Fighting the good fight: Keeping counterfeits out of the supply chain
Counterfeit products are increasingly finding their way into the stainless steel supply chain, with potentially devastating consequences for safety, the economy and the environment. For this reason, during the 2017 Stainless Steel World conference a dedicated workshop explored and proposed additional industry initiatives that could further mitigate the manufacture and use of counterfeit products. The conclusions are presented here.
Article by Steve Paterson, Arbeadie Consultants & Joanne McIntyre, Stainless Steel World
Steve Paterson (Arbeadie Consultants) as Co-chair introduced the workshop by highlighting that counterfeiting is still an issue, particularly in the oil & gas industry where an increase in activity in a costconstrained business has resulted in end users looking to source cheaper, good quality products from low-cost suppliers and countries. The workshop was an opportunity to develop an integrated approach across the entire supply chain from manufacturers to fabricators and through to end users. The invited panel included representatives from two industry associations: the Steel Alliance Against Counterfeiting (SAAC), and the Engineering Equipment and Materials Users Association (EEMUA) which acts on behalf of the end users.
He added that wider use of industry standards such as the recent ISO 17781 for duplex stainless steels would also be addressed. Finally, he explained that counterfeit in the context of the workshop meant any delivered product that was fake or did not meet the required quality. Steve then introduced the panel who would each speak about different aspects of the counterfeiting issue.
- Michael Kremmel (Erne Fittings, Austria)
Joelle Greenwood (Mannesmann Stainless Steel Tubes, France)
Jared Ayres (IPP Group, UK)
Carlo Farina (Friedrich Geldbach, Germany)
Alan Cockerill (EEMUA, UK)
Costly to fight
Michael Kremmel described some experiences with fake products which were mainly found in the Middle East and Asian markets, particularly in UAE, India, Iran and South East Asia. He reported a large increase in the number of fake products and materials certificates in the last two to three years. There was a significant increase in requests to verify material certificates, 90% of which were from the Middle East area, and approximately one-third of all checked certificates were found to be fake.
While there have been recent improvements with fewer fake certificates, approximately 10% are still fake. Michael showed some examples of fake certificates and product marking which were very good imitations. He then gave an example of a fake website in which an exemployee had started his own business in India with a similar company name, which was a copy of the Erne Fittings website. Erne Fittings took legal action and the bogus company had to change its name but is still using images from Erne Fittings on its website. Such an action is costly and timeconsuming. Michael described a number of actions taken by Erne Fittings against counterfeiting:
- co-operation with end users, e.g. Saudi Aramco require contractors and fabricators to check certificates with the original manufacturers,
- joining the SAAC initiative,
- implementation of dedicated email address with documents checked within 24 hours,
legal action if there is serious counterfeiting,
- implemented QR codes in certificates
- development of further measures for actual products.
Joelle Greenwood described the approach taken by duplex stainless steel manufacturers and end users to create an industry standard that established common test methods for quality control of duplex and super duplex stainless steels. This enables manufacturers to apply the same test methods for all clients in a consistent manner and allows end users to get the quality they need in line with industry agreed requirements. She reported how ISO 17781 provides robust test methods and acceptance criteria including direct assessment of microstructure of duplex and super-duplex stainless steels and correct etching methods to reveal what is potentially undesirable in the material.
Alan Cockerill spoke about the EEMUA 224 publication which is a guide to risk-based procurement. Working with a number of member companies EEMUA developed this document based on the procurement of subsea equipment where nothing can be left to chance because of the inaccessibility of the equipment once installed. He also emphasized the significant consequences of coming across fake or sub-standard materials during the construction or commissioning phase of such projects.
The risk-based approach uses an overall criticality factor determined from the likelihood of the risk and potential consequences, to allocate different regimes of quality processes. At the lowest level of risk, normal commercial quality is acceptable as there is low impact on the project if the sub-standard or fake equipment is delivered. At the highest level of risk where quality is vital and cannot be compromised, more stringent quality and inspection requirements can be applied. If used rigorously this method reduces the risk of poor quality or counterfeit equipment but cannot eliminate it completely. Having good quality procurement processes is also necessary to reduce the risk.
Carlo Farina spoke about Steel Alliance Against Counterfeiting (SAAC) which is trying to unite major manufacturers of pipes and piping products against counterfeit goods. It was started in 2015 and today has 18 members, all manufacturers of steel pipes and pipe connections.
The manufacturers are concerned about the quality of materials that are produced and used by industry. There are critical segments such as pipelines, subsea, and refineries, where counterfeiting creates not only financial or economic risks but more importantly safety and environmental risks. The main goal of the initiative is to increase awareness and the following three groups have been targeted:
- governmental entities such as ministries of economy and trade, chambers of commerce, customs agencies, police departments for illegal trade and intellectual property, and trademark protection;
- end users such oil & gas and energy companies;
- EPC contractors and subcontractors.
The Alliance has had some meetings and participated in two conferences. It has been mainly active in the Middle East but recognizes that Asia and South America are markets which are engaged in counterfeiting. The Alliance has met with the Dubai police in the Middle East, with the customs authority at the European Commission, and has had meetings in Europe with the United Nations to raise awareness of the issue.
The Alliance would like to promote technical solutions to minimize counterfeiting, whilst recognizing that it is almost impossible to prevent counterfeiting completely. Jared Ayres compared counterfeiting to someone having spent a lot of money on tickets to the 100 meters sprint final at the Olympics, a great sporting event, only to find out afterwards that the race was won by an athlete using performance enhancing drugs, i.e. you feel cheated. He emphasized the need to focus on removing this corruption from our industry and for everyone to work together to find ways to eradicate fake products.
The presentations were followed by a lively question and answer session. One participant stated that his purchase orders for piping specifically require the origin of materials to be North American, Western European, South Korean or Japanese, but then you have to rely on the integrity of the supply house for the source. It is expensive for manufacturers to monitor or enforce where their products are delivered to, and for every individual company to have a quality program to check every stockist or supply house. He asked whether there are other ways for manufacturers to reach out to end users.
The Panel responded that engineering companies could go directly to the manufacturer and ask for type 3.2 certificates but that is not always possible because of end users’ demands. An option would be to implement a QR code on material certificates which you can verify on a website. Another option in development is to tag the product in such a way that it is difficult to fake it. Or manufacturers could only supply to authorized distributors and traders who have the full trust of the manufacturers, end users, and engineering companies.
In response to a question asked about the basis of the QR code implementation Michael Kremmel replied that Erne Fittings currently only implement a QR code on the materials certificates and not on the product. Technologies such as chips or laser marking exist but are difficult to implement.
In response to a question about the position of officials in countries the SAAC Alliance is working with, Carlo Farina stated that laws and norms against counterfeiting exist in most countries. In the Middle East, these are extremely tight for fake products but the problem is that the quantity is so large that it is impossible for customs to control every container, and not every country has the same level of concern about the problem.
The Alliance has concentrated on the Middle East because that was the first market where the issue was raised, but it happens elsewhere. It was emphasized that the Alliance, which includes Asian manufacturers, does not have anything against the origin of the material, provided it is good quality.
In response to a question as to why so much equipment supplied to the Middle East is counterfeit it was stated that there is a big demand for piping material in particular and interest about counterfeiting from end users in the Middle East varies considerably. In response to a question on what is expected from end users and the role of the supply chain Michael Kremmel responded that end users define approved vendor lists but need to co operate on a more technical basis because it is not always possible to conduct direct business between manufacturers and end users, and every part of the supply chain has its role. It is not the intention to remove intermediaries such as stockists and traders who should continue to operate in the market.
Joelle Greenwood added that management of the supply chain is critical in all aspects to ensure the material supplied is authentic and exactly what was requested. It is not a question of redefining the supply chain but rather validating it. The ISO 17781 standard puts focus on the competence of manufacturers and testing of materials because, due to cost constraints and material availability, some buyers do not always check the details. All end users have their approved vendor list, approved stockists and controls, but materials supply is sometimes urgent and quality may be overlooked. Technical and quality discussions should be the focus between the manufacturer and the end user.
In response to a question about validating certificates by adding photographs of the product, it was considered by the panel to be a good idea to be able to see the logo or some form of marking but is also no guarantee of authenticity and could add time to delivery. A representative of a laser marking company indicated that there is an increasing tendency in various industries to assure the supply by laser marking the actual product with QR codes. It is a good method for assuring the material if you don’t have the possibility to verify it on site. The photo of the QR code can be used to check on the website to secure and assure the materials supply in addition to any inspection.
In response, the panel agreed it should be made easier to apply technical solutions to components. Some manufacturers have already implemented QR codes and others are trying to find other solutions, but it is also possible to fake QR codes.
An end user in the chemical industry highlighted that they do not have the staff to monitor all certificates for incoming material, but it is important to verify material because if something goes wrong in the plant it is the responsibility of the operator.
Steve Paterson (co-chair) asked whether there were any ideas, in addition to QR code implementation, that people could take away from the workshop as something worth following up. Responses from the audience included:
- Laser marking is a possibility but there was some discussion about the application with carbon steel products especially when coated.
- Use of a website to report suppliers of fake products but the concern was raised about legal implications of naming any individual company.
- Use of 3.2 certification requirements but this is not practical when the material is sourced from stockists because most certificates are 3.1 and recertifying products with witnessed testing would increase cost and delay delivery.
Finally, Thomas Ladwein (Aalen University) as Co-chair gave a summary of the key issues raised in the workshop discussion:
- Counterfeiting of materials seems to be prevalent in the Middle East but not exclusively so;
- Responses from officials in different countries in tackling counterfeiting issues vary and in the Middle East there are insufficient staff to control all products coming in;
- Various initiatives to tackle fake products have been started such as the SAAC Alliance and use of QR codes on certificates;
- Main remedies discussed were
- to improve communication between end users and manufacturers
- to supervise and control the supply chain
- to provide better identification such as QR codes and laser marking;
- The issue of fake products is important from a safety perspective because failure can have serious consequences.