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Health & Safety Risks from Counterfeits in the Supply Chain

A non-profit industry group that focuses on reliable business practices, the Center for Responsible Enterprise and Trade (CREATe.org), released a white paper recently that outlined the problem with counterfeits in various industries and why they are harmful. CREATe.org speaks of the problem with counterfeit parts and pirated goods within big supply chains, and the various risks that are associated with these problems. They also list practical advice so that companies may thwart counterfeits, and reduce the risks in the work place.

CREATe.org is based in Washington, D.C., and dedicated to assisting companies and their suppliers and business partners to reduce counterfeiting, theft, piracy and corruption in the business community. It is their belief that by sharpening practices within the supply chains, companies and global economy can strive. To achieve these goals in the different industries, CREATe.org has created CREATe Leading Practices for IP Protection and CREATe Leading Practices for Anti-Corruption. They offer practical assessments and evaluations, as well as online training and resources to help avoid and prevent counterfeiting.

President and chief executive officer, CREATe.org, Pamela Passman, explained the need for the report, stating that: “Global supply chains are incredibly complex and open to vulnerabilities at every point. Increased focus and the sharing of leading practices are needed to help safeguard the health and safety of consumers while protecting intellectual property rights across the supply chain.”


The white paper is titled Health & Safety Risks from Counterfeits in the Supply Chain and outlines just how these counterfeit parts are entering the global supply chains. Even though there are government regulations and precautionary measures taken by the industry, there seems to be a growing problem with counterfeit parts that can cause damage and even fatalities. The introduction of the whitepaper claims: “The complex and distributed nature of supply chains has created vulnerabilities for companies and organizations. Governments and regulations can only go so far. As such, industry can benefit from taking a more proactive approach to protecting the supply chain from counterfeit products and pirated materials.”

There have been many cases of counterfeit, or bad, products and materials making its way into the factories and into finished products that are used by consumers all around the world. Examples of this problem that are given in the CREATe.org report are:

  • Melamine-laced infant milk powder killed 6 and injured 300,000 in China.
  • Toothpaste tainted with diethylene glycol, an antifreeze ingredient, resulted in a recall of 5 million tubes in Japan.
  • Counterfeit cell phone batteries exploded and caused many deaths in both India and China.
  • Toxic lead paint used to coat toys caused a 2 million toy recall across the globe.

The white paper talks about the risks that affect the pharmaceutical, information technology, transportation and food, beverage, toy and other consumer products sectors. Each category has detailed examples of how counterfeit materials or components made its way into the supply chain of each industry, whether it be through labels, packaging or raw materials. It also points out that low quality materials has led to defects that cause fires, explosions, airplane engine failures, computer network crashes and in extreme cases, death.

What can be done about this counterfeit problem? The report states that: “Many existing laws and regulations seek to tackle the problem of counterfeits in the supply chain. For each of the sectors discussed in … this paper, government authorities have promulgated measures to strengthen supply chain security.”

CREATe.org goes on to show the different regulations, laws and acts that affect each of the industries, but also stating that more may be needed. After all, even with all these laws in place, we still continue to see product recalls and reports of injuries and illness due to products or edibles.


The report ends with emphasizing that it is important for the business industry as a whole to reinforce the security and the integrity of the supply chains. This can be done by establishing efficient solutions that will fight off counterfeits. It also gives measures that companies can take to help alleviate counterfeits, which include:

  1. Ensure greater traceability in the supply chain
  2. Foster greater cooperation, coordination and accountability among all participants
  3. Increase information sharing to strengthen supply-chain integrity
  4. Include provisions in supplier contracts that facilitate and improve oversight
  5. Calibrate supplier assessments according to the risk level
  6. Engage proactively with suppliers on an ongoing basis
  7. Ensure that supplier requirements flow down to subcontractors
  8. Develop procedures for reporting on and ensuring destruction of counterfeit parts
  9. Work collaboratively with government authorities to support product safety and quality
  10. Increase awareness among consumers and end users about the hazards of counterfeits

CREATe.org ends the report with this summary statement: “Counterfeit components have infiltrated the supply chains of even reputable, well-respected multinationals — sometimes with tragic consequences for consumers. By taking steps to responsibly manage their own practices and supply chains, companies can help eliminate the bad actors that prey on supply-chain vulnerabilities, forestall unnecessarily burdensome regulations, and mitigate risks to public health and safety.”

Counterfeit parts and pirated goods is a growing problem within various supply chains and throughout many industries and sectors. Businesses of all sizes would do well to inform themselves. There is simply too much money at stake for criminal enterprises to ignore the fast cash available and relatively low penalties. For businesses an ounce of prevention really is worth a pound of cure when dealing with counterfeiters.

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One comment so far.

  • [Avatar for Stan E. Delo]
    Stan E. Delo
    November 20, 2012 05:12 pm


    I heard about counterfeit processor chips that have found their way into military equipment which seems pretty scary to me. They are very prone to failing because they are cheap knock-offs of originally specified components. I heard of it in an IEEE newsletter that I receive, so I know it to be true. Very difficult or impossible to spot them from their outside appearance, and even the subcontractors that are using them probably don’t know they are bogus.