The Real Cost of Counterfeit Products From the Eyes of a Contractor

Posted in: Features, May/June 2013

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Manufacturers and trade associations have devoted much attention to counterfeit electrical products and their effects on consumers. The U.S. Customs' Consumer Safety and Critical Technology seizures of counterfeit electrical products are second only to pharmaceuticals. According to the Department of Homeland Security, over 3,400 seizures of Consumer Safety and Critical Technology products accounted for more than $146 million in 2012.

Using counterfeit electrical products can result in product malfunctions or failures, resulting in serious bodily injury and even death. These failures are also capable of causing unplanned outages, manufacturing downtime, and even significant property damage. When you factor in the financial and legal liabilities, the potential damages of counterfeit  products not only affect the customer, but also the electrical contractors responsible for properly installing equipment that should pass independent certification testing and code regulations.

Eaton is committed to stopping the counterfeiting of electrical products worldwide and has adopted a zero tolerance policy for the illegal practice. Eaton is also committed to creating awareness of the dangers that counterfeit electrical products present and frequently collaborates with electrical industry organizations, such as IEC, to increase this awareness.

In order to find out exactly what that means for electrical contractors, Eaton reached out to Michael Scherer, general manager of Scherer Electric in western New York, an IEC member, and an Eaton Certified Contractor Network (ECCN) instructor to share his experiences.

Eaton: Have you ever seen a counterfeit or suspect product in the field?

Scherer: I’ve had a few experiences with counterfeit products. Each experience was the result of a cold sales call into our office with an offer that seemed too good to be true. It turns out that they were exactly that, and resulted in our company wasting time and money on inferior quality products.

One such experience was a call from a reseller claiming they had bought out a contracting company and had brand-name saw blades for sale at a deeply discounted rate. When the blades arrived, they appeared to be the real product. It was when they were put to use that we found the blade teeth were so brittle they fell off during the first use. We had to throw out these blades and buy new ones, resulting in more money being spent than if we had bought the higher-price but higher-quality blades in the first place.

On another occasion, we bought staples from a small local electrical supply house; the staples ended up being soft and would bend when we tried to hammer them. The  supplier did not allow us to return the product so we wasted money again, throwing out the entire shipment. This supply house went out of business shortly after that.

Eaton: In each of those experiences, it sounds like it was only after using the product that you learned of its inferior quality. We learn these lessons the hard way since so many products today are purchased online with unknown quality. In the case of the saw blades, the inferior quality meant a frequent replacement and time wasted on the job. Fortunately the blade breakage didn’t result in any injuries. For electrical products, this risk can be a lot higher, especially if undetected during installation.

The inferior construction of a counterfeit product means that malfunctions or failures could result in serious injury or property damage. What do these risks mean for you as an electrical contractor?

Sherer: You’re exactly right, the risks that counterfeit electrical products pose are threatening to both personal safety and business health.

As electricians, our number one job is to protect our clients. An electrician who uses counterfeit electrical products is violating that responsibility. Our codebooks are written based on situations involving the harming of people and property and are put in place to protect our clients. If we are to follow these codes, the products we use need to meet the minimum standards, as evaluated by independent certification testing organizations, such as Underwriters Laboratories (UL) and ETL from Intertek. Counterfeits consistently fail these tests.

If you are aware that one of the products you install is not authentic, you can be held liable for any damage that results, from property damage to personal injuries or even deaths. That liability can be enough to not only financially weigh down a company, but also weigh on your conscience.

Once news of your responsibility in the damage spreads, your company reputation could be on the line. Most clients are not going to hire a company that used inferior quality products to save a few dollars.

Even if a disastrous situation does not occur, buying less expensive counterfeit products will almost always cost you more money in the long run.

Your productivity can be impacted as inferior parts may be more difficult to work with or even need to be discarded, which is what happened to me with both the staples and saw blades.

Even small product malfunctions can result in added costs if you are called back to fix an issue. Many contracting companies, such as Scherer Electric, offer warranties and guarantees in installations and are not paid for callbacks. They can also result in increased maintenance and repair costs for your clients, leading to unsatisfied and unhappy clients. If clients become aware that you knew inferior products were used, you could become known for cutting corners. If you cut corners on product quality, clients may also assume you cut corners elsewhere. In a word-of-mouth industry, unhappy clients not only mean the loss of repeat business, but also the loss of referrals.

Most  electricians want to do a good job and want to have a reputable business.

Eaton: With all of these risks, why would an electrician be tempted to buy a suspect or counterfeit product?

Sherer:  In a down economy, business from clients is highly competitive. It can be tempting to accept deals that sound too good to be true in order to cut down costs and put in a lower bid than your competition. These “deals” can also be tempting to increase sales and profitability. Some may even feel that using these products is a small price to pay if it means they are able to stay in business.

It is important to realize that by using counterfeit or suspect products, you are putting your quality of work and your reputation at risk.

Whatever the reason for using these products and no matter how good the “deal” is, they  will almost never put you out on top. With all of the risks that I previously mentioned, using these products will cost you, and in more ways than just financially.

Eaton: As a manufacturer,  we know it is difficult to tell an authentic product from a counterfeit one just by looking at  it. Counterfeiters are becoming sophisticated in their techniques, even copying certification marks. We often encourage our customers to first try to avoid counterfeit products and then provide them with tips to identify counterfeits if they encounter them. How do you avoid purchasing counterfeit products?

Sherer: Electricians are often buying mass quantities of products and do not have time to check holograms or inspect products for counterfeiting. We need to trust our supply chain.

I deal only with established quality suppliers, both locally and nationally, with a strong reputation. These suppliers are often authorized by manufacturers to sell their products.

As I learned from my personal experiences, it is always important to research sellers before working with them, especially if they are contacting you on a cold sales call.

We once had a company call us selling circuit breakers. We called our sales representative for that manufacturer and they were able to tell us that they were not an authorized dealer, leading us to take our business elsewhere.

Always be skeptical of a price that seems too good to be true; it is most likely not legitimate.

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Stopping  the  sale  of  counterfeit  products  is everyone’s responsibility – manufacturers, distributors, resellers, contractors, and customers alike. You should always purchase products from an authorized representative or  distributor of the manufacturer.  As Scherer made clear through his experiences, this is the best way to avoid counterfeit products. There is a higher risk of receiving a counterfeit product if you cannot trace the path of commerce to the original manufacturer.

Scherer  isn’t  the only electrician we want to hear from. As part of their anticounterfeit initiative, IEC and Eaton will reach out to each member of IEC to research the impact  of counterfeit electrical products on the electrical contracting industry. The results of this survey will help our industry find the best solutions to combat the use of counterfeit electrical products.

If you have reason to suspect youve purchased a counterfeit product, contact the manufacturer. You can also contact Eaton at Report_fakes@eaton.com.