McCaul, McKeon Introduce Bill to Stop Flow of China’s Counterfeit Microchips into U.S.

06/21/12

Chips Pose Risk to Military and Sensitive Computer Networks
http://mccaul.house.gov/index.cfm?sectionid=29&itemid=1383

WASHINGTON, D.C. – Congressman Michael McCaul (R-TX), Chairman of the Homeland Security Oversight & Investigations Subcommittee, introduced legislation Wednesday to stop the flow of more than one million counterfeit microchips into the United States, primarily made in China, that pose a risk to our military and sensitive computer networks. Congressman Buck McKeon (R-CA), Chairman of the House Armed Services Committee, and Congressman Bill Keating (D-MA), Ranking Member on Homeland Oversight, are original co-sponsors.

McCaul’s bill would reverse a Department of Homeland Security policy implemented in 2008 that hinders American companies from positively identifying whether a suspected chip is their product or a rogue counterfeit.

“This flawed policy has opened the floodgates for corrupt microchips to enter theUnited States,” Congressman McCaul said. “This is a tremendous national security risk to our military and our intelligence networks. The industry has the ability to detect these chips but the government is standing in the way. The policy has to be reversed.”

“When counterfeit chips make their way into the United States, consumers across the country are put in danger, not to mention the men and women serving our country,” said Congressman McKeon. “From brake systems and defibrillators to advanced military weapon systems, when a product fails because of a counterfeit chip, the consequences can be catastrophic. This bill will fundamentally improve our efforts to stop the dangerous flow of counterfeitchips onto our shores.”

“One of the most threatening genres of counterfeit goods flooding the markets are semi-conductors – parts and chips – that are finding their way into military systems and modes of transportation through vulnerable supply chains,” said Rep. Keating. “Recently, supply chains have become even more exposed to these faulty chips due to a little known Customs and Border Protection protocol that seriously obstructs a manufacturer’s ability to identify counterfeit chips. This bill seeks to overturn this protocol and aid manufacturers to identifywhich of their chips are actually their own and which are imposters. Inevitably, this bill will save equipment from unexpectedly malfunctioning and potentially save many lives.”

DHS helps chipmakers verify authenticity. However, in 2008 the Departmentstopped sending companies photos with serial numbers and other identifying information, which is necessary for a company to determine whether a product is authentic or counterfeit.

Last July, Brian Toohey, with the Semiconductor Industry Association (SIA), testified before McCaul’s subcommittee that it is now impossible to make this determination, and easier for counterfeit chips to enter the marketplace. He said the 2008 policy led to the US military purchasing 59,000 counterfeit microchips from China in 2010.

A recent Senate Armed Services Committee investigation found counterfeit microchips from China in the following:

1.The Navy’s SH-60B Seahawk helicopter used for anti-submarine warfare, search and rescue, drug interdiction, anti-ship warfare, cargo lift, and special operations. Counterfeit parts were found on a part that compromised the copter’s night-vision system.
2.C-130 and C-27 cargo planes. Systems that tell pilots of about the aircraft’s performances could have gone blank.
3.The Navy’s P8-A, long-range anti-submarine warfare, anti-surface warfare, intelligence, surveillance and reconnaissance aircraft (Boeing 737). Test planes contained a tampered part that never should have been installed.
“You want to help the government identify counterfeit chips and it’s my understanding that the lawyers at the Department have now determined that they cannot give you this information unless they have basically taken all of the identifying information off of it. How can you possibly identify if something is counterfeit when they have taken off all the code numbers?” Chairman McCaul asked during the July 7, 2011, hearing.

“You’re exactly right, Mr. Chairman. You can’t,” Toohey responded.

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