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Visibility and Significance of Liberty's Hull Markings
Until recently, the United States Navy hull marking system was unique in the world. Only one other country in 1967 (Argentina) used anything similar. Putting aside the issue of the presence and visibility of the ship's American flag, the hull markings alone were sufficient to identify USS Liberty as a U.S. Navy ship (Source: Clifford Memorandum, finding of fact (f)).

Liberty's Stern

Liberty's Bow
The characters on the bow consisted of the letters "GTR" four feet high, and the numeral "5," which was eight feet high. On the stern, the "GTR" characters were two feet high and the numeral "5" was four feet high. Also on the stern, in characters eighteen inches high, was the ship's name, USS Liberty.
The Israelis admit that their maritime reconnaissance aircraft crew had little difficulty identifying her as a "supply ship of the US Navy" in the early morning light. The observer recorded USS Liberty's hull number (GTR-5) and later, during his debriefing after landing (at about 1050), positively identified the ship he saw as USS Liberty (Source: IDF History Report, pp. 7-8). The crew of USS Liberty was able to read and identify the much smaller hull markings of the lead Israeli torpedo boat (Source: Clifford Memorandum, conclusion (c)).
These hull markings are significant because they use Roman characters, not the Arabic script used for hull markings by the Egyptian navy (Source: Clifford Memorandum, finding of fact (e)).
While the Israelis deny that any of their aircraft saw an American flag, they admit that all of them saw the hull numbers. The pilots of the attacking aircraft made at least three references to the hull numbers during the attack (Source: IDF Transcripts). This information was passed on to the Navy approximately twenty minutes before the torpedo attack.
The Chief of Naval Operations was personally aware of these markings prior to the attack, but discounted them as "an Egyptian ruse" (Source: IDF History Report, p. 16). This is an amazing claim. Think about it for a moment. The top man in the Israeli navy, whom one would presume had knowledge of the Egyptian naval order of battle, receives reports of a ship unlike anything in the Egyptian navy, and rather than seek a positive identification of the ship's nationality, his first reaction is to assume that it is an Egyptian ruse. That being the case, what difference would an American flag have made? It would appear that the Israeli Chief of Naval Operations had already made up his mind that this particular ship was going to be attacked and extrinsic evidence of its neutrality was of no consequence.