WICHITA, Kan. -- A yearlong investigation found what federal officials called a widespread problem of counterfeit electronic parts making their way onto critical defense systems -- into Air Force cargo planes, assemblies used in Special Operations helicopters, and in Navy surveillance planes.
The investigation found 1,800 cases involving bogus parts during 2009 and 2010.
Those parts -- which numbered more than 1 million -- came from more than 650 companies. More than 70 percent of the parts tracked were traced to China.
The report was released this week by the Senate Armed Services Committee, which launched the investigation in March 2011.
"It's the aerospace equipment equivalent of fake Gucci purses," said Loren Thompson, defense analyst with the Lexington Institute.
The report outlines how the flood of counterfeit parts threatens national security, the safety of U.S. troops, and American jobs, said Sen. Carl Levin, D-Mich., in a statement released with the report.
"It underscores China's failure to police the blatant market in counterfeit parts," said Levin, chairman of the committee.
Counterfeit parts included unauthorized copies of an authentic product and previously used parts that were made to look new and sold as new.
The parts often change hands multiple times before being bought by defense contractors, who may know little about the source of the parts they buy, the report said.
In many cases, however, the defense industry failed to report cases of suspected bogus parts, it said.
Last year, an amendment to the 2012 National Defense Authorization Act to address weaknesses in the defense supply chain and promote adoption of counterfeit avoidance practices by the Department of Defense and the defense industry was adopted by the Senate.
A revised version was included in the bill signed by President Barack Obama in December.
The law includes provisions to help stop counterfeit electronic parts before they enter the U.S.
It strengthens the inspection regimen for imported parts and gives the government wider berth in seeking assistance from the private sector in determining whether parts are authentic, the report said. It also requires that electronic parts in production or available in stock be purchased from manufacturers or authorized distributors.
Among other provisions, it also requires the Department of Defense and contractors that suspect bogus parts in a military system to report their suspicions.
The Chinese government has failed to take steps to stop counterfeiting operations, the report said.
For example, one witness described visiting China and seeing public sidewalks covered with electronic components that had been harvested from electronic waste shipped to China from the U.S. and the rest of the world, the report said.
Another described seeing factories in China employing 10,000 to 15,000 people set up for the purpose of counterfeiting, the report said.
Instead of taking action, the Chinese government has tried to avoid scrutiny. For example, it denied visas to Senate Armed Services Committee staff who wanted to travel to mainland China as part of the investigation, the report said.
The investigation found the use of bogus parts in critical military systems, such as the thermal weapons sights delivered to the Army, on the mission computers used on high altitude missiles and on a number of military airplanes.
Last year, Raytheon Co. alerted the Navy that electronic parts suspected to be counterfeit had been installed on three filters used in a night-vision system called Forward Looking Infrared, or FLIR. The FLIRs were installed on the Navy's SH-60B helicopter, which is used for anti-submarine and anti-surface warfare and surveillance.
A failure would compromise the pilot's ability to avoid hazards and identify targets at night and limit the helicopter's ability to be deployed in night missions, it said.
The parts were sold to Raytheon by a defense subcontractor in Texas. They were traced through a supply chain that spanned four states and three countries and originated with Huajie Electronics in Shenzhen, China.
Another problem is a disparity in the testing of parts used by defense suppliers, Senate officials said.
Some require a range of testing, such as exposing a part to solvents to determine whether markings are authentic. Others accept parts that had only basic functional testing.
The report said that in one case involving counterfeit memory chips sold to L-3 Communications, a Chinese supplier sent 18 parts to L-3's U.S.-based distributor for testing.
Once tested and validated as authentic, the Chinese supplier sold the distributor more than 10,000 chips. But L-3's process at the time allowed the distributor to accept the chips without additional testing by an independent laboratory, the report said.
The memory chips were used on display units built by a division of L-3 and installed on Air Force C-130J and C-27J cargo planes. The displays provide the pilots with information about the airplane, such as engine status, fuel use, location and warning messages.
The defense industry also has routinely failed to report cases of suspected bogus parts, the report said.
For example, the majority of the 1,800 cases involving counterfeit parts appear to have gone unreported to the DOD or criminal authorities.
Boeing failed to report a case of a suspect counterfeit part used in the Navy's P-8A surveillance airplane until the Senate Armed Services Committee began inquiring, the report said.
And L-3 Communications didn't report the suspect memory chip to the Air Force until the day before the committee's staff was scheduled to meet with the Air Force program office responsible for the program.
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