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Paymasters assigned to Panama Canal construction the land divided; the world united.

Submerged in the vast amount of literature chronicling the impressive design and construction of the Panama Canal by the United States are the important roles performed by American armed forces 100 years ago. Of special interest are the contributions of the U.S. Navy Pay Corps, predecessor of the present-day Supply Corps. Assembling, transporting and supporting the enormous number of workers and the huge amount of machinery and material required for construction of the Panama Canal was an accomplishment of gargantuan proportions and one of the greatest logistics success stories in United States history.

To understand more fully and to appreciate the contributions of the early 20th century paymasters and their fellow servicemen to the project, it is important to review the background of world events and conditions in the latter half of the 19th century. At that time, major European nations were still involved in a centuries-old bitter race for world domination from both military and commercial perspectives. Military strategists, as well as commercial interests, were hampered by limiting geographic constraints and insufficient financial resources that restricted their options. Western European nations and their merchants had been searching for alternative routes to the Far East since the Turks had taken over Constantinople in 1453 and closed well-traveled land routes for India and the Orient to "infidels."

Rather than to continue attempts to improve its world position through further land and sea battles, France chose in 1859 to begin a 10-year project to construct a 103-mile canal that would provide a direct water-level connection between the Mediterranean and Red seas, significantly reducing transit time between Europe and Asia. Construction of the Suez Canal through flat desert territory was directed by Vicomte Ferdinand Marie de Lesseps. He was a colorful character on the Parisian social scene, known popularly in France as The Great Engineer, but he had no technical background, no experience in finance, and only modest skills as an administrator.

Completion of the Suez Canal and the American transcontinental railroad, both in 1869, were widely hailed as opening a new era in world trade, but a water passage between the Atlantic and Pacific oceans still required a long and arduous voyage around South America. A narrow, mountainous strip of land connected the northern and southern continents of the Western Hemisphere. Christopher Columbus had been told as early as 1502 of a "narrow place" leading to another sea by natives on the east coast of Central America during his fourth voyage to the "new world" in 1502. Portuguese explorer Vasco Nunez de Balboa, aware of the rumors, eventually discovered the Pacific Ocean in 1513.

Land Bridge Established Balboa's discovery led to opening of an overland route, called El Camino Real (the "King's Highway"), a land bridge across the narrow Isthmus of Panama between the two oceans. As early as 1826, a New York City merchant, Aaron Palmer, financed a study of two possible interoceanic routes--one through Nicaragua and the other across Colombia's Panamanian Region--but nothing came of his efforts. El Camino Real and a companion Las Cruces Trail became widely traversed during the California Gold Rush of 1849 and supplemented heavy oceanic travel around South America.

The next effort to open a faster route between the two oceans came about in 1850, when American interests undertook to supplant El Camino Real by constructing the Panama Railroad across the Isthmus. The rail line was completed and opened for business in 1855 with terminals at cities on both coasts. This more rapid mode of transportation stimulated significantly shorter travel across the isthmus. Shipping lines operating in both the Atlantic and the Pacific made the two railroad terminals regular ports of call.

When Great Britain gained control of the Suez Canal through shrewd financial maneuvering in 1875, the proud French nation turned attention to the Western Hemisphere and once again enlisted de Lesseps to lead a venture to replicate his successful Suez experience. He was called upon to advance the prospect of an interocean canal from a vague idea to a realistic proposal. Initially, de Lesseps concentrated on a water-level canal route through Nicaragua, but other Frenchmen favored a route across the isthmus in northern Colombia, where the land bridge had been located.

The government of Colombia granted a concession to Hungarian General Stephen Turr to construct a sea-level canal similar to Suez at an estimated cost of $186.6 million with construction to begin not later than 1883 and to be completed within 12 years. Turr organized a provisional French company, La Societe International du Canal Interoceanique, with the incredibly fortunate de Lesseps as president. Construction commenced in February 1881.

French Foredoomed to Failure Excavation over the projected canal route in Panama was mostly through a rocky jungle environment, completely dissimilar to that of the largely flat, sandy route of Suez. In the process, Turr's company "fell into the hands of promoters and speculators." Close observers concluded that the grandiose scheme was "foredoomed to failure." Laboring under stinging criticism, harsh working conditions, inadequate financing, and ravaged by malaria and yellow fever, progress was agonizingly slow. By mid-1885, using small steam shovels, workers had evacuated substantially less than planned. It became obvious that original plans could not be completed on schedule.

Frustrated by disappointing progress, the company abandoned plans to build a water-level canal and took the drastic step of shifting to a new plan to build a lock-type canal. Significantly short of funds, the new effort was "apparently without hope of success," but work was continued under the new plan. Finally, on May 15, 1889, the company declared bankruptcy and suspended work. The French project had lasted more than a decade at a cost of more than 1.435 billion francs ($287 million), about a billion francs more than the Suez had cost to complete. The effort also was extremely costly in terms of human life, with deaths unofficially estimated at 20,000 to 23,000. Even German Chancellor Otto von Bismarck lamented that "so heavy a tragedy had overtaken so gallant a people." David McCullough, author of the bestselling book, The Path Between the Seas, concludes, "Nobody knew what to make of it, and as time passed, the inclination was to dismiss it as the folly of one man."

Strong American Interest in a Canal Meanwhile, various American interests, strongly encouraged by popular New York Governor Theodore Roosevelt, (widely known as "T.R."), hero of the Spanish-American War, were voicing loud support of an American takeover from the French. The United States, however, had migrated toward support of a water-level canal across Nicaragua. President William McKinley appointed highly-respected RADM John G. Walker, USN, (Ret.) in 1897 as chairman of the Isthmian Canal Commission and tasked him to develop plans to replace French work in Panama. The commission was sent to explore the possibilities of a canal route across the Isthmus of Darien despite strong popular sentiment for the Nicaraguan route. Walker established several camps at San Bias Bay and points along the Atrato River.

Walker arranged for LCDR W. T. Wallace, Supply Officer, USS Scorpion, to be assigned additional duty as disbursing officer of the commission, which employed Colombian laborers in local pesos (Colombian half dollars). LCDR Wallace collected money from the ship's headquarters at Cartagena and he made periodic trips to the camps to pay the workers.

The commission prepared and issued the Walker Report, which recommended the Nicaragua route, but it was shelved when Congress authorized release of the second Walker Report, issued by the isthmian commission. This new report considered "all factors of climate, health, legal rights, existing franchises and considering probable costs" for the two ship-canal proposals, and again declared for the Nicaraguan option, as expected. For reasons not clear, this new report also made a strong case for the Panama alternative.

Treaty with Great Britain Revised President William McKinley directed Secretary of State John Hay to negotiate a new treaty with British Ambassador Sir Julian Pauncefote that would supersede the existing Clayton-Bulwer Treaty of 1850. This mid-19th century agreement had bound the United States and Great Britain to joint control over any canal to be built in Central America. A replacement treaty would give the United States the right to construct and operate a canal, which as the Suez Canal, "was to be free and open in time of war as in time of peace, to all vessels of commerce and of war, on terms of entire equality."

The new treaty called for the United States to police traffic, but to maintain no land fortifications. The United Kingdom, burdened by a bitter, unpopular Boer War in its South African dependency, had lost interest in a Central American presence and was agreeable to giving the United States a free hand in that area. The two nations signed the Hay-Pauncefote Treaty on Feb. 5, 1900.

Both McKinley and Hay believed that the Secretary "had achieved a milestone," but Hay had failed to share details of the treaty with key members of the Senate Foreign Relations Committee. Powerful opposition arose on Capitol Hill, although U.S. Navy leaders buttressed the cause for the new treaty and voiced no objection to the treaty's restrictive provisions. Navy witnesses testified that a canal could be defended from bases in Puerto Rico and Hawaii. Strong objections, however, arose from other quarters.

Roosevelt "No Mere Governor" Theodore Roosevelt, recently elected governor of New York, exploded in "shrill indignation" upon learning that the treaty's provisions limited the ability of the United States to exercise control of any canal across the isthmus. Hay is reputed to have written a frosty response to T.R., stating in no uncertain terms, that "such a matter ought not to concern a 'mere governor.'" It turned out that Roosevelt was "no mere governor," as was vividly demonstrated when he was elected vice president for a second McKinley term in 1900. A few months later, Roosevelt ascended to the presidency upon the assassination of McKinley on Sept. 6, 1901.

President Roosevelt brought to his new office a comprehensive knowledge of world power. He was acutely aware of the strategic limitations imposed by lack of a direct passage between the two oceans north of the Strait of Magellan. The highly publicized 66-day dash of the brand new battleship USS Oregon in 1898 around South America to reach Cuban waters just in time to make a major contribution to the decisive battle of the Spanish-American War graphically demonstrated the strategic value of a canal across Central America. The activist President became irritated when Colombian authorities insisted upon significant changes to potential agreement with the United States.

Global Destiny for America President Roosevelt continued his strong support for proceeding with American acquisition of rights to build a canal despite bickering in Congress. He had a deeper perception and perspective on the canal issue from many in Congress and in the popular press.

The new, young president was promoting neither a commercial venture nor a universal utility. To him, this issue was unequivocally clear. An inter-ocean canal linking the Atlantic and Pacific oceans would provide "the vital--the indispensable--path to a global destiny for the United States." Roosevelt envisioned America as the commanding power of two oceans, joined by a canal that was built, owned, operated, policed, and fortified by his country. The canal would be the first step in solidifying American supremacy at sea.

Legislation authorizing a canal to be built across Nicaragua was slowly making its way through Congress with substantial (but not unanimous) political, press and citizen support. The Spooner Act of 1899 authorized formation of the Isthmian Canal Company with RADM Walker as chairman. On Dec. 10, 1899, a convention was signed at Managua, Nicaragua, formalizing a plan to construct a canal in that country. The Senate ratified the disputed Hay-Pauncefote Treaty six days later.

Walker Commission Selects Nicaragua In the summer of 1901, the United States formally abrogated the 1900 Hay-Pauncefote Treaty and its restrictive provisions, including a prohibition that no nation was to have sole control over any canal. The Walker Commission reported in November 1901 support of the 1899 convention to build a canal across Nicaragua, unless the French company with the Panama concession would sell out to the United States for $40 million. The renamed French company, Companies Nouvelee de Panama, eager to sell, was inclined to accept that amount, but the issue still was not completely resolved.

It was widely assumed that the Walker Report had "settled once and for all" the question of the routing of a canal. All that remained was for Congress to approve the Nicaragua route and pass enabling legislation. But, as noted historian McCullough points out, "For those few who bothered to read the Commission's report, however, it was obvious that the important news was not the concluding decision for Nicaragua, but the exceedingly strong case made for Panama. All one had to do was to look at the technical arguments being presented, none of which was very technical nor complicated."

In reluctantly admitting defeat, the French company had decided to sell construction equipment and rights to build a canal across the isthmus to the United States at any price. Even though eager to unload assets to anybody who had cash, officials of the French company, as of Dec. 21, had not yet established an asking price. RADM Walker learned that the French company considered the Panama franchise, real property and equipment to be worth $109 million. Walker concluded that would be the French asking price, but he figured that the assets the French were offering were old, required extensive refurbishing and were worth considerably less.

Over the next year, Walker and his staff carefully reviewed the French offer and determined that the value was only about $40 million. But, on Jan. 4, 1902, the French company offered to sell assets for $109 million, nearly three times what Walker and staff believed they were worth. While negotiations on possible purchase of French assets were underway, the House of Representatives voted nearly unanimously to proceed with the Nicaragua option. Roosevelt remained aloof from the fray, having earlier given the implicit understanding that he remained in favor of a Nicaragua canal.

The situation became more cloudy when the president summoned members of the Walker Commission to the White House individually to seek the personal views of each. A subsequent secret meeting of the commission was held, at which the members voted unanimously to accept the French offer at a cost not to exceed $40 million and to resume construction where the French had stopped. On Jan. 20, 1902, the news of this decision was leaked to the press and created wide incredulity throughout America.

Dealings with Colombia

Compagnie officials finally provided an initial general inventory, which included about 30,000 acres of company land along with the Panama Railroad that American engineers deemed sufficient for their needs. In addition, more than 2,000 buildings, shops, schools, hospitals, churches, residences and social and athletic facilities were listed. Construction equipment included an "immense amount of machinery," railroad locomotives and rolling stock, cranes, tugs, barges, excavators, pumps, surveying instruments and medical, engineering and construction supplies. The United States accepted the inventory as accurate.

The next task was to negotiate a mutually agreeable price with Columbia. In the summer of 1903, the United States offered Colombia a fixed price of $10 million plus a $425,000 annual payment for a six-mile-wide right-of-way across the isthmus. The U.S. Senate ratified the agreement in March 1903, but Colombia stalled on ratification in the hope of securing a more lucrative offer. Meaningful negotiations slowed to a crawl over the following months until Colombia finally rejected it in August.

Meanwhile, leaders of a dissident group of Colombian citizens residing in the isthmus were agitating for recognition as an independent nation. The ever-impatient Roosevelt, determined to "make dirt fly" before the 1904 presidential election, correctly assessed that existence of the dissident movement would be a valuable asset to the United States. T.R. understood that the United States being a potential ally in removing Colombian government obstacles would be invaluable to an American takeover.

At the start of an armed uprising in November, Roosevelt moved quickly to provide support to the rebels by dispatching the gunboat USS Nashville to Colon. The stated purpose was to "protect American interests." Arrival of Nashville also permitted Sailors to prevent Colombian troops from disembarking to suppress the insurrection. Fifteen days later, a newly independent Panamanian government granted the United States an enlarged 10-mile-wide zone across the isthmus in perpetuity under all the other terms as America had offered Colombia two years earlier.

A transfer of rights and property from the French company finally took place on May 4, 1904, and the U.S. paid $40 million to assume the rights. Then the Isthmian Canal Commission accelerated the task of selecting the men to accomplish the enormous construction challenge ahead. American work on the canal began in earnest with dirt flying in May 1904, well before the fall elections. Americans workers on the project tackled their new responsibility with enthusiasm, and came up with a motto, The Land Divided, the World United. This catchy phrase became so popular that is was officially adopted in 1906.

A United States base at Guantanamo Bay, Cuba, acquired as "spoils" of the Spanish-American War in 1898, provided U.S. Navy insurance for the safety of the canal. President Roosevelt also unilaterally proclaimed a "corollary" to the original Monroe Doctrine proclaimed early in the 19th century. In his pronouncement, T.R. claimed for the United States the right to intervene in any dispute between a Western Hemisphere nations and a European country.

Magnificence of French Failure The French had failed to complete the project, but their efforts were not a total loss. Americans soon understood that they had also taken control of an 11-mile navigable waterway with depths ranging up to 25 feet and 70-feet wide. Further inspection found evidence of significant excavation at a site originally intended for construction of the planned Eiffel locks.

Even though the French had been unable to complete the task, they had accomplished much usable work, including about 40 percent of the excavations required along the route. Americans, arriving on the scene, were impressed with the "magnificence of the French failure." Evidence of preliminary excavation was also discovered over much of the entire projected canal route. The only major exception was a seven-mile stretch leading to the summit of the Panamanian Continental Divide, where excavation had reached a depth of 163 feet, but had not been completed.

Building a lock-type canal called for a system of gravity-activated underground valves and culverts which obviated the need for a system of pumps. Gravity pressure would be sufficient to raise and lower water levels necessary to allow ships to pass through the multi-lock systems at each end of the canal. This unique system, devised by American engineers, necessitated the flooding of a vast area to create the huge Gatun Lake, fed by tropical rain runoff that provided pressure to open and close lock gates.

American Military Provides Needed Leadership

Before new construction efforts could actually get underway, the Isthmian Commission looked next to American military services to provide the leadership for success that civilians in charge had experienced difficulty in providing. By the time that actual construction began in 1904, the Commission had selected career Army officers to solve the critical engineering and health challenges that had haunted the French. Lt.Col. (later Col.) George Washington Goethals, a U.S. Army Corps of Engineers officer, was given responsibility to review the Canal design and to assess how much of the French work and equipment could be integrated into the revitalization undertaking.

Lt.Col. (later Col.) William C. Gorgas, an Army Medical Corps officer, was selected to spearhead efforts to eliminate the twin scourges of yellow fever and malaria, which had taken the lives of thousands of workers during French construction work.

U.S. Navy officers were also called upon to take on important tasks. RADM Albert E. Kenny, Navy paymaster general since 1899, had retired from the Navy in January 1903. He was appointed treasurer and a principal employee of the Isthmian Canal Commission. He was the first of the veteran Navy paymasters to assume executive responsibilities for major functions during initial phases of American assumption of responsibility for Canal construction.

Paymaster (later pay inspector and captain) Eugene C. Tobey, PC, USN, reported to the renamed Panama Canal Commission chairman and was appointed chairman, Department of Material and Supplies. Tobey was assigned increasingly more responsible positions. In June 1904, he was appointed director of posts, where he served until September when he turned over the position to the first civilian director.

Canal Treasury in Need of Reorganization

Given the vast amount of government funds involved in the largest federal construction project ever undertaken, full and complete accounting and safeguarding of funds was absolutely essential. As treasurer, RADM Kenny promptly recommended a simple classification, "sufficiently elastic to permit expansion and contraction to any extent desired, and so arranged that it shows the amount of money expended for all purposes suitably minutely classified."

The Commission soon determined that the rapid development of work and the purchase of equipment from the French demanded formation of a Department of Material and Supplies with Paymaster Tobey as chief.

The Commission also set up a new Board of Inventory and Appraisal to examine "the material, machinery, and other movable property acquired from the new Panama Canal Company and now available." As of July 1905, the new department had on hand material with a book value of nearly $29 million, including 176.2 miles of track, 24 American locomotives, 212 Franco-Belgian locomotives, 5,000 dump cars, 273 handcars, 896 excavators and dozens of other items.

In their haste to establish the autonomy that had been promised them, the members of the Isthmian Canal Commission instituted a system originally intended to avoid misuse of funds or any hint of graft. While attention to detail was necessary and commendable, emphasis on minutia degenerated into a fear of any appearance of extravagance. All significant expenditures were subject to an elaborate system of forms and regulations. Every detail of procedure required approval of the seven commission members, who were located in the United States, 2,000 miles away.

For example, when supervisory personnel desired to rent a handcar for an hour, the process required six separate vouchers. Carpenters were not allowed to saw a board 10 feet in length without a signed permit. Biweekly payrolls for 1,800 workers required six and a half hours to complete 7,500 separate pieces of paper, weighing 103 pounds. Because of the time necessary to process purchase orders through Washington, department heads frequently ordered material in excessive quantities and well before they were required. There were many "horror" stories, including one order for 240,000 pairs of hinges with which to hang 15,000 doors.

Avoiding Financial Disaster

Into this potential financial disaster stepped Paymaster George Schafer, PC, USN. In one instance, a civil servant was sent to Barbados to recruit workmen and to transport them to Panama by a British steamship company. When the ship owners rendered a bill for transportation, LT Schafer reluctantly paid it, but notified recruiters that he could no longer pay bills for transportation of workers because of a department ruling.

With trained and organized American military officers in the key positions, the construction work moved forward relentlessly. Over the next eight years, excavation proceeded at an impressive pace and huge amounts of concrete were poured to form the locks. American industry promptly met the challenge to manufacture the gargantuan lock gates that exceeded the size of any steel structures previously manufactured in the United States. Newspapers around the world eagerly chronicled Panama Canal progress as it moved forward relentlessly. As the date of projected canal completion neared, the national and international press published longer, more detailed and more favorable reports on progress.

Success at Last in August 1904

While still in office, ex-President Roosevelt had been the canal's primary cheerleader as he continued to link completion of the canal to America's projection of sea power throughout the world. Some naysayers in Congress and the press were grudgingly won over as the constructors set impressive records, but harsh critics remained. A target date of late 1913 was established for the grand opening of the Panama Canal, but a sudden collapse of the huge Culebra Cut in December set back the optimistic timetable.

In just eight months, massive restorative efforts at Culebra succeeded in permitting opening the Canal to the initial interoceanic voyage when, on Aug. 3, 1914, the cement boat Cristobal made a surprise westbound transit. The first official transit of the Panama Canal was recorded by the ocean vessel, SS Ancon, on Aug. 15. Although he had surrendered the office of president to William Howard Taft in 1909, T.R. had the last laugh on his critics when the event that had eluded mariners for centuries finally occurred.

Exceptional Result; Enormous Cost

The completed canal cost Uncle Sam $352 million, including the $40 million paid to the French company and $10 million paid to Panama. Together, expenditures by the American and French efforts totaled about $639 million, four times those of the Suez Canal, but the Panama Canal had cost the United States $23 million less than originally estimated. The United States excavated 232,440,945 cubic yards of earth, while the French provided a rounded total of another 262 million cubic yards. By 1914, the work force had reached 45,107, but the end was in sight. The canal had been opened six months ahead of schedule in spite of an eight-month delay because of the collapse of the Culebra Cut. The cost in lives lost to disease and accidents during 10 years of American administration, according to hospital records, dropped dramatically to 5,609.

Maj. R.E. Wood, Quartermaster Corps, U.S. Army, wrote in 1916, "The Canal will always remain a material monument from a construction and engineering standpoint; it will also stand as a monument in the minds and hearts of the employees who worked on it during the construction period." His sentiments were echoed by the vast majority of those who worked on the massive project. CAPT Tobey continued to serve in supply-related posts until he was ordered to duty in the Bureau of Supplies and Accounts at Washington in 1906. He eventually served throughout the Great War (later known as World War 1) as a key link in the successful relationship between the U.S. Navy and the British Royal Navy.

Traffic through the Panama Canal during World War I initially failed to achieve projections and only four or five ships transited the new waterway each day, a total of fewer than 2,000 ships annually. Ten years later, however, canal traffic had increased to more than 5,000 ships each year. By 1939, total annual inter-ocean traffic was greater than 7,000. After World War II, traffic more than doubled.

The unexpected delay in the planned grand opening in early 1914 resulted in press reports of the Panama ceremonies being overshadowed by events of six hours earlier, when in Europe, the anticipated artillery duels of World War I finally commenced on the Western Front. Reports of the long-awaited completion of the Panama Canal, which under other circumstances would have been front-page headline news, was relegated to back pages in most newspapers.

Smooth, seamless operation of the canal continued to demonstrate the epitome of American technology and know-how until President Jimmy Carter supported 1977 legislation to turn the expensive engineering and construction feat over to the government of Panama by 2000. Many Americans consider this transaction an unfortunate "giveaway," considering the thousands of Americans who lost their lives and the millions of dollars expended over the 10-year span.

Though the Panama Canal Zone is no longer an American dependency, the magnificence of engineering and construction efforts in designing and building the canal and the positive economic impact on Panama will remain testimony to American ingenuity and commitment.


Annual Reports of the Isthmian Canal Commission, Government Printing Office, Washington, D.C., 1904 & 1905.

Avery, Ralph E., America's Triumph in Panama, The L.W. Walter Company, Chicago, Ill., 1913.

Baker, CAPT Cecil S., SC, USN, A Collection of Abstracts Giving Historical Background for the Work of the Supply Corps, ca. 1939.

Bennett, Ira E., History of the Panama Canal, Historical Publising Company, Washington, D.C., 1915.

Canal Zone Postage Stamps, Canal Zone Postal Service, Mount Hope, C.Z., 1961.

Hendrix, LCDR Henry J., USN, "Fulcrum of Greatness," NAVAL HISTORY, United States Naval Institute, Annapolis, Md., Dec. 2002.

McCullough, David, The Path Between the Seas, Simon and Schuster, New York, N.Y., 1977.

Scott, William R., The Americans in Panama, The Statler Publising Company, New York, N.Y., second printing, 1913.

Extracts and copies of individual documents provided by Panama Canal Museum, Seminole, Fla., April to July 2004.

RADM Frank Allston had 34 years of active and Reserve duty when he retired in 1985. He was commissioned an ensign in the Naval Reserve Supply Corps in 1952 and served on active duty during the Korean War. Returning to civilian life in 1954, he served in management positions with General Electric Company, Bunker Ramo Corporation, and IC Industries before retiring in 1989 as vice president of corporate affairs for Illinois Central Railroad.

As a Naval Reservist Allston has served as Commanding Officer of Reserve units in New York City; Greenville, S.C.; and Chicago, Ill. He is founder of the Recruiting District Assistance Council program for the Navy Recruiting Command, and the Supply Corps Reserve Direct Commission Program. He served as President of both the Navy Supply Corps Association and the Chicago Council of the Navy League of the United States.

Allston was presented the Department of the Navy Distinguished Public Service Award in 1998 for his 10-year effort in researching and writing "Ready for Sea, " an extensive history of the first 200 years of the U.S. Navy Supply Corps.
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Author:Allston, Frank J.
Publication:Navy Supply Corps Newsletter
Geographic Code:1USA
Date:Nov 1, 2004
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