Counterfeit alert! Counterfeit products are fakes or unauthorized replicas of the real product. They are often produced with the intent to take advantage of the superior value of the imitated product.
There are mainly two illicit practices, namely: (Source)
- A fraudulent branding of non-certified steel products using the brand of well-known, certified suppliers often sold together with falsified certificates
- The refurbishment of used steel products to appear and be sold as new
84% of counterfeit products affect construction industry
98% of fake steel products pose a risk to the industry
53% of suppliers faced with counterfeit steel products
The Impact Of The Scandal At Kobe Steel Ltd.
Although the problem of counterfeit concerning companies using substandard materials usually involves SMEs, the most recent scandal regarding counterfeiting material involves a large corporation like Kobelco (Kobe Steel) based in Japan.
Employees at Kobe Steel had falsified Material Test Certificates (MTC’s) to make the materials meet the customer specifications when in fact they did not. The fraud lasted over a decade and had cost the company millions. Two days after the announcement, Kobe Steel shares price lots value for over 133 million USD. (More Numbers)
Kobe Steel Says ‘May Find More Fake Data’
Video by Bloomberg
Creusot Nuclear Forge In France
A few years ago a major scandal involved a leading French forgemaster. The French Authority for the Nuclear Safety, Autorité de Sûreté Nucléaire (ASN), announced in April 2015 the discovery of an anomaly in the composition of the steel in certain zones of the vessel closure head and the vessel bottom head of the Flamanville EPR reactor.
In May 2016, the regulator said an ongoing quality audit at Le Creusot forge, bought by Areva in 2006, had identified “irregularities” in paperwork on some 400 plant forged components produced there since 1965 and delivered to 18 French nuclear power reactors operated by EDF. The issues “comprise inconsistencies, modifications or omissions in the production files, concerning manufacturing parameters and test results”, it said. (Source)
On August 2017, France’s nuclear safety regulator has opened a public consultation on a draft decision governing the review of manufacturing files at Areva NP’s Le Creusot forge. This draft decision requires EDF to examine the manufacturing records of all components produced by the facility that are in use at its operating nuclear power plants. (Source)
Counterfeit Parts In The Aerospace Supply Chain
Even the Aerospace industry have experienced counterfeit issues in the past. More than in other industries, counterfeiting in the aerospace industry may have life or death consequences.
“Though we know counterfeit parts enter the aerospace supply chain, the time and place of their entry is unpredictable”, has written Marion C. Blakey, President and Chief Executive Officer of the Aerospace Industries Association (Source).
Aerospace and defense products throughout their lifecycle sometimes requires the use of parts that may no longer be available from the Original Equipment Manufacturer (OEM), authorized aftermarket manufacturer or through franchised or authorized distributors or resellers.
When parts and materials, such as microcircuits, are acquired through distribution channels other than those franchised or authorized by the original manufacturer, there is higher risk to receive parts that do not meet the original specifications.
Top Ten List Of Fake Steel Products
The Construction Industry Institute (CII) study had found that raw, substandard steel was the most counterfeited commodity among the materials (within the construction industry). Here is the rest of its Top Ten list: (Source)
- Circuit breakers
- Rotating equipment parts
- Electric equipment
- Pipe fittings
- Pressure vessels
Material Test Certificates (MTC)
The steel industry understands the due diligence needed when requesting Material Test Certificates (MTCs) from suppliers and the ability to meet the required standards. In many cases, steel products are sold with an MTC as a proof of legitimacy.
When is a MTC fake?
There are a number of ways that the industry uses to detect if an MTC is replicated / fake. A few key information to look out for on an MTC are the following:
- Requested specification will always be specified on the MTC.
- Chemical analysis should match the specification requested.
- Size requested by the customer.
- Mechanical properties should match the specification requested.
- Mill lot and heat numbers.
- The type of test certificate.
- The buyers (stockholder) logo will never be on the mill cert.
Performing a PMI
Anyway, as Louis V. Gerstner Jr, IBM’s chairman from 1993 to 2002 once said “You get what you inspect, not what you expect”, therefore the best option, especially when buying critical materials, would be to perform a Positive Material Identification (PMI) on the material.
Positive Material Identification (PMI) is the identification and chemical analysis of various metal alloys through nondestructive methods, like X-ray fluorescence (XRF) and optical emission spectrometry (OES).
Will be blockchain a game changer?
More in general, organisations and buyers that purchase products from suppliers are fully aware of counterfeit and fraudulent materials, or should be. They stress that all suppliers must use their approved suppliers lists alongside a counterfeit and fraudulent policy, in order to have full trackability of their products. In most industries the supplier supplying the material must have an international standard in place in order be approved by the organisation or buyers.
In the long term, some companies are already considering blockchain as a means to counterfeit mitigation, providing the ability to track and trace a design through the full product lifecycle. Blockchain could basically create an environment of trust within the supply chain.
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At Steel Available we have implemented a counterfeit and fraudulent policy and we are continuously improving our procedures to prevent counterfeit and fraudulent materials getting through to our customers. At the same time we are developing our Steel Available approved suppliers list.
For any case in which a third party inspection is required, we have partnered with SGS, who are world leading company in inspection, verification, training, testing and certification.