DoD Issues Final Rule on Detection and Avoidance of Counterfeit Electronic Parts

May 19, 2014, 3:04 PM

On May 6, 2014, the Department of Defense issued its final rule on the Detection and Avoidance of Counterfeit Electronic Parts (Rule). 79 Fed. Reg. 26,092. The Rule is effective immediately and implements sections of the National Defense Authorization Act (NDAA) for FY 2012 and the NDAA for FY 2013. The Rules requirements apply only to contractors that are subject to the Cost Accounting Standards under 48 CFR 9903.201-1.

The Rule addresses new contractor responsibilities for detecting and avoiding the use or inclusion of counterfeit electronic parts or suspect counterfeit electronic parts, the use of trusted suppliers, and requirements for contractors to report counterfeit electronic parts and suspect counterfeit electronic parts. Contractors are required to establish and maintain an acceptable counterfeit electronic part detection and avoidance system. DFARS 246.870-2. Failure to do so may result in disapproval of the purchasing system by the contracting officer and/or withholding of payments. Id.

The Rule defines counterfeit electronic part to mean an unlawful or unauthorized reproduction, substitution, or alteration that has been knowingly mismarked, misidentified, or otherwise misrepresented to be an authentic, unmodified electronic part from the original manufacturer, or a source with the express written authority of the original manufacturer or current design activity, including an authorized aftermarket manufacturer. Unlawful or unauthorized substitution includes used electronic parts represented as new, or the false indication of grade, serial number, lot number, date code, or performance characteristics. DFARS 252.246-7007.

The Contractor Counterfeit Electronic Part Detection and Avoidance System required by the Rule must address:

  • The training of personnel;
  • The inspection and testing of electronic parts, including criteria for acceptance and rejection;
  • Processes to abolish counterfeit parts proliferation;
  • Processes for maintaining electronic part traceability;
  • Use of suppliers that are the original manufacturer, sources with the express written authority of the original manufacturer or current design activity, including an authorized aftermarket manufacturer or suppliers that obtain parts exclusively from one or more of these sources;
  • The reporting and quarantining of counterfeit electronic parts and suspect counterfeit electronic parts;
  • Methodologies to identify suspect counterfeit electronic parts and to rapidly determine if a suspect counterfeit electronic part is, in fact, counterfeit;
  • Design, operation, and maintenance of systems to detect and avoid counterfeit electronic parts and suspect counterfeit electronic parts;
  • Flow down of counterfeit detection and avoidance requirements;
  • Process for keeping continually informed of current counterfeiting information and trends;
  • Process for screening the Government-Industry Data Exchange Program (GIDEP) reports and other credible sources of counterfeiting information.
  • Control of obsolete electronic parts.
See DFARS 252.246-7007. The new DFAR clause implemented by Rule is a required flowdown in subcontracts for electronic parts or assemblies containing electronic parts, including subcontracts for commercial items. DFARS 252.246-7007(e).

For more information, please contract Karla J. Soloria.