Counterfeit electrical devices: A costly and growing problem

All well-known products and brands are counterfeited. The counterfeiting of global products has increased by 10,000 percent over the past 20 years. According to IACC.org, the estimated value of global cross-border trade in counterfeit and pirated physical goods is $1.77 trillion as of this writing. In the United States alone, that figure is estimated at $200 to $250 billion and costs U.S. companies 750,000 jobs a year in revenues lost to imitation devices.

While the financial impact on the global economy is staggering, safety is the primary issue as counterfeit electrical products can fail to perform their protective functions. They may also overheat or cause short circuits, which can result in fires, electrical shock or explosions that damage equipment and property and cause personal injury.

Battling counterfeits in the gray market

Sales channels unintended by the original manufacturer, or “gray markets,” rely on the purchase and resale of goods outside of traditional sales channels. And because the products sold usually lack traceability back to the original manufacturer, gray markets pose the highest probability of supplying counterfeit products. Buyers often fall victim to below-market pricing with little or no assurance of product origin or manufacturer warranties.

The nature of the digital world we live in makes the global sale of counterfeit products easy, with online marketplaces and auction houses acting as the preferred channel for many consumers. Some online retailers are taking proactive measures to assure authenticity by implementing processes such as brand registration, however they are not industry standard. Further, websites may boast images of clean manufacturing facilities, but in reality, they might be low-tech, labor-intensive operations that produce counterfeit products in illegal shops and factories.

Counterfeit products were once easy to spot, with lower-quality labels, misspellings, and poor moldings and casings. But today’s nefarious assembly techniques enable counterfeit products to easily go undetected. To that end, supply chain traceability is one of the best ways to ensure the identity of authentic devices built by original manufacturers. 

Supply chain traceability and authentication can protect people and systems

Supply chain traceability is the process of tracking products from manufacturers to authorized resellers to customers. This is usually accomplished as an unbroken, verifiable trail of purchasing transactions established from the customer to the manufacturer. Often referred to as a “paper-trail,” emerging technologies, such as Blockchain, look to create an immutable ledger of these transactions in a distributed digital system. Blockchain uses a decentralized network of databases to record transactions and group them together with unique code markers, making purchase information nearly impossible to tamper with and easy to track.

Serialization (the use of unique identification numbers per device) helps assure product quality at every stage of the manufacturing process. When combined with the use of a manufacturer’s proprietary authentication tools, such as online and mobile systems, users can verify that they have purchased a genuine product. Increasingly, the serialization of products and authentication upon delivery helps customers feel more confident in the products they’ve purchased. 

Additional security layers are added to the mix that protect the product even further. Packaging with hidden cues on the label, microprinting, and taggants that require special readers to verify marks are tools that, when used in combination, can significantly increase authentic product integrity. At Eaton, we implement serialization along with additional layers of authentication to make sure our customers are receiving genuine products.

Are used, surplus, or reconditioned products a cause for concern?

Thanks to traceability and authentication, manufacturers typically know who the first purchaser of a product is and where the product may have been installed. However, electrical safety devices are very durable and may outlive their original application, which means they’re very likely to re-enter the market.

All too often, equipment exposed to damaging fault currents, water, fire and other environmental elements makes its way back into the supply chain. For example, switchgear installed in a hotel may well outlast the structure. In cases where buildings are scheduled for demolition or rehabilitation, independent resellers — professionals who replenish much of their inventory via closeouts and building buyouts — purchase the components and subsystems inside. While it might be possible to confirm an originally manufactured product, customers are often left to rely on resellers to confirm the condition or usability of used, surplus, or reconditioned products. While some equipment might be viable, other components might contain hidden dangers because of exposure to previously unknown conditions.

Beyond usability concerns, some products, like factory-sealed molded case circuit breakers, cannot be reconditioned. Resellers and third-party companies that recondition products do not typically have access to original product manufacturing specifications and “trade secrets” — the intellectual property required to recondition products to original manufacturer specifications.

How manufacturers and customers can help

Here’s what original equipment manufacturers (OEMs) and customers can do to keep dangerous, suspect and counterfeit products off the market:

Manufacturers:

• Get involved. Electrical industry standards organizations (the National Electrical Code (NEC), the Institute of Electrical and Electronics Engineers (IEEE), etc.) and governments encourage all in the industry to join panels that raise awareness and create the guidelines necessary to stop counterfeits.
• Invest in product enhancements and features that improve counterfeit detection and improve supply chain security.
• Develop consumer-based authentication systems to confirm a product’s origin. Eaton's Molded Case Circuit Breaker Tool is a great example.

Consumers:

• Use common sense. If the price of a product seems too good to be true, there’s a good chance the device is not new or genuine. Do your due diligence before purchase.
• Buy products only from manufacturer-authorized distributors and resellers. If every individual along a product’s supply chain played an active role in tracing the path of commerce to the original manufacturer, the market for counterfeit electrical products would decrease.
• Report counterfeit products in the field to their respective manufacturers. This allows authentication of suspect products and ensures removal from the marketplace.

Stopping the sale of counterfeit products is a collective effort. By working together, we can dramatically reduce counterfeits available on the market and remove dangerous devices in the field. 

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