Senators moving on DoD counterfeit parts law

Senate Armed Services Committee Chairman Sen. Carl Levin is still fired up about the problem of counterfeit electronic parts in DoD's supply chain -- and he has vowed to do something about it.

Levin and the committee's top Republican, Arizona Sen. John McCain, talked on the Senate floor Thursday about the amendment they want to add to this year's defense bill to crack down on the millions of fake parts that wind up in military gear. Only congressional action, Levin said, can end the "absurdity" now plaguing the other two sides of the Iron Triangle.

Although reporters have been banging the drum for awhile about the problem of "e-waste" repackaged in China and re-sold to the West as new, Levin and the SASC unveiled their own investigation about it earlier this month. According to the committee, bad components end up in the U.S. military arsenal all the time, "ticking time bombs" in sensors, displays and other vital equipment, threatening to break at any second -- years or decades before genuine components would wear out.

The Senate investigation made the problem sound like criminal fraud by many independent scammers, not deliberate sabotage by the Chinese government. But a peeved Levin also pointed out that China wouldn't let his investigators visit the e-waste "boiler rooms" or get serious about cracking down on their exports.

And though lawmakers say they're not aware of any missions that have failed because of counterfeit electronics, they don't want to take any chances. So Levin described Thursday how his bill would enlist both the government and the defense industry to stanch the flow of counterfeit electronics into DoD's supply chain.

The Department of Homeland Security would be charged with inspecting shipments "from any country determined by the Secretary of Defense to be a signifiant source of counterfeit parts" -- a.k.a., China. DoD and its vendors would be required to buy from "original equipment manufacturers, authorized dealers or from trusted suppliers who meet establish standards for detecting and avoiding" fakes -- i.e., probably not the small firms that have been able to creep into this market trans-selling components.

Levin's bill also would toughen criminal sentences for counterfeit "military goods and services;" require vendors to notify DoD when they discover fakes; and require DoD itself to define all the new rules of engagement for its suppliers.

The most important element, though, appears to be Levin's call for suppliers to bear the cost when they or the services discover fakes in their equipment. It "would make it clear that it’s the supplier of the counterfeit part who is going to pay for its replacement," Levin said, "and not the taxpayers of the United States." But given that the U.S. government is not going to bill a young Chinese counterfeiter, that means it'd instead bill Raytheon, or L3 or Honeywell -- and as such, give them the incentive to make sure their components are genuine, Levin hopes.

The Armed Services Committee lawmakers are gung-ho about this thing, but it was difficult to get a sense about the wider implications. The difficulty for U.S. customs officials to catch fakes; the willingness of vendors to go along with the stricter guidelines and penalties -- there are a lot more questions to answer as this measure moves forward.