October 3,
2006
Fraud
Still a Big Problem in China
A
North American independent components distributor places an order for 100,000
reels from a distributor in China. The payment for the merchandise is placed
with an escrow company pending inspection of the parts. The purchase order
stipulates new factory-original reels. When the reels arrive, they are in
sealed packaging that was not how they were shipped from the manufacturer. When
the first sealed reel was opened, it contained 200 parts, but the balance of
the tape was empty. Another box was opened and all the slots in the tape were
empty. The entire shipment contains nothing but empty reels.
Meanwhile,
the escrow service reports that they received an email purportedly from the
buyer’s salesperson stating that it was okay to release payment for the parts.
After an investigation, the escrow service determines – from the e-mail’s IP
address – that the email originated from China. Since the escrow company
detected the fraud, no payment was sent. Meanwhile, the seller’s people in
China send out a mass email claiming that the buyer and the escrow service have
cheated them.
Unfortunately,
the fraud and counterfeiting of electronic parts is still a major problem, and
most of the fingers point to China. There are plenty of components coming in
from China these days. One independent distributor insists that most – if not
all – of those parts are bogus. “I say 100 percent of the parts from China are
bad,” says Stan Friedman, owner and general sales manager at Amor Electronics
Inc., a family-owned independent distributor in Laguna Hills, Calif. “Others
say 80 to 90 percent is bad product.”
Friedman
recently gave China another shot, since a customer needed product and there was
none available except in China. “I was desperate, so I bought from China 25
times, and every time it was bogus product,” says Friedman. “When the shipments
came in, we inspected to see if the product looked brand new and had matching
lot codes and date codes.” What he found was parts with excess solder. “When they
have excess solder, they’ve been pulled from a board.”
Friedman
also noticed the parts has different lot codes and date codes. He also
performed chemical tests to see if the parts had been reprinted. “If the
writing comes off, that means they’ve been reprinted,” says Friedman. “Out of
25 orders, 25 had been reprinted.” He notes that sometimes counterfeiters will
take a part from a different manufacturer and make it look like the brand-name
part. He points out that sometimes, it’s not even the same part. “Also, you
look at the bottom of the parts and you’ll see that each chip is different.
Some will have three holes, others will have two holes, and some with have one
hole.”
Since
Friedman has inspected a wide range of counterfeit parts from China, others in
the parts business have come to Amor to have their parts inspected. “We offer
this as a free service,” says Friedman. As industry friends bring product for
inspections, Friedman notes that the counterfeiters are becoming sophisticated.
“They’re getting more advanced. They packing the product in factory boxes to
dress it up,” says Friedman. “They’re copying the packaging just like they’re
copying the parts. But you can tell it’s fake because the printing on the
package is all blurry.”
When
he was asked how a company could pass off bad product and stay in business,
Friedman explains that some of these companies don’t have to stay in business
long. “If someone makes $10,000 in China, they can live on it for ten years,”
says Friedman. “So brokers buy from them and the company disappears.” He notes
that some counterfeit companies make a sale then change their name before they
make the next sale. “They disappear and reappear as a different company.”
While
China has a reputation for selling counterfeit parts, Friedman notes there are
still brokers who will take a chance on product from China because it’s cheap
and they need the product to keep their customers happy. “The sad part is that
some brokers and manufacturers are so desperate they don’t care.” Friedman
notes that the fake parts are also usually bad parts. “All of these products
are blowing up in the field,” says Friedman. To solve the counterfeiting
problem at his company, Friedman has discontinued all purchases from China. “I
buy excess inventory from legitimate manufacturers only now.”
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