In early 2011 US Senators Levin and McCain announced a Senate Armed Service Committee investigation into counterfeit electronic parts and the risks these parts pose to the Department of Defense supply chain.
On November 8, 2011, the Committee held its first hearing in Washington, DC during which Senator Levin promised a swift response.
Testimony during this hearing revealed the results from a congressional probe which found at least 1,800 cases of counterfeit electronics in US weapons systems covering more than 1 million suspect parts. Approximately 70 percent were traced to Chinese firms.
Panel members also testified that counterfeiting costs the semiconductor industry an estimated $7.5 billion a year in lost revenue and about 11,000 US jobs alone.
On November 29, 2011, the US Senate unanimously approved an amendment to the National Defense Authorization Act for Fiscal Year 2012. President Obama signed the Defense Bill (H.R. 1540) into law on December 31, 2011.
Each year since, amendments have been made relating to the detection and avoidance of counterfeit electronic parts as rule makers respond to this evolving threat.
The Senate’s “Inquiry into Counterfeit Electronic Parts in the Defense Supply Chain” lifted the veil on counterfeit electronics across the globe.
The threat of counterfeit electronic parts continues to plague the world’s military, aerospace, defense and high tech electronics manufacturing communities.
Inquiry Into Counterfeit Electronic Parts in The DOD Supply Chain
In March of 2011, the Senate Armed Services Committee initiated an investigation into counterfeit electronic parts in the Department of Defense (DOD) supply chain. The investigation uncovered overwhelming evidence of large numbers of counterfeit parts marking their way into critical defense systems. It revealed failures by defense contractors and DOD to report systems. The investigation exposed a defense supply chain that relies on hundreds of unvetted independent distributors to supply electronic parts for some of our most sensitive defense systems. And it found overwhelming evidence that companies in China are the primary source of counterfeit electronic parts in the defense supply chain.
This report consists of the following sections:
Section I provides background on counterfeiting and discusses factors that make defense systems particularly vulnerable to counterfeit electronic parts.
Section II describes the Committee’s findings on the extent of counterfeiting in the defense supply chain and discusses the types of parts and countries of origin of counterfeit parts identified by the Committee.
Section III describes an investigation, conducted by GAO at the Committee’s request, into online sales of counterfeit parts.
Section IV consists of several case studies of counterfeit electronic parts that were identified by the Committee as having been integrated into defense systems.
Section V discusses suspect parts identified by the Defense Logistics Agency (DLA) and describes agency policies and practices relating to counterfeit parts.
Section VI describes provisions contained in the FY 2012 National Defense Authorization Act aimed at reducing the number of counterfeit electronic parts in the defense supply chain.
C-SPAN Video - Counterfeit Electronic Parts on Defense Systems
Witnesses testified during a Senate Armed Services hearing about sources of counterfeit electronic parts, how they are made, cases where counterfeit electronic parts have penetrated the defense supply chain, and the cost and potential impact of counterfeit electronic parts on defense systems.
Nov 8, 2011
Counterfeit Electronic Parts on Defense Systems
NDAA FY2020
H.R. 2500 National Defense Authorization Act for Fiscal Year 2020 (Public Law 116-92)
(Sec. 230) Requires the Secretary of Defense to establish trusted supply chain and operational security standards for the purchase of microelectronics products and services by the Department.
(Sec. 254) Increases funding for anti-tampering heterogenous integrated microelectronics by $5,000,000.
(Sec. 255) Requires the Under Secretary of Defense for Research and Engineering to provide a briefing on the potential use of distributed ledger technology for defense purposes to improve cybersecurity, reduce single points of failure in emergency and catastrophe decision-making, improve the efficiency of defense logistics and supply chain operations, enhance the transparency of procurement auditing and allow innovations to be adapted by the private sector for ancillary uses.
(Sec. 855) Amends the process for enhanced supply chain scrutiny by inserting a new paragraph, “Development of tools for implementing supply chain risk management policies during the generation of requirements for a contract.”
https://www.congress.gov/116/bills/hr2500/BILLS-116hr2500eh.pdf
NDAA FY2019
H.R. 5515 National Defense Authorization Act for Fiscal Year 2019 (Public Law 115-232)
(Sec. 843) Authorizes the Defense Microelectronics Activity, or DMEA, to coordinate with the Undersecretary of Defense for Research and Engineering to establish a pilot program to test the feasibility and reliability of using machine-vision technologies to determine the authenticity and security of microelectronic parts in weapon systems.
(Sec. 845) Requires the Secretary of Defense to submit to Congress a report analyzing the “health of the defense electronics industrial base, including analog and passive electronic parts, substrates, printed boards, assemblies, connectors, cabling, and related areas, both domestically and within the national technology and industrial base.
(Sec. 1261) Establishes that long-term strategic competition with China be a principal priority for the United States.
(Sec. 1653) Requires a study on the feasibility and advisability of the creation of reserve component cyber civil support teams for each state.
(Sec. 1765) Requires an annual report reviewing: the effect of controls imposed on exports, reexports and in-country transfers of items addressing threats to national security; the impacts of such controls on the scientific and technological leadership of the United States; efforts to provide exporters with compliance assistance; summary of export enforcement actions; summary of approved license applications; and summary of industrial base assessments conducted during the previous year by the Department of Commerce, including with respect to counterfeit electronics, foundational technologies, and other research and analysis of critical technologies and industrial capabilities of key defense-related sectors.
https://www.congress.gov/115/bills/hr5515/BILLS-115hr5515enr.pdf
NDAA FY2018
H.R. 2810 National Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91)
(Sec. 217) Authorizes the Secretary of Defense to establish expedited access to university technical expertise to address acquisition, management, and operational challenges covering several mission areas including cybersecurity and trusted electronics.
(Sec. 846) Establishes a program to procure commercial products through commercial e-commerce portals to be implemented in phases with the objective of enabling government-wide use of such portals.
(Sec. 1670) Requires the Secretary of Defense to provide certification that an assured capability to produce or acquire strategic radiation hardened trusted microelectronics is operational and available to supply necessary microelectronic components for necessary radiation environments involved with the acquisition of delivery systems for nuclear weapons.
https://www.congress.gov/115/plaws/publ91/PLAW-115publ91.pdf
NDAA FY2017
S.2943 National Defense Authorization Act for Fiscal Year 2017 (Public Law No: 114-328)
(Sec. 815) Revises requirements for the detection and avoidance of counterfeit electronic parts to require contractors and DOD to meet certain requirements using "suppliers that meet anticounterfeiting requirements" rather than "trusted suppliers."
https://www.congress.gov/114/bills/s2943/BILLS-114s2943enr.pdf
NDAA FY2016
S.1356 National Defense Authorization Act for Fiscal Year 2016 (Public Law 114-92)
(Sec. 238) Requires DOD to conduct a hardware assurance study to assess the presence, scope, and effect on DOD operations of counterfeit electronic parts that have passed through the Department supply chain and into fielded systems.
(Sec. 885) Expands the eligibility for contractors to include costs for rework and corrective action related to counterfeit electronic parts as allowable costs under DOD contracts. Permits DOD to approve industry-selected trusted suppliers.
https://www.congress.gov/114/plaws/publ92/PLAW-114publ92.pdf
NDAA FY2015
H.R. 3979 National Defense Authorization Act for Fiscal Year 2015 (Public Law 113-291)
(Sec. 817) Revises sourcing requirements related to avoiding counterfeit electronic parts.
https://www.congress.gov/113/plaws/publ291/PLAW-113publ291.pdf
NDAA FY2014
H.R. 3304 National Defense Authorization Act for Fiscal Year 2014 (Public Law No: 113-66)
(Sec. 803) Directs the Secretary to implement a process for the expedited identification and replacement of obsolete electronic parts included in DOD acquisition programs.
https://www.congress.gov/113/plaws/publ66/PLAW-113publ66.pdf
NDAA FY2013
H.R. 4310 National Defense Authorization Act for Fiscal Year 2013 (Public Law No: 112-239)
(Sec. 833) Amends the NDAA for Fiscal Year 2012 to provide an exception, in limited circumstances, to the prohibition as allowable contractor costs the cost of counterfeit and suspected counterfeit electronic parts and rework or corrective action with respect to such parts.)
https://www.congress.gov/112/plaws/publ239/PLAW-112publ239.pdf
NDAA FY2012
H.R. 1540 -National Defense Authorization Act for Fiscal Year 2012 (Public Law No: 112-81)
(Sec. 818) Directs the Secretary to assess DOD acquisition policies and systems for the detection and avoidance of counterfeit electronic parts. Outlines specific actions to be taken by the Secretary following such assessment, including revising the DOD Supplement to FAR to address such detection and avoidance. Provides contractor responsibilities relating to such detection and avoidance. Requires DOD contractors and subcontractors at all tiers, whenever possible, to obtain electronic parts from trusted suppliers (as compiled by DOD). Requires any DOD contractor or subcontractor who becomes aware of or has reason to suspect that any end item, component, part, or material contained in supplies purchased by DOD is counterfeit to report such fact to appropriate government authorities and the Government-Industry Data Exchange Program. Directs the Secretary of Homeland Security to establish a methodology for the targeting of imported electronic parts as counterfeit sources. Requires the DOD Secretary to implement a program to enhance contractor detection and avoidance of counterfeit electronic parts. Amends the federal criminal code to provide criminal penalties for the intentional trafficking in counterfeit military goods or services. Requires the Attorney General to include in an annual report to Congress on Department of Justice (DOJ) business all DOJ actions taken with respect to such trafficking.
https://www.congress.gov/bill/112th-congress/house-bill/1540/text
NASA TRANSITION AUTHORIZATION ACT 2017
S.442 - National Aeronautics and Space Administration Transition Authorization Act of 2017 (Public Law No: 115-100)
Sec. 823 of the bill acknowledged and addresses the risk counterfeit electronic parts pose to astronauts, crew, other personnel and to NASA overall.
https://www.congress.gov/bill/115th-congress/senate-bill/442
NASA TRANSITION AUTHORIZATION ACT 2010
S.3729 - National Aeronautics and Space Administration Transition Authorization Act of 2010 (Public Law No: 111-267)
Sec. 1206 of the bill addresses counterfeit parts.
https://www.congress.gov/bill/111th-congress/senate-bill/3729/text
FEDERAL ACQUISITION REGULATION: REPORTING OF NONCONFORMING ITEMS TO THE GOVERNMENT-INDUSTRY DATA EXCHANGE PROGRAM
DoD, GSA, and NASA issued a final rule amending the Federal Acquisition Regulation (FAR) to require contractors and subcontractors to report to the Government-Industry Data Exchange Program certain counterfeit or suspect counterfeit parts and certain major or critical nonconformances effective December 23, 2019.
https://www.federalregister.gov/documents/2019/11/22/2019-24960/federal-acquisition-regulation-reporting-of-nonconforming-items-to-the-government-industry-data