Canada dismisses U.S. concern over fake Chinese military parts

The Canadian government is ignoring U.S. warnings that a flood of bogus military parts from China has been discovered in American-made fighter jets, transport planes, missiles and other weapons, potentially putting the lives of Armed Forces personnel at risk.

A 14-month U.S. Congressional investigation uncovered 1,800 cases of counterfeit electronic components for American military equipment, in total involving over one million bogus parts.

Investigators discovered fake electronic components in all kinds of military equipment, including: targeting systems for helicopter-launched hellfire missiles; instrument panels of military cargo planes; mission computers for interceptor rockets and in crucial ice-detection sensors for naval patrol aircraft.

The investigation reported a failure of the fake parts could have caused missiles to go haywire, or left military transport pilots staring at blank instrument panels in mid-flight.

The Canadian military recently bought 17 of the same Hercules transport planes.

The probe by the powerful U.S. Senate Armed Services Committee found the bogus parts are typically from discarded computers and other electronic trash being recycled in China, and have high failure rates with potentially "catastrophic" results.

Julian Fantino, Canada's associate defence minister, shrugs off the U.S. alarm bells.

"At this point in time, other than continuing to be vigilant, we don't have any particular concerns in this country," Fantino tells CBC News.

Serious problem for defence industry

Fantino's reaction is puzzling defence experts who say the Canadian military has to be equally at risk of bogus parts getting into critical equipment.

They point out Canada buys a majority of its military equipment, spare parts and other gear from the same American defence contractors used by the U.S. military, many of which are cited in the congressional investigation.

Executives with four of the Canadian military's largest suppliers all told CBC News that counterfeit electronic parts are regarded as a serious problem by the entire defence industry.

According to the congressional investigation, Canada is the world’s third-largest trafficker of counterfeit military parts from Asia, and home to one of the biggest internet trading sites for obsolete electronic components.

An independent electronic parts broker in Toronto says the problem of Asian counterfeits is rampant, and the Canadian government "should really work hand-in-hand with the United States and deal with the problem."

The head of an Ottawa laboratory that checks military and other electronic parts for fakes calls counterfeiting a "billion-dollar problem," but says Canadian suppliers may be suffering an "ostrich syndrome."

If true, the syndrome may also be afflicting government.

Public Works Minister Rona Ambrose heads the department responsible for all federal purchasing, but refuses to comment on the problem of counterfeit military parts.

Her department issued a written statement saying the standard federal purchase agreement stipulates suppliers can't sell the government counterfeit goods.

Government defends 'checks and balances'

Fantino agreed to a brief interview on the counterfeit parts issue as the minister overseeing major military purchases.

He apparently doesn't see a problem at all.

"I have been advised that the checks and balances we have in place in our country are sufficient."

Fantino's office and the Department of National Defence subsequently undertook to provide CBC News with details of those "checks and balances."

Every day for six days, the department said it needed more time to "verify its facts."

Finally, the department issued a written statement describing the checks and balances against counterfeits as follows: "Whether made in Canada or imported, there are already rigorous processes in place to ensure that the spare parts used in CF (Canadian Forces) equipment are of highest quality."

If the U.S. experience is any indication, National Defence and its political bosses may well be among the last to know the extent to which counterfeit parts have infected the Canadian military.

The U.S. congressional probe found the "vast majority" of the roughly 1,800 counterfeit cases identified in the investigation had never been reported to the defence department or criminal authorities in that country.

In some cases, defence contractors discovering counterfeit parts waited months to notify the U.S. military, and then only with the congressional investigators on their doorsteps.

Most of the time, experts say, the supply chain for electronics is so convoluted that reputable defence companies probably don't know they are selling electronic junk recycled in China.

In one case cited in the congressional investigation, for example, a counterfeit part uncovered in the targeting system for hellfire missiles had gone through seven companies on three continents before being sold to the U.S. navy.

Internet a global counterfeit 'flea market'

Similarly, the rest of the 1,800 counterfeit cases exposed by the investigation involved more than 650 companies in countries around the world — and experts say the congressional committee just touched the tip of the iceberg.

A handful of internet trading sites for electronic components alone host millions of transactions a year in what one congressional investigator describes as a global flea market for counterfeit products.

As part of the investigation, the Government Accountability Office — the U.S. equivalent of Canada's auditor general — set up a dummy corporation that went shopping online for common electronic military parts found in "scores" of weapons systems.

In an interview with CBC News, the head of the agency's forensic investigation team, Rick Hillman, said the purpose of the sting was to test the authenticity of 16 military-grade parts purchased on internet trading sites.

Hillman said the results were conclusive: All 16 parts purchased were counterfeits, and all 16 originated in China.

Sometimes, the counterfeiters are just too good to be detected by the companies buying their fake wares.

Dr. Martine Simard-Normandin is head of what she likes to call her "CSI Counterfeit," a sophisticated testing lab in Ottawa often used by defence contractors to check for fake electronic parts.

She says the counterfeiters "are starting to be very, very good" — so good that it takes high-powered microscopes, X-ray machines and other specialized equipment to detect the bogus parts.

She points to a chip the size of a pinhead, magnified under a special microscope to fill her computer screen.

"When we received those chips for analysis, they looked absolutely brand new," she says.

But under a special acoustic microscope, "we find they are all cracked and damaged inside."

"These are chips that have been removed from boards and essentially cleaned up and repainted and resurfaced, and they put a new [serial] number on them, and they are sold as new.

"Eventually they will fail. They are on average of very poor quality."

The downside of recycling

The way experts describe the supply chain for a lot of bogus parts, it's a wonder they work at all.

Most Canadians tossing their old computers into a recycling bin likely never imagined some of those parts coming back into service as a critical precision  component in a fighter jet or guided missile.

But that is exactly what is happening – every year, millions of tonnes of electronic circuit boards and other e-junk being pitched in Canada and the U.S. are being shipped to China for "recycling."

One witness who testified before the congressional committee described mountains of the imported scrap circuit boards piled high in the streets of the Chinese city Shantou. He said Chinese workers sit around open fires, melting the circuit boards to salvage components which are then washed off in dirty river water and left to dry on city sidewalks.

All markings on the parts are then sanded off, and replaced with new codes, often indicating they are a higher quality and capability than the originals.

When finished, the parts look brand new to the naked eye.

As a result of the congressional investigation, the U.S. recently passed tough new laws aimed at cracking down on military counterfeiters, and setting new purchasing rules for defence contractors.

Fantino says the Canadian government has no plans to follow suit.

"As it stands now, we don't have the same concerns that the Americans have."