GAO sting operation exposes pervasive counterfeit parts problem

Counterfeit electronic goods are readily attainable and pose a serious threat to users of U.S. weapons systems, including troops on the ground, according to the Government Accountability Office.

“Counterfeit parts – generally the misrepresentation of parts’ identity or pedigree – can seriously disrupt the Department of Defense supply chain, harm weapon systems integrity and endanger troops’ lives,” the GAO noted in a report issued to Congress in February and publicly released March 26.

The report centers on an investigation conducted by GAO in which the agency posed as a company buying military-grade electronic parts. GAO gained access to two platforms on which parts are bought and sold, requested quotes from numerous vendors and purchased 16 parts – all of which turned out to be fake after being tested by an independent lab. All of the 16 parts came from China.

GAO requested rare and/or obsolete parts as well as parts with made-up identification numbers. The counterfeit parts were re-marked with different numbers or manufacturer logos, deficient from military standards or had part numbers that do not actually exist and were completely bogus.

“These findings should outrage every American,” said Sen. Carl Levin (D-Mich.), chairman of the Senate Armed Services Committee, in a statement. “GAO’s finding that every single counterfeit part that they bought online came from suppliers in China, while not surprising, is deeply troubling. The Chinese government’s refusal to shut down counterfeiting that occurs openly in their country puts our national security and the safety of our military men and women at risk. Not only that, but it also costs thousands of American jobs.”

Congress’ inquiry into the counterfeit electronics problem started last November, when Levin and Sen. John McCain (R-Ariz.), SASC ranking member, drilled defense contractors on how the fake parts are ending up in U.S. military weapons systems. Levin and McCain also helped get provisions into the 2012 National Defense Authorization Act addressing the issue, holding contractors responsible for identifying and rectifying the presence of counterfeit parts in their goods.

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Part of the problem is the globalization of manufacturing and reliance on commercial off-the-shelf technology and equipment, according to one DOD official who testified at a Capitol Hill hearing March 27.

“Although the globalization of the [information communications technology] sector has accelerated the pace of technological innovation, it has also raised national security concerns,” Mitchell Komaroff, DOD director of trusted mission systems and networks, said in written testimony submitted to the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations. “As a result of this diverse global supply chain, adversaries have more opportunities to corrupt technologies, introduce malicious code into the supply chain and otherwise gain access to the department’s military systems and networks.”

Beyond holding buyers responsible for counterfeit parts, provisions in the NDAA also aim to tighten inspection controls and institutionalize a public-private partnership to identify and deal with the fake parts. McCain and Levin pointed to those NDAA provisions as at least partial recourse to combat the problem.

“The Chinese government won’t act to stop counterfeiting carried out in their country,” Levin said. “Since China won't act, we must. It is critical that Treasury and the Department of Homeland Security implement the authorities we gave them in the National Defense Authorization Act to stop counterfeit parts before they enter the country. There is too much at stake for us to delay.”