Mr. McGrath to Mr. Swift.

Sir: Referring to our communication of April 9, we would add thereto that we have no case as yet of any interference on the part of the Government, further than some inquiries as to the status of the medicine, whether being a food medicine simply or a patent medicine, the latter paying a stamp tax and a special license being required. The Japanese druggists fear that it will be classed as the latter, which would involve, perhaps, some fine for selling this medicine without a license and for stamp.

This fear interferes with the sale of the emulsion, and hence we are obliged to ask that the inquiry be made of the proper authorities if “Scott’s Emulsion” will be accepted here, as in the United States, as a “food medicine” (its contents being detailed on the label) or if a special license will be required by the Japanese druggists for the sale of the same.

We remain, etc.,

Thos. F. McGrath,
Manager of China and Jopan Trading Company.
[Inclosure B.]

The board of health of Osaka Fu to the China and Japan Trading Company.

In reply to your note of the 31st ultimo, regarding the “Scott’s Emulsion,” we now have to say that we have called Takeda Chobei and three others, the agents for the sale of the emulsion, and have told them that they must get license for the sale of “Scott’s Emulsion” as a patent medicine.

This is in accordance with the instructions we have received from the home and finance departments, in answer to our inquiry to those departments about the emulsion which is advertised in the papers.

The Board of Health,
Osaka Fu.
[Inclosure 2 in No. 88.]

Mr. Swift to Count Okuma.

No. 20.]

Sir: Referring to my communication No. 14, dated September 13, 1889, in which I brought to Your Excellency’s notice what seemed to me to be an infraction by the Japanese authorities of the treaties between the United States and the Empire of Japan, in levying an excise upon an article of American production and import, known as “Scott’s Emulsion,” I respectfully call Your Excellency’s attention to the circumstance that the question is one of considerable importance to my countrymen engaged in commerce in Japan and urge that you will kindly give it as immediate attention as your other duties will permit of.

[Page 582]

The finance department, it seems, requires a revenue stamp representing 10 per cent, of the value of the article sold to he placed upon each package. Since sending you my communication of the 13th ultimo, informing you of the action of the Government officials of Osaka Fu, the sale of the article in question has been authoritatively prohibited in Tokio.

That you have not found time to answer my inquiry, nor even to acknowledge its receipt, although 3 weeks have elapsed since it was sent, I have no doubt is due to the pressing nature of other official duties of more importance to Your Excellency’s Government than this which I have had the honor to point out to you. But, as the question raised by me involves an important right hitherto enjoyed by American citizens under the treaties, I respectfully ask your indulgence in pressing it upon your attention and for as early a reply as your convenience will permit of.

I avail myself, etc.,

John F. Swift.
[Inclosure 3 in No. 88.—Translation.]

Viscount Aoki to Mr. Swift.

No. 37.]

Sir: I have the honor to acknowledge the recept of Your Excellency’s note of the 4th instant, in reference to the alleged interference on the part of His Imperial Majesty’s Government with the sale of a medical preparation known as “Scott’s Emulsion.”

In a note upon this subject dated the 13th ultimo you stated that His Imperial Majesty’s department for finance had forbidden the sale in Japan of the article in question by any merchant or agent of sale, unless such merchant or agent first obtained a Government license authorizing such sale as a patent medicine, which license, you were advised, was subject to a monetary charge for the purposes of revenue. You thereupon expressed the opinion that the license in question was in contravention of the provisions of the treaty of 1858, and you invited the attention of the Imperial Government to the question.

In your note now under acknowledgment you refer to your former communication on this subject and declare that the infraction of the treaty complained of consisted of an attempt to levy upon the emulsion an excise tax of 10 per cent. ad valorem, and you add that the sale of the emulsion had been authoritatively prohibited in Tokio since your first communication on the subject was written, and, finally, Your Excellency is pleased to call attention to the fact that your note of the 13th ultimo had not been answered, nor even its receipt acknowledged, although 3 weeks had elapsed since it was sent.

In reply, I beg to acquaint Your Excellency that, immediately upon the receipt of your first note on the subject, the matter was referred to the department of home affairs for investigation. I am just in receipt of a reply from His Excellency the minister of home affairs, but, as that response only professes to deal with the question of licenses and license fees and does not touch the new issue relating to excise duty which you raise in your note of the 4th instant, I have deemed it best to obtain from the department of home affairs a report upon the second question before reporting to you the result of the first examination, and I beg to assure you that no unnecessary delay will be permitted either in the examination of the question or in acquainting you of the result of such examination.

I avail myself, etc.,

Viscount Suizo Aoki,
Vice Minister for Foreign Affairs.
[Inclosure 4 in No. 88.—Translation.]

Viscount Aoki to Mr. Swift.

Sir: In my note of the 23d of October last, I had the honor to acknowledge the receipt of Your Excellency’s notes of the 13th of September and the 4th of October last, in which, referring to the alleged interference on the part of certain authorities of the Imperial Government with the sale of a medical preparation known as “Scott’s [Page 583] Emulsion” imported into Japan by the China and Japan Trading Company, and the attempt made by them to levy upon the emulsion an excise duty equal to 10 per cent. ad valorem, you expressed your opinion that the action of such authorities would seem to be in contravention of the treaty concluded between Japan and the United States. In that note I stated that, before communicating to you a definite reply in reference to the question raised by Your Excellency, I had deemed it best to obtain from the department for home affairs a report on the question of the alleged imposition of an internal tax. Being now in receipt of reports from the department for home affairs and the department for finance, I am prepared to state herewith the result of the examination into the matter in question and to set forth the opinion of the Imperial Government.

It appears from the report received from the department for home affairs that in Osaka the local authorities directed certain Japanese subjects who were selling “Scott’s Emulsion” to obtain a license permitting them to sell the emulsion as a licensed medicine, and that in Tokio, although the local authorities have never directly prohibited the sale of the emulsion, certain Japanese subjects engaged in the sale of that medical preparation, having been summoned to Tokio Fu and warned by the authorities that they must obtain licenses in accordance with the provisions of the “Regulations for the sale of licensed medicines,” they filed a declaration to the effect that they would no longer continue to sell the emulsion.

This medical preparation, being a combination of cod-liver oil with certain drugs, such as hypophosphites of lime and soda, glycerine, etc., intended for direct use as a remedy for certain kinds of diseases, and being accompanied by directions for use, clearly falls within the description of that class of medicines for the sale of which special licenses are required by the above-mentioned regulations. For this reason, the Imperial Government should not be justified in regarding “Scott’s Emulsion” as an ordinary article of commerce and are obliged to require all Japanese subjects who may desire to sell it to obtain from the local authorities licenses permitting them to be dealers in licensed medicines.

In reply to Your Excellency’sofinion that the action of the Imperial Government in thus requiring Japanese subjects to obtain licenses for the sale of certain articles imported from the United States, for which license fees are to be paid in accordance with the laws and regulations of the Imperial Government, and to pay the taxes prescribed by such regulations. It therefore seems to me quite unnecessary in reference to this question to enter into the discussion of article iii of the treaty, which provides that all classes of the Japanese may sell any articles sold to them by the Americans, and the question whether the action of the local authorities of the Imperial Government in reference to the sale of the emulsion was proper or improper can only be decided by the consideration of the provisions of article iv.

The fifth paragraph of article iv provides that “imported goods which have paid the duty fixed by this treaty may be transported by the Japanese into any part of the Empire without the payment of any tax, excise, or transit duty whatever.” The Dutch version is also identical to the English version.

This clause, in the judgment of the Imperial Government, can only be construed to mean that all goods imported from abroad may be transported by the Japanese into any part of the Empire, and such goods shall not be liable to pay any tax in the interior of the country on account of their transportation, provided the customs authorities had already levied import duties upon them. There is, of course, a marked difference between a declaration to the effect that no tax shall be paid in respect of transportation and a stipulation that no tax shall be levied in respect to the sale, use, or consumption of goods. Had it been intended to include in the inhibition this latter class of imposts, the qualifying words “may be transported” would not have been inserted in the treaty.

I am therefore impressed with the conviction that the action of the Imperial Government in requiring every Japanese subject who may sell “Scott’s Emulsion” to obtain licenses upon payment of certain fees in accordance with the “Regulations for the sale of licensed medicines,” and in imposing upon the emulsion, when sold by such licensed dealers, certain stamp duties which are in all cases levied upon medical preparations, both domestic and foreign, falling within the description of “licensed medicines,” is in no wise contrary to the terms of the treaty.

I avail myself, etc.,

Viscount Suizo Aoki,
His Imperial Majesty’s Minister for Foreign Affairs.
[Page 584]
[Inclosure 5 in No. 88.]

Mr. Swift to Viscount Aoki.

No. 40.]

Viscount: Immediately on returning to this legation on Thursday, I prepared a memorandum of our conversation, as I promised you I would do, and herewith send it for your examination and approval. It is not complete, that is, it does not give the entire conversation, hut contains the gist of what was said on both sides, to the best of my recollection, and I therein set forth all that is of any real importance on the affair out of which it arises.

I do not send this paper to you as the basis of a discussion of any kind between us, but simply that I may have your own assurance that I have not misunderstood what took place so far as it bears upon the position of His Imperial Japanese Majesty’s Government in the construction it now places upon its treaty with the United States, in order that I may inform my Government with the greatest possible accuracy.

If I hear no objection from you before the departure of the next mail, I will take the liberty of assuming that my understanding and recollection of the conversation has been substantially correct and will forward the precis to my own Government, along with the other papers in the case, the most important being your No. 4, with the written decision of your Government, and await further instructions.

I avail myself, etc.,

John F. Swift.

Précis of a conversation which took place by special appointment at the foreign office, Tokio, January 23, 1890, between His Excellency Viscount Aoki, His Imperial Japanese Majesty’s minister of state for foreign affairs, and Mr. Swift, Ihe minister of the United States.

Subject.—The decision of His Imperial Japanese Majesty’s Government as to the license and excise tax imposed upon the article of American production known as “Scott’s Emulsion of Cod-liver Oil,” and as to the construction placed upon the treaties between the United States and Japan.

Mr. Swift began by referring to His Excellency Viscount Aoki’s communication No. 4, dated January 17, 1890, and in that connection proceeded to say that before notifying his Government of the fact that the Japanese authorities have imposed and are now exacting upon a certain article of merchandise known as “Scott’s Emulsion of Cod-liver Oil,” imported from the United States, a special license to sell as well as an excise duty or tax of 10 per centum ad valorem in addition to the customs duties agreed upon in the treaties between the two countries, as well as of the communication he had received from His Excellency Viscount Aoki, above referred to, which, if he (Mr. Swift) fairly understood the effect of the same, claimed the right to impose such excise, not merely upon the particular article above named, but upon all goods imported from the United States, in spite of the treaty stipulations, he desired to ask of His Excellency a more complete explanation of the scope and meaning of His Imperial Japanese Majesty’s Government as set forth in the said communication.

To this, Viscount Aoki answered that he would willingly give Mr. Swift the desired explanation.

Mr. Swift asked if the decision to place an internal-revenue or excise tax upon “Scott’s Emulsion” was because of any peculiar quality or character in that article taking it out of the general provisions of our treaties, or whether His Imperial Japanese Majesty’s Government claimed the right generally to impose and exact at will additional taxes upon American goods after their passing the custom-house, as a condition of their sale by Japanese merchants in the ordinary way of trade.

To this, Viscount Aoki replied that it was unnecessary to answer that question; that it was sufficient to say that His Imperial Majesty’s Government claimed the right to require merchants to take out a special license for selling “Scott’s Emulsion of Cod-liver Oil” and to pay an excise tax of 10 per cent, ad valorem upon all the sales of that article as had been done. His Excellency then went on to remind Mr. Swift that His Imperial Majesty’s Government had not raised this question as to the full extent of their rights and had no present intention of doing so; that it was Mr. Swift that was raising the question, and, as His Excellency thought, prematurely and unnecessarily. He warned Mr. Swift that, if he persisted in asking for an answer, His [Page 585] Imperial Majesty’s Government might take the ground that it had the right to levy an excise or other additional taxes at will upon all goods coming from the United States.

Mr. Swift answered this by saying that he did not think that the fear that His Imperial Japanese Majesty’s Government would so decide ought to deter him from asking from His Excellency a complete explanation of the written paper he had already received, in which, if he correctly construed its terms, His Imperial Japanese Majesty’s Government had informed him officially and in writing that it did take precisely that very ground, and so justified the imposition of the excise tax. He also called His Excellency Viscount Aoki’s attention to the fact that had His Imperial Japanese Majesty’s Government desired to confine the decision to the exact facts before them and not to intimate anofinion as to what it would do as to goods other than “Scott’s Emulsion of Cod-liver Oil,” they could have done so by restricting the decision to that article, but this they had not done. On the contrary, they had covered the entire field in that decision and had given as a ground for the excise on that article reasons that logically extended to goods of every nature coming from the United States. Mr. Swift further proceeded to say that if the interpretation of the treaties which had stood undisturbed, to the best of his belief, from the very commencement of commercial intercourse between Japan and foreign countries, namely, that goods once past the custom-house were not to be again taxed as a condition of sale, was now to be changed as to the United States, our merchants being selected as the first to bear the brunt of a serious trade impediment, he felt it to be his duty to learn the extent of the danger threatened to American commerce as soon as possible, in order to forewarn his Government of what might be expected; that although “Scott’s Emulsion of Cod-liver Oil” seemed to make but a trifling item in the trade reports between Japan and the United States, yet its importers had the same rights under the treaties with the importers of kerosene oil or any other article; that if the Japanese Government oould, without violating the treaties, impose an excise tax upon “Scott’s Preparation of Cod-liver Oil,” so far as he, Mr. Swift, could judge from present lights, they could do the same thing upon kerosene oil, upon clocks and watches, or any other American commodity; that in this particular instance the announcement of this new tax was a special hardship upon the importers of “Scott’s Emulsion,” owing to the fact that before offering it upon the market they had expended several thousand dollars in advertising the goods in the Japanese native papers, and that the excise had not been brought to their notice until after these large sums had been laid out; that both the excise and the license hadoferated upon them as a complete surprise, and that their sale had been substantially interdicted by direct Government and police interference; that what had been done as to this article might, so far as Mr. Swift could see, at any day be done as to kerosene oil or any other American production, and that his Government and countrymen ought to know where they stand.

Under these circumstances Mr. Swift thought His Excellency would allow him (Mr. Swift) to be the judge of the wisdom and propriety of his asking, as he respectfully did, whether the communication of the 17th instant had been duly considered in all its reach, scope, and bearings, and if, in fact, His Imperial Japanese Majesty’s Government claimed the right to impose and exact excise and license taxes upou any and all American merchandise as a condition to their sale in the ordinary way of trade. “To be more explicit,” said Mr. Swift, “do you claim the right to impose an excise duty, for example, upon kerosene oil?”

His Excellency Viscount Aoki answered that he did so claim, but that there was no present intention to exercise the right.

Mr. Swift then said he was very sorry to be obliged to report to his Government what seemed to him, so far as he could judge, a direct violation, not only of the plain terms of the treaty, but of an interpretation that had been uniform from the commencement of trade relations between Japan and the United States and with all other foreign countries. He also said that he could not refrain from expressing his regret that His Imperial Japanese Majesty’s Government had thought it expedient to inaugurate this new ruling by a discriminating act directed at the commerce of the United States, while the merchants of other countries were left untouched. He reminded His Excellency Viscount Aoki that the United States had in the past manifested its well-known kindly feeling towards Japan in many ways, but notably in the position it had taken more than 10 years ago by agreeing in a treaty to yield and surrender all right to interfere in Japanese tariff and trade regulations, only stipulating for what was essential if any American commerce was to remain, namely, that the treaty should not take effect until other powers had agreed; that, under these circumstances, the people of the United States, especially those engaged in commerce, would certainly be surprised at their being, as they might think, picked out from all the others as the first to have their trade put under disadvantageous restriction; that they must, he feared, feel more or less displeased and aggrieved at feeling themselves picked out and selected from amongst all the foreign merchants domiciled in Japan as the subjects of this experiment, under an unexpected and startling departure in treaty construction suddenly put in force by the Japanese Government.

[Page 586]

Mr. Swift remarked that it was likely that they would feel to some extent aggrieved even if the new departure in construction was one seemingly not so wide as is this from the original intent and meaning of the treaty when made 30 or more years ago. But, on the contrary, if it should strike them, as he certainly thought it would, that the new construction is erroneous and the old and original interpretation which has stood unchallenged for so long a period was a sound one, then their dissatisfaction with being made the first victims of a change would, he feared, be increased by that circumstance. In short, he was afraid that there might be some who would feel and, perhaps, say that those nations that had been less friendly with Japan than have been the United States, less conciliatory in their bearing, and less yielidng to her just demands perhaps have received greater respect and higher consideration at their hands.

To this, Viscount Aoki said he could not take into account what the American people might feel or think; that the rights and interests of Japan alone were the subject of his concern. He, however, proceeded to say that the goods of citizens of the United States had not been specially selected for the imposition of this tax; that goods from other countries had been taxed in the same way.

Mr. Swift said that he had made careful inquiry from his colleagues, the representatives of other powers, and that they had all assured him that the ruling made in the communication of the 17th instant was absolutely new, and that in no instance had they heard of any such tax being imposed upon goods coming from their countries.

At the end of the conversation His Excellency Viscount Aoki remarked that if Mr. Swift was of the opinion that the excise and license were violations of the treaty, he was willing to discuss the question with him, as the decision of His Imperial Majesty’s Government was not regarded as a violation or breaking of the treaties with the United States, but merely its construction of their meaning.

This Mr. Swift declined to do at this time, stating that his object in obtaining the interview was not to discuss the question, but solely to ascertain as nearly as possible the exact position the Japanese Government had taken upon the right to impose license and excise taxes upon American goods, and to learn if it had been taken with due consideration and thought, and, finally, to express his regret at the new policy having been inaugurated with respect to the goods of American citizens, as tending to weaken the well-known feeling of kindness that had so long existed on the part of our citizens toward Japan.