Counterfeit and Gray Market
Flow Chart
U.S. Automotive and Commercial Vehicle Parts Distribution
Supply Chain Model
A simplified flow chart illustrating the normal flow of products produced by U.S.
manufacturers include:
• Raw material and component suppliers – These may include international or
domestic.
• Manufacturing – This includes the actual manufacture, assembly and
completion of a finished component or part.
• Distribution Center – Where finished parts are moved for packaging,
warehousing and shipping. Owned by the manufacturer.
• OE Production or Warehouse Distributor – The part is then sold by the
manufacturer either for assembly onto a vehicle (OE Production) or into the
aftermarket distribution channel (Warehouse Distributor).
• Parts Store / Jobber / Retail Chain – In the case of the aftermarket
distribution channel, a warehouse distributor may elect to sell through a
parts store either independent or company owned.
• Repair Facility – If the part is installed professionally, the part is sold directly
or indirectly to a repair facility. This may be independent or a car dealer.
• End User / Vehicle Owner – The ultimate end-user or consumer of the part.
U.S. Automotive and Commercial Vehicle Parts Distribution
Supply Chain Model - Simplified
Original Equipment Channel
O.E. Vehicle
Manufacturer
Raw Material
Or
Component
Domestic
Supplier
Domestic
Manufacturer
Distribution
Center
MEMA Member Company
US Manufacturer
International
Supplier
O.E.
Dealer
Warehouse
Distributor
Repair
Facility
End User /
Vehicle
Owner
Parts Store /
Jobber /
Retail Chain
Independent Aftermarket Channel
Color Key:
= Raw Materials and/or Components
= MEMA Member Companies / US Manufacturers
= Original Equipment Channel
= Independent Aftermarket Channel
= Steps in the legitimate Supply Chain Model
Legitimate
U.S. Automotive and Commercial Vehicle Parts Distribution
Supply Chain Model
In the case of counterfeit or gray market products, additional steps in the distribution
model may include:
• Unauthorized Suppliers – Producers of raw materials or components that were
not commissioned by the original manufacturer.
• Unauthorized Manufacturers – Producers products made for the replacement of
the original but in violation of the original manufacturer’s intellectual property.
• “Will-Fit” Supplier – May produce legitimate replacement products will fit and are
not in violation of intellectual property but may later be converted to counterfeit
by affixing trade marks or other trade dress violations by another party.
• Master Distributor / Importer of Record – Generally the company that takes
receipt of illegitimate products within the U.S. with the intent to distribute. They
may also be the converters of legitimate replacement products to counterfeit
through the use of markings, packaging, etc.
• Internet / Web Sites / Mail Order – May also be distributors of illegitimate
products and may or may not be located in the U.S.
• Broker – In the commodities business. Generally not product experts but in the
business of selling large quantities of over run, over stock products which may or
may not contain counterfeit goods.
U.S. Automotive and Commercial Vehicle Parts Distribution
Supply Chain Model - Simplified
Original Equipment Channel
O.E. Vehicle
Manufacturer
Raw Material
Or
Component
Domestic
Supplier
Domestic
Manufacturer
Distribution
Center
O.E.
Dealer
Warehouse
Distributor
MEMA Member Company
US Manufacturer
End User /
Vehicle
Owner
Parts Store /
Jobber /
Retail Chain
International
Supplier
Unauthorized
International
Supplier
Repair
Facility
Independent Aftermarket Channel
Unauthorized
Manufacturer
Will-Fit
Supplier
converted
to
counterfeit
Master Dist
/ Importer
of Record
Internet
/ web site
/mail order
Broker
Legitimate
w/ Counterfeit
and Gray Market
Color Key:
= Raw Materials and/or Components
= MEMA Member Companies / US Mfgs
= Original Equipment Channel
= Independent Aftermarket Channel
= Steps in the legitimate Supply Chain Model
= Illegitimate Steps in Supply Chain
U.S. Automotive and Commercial Vehicle Parts Distribution
Product Flow
A simplified flow chart illustrating the normal flow of products from international
sources to U.S. buyers include:
• Free Trade Zone – Within international borders.
• Freight Consolidator – Actual transporter of goods.
• Customs Broker – Completes necessary documentation for export of goods.
• The process is then reversed upon receipt within U.S. borders.
U.S. Automotive and Commercial Vehicle Parts Distribution
Product Flow
Origin
Free Trade
Zone
Freight
O
Consolidator
Destination
Customs
Broker
Customs
Broker
Freight
Consolidator
Purchaser
Legitimate
U.S. Automotive and Commercial Vehicle Parts Distribution
Product Flow
In the case of counterfeit or gray market products, shipments are generally not
direct to U.S. borders but may include many stops along the way. There are
too many to name but some include:
• Dubai
• Paraguay
• Panama
• Mexico
• Canada
Where import restrictions are less complicated and the entry of counterfeit
goods more likely. The additional paper trail of many stops along the way
make origin hard to detect.
U.S. Automotive and Commercial Vehicle Parts Distribution
Product Flow
International Origin
Free Trade
Zone
Freight
O
Consolidator
U.S. Destination
Customs
Broker
Customs
Broker
Dubai
Canada
Paraguay
Shipments get “pinballed”
around the world prior to
final destination
Freight
Consolidator
Purchaser
Mexico
Panama
Illustrative of Potential
Counterfeit and Gray Market
U.S. Automotive and Commercial Vehicle Parts Distribution
To address the serious issue of counterfeiting and other IPR violations within
the automotive manufacturing community, the Motor & Equipment
Manufacturers Association (MEMA) – in conjunction with its market
segment associations to include the Automotive Aftermarket Suppliers
Association (AASA), Heavy Duty Manufacturers Association (HDMA),
Original Equipment Suppliers Association (OESA) – created the Brand
Protection Council to provide a forum for manufacturers to discuss
counterfeiting and other IPR violations with a focus on North America.
For more information on the Brand Protection Council or for assistance in
contacting automotive brand owners, please contact Jack Cameron at
919-406- 8856 or e-mail jcameron@mema.org.
(http://www.aftermarketsuppliers.org/issues/counterfeiting.php)