Defense contractors aren’t ready to comply with anti-counterfeit rule

Many contractors admit they will be unable to immediately comply with a rule, taking effect by March 2014, that would require contractors to either develop a new system for detecting counterfeit electronic parts or forego payment.

The Pentagon is under pressure to address congressional concerns about the risk of weapons systems failing if adversaries or sloppy suppliers slip in unauthorized components.  That’s because the deadline for carrying out a 2011 defense authorization law  calling for anti-counterfeit regulations was almost two years ago.

But the military sector is unprepared for all the pending requirements, partly because the Defense Department has not offered an explanation for what an acceptable system must do.  Industry members told Pentagon officials as much earlier this summer during meetings and in written comments on a draft rule. Officials say they are reviewing company concerns but still plan to release the mandates during the first quarter of calendar year 2014.

“The rule will take effect when the final rule is published,” Defense spokesman Mark Wright said in an email on Aug. 8, 2013.

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Counterfeits can kill U.S. troops — so why isn’t Congress and DoD doing more to stop it?

Sometime in the not-to-distant future, a submarine will sink. An air defense missile will detonate far from its intended target. A Seahawk helicopter will intercept a suicide speed boat headed for an aircraft carrier only to see its infrared targeting system goes dark.

These chilling scenarios won’t be the result of human error or terrorist plots: They will directly result from a $2 counterfeit electronic tucked deep within a billion-dollar military technology.

It’s not a matter of if, but when. Just this month, the Department of Justice indicted a Massachusetts man for selling counterfeit semiconductors to Navy contractors. Some of the fake parts were intended for nuclear submarines.

The vast majority of counterfeits discovered in military equipment are semiconductors, the stamp-sized silicon wafers that act as the “brains” of nearly every type of modern electronic system. The U.S. military is a huge consumer of these tiny products; a single F-35 Joint Strike Fighter jet is controlled by more than 2,500 semiconductors.

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NASA engineer, defense contractor knowingly bought illicit software from Chinese conspirator

Chinese resident Xiang Li has pleaded guilty to copyright infringement and wire fraud charges connected to a bootleg software conspiracy that involved federal sector accomplices, U.S. authorities are expected to announce today in Wilmington, Del.

A NASA engineer and government contractor knowingly bought some of the $100 million worth of critical computer programs that Li copied from mainly American companies, according to court papers and officials.

Between April 2008 and June 2011, Li peddled ill-gotten software through the Web to colluding customers, including the U.S. public sector employees, according to court documents filed on Jan. 4. Software that retails for as much as $3 million sold for between $20 and $1,200 on the Internet shopping sites he maintained. The pirated software has uses for, among other things, defense, space exploration and explosive simulation.

See undercover videos of sting operation (courtesy Defense Video & Imagry Distribution System):

1. Avoiding Problems with Customs

2. Interacting with Customs

3. Ignoring victim company requests to cease & desist

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Pentagon directive targets fake parts, vulnerabilities in arms systems

A  new Pentagon directive is calling for new safeguards against fake parts and software vulnerabilities in arms and information systems. The mandate, which took effect Nov. 5, is likely to bring new momentum to funding of technology to protect military supply chains.

Signed by Teresa Takai, defense chief information officer, and Frank Kendall, under secretary of Defense for acquisition, technology and logistics, the directive asks for guidance, mechanisms and systems to control the security and configuration of software and hardware. It asks defense to push for new technology for “creating and identifying non-cryptologic software and hardware that is free from exploitable vulnerabilities and malicious intent.”

It calls for heads of defense units to come up with best practices to reduce occurrence of fake or compromised products. The order also asks for a way to give all critical components in systems an item unique identification so fakes can be better weeded out, and requires the implementation of test and evaluation protocols.

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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.

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.”

About the Author: Amber Corrin is a staff writer covering defense and national security for Federal Computer Week.  This article was published on Mar. 27, 2012 at