Commercial chip-makers and OEMs may be held responsible for detecting and investigating counterfeit parts under a new law that applies to US defense contractors. At least, that's the concern of TechAmerica, a technology trade association.
The provision, included in Section 818 of the 2012 National Defense Authorization Act (NDAA), which President Obama signed into law on December 31, 2011, is an effort to stem the growing problem of counterfeit electronics in government systems. It grew out of high-profile hearings held in November by the US Senate Armed Services Committee, which focused on incidents in which counterfeit electronics made their way into military systems. (You can see video of the full hearings by clicking here.)
The committee's investigation revealed dozens of instances of suspect counterfeit electronic parts in defense systems and seven aircraft, including Lockheed Martin's C-130J transport plane and Boeing P-8A Poseidon maritime patrol aircraft.
The anti-counterfeiting measure calls for the Secretary of Defense to "implement a program to enhance contractor detection and avoidance of counterfeit electronic parts." For the first time, defense contractors will be held responsible not only for detecting and avoiding counterfeit parts but also for the cost of remediation and rework if counterfeit parts are discovered in their products. The law specifically states that the DOD program should include "the flow down of counterfeit avoidance and detection requirements to subcontractors."
That "flow down" is what concerns TechAmerica. The language means that defense contractors could push the responsibility and liability to their subcontractors, who in turn could push it onto their suppliers, and so on, all the way back to chip and component makers, including commercial suppliers.
In the past, the military required "mil spec" parts or components that were specifically made and qualified for the military. But in an effort to reduce costs and take advantage of rapid advancements in component technology, the military has over the last two decades increasingly relied on commercial off-the-shelf components. That means that many of the components in military and aerospace systems are the same standard parts that are used in commercial products.
Thus, the new law could have a big, perhaps unintended, impact on commercial suppliers. "This applies to all electronics -- it's not just for communications, radar, weapons systems," says Trey Hodgkins, senior vice president for national security and procurement policy at TechAmerica. "It includes everything from handhelds to desktops -- all the commodities and all the weapons-related stuff -- down to the level of resistors and capacitors."
Counterfeit parts are just as common -- probably more so -- in commercial products. Most of them go unidentified as such, however, because when a part fails in a smartphone, the manufacturer just replaces it under warranty. But what if that smartphone happened to have been procured through a Department of Defense contract? Hodgkins worries that the manufacturer would then be required to determine whether the failure was due to a counterfeit component, and, if so, also determine what other products the component was used in.
A lot depends on the final regulations, which are due out later this year. Meanwhile, TechAmerica is trying to stress to DOD officials the impact of the potential unintended consequences. "I get the sense that the statute -- as it was being discussed -- did not take into account the ramifications for commercial manufacturers who don't know who the end user of their product is," Hodgkins says, noting that the federal government represents a small fraction (from 1 percent to 5 percent) of most commercial manufacturers' sales.