The results of the investigation, conducted by the Senate Armed Services Committee, are to be presented at a hearing Tuesday, where senators plan to grill defense contractors about lapses in monitoring their parts supply chain.
“We cannot allow our national security to depend on electronic scrap salvaged from trash heaps by Chinese counterfeiters,” said committee Chairman Carl Levin (D-Mich.). He called the report’s findings — based on records from 10 defense contractors and their testers — “just the tip of the iceberg.”
In more than 70 percent of the cases in which investigators traced parts back to their source, the trail led to China. And nearly 20 percent of the remainder were traced to Britain and Canada — resale points for counterfeit Chinese parts, Senate staffers said.
Chinese Embassy spokesman Wang Baodong said that his government’s position “on striking down on fake products is clear and consistent.” He said China’s policy “is aimed to ensure that commodities of safety and quality are provided to the consumers.”
In the past, the embassy also has said that the issue of investigating counterfeit parts was a matter of “China’s judicial sovereignty.”
Fake electronic parts often are produced in China by burning raw material off old circuit boards, washing the components in sometimes-polluted rivers and drying them on city sidewalks, Senate investigators said. They said the resulting parts are unreliable over the long term, even if they pass initial factory testing by manufacturers.
“We can’t tolerate the risk of a ballistic missile interceptor failing to hit its target, a helicopter pilot unable to fire his missiles or any other mission failure because of a counterfeit part,” said Sen. John McCain (Ariz.), the ranking Republican on the Armed Services Committee.
McCain and Levin said they intend to use the 2012 Defense Authorization Act to modify acquisition provisions so that the onus is on contractors to pay for replacing such parts, with the hope that they will adopt stricter policies with their suppliers.
The lawmakers also threatened to seek the inspection of shipments of all Chinese electronic parts — for military and commercial use — 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.
In a briefing Monday, Levin angrily accused Beijing of allowing a “brazenly open market” for counterfeit parts in Shenzhen, Guangdong province. He noted that committee staff members were stopped in Hong Kong and refused visas into China by officials who warned that their investigation was “sensitive and could be damaging to U.S.-China relations.”
Levin said that China’s authoritarian rulers could stop the counterfeiting “if they want to stop it.”
Counterfeit electronics 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 recycled materials used in those parts are often sold overseas through a complex web of suppliers, contractors and subcontractors. And the use of counterfeit parts, Senate staffers said, has at times resulted in millions of dollars in waste, with U.S. taxpayers footing the bill when contractors discover the need for replacements.