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UNITED STATES NUCLEAR REGULATORY COMMISSION OFFICE OF NUCLEAR REACTOR REGULATION WASHINGTON, D.C. 20555 October 11, 1989 Information Notice No. 89-70: POSSIBLE INDICATIONS OF MISREPRESENTED VENDOR PRODUCTS Addressees: All holders of operating licenses or construction permits for nuclear power reactors. Purpose: This information notice is intended to alert addressees to possible indications of misrepresented vendor products and to provide information related to detection of such products. It is expected that recipients will review the information for applicability to their facilities and consider actions, as appropriate, to avoid similar problems. Suggestions contained in this information notice do not constitute NRC requirements; therefore, no specific action or written response is required. Description of Circumstances: The NRC is concerned about what appears to be an increased number of instances of misrepresented vendor products being supplied to the nuclear industry. Equipment procured as new is assumed to meet all procurement documentation requirements, applicable plant design requirements, and original manufacturer's specifications. However, on many occasions such equipment has not conformed to these requirements and specifications. The NRC has published numerous bulletins and information notices regarding specific instances of misrepresented products in the last two years. These are listed for reference in Attachment 1. Detecting misrepresented products is difficult because most quality assurance programs are not designed for detecting counterfeit or fraudulent practices. The criteria used to confirm the quality of products during receipt inspection and testing generally have assumed vendor integrity and are not focused on identifying an intent to deceive. This information notice summarizes possible indications of counterfeit or fraudulent material that have been discovered by licensees during inspection and testing and by the NRC staff during inspections, along with information provided by concerned vendors. The NRC staff believes this information will be helpful to licensees in detecting misrepresented vendor products. Attachment 2 lists some common characteristics of misrepresented products. 8910040381 . IN 89-70 October 11, 1989 Page 2 of 3 General indications may be found early in the procurement process, beginning with the price quote and scheduled delivery time requirements. Some things that have been found to be present when misrepresented products were identified and which can be found during the quoting process are: (1) the name of the vendor - several instances of apparent counterfeit and fraud involved vendors who were not authorized distributors for the products they supplied, (2) the price - quoting of prices by the vendor that are significantly lower than those of the competition, (3) delivery schedule - a shorter delivery time than that of the competition, and (4) the source of the item - drop shipment of items has been noted in several cases of misrepresentation where the quoted supplier subcontracted the order to another company and then had the subcontractor ship the product directly to the purchaser. The quoted supplier never saw or verified the quality of the product which, in some cases, has been substandard. The receipt inspection and review process is a key element and important step in detecting misrepresented products. Some easy items to check that are often overlooked are the names and indications of routing on the shipping container and the overall appearance of the products. Some distributors have been bold enough to ship supposedly new equipment with one vendor's name on it in a container marked with another vendor's name. Another important check is to note whether the items in each shipment are uniform and similar in appearance. Some deviations may occur even in authentic items; however, differences can signal a problem and indicate the need for additional review. Some distri- butors or suppliers mix misrepresented vendor products with authentic vendor components. This type of misrepresentation has required close inspection to detect the differences. One of the most common indications of misrepresented components, which can be discovered during receipt inspection, is evidence that the component is not new but has been used and refurbished. There have been many recent instances of licensees buying what they thought were new components only to discover that they actually were given refurbished components that in some cases did not meet their procurement requirements. Evidence of prior usage includes scratches that indicate that the component has been taken apart, new paint that shows evidence of another color underneath or attempted exterior repair, and, for metallic components, pitting or corrosion. Evidence of repair, especially when parts from another manufacturer are used, is also an indication that the component has been used. Knowledge of compo- nents, even of simple things such as color or distinctive markings, has led to the discovery of refurbished items. Recent experience with misrepresented circuit breakers, for example, has shown that close-checking of tags and labels can identify misrepresented equipment. . IN 89-70 October 11, 1989 Page 3 of 3 In an attempt to market refurbished circuit breakers as new, some vendors have been making counterfeit tags and labels from copies of authentic ones and attaching them to the breakers. Such a practice can be detected when the equipment is examined to see, for example, if the labels are in the wrong location or appear different, or if the tags were attached with screws rather than rivets. Another related indication to be aware of is the use by some vendors of counterfeit Underwriters Laboratory (UL) labels on electrical products. There is no substitute for doing appropriate measuring and testing during receipt inspection. An accurate check of dimensions is often essential in determining if a part is acceptable, regardless of whether or not it is misrepresented. Testing to determine the material composition of a product can also be important, as was discovered during a recent instance of misrepresented fasteners. It is recognized that testing is not always practical. Thorough programmatic and implementation audits of the vendors quality assurance programs are, in many cases, necessary to establish and confirm the basis for accepting the vendor products. Licensees may wish to also consider ongoing industry efforts in this area in taking actions to avoid problems related to misrepresented vendor products. This information notice requires no specific action or written response. If you have any questions about the information in this notice, please contact one of the technical contacts below or the appropriate NRR project manager. Charles E. Rossi, Director Division of Operational Events Assessment Office of Nuclear Reactor Regulation Technical Contacts: H. M. Wescott, NRR (301) 492-3216 S. L. Magruder, NRR (301) 492-0985 Attachments: 1. List of Recently Issued NRC Bulletins and Information Notices Regarding Misrepresented Material 2. Common Characteristics of Misrepresented Vendor Products 3. List of Recently Issued NRC Information Notices . Attachment 1 IN 89-70 October 11, 1989 Page 1 of 1 LIST OF RECENTLY ISSUED NRC BULLETINS AND INFORMATION NOTICES REGARDING MISREPRESENTED MATERIAL 1. NRC Compliance Bulletin No. 87-02 and Supplements 1 and 2: "Fastener Testing to Determine Conformance With Applicable Material Specifications." 2. NRC Bulletin No. 88-05 and Supplements 1 and 2: "Nonconforming Materials Supplied by Piping Supplies, Inc. at Folsom, New Jersey and West Jersey Manufacturing Company at Williamstown, New Jersey." 3. NRC Bulletin No. 88-10 and Supplement 1: "Nonconforming Molded-Case Circuit Breakers." 4. Information Notice No. 88-19: "Questionable Certification of Class 1E Components." 5. Information Notice No. 88-35: "Inadequate Licensee Performed Vendor Audits." 6. Information Notice No. 88-46 and Supplements 1, 2 and 3: "Licensee Report of Defective Refurbished Circuit Breakers." 7. Information Notice No. 88-48 and Supplements 1 and 2: "Licensee Report of Defective Refurbished Valves." 8. Information Notice No. 88-97 and Supplement 1: "Potentially Substandard Valve Replacement Parts." 9. Information Notice No. 89-18: "Criminal Prosecution of Wrongdoing Committed by Suppliers of Nuclear Products or Services." 10. Information Notice No. 89-22: "Questionable Certification of Fasteners." 11. Information Notice No. 89-39: "List of Parties Excluded From Federal Procurement or Nonprocurement Programs." 12. Information Notice No. 89-45 and Supplement 1: "Metalclad, Low- Voltage Power Circuit Breakers Refurbished With Substandard Parts." 13. Information Notice No. 89-56: "Questionable Certification of Material Supplied to the Defense Department by Nuclear Suppliers." 14. Information Notice No. 89-59: "Suppliers of Potentially Misrepresented Fasteners." . Attachment 2 IN 89-70 October 11, 1989 Page 1 of 1 COMMON CHARACTERISTICS OF MISREPRESENTED VENDOR PRODUCTS - nonfactory-authorized distributor - price significantly less than that of competition - delivery in significantly shorter time than that of competition - differences in appearance of items in the same shipment - unusual box and packing of component - wear marks or scratches on painted surfaces - pitting or corrosion of metallic components - exterior evidence of attempted repairs - missing name plate or new name plate on old component - unusual location or method of attachment of identification (ID) tag - missing part number or irregular stamping on ID tag - improper dimensions - ground-off casting marks with other markings stamped in the area .
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