Forget hackers, honey traps and photon-counting lasers. China’s latest haul of F-35 secrets apparently came courtesy of an unread email.
According to a new Bloomberg report, the F-35 cockpit canopy and weapons-bay door that ended up in Beijing’s possession were routed through Hong Kong because a United Parcel Service (UPS) employee missed an email warning not to send the shipment through Hong Kong. The email, from freight forwarder DSV (working on behalf of Lockheed Martin ), said the parts must not transit certain countries under the US International Traffic in Arms Regulations (ITAR), the rules designed precisely to keep American weapons tech away from American adversaries.
Regular readers will recall that we have been following this saga since it first went “MIA” on the way to Hong Kong last month. What started as a mysterious detour has now been traced to the most mundane failure imaginable. Below we lay out what the Pentagon just told Congress, why the parts matter more than anyone in an official capacity is willing to admit, and what it means for UPS, which was already the market’s least favorite parcel name.
Late, Rerouted, Gone
The new details were laid out by Pentagon officials on Sept. 29 in a roughly hour-long closed-door meeting with staff from the House Foreign Affairs and Armed Services committees, according to a person briefed on the incident. Here’s the sequence, per Bloomberg:
- The shipment, from an Australian F-35A and bound for the US “for possible repair or disposal,” was supposed to travel to San Francisco via South Korea and Taiwan, both US defense partners.
- It was late leaving Australia, and so it was “mistakenly routed via Hong Kong in an effort to speed up delivery.”
- DSV had sent the ITAR email “as required by US regulations,” but it “may have been sent through a different IT system than the one used by the UPS agent.”
In other words, an ITAR-controlled stealth component was rerouted through Chinese jurisdiction to save a few days, because the warning not to do exactly that was sitting in the wrong inbox. Somewhere a compliance officer is quietly updating the “lessons learned” slide deck.
And so, a shipment that was “late” in May is now, five months later, in Beijing. Which is one way to fix a delivery delay.
Hong Kong, for those keeping score, is not some neutral way station: Washington has long since stopped treating the territory separately from mainland China under US export controls, which is precisely why the DSV email existed in the first place.
“Unserviceable”… And Coated In Radar-Absorbing Material
From day one, the official line has been to shrug. The Pentagon called the parts “unserviceable.” Lockheed’s Australian arm said they were “unserviceable and deemed low risk for exploitation.” Australia’s defense minister Richard Marles insisted that “we’re not talking about sensitive equipment here or sensitive parts.” US Transportation Command took the time to issue a statement that “it was not involved in the transportation or coordination of the shipment in question.” Very reassuring.
The problem is what the parts actually are. As Bloomberg first reported on Sept 23, both the canopy and the weapons-bay door were coated with radar-absorbing material that enhances stealth, and the Chinese government took possession of them and has not given them back. We flagged it in real time:
*CHINA IS HOLDING SENSITIVE F-35 PARTS DIVERTED TO HONG KONG *PENTAGON SAYS IT’S WORKING TO RETRIEVE STEALTHY JET PARTS
— zerohedge (@zerohedge) September 23, 2026
“Unserviceable” describes whether a part can go back on a jet; it says nothing about what it reveals. On a stealth fighter, the canopy is part of the radar cross-section, with coatings that keep the cockpit from lighting up on radar while staying optically clear, and the weapons-bay door is a large moving panel that must seal flush and open in flight without breaking stealth. Two parts are not a blueprint for an F-35; they are, however, a free tutorial in two of its hardest low-observable engineering problems.
The Government Accountability Office, which actually audits the program, isn’t buying the shrug either. Diana Maurer, who oversees GAO’s F-35 support reviews, called the loss “a big deal“:
“I’m sure the Chinese celebrated and then they got busy trying to reverse engineer it and figure out how to counter it with their own technical capabilities. I’m sure that’s what they were up to once they got those things.”
We’ve seen this movie before. In May, we asked whether Iran got its hands on a US stealth missile after JASSM-ER wreckage turned up near Arak, a reminder that Tehran claimed to have copied the RQ-170 drone it captured in 2011. The difference: Iran had to shoot something down first. China just had to wait for the package.
Nor is this the first time the F-35’s supply chain has leaked like a sieve. As we noted when Senate Intelligence chair Tom Cotton demanded a supply-chain security review, a 2023 GAO audit found that one F-35 prime contractor had recorded more than 1 million spare parts worth over $85 million as lost since May 2018, and the program office reviewed the circumstances behind less than 2% of those losses. Diversification at its finest.
“Did China Have A Plan All Along?”
Washington, which was reportedly briefed on the diversion back in June and then sat on it until Politico’s Sept 18 scoop, is now very, very concerned. Cotton wants a review of chain-of-custody rules, shipment tracking, route-change approvals and “safeguards against military materiel transiting through or being diverted to China.” Senate Intel’s ranking Democrat Mark Warner demanded the Pentagon briefing. And Sen. Kevin Cramer (R-N.D.), who chairs the Armed Services panel investigating the incident, has asked the obvious question: “Did China have a plan all along to intercept this?“
Bloomberg’s sourcing so far points to incompetence rather than conspiracy, though the two are not mutually exclusive: Beijing didn’t need a plan to intercept the shipment, just a plan for when one landed in its lap. China’s foreign ministry, for its part, said it was “not aware of the situation”, the kind of non-answer that tends to precede actual answers, or even more non-answers.
The timing has been exquisitely awkward from the start. Bloomberg’s original scoop broke as Xi Jinping arrived for a state visit with President Trump, prompting Sen. Elissa Slotkin to quip that “the Chinese are holding some of our most sensitive technology, and we are rolling out the red carpet for their president.” Meanwhile, the State Department’s Directorate of Defense Trade Controls is investigating, and the Pentagon’s deputy assistant secretary for logistics, Erica Plath, told congressional staff she has assembled a team to prevent a repeat. Asked what that team is actually doing, a Pentagon spokesman said the department would have “nothing more to provide.”
Lockheed, which manages much of the global spare-parts pool for the US and 19 other F-35 nations, said last month that “our logistics decisions are not made unilaterally.” Presented with the new details on Wednesday, it said it had “nothing to add or correct.” Translation: it wasn’t us, but we’re not disputing it either.
All of this as Washington races to sell even more F-35s abroad, including a possible deal to Saudi Arabia approved just three weeks ago:
*US APPROVES POSSIBLE F-35 SALE TO SAUDI ARABIA OF UP TO $24.3B
— zerohedge (@zerohedge) September 17, 2026
Each new customer is another set of spare parts that has to cross the world, sometimes late, sometimes in a hurry. If two “unserviceable” panels from Australia could end up in Beijing because of a missed email, the global sustainment network serving 20 countries is only as secure as its least attentive freight agent.
UPS: Already The Market’s Least Favorite Parcel Name
UPS shares turned negative after the report, though the decline was less than 1%, which tells you the market treats this as a reputational bruise rather than a business problem. UPS doesn’t break out aerospace and defense revenue, though it has made a strategic push into the sector. A State Department ITAR probe is not the kind of reference that wins defense logistics contracts.
It also lands on a stock that was already struggling. Per Goldman’s transport analyst Jordan Alliger in his latest Valuation Tracker (available to pro subs), parcels were the worst-performing transport subsector in September, down 12% on average (FedEx -13%, UPS -10%), versus a mere -0.5% for the S&P 500. Year-to-date through September, UPS was down 6%, among the three worst performers in Goldman’s entire transport coverage, while the S&P rose 12%.
Positioning tells the same story. Goldman’s Industrials desk (available to pro subs) wrote this morning that while transports remain “more crowded generally with hopes of another reacceleration in spot rates,” the group’s notable underweights include “UPS, Canadian rails, WERN, ODFL.” In other words, the people paid to own transports had already decided they didn’t want UPS, and that was before the stealth canopy turned up in China.
Bottom Line
The Pentagon says it is “actively working with U.S. authorities and industry partners to retrieve these components, investigate the incident, and place safeguards to avoid a future occurrence.” Good luck with the first part: there is roughly zero chance Beijing returns a radar-absorbent canopy it has had for months, at least not before it has measured, scanned and sliced it.
Which brings us back to a point we made just last weekend, when a Chinese missile academy claimed it could find the F-35 with a laser: the real threats to the jet are the boring ones. We warned back in 2021 that the F-35 was at risk of falling behind Chinese and Russian defenses, and that risk is real, but it is arriving through heat-seekers, cargo manifests and now spam filters. China has spent years hacking, spying and reverse-engineering its way toward the world’s most advanced fighter. It turns out it just needed to wait for someone not to read their email.
Then again, it’s hard to think of a cheaper counter-stealth program than a parcel service in a hurry.
Much more in the full Goldman “Americas Transportation: Valuation Tracker” note and the Goldman Industrials desk note, both available to pro subs.
Tyler Durden
Wed, 10/07/2026 – 21:03
