Chapter V

By Commander G. F. Markoff, U.S.N.R. (FX-375)

1. With the outbreak of the war in Europe the British Admiralty adopted the Lloyds reporting system, modified it to meet the wartime needs of the Admiralty and augmented it by including routing officers and intelligence centers and establishing additional reporting officers to permit a reasonably accurate plot of all shipping world-wide. This system of reporting merchant ship movements was called the "VESCA" (Vessel and Cargo) system.

2. It was recognized that if the United States did become a belligerent some method of obtaining merchant ship movement reports would be required and that such a system, no matter how integrated, would involve a heavy communication load of a specialized nature and because of its nature would require special and expeditious handling. For these reasons, it was considered desirable that a communication section be established as an integral part of NTS for the internal handling of the anticipated volume, and one communications officer of the Naval Reserve was ordered to report for duty to NTS for this purpose on 6 April 1941.

3. The first duty of the communication officer was to go with a party consisting of one Rear Admiral and three Captains to the Canadian Naval Service Headquarters, Ottawa, Canada for the purpose of consultations with Canadian Naval authorities in connection with routing and reporting of merchant shipping, the operation of convoys, and to assimilate as much information as possible regarding the British methods of communicating and handling merchant ship movement reports.

4. Early in the summer of 1941 it was considered that the time had arrived when the Chief of Naval Operations should commence maintenance of records pertaining to the movement and disposition of U. S. Flag shipping, particularly in the Atlantic but not excluding other parts of the world. To achieve this, dispatch directives were promulgated to the various U. S. Naval Attaches and Naval Observers throughout the world requiring them to submit by daily dispatch to C. N. O. information regarding arrivals and departures of U. S. Flag merchant shipping at their respective ports and such other ports as could be covered by them. This was augmented by prevailing upon the State Department to issue a similar directive to various American Consuls requiring them to submit similar information on a daily basis. This arrangement permitted maintenance of records in NTS of movements in all major ports and a considerable number of minor ports. These movement reports, as differentiated from the VESCA Reports received by the British Admiralty and Naval Service Headquarters, Ottawa were essentially daily summaries but did provide NTS with the desired information, and since the United States was not yet at war immediate notification of merchant ship departures and routes was not yet essential. However, during the summer of 1941 plans were being formulated for obtaining such information by the most expeditious means in the event the United States should become involved in the war.

5. As a result of the issuance of the above-mentioned directives, dispatch communications to NTS took a marked upward trend and it became apparent that the communications officer would require some additional help. This was provided for by ordering an Ensign of the Naval Reserve to report for communication duty in NTS.

6. By early Fall of 1941 it became a foregone conclusion that the United States would be brought into the war and, whereas up to this time


the merchant ship arrival and departure reports were considered adequate for Navy Department needs, it now became apparent that information as to the routes of the vessels would also be required. Since all routing of all United States shipping at that time was done only by the British through their respective routing officers throughout the world, it was obvious that if the Navy Department desires vessels' routes it must come from British sources. Through suggestions with the British Admiralty and Naval Service Headquarters, Ottawa it was agreed that a leased teletypewriter circuit be installed between Ottawa and the Navy Department and that the former, which was already receiving all route messages, relay these to the Navy Department. In view of the fact that this traffic would be of substantial proportions and all of it encrypted, the Director of Naval Communications was consulted with a view to establishing a separate coderoom for this purpose. This was agreed to and a separate coderoom manned by Op-19 personnel was established. The required leased teletypewriter circuit was installed with the Washington printer located in the special coderoom. VESCA reports and route messages were then received from Ottawa by this means until after the United States became involved in the war. Dispatches pertaining to shipping in convoy were received directly from  British originators by including C.N.O. as an addressee. During this period merchant ship movement reports continued to be received from the various Naval Attaches, Naval Observers and American Consuls.

7. As the result of the voluminous communications being received fro Ottawa together with that being received directly from the U.S. Naval Attaches, Naval Observers and American Consuls, it became necessary to augment the communication section. This was done by ordering an additional Naval Reserve Officer for this duty together with four civil service clerks. At this time it became obvious that, in order to function efficiently, at least four copies of each dispatch would be required. The Director of Naval Communications was requested to furnish the required number of copies of each dispatch, but because of the existing policy of the Director of Naval Communications at that time the request was disapproved with the result that the communications section was required to copy each incoming dispatch in order to provide the three necessary additional copies. This is the situation that prevailed at the outbreak of the war in the United States.

8. After 7 December 1941, with U.S. shipping now being routed, the volume of communications again took an upward curve and two additional Ensigns and four yeoman of the Naval Reserve were assigned.

9. Early in 1942 an agreement between the British Admiralty and the Chief of Naval Operations, known as BUSRA, was consummated (see Chapter II, B). This agreement provided that in the area under U.S. control the U.S. Navy would provide required routing and reporting officers to relieve their British counterparts and to assume the responsibility for originating merchant ship movement reports and route messages. U.S. Routing officers were established in all major ports within the continental United States and, as they became available for assignment, U.S. routing and reporting officers gradually took over the responsibility of routing and reporting merchant ship movements in the U. S. Strategic Area.

10. In the initial stages the U. S. routing and reporting officers followed the same general pattern of reporting ship movements as provided for by the VESCA system. Basically this required that a separate dispatch concerning each movement be addressed directly to each of the following: CNO; Admiralty; NSHQ Ottawa; Sea Frontier Commanders through whose areas the ship would pass; and the British Staff Officer (Intelligence) in the


area concerned. This involved a load greater than the Naval Communication Service could handle, and because many ports were involved in which naval communications were not provided, it was necessary to resort to the use of commercial communication cable facilities. It was costly due to the fact that the originators are permitted to include only one addressee in each commercial cable dispatch which meant that routing and reporting officers had to send the same text to each of the required addressees and were billed for transmission to each addressee as a separate cable dispatch. This was "field day" for the cable companies.

11. During the summer of 1942 negotiations were opened with the major cable companies to establish a "drop off" system whereby the cable companies would permit more than one addressee in the same dispatch, effect delivery for a nominal fee to such addressees as were situated in places through which the cable dispatch would normally be routed, and base the cost of sending the dispatch at prevailing rates to the furthest addressee. The cable companies objected on the grounds that their rate structures would not permit this. The adoption of the "drop copy" may have been enforced upon the cable companies by the Federal Communications Commission, but the Navy contemplated no further action and the matter was dropped.

12. By late summer of 1942 and in view of the unsuccessful negotiations with the cable companies for a "drop off" copy system, it became apparent that either the costly method of transmitting ship movement reports and route messages must continue to be borne or some other method of handling these communications must be devised.

13. If a new system was to be developed it would have to be one that would provide all activities concerned with the requires information as regards merchant ship movements and routes by the most expeditious means and at a minimum of expense. It would require that such a system be flexible enough to provide for the variation of addressees as required due to vessels passing through various Sea Frontier Areas depending upon the voyages of the vessels concerned. It also would require that the system be unencumbered by a complicated method of handling such communications, that it be as simple yet effective and efficient as possible, due primarily to the fact that most routing and reporting offices were not provided with communications officers. Accordingly the communications officer undertook to devise such a system.

14. By early fall of 1942 a system which it was believed embodied all of the above requirements was consummated and it was named "MERCO" (Merchant Control) system. The details of this system were first promulgated 15 October 1942 in GIRO.

15. The underlying principals upon which the MERCO system was predicated follows. Reporting Centers were established at communication hubs throughout Central America, South America and the Caribbean area. Such Reporting Centers were established at Seattle, Recife, Rio de Janeiro, Montevideo, Lima, Cristobal, Guatemala City, Vera Cruz, Havana, Guantanamo, San Juan, Trinidad and Aruba. The establishment of Reporting Centers in the same geographical locations as Sea Frontier Commanders and other operational commands was an important consideration in reducing communications. For ship movement reporting purposes each Routing and Reporting officer was directed to route all MERCO Reports and Route Messages to a specific Reporting Center. The designation of the Reporting Center to which each Routing and Reporting officer was to route his MERCO traffic was predicated on both availability of communications facilities and operational areas in which such officers were located. This resulted in the Reporting Center Areas following a marked geographical pattern.


16. In addition to the establishment of Reporting Centers, relay centers known as MERCO offices were established at New York and San Francisco.801 802

17. A separate codeword was established for each MERCO/Route message addressee, including Admiralty and Ottawa. Additional codewords embracing multiple addressees were also established. These codewords, as appropriate, were to be inserted as the first words of the text of each MERCO Report or Route message by the originator.

18. A special flat strip cipher series known as U. S. Shipping Control Cipher was published for the purpose of encrypting MERCO Reports and Route messages.803 Because of the very large volume of such dispatch reports it was not considered cryptographically secure to use any single cipher common throughout the Atlantic area of U. S. Merchant Ship Control. Accordingly Routing and Reporting Officers in each respective Reporting Center area were provided with a single area system of the series. All of the area systems comprising the series were held by all MERCO/Route message addressees.

19. In operation the MERCO System functioned basically as follows. The Routing and Reporting Officer originating a MERCO Report or Route message included the required addressees by inserting the appropriate codewords as the first words of the text and forwarded the dispatch to his respective Reporting Center, which in most cases was the Sea Frontier Commander or sub area commander having cognizance in the area in which the port of arrival or departure was situated. The Reporting Center, without delaying for decryption, immediately passed the dispatch to the appropriate MERCO office, which made further delivery in accordance with the codewords contained in the first words of text. In this manner the originator filed only one dispatch, instead of several containing the same text as required under the VESCA method of handling ship movement reports. This system provided the necessary information to the area commander first required to have it, and minimized the cable tolls to the extent that the cost of only one dispatch was involved as against the cost of several containing the same text as under the former system.

20. No Reporting Centers were established for the Routing Officers within the Continental United States. Such Routing Officers forwarded their MERCO Reports and Route Messages directly to the MERCO Offices in New York or San Francisco as appropriate, which in turn delivered to the required addressees in accordance with the codewords.

21. Surprisingly little difficulty was experienced in getting the MERCO System into smooth operation, which fact can probably be attributed to the clearly defined and systematic method laid down for handling of the traffic involved.

22. Upon inauguration of the MERCO system, Ottawa discontinued relaying VESCA and Route messages to Washington, and was informed of movements in the U. S. Area of Merchant Ship Control by Washington's relaying the necessary MERCO Reports and Route messages. This resulted in the reversal of the traffic flow on the Ottawa-Washington leased printer circuit.

23. Shortly after the establishment of the MERCO system it was considered that the Reporting Centers could be put to additional advantageous use in connection with reducing communications. Up to this time the many dispatch directives emanating from the Navy Department and addressed to all U. S. Routing and/or Reporting Officers had to be delivered and paid for as separate cable dispatches to each Routing or Reporting Officer located beyond the Continental limits of the United States. This excessive


cost was circumvented by publishing a special strip cipher held by all U. S. Routing and Reporting Officers and addressing such dispatch directives only to the relatively few Reporting Centers with instructions in the text directing them to pass to all Routing and/or Reporting Officers in their respective areas.

24. During the Autumn of 1943 electric ciphering machines came into greater production and Routing Officers at major ports were provided with this device to augment the U. S. Shipping Control Cipher. A separate key list for MERCO traffic was published for use with this device and  all MERCO addressees were equipped with the machine and required key lists.

25. It was not long after the MERCO system was placed in operation that the British Admiralty became cognizant of the advantages provided by this system and requested that they be permitted to route VESCA Signals and Route Messages originated by British sources through MERCO channels to the required U. S. addressees. This meant that British originators instead of sending a separate dispatch to each of the U. S. addressees concerned, had only to send one dispatch to either the MERCO Office in New York or San Francisco which would deliver to the required addressees. This interconnection of the MERCO and VESCA systems was effected and proved to be mutually highly satisfactory.804

26. A continuous study was made of MERCO traffic from which a curve was drafted. The curve started at an approximate level of 600 dispatches daily when the MERCO system was first established, and progressed upward to approximately 900 dispatches daily by the summer of 1943, after which it followed almost a flat trend until cessation of hostilities with Germany and the discontinuance of convoys which resulted in a sharp upward trend. This study did not include dispatches pertaining to convoy operations and other miscellaneous traffic which averaged approximately 200 dispatches per day throughout the entire period of the war with Germany.

27. Originally the MERCO System was placed in effect in North America, Central America, South America, Hawaiian Islands, Alaska, and the Caribbean area.805 As the war in the Pacific progressed westward, shipping in that area west and south of the Hawaiian Islands came into greater prominence and under date of 26 July 1943 a proposal was submitted to CinCPac. Australian and New Zealand authorities suggesting that the entire Pacific area be brought into the MERCO system.806 This was concurred by all commands concerned. Accordingly GIRO was modified to embrace the whole Pacific theater. A MERCO office similar in purpose to those already in operation at San Francisco and New York was established at Suva to serve the South Pacific, Southwest Pacific and New Zealand Sea Frontiers.807 The U. S. Shipping Control Cipher series was augmented by publishing additional area systems for each of the Merchant Ship Control Areas involved. Reporting Centers were established at Pearl Harbor, Noumea, Melbourne and Wellington. The Reporting Center at Seattle was transferred to Adak due to the establishment of Commander, Alaskan Sea Frontier Headquarters at that place. Considerable time was consumed in setting up the basic structure and getting the necessary publications distributed to all routing and reporting officers. It was not until 7 February 1944 that the MERCO System was brought into full effect throughout the Pacific.808

28. Because of limited load capacities of existing Naval radio circuits in the Pacific at the time the MERCO system was placed in operation in that area, cable facilities were used wherever possible. This was the determining factor in locating the MERCO Office at Suva, which is a cable hub in the Pacific. However, after additional and better Naval radio facilities became available, and in order to eliminate cable tolls, the MERCO Office was moved from Suva to Noumea.809


29. As the war in the Pacific moved westward and island bases became consolidated by U. S. Forces, the reporting of shipping movements to and from these places was done through the MERCO system. An additional MERCO Office was established at Pearl Harbor and after the Marianas were consolidated a Reporting Center was established at Guam to serve the Forward Area.810 811

30. As originally established in the Pacific, the MERCO system was only for the purpose of reporting the movements and routes of independent shipping. This was later expanded to include convoy movements. During the winter of 1944-1945 the purview of the MERCO system in the Pacific was again expanded to include the movements of Naval vessels, both combatant and auxiliaries. Some modifications to the MERCO system were required from time to time in both the Atlantic and Pacific to meet new demands and changing conditions.

31. In July 1944 in order to reduce communications, ComTenthFleet C&R, Admiralty and NSHQ Ottawa were discontinued as addressees for MERCO Reports and Route messages concerning movements in the Pacific, and the Commander, Western Sea Frontier compiled daily summaries of all Pacific movements for these activities.813 814 815 816

32. Shortly after the Commander, Philippine Sea Frontier became shore based and consolidated on Leyte, an additional Reporting Center was established there to serve ports in that Sea Frontier.817

33. By early spring of 1945 shipping in the South Pacific had lessened and the corresponding MERCO traffic was reduced to the extent that the retention of the MERCO Office at Noumea was no longer justified. It was accordingly disestablished 10 May 1945.818

34. In May 1945, in order to again reduce communications, particularly between Pearl Harbor and San Francisco, a new arrangement for summarizing Pacific movements for C&R, Admiralty and NSHQ Ottawa was brought into effect.819 On this new basis the Commander Western Sea Frontier summarized only those movements in the Alaskan, Western and Panama Sea Frontiers. Summaries concerning all other movements in other parts of the Pacific were compiled by the MERCO Office at Pearl Harbor.

35. In April 1945 the situation in the Atlantic had so changed that it was considered possible to further reduce communications by requiring U. S. originators of MERCO Reports and Route messages to include Admiralty as an addressee only when the vessel concerned was routed east of the Atlantic chop line.820 In a similar manner British originators included C&R as an addressee in their VESCA Reports only if the voyage of the vessel being reported upon crossed to the west of the chop line.821 Admiralty was informed of movements wholly west of the chop line through daily summaries originated by Ottawa while C&R was informed of movements east of chop by daily summaries compiled by the Admiralty.822

36. All dispatches originating in C&R are typed in final form in the Communications Section and delivered via pneumatic tube to Op-19 for encryption. Incoming dispatches likewise are decrypted by Op-19 for C&R. This section is the arranging authority for BAMS transmissions to the western portion of the North and South Atlantic and the southeast Pacific areas (BAMS Areas 2A, 2B, 4 and 8). The section was operating in 1945 with six officers, of whom four are Waves, and fourteen enlisted personnel.


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