Senate Approves Amendment to Strengthen Protections Against Counterfeit Electronic Parts in Defense Supply System

Tuesday, November 29, 2011

WASHINGTON – The Senate on Tuesday approved an amendment by the bipartisan leadership of the Senate Armed Services Committee to strengthen protections against a flood of counterfeit electronic parts coming into the defense supply system.

Sens. Carl Levin, D-Mich., and John McCain, R-Ariz., the chairman and ranking member of the committee, offered the legislation as an amendment to the National Defense Authorization Act for Fiscal Year 2012. The legislation is a response to a committee investigation that found more than 1,800 instances of counterfeit electronic parts in the defense supply chain. It now becomes part of the authorization act, which is being debated on the Senate floor.

“These counterfeit parts endanger our troops, harm national security and cost taxpayers,” Levin said. “The flood of counterfeit parts must stop, and this amendment provides tools and incentives that will help stop it.”

“Counterfeit parts pose an increasing risk to our national security, to the reliability of our weapons systems and to the safety of our men and women in uniform,” McCain said. “We cannot risk a ballistic missile interceptor missing its target, or a helicopter pilot unable to fire his weapons, or display units failing in aircraft cockpits, or any other system failure, all because of a counterfeit electronic part. This legislation will inject some much needed integrity, transparency, and accountability into the defense supply chain, help customs officials intercept these counterfeits, and ensure that prosecutors bring the full weight of justice down on those who traffic in military counterfeits.”

The committee’s investigation found that counterfeit parts have made their way into important systems such as the Navy’s SH-60B helicopter and P-8 Poseidon aircraft; Air Force C-130J, C-27J and C-17 aircraft; and Marine and Army helicopters such as the AH-64 and CH-46. Committee investigators tracked well over 100 individual cases of counterfeit parts, and found more than 70 percent originated in China, where an open market in counterfeit electronic parts thrives.
The investigation also found instances in which contractors were unaware of the presence of counterfeit parts in their products, or had failed to notify the military of counterfeit cases even when they were aware.

To strengthen protections against counterfeit parts, the Levin-McCain amendment:

  • Prohibits contractors from charging the Defense Department for the cost of fixing the problem when counterfeit parts are discovered.
  • Requires the department and its contractors whenever possible to buy electronic parts from original component manufacturers and their authorized dealers or trusted suppliers who meet established standards for detecting and avoiding counterfeit parts.
  • Requires military officials and contractors who learn of counterfeit parts in the supply chain to provide written notification to the contracting officer, the Department of Defense Inspector General and to the Government-Industry Data Exchange Program.
  • Requires the Secretary of Homeland Security to establish a methodology for the enhanced inspection of electronic parts after consulting with the Secretary of Defense as to the sources of counterfeit parts in the defense supply chain.
  • Requires large defense contractors to establish systems for detecting and avoiding counterfeit parts, and authorizes reductions in contract payments to contractors who fail to do so.
  • Requires DoD to adopt policies and procedures for detecting and avoiding counterfeit parts in its direct purchases, and for assessing and acting on reports of counterfeits.
  • Adopts provisions of a bill sponsored by Sen. Sheldon Whitehouse, D-R.I., to toughen criminal sentences for counterfeiting of military goods or services.
  • Requires DoD to define the term “counterfeit part,” and at a minimum to include in that definition previously used parts represented as new.