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Categorized | Voices and Views

Counterfeit Electronic Parts Threaten Our Troops and Our Security

By Sen. Carl Levin

Earlier this year, the Senate Armed Services Committee, which I chair, began an investigation of counterfeit electronic parts finding their way into the systems that our military uses to defend us. We recently held our first hearing to look at what our investigation has discovered so far, and what we have found will shock the American public.
There is a flood of counterfeit electronic parts entering the defense supply chain.  It is endangering our troops and costing us a fortune. And the overwhelming share of these counterfeits comes from one country: China.
Here is some of what we have found:
*Looking at just a slice of the defense contracting universe, the committee reviewed 1,800 cases of electronic parts suspected to be counterfeit.  Those 1,800 cover more than 1 million individual parts. Now, 1 million parts is surely a huge number, but remember, we’ve only looked at a portion of the defense supply chain. Those 1,800 cases are just the tip of the iceberg.
*Staff selected more than 100 of those cases to trace the suspect parts back through the supply chain. In more than 70 percent of cases, the trail led to China, where a brazenly open market in counterfeit electronic parts thrives.  In most of the remaining cases, the trail led to known resale points for parts coming from China.
*We also conducted detailed investigations of how suspect counterfeit parts from China ended up in three key defense systems. In each case, we traced the parts through a complex web of subcontractors and suppliers back to Chinese companies.
*It is stunning how far the counterfeiters are willing to go.  We asked the Government Accountability Office (GAO), acting undercover, to go online and buy electronic parts used in military systems. Every single part the GAO has received so far has been counterfeit. GAO found suppliers who not only sold them counterfeit parts when they sought real parts; suppliers were also willing to sell them parts with nonexistent, made-up part numbers. Every one of the counterfeit parts they received came from China.
Too often, the cost of replacing counterfeit parts once they are discovered falls on taxpayers. We are working on legislation that would change Pentagon rules so that contractors, not taxpayers, pay to replace counterfeit parts when they are discovered. We will require that contractors notify the military immediately when they discover electronic parts that are suspected to be counterfeit, and that they report those counterfeit cases to a computerized system that contractors and the government use to track such problems.
But as we do that, we also must stop the flood of counterfeit parts at the source – and that source is mainly in China.
Witnesses told us how counterfeiters in China remove electronic parts from scrapped computers and other electronic waste, how they wash the parts in dirty rivers, and dry them in the street.  Counterfeiters make this scrap look like new parts and sell them openly in markets in Chinese cities and through the Internet to buyers around the world.
Chinese authorities impeded our investigation, refusing even to issue visas to our investigators to enter mainland China. At one point, a Chinese embassy official told staff that the issues we were investigating were “sensitive” and that the investigation could be “damaging” to U.S.-China relations.
They got it backwards. What is damaging to U.S.-China relations is China’s refusal to act against brazen counterfeiting.
If China does not act promptly to end counterfeiting, then we will have no choice but to treat all electronic parts coming in from China—whether for military or civilian use—as  suspected counterfeits. That would mean requiring inspection of all shipments of Chinese electronic parts to ensure that they are legitimate.
We cannot afford to put our troops at risk by arming them with unreliable weapons or asking them to fly planes with fake parts on them. We cannot afford to spend needed defense dollars on fake parts. And we cannot allow our national security to depend on electronic scrap salvaged from trash heaps by counterfeiters in China.
Carl Levin is the senior U.S. senator from Michigan and chairman of the Senate Armed Services Committee.

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