Shared Responsibility

Everyone in the supply chain—from manufacturers to distributors, electrical contractors and end-users—has a responsibility to try to identify, avoid and report counterfeit products.

By Darlene Bremer

Mid-fiscal year (FY) 2008 statistics released by U.S. Customs and Border Protection this past May show that seizures of consumer electronics and electrical products that infringed on intellectual property rights (IPR) accounted for 9 percent of the total seizures made by the agency for the first half of the year. Although total IPR seizures decreased by 1 percent between mid-FY2007 and mid-FY2008, the number of seizures of consumer electronic and electrical products rose 3 percent—from more than $9.4 million worth of products at mid-FY2007 to more than $9.7 million for the same time period in FY2008.

IPR violation is really a fancy term for counterfeit. After all, manufacturers invest a lot of money in researching, developing and manufacturing their trademarks and testing laboratory-certified products. A counterfeiter is actually stealing that investment. To avoid abetting that theft, everyone in the supply chain has a responsibility to try to identify, avoid and report counterfeit products.

Manufacturer musts

According to Brian Monks, vice president of anti-counterfeiting operations for Underwriters Laboratories (UL), Northbrook, Ill., manufacturers of electrical products need to understand their component or assembly supply chain to make sure it contains pure, untainted products.

“Electrical product manufacturers should ensure that they are dealing with reputable vendors that they know,” he said.

Knowing the company or companies that the manufacturer is dealing with means performing due diligence when beginning relationships with new suppliers, asking questions about component sources and asking for certifications of authenticity.

“Manufacturers do have to guard against counterfeit components within their own supply chain to avoid errors in manufacturing and to protect their reputations,” said Dave Moeller, national market manager, construction, Graybar, St. Louis. However, he said, while everyone in the chain has a vested interest in identifying, avoiding and reporting counterfeit products, manufacturers have the ability to readily compare legitimate product against counterfeit.

“We know our suppliers can stand behind their products,” Moeller said. “That’s one of the reasons Graybar has taken a public stance against private labeling, and we encourage the rest of the industry to do the same.”

A major responsibility held by the manufacturer concerning counterfeit products is maintaining communication through their distributors, according to Bernie Bush, purchasing manager for Valley Electrical Consolidated, Girard, Ohio.

“That’s the best channel for manufacturers to let the entire chain know if one of their products is being counterfeited,” Bush said.

For example, Valley Electrical learned about Square D’s problem with counterfeit circuit breakers through information that its distributor relayed to the company.

Ken Narod, vice president, channel at Eaton Electrical Group, Cleveland, said manufacturers’ responsibilities include having a formal anti-counterfeiting program in place, including authentication processes for trademarks and labels, as well as offering a training program to advance education throughout the industry.

“Manufacturers should also have the ability and staff to work with federal authorities to help identify and prosecute violators and to educate law enforcement on how various electrical products are being counterfeited and how they are potentially entering the country,” he said.

Manufacturers also can advance education by working and communicating with trade associations, organizations and other manufacturers to curtail counterfeiting.

Distributor to-dos

“Distributors need to perform due diligence, as well, by asking questions about sourcing, requiring certifications of authenticity for the products they purchase for distribution, and making sure they know who is responsible for problems that occur with products,” Monks said.

Distributors also have a responsibility to understand the supply chain and to only deal with reputable manufacturers. In addition, Monks advises distributors to perform spot checks to ensure counterfeit products have not accidentally gotten into the chain.

“Counterfeiting is a criminal activity, and counterfeiters are ingenious at getting around the system,” Monks said.

However, in economic downturns, it is tempting to procure products the distributor knows are too cheap, a key indicator that a product is counterfeit. This is a temptation the entire supply chain needs to avoid.

“It is the distributor’s responsibility to not let competitive pressures lure them into ignoring the warning signs of a counterfeit product, such as prices that are too low, when choosing whether to carry a new manufacturer’s product,” Bush said.

Distributors need to buy products directly from the manufacturer to avoid finding themselves distributing counterfeit material.

“Distributors must make a commitment to training their personnel on the safety and liability risks of distributing counterfeit products and to report any suspicious products to the manufacturer,” Narod said.

According to Larry Wilson, senior communications manager for Fluke Corp., Everett, Wash., the company has not had much trouble in terms of direct knockoffs, but rather with test meters that are similar enough that people think it is a Fluke product.

“Distributors are responsible for understanding that Fluke owns the trade dress and that they should not be purchasing or distributing meters that violate the visual appearance of a Fluke product or its packaging,” he said.

If a distributor discovers counterfeit products being sold, then the distributor is responsible for letting the manufacturer know.

“It’s then up to Fluke to pursue the matter by notifying the seller that they are violating our trade dress,” Wilson explained.

Graybar’s responsibilities for identifying and avoiding counterfeit products starts with communicating awareness of the issue throughout the company, Moeller said. As a distributor, Graybar also goes through great effort to represent known, reliable manufacturers and to deal with suppliers that have good business practices and that are financially sound.

“Graybar has a long history of actively seeking out the brands that customers are most interested in purchasing and then becoming the preferred distributor of those brands,” Moeller said.

Distributors can lessen the chance of counterfeit product lines getting into the supply chain by recognizing those areas from where counterfeit products are likely to appear and by only dealing with suppliers with a history of making the original product.

Unfortunately, it has not historically been the norm for distributors or contractors to investigate who is supplying the product, according to Warren Janes, vice president of sales and marketing for Maurice Electrical Supply, Washington, D.C. There are many ways a distributor can get counterfeit product on its shelves without knowing it, and investigating authenticity creates an extra step in the buying process that not everyone has been willing to take.

“To ensure that the door remains closed to counterfeiters, distributors should buy products only from authorized sources,” Janes advised. Internet sourcing in particular, he added, is so wide open that it is easy to unknowingly find and source counterfeit products because the trail is too hard to follow.

Contractor checklist

Contractors, according to Monks, are the last link in the supply chain and the least likely to think they need to perform diligence and ask questions about product sources.

“The reality is that contractors rely on their distributors for that,” Monks said.

A contractor’s problems could begin when it doesn’t buy from reputable distributors and purchases products outside the normal chain from places such as flea markets, overstocks, discount stores or through the Internet.

“Contractors, however, are responsible for being aware of the issue and for realizing that if the price is too low, it really is too good to be true. And, if a counterfeit product is discovered after installation, the end-user is probably going to go after the contractor first,” Monks said.

“Contractors need to deal with reputable distributors. We rely on them to authenticate products,” Bush said.

In addition, contractors must educate field electricians about key indicators of counterfeit products and encouraging them to examine products closely before installation and to become familiar with the look, feel, packaging and trademarks of legitimate products.

“Identifying counterfeits can be difficult, however. Sometimes it only becomes apparent after the installation,” Bush said.

Electrical contractors that are aware of what they are buying and from whom should be able to avoid counterfeit products.

“Contractors working in commercial and industrial applications need to use high-quality meters that are appropriately designed, manufactured, and tested to meet safety guidelines for those environments,” Wilson said.

Even though safety standards are not law, contractors are responsible for providing a safe workplace and should, therefore, report counterfeit safety products to the Occupational Safety and Health Administration.

All together now

Obviously, if a manufacturer, distributor or contractor is selling or buying counterfeit products and something goes wrong, it creates safety issues, liability risk, brand delusion, customer complaints and can destroy the public’s faith in the industry.

“The public is being defrauded when given counterfeit products, even when the contractor or distributor does so unknowingly,” Monks said.

Counterfeiters have improved their goods so much that it is difficult to determine authenticity when the product is not purchased from a known source. However, by communicating up and down the chain, joining coalitions, talking to law enforcement, and understanding the testing and certification, standard development, and distribution processes, all members of the chain can work together to combat the problem.

“Communication is the key,” Moeller said. “Everyone in the chain has to be clear about what they want to purchase and only do so from reputable sources.”

Channel partners can get involved with the National Association of Electrical Distributors, the National Electrical Contractors Association, the National Electrical Manufacturers Association, the National Association of Wholesalers, and other industry organizations and trade associations to stay informed. These associations also have government affairs platforms and are in contact with political leaders concerning these issues and filter the information to members and other interested parties.

“Get vocal and talk about the issue accurately all along the chain,” Moeller said.

Wilson advises channel partners to be aware of trademark, trade dress, and intellectual property laws and learn how to differentiate between legitimate and counterfeit products.

“Be active in industry groups to learn about the issues,” Moeller said. “Trade associations support their members with education and with networking opportunities that promote the exchange of information about issues, such as counterfeiting, the danger of these products, and how to avoid them.”

BREMER is a freelance writer based in Solomons, Md., and a frequent contributor to ELECTRICAL CONTRACTOR and TED magazines. She can be reached at darbremer@comcast.net.