A US Senate investigation has uncovered a “flood” of counterfeit electronics in use by the Department of Defense (DoD). The Senate Armed Services Committee (SASC) made public the results of a 14-month long investigation on 21 May that detailed the discovery of 1,800 cases where fake parts were in use or in DoD’s supply chain. The cases detected involved more than a million individual parts between 2009 and 2010.
The investigation was initiated by Democratic Senator Carl Levin of Michigan, Chairman of the Senate Armed Services Committee, and the ranking Republican committee member, Senator John McCain of Arizona. The SASC report follows on the heels of a US General Accountability Office (GAO) report released in March that detailed the ease with which counterfeit electronics could be ordered from suppliers on the Internet.
The 112-page report identified the counterfeit parts as coming primarily from China and, Senator Levin said, “threatens national security and the safety of our troops and American jobs.” According to the report, more than 70 percent of the fake parts came from China and the bulk of the remainder originated in the United Kingdom and Canada. Included in the report are comments that chide China for refusing committee members travel visas during the course of their investigation. A Chinese embassy official is quoted as stating that an adverse report would be “damaging” to relations between the two nations.
While the report singles out China for the majority of criticism and blame, the Committee also contained strong words of condemnation for US procurement officials and government contractors. The report faults contractors and procurement agents for creating an environment within DoD’s supply system that perpetuated vulnerabilities in the procurement process through failures to detect suspicious items or report fake parts to cognizant military officials.
The Department of Defense was strongly criticized for failing to recognize the “scope and impact of counterfeit parts on critical defense systems.” DoD was also censured for failing to exercise prudent oversight of the procurement process and an overreliance on doing business with “unvetted” independent contractors and distributors to supply critical parts for military use. Contractors were also cited for failing to properly and systematically test parts to ensure they met the standards of quality and reliability required of such vital components.
The investigation discovered fake parts in a wide-range of critical military systems. Counterfeit memory chips were located in the display arrays of the US Air Force’s C-17 Globemaster III and C-130J cargo aircraft and the ice detection modules in the US Navy’s P-8A Poseidon were found to be rebuilt components and not new. The P-8A Poseidon is a modified Boeing 737 tasked with anti-submarine warfare (ASW) missions and can be employed in anti-surface warfare situations as well.
The SASC report provides detailed information outlining how counterfeit components are entering the Defense supply chain. One example cited in the report describes how one Chinese supplier, Hong Dark Electronics Trade Company, based in Shenzhen delivered an estimated 84,000 suspect parts that were then incorporated into the US Air Force’s Traffic Alert and Collision Systems (TCAS) designed to equip Air Force C-SAMP, C-12, and Global Hawk air assets. Suspect parts were also identified in systems designed for use with the US Missile Defense Agency’s Terminal High-Altitude Area Defense (THAAD) and on vital military aircraft including CH-46 Marine helicopters, AH-64 attack helicopters, and C-27J cargo aircraft.
Hong Dark components were also included in the Electromagnetic Interference Filters fitted to the Navy’s SH-60B helicopters used for night missions and are a critical component in the “Hellfire” missile system. Other fake parts were identified in the Navy’s P-3 ASW aircraft, Special Operations Forces’ A/MH-6M “Little Bird” light attack/reconnaissance helicopters, Excalibur artillery rounds, US Army Stryker Mobile Guns, and the Navy’s Integrated Submarine Imaging Systems. Hong Dark was placed on the US government’s Excluded Parties List as of 16 May 2012.
In the 1,800 cases investigated by SASC, it was learned that parts were procured from more than 650 companies and these companies employed the services of another layer of suppliers. Since the chain of supply relies upon a huge network of suppliers, end users who are expected to make use of critical components cannot verify the origin of the parts they receive.
The SASC report notes that trade in counterfeit parts is an “open” and very lucrative industry in China and accuses the Chinese government of failing to initiate measures to halt counterfeit operations and calls on Chinese leaders to “rectify” the situation. The report goes on to say that DoD and government contractors have not been as aggressive as they need to be to identify and prevent fake parts from entering the supply chain and, as a result, jeopardize the safety and reliability of essential military equipment.
Investigators learned that the apparatus designed to prevent the procurement of fake parts was being underutilized by the DoD and government contractors making the entire procurement system even more vulnerable. The Government-Industry Data Exchange Program (GIDEP), a DoD reporting system, was placed into operation to help procurement officials and contractors share information that could then be used to identify fake components. The Senate Committee discovered that this system was not being updated or maintained as designed with data entry being routinely ignored.
Military electronics and associated hardware risks were not the only focus of the SASC report. The Committee also stated that the widespread counterfeiting represented a serious threat to American jobs, intellectual property rights, and placed the United States’ economy at risk. The US Semiconductor Industry Association (SIA) claims that this counterfeiting costs American companies as much as $7.5 billion annually and has resulted in the loss of as many as 11,000 jobs in the US.
With access to a preliminary draft of the report’s findings last November, Senators Levin and McCain included provisions in the 2012 National Defense Authorization Act intended to correct weaknesses identified in the military supply chain. The Senate version, with the Levin and McCain additions, included adoption of specific DoD preventative measures to keep fakes out of the supply system and placed the burden of replacing fake parts on the shoulders of government contractors. The final bill, with some revisions, was signed by President Obama in December 2011.