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The mark you described with the U is a proof mark (safety test mark). It is usually on the left side of the chamber. As time passed the stamp marks used in the government proof houses (no government proof houses exist in the US) changed. Such marks can often therefore be used as an aid in dating a foreign pistol. Further there were inspection mark stamps. In many manufacturer's plants (including Colt's in the US) of that period a stamp was issued to a specific employee and used only by him until he died, left or retired. At similar thing happened with military inspectors and their stamps. [On US military pistols of that period an easy to find example is the RAC (Ronald Carr) and JTT and John Thompson (of Tommy gun fame) stamps on US military pistols from the WWI era and earlier. Likewise in the US, specific arsenals used specific stamps in their inspection process (the Springfield Arsenal eagle stamp is perhaps the best known example) before the gun made or refurbished there left the arsenal.] Military acceptance and inspection stamp marks appear on many foreign military pistols as well as those of the US military. The US 'ordnance bomb' of WWI and II is an obvious example, but there are others, such as the British Broad Arrow, etc. Germany had several military stamps in the 20th century. Each ties the gun to a specific era and or type of military use. Just about every major country had stamps they ordered stamped into a gun either as a condition of entry into the country, sale therein, or govt. use. Some of the stamps an examiner of a gun may encounter are very small. Some are strange shapes or words. There exist books that show and explain them. Still every now and then one finds a stamp that isn't in this or that book and further research is needed. Add to all this the fact that Lugers, C96s and some other period guns have their serial number stamped on every major part, even the internal ones. It is not uncommon to encounter a seemingly all matching gun, but with mismatched internal part numbers. Forged stampings are also sometimes encountered. Some are of poor quality, some are very good forged stamps, but in the wrong place, or inconsistent with all the other stamps or claims about the gun (i.e., a Nazi Luftwaffe stamp on a pistol supposedly brought home after WWI, and in a strange place on the gun, etc.)
Adding to everyone's fun is a) Mauser production records do not exist regarding the C96 pistols (the records were allegedly thrown away by US Army troops after the war to make room for a barracks in the factory warehouse), b) Mauser started renumbering serial numbers at 1 for several contracts while at the same time continuing the older serial number run on other C96 pistols. The result is multiple serial #1s, 5, 19, etc. are known to exist. You can have a serial # 300 Prussian contract pistol, but someone else has serial # 300 Italian Navy contract made a few years later, or perhaps even on the same day. No one living knows. aybe someone else has a pre WWI commercial, but over there someone else has a post WWI commercial variant with the same #. Very aggravating to Americans who believe serial #s are supposed to mean something.
The pistol was awkward and didn't sell well, so Mauser, for the first 20 years or so, played with the design and changed things often, looking for the design that appealed the most. So we have large ring hammer versions, small ring hammer versions, removable magazines, non-removable magazines, long barrels, short barrels, multiple calibers, 10 round magazines, 6 round magazines, 500 yard sights, 1000 yard sights, fixed sights, knurled safeties, checkered safeties, new design safeties, old design safeties, etc. etc. All of it was sold commercially and also by purchase contracts from various governments. What did often survive is the records of the receiving military customer. Some people apparently make a living photocopying old ordnance issue, capture and repair records then selling them to collectors trying to run down how this or that piece acquired this or that mark. At the same time, sometimes private people would buy one, then carry the personal weapon into combat. Winston Churchill had a personally owned C96 which he used in Afghanistan, others did too. I have seen photos of US soldiers in the Philippines in the early 1900s carrying C96s. How they got them is anyone's guess. Spanish leftovers?
China was a huge customer of these things. Those purchased by, or given to (by other governments), China could have seen action in the Boxer Rebellion, the 1905 Manchurian War, WWI, a dozen small warlord turf battles between the world wars, then WW II, then the Communist Rebellion, then finally service with Mao's People's Army before finally being retired and warehoused. In the 1980s as the US laws changed to allow the first import of surplus military weapons since 1968. China finally sold most of their C96 stockpile off to various American importers. Collectors have been pulling out their hair ever since.
Where Collectors go crazy is when they hit a gun with marks showing official use in multiple countries. C96s and Lugers and some American weapons all sometimes exhibit this. Both were sold all over the planet before and between the World Wars. Some were captured by one side, used then sold again just in time for the next war. Some stayed with one side for 3 or 4 wars. Pre WWI Lugers and C96s exist with markings and documented capture histories showing almost continual use for 40 years.
Original condition Mauser C96 pistols are often found with multiple small stamps in different places. On yours, I would also look for an import stamp. Probably a very small NA or CAI in an inconspicuous place such as the underside of the barrel or near the lanyard loop. I say this because yours does not appear to be in an original (i.e., as it left the factory) configuration and many such pistols were imported into the US in the 1980s then re-worked into fantasy guns, or otherwise tweaked to arouse the interest of the unwary.
Your gun has problems if someone has made a claim of originality as it left the factory. If I may quote from the C96 site previously mentioned:
"All Mauser-made carbines had -
• 10-shot fixed magazines
• unmilled side rails (one or two prototypes may have had milled rails, like the pistols)
• a removable buttstock dovetailed to the frame (so that the carbine, lacking a grip on the frame, could not be fired as a pistol when the stock was removed)..."
The pictured sights are also wrong for a 12 inch barreled variant.. They should be 500 yd. sights, but they aren't.
"Most had -
• 500 meter sights
• 11.8 inch (300mm) barrels"
So we know it is NOT a Mauser carbine. It IS however, a C96 pistol converted to 12", and probably re-blued and with new grips.
Was it used by a military as an issue weapon? Without the right stamps in the right places, possibly not. On the other hand, when someone did a re-bluing, they may have buffed critical stamps out.
C96s were last officially made in the 1930s, so new condition parts are becoming rare. A critical part is the bolt stop. Inspect the bolt stop for cracks, wear, and signs of battering. From time to time machinists will make one of modern steel and sell it on ebay or other venues. If you need to replace parts, keep any old parts in a baggie to go with the gun someday. Wolff Spring Company still makes replacement springs for them. Don;t worry to much about the recoil spring, its only purpose is to return the slide. The critical spring is the mainspring. That is the one you don't want to be weak. Replace your mainspring with a new one from Wolff if there is any chance at all you will be firing the pistol. Never-Ever fire Tokarev ammo in a C96. Tokarev ammo is the exact same size, but it is loaded much hotter. Buy only C96 Mauser ammo. Federal makes a nice soft point for the C96. Fiocchi makes a decent FMJ load for it. C96s are great fun to shoot. The factory battle sight (leaf down) zero is 100 meters. That's 110 yards, your bullets should be dead on at that range.