January 25, 2010 -- By Matt Vincent, Senior Editor -- Interconnection World recently interviewed Robin B. Gray, Jr., Executive Vice President of the National Electronic Distributors Association (NEDA - www.nedassoc.org). Topics of discussion include the NEDA's newly issued guidelines on product returns, and an update on efforts to alleviate the scourge of global electronics counterfeiting.
Interconnection World (ICW): Robin, can you provide our audience with some context regarding the creation of the new NEDA guidelines on product returns, issued last December?
Robin B. Gray, Jr., Executive Vice President, NEDA (RG): Basically, the reason for creating it was to publicize best practices -- something that most, if not all, of our members have been doing for a while now. The counterfeiting issue really reared its ugly head probably about 7 years ago, or more. It really became a serious problem for the supply chain, when distributors started noticing that they were getting counterfeit product coming back in returns. So they began implementing various practices for preventing that sort of thing from happening. And it occurred to [NEDA] that it would be a good idea to kind of codify [these practices], if you will.
ICW: Is the guideline available on NEDA’s website?
RG: Yes, it is [View PDF document]. It’s not a standard – it’s truly a guideline, best practices that we want our members to be aware of -- and if they haven’t adopted them already, to take the guideline into consideration, when processing returns.
ICW: The press release mentioned that NEDA member firms were instrumental in creating the new document. So, the member firms actually wrote the document?
RG: Yes, a task force of NEDA members did, of both distributors and manufacturers.
ICW: We’ve spoken before regarding the issue of electronics counterfeiting. From your perspective, were there any developments of particular note over the past year that people in this industry should remember, in terms of counterfeiting? Does NEDA have anything new to report on that front?
RG: There are a couple of things going on. There’s a continued effort to get funding from Congress to support customs and other law enforcement and prosecutorial functions to go after counterfeiters. The main thing is that there was a law passed last year by Congress to strengthen the laws and provide greater penalties, fines for counterfeiters. The law was passed last year; the effort this year is to make sure it gets fully funded. We’ve been working with the SIA [Semiconductor Industry Association] on that initiative.
Recently in the news, on our side of the industry, there was an arrest and prosecution of some counterfeiters -- brokers in this country. The challenge, at least for the semiconductor industry, is that there’s a quirk in the customs enforcement regulations and statutes about disclosing trademarked information. The gist of it is that if the customs official seizes counterfeit product at the port of entry, the law kind of restricts them from showing that to the actually trademarked owner, even if they suspect it’s counterfeit.
So the SIA, [in early December 2009], sent a group up to Capitol Hill to meet with some customs officials to see if we could get some clarification or correction of the language in this quirky little part of the statute that will allow customs officials to go to the trademarked owner and show them pictures of labels and boxes and so forth, to help verify that the products are indeed counterfeit.
There’s also an effort right now to set up some further inter-governmental co-operation, create a Department head-level official advisor within the White House to advise the President on counterfeiting issues.
ICW: In terms of counterfeit electronic parts coming into this country, are they mainly coming from China?
RG: The vast majority comes from China, yes; and, in particular, Shenzhen province. More and more, though, we’re finding that it’s spreading to other parts of the globe, and that it’s very much done by organized crime. It’s significantly more profitable and less risky for criminal elements to counterfeit, than it is to deal in drugs and other illegal activities.
ICW: Has the Chinese government displayed any enthusiasm in cracking down on the counterfeiting situation?
RG: The SIA task force that NEDA is a part of had a meeting back in November in Asia with customs officials from the various Asian countries, including China, Taiwan, Malaysia, South Korea, Japan. There were varying degrees of support for restricting and prosecuting counterfeiters. Obviously, those countries that had more intellectual property to protect, such as Taiwan, Japan, and South Korea, had a lot more interest in cooperating on enforcing laws and prosecuting counterfeiters.
There was less enthusiasm from China, but there seems to be a growing awareness that they need to do something to become more accepted in the global economic community, particularly within the electronics supply chain. There is recognition on their part that they need to do more. But there’s a different cultural perspective about the meaning of property rights. Particularly with a Communist government where the underlying philosophy is, everything belongs to the State. And there is some evidence to support that some of the counterfeiting is State-supported.
ICW: Really?
RG: Yes, particularly when it involves advanced technology, or things that have military applications. The growing concern is that with a number of high tech products being manufactured in China, trap doors, malware, Trojans, etc. may be inserted in product that gets sold elsewhere -- particularly into sensitive areas. Not only into the defense industry, but finance and communications and so forth.
ICW: The implications of that could be disastrous.
RG: Oh yeah. You could send out a command, and stuff fails. Or provide information that you didn’t know was going out.
ICW: Thanks for taking time to speak with us, Robin.
RG: You're welcome.
