Dear ERAI Members and Colleagues,

2019 has gotten off to a busy start at ERAI. We are contacted on a daily basis for assistance from both large and small organizations both domestic and abroad. Unfortunately, many times the common thread uniting different problems is a lack of due diligence. This can range from simple human oversight to a general corporate laissez-faire attitude of not clearly defining terms and conditions and expectations.

Too many times we are conditioned in life to accept the daily grind and perform our duties as we always do, yet this is how mistakes are made. Despite performing the same task a thousand times, there will be situations in which variables, even seemingly small ones, will change the outcome. In this industry, that could mean a counterfeit escape, rework costs, brand damage and even incarceration. The margins for error are too small.

This is one thought (of the many!) I carry with me daily after 15 years at ERAI. All too often, we find that one connection, that one red flag after digging deeper that can define the difference between a trustworthy supplier and a problematic supplier. The five minutes in productivity that is “saved” can result in hours of overtime and legal fees if a problem arises.

Encourage your employees and coworkers to take that “extra” step or to ask ERAI for help. ERAI staff will be happy to assist your organization, regardless of membership status and free of charge. Call us at 239-261-6268 or email eraiinfo@erai.com.

Anne-Liese Heinichen

Supplier Selection – Choosing Wisely

By Anne-Liese Heinichen

In the movie Indiana Jones and the Last Crusade, Harrison Ford’s character is forced by a Nazi cooperator to find the Holy Grail to save his father from certain death. From a table replete with various different chalices, the evil Nazi incorrectly chooses the most ornate one and subsequently dies. The Crusader knight that has been guarding the Grail admonishes, “he chose poorly”. Indiana Jones picks the simple wooden chalice by intuitively guessing it would be the cup of a carpenter (Jesus) and saves the day. The Crusader knight confirms his choice with, “you have chosen wisely”.

Unfortunately, selecting a supplier for your organization is not as cut and dry as in the movies. Common industry best practices cite requirements such as audits (on-site preferable), adherence to industry standards, quality certifications (which should always be validated), documented warranties and return policies, documented counterfeit mitigation policies, personnel certifications and training, documented purchasing and acceptance processes, trade references, performance history, and any recorded problems reported by industry data sources such as ERAI and GIDEP. These steps are vital in “weeding out” any companies that could put your organization in harm’s way and are important in reducing the risk posed by uninformed suppliers that can threaten your supply chain.

A recent example highlights how asking the right questions should be an integral part of your organization’s documented counterfeit mitigation program to identify supplier risk. An individual sought to subscribe her distribution company to ERAI’s services. When queried whether the company had a counterfeit part mitigation policy and/or control plan, the individual responded by asking, “which one is the normal?”. In other words, the individual wanted to be clued in as to how she should respond, making it likely that the organization did not have either the policy(ies) nor process(es) in place.

Another organization reached out to ERAI to report that a company was falsely proclaiming to be a Defense Logistics Agency (DLA) Approved Laboratory.  The purpose of the QTSL Program is to mitigate the risk of nonconforming or counterfeit semiconductors and microcircuits entering the supply chain for the military by testing and other quality assurance demonstrations prior to award. Upon closer examination, it was concluded the “Quality” section of the company’s website was a verbatim copy of a government prime contractor’s test analysis portion of their copyright protected website.

ERAI became aware of a fraudulent company after an organization sought to verify their alleged ERAI membership after seeing ERAI membership advertised on the company’s website. Along with fraudulently claiming to be a member of ERAI, the company purported to have certification to ISO/IEC 17025:2005, SAE AS6081, ISO 9001:2015, AS9120B and Environmental Health and Safety Management System. By contacting the registrar listed on the certificates, ERAI was able to verify that all of the certifications appearing on the company’s website were counterfeit. Additionally, during the investigation, it was discovered that the company had stolen the vast majority of the website content, including images and videos, from the website of another independent distributor with in-house testing capabilities. Organizations that make false claims regarding memberships, certifications or quality processes should be considered extremely high risk. 

Three companies, all with locations in Shenzhen, China and Hong Kong, separately applied for ERAI membership within a span of a few days. All three companies provided mainland China VAT licenses which were verified by a Chinese government-run database. ERAI staff noticed that the Hong Kong locations cited by two companies as warehouses were identical. When asked, one company stopped responding to ERAI’s inquiries while the other admitted that the address belonged to a third party logistics service that “help most IC company to manager their stock…[it is] one of the IC stock center, it means it is more easy to delivery stock to other client's warehouse.” One company shares an identical address with an organization that was reported by ERAI four times, including once for counterfeit documentation and once for suspect counterfeit product. The second company’s owner and corporate shareholder contacts are listed in the same aforementioned-reported company and shares a Hong Kong address with another organization reported for supplying counterfeit product. The third company, who ceased communications with ERAI, shares a primary point of contact with six other companies and denies any connection with those six companies. Note: of the six companies, two were previously identified by ERAI as having supplied suspect counterfeit product.

In another instance, ERAI was contacted by a member with a question regarding a company’s listing on the US Entity List. The Entity List is a list of foreign businesses, research institutions, government and private organizations, individuals, and other types of legal persons administered by the Bureau of Industry and Security of the US Department of Commerce. These companies and individuals are subject to specific license requirements for the export, reexport and/or transfer (in-country) of specified items.1 The distributor was performing due diligence on whether a company should be added to their approved vendor list and uncovered a listing in a third party database which contained a similar company’s name. Although the company name differed by one letter (a instead of e), the Member contacted ERAI for assistance. An ERAI investigation determined that the companies were indeed separate entities with different owners. The company whose name ended with the letter “e” was listed on the Entity List. The other organization whose name ended with the letter “a” was owned by the same individual (according to the Hong Kong Integrated Companies Registry Information System) as another company that was named in the same listing as the company whose name ended with the letter “e” on the Entity List, as participating in a network that imported items into China and Hong Kong and subsequently on to end-users associated with the government of Syria.

An Asian contract manufacturer contacted ERAI requesting a free report on an independent distributor located in France they were considering adding to their approved vendor list. Although ERAI did not have information in our proprietary database regarding this company, an investigation uncovered:
  • No company was registered under this name in the French Registry at www.infogreffe.com.
  • The company’s website domain was registered one year ago allegedly from Delhi, India; the company purported to have a location only in Paris, France.
  • The company’s address listed on the website was incomplete: only a street name was provided.
  • No record of a company by this name was found in the Dun & Bradstreet database.
  • A Google image search for one of the alleged employees yielded a search result for an individual working as a clinical recruitment consultant based in Norway. The images of both the alleged employee and the Norwegian consultant were identical.
Useful Tips:
  • Verify all certificates appearing on a company’s website. If not present on the website, request copies and verify the certificates with the appropriate registrar. Do not validate a certificate using links or phone numbers provided on certificates. ERAI has previously encountered a counterfeit certificate containing “fake” registrar contact information; contact the registrar yourself directly by performing an Internet search.
  • Perform on-site audits of suppliers whenever possible prior to adding them to an AVL (Approved Vendor List). If not possible, always verify a company’s registration in as many locations as possible and perform Internet searches for addresses and use map searches. Do the address locations exist, is the company listing a mailing store or shared office space as a location and do other organizations list the identical address as offices? Question your potential supplier and establish if the company is really working at the address(es) as they claim.
  • Routinely copy and paste text from the company’s website and perform an Internet search. Are they plagiarizing from other companies?
  • Perform Google image searches on individuals, offices, and products shown in a company’s website at https://images.google.com/. Images can be easily uploaded using this tool.
  • ERAI Member Tip: ERAI Members search the US government's Consolidated Screening List (CSL). Per the Bureau of Industry and Security, "the CSL is a streamlined collection of nine different "screening lists" from the U.S. Departments of Commerce, State, and the Treasury that contains names of individuals and companies with whom a U.S. company may not be allowed to do business due to U.S. export regulations, sanctions, or other restrictions. If a company or individual appears on the list, U.S. firms must do further research into the individual or company in accordance with the administering agency’s rules before doing business with them." The information is provided directly from the International Trade Administration (ITA) Developer Portal and is included in your ERAI membership under the Search tab - US Consolidated Screening List.
ERAI encourages all organizations, regardless of ERAI membership status, to contact our office for assistance with your organization’s verification process. Prior to sustaining a loss or receiving counterfeit goods, if you receive a suspicious email or if you need tips on locating information publicly available on the Internet, let us know. As illustrated above, even small insignificant details can be valuable data. Contact our office at 239-261-6268 or eraiinfo@erai.com with any inquiries.

1 https://bis.doc.gov/index.php/policy-guidance/lists-of-parties-of-concern/entity-list

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.

Amazon Begins to Address Counterfeits, Will Other Platforms Follow?

In its 2019 annual form 10-K report to the United States Securities and Exchange Commission, Amazon finally acknowledged that the sale of counterfeit goods on its site poses a liability risk to consumers and to Amazon itself:

We Could Be Liable for Fraudulent or Unlawful Activities of Sellers

The law relating to the liability of online service providers is currently unsettled. In addition, governmental agencies could require changes in the way this business is conducted. Under our seller programs, we may be unable to prevent sellers from collecting payments, fraudulently or otherwise, when buyers never receive the products they ordered or when the products received are materially different from the sellers’ descriptions. We also may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies. Under our A2Z Guarantee, we reimburse buyers for payments up to certain limits in these situations, and as our third-party seller sales grow, the cost of this program will increase and could negatively affect our operating results. In addition, to the extent any of this occurs, it could harm our business or damage our reputation and we could face civil or criminal liability for unlawful activities by our sellers.1

As the news broke, Amazon was quick to roll out the announcement of a new initiative, Amazon Project Zero. Through a three-tier approach, Amazon claims to have a solution to “drive counterfeits to zero”.2 The approach places the onus on the intellectual property owner to register with the semi-automated system. Through automated protections, Amazon’s artificial intelligence scans over 5 billion product listings on the shopping portal and compares IP holder’s uploaded logos and trademarks against these listings, resulting in the “stop [of] 100 times more suspected counterfeit products as compared to what we reactively remove based on reports from brands.”3 Along with this automated process, Amazon now provides IP holders with a self-service counterfeit removal tool that allows brands to remove counterfeit listings themselves without contact to Amazon. The third tool, a product serialization service, requires the manufacturer to put a code on their products during the manufacturing process. When an order for a serialized product is received by Amazon, the product’s code is scanned and verified prior to shipping, which Amazon claims allows them to, “now detect and stop counterfeiting for every product unit before it reaches a customer.”4

Another news report claimed that Amazon was also requiring sellers to provide five second video clips of their faces when registering on the site.5 The videos would presumably be used by Amazon’s facial recognition software, Rekognition, which Amazon claims can provide accurate facial recognition that can identify people, objects, scenes, activities and inappropriate content. However, civil rights groups have been critical of Amazon’s use and sale of Rekognition citing concerns over the software’s accuracy, especially when analyzing female and darker-skinned faces.

Amazon has received harsh criticism from The Counterfeit Report, an industry watchdog founded by Craig Cosby that reports and advocates against counterfeits in the U.S. market. In a February 9 report, The Counterfeit Report stated, “Amazon is the free-flowing conduit that enables Amazon, and facilitates "bad actors," to flood the consumer market with an inexhaustible supply [of] counterfeit, fraudulent, pirated and replica items…Apple® reported that 90% of Apple products it purchased directly from Amazon were counterfeit.” 6

The acknowledgement of liability by Amazon is significant, given the company’s 2017 victory in Milo & Gabby, LLC. v. Amazon.com, Inc., in which the trade giant was found not liable for infringing product sold by third-party vendors. In addition to direct sales, Amazon also acts as a sales portal for an approximate 6 million global marketplace sellers, many of whom ship products from China, which comprise an estimated two-thirds of total Amazon sales.

Since 2011, the Office of the United States Trade Representative has annually published a Notorious Markets List to increase public awareness and assist market operators and governments in prioritizing intellectual property right enforcement efforts. In the “2017 Out-Of-Cycle Review of Notorious Markets”, Taobao, part of the Alibaba Group, was listed, cited as a portal which continuously offered counterfeits for sale, and was the most-requested e-commerce portal for assistance from US government agencies.7 In response, Taobao created a user interface for takedown requests and claims to have shut down more than 230,000 vendors for infringing goods over a one-year period. Alibaba further claimed a 25% decrease in takedown requests despite an 11% increase in the number of registered IP accounts across all its platforms.8 However, reports indicated ongoing problems including delays with the takedown process.

Call to action for industry e-commerce platforms

While Amazon, Taobao and Alibaba’s difficulties lie in the sheer size and volume of their platforms, organizations should remain wary of purchasing product from e-commerce platforms, regardless of size of scale.

Industry e-commerce platforms are called-upon to:
  • Improve the ease and efficiency of user and IP-holder reporting and takedown processes.
  • Report IP violations and counterfeit activity to relevant legal authorities.
  • Ensure effectiveness of processes to block offenders from re-joining and re-posting counterfeits.
  • Enact and improve tools to prevent the sale of counterfeit products.
  • Make available the identity and contact information of suppliers reported for counterfeits and provide this information to other industry platforms, associations and intellectual property rights holders.
As we see daily at ERAI, counterfeiters are continuously renaming, relocating and concealing their identities in order to continue supplying the market. It is only through full-scale industry cooperation and strict government enforcement that we can start making a dent in the availability of counterfeit parts.

1 United States Securities and Exchange Commission, Washington, D.C. 20549, Form 10-K, Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018, Commission File No. 000-22513, Amazon.com, Inc.
2 https://blog.aboutamazon.com/company-news/amazon-project-zero?ld=NSGoogle_null
3 https://blog.aboutamazon.com/company-news/amazon-project-zero?ld=NSGoogle_null
4 https://blog.aboutamazon.com/company-news/amazon-project-zero?ld=NSGoogle_null
5 https://thehill.com/policy/technology/428863-amazon-testing-facial-recognition-tools-for-online-sellers-report
6 https://thecounterfeitreport.com/press_release_details.php?date=2019-02-06&id=799
7 https://ustr.gov/sites/default/files/files/Press/Reports/2017%20Notorious%20Markets%20List%201.11.18.pdf
8 https://ustr.gov/sites/default/files/files/Press/Reports/2017%20Notorious%20Markets%20List%201.11.18.pdf

Government Convictions and Sentencings Continue

Scott Allen Thomas and All Computer Parts, LLC

In August 2015, Scott Allen Thomas, the owner of All Computer Parts LLC, aka ACP based in Magnolia, Texas, was charged in a 5-count indictment that alleges he knowingly trafficked in goods that he knew contained a counterfeit mark in violation of Title 18, United States Code, Section 2320(a). 

According to the indictment, from May 2008 until April 2014, United States Customs and Border Protection (CBP) seized a total of 12 shipments from Hong Kong or China intended for Thomas that contained counterfeit computer products. Thomas maintained a website and a storefront where he offered IBM, HP, Cisco and other companies’ computer products.  Beginning on March 27, 2013, special agents of United States Homeland Security Investigations (HSI) made undercover purchases of computer products from Thomas, all of which were counterfeit goods.

On March 11, 2016, Thomas pleaded guilty to trafficking in counterfeit goods and knowingly conspiring with others, known and unknown, to import counterfeit computer materials into the United States from China and Hong Kong.  

On January 5, 2018, Thomas was sentenced to 24 months in prison, 3 years’ supervised release, and a $10,000.00 fine.

Ruiyang Li

On February 15, 2019, Ruiyang Li, a Chinese citizen, was sentenced to 54 months’ federal imprisonment for conspiracy to traffic in counterfeit goods.

The indictment outlined a conspiracy where Scott Allen Thomas of All Computer Parts would knowingly purchase counterfeit computer products from contacts including Li in China, Hong Kong and other parts of Asia. Thomas would then sell the counterfeits through his website and online e-commerce platforms. From May 2008 through April of 2014, US Customs and Border Protection seized a total of 12 shipments containing counterfeit product. After the seizures, Li and Thomas would communicate via email and instant messaging to devise new methods to circumvent CBP detection, which included breaking up shipments, using forwarding companies and revising destination addresses. In 2013 and again in 2017, undercover Homeland Security Investigations agents made approximately 7 undercover purchases of computer networking and memory from Thomas, all of which were deemed counterfeit.

The counterfeit product included:
  • 20 Cisco GLC-SX-MMD transceivers
  • 45 Hewlett Packard J4858C transceivers
  • 5 Cisco GLC-LH-SM transceivers
  • 35 Cisco GLC-LH-SMD transceivers
  • 10 Cisco GLC-FE-100FX transceivers
  • 20 Hewlett Packard J4859C transceivers
  • 10 Intel E10GSFPSR transceivers
After serving his sentence, Li is expected to face deportation proceedings.

Jizhong Chen

On January 31, 2019, Jizhong Chen was arrested after an Apple coworker saw him taking photographs with a wide-angle lens in a secure Apple office space on January 11, six months after having signed a confidentiality agreement. The photos were allegedly comprised of Apple’s autonomous car project. Chen also admitted copying 2,000 files to a personal hard drive that included manuals and schematics for the car project. Chen allegedly was seeking employment with a Chinese autonomous vehicle company. Chen was arrested prior to a planned trip to China to visit his family.

John T. Finkle III, Steven C. Gold, and Kenneth J. Pedroli

On February 15, 2019, prosecutors announced a seven-count indictment against John T. Finkle III of East Haven Connecticut, Steven C. Gold of Pleasant Prairie, Wisconsin and Kenneth Pedroli of Stony Brook, New York, alleging the trio ran a scheme to defraud an unnamed Illinois company of $1,500,000.00.

The indictment alleges that Finkle and Gold were employees of an electronics supplier based in Waukegan, Illinois. Finkle worked in the company’s sales department in Connecticut and Gold worked in the accounting department in Illinois. From February 2015 through December 2018, Pedroli, operating from his own business in New York, placed orders with Finkle at significantly reduced prices than those advertised by the Illinois company. Finkle would ensure that the product would be shipped to Pedroli at the discounted prices. Finkle instructed Pedroli to make partial payments to the Illinois company and pay the rest directly to Finkle in the form of checks that were deposited into Finkle’s personal accounts. Finkle then had Gold apply fictitious credits to the balance due on Pedroli’s open invoices in exchange for money which Gold used for personal gain.

The Illinois company was allegedly defrauded of more than $1.5 million with Finkle personally profiting in excess of $500,000.00.

Finkle, Gold and Pedroli are each charged with one count of conspiracy to commit mail and wire fraud, which carries a maximum sentence of 20 years’ imprisonment. Finkle is additionally charged with two counts of wire fraud, Gold with two counts of wire fraud and Pedroli with two counts of mail fraud; each charge carries a maximum sentence of 20 years’ imprisonment.

Alexander George, Paul Attwater, Iris Attwater, Pairs Aviation Ltd and Wiky Global Corp.

In late November 2018, HM Revenue and Customs announced that Alexander George was sent to jail for 2.5 years for violating UK licensing regulations by shipping Russian MiG and US F4 Phantom jet parts with an end destination of Iran.

Prosecutors contended that George, along with two other UK nationals, sourced dual-use aircraft parts from the US, shipped them to unnamed companies belonging to George in Malaysia and Dubai, and then forwarded them on to Iran, despite knowing they were restricted under weapons of mass destruction control. George’s accomplices, Paul Attwater and Iris Attwater, assisted George by using their company, Pairs Aviation Limited, to procure parts and ship them to Malaysia. However, several exports originating from Pairs Aviation were blocked by HM Revenue and Customs who informed the three directors they were exporting without a license. When questioned by HMRC officers, George denied he was dealing in aircraft parts and stated he was exporting wheelbarrows stated he was exporting wheelbarrows, goggles and gloves used in construction.

To further their scheme, the three individuals registered an offshore company in the British Virgin Islands named Wiky Global Corp. and shipped product to Holland prior to sending them to George’s company in Malaysia.

The Attwaters were convicted of knowingly exporting controlled goods and were each sentenced to a six-month suspended prison sentence in October of 2018. George was sentenced to 2.5 years in prison in November of 2018. At the time, it was estimated that George profited more than £5 million (est. $6.6 million US Dollars) from the sales while the Attwaters profited an approximate sum of £500,000.00 (est. $660,000.00 US Dollars).

On March 4, 2019, cash totaling $30,700.00, £13,475.00 and €4,270.00 was seized from George and forfeited in court.

Luke Dockwray of the Crown Prosecution Service stated, “Alex George, Paul Attwater and Iris Attwater sold aircraft components to countries and customers they knew required a license from the government…despite being warned the goods he was exporting were at risk of being used in a WMD programme, the defendant introduced new corporate entities into the trading chain to disguise the destination of the sales, in order to continue their supply.”

Valery Kosmachov, Sergey Vetrov, Adimir OU, and Eastline Technology OU

On March 20, 2019 Valery Kosmachov, Sergey Vetrov, Adimir OU, and Eastline Technology OU were charged with one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA), one count of conspiracy to commit international money laundering, 12 counts of violating the IEEPA, 19 counts of smuggling goods from the United States, and 17 counts of international money laundering.

According to an indictment filed September 21, 2017, Valery Kosmachov was the owner of Adimir OU and co-owner of Eastline Technology OU, along with Sergey Vetrov. Kosmachov and Vetrov used their Estonian companies to obtain license-controlled electronic components that were shipped to Estonia and Finland and subsequently allegedly smuggled into Russia.

Some of the components were procured from US-based authorized distributors; other parts were sourced by Rootron, a Tampa-based independent distributor owned by Vetrov and Kosmachov. Trident International Corporation owned by Pavel Semenovich Flider, who on March 5, 2015 was charged by indictment for exporting dual-use goods to Russia by smuggling goods, conspiracy to commit international money laundering and money laundering, was also identified as a source of supply.

Kosmachov was arrested in Estonia in September of 2018 and was extradited to the US in March where he remains in federal custody. Vetrov’s whereabouts remain unknown.

If convicted, each defendant faces a maximum of 20 years’ incarceration for each IEEPS and money laundering-related count and a maximum of 10 years’ incarceration for each count of smuggling.

Please note: Sergey Vetrov has also been identified as the owner of Real Components Ltd, a distributor based in Moscow, Russia.

Ali Caby aka Axel Caby

On March 21, 2019, Ali Caby, an Iranian citizen and resident of Bulgaria, was deported by US Immigration and Customs Enforcement. Caby was convicted of conspiracy to violate the International Emergency Economic Powers Act (IEEPA). Through their Miami-based company, AW-Tronics, LLC, Caby and two family members devised a scheme to export dual-use goods with both civilian and military applications by listing the destination of the products as “USA” while then exporting the devices to their Bulgaria office where they were subsequently forwarded to Syrian Arab Airlines, a government-run airline allegedly transporting weapons and ammunition to Hezbollah and the Iranian Revolutionary Guards.

It is unknown when and where Caby entered the United States. He was present in the country without admission by US immigration authorities. Caby was subsequently incarcerated in a federal prison in Pennsylvania. He was then remanded to Enforcement and Removal Philadelphia who charged Caby with inadmissibility as an alien who engaged in illegal activities. In January an immigration judge ordered Caby to be removed from the US to Bulgaria or Iran. Caby was turned over to Bulgarian authorities on March 22.

David Russell Levick and ICM Components Inc.

On March 21, David Levick, an Australian citizen, was sentence to two years’ incarceration in a federal US prison on four counts of violating the International Emergency Economic Powers Acts (IEEPA). In addition to incarceration, Levick was forced to forfeit $199,227.00, representing the total value of goods from his illicit activity. After incarceration, Levick will face deportation proceedings.

Levick was general manager of ICM Components, Inc, an independent distributor specializing in aircraft parts located in Australia. The February 29, 2012 indictment alleged that Levick purchased restricted goods in 2007 and 2008 such as VG-34 Series Miniature Vertical Gyroscopes; K2000 Series Servo Actuators; Precision Pressure Transducers, Part Number PT0001DWW2C ; Emergency Floatation System Kit, Part Number 206385-103; and Shock Mounted Light Assembly, Part Number 151-0005 from a US Distributor by concealing the true identity of the end-user, an Iranian company. This Iranian partner also operated companies located in Malaysia to act as intermediaries for the Iranian company. Payments were structured between the conspirators to avoid banking restrictions by sending funds to companies in the United States as payment for the parts. Levick’s Iranian partner was prohibited from purchasing aircraft parts and other items from the United States without US Government permission.

In an interview on March 1, 2012, Levick stated he had been unaware of any pending charges against him until the indictment. He claims to have been investigated by the Australian Security Intelligence Organization (ASIO) in 2008 but had not heard anything further since then. Levick was quoted by the Sydney Morning Herald as stating, "it's just that he asked me for it, and I'll supply anything if someone asks me for it…I didn't realise that I wasn't allowed to sell stuff to Iran."

Fraud Alert- High Risk Websites That Take Your Money and Run

By: Kristal Snider

This message is a warning to any organization involved in the purchase of electronic components. ERAI has identified numerous websites run by malicious individuals that are paying for premium placement on Google and require payment in advance for goods but never ship the ordered product. These sites have been set up with the intent to commit fraud. Dozens of victims have come forward sharing nearly identical experiences.

The perpetrators behind these fraudulent activities are believed to be operating the following sites:


WARNING: Some of these sites may contain malicious code and/or content.

Invoices received in response to orders placed via these websites or the bank beneficiary name provided include, but are likely not limited to:

3 City Electronics
AYNX Electronics Limited
Components Center
Component HK Wonder Industry Electronic
Doco Electronic Technology Co., Ltd.
Electronics IC
EMO Industry Limited
Fanno Electric Co., Limited
FUDA Group Limited
Gotek Electronics Co., Limited
Great Way Lighting Limited
Guo Feng International (HK) Industrial Co., Ltd.
HengSun Industry (HongKong) Co., Ltd
HK XinYu Technology Limited
HK HYT Ltd. aka Hong Kong HYT
Huifa Technology (Hong Kong) Co., Ltd.
I Win Ltd. aka I-Win (HK) Limited
Jisong Electronics
Jianrong Electronics aka Jian Rong Electronics Limited
Kin Do Industry (HK) Limited
Kong Chong Hing Electronics (Hong Kong) Limited
LCD Displays Distributor
LHG Limited
Olympics Long Co., Ltd.
Power Technology
Qiying Electronics Co., Ltd.
Reliable HK Electronics
Reytech Industry Co., Limited
Risesun Technology (HK) Limited
Sunhta Industry HK Limited
Universal Parts (HK) Co., Ltd.
Vance Nam Components Limited
Western Precision International Holding Co., Ltd
Wonder Industry Electronic Technology Limited

Risk Indicators
  1. These websites accept only payment in advance. Once payment is made, communications stop and goods are never delivered.
  2. The owner(s) of these sites purchase Google ads. If you Google a part number, it is likely the scam site will appear on either page 1 or page 2 of your Google search results.
  3. The sites falsely claim to be authorized distributors for major semiconductor brands.
  4. The sites falsely claim to be members of ECIA.
  5. The sites share almost identical language and, in some instances, are a mirror copy of one another.
  6. Obsolete and hard to find parts are identified as in “stock” at below market prices.
If you have done business with or have information about any of the above-named entities, please contact ksnider@erai.com.

How to Spot a Counterfeit: Counterfeits in My Stock?

Parts management is accomplished in different ways by different organizations. Each organization should be sure to have processes in place to review stock once your organization becomes aware of a federal notice, criminal indictments, GIDEP or ERAI Alert to ensure that counterfeits are not lurking in your storage.

On December 27, 2018, Rogelio Vasquez, aka Roger Vasquez aka James Harrison, pleaded guilty to wire fraud, trafficking in counterfeit goods and trafficking in counterfeit military goods. Customers of his independent distribution company, PRB Logics Corporation, based out of his home in Orange, California, included the US military to whom he provided parts historically used in military applications for the US Air Force, Army, Navy and Marines.

In August 2012, Vasquez bought unspecified counterfeit ICs from China and subsequently sold them to a defense subcontractor; the parts were discovered to have been used in a classified US Air Force weapon system.

Between November 2015 and May 2016, Vasquez knowingly sold 82 counterfeit Xilinx ICs and 24 counterfeit Analog Devices ICs that had military applications totaling $91,580.00 to undercover agents. During a raid on his house, federal agents uncovered 1307 pieces of counterfeit Xilinx parts commonly used in military applications.

While counterfeit products can result in premature failures, replacement costs and place lives at risk, the parts may also contain malicious code that can remotely disable systems, intercept communications and provide hidden back doors into computer networks, posing cybersecurity risks to mission-critical operations.

As Vasquez’s operations spanned nearly a decade, the exact quantity and current location of counterfeit material originating from China funneled through PRB Logics and other companies operated by Vasquez into the market is unknown. ERAI recommends that all organizations check their inventory against the list of affected products named in the table. Additionally, all product supplied by PRB Logics and/or Vasquez, even if not named in the table, should be subject to scrutiny. Your organization’s customers should be contacted and made aware of the possibility that the items may be counterfeit and/or were shipped with falsified test reports. ERAI recommends testing all product to SAE AS6171 requirements and guidelines.

If you or your customers discover counterfeit parts, you are encouraged to inform ERAI at reportparts@erai.com, relevant local and/or federal authorities and the FBI’s Internet Crime Complaint Center (IC3) at www.ic3.gov.

ERAI Members:
While operating as PRB Logics, Vasquez was previously reported by ERAI three times for suspect counterfeit product in 2011, 2012 and 2013 as well as for a past due invoice in late 2017. Vasquez has also been associated with several other companies that have been reported by ERAI and is thought to have used additional aliases not named in the indictment. Please login to the ERAI website and search the companies’ database for “PRB Logics Corporation” to view the alerts issued against Rogelio Vasquez and PRB Logics.

Section 301 Tariff Update

As a response to China’s “unfair” trade practices related to the transfer of American intellectual property and technology, starting on July 6, 2018, the US Government began implementing additional tariffs for selected Chinese imports. Recently, US Customs and Border Protection (CBP) announced that, at the direction of President Trump, the duty rate will remain at 10% for Chinese imports until further notice.

The USTR had imposed additional duties at a rate of 10% on approximately 5,700 items in the Harmonized Tariff Schedule pursuant to the US Government’s Section 301 investigation. The rate had been scheduled to increase to 25% on January 1, 2019; however, the increase was postponed to March 2, 2019. On February 24, 2019, the President directed a further delay in the rate increase.

For more information, please visit:

Still Confused about ISO Certification?

By: Mary Dunham

In today’s market, many organizations claim to be “ISO Certified”. ERAI has even recently reported on several companies that have supplied counterfeit ISO documentation. If you’re still unclear on the process of becoming certified, we'll break the process down for you.

ISO (International Organization for Standardization) is an international body founded by governments around the world whose purpose is to publish standards as a way to deliver knowledge and best practices. There are approximately 20,000 published standards that are recognized in every country.1

ISO develops international standards but does not issue certificates nor are they involved in the certification process. The certification process and issuing of certificates are done by external bodies, normally called Registrars (used primarily in North America) or Certification Bodies.

Additionally, ISO’s Committee on Conformity Assessment (CASCO) has produced a number of standards relating to the certification process, which are used by these certification bodies.

Certification is the provision by an independent body of written assurance (a certificate) that the product, service or system meets specific requirements.2

Accreditation is the formal recognition by an independent body, generally known as an accreditation body, that a certification body operates according to international standards.3

Any organization can implement a management standard and use it to manage risk and drive improvement within their company. The organization can choose to meet the requirements and perform internal audits as part of their overall management scheme. There is usually no requirement for an external audit. Basically, any organization can implement the standard and claim to be compliant.

Certification requires an audit being performed by an independent organization known as a Certification Body or Registrar. The audit is usually done in two stages: Stage One is a high level review of the management system; Stage 2 looks at the management system in closer detail to provide evidence of compliance in various areas.4 If the organization meets the requirements and is recommended for certification, a certificate is issued for a period of 3 years. During this time, the organization must undergo annual surveillance audits, designed to see whether the organization is maintaining and improving its management system.

In order for certification bodies to be able to perform certification audits and issue the certificates, they need to get a license – and this license is called accreditation.5 The certification body needs to be compliant with the standard ISO 17021 if they want to be accredited for certifying management systems.

Accreditation is the formal recognition by an authoritative body of the competence to work to specified standards. The goal of accreditation is to demonstrate the reliability of the results and/or the creditability of the certificates issued by the registrar or certification body.6 Accreditation bodies also need to be compliant with a standard, ISO 17011, which defines the process of accreditation.

To simplify, certification is the third-party endorsement of an organization’s systems or products, while accreditation is an independent third-party endorsement of the certification.

While there are numerous certification bodies in each country, there is usually only one accreditation body for each country (e.g., UKAS for the United Kingdom, COFRAC in France, DAkkS in Germany, ANAB in North America, etc.). In most cases, these accreditation bodies publish the list of accredited certification bodies in their countries. Most of these bodies are members of the International Accreditation Forum (IAF).

There are several requirement standards for accreditation, depending on the nature of the organization’s activities. All accreditation standards include the principles of quality management systems. It is the ability to demonstrate technical competence that puts accredited certification on a level above non-accredited certification.7 Applicants for accreditation define the scope within which its competency is assessed. Accreditation is granted for the scope in which the applicant’s competence is demonstrated.

It is important to note that not all registrars or certification bodies are accredited, nor does it appear there is any requirement that they must be. It has been shown, however, that it is sometimes harder to prove creditability without this recognition. In addition, there are customers who require their vendors to be certified by an accredited certification body.

How to choose a certification body to become certified

There are no rules or laws preventing anyone from setting up a company and calling it a “certification body” and awarding certificates. So, how do we choose one that is credible and reliable? Here are some things to look for.
  • Evaluate several certification bodies as to credibility, geographic presence, price, knowledge of your industry and competency of their auditors.
  • Check to see if they use the relevant CASCO standard
  • Does this certification body follow ISO 17021?
  • Check to see if it is accredited
Remember, accreditation is not compulsory but it does provide independent confirmation of competence. To find an accredited certification body, contact the national accreditation body in your country or visit the International Accreditation Forum.8

To verify an ISO certificate, contact the Registrar listed on the certificate directly. Visit the Registrar’s website to obtain contact information from the Registrar directly.

You can also register for access to International Aerospace Quality Group (IAQG) Online Aerospace Supplier Information System (OASIS) if you are working in the aerospace industry or are involved in aerospace supplier selection. This online resource contains a list of suppliers who are certified / registered under the IAQG rules to be in compliance with the aerospace quality management system requirements (9100 series). This resource also contains all bodies involved in the process (i.e. National Accreditation Bodies, Certification Bodies and Authenticated Aerospace Experienced Auditors).9 Please visit https://www.iaqg.org/oasis/login.

1 https://advisera.com/27001academy/blog/2016/02/29/accreditation -vs-certification-vs-registration-in-the-iso-world; Dejan Kosutic
2 https://www.iso.org/certification.html
3 Ibid.
4 https://pecb.com/help/index.php/knowledgebase/difference-between-iso-compliance-certification-and-accreditation/
5 Dejan Kosutic, op.cit
6 https://www.finas.fi/sutes/en/accreditation/activity/Pages/Certification-bodies-.aspx; Jenni Harjuoja; 1/14/2016
7 Ibid.
8 https://www.iso.org/certification.html
9 https://www.iaqg.org/oasis/login

SAE International Publishes Revision C of AS5553

On March 26, 2019, SAE International’s G-19 Continuous Improvement Committee led by Bill Scofield of the Boeing Company launched Revision C of Aerospace Standard AS5553: Counterfeit Electrical, Electronic, and Electromechanical (EEE) Parts; Avoidance, Detection, Mitigation, and Disposition.

AS5553, first published in 2009, was designed for use by EEE parts integrators such as original equipment manufacturers, contract manufacturers and government prime contractors. The standard sets forth requirements for the mitigation of counterfeit EEE parts through a risk-based approach and are intended to be flowed down through the supply chain. A companion document, SAE ARP6328, provides additional guidance for implementation of AS5553C requirements.

Revisions to AS5553 continued to reflect alignment to the requirements contained within DFARS 252.246-7007, Contractor Counterfeit Electronic Part Detection and Avoidance System and DFARS 252.246-7008, Sources of Electronic Parts, by differentiating between Authorized Sources, Suppliers who provide EEE parts obtained exclusively from Authorized Sources, and non-Authorized Sources. As AS5553 remains an international standard, full concordance with US Government regulations is difficult but the document manages to provide further enhancements useful for both government and international organizations.

To purchase SAE AS5553 Revision C:

New InterCEPT Class Launched

TM-04: Counterfeit Inspection and Testing of Electronic Parts: Surface Testing and Criteria for Acceptance or Rejection

A new class has been added to InterCEPT’s suite of counterfeit inspection and testing of electronic parts study course. TM-04 provides an in-depth discussion of surface testing associated with detecting counterfeit electronic parts. It references both the IDEA 1010B standard and SAE AS6171 requirements for surface inspection. The class includes video footage and images from a test lab to help the student understand how surface testing is performed. Device images are reviewed so that the student can recognize the criteria for acceptance and rejection.

The course covers:
  • Surface testing - tests for remarking and resurfacing
    • Equipment needed, equipment costs
    • How to perform the tests including on-site video and step-by-step instructions
    • Criteria for acceptance
    • Criteria for rejection
  • Content of test reports
  • Training considerations
  • Outsourcing surface testing
Students completing the class will:
  • Understand the terminology for tests for remarking and resurfacing.
  • Understand how to perform the tests.
  • Understand the criteria for acceptance and rejection.
  • Understand the general format of the test report for surface testing.
  • 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-04 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 and TM-01: Counterfeit Inspection and Testing of Electronic Parts: Test Methods Overview.

Click here to register for TM-04

ERAI New Website Features

SSL Encryption for Member Access
The entire member portion of the website is now encrypted using SSL (Secure Sockets Layer). SSL is the standard technology for maintaining security between two systems; in this case, the ERAI Member and the information provided by and to the ERAI website. SSL ensures that only the intended user, the ERAI Member, accesses the information sent between the two systems, preventing criminals from reading or modifying any data that is transferred. SSL renders the information unreadable to third parties, safeguarding your sensitive data.

OCM Verification and/or Statement Field Added to Reported Part Alerts
ERAI Members can now filter parts reported to the ERAI High Risk and Suspect Counterfeit Parts Database which contain a verification statement or other comment provided by the Original Component Manufacturer.

Under the High Risk & Counterfeit Parts search feature, click on the blue section highlighting the High Risk and Suspect Counterfeit Parts Advanced Search:

Once the advanced search field is open, select the filter by placing a checkmark next to “Include only parts that have OCM verification and/or statement” and click on the search button.

The comment will be displayed within the selected part report:

OCM statements are obtained directly from the Original Component Manufacturer and generally contain information that assist in determining the authenticity of the product in question.

Supplier Alerts
When a company is identified as the supplier of a suspect counterfeit part through a report submitted to ERAI, ERAI staff will review all parts recorded in ERAI’s internal database in which the company was identified as the supplier of nonconforming or suspect counterfeit parts within the previous 5 years. For organizations that demonstrate repeated complaints of a like nature, ERAI will issue a Reported Parts Supplier Alert that identifies the company as the source of supply of the reported product. The alert(s) will be visible in the Reported Parts Supplier section of the company’s ERAI profile and can be found in the Recently Reported Supplier Alerts section of the Recent Company Alerts page.

The only exception with regard to the definition of suspect counterfeit parts are parts sold as “new”. These SC/NC parts are not included in the above. For organizations that are ERAI Members, ERAI membership will be revoked if the organization is repeatedly identified, as the alerts demonstrate that the supplier is failing to perform corrective actions necessary to improve the detection of counterfeit parts.

New Incident Type: Unverified List Addition
US-based organizations exporting goods abroad are required to verify if an entity has been identified as a party of concern by the US Government. There may be export prohibition, specific license requirements or other indicators which may require additional due diligence on behalf of an organization prior to export. ERAI has added a new classification to identify when an organization, entity or individual has been identified on the Unverified List. According to the US Bureau of Industry and Security:

“Parties listed on the Unverified List (UVL) are ineligible to receive items subject to the Export Administration Regulations (EAR) by means of a license exception. In addition, exporters must file an Automated Export System record for all exports to parties listed on the UVL and obtain a statement from such parties prior to exporting, reexporting, or transferring to such parties any item subject to the EAR which is not subject to a license requirement. Restrictions on exports, reexports and transfers (in-country) to persons listed on the UVL are set forth in Section 744.15 of the EAR. The Unverified List is set forth in Supplement No. 6 to Part 744 of the EAR.”
(Source: https://www.bis.doc.gov/index.php/policy-guidance/lists-of-parties-of-concern/unverified-list)

The Unverified List, in short, contains names and addresses of individuals or entities whose “bona fides” (i.e., legitimacy and reliability relating to the end use and end user of items subject to the EAR) have not been verified by BIS.

If an organization is identified on the Unverified List, Denied Persons List, Entity List or the Consolidated Screening List, please consult your organization’s export compliance department.

New Nonconformance Categories in Reported Parts
Two nonconformance category types have been added to ERAI’s Suspect Counterfeit & High Risk Parts Database:
  • Inconsistencies identified during cross-section analysis in comparison to a known good device.
  • Inconsistencies identified during cross-section analysis within a homogeneous lot.
ERAI Members can now search for relevant images tagged with these nonconformances in the ERAI Nonconformance Photo Library under Decapsulation Internal Analysis.

White Paper Review

A New Circular Vision for Electronics: Time for a Global Reboot

Why you should read it: This report by seven United Nations entities estimates that current global annual e-waste results in approximately 50 million tons of lost materials representing an estimated $62.5 billion dollars. Changes in the global economy and the creation of a circular economy that specifically addresses e-waste are needed in order to reduce the e-waste tsunami.

ERAI Insight: E-waste has been identified as a major global environmental problem with current YEARLY estimates comprising an amount equal to 4,500 Eiffel Towers placed side by side occupying an area approximately the size of Manhattan. Of this annual total, approximately 40 million tons are sent to landfills, burned or illegally traded. The UN University estimates that without any changes, e-waste could triple to 120 million tons by 2050. The paper states that while the total number of people working “informally” in the e-waste sector is unknown, 100,000 people in Nigeria and 690,000 people in China are estimated to be working “informally” in the sector.

The report states that cooperation between major brands, small and medium sized enterprises, trade unions, academia and civil society is necessary to effect change. This collaboration would enable a circular economy which would encourage responsible reuse and recycling that would create employment opportunities with minimal environmental impact. The report adds that additional reductions in materialization can arise from increased cloud computing and the Internet of Things (IoT).

The seven organizations involved in the writing of the report through the E-waste Coalition are: the ILO; the International Telecommunication Union (ITU); UNEP, the UN Industrial Development Organization (UNIDO), the UN Institute for Training and Research (UNITAR), UNU and the Secretariats of the Basel, Rotterdam and Stockholm (BRS) Conventions, with support from the World Economic Forum (WEF) and the World Business Council for Sustainable Development (WBCSD).

Click here to open


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