U.S. Supply Chain Security

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Supply Chain Security

President Biden’s February 24th Executive Order is, to some extent, an extension of past efforts that recognized vulnerabilities in supply chains.  What has changed during the past year is the degree to which the US experienced its vulnerabilities in critical areas during this national emergency.

The past year exposed us to the problems arising from shortages of medical products.  But, the issue of supply chain security and integrity should not be viewed from the perspective of our vulnerabilities during national emergencies.  Supply chain security is a 24/7 issue. 

Whether it is shortages of critical products or everyday products, supply chain security is a constant issue and has been for an extremely long time.  Substandard goods entering the supply chain or outright bogus (counterfeit) products competing with genuine goods, has been and continues to be a challenge for both government and non-government commercial enterprises.

The gaps and vulnerabilities in supply chains was and continues to be a serious issue for the US Department of Defense.   For example, the 2012 National Defense Authorization Act included provisions that imposed a duty on defense contractors to take affirmative steps to prevent fake electronic components from entering US defense systems.  Under the 2012 Act, defense contractors and subcontractors were obligated to establish and maintain counterfeit electronic part detection and avoidance systems. 

What is important to note is that the enactment of laws and executive orders do not stop or eliminate threats and vulnerabilities.  Despite the emphasis on supply chain integrity and ensuring that defense related items meet the requisite standards, instances of counterfeit items sold to the US Department of Defense continues. 

For example, in 2014, two businessmen pled guilty for selling counterfeit and modified computer equipment to the Army.  In 2017, a major corporation agreed to pay over a million dollars to settle a claim that involved one of its subcontractors installing substandard microprocessors in military helicopter control systems.   

When one considers the combination of the number of sophisticated component parts needed in medical and military equipment and money involved, it is not difficult to conclude that there are individuals and businesses willing to take risks in using substandard and fake parts to win lucrative contracts. 

The industries prioritized in the Executive Order include those that have long and extensive supply chains.  With the thousands of components in vehicles, medical equipment and products, and military systems, there are hundreds or more contractors and subcontractors.  Thus, the monitoring and policing to ensure supply chain security and integrity is a complicated process that itself requires the latest technologies to authenticate parts and products.

For industry and government, supply chain security is a significant challenge.  What technologies are contractors and subcontractors using to authenticate parts and products?  How many different authentication technologies are involved in any one final product given the number of components involved?  These and many other questions need to be addressed.

As noted above, there are legal liability issues.  What are the civil and criminal provisions that may apply when a person or business is found to have violated established rules or laws? 

One example of criminal liability that explicitly carves out higher fines and terms of imprisonment for trading in military goods or counterfeit drugs is the federal law provision on trafficking in counterfeit goods.  This federal criminal provision raises the stakes for those found guilty of trafficking in “counterfeit military good or service or drug that uses a counterfeit mark”.

Ultimately, supply chain security and integrity will continue to be a daunting challenge when there are many who will seek to exploit commercial opportunities for their own financial benefit and with disregard for the safety and welfare of others.  And, because supply chains cover long distances, there are many points along the chain where substandard and fake components may be inserted.  Active vigilance will be necessary to reduce the risk to the consuming public.

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Timothy Trainer was born in Japan and is an Army brat and served in the Army. After earning multiple degrees and studying in Japan, he moved to the Washington, DC area. As an attorney, he has focused on intellectual property issues and has been engaged in that work since 1990. He has worked in government agencies and in the private sector. His work has taken him to roughly 60 countries around the world. He has worked with INTERPOL's Intellectual Property Crime Action Group, the UN's Economic Commission for Europe and, as a former attorney with the U.S. Patent and Trademark Office, represented the U.S. at meetings of the World Intellectual Property Organization. He was a cleared industry advisor to the U.S. Department of Commerce and the Office of the U.S. Trade Representative from 2000 to 2020.

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