United States Nuclear Regulatory Commission - Protecting People and the Environment

Information Notice No. 89-70: Possible Indications of Misrepresented Vendor Products

                                  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
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                                                            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. 
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                                                            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
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                                                            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."
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                                                            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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