An Interesting Perspective From Singapore: “Fake Electronic Imports A Worry For US Defence”

Fake Electronic Imports A Worry For US Defence

Singapore Straits Times
April 9, 2012
Pg. 16

Fake Electronic Imports A Worry For US Defence

By Robert Karniol, Defence Writer

THE United States Senate Armed Services Committee is expected to issue a report on counterfeit electronic parts in the Pentagon’s supply chain within weeks. It is likely to have implications affecting defence forces worldwide.

Preliminary findings point to China as a major culprit in the trade. “The Chinese government’s refusal to shut down counterfeiting that occurs openly in the country puts our national security and the safety of our military men and women at risk,” said Senator Carl Levin, the committee chairman, in a statement released by his office.

The report aims to provide a full picture of this illicit activity, along with the threat posed to the US. But two developments foreshadow its findings.

The first involves provisions hurriedly included in the 2012 National Defence Authorisation Act, which was signed into law on 31 Dec. These are intended to strengthen the inspection regime for imported electronic goods and ensure that the government can work smoothly with the private sector in determining whether or not an imported product is authentic.

Legislative action taken even before the committee issues its report suggests the gravity with which this issue is viewed in Washington, and additional measures may yet be forthcoming.

The second indicator is a study commissioned by the committee from the General Accountability Office (GAO), the US Congress investigative arm. Published on March 26, its findings will be incorporated in the final report.

“Our focus was to answer one specific question (posed by the Senate committee): Can you obtain counterfeit electronic parts on Internet trading platforms?” said Mr Rick Hillman, managing director of GAO’s Forensic Audit and Investigative Service, in a telephone interview.

Mr Hillman’s team undertook an elaborate undercover investigation to pursue this mandate, establishing a fictitious company to gain access to Internet platforms that bring together vendors selling military-grade electronic parts and potential buyers. They were looking to obtain parts under three distinct categories.

The first category involved items with authentic part numbers but out of production and hard to find, such as might be required for older equipment. The second centred on items with authentic part numbers but stamped with date codes beyond the actual production date, and the third involved invented part numbers.

The sampling represented component elements of systems such as the F-15 Eagle fighter aircraft, Maverick air-to-ground missile, V-22 Osprey tiltrotor aircraft and Los Angeles-class nuclear submarine. A parts failure could endanger the platform, the mission and the lives of operating personnel.

Vendors representing 396 suppliers offered to sell parts to the GAO’s front company. These included 334 in China, 25 in the US and 37 in other countries including Britain and Japan. Whether these suppliers themselves manufactured the parts is not apparent.

The GAO front company ultimately purchased 16 parts across the three categories, based on selection criteria that included the lowest price on offer and the availability of vendor contact details. These saw all sourced from China.

Testing ranged from inspection with electron microscopes to X-ray and chemical analysis. And all were classified as “suspected counterfeit” by the independent testing laboratory, SMT Corporation.

However, Mr Hillman qualified these results. “The extent to which there are parts being counterfeited and the players associated with that are way out of our review. Our results… cannot be used to make inferences about the extent to which parts are being counterfeited,” he said.

Neither could he say whether Internet platforms are the dominant source of supply. Rather, they are likely among several streams feeding the Pentagon’s worldwide supply chain.

“The concern is that subcontractors – and, in turn, their own subcontractors – may at times be relying on these types of mechanisms,” Mr Hillman explained.

How widely bogus electronic parts infiltrate this supply chain, he added, may become more readily evident through the Senate committee findings.

Though the report has yet to be released, hearings held last November shed some light on the issue. And already, an accusatory finger points at Beijing.

“That China was the source for all these bogus parts (in the GAO study) is consistent with our committee’s own investigative work, as well as previous governmental reports,” Senator John Mccain commented.

This suggests that a new irritant is brewing to further muddle relations between Washington and Beijing. Just how serious its impact should be seen from the forthcoming committee report.

But the issue is also indicative of a much wider problem. If the US, with its sophisticated military procurement system, has concerns over the threat posed by counterfeit electronic parts, what of the controls in place elsewhere?

The developing world, with its preponderance of older defence kit and less stringent procurement norms, may seem an obvious target for counterfeit parts, though the US experience suggests a broader problem.

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