Dear ERAI Members and Colleagues,

This quarter’s issue focuses on helping organizations navigate the dangers of the supply chain. We’ve all heard the saying “trust but verify”; however, I would argue that in this industry, the motto “do not trust and verify” is apropos.

The main danger that the industry has focused on is counterfeit parts but criminals are constantly devising new ways to circumvent laws for financial gain and even more sinister reasons such as threatening international security. There are reports this quarter of Chinese Government-backed IP thefts performed by employees at a major US contractor, illegal procurements of controlled items by Iranian actors made through US front companies, an allegation of a domestic corporate employee falsifying documentation for space-grade parts sold to government and private space organizations in order to “get more business” for his company, and a US supplier asking a test facility to falsify documentation accompanying military-grade parts intended for sale to the US government.

The dangers of the market are widespread and constantly changing. After 15+ years at ERAI, I have learned to apply due diligence not just to each and every company that comes under ERAI scrutiny, but in my daily life as well by second-guessing that “great price” on that “prime” online marketplace and buying instead directly from the manufacturer. Each and every employee at every organization should be urged to do the same, whether in procurements for an organization or for personal use.

Complacency or procurement shortcuts do not justify counterfeit escapes; neither does failing to report a part or a problem organization. Countless reports have come in to ERAI from victims of fraudulent websites set up by criminals with the intent of stealing money and not shipping product. Each and every report places pressure on enforcement authorities and alerts other potential victims of the scheme, restricting the counterfeiters’ income. Together, each organization in the industry can play a vital role in making the global supply chain a safe environment.

Anne-Liese Heinichen

Evaluating Risk - The Aftermath of the Rogelio Vasquez Conviction

On May 30, 2019, Rogelio Vasquez, aka “James Harrison”, owner of PRB Logics Corporation, was sentenced to 46 months in a federal prison after pleading guilty to trafficking in counterfeit military goods, trafficking in counterfeit goods, and wire fraud.

Vasquez’s guilty plea, entered on January 17, 2019, was the result of a multi-agency investigation that began in 2015 and that unraveled a scheme to defraud beginning on or before July 2009. The investigation was conducted by U.S. Department of Defense, Office of Inspector General – Defense Criminal Investigative Service; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; and the National Reconnaissance Office, Office of Inspector General.

The investigation revealed that Vasquez, for at least seven years from approximately July 2009 through May 31, 2016, imported counterfeit integrated circuits from suppliers in China and re-sold them to customers in the United States, many of which were ultimately purchased by defense contractors for use in the U.S. military. Vasquez knew, and took great lengths to cover up, the ICs he was selling were old, used and/or discarded and that his Chinese suppliers had sanded off all of the original markings, and then resurfaced and remarked these chips using a process commonly referred to as “blacktopping”. Once the parts were resurfaced and remarked, the parts were sold as new parts.

Equally disturbing, Vasquez instructed a test laboratory in China by the name of Advanced-Lab Technology Center to prepare two separate versions of test reports to hide the fact the parts failed remarking and resurfacing tests such as resistance to solvents using acetone. In addition to defrauding his customers, Vasquez also engaged in a scheme to avoid seizures by CBP by including sanitized versions of test reports generated by Advanced-Lab in shipments as evidence the goods contained therein were genuine when, in fact, they were counterfeit.

On May 26, 2016, federal agents executed a search warrant at the office of PRB Logics, which was Vasquez’s home, where parts marked with part numbers historically used in military applications were seized. We know for certain some of the counterfeit ICs sold by Vasquez ended up in a classified Air Force program, and others were intended for use in the B-1 Bomber aircraft, but we will likely never know the whereabouts of all the counterfeit parts linked to Vasquez’s criminal operation. We can safely assume a significant number of counterfeit parts have entered the supply chain as a result of Vasquez’s illegal enterprise. We should also assume, any part sold by Vasquez was counterfeit unless the part was fully vetted in accordance with industry recommended inspection and testing guidelines.

Under the terms of his plea agreement, Vasquez agreed to forfeit 169,148 suspect/presumed counterfeit integrated circuits seized by the government from his residence. These parts have been added to ERAI’s High Risk and Suspect Counterfeit Parts Database and assigned a classification of FN - Federal Notice - A part or list of parts which are publicly released as part of a U.S. federal/government agency notice. These parts may require additional evaluation based on your organization’s internal risk mitigation procedures.

Additional reading:

Government’s Sentencing Position
Government’s Order of Forfeiture

The following parts were identified as seized items noted in the Government’s Order of Forfeiture

Part NumberManufacturer
Part NumberManufacturer

ERAI recommends any parts purchased from Vasquez that were not tested and inspected in accordance with industry recommended inspection and testing guidelines be considered suspect counterfeit or high risk and subject to reevaluation.

Counterfeit electronic parts pose a significant risk to performance of defense systems.  Even if counterfeits made from previously used parts and salvaged from e-waste may initially perform, there is no way to predict how well they will perform, how long they will last, and the full impact of failure.

To view the parts supplied by Rogelio Vasquez as reported by the government, after logging in to the ERAI website, select “High Risk & Counterfeit Parts” under the search tab. Once the search page appears, open the Advanced Part Search by clicking on 2. High Risk and Suspect Counterfeit Parts Advanced Search. Make sure the “FN Federal Notice” checkbox is checked and click on the Search button. The alerts will have report dates of June 4, 2019 and May 2, 2018.

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.

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

Kristal Snider
ERAI, Inc.

Malicious individual(s) are continuing to use premium Google placement to entice victims into placing orders that require advanced payment for goods which the perpetrators do not intend to ship. To date, ERAI has recorded losses totaling in excess of $300,000.00 and has notified appropriate law enforcement agencies. Organizations around the world and from various industry sectors have been, and continue to be, targets.

We have received additional website URLs and bank beneficiary names. As this scheme persists through the use of ever-changing pseudonyms and rotating bank accounts, ERAI is re-posting this message as a warning to any organization involved in the purchase of electronic components.

The perpetrators behind these fraudulent activities are believed to be operating the following sites as well as sites not currently known by ERAI:


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
Bolan (Hong Kong) Trading Co., Ltd.
Components Center
Component HK
Doco Electronic Technology Co., Ltd.
Dynasty Digital Devices Co., Ltd.
Electronics IC
EMO Industry Limited
Fanno Electric Co., Limited
FUDA Group Limited
General Surplus Electronics Co., Ltd.
Gotek Electronics Co., Limited
Great Way Lighting Limited
Guo Feng International (HK) Industrial Co., Ltd.
Hengjia Trade Co., Ltd.
HengSun Industry (HongKong) Co., Ltd
HK XinYu Technology Limited
HK HYT Ltd. aka Hong Kong HYT
Power Technology
Qiying Electronics Co., Ltd.
Reliable HK Electronics
Reytech Industry Co., Limited
Risesun Technology (HK) Limited
Shengmao Trade Co., Ltd.
Siusai Technology (HK)
Sunclass Technology Ltd.
Sunhigh (HK) Technology Co., Limited
Sunhta Industry HK Limited
Hong Kong Oland Technology Limited
Huifa Technology (Hong Kong) Co., Ltd.
I Win Ltd. aka I-Win (HK) Limited
IT Electronic Components 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
Leader Lighting Industry
LHG Limited
Lijingyin Trading Limited
MD Power Technology
Mingsun Lighting Co., Limited
Miraca Industrial Co., Ltd.
New Riverside Co., Limited
Olympics Long Co., Ltd.
Polaris (HongKong) Int'l Limited
TSINQ International (HK) Co., Ltd.
Universal Parts (HK) Co., Ltd.
View Lighting Co., Limited
Viewled Optoelectronic Co. Ltd
Vance Nam Components Limited
Wahsung Co., Limited
Western Precision International Holding Co., Ltd
Wonder Industry Electronic Technology Limited
YAKA (H.K.) Trading Co., Limited
Yixing Electronic (HK) Co., Ltd.

All of the victims wired payment in advance to bank accounts held with HSBC Hong Kong.  Law enforcement officials advised ERAI it is not uncommon for crime rings like this to use existing bank accounts belonging to third parties in order to receive payments.  In return, the actual account holder is paid a fee.  Enforcement officials indicated it is unlikely the criminals themselves are opening and closing these accounts which will make it more difficult to identify the perpetrators.   While new bank accounts are identified regularly, thus far the following bank accounts have been used to receive payments from victims and are considered extremely high risk:


The location of the perpetrators is unknown.  While the addresses appearing on the fraudulent websites, invoices, and quotes are regularly changing, the following address has been identified consistently as the beneficiary address on wire instructions and is considered extremely high risk:

Rm 603 6F Hang Pont Commercial Building
31 Tonkin Street, Cheung Sha Wan
Kowloon, Hong Kong

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.

Criminal Charges Continue

Chan Hung Le

Chan Hung Le was arrested on April 16, 2019 by federal law enforcement on charges that he allegedly managed a counterfeit ring that imported fake Apple and Samsung cell phone components from China into the United States. Le has been charged with conspiracy to traffic in counterfeit goods, money laundering conspiracy, conspiracy to commit mail fraud and wire fraud and aggravated identity theft.

The government alleges that Le and his wife operated EZ Elektronix in Irvine, California to serve as a front for importing counterfeit electronic products starting in June 2010. The products were then advertised as authentic and were sold through various online stores. In order to evade detection by the authorities, Le used various company names and addresses, virtual offices and post office boxes throughout California, Texas, and Oklahoma. The company names used by Le are: EZ Elektronix Corporation; Fix2Save, Inc.; Gadget Fix Corp; Gadget Parts Direct; Gadgetfix Corporation; JV Trading Solutions; JVU Unlock; Pac Depot Inc; Pac-Depot; US Mobile Parts and Wholesale Gadgetfix.

Government authorities began looking into Le’s activities in October 2011 and February 2013 when search warrants were executed at EZ Elektronix resulting in the seizure of 7,200 counterfeit iPhone components and 11,700 other counterfeit mobile telephone components valued in excess of $1.7 million. After the raids, Le began routing the illegal shipments to Texas and Oklahoma and allegedly only had authentic good shipped directly to EZ Elektronix in hopes of evading customs authorities. To disassociate himself from the transactions, he also received assistance from family members and employees. It is estimated that between January 2012 and December 2018, EZ Elektronix paid in excess of $72 million to three companies who helped him import counterfeit parts from Hong Kong and China into the United States.

In 2016, one of Le’s suppliers, Hongwei “Nick” Du, pleaded guilty in California to conspiring to traffic in counterfeit goods and related money laundering charges. Du acknowledged providing Le with nearly $19 million worth of cellular telephone and other electronic components and stated that approximately half of the goods bore counterfeit Nokia, Samsung and Apple trademarks, among others.

If convicted of all charges, Le faces up to 45 years’ imprisonment plus a two-year consecutive sentence for aggravated identity theft.

Yi-Chi Shih

Yi-Chi-Shih, an adjunct professor of electrical engineering at the University of California Los Angeles (UCLA), has been convicted on all 18 counts brought against him including conspiracy to violate the International Emergency Economic Powers Act (IEEPA), mail fraud, wire fraud, subscribing to a false tax return, making false statements to a government agency and conspiracy to gain unauthorized access to a protected computer to obtain information.

The government’s charges outlined a scheme between Shih and codefendant Kiet Ahn 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, missiles, fighter jets, electronic warfare countermeasures, missile guidance systems and radars. Shih allegedly gained access to the victim company’s computer systems through their web portal by pretending to be a US customer interested in custom MMICs for domestic use. The true intent was to transfer the company’s technology and product to China.

The government alleged a conspiracy between Shih, Mai, and Shih’s brother, Ishiang Shih. 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, MicroEx Engineer dba L2kontemporary, Inc. in California in 2010. Ishiang Shih, a former engineering professor at McGill University in Canada, registered a company in Canada by the name of JYS Technologies and was also listed as the technical director of Chengdu GaStone Technology Company.

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.

Shih faces a maximum sentence of 219 years’ imprisonment and a sentencing date has not yet been set. Codefendant Mai, a naturalized US citizen from Vietnam, pleaded guilty to federal charges of smuggling and faces up to 10 years’ imprisonment. Mai’s sentencing is scheduled for September 19. According to a report in the Canadian press, the US government is seeking the extradition of Ishiang Shih from Canada.

Xiaoqing Zheng and Zhaoxi Zhang

On April 23, the US Department of Justice announced the indictment of Xiaoqin Zheng of New York and Zhaoxi Zhang of Liaoning Province, China. The former General Electric engineer and Chinese businessman were charged with economic espionage and conspiring to steal General Electric’s trade secrets regarding turbine technologies for the benefit of the People’s Republic of China.

The indictment alleges that Zheng, while employed in New York by GE as an engineer specializing in sealing technology, accessed electronic files containing proprietary design models, drawings, configuration files and material specifications relative to General Electric gas and steam turbines and their components and testing systems. The files were emailed to Zhang in China who subsequently used the trade secrets to advance Zhang and Zheng’s personal interests in two Chinese companies that develop parts for turbines: Liaoning Tianyi Aviation Technology Co., Ltd (LTAT) and Nanjing Tianyi Avi Tech Co. Ltd. (NTAT). Notably, the defendants are alleged to have received financial and other support from the Chinese government and entered into research agreements to develop turbine technologies. The defendants have not been charged with being Chinese agents.

Zheng’s activities were discovered after GE installed monitoring software on Zheng’s computers in an effort to determine what information he was encrypting. Zheng employed “steganography” to conceal stolen material in otherwise ordinary files, for example a digital photograph of a sunset. When interviewed by the FBI, Zheng denied emailing GE’s proprietary information to his Chinese contacts. A search of Zheng’s home revealed he had visited China five times over the course of two years’ time and a handbook that described benefits the Chinese government offered to individuals with technical knowledge.

Zheng has pleaded not guilty. He faces a maximum of 15 years’ imprisonment for economic espionage, 10 years’ imprisonment for trade secrets theft, and 5 years’ imprisonment for making false statements to the FBI, along with fines and supervised release. Zheng has been released on bond pending a trial. Zhaoxi Zhang is believed to be in China.

James Smalley

Charges were announced on May 22 against James Smalley, a former employee of PMI Industries, LLC. Smalley was charged with falsifying inspection reports for aerospace parts. Smalley began his employment in March 2017 as a Quality Assurance Engineer at PMI, an aerospace precision machining company. PMI specialized in high-tolerance machining for aerospace parts used by SpaceX and Department of Defense aerospace contractors used to build space vehicles.

In January 2018, during an internal audit performed at the direction of SpaceX by SQA Services, Inc, falsified source inspection reports and falsified non-destructive testing certifications from PMI for Falcon 9 and Falcon Heavy critical parts were discovered. The signed source inspection report had a forged inspector’s signature that appeared to have been photocopied and digitally cut and pasted into the source inspection report. NASA’s Office of Inspector General (OIG) was notified in February of 2018 who found the falsely certified components were to be used for an upcoming satellite mission launching on a SpaceX Falcon 9 rocket.

During his employment at PMI, Smalley had falsified at least 38 source inspection reports for components procured by SpaceX for the Falcon program and 76 individual parts that were rejected during inspection or were never inspected and subsequently shipped to SpaceX. The parts are not specifically listed in the court complaint. A total of seven NASA space missions, two US Air Force space flight missions and one National Oceanic and Atmospheric Administration (NOAA) space flight missions were affected by the parts. It is not clear whether any of the parts were actually flown on the vehicles.

SpaceX terminated its $200,000 a month relationship with PMI, resulting in PMI’s subsequent termination of operations and 35 people losing employment. When asked why he forged the documents, Smalley replied that, “he wanted to ship more product for the company.”

“According to the criminal complaint, James Smalley took the act of forgery to a new level,” said FBI Buffalo Special Agent-in-Charge Gary Loeffert. “A potentially catastrophic level with the potential to not only cost millions of dollars, but also jeopardize years of irreplicable work.”

Smalley faces a maximum 10 years’ imprisonment and a $250,000 fine.

Joyce Eliabachus, Peyman Amiri Larijani and Kral Aviation

On June 11, Joyce Marie Eliabachus aka Joyce Marie Gundran Manangan, principal of Edsun Equipments LLC, an aviation parts trading company, pleaded guilty to conspiracy to violate the Iranian Transactions and Sanctions Regulations (ITSR).

In tandem to the guilty plea, a related complaint was unsealed in New Jersey against Peyman Amiri Larijani, a citizen of Iran and former resident of Istanbul, Turkey, charging him with conspiracy to violate the ITSR, conspiracy to commit money laundering, and conspiracy to smuggle goods from the United States. In the US District Court for the District of Columbia, Larijani was charged in two separate indictments on June 4 with conspiracy to acquire US origin aircraft parts and goods to supply to entities and end-users in Iran, to conceal from the US government that the goods were destined for Iranian aviation end users, to financially profit along with other conspirators, and to evade the International Emergency Economic Powers Act (IEEPA), the ITSR and the Export Administration Regulations (EAR).

The US Government contends that Eliabachus, Larijani and others formed, “part of an illicit, international procurement network that is designed to surreptitiously acquire large quantities of aircraft components from United States manufacturers and vendors, and to unlawfully export those parts to entities in Iran…[the] network has obtained and exported over $2 million worth of aircraft components from the United States to Iranian business entities in violation of export control laws.” Joyce Eliabachus, a naturalized U.S. citizen born in the Philippines, allegedly operated Edsun Equipments, LLC aka Edsun Equipments LTD out of her New Jersey home. Peyman Amiri Larijani owned an Iranian procurement company and was the operations and sales manager of Kral Havacilik IC VE DIS Ticaret Sirketi (Kral Aviation), a Turkey-based company.

According to the criminal complaint, from May 2015 through October 2017 Eliabachus provided Larijani and other Iranian conspirators with access to Edsun’s account to an online aircraft parts database through which purchases were made, concealing the identity of the true end user(s). These end users included: Mahan Air Co, Ukranian-Mediterranean Airlines, Caspian Airlines, Kish Air, Atrak Air, Iran Air Tours, ATA Airlines and Karun Airlines. Among the parts purchased were aircraft brake assemblies, rotor assembly parts, and a series of other unspecified aircraft parts.

The parts were then sent to Edsun in New Jersey where Eliabachus used freight forwarding services to send the parts to Turkey and the United Arab Emirates to organizations such as Parthia Cargo and Reibel Tasimacilik Ve Tic A.S., while falsifying the true value of the cost of goods, the destination, and/or the end user of the components, without obtaining the necessary export licenses. Upon arrival, Larijani and other Iranian co-conspirators then transported the parts on to the end users in Iran. In turn, Eliabachus profited financially through millions of dollars which were funneled through various Turkish bank accounts held in the name of shell companies controlled by the Iranian conspirators.

In total, the government estimates that Eliabachus, Larijani, and other conspirators were responsible for at least 49 shipments containing 23,554 license-controlled aircraft parts being exported from the United States to Iran without required licenses.

Eliabachus faces a maximum of 5 years’ imprisonment and a $25,000 fine for conspiracy to violate the IEEPA. Sentencing is scheduled for September 24, 2019.

If convicted, Larijani faces: for conspiracy to violate the ITSR, a maximum of 20 years’ imprisonment and a $1 million fine; for conspiracy to commit money laundering, a maximum of 20 years’ imprisonment and a $500,000 fine; and for conspiracy to smuggle goods, a maximum of 5 years’ imprisonment and a $250,000 fine.

Navigating Around the Supplier Selection Land Mine

Mary Dunham
ERAI, Inc,

This quarter’s issue focuses on helping organizations navigate supply chain land mines. While there are dangers from untrained staff, substandard and counterfeit parts, and supply chain disruptions, arguably the most dangerous land mine is an untrustworthy supplier. An organization depends on its suppliers to deliver products on time, at the right price, and in compliance with its quality standards. Choosing the wrong supplier can lead to shipping delays, product returns and poor quality, all of which result in lost time and profit. An organization’s supplier selection impacts an organization as a whole.

While the topic of supplier selection may seem to be a topic discussed ad nauseum, it is a step where many purchasers seem to be willing to give an unknown organization “a chance”, leaving your organization vulnerable to criminals supplying counterfeit parts, substandard parts, or even completely unverified parts accompanied by counterfeit documentation, as James Smalley is accused of doing (see “Criminal Charges Continue”).

Your organization’s quality management system and counterfeit parts control plan should already address supplier selection, especially for organizations dealing with government procurements. However, are your procedures robust and are you ensuring that your employees are following the policies that your organization has set forth?

Set your criteria. The first step is to determine what criteria your organization should use in choosing a supplier, as well as defining the importance of each item on your list. This will enable your organization to evaluate potential suppliers and ensure that you don’t overlook any important requirements. As part of this process: ASK QUESTIONS, GET ANSWERS, and VERIFY THE INFORMATION YOU RECEIVED.
  1. Years in business, sustainability, and financial stability. Your organization needs to ensure that the company you are considering is established and can fulfill your requirements. Request a copy of their business license, tax ID number, Dun & Bradstreet number, Cage Code number, etc. The last thing you want to do is scramble to find a new supplier because your source just went out of business. Check to see if there are or have been any indications of financial issues. Once you receive the requested documentation, verify that the information is correct. The Internet is a readily available source you can use to verify ISO certificates, VAT Licenses and company registrations. Many countries and most of the US States have listings of registered companies and their corporate documentation.
  2. Ability to constantly supply products or services. This is particularly important when dealing with long term projects that may contain multiple reorders. Search out and review the company’s reliability and their history of delivering the goods you require in a timely manner. A vendor with supply issues will affect your ability to supply product to your customers.
  3. Ability to supply all the products required. Is this an authorized source for the product you are ordering? Where are they getting the goods – an authorized source, a distributor, a third-party marketplace (e.g. Amazon, OEMS Trade)? If placing multiple orders, are all of the parts coming from the same source? Will the supplier guarantee that this is the case throughout the transaction? Is the product accompanied by documentation that can be verified?
  4. Flexibility to allow changes in orders. In this industry, changes happen on a fairly regular basis. Will your vendor be flexible or stringent when this happens? Will there be and what are the restocking charges? Will they issue cash refunds or house credit in the event of changes? A supplier who heavily penalizes your company for changes may not be the right choice for you.
  5. Appropriate supply of internal experts to answer your questions. Does your supplier have engineers or others who can answer any questions you may have about your product or are they strictly providers? Having experts available can minimize your risk, particularly in instances involving new or new-to-you products.
  6. Quality assurance processes. Does the organization have a documented quality management system and a counterfeit parts control plan? Is the organization ISO 9001 compliant or certified? Is the organization certified to recognized industry counterfeit avoidance standards such as SAE AS6081, AS5553, AS6496, etc.? If certified, request a copy of their certificate and then make sure it is valid. Many of the registrars will publish a list of their certificate holders on their websites. Recently, ERAI has seen an increase in the number of companies falsely claiming to be ISO certified. If you have difficulty verifying the authenticity of an ISO certificate, please contact ERAI and we will assist you in doing so.

    Suppliers should maintain clear and updated quality records (one of the key tenets of ISO 9001 certification). It is, however, your responsibility to also clearly outline your and your customer’s requirements to your suppliers. Important information your suppliers should keep organized and updated includes:
    • quality standards, including known quality issues, defect classifications and performance standards;
    • product specifications and requirements including dimensions, colors and materials;
    • packaging requirements including labels, shipping markings and retail printing files;
    • Regulatory requirements including any changes in legislation and standards.
    Review supplier quality data in industry product alert sources such as ERAI and GIDEP. Does the supplier have a history of supplying counterfeit or nonconforming parts?
  7. Accountability for quality issues. A reputable supplier will take responsibility for a quality problem and will address it quickly. They will offer to correct the issue and/or take whatever measures are necessary to prevent the same defect from occurring. A supplier without accountability is more likely to deflect responsibility to someone else and your company may be left holding the bag. Look for signs of accountability as a key characteristic of a good supplier. The best way to verify a supplier’s product capabilities and quality process is to visit the supplier, either personally or through a third-party agent. You can learn a lot about a supplier by verifying areas such as their raw materials and finished product inventory, their incoming quality control process, their machine and equipment maintenance and calibration, and by verifying their business and export licenses. Do your due diligence.
  8. Testimonials and references from customers and contactable references. When you receive a list of references, CONTACT them and ensure that the references are from genuine companies. If they cannot be reached or are unwilling to provide information, this should raise a red flag. Ask the references about prior successful and unsuccessful sales. If successful, was the product delivered on time and in good condition? Were there any issues at all? If they were unsuccessful, what were the issues? Were they resolved and, if so, how quickly?
  9. Location, Facility, Warehouse. This is often a key “red flag” that can easily be uncovered using publicly-available data. All potential supplier’s addresses and business registrations should be verified prior to adding a company to your organization’s approved vendor list (AVL). If you cannot physically inspect the facilities or have a third party do it for you, do some digging. Use Google and Google Maps to find out where the property is located: does the address actually exist; is it an industrial area, residential area, etc.? If the location is in an office building, see if you can find out who the managing company is and then call and ask them about the supplier. If the building has a security officer, speak with him or her to see what you can learn. Are you able to find the name of another tenant in the building? Call and ask them if they see a sign on the door, people entering and exiting, and if they receive regular mail and/or deliveries?

    You may be asking yourself: What if the company is in another country? ERAI members can check the ERAI database to see if there is another member who may be located in the same city whom you can contact and ask if they are familiar with the company or if it would be possible for them to physically check out the location and let you know what they learn. At ERAI, we occasionally ask members to visit physical addresses either during an investigation or when we verify membership applications. Use the information provided by ERAI and our members to help in the decision-making process.

    ERAI has discovered over the past 20 years that a number of companies advertise corporate addresses that are virtual offices, registered agent facilities and/or shipping services. While some companies may have a legitimate reason for doing so, you might want to consider some of the other reasons for choosing to remain anonymous. Companies may be using these addresses for illicit purposes such as evading taxes, importing or exporting counterfeit goods, or circumventing authorities for illegally importing or exporting goods that require a license. ERAI recently reported on the arrest of a California man who used multiple business names and addresses, as well as virtual offices and post office boxes in at least three US states in order to evade the authorities for his purchase and sale of counterfeit cell phone parts. Organizations not operating from a verifiable, brick and mortar location whereby they can be audited on site should be treated as a higher risk.

    Storage and handling facilities – In addition to the concerns above, depending on the type of product you are purchasing, you may want to know if the facilities are suitable – temperature controlled, static controlled, etc.

    ERAI has identified several addresses below that warrant special attention.
  10. Prices. Are their prices comparable with others for the same goods? Are their prices “too good to be true” or are they the sole source of a product?
  11. Terms of business, including minimum and maximum order quantities, lead times, delivery times, methods of delivery; return policies and payment terms all have an impact on your business and must be discussed and agreed upon up front.
  12. Customer Service. Is the staff professional, cordial and easy to work with? More importantly, are they available and responsive during your business hours to help with ordering and any issues that may crop up? All too often organizations find that suppliers have excellent customer service until the moment a problem arises.
Define your process. Determine what methods will be used to find your suppliers. Will you post your requirements on a search engine, will you approach selected companies directly, or both? Whichever way you choose, set a time frame for the selection process. In addition, assign a qualified member of your staff to review the proposals and provide you with a short list of approved suppliers to choose from for your needs.

Call for Quotes. When you actually send out the RFQs, make sure they include full details of the products needed together with quantities, delivery dates, quality standards and any and all other pertinent information. Request that the quotes include detailed information on the vendor’s processes, the stability of their suppliers and a reason why you should buy from them. This last item may give you a feel for how your company may be treated; if it isn’t answered, does that mean the company does not listen to directions, are too busy to bother answering, or just don’t care? Is it a stock answer or does the company appear to really want your business and will do all they can to assist you to the best of their ability?

Evaluate the Quotes. Compare the quotes against your criteria checklist and verify the information you receive. Determine the order of importance for your criteria and how the company measures up. This will give your company a more objective method of evaluation.

Routinely Monitor Supplier Performance. Once you’ve decided on a supplier, make sure both of you have direct contacts with each other and conduct regular performance reviews so you can keep an eye on things. In order for a business relationship to flourish, you must be able to depend on the supplier and know they will take care of you.

While the above process seems time-consuming, the time it takes for your organization to properly vet a supplier can save you hours, rework costs, and headaches. ERAI is here to help any company, regardless of membership status with verification and direction on accessing public data sources. For assistance, please contact us at +1-239-261-6268.

Below is a listing of addresses ERAI has identified as being used by multiple organizations and/or may be indicative that additional information should be requested from a potential supplier:

Addresses in China and Hong Kong

Room A, 10F, Kras Asia Industrial Building
70 Hung To Road, Kwung Tong
Hong Kong
NOTE: This belongs to E-Reach Industrial Limited, a company that provides warehousing and logistics services in Hong Kong.

Flat/Rm 2309 A, 23/F Ho King Commercial Center
2-16 Fa Yuen St. (aka Garden Street)
Hong Kong
NOTE: This belongs to a corporation registration company.

Unit 4, 7/F, Bright Way Tower
No. 33 Mong Kok Road
Hong Kong
NOTE: This belongs to a corporation registration company. The ERAI database currently lists 39 companies using this address.

Room 803, Chevalier House
45-51 Chatham Rd. S.
Tsim Sha Tsui
Hong Kong
NOTE: This belongs to a corporation registration company.

Rm 603, Fl. 6, Hang Pont Commercial Building
31 Tonkin St., Cheung Sha Wan
Hong Kong
NOTE: This belongs to a corporation registration company.

Si Toi Commercial Building, 3/F, Unit B
62-63 Connaught Road West
Hong Kong
NOTE: This address belongs to Tiptrans Ltd, a company that allegedly provides mail forwarding services in the UK, Germany, Czech Republic, Hong Kong and China.

3/F, Building A10 FuAn
No. 2 Industry Park, FuYong, BaoAn
NOTE: This address belongs to Tiptrans Ltd, a company that allegedly provides mail forwarding services in the UK, Germany, Czech Republic, Hong Kong and China.

Block A2 G/F Hoi Bun Industrial Building
6 Wing Yip Street
Kwun Tong, Kowloon
Hong Kong, China

Unit A, G/F Yau Tong Industrial Bldg
No 2 Shung Shun St, Yau Tong
Hong Kong China

Note: The above two addresses belong to GSE (HK) Limited aka GSE-Elec HK Ltd, a company that provides freight forwarding services in China and Hong Kong. Numerous companies (at least 38 that we are aware of) have been instructed to return rejected goods to one of these two addresses over the past years.

Addresses in the United Kingdom

9 Pantygraigwen Road
Mid Glamorgan
Pontypridd CF37 2RR
United Kingdom
Note: There are 744 companies registered to this address according to Companies House Registration.

2e Parkinson Road
Liverpool L9 1DL
United Kingdom
NOTE: This address belongs to Tiptrans Ltd, a company that allegedly provides mail forwarding services in the UK, Germany, Czech Republic, Hong Kong and China.

Addresses in the Czech Republic

Slevacska 476/2A
Rumburk 40801
Czech Republic
NOTE: This address belongs to Tiptrans Ltd, a company that allegedly provides mail forwarding services in the UK, Germany, Czech Republic, Hong Kong and China.

Addresses in Germany

Hauptstrasse 20
Neugersdorf 02727
NOTE: This address belongs to Tiptrans Ltd, a company that allegedly provides mail forwarding services in the UK, Germany, Czech Republic, Hong Kong and China

The Advanced Company Search is a great resource for members to benefit from ERAI’s 20+ years of data collection. After logging in to the website, select the “Company Search” subtab from the Search area. Then open the advanced search interface.

Entering data into the fields will perform a search for any of the entered criteria. Addresses, bank account and bank beneficiary names are helpful in uncovering relationships between different organizations. For example, a search for bank account number 561780677838 results in two companies, Components Mart and Infinite Electronic, both of whom have used the same account on Proforma Invoices.

US Government Issues New Section 301 Report

In April, the Office of the United States Trade Representative released its annual Special 301 Report which analyzes the efficacy of other nation’s protections, or lack thereof, of intellectual property rights. The report is prepared annually by the USTR pursuant to Section 301 of the Trade Act of 1974 as amended by Section 1303 of the Omnibus Trade and Competitiveness Act of 1988. The USTR releases the Notorious Markets List which names digital and physical markets that facilitate the sale of pirated and counterfeit goods.

The report names 36 countries of interest which present the most significant concerns regarding IP rights violations. Notably on the Priority Watch List are China, India, Indonesia, and Russia, among others. For those countries on the Priority Watch List for multiple years, the USTR may take appropriate actions under Section 301 of the Trade Act or pursuant to World Trade Organization settlement procedures. Such is the case with the recent “Section 301 Tariffs” that were placed on specific goods listed by the USTR that were of Chinese origin.

Once again, China remains on the Priority Watch List, with Section 306 monitoring remaining in effect. The report cites pressure on China over the last year and cites China’s “specific gaps in trade secret protection and enforcement.” Additionally, the report names China as the top origin for counterfeit and pirated goods, including semiconductors, other electronics, and automotive and aircraft parts, and describes how many of these counterfeits make their way around the world through transit hubs such as Indonesia, Turkey and the UAE. As the point of origin for over 80% of seized counterfeit and pirated goods worldwide, the USTR calls on China to enact enhanced trademark protection legislation and calls for easier criminal enforcement practices.

What this means to the industry

It is no secret that counterfeits are wantonly sold on online platforms. While some third-party marketplaces such as Amazon are demonstrating proactive efforts, hundreds, if not thousands, of other portals provide counterfeiters with access to the global marketplace. Websites, not just in China, but around the world and even in the US, allow counterfeiters to market counterfeit consumer goods and electronic components. As buyers, organizations should be wary of purchasing from online portals as laws on contributory infringements vary from country to country and prosecution is many times difficult, making returns and refunds nearly impossible.

Many third-party portals are failing to take direct action, leaving them and you at risk. Anyone sourcing parts online should expect and demand that providers routinely and proactively monitor all suppliers, their listings and activities and initiate immediate action when they receive reports of counterfeit parts or other unscrupulous business practices. This should include a verification system to ensure repeat offenders will not be able to re-access the site under different identities.

Behind the scenes, data collection and verification are a large part of ERAI’s staff duties. ERAI maintains thousands of company profiles including hundreds of thousands of contacts and notes on relationships between entities. We look for connections between companies, addresses, phone and fax numbers, contact names, cage codes and banking information to identify bad actors.

If you come across suspicious activity or have a tip for ERAI, please let us know by calling our office at 239-261-6268 or via email at eraiinfo@erai.com.

Read the entire report at: https://ustr.gov/sites/default/files/2019_Special_301_Report.pdf

White House Memorandum on Combating Trafficking in Counterfeit and Pirated Goods

On April 3, 2019, President Trump released a memorandum mandating various federal departments and agencies to direct coordinated efforts to combat the trafficking of counterfeit and pirated goods. The memo emphasizes how counterfeits impair the competitiveness of US intellectual property rights holders, damage the reputations of online marketplaces, place consumers at risk and threaten national security and public safety. The report cites that the Organization for Economic Co-operation and Development (OECD) estimates the annual value of trade in counterfeit and pirated goods to approximate half a trillion dollars, of which roughly 20% infringes upon American IP rights holders.

The memorandum requires various government agencies to submit a report to the President within 210 days of the memorandum which must:

  1. Analyze available data to develop an understanding of how third-party marketplaces are used to facilitate the import and sale of counterfeit and pirated goods and what incentives contribute to the facilitation of counterfeit good trafficking by the third-party marketplaces (e.g. Amazon, E-Bay).
  2. Evaluate existing policies and procedures of third-party marketplaces related to counterfeit and pirated goods and identify practices that have the most success in curbing counterfeit imports. Specifically identified is a requirement to evaluate the effectiveness of federal efforts including the Defense Federal Acquisition Regulation Supplement (DFARS) 252.246-7007 for the detection and avoidance of counterfeit electronic parts.
  3. Recommend changes to the data collection practices of agencies.
  4. Identify changes, including enhanced enforcement actions, that could substantially reduce trafficking in counterfeit and pirated goods.
  5. Identify guidance that can be provided to third-party marketplaces to assist them with counterfeit and pirated goods mitigation.
  6. Identify policy changes to more effectively share information of counterfeit and pirated goods with IP rights holders, consumers and third-party marketplaces.
  7. Evaluate current and future agencies’ needs for the detection, investigation and prosecution of counterfeiters.
  8. Identify areas for collaboration between the Department of Justice and Department of Homeland Security relative to combatting the trafficking of counterfeit and pirated goods.
The Department of Commerce has published a Federal Register Notice for IP rights holders, third-party marketplaces and other stakeholders to provide input and recommendations at: https://www.federalregister.gov/documents/2019/07/10/2019-14715/comment-request- report-on-the-state-of-counterfeit-and-pirated-goods- trafficking-and-recommendations

Read the Memorandum: https://www.whitehouse.gov/ presidential-actions/memorandum- combating-trafficking-counterfeit- pirated-goods/

ERAI Member Benefit – Reported Parts Search Log

With government regulations and industry standard requirements, ERAI Members may be required to show due diligence was performed during the part sourcing process. With this in mind, ERAI created a logging tool that makes a record of every reported parts search performed by members on the ERAI website. The system records the entire process of a reported parts search including:
  • The user that performed the search.
  • The date and time the search was conducted.
  • The search criteria used to conduct the search.
  • The search result pages that the user accessed (some searches may result in multiple pages of results so the system records which page(s) of results were in fact accessed and viewed).
  • The reported part(s) within the search results that were accessed by the user. The part data that is saved is the exact version on the date it was accessed. Meaning, in the future, if the part alert is edited or more information is added, the system will display the actual data that was presented to the user on that date, prior to those changes/edits.
Administrators and users can later login in to the website, access the Reported Parts Search Log tool, and pull a report that shows the part searches conducted during a specific period of time by a specific user. The resulting Certified ERAI Search Report can be used to provide a proof of due diligence conducted on a part provided to a customer or to an auditing body. The watermark seal includes a date of access and an individual numeric ID that a third party can use to verify the authenticity of the search data and a search date from the ERAI website, providing ERAI Members with a detailed and verifiable record of a part search conducted.

The numeric ID on the bottom of the seal can be used to verify the authenticity of the information by visiting the ERAI Reported Parts Search Log and searching by Search Reference ID or Part Reference ID.

New InterCEPT Certification Programs

InterCEPT has developed two new certification programs designed for individual students in the electronics industry who want to take an extra step to further their counterfeit mitigation knowledge. Counterfeit techniques and, accordingly, detection methods and avoidance best practices are constantly changing and evolving. InterCEPT Certification programs are designed to verify an individual’s technical knowledge and skills and provide recognition to the individual’s commitment to quality.

What InterCEPT certification means for you...

Provides proof of your skills and knowledge to an employer or potential employer
Affirms your competency and dedication to stay informed about the mitigation of counterfeit parts
Increased employer confidence and commitment to quality

What InterCEPT certification means for your company...

With millions of dollars lost per year due to counterfeits, the continuous growth of counterfeit parts entering the market has a tremendous effect on all organizations in the chain of supply. Many employers, customers and certification standards now include personnel training requirements. Conventional training and off-site educational opportunities place increasing time, budget and travel constraints on you and your personnel. InterCEPT provides your organization with:
Training solutions to meet customer, standards and federal requirements
Proficient employees versed in counterfeit mitigation
Increased customer, organizational and employee confidence to quality products and services
Flexible online classes with administrative tools to easily monitor training patterns

The Certification Process:

Each program has individual requirements. However, all programs will require that a student take a specified set of InterCEPT classes. Once you have completed the classes and have met the eligibility criteria, an application for certification can be submitted to InterCEPT along with any other required documentation. Your application will be reviewed to confirm your documented skills to ensure the credibility of InterCEPT’s certification program. Upon approval, you will receive your training certificate. Please remember that certification is valid for 5 years after which you will need to apply for recertification.

The Certification Programs:

InterCEPT Visual Inspector 1

An individual who completes the InterCEPT Counterfeit Inspection and Testing of Electronic Parts Certification is a person qualified to inspect and record the results of a counterfeit detection inspection on an electrical, electronic or electromechanical part. The certified inspector will have an understanding of the knowledge and skills necessary to perform a visual inspection, knowledge of the tests used to detect counterfeit electronic parts and knowledge of best practices used in the mitigation of counterfeit electronic parts.

An InterCEPT Certified Inspector 1 (Visual Inspection) has demonstrated the knowledge covered in the following InterCEPT classes:
CF-02: Understanding the Global Electronics Supply Chain and How Counterfeits Enter the Supply Chain
CP-01: Developing and Implementing a Documented Counterfeit Mitigation Program
TM-01: Counterfeit Inspection and Testing of Electronic Parts: Test Methods Overview
TM-02: Counterfeit Inspection and Testing of Electronic Parts: Visual Inspection and Criteria for Acceptance or Rejection

InterCEPT Certified Program Manager

A program manager is responsible for ensuring that products are manufactured in an organized manner to ensure that all customer requirements are met. In the electronics industry, a project cannot be successful without a pro-gram manager with the knowledge and experience necessary to avoid the risk posed by counterfeit parts. An individual who completes the InterCEPT Program Manager Certification for Counterfeit Electronic Parts is a person who understands the history, impact and solutions for mitigating counterfeit electronic parts.

The required courses include an understanding of how counterfeit parts enter the supply chain, developing a counterfeit mitigation program, an overview of the various industry standards developed to combat counterfeit electronic parts and an overview of the various counterfeit detection test methods for counterfeit electronic parts. These topics are all necessary to ensure that the customer requirements for the mitigation of counterfeit electronic parts are appropriately communicated to employees and flowed down throughout the supply chain.

An InterCEPT Certified Program Manager has demonstrated the knowledge covered in the following InterCEPT classes:
CP-01: Developing and Implementing a Documented Counterfeit Mitigation Program
TM-01: Counterfeit Inspection and Testing of Electronic Parts: Test Methods Overview
CF-02: Understanding the Global Electronics Supply Chain and How Counterfeits Enter the Supply Chain
ST-01: Industry Response to Counterfeits: An Overview of the Industry Standards

InterCEPT Visual Inspector 2 - Coming soon

An InterCEPT Certified Inspector 2 (Visual Inspection, Surface analysis, X-Ray, Decapsulation and XRF) will complete all requirements for an Inspector 1 in addition to the following:
TM-03: Counterfeit Inspection and Testing of Electronic Parts: XRF, Decapsulation, Radiography and Criteria for Acceptance or Rejection; and
TM-04: Counterfeit Inspection and Testing of Electronic Parts: Surface Testing and Criteria for Acceptance or Rejection.

Please visit www.counterfeittraining.com to sign up or email interceptinfo@counterfeittraining.com for additional information.

ERAI Website New Features

Recently Updated Filter

ERAI members can now easily review updated company alerts in the “Recent Company Alerts” area of the ERAI website. By default, the tool shows a list of all alerts posted within the last 30 days. By selecting the “Include recently updated” checkbox at the top of the window, the results will also include company alerts that have been updated within the last month. By selecting a different time frame from the pull-down filter, the time frame can be modified to show alerts issued as far back as 6 months.

Alert Viewing in Company Search Results

Within the company search results, the system now enables users to quickly view the date and alert type of all alerts associated with the company by simply clicking on the alert number within the search results. A dynamic popup will display the alerts with the ability to permit members with a “quick” look option to view the alert details without having to load the company’s full profile and leaving the search results, streamlining the amount of time required to view a supplier’s history.