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Posted at 02:13 PM ET, 11/07/2011

Probe traces bogus military parts to China

A probe into counterfeit electronic parts in the military supply chain has led investigators to a familiar suspect: China.

The Senate Armed Services Committee on Monday released some of the findings of its months-long investigation into bogus parts in the Defense Department’s labyrinthine supply chain. The probe uncovered 1,800 cases of suspect counterfeit electronic parts, with the total number of suspect parts exceeding 1 million.

In more than 70 percent of the cases in which investigators were able to follow the supply chain backward, the trail led to China. Nearly 20 percent of the remaining cases were traced back to Britain and Canada, known resale points for counterfeit Chinese parts.

“We are going to take action to stop the flow of counterfeit parts at the source — and that source is mostly China,” Sen. Carl Levin (D-Mich.), the chairman of the Senate Armed Services Committee, told reporters Monday.

Counterfeit electronic parts are a well-known scourge of the military supply chain, and China a well-known source. A 2010 study by the Commerce Department said that China was nearly five times more likely than any other country to be identified as the source of suspected counterfeit goods by manufacturers, distributors and others involved in the supply of weaponry to the Defense Department.

The raw materials used in those parts are often salvaged from electronic waste and refurbished into new parts to be sold overseas through a complex web of suppliers, contractors and subcontractors.

The use of counterfeit parts results in millions of dollars in waste, with U.S. taxpayers forced to foot the bill after contractors discover the need for replacements.

Levin and Sen. John McCain (Ariz.), the ranking Republican on the Armed Services Committee, said Monday they intend to use the 2012 Defense Authorization Act to modify acquisition provisions so that the onus is always on contractors to pay for replacement parts, with the hope that the contractors see it in their own interest to ensure parts from their own suppliers are genuine.

The lawmakers also threatened to seek the inspection of all shipments of Chinese electronic parts at U.S. ports if China does not take steps to curb the flow of counterfeit goods. The costs of those inspections, they said, would be borne by the shippers.

McCain said the panel’s findings were “not surprising,” but they were worrisome given that the proliferation of counterfeit parts could mean the failure of weapons systems used by American troops. He noted that, even if the investigation had not documented a case in which counterfeit goods had led to injuries or deaths, it did unearth plenty of cases in which vast sums had to be spent on replacement parts.

“We cannot afford that in these times,” he said.

McCain and Levin are expected to present more findings from the investigation during a hearing on the issue of counterfeit parts on Tuesday.

By  |  02:13 PM ET, 11/07/2011

 
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