SOURCE: Applied DNA Sciences

Applied DNA Sciences

January 03, 2012 20:00 ET

President Signs FY'12 National Defense Authorization Act Into Law, Including Federal Anti-Counterfeiting Amendment

Act Places Liability for Counterfeit Chips on Contractors

STONY BROOK, NY--(Marketwire - Jan 3, 2012) - Applied DNA Sciences, Inc. (OTCBB: APDN) announces that it is positioned and ready to empower government contractors and Federal Agencies as they move to comply with new Federal anti-counterfeiting law. A bipartisan amendment (S.AMDT 1092) to the 2012 National Defense Authorization Act (NDAA) requires that the Department of Defense, the Department of Homeland Security, and government contractors "detect and avoid counterfeit parts in the military supply chain." President Obama signed the NDAA on December 31.

Applied DNA Sciences is already engaged in piloting the only anti-counterfeiting technology currently funded by the Defense Logistics Agency (DLA), using a system APDN previously proved able to screen and block those counterfeit parts from entering the military supply system. APDN's work was done with a well-known manufacturer of microchips at full commercial scale, and with one of the largest electronics distributors in the world.

"We have already tackled scale-up and implementation, and we are in dialog with electronics integrators," said Dr. James Hayward, President and CEO of APDN. Referring to the new mandate, he added: "If the military and its defense contractors come calling tomorrow, we are ready to go." Hayward points out that the APDN technology responds to all the desired features and programs of the newly enacted anti-counterfeiting legislation.

The bipartisan amendment is a result of a Senate Armed Services Committee (SASC) hearing on November 8, 2011 that exposed upwards of a million counterfeit parts in U.S. military supply chain. At the hearing, SASC Chairman Carl Levin (D-Mich) vowed to work with Senator John McCain (R-Ariz) in a bipartisan effort to legislate a solution to this "clear and present danger." Highlights of the legislation, which can be found here, include the following:

  • Require the Secretary of Homeland Security to establish a program of enhanced inspection of electronic parts imported from any country that is determined by the Secretary of Defense to be a significant source of counterfeit parts in the DOD supply chain. Authorize information sharing with original component manufacturers, to the extent needed to determine whether an item is counterfeit. (HR. 1540, SEC. 818)

  • Require covered contractors that supply electronic parts or systems that contain electronic parts to establish policies and procedures to eliminate counterfeit electronic parts from the defense supply chain. (HR. 1540, SEC. 818)

  • Require DOD to adopt policies and procedures for detecting and avoiding counterfeit parts in its own direct purchases, and for assessing and acting upon reports of counterfeit parts from DOD officials and DOD contractors. (HR. 1540, SEC. 818)

The new law authorizes the debarment of contractors who fail to detect and avoid counterfeit parts, or do not exercise adequate due diligence. Contractors are now prohibited from charging the DOD for the costs of rework or corrective work to remove and replace counterfeit parts. Moreover, defense contractors are now responsible for the remedies required after the use or inclusion of counterfeit components they may have accidentally supplied, regardless of where the counterfeit entered the supply chain.

From the December 31, 2011 blog of Henry Livingston, Technical Director and Engineering Fellow at BAE Systems:

"In the case of Section 818 of the FY 2012 NDAA, there will be liability to a contractor regardless of where the counterfeit part entered the supply chain. This legislation will affect all contractors at all tiers and is not limited to direct acquisition of parts. Parts suppliers may be subject to debarment for selling counterfeit parts, but the contractor or subcontractor will assume responsibility for the authenticity of parts provided by the supplier and the costs to remedy a counterfeit part escape."

Dr. Hayward commented: "This law will offer tremendous savings for the American taxpayer and our military forces, which lose access to essential equipment when counterfeit chips invade government systems. We applaud the government for a bipartisan success that raises the bar for the entire electronics industry. This benefit should extend beyond military supply chains, and share benefits with unrelated industries such as medical devices and the automotive industry. Ultimately the benefits will be counted in billions of dollars and thousands of lives saved each year. This is one American problem that can be solved."

About APDN

APDN sells patent-protected DNA security solutions to protect products, brands and intellectual property from counterfeiting and diversion. SigNature DNA is a botanical mark used to authenticate products in a unique manner that essentially cannot be copied, and provide a forensic chain of evidence that can be used to prosecute perpetrators. To learn more, go to www.adnas.com where APDN routinely posts all press releases.

The statements made by APDN may be forward-looking in nature. Forward-looking statements describe APDN's future plans, projections, strategies and expectations, and are based on assumptions and involve a number of risks and uncertainties, many of which are beyond the control of APDN. Actual results could differ materially from those projected due to our short operating history, limited financial resources, limited market acceptance, market competition and various other factors detailed from time to time in APDN's SEC reports and filings, including our Annual Report on Form 10-K, filed on December 8, 2011 and our subsequent quarterly reports on Form 10-Q. APDN undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date hereof to reflect the occurrence of unanticipated events.

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