The Mil & Aero Blog
Friday, April 8, 2011
  What if we considered selling counterfeit electronic parts like we do selling stolen property?

Posted by John Keller.

The problem of counterfeit electronic parts, and the threat they pose of finding their way into crucial aerospace and defense systems, is bad, and it's getting worse. Not only do counterfeit parts threat to cause reliability problems in military electronic systems, but counterfeit parts also might be loaded with kill switches and other sabotage that could enable an enemy to disable or shut down U.S. systems in the event of conflict.

It's gotten the attention of influential members of Congress, as we have reported. U.S. Sens. John McCain, R-Ariz., and Carl Levin, D-Mich., of the Senate Armed Services Committee have vowed to investigate the counterfeit electronic parts problem in the military, and are expected to conduct congressional hearings later this year.

A Senate investigation is all well and good, but this problem always seems to get worse. The reason for this is lax -- or non-existent -- penalties for those who knowingly or unknowingly sell counterfeit electronic parts.

Enforcement is sporadic. Tangible penalties are few and far-between. In short, there's so little risk to trafficking in counterfeit electronic parts that anyone inclined to do so has little to fear ... and this has plenty of people involved in legitimate electronic business pursuits plenty fed-up.

Perhaps it's time we took a fresh look at the issue of counterfeit electronic parts.

If you counterfeit an electronic part -- an integrated circuit, amplifier, battery, connector, or something else -- you're stealing from either the original manufacturer or from authorized resellers, such as aftermarket semiconductor houses like Lansdale Semiconductor in Phoenix, or Rochester Electronics in Newburyport, Mass.

If that's the reality -- and a strong case can be made that it's so -- then perhaps we ought to consider sales of counterfeit electronic parts to be selling stolen property. If we view the problem in those terms, it's bound to get the attention of a lot of people operating on either side of the law who until now have been ignoring the issue.

One of the problems revolves around non-existent penalties for selling counterfeit electronic parts. Those who sell these parts to the U.S. military, for example, can simply claim they didn't know the parts were counterfeit. Moreover, the government will ask for the purchase price back, and return the counterfeit to the seller.

With no penalty, that seller then is free to try to sell that counterfeit part to someone else.

Dale Lillard, president of Lansdale Semiconductor, also is an avid owner and restorer of rare antique cars. He says selling counterfeit electronic parts should be treated like selling stolen cars. It doesn't matter if one knows a car is stolen if he tries to sell it. If caught, that person will be charged with selling a stolen car and face serious jail time.

If sellers of counterfeit electronic parts faced still jail sentences, then a lot fewer people would be doing it, Lillard says, and he's right.

"The government is really doing nothing to stop that [counterfeit] traffic. They know it's coming in, and they are not stopping it," Lillard says. "Nobody is treating counterfeit product like we consider stolen property should be treated," he says. "Give someone a $10,000 fine and six months in jail, and the trafficking in these counterfeit parts will slow."

Perhaps Sens. McCain, Levin, and other members of the Senate Armed Service Committee ought to look at the problem in these terms as they conduct their investigation and call witnesses to hearings later this year.
A good idea in concept. The difficulty lies in enforcement across international borders. At what level does the penalty occur? If a systems manufacturer uses a counterfeit part in a product they sell, are they liable? Or is it the part seller who sold the chip to the EMS contractor who sold the board to the contract assembler who sold the module to the OEM? Realize that numberous international boundaries have been crossed - some several times.
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