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SASC Chair Pushes New Counterfeiting Laws: China Blamed For Inaction

Posted by Colin Clark on

UPDATED WITH PENTAGON RESPONSE Capitol Hill: Faced with a torrent of counterfeit parts that pose a serious risk to the lives of American servicemen and to the performance of sophisticated weapons, Sen. Carl Levin pledged today to push for new laws and policies to help curb the problem.

Levin, chairman of the Senate Armed Services Committee, held what could almost be called a marathon hearing (it started at 9:30 and ended after 3 with a few breaks) on the topic which included results of a sting operation run by the Government Accountability Office to demonstrate just how easy it was to buy counterfeit parts from Chinese firms.

“Some of this is absolutely stunning.” Levin said at the end of the hearing. “These counterfeiters will do anything. They will stoop to anything.” (For the record, a Chinese government spokesman said his country really, really tries hard to stop counterfeiting.)

Counterfeit parts were discovered on at least seven aircraft, including two C-27J aircraft deployed to Afghanistan, Boeing’s new P-8A anti-submarine and ISR aircraft, as well as some of Lockheed Martin’s C-130Js, according to today’s testimony. The companies provided very different responses when Levin asked them when they told their customers about the phony parts and how they reacted when the parts were discovered.

L-3, maker of the C-27, and Raytheon –which provides sensors to a huge variety of Pentagon platforms — said they would report counterfeit parts to their customers right away from now on and would bear the cost of replacing them. The vice president of Boeing’s P-8 program, Charles Dabundo, handled prosecutorial questioning from Sen. Levin with a less than inspired corporate touch.

How bad did Dabundo’s exchanges with Levin get? After Levin gave the Boeing executive chance after chance to say his company would immediately report counterfeit parts and replace them at company cost, the senator got so frustrated he shot back at Dabundo this question: “Why are you taking our money?”

But the real news of the hearing for the defense world isn’t that counterfeit parts are easily bought and sometimes make it through the screening systems used by the prime contractors and the four services. No. The real news were Levin’s comments that he will push for new legislation as early as next week that will force companies to pay for replacement of any counterfeit parts they buy. Under current law, cost-plus contracts do not require contractors to pay unless the company knowingly installed defective parts.

The committee chairman also said he wants to change the law so that the services — not the companies — make the decision about whether a counterfeit part poses a safety risk and needs to be replaced. That seemed to arise largely because of Levin’s frustration with the testimony of Boeing’s P-8 executive, who kept saying that the deicing module which contained counterfeit parts was not a critical safety system so Boeing didn’t need to replace the parts.

Best lines of the hearing came when Sen. John McCain asked Lt. Gen. Patrick O’Reilly, head of the Missile Defense Agency, if China was trying to curb counterfeit exports:

O’Reilly: “Sir, the data indicate the opposite.”

McCain (shades of Capt. Renault in “Casablanca”): “I’m shocked, shocked to hear that is the case.”

Several hours after the hearing ended, the Pentagon released a “fact sheet” about counterfeit parts. It said, in part, that the department thinks it’s a serious problem, one that it is “addressing aggressively.” It pointed to several programs developed with industry and across government to identify and help prevent counterfeit parts from entering the supply chain, including the Pentagon’s Government Industry Data Exchange Program and efforts run by the Aerospace Industries Association and the Society of Automotive Engineers.

Perhaps most important, from the Pentagon’s point of view, is that they’ve not been quiescent and have been working on an anti-counterfeit policy that should be ready next March.

What do you think?