The idea of maintaining stocks of materials is not something recent. Ever since ancient times maintaining adequate supplies of important materials has been known. In the first book of the Old Testament, Genesis Chapter 41, we are told how nearly 4,000 years ago Egypt built a stockpile of food equal to two years of normal consumption. We all keep stocks or inventories of items (milk, bread, and so on) as a form of insurance for use in an emergency. Today’s National Defense Stockpile (NDS) has a long history. It is marked by numerous public laws, debates among military and civilian agencies, changing requirements, and changing political views.
By 1917 it was noted that the United States was
deficient in certain minerals of great importance, particularly in war time … The remedy may mean … the accumulation of a reserve supply, either by government or private companies. (Morgan, 1949)
The many supply shortages of strategic materials encountered in World War I caused the War Industries Board to recommend that future materials problems should be anticipated and ameliorating actions taken. (Morgan, 1993)
In 1922 the Army and Navy Munitions Board was established in the War Department to plan for industrial mobilization and procurement of munitions and supplies. The pre-World War II list of important materials was divided into two groups: 14 strategic materials essential to the national defense the supply of which in war must be based entirely or in substantial part on sources outside the United States and 15 critical materials essential to the national defense procurement of which in war would be less difficult (for example, more readily available domestically) than the strategic materials. (Morgan, 1949)
FROM 1938 THROUGH WORLD WAR II
The first activity to develop an inventory of strategic and critical materials for military use was authorized in the Naval Appropriations Act of 1938, which also provided funds to buy strategic items. But today’s NDS had its beginning with the passage of the 1939 Strategic Materials Act, which authorized $100 million for the Secretaries of War and the Navy acting jointly with the Secretary of the Interior and in conjunction with the Army and Navy Munitions Board to purchase strategic raw materials for a stockpile. The Army and Navy Munitions Board had developed a list of 42 strategic and critical materials needed for wartime production. The list was based on the threatened loss of vital imports as a consequence of Japanese conquests in Asia and the possibility of war in Europe (Snyder, 1966). By May 1940, small quantities of certain materials—such as chromite, manganese, rubber, and tin—were procured under the Strategic Materials Act. By October 1940, both the Army and Navy Munitions Board and the National Defense Advisory Commission, a Presidential advisory group, had recommended specific quantities of strategic minerals for stockpiling, many of which were the same as on the earlier list. Unfortunately, the acquisition of these materials was not completed before the beginning of the war, because only $70 million of the $100 million had been appropriated by Congress and only $54 million worth of materials had been acquired.1
Throughout World War II, the United States relied mainly on its strong industrial base for processing and manufacturing to meet national defense needs. All segments of the industry were fully mobilized in a short time to manufacture the goods and products needed to win the war. To support this effort, numerous materials were imported in large quantities—such as ferroalloys, manganese, tin, and natural rubber. Several federal agencies—including the Reconstruction Finance Corporation and the War Production Board, which was formed in January 1942—were responsible for importing these materials, as well as arranging for the building up of government-owned reserves or stockpiles of strategic and critical materials. Major expansions of the domestic supply of materials were financed by the federal government, most notably the supply of aluminum and synthetic rubber. Of the 15 materials in the stockpile during World War II, only 3 were from domestic sources, while the rest were from foreign sources (War Department and Navy Department, 1947). Between 1942 and 1944, 6 materials in the national stockpile inventory were released for military needs, and a seventh material under contract but not yet in the stockpile was redirected, all by Executive Order of the President (War Department and Navy Department, 1947).
POST-WORLD WAR II TO 1958
The first significant post-World War II congressional action pertaining to stockpiling was passage of the Strategic and Critical Materials Stock Piling Act of 1946 (Public Law 520-79). Consideration of this legislation began well before the end of the war and was contentious at times. The struggle centered on two broad subjects: the purposes which stockpile policy was to serve; and the roles and procedures for making policy, which, in effect, would determine the degree of influence for each of the interested agencies, and the allocation of power between the Executive Branch and Congress (Snyder, 1966). Some parties wanted to eliminate the Buy-American clause; others focused on only military requirements. Still others wanted civilian, international trade, and economic needs considered. The questions of which agency should have control, which should develop requirements, and which should set policy were all debated.
The resulting legislation (Public Law 520-79) was a compromise and not a completely new law: It was an amendment to the Strategic Materials Act 1939. Section 2 provided for the Secretaries of War, Navy, and Interior, “acting jointly through the agency of the Army and Navy Munitions Board, [to] be authorized and directed to determine … which materials are strategic and critical … and to determine … the quality and quantity of such materials which shall be stockpiled” in cooperation with the Secretaries of State, Treasury, Agriculture, and Commerce. Other actions were authorized in the 1946 law: the appointment “to the fullest extent practicable” of industry advisory committees; the application of the Buy American Act of 1933 to purchases; the storage of materials on military and naval reservations; the refining or processing of required materials; the rotation of stockpiled materials to prevent deterioration; the disposal of stockpiled materials after 6 months notice in the Federal Register and notice to Congress—no materials were to be disposed of without congressional approval except for reasons of their obsolescence; and the transfer into the stockpile at no cost of stocks held by other government agencies during the war. The new law also required Presidential authorization for the release of materials. Materials were to be purchased by the Procurement Division of the Treasury Department, which subsequently became the Bureau of Federal Supply.
The National Security Act of 1947 created a civilian mobilization agency, the National Security Resources Board, to advise the President. Its functions included “the coordination of military, civilian, and industrial mobilization including the policies establishing adequate reserves of strategic and critical materials and for the conservation of these reserves” (Snyder, 1966). This new board had the lead in stockpile policy. The Munitions Board, which was formed from the Army and Navy Munitions Board, had responsibility for evaluating military as well as civilian needs. It was aided by a civilian interagency advisory team initially called the
Strategic Materials Committee and later the Interdepartmental Stockpile Committee. This committee had knowledgeable representatives from the Departments of State, Treasury, Interior, Commerce, and Agriculture that coordinated with the Munitions Board in developing stockpile goals. The Munitions Board and the Interdepartmental Stockpile Committee were advised by additional interdepartmental commodity committees that provided data on production, supply, and requirements for specific materials (Snyder, 1966).
By 1948 the Munitions Board had developed a list of 51 required strategic and critical material groups estimated to have a value of $2.1 billion. By 1950 the actual stockpile inventory had reached a market value of $1.6 billion, and an additional $500 million worth of materials were on order (Snyder, 1966). Also by then, the number of required strategic and critical materials had expanded to 54 groups, representing 75 specific commodities, with an estimated objective value of $4.0 billion (Snyder, 1966). These requirements were identified based on the updated planning requirements for a 5-year conventional war and would also provide materials for essential civilian use. With the outbreak of the Korean War, Congress quickly appropriated $2.9 billion in a 6-month period for stockpiling of materials. Also, the value of the requirements jumped to $8.9 billion (Snyder, 1966).
Materials were to be stored at secure locations close to points of use and transportation. Military and government depots were preferred primarily for reasons of security and economics. In January 1948, 70 military depots, 10 commercial warehouses, and 3 stand-by defense plants were being used as storage sites. By August 1953 the stockpile was stored at 318 locations consisting of 71 military depots, 9 GSA depots, 4 government-owned vaults, 6 commercial vaults, 165 commercial warehouses, 34 commercial tank-farms, 7 open-air commercial sites, 4 open-air government sites, and 18 industrial plants (Snyder, 1966).
In 1949 the Bureau of Federal Supply had been transferred from the Treasury Department to the newly created GSA. With the Korean War in 1950, the stockpile program had expanded to become a separate activity in the Emergency Procurement Service of the GSA (it became the Defense Materials Service in September 1956). The Defense Production Act of 1950 authorized the government to divert resources to military and essential programs, including stockpiling, and to expand production of needed materials. By the end of 1950, President Truman declared a national emergency and created the Office of Defense Mobilization and Defense Production Administration. Many of the National Security Resources Board’s responsibilities relating to stockpiling were transferred to these new agencies (Snyder, 1966).
During the Korean War, which lasted until 1953, the government released, under Presidential Order, “about $60 million worth of materials, primarily aluminum and copper” from the stockpile (Office of Defense Mobilization, 1956). As many as eight materials were released between 1951 and 1953 for defense purposes under
12 Presidential Orders (Gutchess, 1969). In addition, large quantities of materials on order to the stockpile were diverted to meet industry needs. The Munitions Board thought that the Defense Production Administration released too much material to civilian use rather than stockpiling it for defense (Snyder, 1966). By 1953 the mobilization controls and allocations were removed, and stockpiling of materials resumed. Between December 1949 and December 1952, the inventory value went from $1.15 billion to $4.02 billion; total stockpile objectives went from $3.77 billion to $7.49 billion in the same period. (Munitions Board, 1950, 1953) Twice under a Presidential Order in 1952 and once again under such an order in 1956, mercury was released, at no cost, for use in the atomic weapons program (Gutchess, 1969; Kulig, 1992).
President Eisenhower consolidated mobilization functions within the government in 1953. The Office of Defense Mobilization was reorganized and took over the duties of the Defense Production Administration and the National Security Resources Board, both of which were abolished. The Munitions Board transferred the stockpiling program to this new agency, thereby putting the stockpiling activity under civilian control, except for determining the military requirements, the responsibility for which was transferred to the new Assistant Secretary of Defense for Supply and Logistics (Snyder, 1966). The GSA continued to purchase and manage stockpile materials and facilities. During the mid-1950s stockpiling continued, with materials being added from transfers of materials acquired under the Defense Production Act programs and the Department of Agriculture’s program for the sale of surplus food to foreign countries, which was paid for in commodities. Determining the stockpile requirements had become more political during this period. Requirements were now developed based on new criteria, 1-year’s normal use and no reliance on imports for the materials in the stockpile from anywhere beside Canada and Mexico. The Office of Defense Mobilization in 1956 reported materials requirements with a value of $10.9 billion; $6.4 billion of this was said to be the minimum required, and $4.7 billion worth of those materials were in the stockpile’s inventory (Office of Defense Mobilization, 1956).
COLD WAR YEARS
During the mid-1950s, the military planners began to examine new scenarios for wars of short duration based on a nuclear conflict, impacting the concept of industrial mobilization and industry’s need for materials. These strategies for the Cold War would greatly reduce the quantities of materials needed in the stockpile in years to come. A revised plan was developed in 1958 based on a 3-year war instead of a 5-year war. Excess materials could disposed of only if they did not disrupt U.S. domestic markets or affect foreign relations. Outstanding contracts were terminated or reduced during this time. Of the 75 materials in the government
stockpiles, all but 12 were now in excess (Snyder, 1966). In 1959 an advisory committee of the Departments of Commerce, State, Interior, Agriculture, and Defense was established to review disposal plans. Disposals from the national strategic Stockpile and Defense Production Act Stockpile progressed slowly between “1954 and 1964 because of legal restrictions, cumbersome administrative procedures, and strong resistance from both domestic and foreign interests” (Snyder, 1966).
In 1962 President Kennedy announced that he was “astonished to find that the stockpiling program had accumulated $7.7 billion worth of materials, an amount nearly $3.4 billion greater than estimated wartime needs” (Snyder, 1966). The Executive Stockpile Committee under the Director of the Office of Emergency Planning, Executive Office of the President, was created to examine the disposal of strategic and critical materials. A congressional investigation held in 1962 and 1963 featured open hearings to examine the operations of the stockpile. The Interdepartmental Disposal Committee was established by the Director of the Office of Emergency Planning in 1963 to develop long-range disposal plans for materials no longer required (Office of Emergency Planning, 1965). By the end of 1965 disposal sales of stockpile materials had reached $1.6 billion (Office of Emergency Planning, 1966).
Interestingly, at the same time, a worldwide shortage of cadmium had developed by 1962; domestic users were forced to curtail production, including production for defense use. The Office of Emergency Planning, with Presidential approval, authorized the GSA to sell 2 million pounds of cadmium from the national stockpile. Congress waived the 6-month waiting period and authorized immediate disposal of the cadmium. The 2 million pounds were sold in four batches with some cadmiuim set aside for defense rated orders, small businesses, domestic consumers, and unrestricted consumers (Office of Emergency Planning, 1963). Also because of several sizable supply shortages in 1964, the Congress authorized emergency sales of antimony, lead, and zinc. In addition the President approved the release of copper from the Defense Production Act inventory in the stockpile in 1964 to relieve industry hardship cases (Office of Emergency Planning, 1965). Again in 1965, the President authorized copper from the national stockpile to be released “in the interest of common defense” (Office of Emergency Planning, 1966) because of a continuing worldwide shortage. Thus it can be said that the national stockpile materials served as a economic stabilizer during this period.
The Materials Reserve and Stockpile Act of 1965 directed that the national stockpile, the supplemental stockpile, including the Commodity Credit Corporation stockpile, and the Defense Production Act inventory be combined into one National Stockpile and that a long-range disposal plan be developed to reduce the inventory of excess materials. (The original national stockpile has been established under the Strategic Materials Act of 1939, and by September 1964, it had 89 strategic and critical materials with a market value of $6.0 billion. The Department
of Agriculture’s supplemental stockpile and the Commodity Credit Corporation stockpile were based on materials acquired by barter under the Agricultural Trade Development and Assistance Act of 1954; by September 1964, these held 50 materials with a market value of $1.3 billion. The Defense Production Act of 1950 had formed its own inventory under their industry expansion programs; by September 1964, it contained 22 materials with a market value of nearly $0.9 billion. The National Stockpile would be managed as one stockpile to hold all the required strategic and critical materials.)
In February 1966, the President authorized the release of quinine sulfate from the National Stockpile. The material was needed for use in Vietnam to combat a strain of malaria that resisted the synthetic drug being used. Also in 1966, the President authorized two additional releases of copper “for purposes of the common defense.” In 1969, nickel strikes against the two major world producers of primary nickel drastically cut nickel availability, and the U.S. defense industry began to suffer. In December the President ordered the release of nickel for use in defense production. This stockpile release was in the form of a loan rather than a sale (Office of Emergency Planning, 1970) but was later changed to a sale since the requirement’s quantity was reduced and the material did not have to be replenished.
A reevaluation of the stockpile by the National Security Council was completed by 1973. This was the basis for developing new goals or requirements for each material. Three conditions were set for the scenarios used to develop the materials requirements: (1) materials would be used only for defense purposes; (2) the analysis would include simultaneous multitheater (Europe and Asia) conflicts; and (3) imports of supplies would be available for all years of the national emergency.
By the end of FY1974, $2.05 billion worth of materials had been disposed of (GSA, 1979). In 1973 the Office of Emergency Planning was abolished and its stockpile planning and policy functions were transferred to the GSA.
In 1976 the President issued new stockpile policy guidance. The National Stockpile would support defense requirements during a major war over a 3-year period, operate on the assumption of full-scale industrial mobilization and increased materials demands, provide for a wide range of civilian economic needs to ensure a healthy economy, and develop the Annual Materials Plan to include provision for any acquisition or disposal of excess materials.
The National Stockpile program was changed again in 1979 by the Strategic and Critical Materials Stockpiling Revision Act; this was the second major revision of the original 1939 Act. Stockpile administration and policy functions were transferred to the newly created Federal Emergency Management Agency (FEMA) from the GSA. The management of storage, maintenance, upgrades, purchases, and sales remained with the GSA. In addition, the National Defense Stockpile Transaction
Fund was established in the Treasury Department for money received from sales. A 3-year duration for the conflict or national emergency period was reaffirmed.
In November 1979, the President released a portion of the chrysotile asbestos to the Department of Defense. The one operating mine, in Canada, had been depleted of reserves and the only other mine in the world, in Zimbabwe, was not producing (FEMA, 1980).
In 1981, President Reagan announced a “major purchase program for the National Defense Stockpile, saying that it was widely recognized that our nation is vulnerable to sudden shortages in basic raw materials that are necessary to our defense production base” (FEMA, 1981).
During the early 1980s, the U.S. metallic minerals production industry was at best stagnant and often in decline. The world economy was in a recession that impacted the production of minerals. U.S. metal mines and processors closed down operations. In 1982 the GSA initiated a presidentially directed long-term program to upgrade chromite and manganese ores to high-carbon ferrochromium and high-carbon ferromanganese. This program would help sustain a U.S. ferroalloy furnace and processing capability vital for the national defense industry. The program was paid for with excess stockpile materials that were authorized for disposal (FEMA, 1985). Between 1984 and 1994, nearly 1.4 million tons of chromite ore and 1.0 million tons of manganese ore were upgraded to ferroalloys (DoD, 1994).
The selling of excess materials and the purchasing of required materials, using funds from the Transaction Fund, continued from 1981 through 1985, when the GSA suspended sales temporarily because the Transaction Fund had reached the mandated $250 million limit. Disposals were continued, and the funds were used to support the presidentially directed ferroalloy upgrading program and the transfer of silver to the Department of the Treasury for use in minting Liberty coins (FEMA, 1986). Limited purchases, disposals, upgrades, and transfers of materials continued to 1988. From August 1979 through September 1988, total net receipts of nearly $1.2 billion had been credited to the National Defense Stockpile Transaction Fund; the available balance totaled $505 million, while the remaining amount had been approved by Congress to purchase goal materials and for research grants (DoD, 1989).
The Cold War was drawing to a close by the late 1980s with the demise of the nuclear military threat from the Soviet Union. At that time, military planners were reevaluating the conflict scenarios to be used for DoD budget planning. This would lead to major changes for the armed services and the stockpile in years to come.
POST-1988—A PARADIGM CHANGE
In February 1988, Executive Order 12626 designated the Secretary of Defense to be the National Defense Stockpile manager. He then delegated the managerial functions to the Assistant Secretary of Defense for Production and Logistics, supervised
by the Under Secretary for Acquisition. The operational activities were delegated to the Director of the Defense Logistics Agency. The Defense National Stockpile Center was established as a field activity within the Defense Logistics Agency to manage the operations of the stockpile program (DoD, 1988). FEMA and the GSA transferred all funds, personnel, property, and records of the National Stockpile to DoD. The civilian agencies were now out of the stockpiling business except for being represented on the advisory committees. Executive Order 12626 also directed that the Secretary of Defense (stockpile manager) must consult with heads of other agencies when performing stockpiling functions (for example, disposals).
DoD planning guidance began to change in 1989. The Cold War military conflict, as in the past, was still the scenario, but the reliability of foreign countries as sources for materials improved. By 1991, Caribbean Basin suppliers were considered reliable, and other foreign country reliabilities were modified. By 1992 the 3-year global war scenario was being questioned, the military force structure was reduced, and foreign countries were considered to be more reliable as suppliers. A highly mobile armed forces that would “come as you are” was the direction of the future military. In 1995, the scenario in use was a 3-year conflict with a 7- to 9-year warning period, which included a short military conflict followed by a 2-year stalemate, followed by another short military conflict. Most foreign suppliers were considered to be reliable, and platinum group metals for automotive catalytic converters were taken off the requirements list. In 1997, the scenario used to develop the stockpile requirements was the same as for other DoD planning: a 1-year conflict involving two overlapping major theater wars (Halpern, 2007). These planning scenarios were used in the biennial Defense National Stockpile Requirements Report to Congress. Based on this report, requirements for strategic and critical materials had been reduced to nearly zero by 2003.
In April 1992, Congress held a hearing on DoD’s 1992 Stockpile Requirements Report of 1992. The Assistant Secretary of Defense said that because of the changing military scenario, requirements had been reduced for stockpiled materials, to $3.3 billion (House of Representatives, 1992). Congress responded to DoD’s recommendations by authorizing the disposal of large quantities of 44 NDS materials in the National Defense Authorization Act for FY1993 (DoD, 1993).
From FY1988 through FY1992, the stockpile had already disposed of $435 million worth of materials (DoD, 1993, 1994). As of September 1992, the NDS inventory held 84 individual materials with a total value of $7.1 billion. Nearly all acquisitions and upgrades had stopped by FY1994, with very small amounts continuing until FY1997, when they were completed (DoD, 1998).
Section 2 of the Strategic and Critical Materials Stockpiling Act, as amended by the National Defense Authorization Act for FY1993, stated that “the purpose of the NDS is to serve the interest of national defense only. The NDS is not be used for economic or budgetary purposes” (DoD, 1993). Congress would legislate acquisi-
tions and disposals (Section 5). Section 6 specifies that “efforts shall be made in the acquisition and disposal of such materials to avoid undue disruption of the usual markets of producers, processors, and consumers of such materials and to protect the United States against avoidable loss.” Section 10 established the Market Impact Committee, composed of representatives from the Departments of Defense, State, Commerce, Interior, Agriculture, Energy, and the Treasury, and from FEMA. The committee would advise the National Stockpile Manager on the projected domestic and foreign economic effects of all acquisitions and disposals of stockpiled materials included in the Annual Materials Plan that is to be submitted to Congress each year (DoD, 1993). The Annual Materials Plan specifies the maximum quantity of each commodity that may be sold or bought by the DoD in a given fiscal year.
Under the National Defense Authorization Act of 1996, the DNSC was directed to transfer 250 tons of titanium sponge each year from FY1996 through FY2003 to the Army’s Tank and Automotive Command. This material was used to make lighter weight armor for the main battle tank (DoD, 2004).
From FY1993 through FY2005, $5.9 billion worth of materials was sold (DoD, 2006). Since the main sales program began in FY1993, Congress has earmarked part of the proceeds from the sale of DNS materials for particular revenue goals. In fact the sale of certain materials was assigned to fund specific programs. By the end of FY2006, a total of nearly $3.9 billion had gone to support specific accounts. From FY1993 through FY2001, $1.65 billion had been transferred to the military operation and maintenance readiness accounts, in equal amounts to the Army, Navy, and Air Force, from the Stockpile Principle Sales Program Transaction Fund.
A long-term program was begun in FY1997 for the sale of 11 commodities to offset costs of the Foreign Military Sales Program; by FY2006, $633 million had been placed in the Foreign Military Sales Program Transaction Fund. Starting in FY1999, another funding program was started for 27 commodities; the Health and Human Services and Treasury General Fund Program Account was authorized to transfer funds to the Department of Health and Human Services for the Federal Hospital Insurance Trust Fund and Federal Supplementary Medical Trust Fund; through FY2003 this fund received $92 million. A long-term program was started in FY2000 for revenues to reclaim certain radio frequencies that are reserved for DoD but were to be surrendered for civilian use and to fund various military personnel benefit programs; $426 million had been put into the Spectrum Sales Program Transaction Fund by FY2006. The World War II Memorial and MILPERS Benefit Program Transaction Fund were authorized to sell one commodity; in FY2001 and FY2002, $6 million was transferred to the American Battle Monument Commission for the World War II Memorial; the remainder was deposited into the General Fund of the Treasury for military personnel benefits. Nearly $1.1 billion has been transferred to the General Fund of the Treasury portion for all the specific sales programs (DNSC, 2007).
Owing to the large reductions in the number and quantities of materials, DNSC has been able to sharply reduce the number of facilities warehousing materials. Under the current plan, by the end FY2007, DNSC will have three operating, consolidated storage locations and a total workforce of 65.
Defense National Stockpile Center. 2007. Internal National Defense Stockpile Center Spread Sheet, Cash Collections and Transferred Table by Fiscal Year and Program, March 5, 2007.
Department of Defense (DoD). 1988. Strategic and Critical Materials Report to the Congress, Operations under the Strategic and Critical Materials Stockpiling Act During the Period October 1988 March 1988.
DoD. 1989. Strategic and Critical Materials Report to the Congress, Operations under the Strategic and Critical Materials Stockpiling Act during the period April 1988-September 1988.
DoD. 1993. Strategic and Critical Materials Report to the Congress, Operations under the Strategic and Critical Materials Stockpiling Act during the Period October 1991-September 1992.
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DoD. 1998. Strategic and Critical Materials Report to the Congress, Operations under the Strategic and Critical Materials Stockpiling Act during the period October 1996 through September 1997.
DoD. 2004. Strategic and Critical Materials Report to Congress, Operations under the Strategic and Critical Materials Stockpiling Act during the period October 2002 through September 2003.
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Halpern, P. 2007. The Stockpile Requirements Process Since 1988. Paper read at Committee on Assessing the Need for a Defense Stockpile, February 20, 2007, at Washington, D.C.
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Kulig, J.W. 1992. The National Defense Stockpile. In SME Mining Engineering Handbook. H.L. Hartman, A.B. Cummins, and I.A. Given, eds. Littleton, Colo: Society for Mining Metallurgy.
Morgan, John Davis, Jr. 1949. The Domestic Mining Industry of the United States in World War II: A Critical Study of the Economic Mobilization of the Mineral Base of National Power.
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Munitions Board. 1950. Stockpile Report to Congress-23 January 1950.
Munitions Board. 1953. Stockpile Report to the Congress-15 February 1953.
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