A recent report by the United States Senate Armed Services Committee has shown that an investigation into counterfeit parts in the military supply chain discovered 1800 cases of suspected electronic components between 2009 and 2010. In total, they estimated there were around one million individual counterfeit components in circulation.

The committee, led by senators John McCain and Carl Levin, stated that the fake parts present a genuine danger to US military personnel and were proving expensive to compensate for if and when they are discovered.

Perhaps unsurprisingly, around 70% of the counterfeits are thought to have come from China where a variety of methods were uncovered to get the counterfeit or recycled parts into the supply chain.

The Senate hearings on the subject heard testimony from an individual who had visited component marketplaces in China in July 2008 where scrapped electronic parts were washed in rivers and collected in bins before being remarked, fixed up and then shipped to brokers in the West who would sell them on, knowingly or unknowingly, for many times what they had paid.

A recent report by the Huffington Post argued four main reasons that the situation has become so dire: military specification components have been replaced by off the shelf equivalents, “Buy American” requirements relaxed, manufacturing outsourced abroad and the rapid obsolescence of components.

The first three points are thought partly to have been caused by spending scandals in the 1980s over expensive components. These components were often made, however, by specialist contractors who had to factor in production costs to the individual unit price. Since military products were produced in lower volumes, the price was high compared to consumer goods.

The outcry over this caused procurement regulations to be relaxed, which ultimately led to outsourcing and the use of ‘off the shelf’ products. These factors led to many bespoke producers going out of business, taking with them the traceability and precise specifications of their products.

Whilst the investigation described many frauds by independent actors, Levin was keen to point out that the Chinese government would not let his investigators visit their e-waste sites or show any signs of cracking down on exports. Some have gone as far to suggest that, given the scale of the problem, this is nothing short of sabotage by the Chinese authorities.

Levin also stated how he was committed to getting legislation to protect the US military supply chain into the Defense Authorization Bill.  Under his plans, the Department of Homeland Security would be charged with inspecting shipments from high-risk countries and that all procurement should be from “original equipment manufacturers, authorized dealers or from trusted suppliers who meet established standards for detecting and avoiding fakes”. The intention of the latter part would be to wheedle out the smaller suppliers that have been identified as being most likely to be mis-selling components.

Levin also wants suppliers to bear the cost when fake components are found in their equipment, instead of the US taxpayer. The hope is that this will provide an incentive for suppliers to be vigilant over the veracity of their components.

The Defense Authorization Bill, however, is facing difficulties due to other components, with President Obama threatening a veto, so it might be unlikely that the above will be introduced. Even if it were, it may prove difficult to persuade suppliers to go along with stricter guidelines and penalties.

The issue of counterfeits in the US military supply chain acts as a microcosm of the wider issue of counterfeits. In the August 2011 edition of Industry Week, it was reported that the US government had seized fake goods worth USD 188.1 million - had the goods been genuine they could have fetched around USD 1.4 billion. Approximately two-thirds of these goods are thought to have originated in China.

The notion of a brand relies on integrity and this is being undermined all too often, either by the production of fake products masquerading as the original, or, most worryingly, products that are compromised by a component that is being used unwittingly by an otherwise respectable manufacturer.

The end-user, whether they are an air force relying on electronic chips for navigation or a consumer that needs safe products in the home, gets a raw deal so long as adequate controls are not in place throughout the supply chain.