US Senate Finds Fake Chinese Parts in US Military Systems

23 August 2012

A United States Senate Armed Services Committee investigation discovered counterfeit electronic parts from China in the Air Force’s largest cargo plane, in assemblies intended for Special Operations helicopters, and in a Navy surveillance plane among 1,800 cases of bogus parts, a committee report released in May shows.

The year-long investigation found a total number of suspect counterfeit parts involved in those 1,800 cases exceeding 1 million.

“Our report outlines how this flood of counterfeit parts, overwhelmingly from China, threatens national security, the safety of our troops and American jobs,” said Carl Levin, the Michigan Democrat who chairs the committee. “It underscores China’s failure to police the blatant market in counterfeit parts – a failure China should rectify.”

“Our committee’s report makes it abundantly clear that vulnerabilities throughout the defense supply chain

allow counterfeit electronic parts to infiltrate critical US military systems, risking our security and the lives of the men and women who protect it,” said Senator John McCain, the ranking Republican on the committee. “As directed by last year`s Defense Authorization bill, the Department of Defense and its contractors must attack this problem more aggressively, particularly since counterfeiters are becoming better at shielding their dangerous fakes from detection.”

The investigation’s findings point to China as the dominant source of counterfeit electronic parts and the

Committee concluded that the Chinese government has failed to take steps to stop counterfeiting operations that are carried out openly in that country. The Chinese government denied visas to Committee staff to travel to mainland China as part of the Committee’s investigation.

The Committee’s report includes detailed descriptions of how counterfeits are flooding the supply chain, risking the performance and reliability of critical defense systems. In just one example described in the report, the US Air Force says that a single electronic parts supplier, Hong Dark Electronic Trade of Shenzhen, supplied approximately 84,000 suspect counterfeit electronic parts into the DOD supply chain. Parts from Hong Dark made it into Traffic Alert and Collision Avoidance Systems (TCAS) intended for the C-5AMP, C-12, and the Global Hawk aircraft.

Parts from Hong Dark also made it into assemblies intended for the P-3, the Special Operations Force A/MH-6M, and other military equipment, like the Excalibur (an extended range artillery projectile), the Navy Integrated Submarine Imaging System, and the Army Stryker Mobile Gun.

While the investigation focused on the risk that counterfeit parts pose to US national security and the safety of military personnel, the committee report also notes that the theft of intellectual property also impacts the US economic security. According to the Semiconductor Industry Association (SIA), counterfeits cost US semiconductor companies more than US$7.5 billion annually in lost revenue, a figure SIA says results in the loss of nearly 11,000 American jobs.

The report concluded that China is the dominant source country for counterfeit electronic parts that are infiltrating the defense supply chain. The US Trade Representative (USTR) has said that China’s global manufacturing capacity “extends to all phases of the production and global distribution of counterfeit goods.” The Committee tracked well over 100 cases of suspect counterfeit parts back through the supply chain. China was found to be the source country for suspect counterfeit parts in an overwhelming majority of those cases, with more than 70 percent of the suspect parts traced to that country. The next two largest source countries were the United Kingdom and Canada. The Committee identified instances in which both countries served as resale points for suspect counterfeit electronic parts from China.

The report also states that the Chinese government has failed to take steps to stop counterfeiting operations that are carried out openly in that country. One Committee witness described visiting China and seeing public sidewalks covered with electronic components that had been harvested from e-waste. Another witness said he saw whole factories in China of 10,000 to 15,000 people set up for the purpose of counterfeiting. Rather than acknowledging the problem and moving aggressively to shut down counterfeiters, the report says, the Chinese government has tried to avoid scrutiny, including denying visas to Committee staff to travel to mainland China as part of the Committee’s investigation.

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