Avoiding Counterfeit, Fraudulent & Suspect Items in your supply chain.

Counterfeit, Fraudulent and Suspect Items (CFSI) can be a significant issue in any supply chain or project. These goods do not undergo the same strict quality assurance procedures as legitimate items, and often deviate from prescribed specifications. It is becoming more important each year to instigate a company-wide, proactive approach to detect and prevent the intrusion CFSI.

What is CFSI?

Counterfeit, Fraudulent and Suspect items, are goods & materials whose origin, age, composition, configuration, certification status or other characteristic (including whether the material has been used previously) has been falsely represented in any of the following ways:

• Misleading marking of the material, labelling or packaging.
• Misleading documentation (e.g. material and/or test certification).
• Any other means, including failing to disclose information.

CFSI represent 3.3% of world trading and amount to more than $509 Bn (USD) global business. It is one of the world's greatest thefts, which profits are linked to money laundering, human trafficking, child exploitation,  organized crime and international terrorism. 

What does CFSI stand for?

Counterfeit: Items that are intentionally manufactured or altered to imitate a legitimate product.

Fraudulent: Items that are misrepresented with intent to deceive, including materials with incorrect identification or false certification.

Suspect: An item about which there is an indication by visual inspection, testing or other preliminary information that it may not conform to accepted standards, specifications (may be counterfeit, fraudulent or nonconforming)

Item: Although it stands for “item”, it can be a good, a material or a service. This includes components, assemblies, vessels, civil structural components, inspection, technical support and peer review.

The risks of CFSI

Counterfeit, Fraudulent and Suspect items (CFSI) can be a significant issue in any supply chain or project. CFSI do not undergo the same strict quality assurance procedures as legitimate items, and often deviate from prescribed specifications.  Therefore, these goods, materials or services can diminish the integrity of equipment, systems, structures and components. 
 
The inadvertent introduction or malicious insertion of CFSI within your supply chain could lead to significant production losses because of failure, significant delays in your projects and even to the occurrence of a widespread security event.

2 examples of CFSI in the industry

Kobe Steel: Kobe Steel admitted in 2017 that 605 customers (most non nuclear) had been misled as a result of falsification of quality inspection data for aluminium and copper products over the past 50 years.

South Korea: In South Korea in 2012, eight companies were accused of supplying 60 forged quality control certificates covering 7,682 mostly non-safety critical components to the Korea Hydro and Nuclear Power company since 2002. The affected equipment comprised mainly fuses, switches and cooling fans. Another case discovered in 2013 involved false test certificates for cabling.

Red flags in CFSI

It is important to recognize the risk CFSI plays in your business and have the correct policy, plans and processes in place to address the risks. At Stork we identify 10 red flags, that could indicate you are dealing with CFSI in your supply chain:

1. Product / Material is known to be susceptible to counterfeiting.
2. It has been previously reported / recorded receipt of suspected CFSI of similar type.
3. Shorter lead times than other suppliers for that product / material.
4. Sudden availability of obsolete or hard to source goods.
5. Cheaper than expected prices.
6. Scrapping and/or rework of non-conforming product will be extremely costly for the provider.
7. If it is too good to be true, it probably is …
8. Provider is not the Original Equipment Manufactured (OEM), authorized distributor or is new / unknown within the industry.
9. Slight differences in packaging or labels.
10. The provider of the item is known to be in poor or declining financial position.

5 quick tips to avoid CFSI

1. Write and issue policies and practices, checklists​, but also promote awareness of CFSI and provide functional training within your business.
2. For engineering and design roles; clearly define technical specifications, critical characteristics and acceptance criteria as early as possible
3. For procurement teams; ensure that these requirements are passed down through the supply chain, as they form an essential part in the acceptance of goods upon delivery.
4. With the rise of online purchasing, the complexity of tackling CFSI in a modern supply chain has increased. Try to trade directly with the manufacturer. Carry out thorough due diligence before engaging with a new supplier. 
5. Proving that something is fraudulent isn’t always easy. Until proven otherwise, treat goods as suspect and treat them with the same caution as counterfeit goods. 

CFSI should form an integral part of a companies Integrated Management System and Quality Assurance Program. Stork's Quality Services have extensive experience in detecting quality issues, including CFSI, in supply chains across different industries. 

Our quality experts are committed to implementing the highest standards of safety, security and quality, and can implement robust CFSI prevention measures to prevent the entry and installation of CFSI items your plant.