Counterfeit, Suspect, Fraudulent Item (CSFI)

1. Counterfeit, Suspect, Fraudulent Item (CSFI) Developing the NRC CSFI Response Community DOE Conference Call Nov. 11, 2009 Daniel Pasquale Sr. Operations Engineer Quality and Vendor Branch Office of New Reactors Daniel.Pasquale@nrc.gov

2. Generic Communication IN 2008-04“Counterfeit Parts Supplied To Nuclear Power Plants” The 3characteristics of an effective procurement and dedication plan: • The involvement of engineering staff in the procurement and product acceptance process; • Effective source inspection, receipt inspection, and testing programs; • Thorough, engineering-based programs for review, testing, and dedication of commercial-grade products for suitability for use in safety-related applications.

3. Program StrategiesThe Defense • Self Assess – and be critical • Encourage a questioning attitude • Perform thorough receipt inspections • Verify procurement requirements • Provide CSFI training to QA/QC receipt inspectors • Make Current CSFI information available • Maintain a comprehensive CGD program

4. Program StrategiesThe Offense • Self Assess – and be critical • Zero tolerance policy for counterfeiting • Supplier selection • Know your suppliers (Upstanding) • Assess supplier’s return & scrap/disposal policies • Precise procurement specifications based on engineering input • IT protection of Intellectual Property • Community Watch programs • Outreach efforts

5. Some Proactive Best Practices • Protect Your Intellectual Property • Register patents & trademarks • Impose strong IP procurement clauses including specific CSFI language • Question the supplier’s IP controls • Institute anti-fraud techniques • Maintain Robust Procurement Controls • Perform vigilant receipt inspections that include CSFI elements • Include a CSFI element for repair/returns receipt inspections • Control disposal of process scraps, rejects, un-repairable returns etc • Trust but verify • Know Your Suppliers • Use O.E.M. authorized distributors • Employ rigorous supplier selection processes • Maintain short supply chains

6. Some Proactive Best Practices • Communicate and Maintain Relationships with the O.E.M • Seek O.E.M. assistance In detecting CSFI • Ensure that the O.E.M. also has a robust CSFI program • Take Action • Report known or suspected Counterfeiting • Guard Intellectual Property • Take appropriate legal actions • Stay Current • Monitor counterfeiting news • Participate in related industry committees • Share information The NUPIC Vendor Interface Committee Meeting June 17 & 18, 2009

7. WHAT IS THE NRC DOING? • Issuance of IN 2008-04, “Counterfeit Parts Supplied To Nuclear Power Plants” (April 7, 2008) • Developing the NRC’s CSFI community (June 4, 2009) • Continuing to enhance the NRC’s Vendor Inspection program • Working with NUPIC to enhance their audit process • Working with EPRI’s Technical Advisory Group (TAG) on CSFI • Cooperating with DHS’s Anti-Counterfeiting task forces • Improving communications and sharing information with the nuclear community

8. COMMUNITY WATCH PROGRAMS A community-based organization working together to combat CSFI activity: • Take positive steps • Share current information of new trends in CSFI • Establish consistent programs for combating CSFI activity • Awareness of & access to the various related government agencies • Develop industry standards • Evaluate CSFI claims • Training for Inspectors, Purchasers and QA personnel

9. DEVELOPING THE NRC’S CSFI COMMUNITY • NRO, Quality & Vendor Branch-BWR • NRO, Quality & Vendor Branch-PWR • NRR, Vendor Branch – Operating Units • NMSS/SFST – Nuclear Fuel Storage • NMSS/FCSS – Nuclear Fuel Transport • OpE (Operational Experience) • ConE- (NRC-Construction Experience) • OI (Office of Investigations) • OAC (Office Allegations Coordinator) • OE (Office of Enforcement) • ADM/DC (Excluded Parties List) • NRC Regions • IRS/IAEA (International Reporting System) • ConX- (NEA-Construction Experience) Internal NRC Family – 1st Tier

10. The NRC’s CSFI Community

11. Outreach Efforts ♦Department of Defense • Government Information Data Exchange Program (GIDEP) • Diminishing Sources and Material Shortages (DMSMS) • NASA • Aerospace Standard AS5553, “Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition ♦ Department of Energy • Suspect/Counterfeit or Defective Items Program (S/CDI) • Occurrence Reporting and Processing of Operations Information (ORPS) ♦ Department of Commerce • International Trade Administration, Office of Energy and Environment • Manufacturing & Services • Bureau of Industry & Security, Office of Technology Evaluation ♦ Nuclear Procurement Issues Committee (NUPIC) • Commercial Nuclear Power Licensees & Suppliers ♦ Nuclear Energy Institute (NEI) ♦ Electric Power Research Institute (EPRI)

12. EXISTING DATA SOURCES • 10 CFR Part 21 Reports - NRC • OpE: Operating Experience – NRC • ConE: Construction Experience - NRC • OpEx: Operating Experience - INPO • EPIX: Equipment Performance & Information Exchange-INPO • GIDEP: Government Industry Data Exchange Program • SCI: Suspect & Counterfeit Items – DOE • EPLS: Excluded Parties List System - GAO • CPSC: Consumer Protection Safety Commission • TheTrueCosts.org: U.S. COC • STOPFAKES.gov: Joint Effort hosted by DOC • IRS: Incident Reporting System – IAEA • ConX: Construction Experience - NEA

13. NOW IS THE TIME TO SHARE CSFI INFORMATION “I have suggested before that this kind of information (defective, counterfeit, or mis-used components)should be collected by all regulators and shared across national borders. Today I will modify my view by saying that this is not merely a good idea, but perhaps even a necessary one.” - NRC Commissioner and Former ChairmanDale E. Klein at the IAEA General Conference Senior Regulators Meeting, Vienna, Austria, October 3, 2008

14. SUMMARY • The threat of CFSI is real – and growing • Industry vulnerabilities are growing also • Maintain a robust CSFI program • Refer to current NRC guidance • Protect your Intellectual Property (IP) • Incorporate Best Practices • Build and maintain a solid CSFI community • Federal agencies • Industry communities • Supply chain

15. QUESTIONS Daniel Pasquale Sr. Operations Engineer Quality and Vendor Branch Office of New Reactors Daniel.Pasquale@nrc.gov