved collection and dissemination of cyber threat intelligence to manufacturers.

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The Changing Face of Distribution

Cisco Files Legal Challenge Against Counterfeiters

Nichia Warns About Counterfeit Laser Diodes

Semiconductor Industry Forecast Continues to Brighten

U.S. Customs Reports a Record Number of Counterfeit Shipments Seized During 2017

Communication and Awareness are Key in the Battle to Combat Counterfeit Components

Cyberattacks on American Factories are Real

Buyer Beware: 20 of 47 Items Bought Online were Counterfeit, Government Report Finds

Trump Administration Targets $50 Billion in Chinese Electronics, Aerospace and Machinery Goods with Tariffs

Terrifying Tariffs: U.S. Manufacturers Brace for Disruption