No. 155.
Mr. Denby to Mr. Bayard .

No. 322.]

Sir: I have the honor to inclose herewith the original of a communication this day sent to the Tsung-li yamên by me.

[Page 192]

The subject thereof is an energetic protest against the new tax of 6 mace (90 cents) on the case (two cans) of kerosene, lately levied as a lekin tax at Canton.

Little explanation is necessary, in addition to the contents of the said communication. I may mention that, in spite of the lekin of 40 cents per case which was levied in 1882, and for the privilege of collecting which the farmer thereof pays $63,000 per annum, the sale of kerosene has been rapidly increasing. Mr. Consul Seymour writes me that prior to the new tax it was anticipated that in 1887 the sale of kerosene imported at Canton would reach 400,000 cases, or 800,000 cans, or 3,000,000 imperial gallons, or 4,000,000 trade gallons. It is now proposed to raise 120,000 taels, or about $80,000, by this new tax. The original tax of 40 cents remains in force.

The farmer was offered the collection of this tax, but declined for fear of smuggling. So the lekin office will collect it by its own officials. The lekin tax alone now amounts to $30 per case. To this the import tax of 5 per cent. ad valorem must be added. To any article but kerosene this tax, being more than 50 per cent., would probably be fatal. But kerosene is so largely used, is so advantageous collaterally in permitting by its use native oils to be applied for food, and is so cheap, that it is difficult to forecast what effect on its consumption so enormous a tax may have.

The Chinese authorities have always contended, in the words of Tseng, uncle of the marquis, now viceroy of Nanking, that “once foreign goods have entered China and become the property of Chinese merchants, their taxation is a matter wholly and solely within the direction of China.”

One answer, at least, to this proposition is, that this right is subjected to the treaty stipulations. It is plain that the right of importation may be valueless if, as soon as goods land, they may be burdened with a prohibitory tax. Thus, by indirection, the treaties may be annulled.

I have endeavored in my communication to the yamên to found my argument on the proposition that the new tax was not only prohibitory in fact, but was levied for the purpose of prohibiting. To this end I have cited passages from the proclamations of the lekin board.

Logically the only difficulty is to determine at what point a tax becomes prohibitory. The extraordinary vitality of kerosene makes it doubtful when such a point will be reached.

We have taxed fire-crackers 100 per cent., and partly on the ground that they are hazardous. The Chinese are improving on our example.

The whole question, as you well know, is embarrassing and troublesome.

* * * * * * *

I have, etc.,

Charles Denby.
[Inclosure in No. 322.]

Mr. Denby to the yamên and ministers .

Your Imperial Highness and Your Excellencies: I respectfully call the attention of your Imperial highness and your excellencies to the late lekin tax, of 6 mace on the case of kerosene oil, levied by the general office of lekin at Canton, by proclamations dated November 28 and December 18, 1886.

I request the repeal of this tax for the reasons hereinafter stated.

[Page 193]

Kerosene oil, besides paying the import duty, did, before this last tax was levied, pay 40 cents per case lekin. The entire tax is, therefore, now about $1.42 cents per case.

A case of kerosene is only worth $2.50. Thus the whole tax is more than 50 per cent. of the value of the article. Under the treaty kerosene, not being a specified article in the list of imports and exports, pays 5 per cent. ad valorem.

Article 1 of the treaty of 1880 provides that the Governments of the United States and China mutually agree to give the most careful and favorable attention to the representations of either as to such special extension of commercial intercourse as either may desire. Under that clause it is proper that I should address you this communication. Whatever may be the proper construction of the treaties relative to lekin taxation, about which there has been so much discussion, one thing, I think, is certain, that neither party to a treaty has the right to abrogate it by indirect action.

China says to all the world, you may send your goods to the open ports if you pay certain duties. Of what avail is the privilege if the moment that the goods are landed and delivered to the consignee they are met with a prohibitory tax? How can the foreign merchant send goods to China if no Chinese subject can buy them because of onerous internal taxes? The whole foreign trade may be wiped out by this process and commercial intercourse may thereby be extinguished.

When it becomes apparent that any internal tax is levied for the purpose of prohibiting the importation of an article, then at least it becomes proper to protest and to ask for its repeal.

The proclamations of the lekin office above quoted disclose on their face that the object of this new tax is to prohibit the importation of kerosene. The language of the proclamation of November 28 is this: “Let it be proclaimed that the article of kerosene is very explosive in its character. The least negligence will result in a calamity of a tire with unlimited evils. Therefore it ought to be prohibited.”

This prohibition is inconvenient. This enormous tax is levied in order to prohibit by indirection.

In the proclamation of December 18 the language is: “If kerosene should he suddenly prohibited it may be feared that inconvenience and trouble will arise.” In both proclamations it is plain that the real intention is to prohibit the introduction of this article. I submit that as long as the treaties are in force this useful and generally used article cannot be excluded. Kerosene is used everywhere at Peking, and elsewhere in China, and all over the world. It has, like all other illuminating substances, caused fires by the negligence of the consumer. It is the cheapest of all the illuminators, and the one most used by the common people. Its use has produced a large revenue to China. A high tax may prevent importation and thereby do away with this revenue.

The levy of such a tax is especially unjust to the foreign merchant. He may have bought large quantities for transportation to Canton, in the faith that the existing duties would not be changed. Now, without notice of any intended change of taxation, he must encounter enormous losses. It is usual in-other countries to fix a long period in advance, at the expiration whereof such changes are to take effect. But I do not rest my objections to this tax on want of notice, but on the plain proposition that it is, on its face, prohibitory and therefore contravenes the treaties.

For these reasons I must earnestly invoke your Imperial highness and your excellencies to examine this question in a spirit of equity and to order justice to be done.

I have, etc.,

Charles Denby.