Tuesday, November 29, 2011

Counterfeit Parts From China Showing Up In US Military Aircraft

Sikorski SH 60-B Sea Hawk lifting off from carrier. A Defense Department audit found that the infared imaging systems in some of the Navy's fleet were using counterfeit components
Earlier this year, I came across a website called havocscope which supposedly tracks the value of black market, smuggled and contraband goods as though they were legitimate commodities traded on the open market. Instead of listing Counterfeit goods under one single category, they subdivided it into categories ranging from Counterfeit Aircraft Parts to Counterfeit Zippos. According to havocscope, the counterfeit aircraft parts trade is worth an estimated US$2 billion annually. And it seems as though some of that money, however unwittingly, comes from the Department of Defense and the US taxpayers.

The Senate Armed Services Committee announced earlier this month that it had learned counterfeit electronics which had made their way into the Department of Defense supply chain and into at least eight aircraft, some of which were deployed to Afghanistan.
The Senate Armed Services Committee found counterfeit parts -- usually from China -- on at least seven aircraft, including the Lockheed Martin Corp. [NYSE: LMT] C-130J transport plane, Boeing P-8A Poseidon maritime patrol and L-3 27J Spartan transport.

“Suspect electronic parts from China were installed on military systems and subsystems that were manufactured by Raytheon Co., L-3 Communications and Boeing,” said a memo from the committee’s staff, released yesterday before a hearing today.

“There is a flood of counterfeits and it is putting our military men and risk and costing us a fortune,” committee Chairman Carl Levin, a Michigan Democrat, said. None of the examples found by the committee were connected to lives lost or dramatic failures causing an aircraft crash, and the companies involved cooperated with the investigation, he said.
A seperate Pentagon audit has shown that cockpit displays on two new US Air Force C-27J Spartans from L-3 Electronics [NYSE: LLL] that were deployed to Afghanistan were found to be utilizing suspect parts.
L3’s Integrated Systems unit notified the Air Force on Sept. 19 that 38 suspect video memory chips were installed in the display units on eight of the first 11 aircraft delivered.

The L-3 unit that made the displays learned of the suspect memory chips in November 2010, the memo said. The committee traced the chips to Hong Dark Electronic Trade in Shenzhen, China, which also delivered an earlier counterfeit part L-3 discovered in October 2009, it said. The display units are made by L-3 Communications Display Systems and provide pilots with diagnostic data including engine status, fuel usage, location and warning messages.

The C-27J displays were among more than 500 containing suspect Chinese parts sold to the Air Force, Navy and defense contractors for installation also on C-130J and C-17 transport and Marine Corps CH-46 helicopters, the memo said.

“Failure of the memory chip could cause a display unit to show a degraded image, lose data or even go blank,” the memo said
The Senate Armed Services committee's investigative staff reportedly compiled a database with nearly 1800 cases of counterfeiting and suspect parts. Out of 100 cases given closer scrutiny, nearly 70% were traced back to Chinese firms. The origins of some of these parts are concealed by having them pass through three or four shell companies before finding their way into the Department of Defense supply chain.

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