Mr. Swift to Mr. Blaine.

No. 88.]

Sir: I have the honor to transmit herewith copies of correspondence lately had between this legation and His Imperial Japanese Majesty’s foreign office under the following circumstances:

The China and Japan Trading Company is one of the principal and amongst the oldest established and most respectable associations of merchants, citizens of the United States, doing business in Japan. Their trade is varied and extensive, covering importations of most of the leading articles of American production used in this country.

Sometime during the year 1887 they made arrangements to bring from the United States and place upon this market an article which they describe as a “food medicine.” It is a preparation of cod-liver oil and is known by the trade name of “Scott’s Emulsion.” Among the first things they did was to inquire of my predecessor, Mr. Hubbard, if it was necessary for them, as a firm of American merchants, to take out a license for the sale of this commodity. To this I understood Mr. Hubbard replied verbally in the negative; that the commodity being an article manufactured in the United States, having once paid the customs import on entering the country, it could not be subjected to further taxation as a condition to its sale or use. Having obtained this decision from the minister of the United States, they commenced the introduction of the goods to the public by an extensive system of advertising in the vernacular newspapers, laying out several thousand dollars in that way.

In the early part of the year just closed (1889) they began to make arrangements with Japanese retail merchants for the sale of their goods and commenced selling. There sprang up within a short time a considerable demand for the article, and the sales became very satisfactory. But, before this had gone on very long, they learned that the native merchants with whom they had arranged for the sale of the goods had been sent for by the Japanese authorities and warned that they must each of them take out a special license for the sale of the article known as “Scott’s Emulsion.” On learning this the American importers, to avoid delay and trouble, instructed the merchants to comply with this requirement and take out the license; but at the same time they applied to me for advice and to obtain, by diplomatic action, a recession of the order requiring a license.

Although I had but recently arrived in the country and was exceedingly unfamiliar, not only with the construction heretofore placed upon the treaties, but even with the terms of those instruments, yet, upon the hasty examination I was able to make, I felt it my duty to call the attention of the Japanese Government to the case, and accordingly addressed to Count Okuma, then His Imperial Japanese Majesty’s minister for foreign affairs, a note calling his attention to the matter and requesting him to consider if the illegal order concerning the license ought not to be withdrawn. It was dated September 13, 1889, and a copy is herewith inclosed.

A short time after sending this first note Mr. Brower, the agent of the China and Japan Trading Company, came to the legation and informed me that a fresh attack had been made by the authorities upon the sale of “Scott’s Emulsion” more serious than the first, and urging [Page 578] me to move the Government to withdraw these orders and to concede to the firm the rights due to tbem under the treaties as citizens of the United States engaged in commerce in Japan. His first complaint was to the effect that the Japanese merchants engaged in selling “Scott’s Emulsion” had been required to pay an excise tax of 10 per cent. ad valorem upon the retail price in the shape of a revenue stamp to be applied to each bottle, and that an evasion of this order would be followed by punishment as a misdemeanor or public offense; that the retail merchants, upon being warned of this exaction and the consequences of refusal, had filed declarations with the authorities to the effect that they would no longer deal in the goods, and, having returned the stock on hand to the importers, they had retired from the business; and that the trade was practically brought to an end. I then sent the second letter to the foreign office, dated October 4, 1889 (copy inclosed). This was answered on the 23d of October by the note of that date, also herewith inclosed.

After a very considerable delay, no doubt due to causes entirely sufficient in themselves to relieve His Imperial Japanese Majesty’s Government of any suspicion of intentional discourtesy, but greatly to the embarrassment, if not to the actual injury, of the American merchants engaged in the trade, a final answer was received on the 17th of January, 1890, deciding the question against the China and Japan Trading Company and holding that not only the license duty, but 10 per cent, excise, is within the right of the Japanese Government under the treaties, to which communication your attention is respectfully called.

If I am not entirely at fault in my reasoning, the decision justifying these impositions, if carried to its logical consequences, practically destroys the treaty, so far as the tariff of customs duties is concerned. And while the United States has long since manifested its willingness to abandon all treaty tariffs with Japan and to leave her free to regulate her own commerce, it would be absolutely destructive to our commerce with, and ruinous to our merchants in, Japan should the regulation be changed, as can be done under this ruling, so as to discriminate against them whilst leaving those of other nations as they now are.

As to the position distinctly taken in Viscount Aoki’s letter of January 17, 1890, that neither the license nor the excise tax are in contravention of the treaty, it can not be sustained for a moment, neither upon the language of the instruments nor from the construction placed upon them by the uniform practice of over 30 years.

Both the license and the excise violate the treaty, and the principle upon which they are sustained annihilates it. The language of the treaty of 1858 would indicate that Mr. Townsend Harris, at the time he made the treaty, was already familiar with the burdens placed upon internal commerce in China by the “likin” taxes and transport passes, and that he took special pains in his treaty to avoid similar imposts in Japan. The language of the treaty of 1858, taken with the long-settled practice under it, in myofinion, testify to his skill and success in that as well as in other matters. By articles iii and iv, which are to be read together, it is provided specifically what goods may be imported by Americans, and what may not, and the amounts of customs duties are fixed in distinct terms. Article iii provides that “all classes of Japanese may purchase, sell, keep, or use any articles sold to them by the Americans.” This clause alone is conclusive of the whole question. Having named a particular condition upon which American goods may enter the country and be sold, no other can be imposed without violating the terms of the treaty, according to all recognized rules of construction.

[Page 579]

A clause in article iv provides that “all goods imported into Japan and which have paid the duties fixed by the treaty may be transported by the Japanese into any part of the Empire without the payment of any tax, excise, or transit duty whatever.”

This was no doubt intended to prevent the levying of tolls upon transportation to the interior, as is done in China. I regard the provision in article iii, allowing Japanese to keep, use, or sell goods bought of Americans, to be the controlling language, and both taken together, certainly, it seems to me, secure our right to be exempt from internal taxation.

The treaty of Mr. Harris is the model upon which all subsequent compacts have been formed. Had subsequent treaties been more favorable, of course we would get the additional advantage under the favored-nation clause; but, as I read them, they are substantially the same though in some instances, perhaps, a trifle clearer in expression.

The last treaty made by Japan was with Austria Hungary in 1869, and as all foreign states have the benefit of it under the favored-nation clause in their own treaties, this is generally referred to as showing the relations existing between Japan and the foreign powers. I do not, however, as I said before, think that it gives the United States any additional rights as to the matter under consideration over the provision on the same subject contained in our own treaty of 1858. Indeed, that compact has been followed by all the powers that have since treated with Japan, as close, perhaps, as differences in language would permit. For your convenience I will, however, insert the provisions of the Austria-Hungary treaty of 1869 bearing on the rights of merchants of that country. They are as follows:

  • Art. VIII. At each of the portsofen * * * to trade, Austro-Hungarian citizens shall be at full liberty to import * * * and sell there * * * all manner of merchandise not contraband, paying the duties thereon as laid down in the tariff annexed to this treaty and no other charges whatsoever.
  • Art. XII. All goods imported by citizens ofthe Austro-Hungarian monarchy into any of the open ports of Japan, on which the duties stipulated by the present treaty have been paid, may, whether they are in the possession of Austro-Hungarian citizens or of Japanese subjects, be transported by the owners into any part of the Japanese Empire without the payment of any tax or transit duty whatever.
  • Art. XIII. All Japanese shall be at liberty to buy any articles from Austro-Hungarian citizens * * * and they may keep and use the articles which they have thus bought, or resell the same.

If our own treaty does not secure to American merchants the right to have the goods resold by Japanese merchants without additional tax, license, or excise, this certainly does.

I have, etc.,

John F. Swift.
[Inclosure 1 in No. 88.]

Mr. Swift to Count Okuma.

No. 14.]

Sir: I have the honor to herewith transmit a document received at this legation from the China and Japan Trading Company, complaining of what appears upon the face to be an infraction of the terms of the treaty between Japan and the United States under the following circumstances: The China and Japan Trading Company is a firm of merchants, citizens of the United States, engaged in business in Yokohama and other treaty ports. One of the articles in which they deal is a preparation made in the United States and sold as an article of merchandise by the trade name of “Scott’s Emulsion.”

[Page 580]

It appears from a document signed by the board of health of Osaka Fu, accompanying the complaint of the China and Japan Trading Company, a copy of which I inclose to you herewith, that the financial department of His Imperial Japanese Majesty’s Government have forbidden the sale in Japan of the said article of merchandise, “Scott’s Emulsion,” by any merchant or agent of sale, unless such merchant or agent first obtain from the Government a license for such sale as a patent medicine, which license, I understand, is not gratuitously given, but is to be paid for in money as a means of raising revenue for Government uses.

This license for the sale of “Scott’s Emulsion” seems to me to be in contravention of the provisions of the treaty of July 29, 1858, especially of article iii, which stipulates that Japanese may sell articles sold to them by Americans, and of article iv, which provides that no tax, excise, or transit duty shall be imposed upon them.

If I am correct in this view, I have the most complete confidence that Your Excellency will promptly take the necessary steps to cause the illegal order to be withdrawn by the department for finance.

If by any mischance I have overlooked any clause of the treaty which shows that the order of the department for finance is not in contravention of that instrument, I shall be only too happy to receive Your Excellency’s explanation, which I will respectfully await.

I avail myself, etc.,

John F. Swift.
[Inclosure 1.]

Mr. McGrath to Mr. Swift.

Sir: Referring to our letter of the 9th of April last, copy of which is inclosed herewith, in the matter of the sale of “Scott’s Emulsion” as an article of merchandise and not as a patent medicine, being an article of foreign manufacture, and not considered or classified in any other country as a patent medicine, it having its formula or composition printed on the face of the bottles, and the disposition exhibited on the part of the Japanese authorities to prohibit or interfere with its sale by their own subjects, contrary to treaty regulations for the sale of foreign articles, etc., imported in accordance with treaty regulations and paying the regular duty of 5 per cent., we beg to state that we have just received from the Osaka authorities (Japanese) a communication in response to an inquiry made of them, prompted by information we had received from our customers for this article that the sale had been prohibited, on the grounds that it is considered by the said authorities as a patent medicine and the law or regulations for the sale of patent medicines manufactured in Japan had not been complied with. We inclose the original letter and the translation.

We would add, however, that we are informed on good authority that the patent law or regulations for the sale of same applies only to patent medicines made in Japan, and not to articles imported under treaty or trade regulations in force and in practice, and paying the regular import duty of 5 per cent.

We would ask for the kind offices of Your Excellency in this matter in ascertaining from the Japanese Government if there has not been some infringement or interference by the Osaka authorities with the sale of this article contrary to the general understanding or interpretation of the treaty or tradal regulations governing such cases.

We remain, etc.,

Thos. F. McGrath,
Manager of China and Japan Trading Company.
[Inclosure A.]

The China and Japan Trading Company to Mr. Hubbard.

Sir: Your Excellency will no doubt remember that about 1 year ago we made personal inquiry through our Mr. Brower as to whether it was necessary for us to obtain from the Japanese Government a license for the sale of a medicine known as “Scott’s Emulsion” of cod-liver oil with the hypophosphites of lime and soda.

It appears that a Japanese subject who manufactures for sale any medicinal article is obliged to obtain a license and stamp each bottle or package according to its retail price per bottle or package.

[Page 581]

Your Excellency was of the opinion at that time that, as “Scott’s Emulsion” is a foreign article, being manufactured by Messrs. Scott & Bowne, of New York, United States of America, and London, England, it was not necessary to obtain such license or affix the stamps.

Messrs. Scott & Bowne, for whom we are agents here, have been and are spending large sums of money in advertising “Scott’s Emulsion,” the result of which has been to create a considerable demand for this article. The retail druggists, however, hesitate to offer it for sale, as it is not stamped or protected by license from the Japanese Government, and we think that it retards our business in this article.

Will you kindly ascertain from the Japanese authorities if it is necessary for us to obtain a license or affix any stamps, and inform us how to proceed in the matter?

We inclose a copy of the report of the Government analyst of Yokohama, showing that there is nothing of a poisonous nature contained in the preparation.

We remain, etc.,

China and Japan Trading Company.