Mr. Blaine to Mr. Swift.

No. 59.]

Sir: I have to acknowledge the receipt of your No. 88 of the 5th ultimo, in relation to taxes imposed by the Japanese Government upon an American preparation known as “Scott’s Emulsion.” This preparation is described as a “food medicine,” being composed of cod-liver oil, hypophosphites of lime and soda, glycerine, etc.

It appears that the China and Japan Trading Company, by whom the article in question has been imported into Japan, sought the advice of the United States minister at Tokio, in 1888, as to whether it would be required of them, being a firm of American merchants, to take out a license for the sale of the commodity, and that they were informed by him that it would not be necessary. Acting upon this advice, they proceeded [Page 595] to advertise the preparation and to arrange for its importation and sale. In the early part of 1889, after the emulsion had for sometime been on the market, the Japanese retail merchants, by arrangement with whom the preparation was disposed of, were informed by their Government that they must purchase a special license for its sale. The American importers, in order to avoid delay and trouble, instructed the Japanese merchants to obtain the license, but at the same time applied to the legation to secure, if possible, by diplomatic action a withdrawal of the order of the Japanese Government. In response to this application, you addressed the Japanese foreign office a note bearing date September 13, 1889, copy of which you inclose. After this note was written another ground of complaint arose. In addition to the license tax previously required, the Japanese merchants were informed that they must pay an excise duty of 10 per cent. ad valorem upon the retail price of the preparation in the form of a revenue stamp to be placed on each bottle, and that an evasion of the order would be followed by punishment as for a misdemeanor or public offense. In consequence of this new exaction, the Japanese merchants were unable any longer to deal in the preparation and were compelled to return the stock on hand to the importers. Meanwhile, an imitation of the preparation has been made by the Japanese and is having an extensive sale, due in large measure to the previous advertising of the American commodity by the China and Japan Trading Company.

On the subject of the second exaction you addressed the Japanese foreign office a note bearing date the 4th of October last. On the 23d of that month Viscount Aoki acknowledged the reception of your two notes, to which he promised a further reply when he should have received a report from the department of home affairs. The further reply was not made until the 17th of January last, and in it Viscount Aoki defends the action of his Government on the twofold ground, first, that “Scott’s Emulsion,” being in the nature of a medical preparation, falls within the Japanese regulations for the sale of licensed medicines, which require a special license to be taken out for the vending of such articles; and, second, that under the treaties the Japanese Government has the right to levy internal taxes on all goods or articles of merchandise imported into the Empire. On the 23d of January last you had a conversation by appointment with Viscount Aoki at the foreign office, in regard to the question at issue, and of this conversation you inclose in your dispatch a précis.

Under date of the 7th instant, the Department received from the chargé d’affaires of Japan at this capital a note relating to the same subject-matter as your dispatch. Accompanying this note are copies of your two notes of September 13 and October 4, 1889, to Count Okuma; of the replies of Viscount Aoki of the 23d of October and of the 17th of January last; of your précis, communicated to Viscount Aoki on January 24, of your conversation with him of the preceding day, and also of a précis, prepared by the viscount, of the same interview. Copies of the note of the Japanese chargé d’affaires and of Viscount Aoki’s précis of the conversation of the 23d of January are herewith inclosed.* The two accounts of the interview vary in some particulars, not an infrequent occurrence where conversations are conducted through an interpreter, but into those variances it is not thought to be material or expedient to enter.

[Page 596]

In the note of the chargé d’affaires the same arguments are used in defense of the action of the Japanese Government as are found in Viscount Aoki’s note to you of the 17th of January last; but it is observed that in the note of the chargé d’affaires it is said that while the Imperial Government entertains the views before stated and feels confident that the Government of the United States may accept them, the Imperial authorities would not have it understood that they would inflexibly adhere to theirofinion or hesitate to abolish the internal taxes upon the imported article if it could be conclusively shown that they are not altogether correct in their position; and in this relation they ask an expression of the views of the United States upon the subject.

In reaching a conclusion in regard to the admissibility of the taxes in question it is thought to be necessary to refer only to two provisions in the treaty between the United States and Japan of 1858, to which you have already called attention. By the third article of that treaty it is provided that—

Americans may freely buy from Japanese and sell to them any articles that eitber may have for sale, without the intervention of any Japanese officers in such purchase or sale, or in making or receiving payment for the same.

And that—

All classes of Japanese may purchase, sell, keep, or use any article sold to them by the Americans.

The obvious purpose of these two provisions was to do away completely with the restrictions which had previously existed in Japan against the sale of articles of merchandise by Americans to the Japanese and the free disposition by the latter of the articles so sold.

By the seventh article of the treaty of 1854 (the first treaty between the United States and Japan) it was agreed that ships of the United States resorting to the portsofen to them should be permitted to exchange gold and silver coin and articles of goods for other articles of goods, under such regulations as should be temporarily established by the Japanese Government for that purpose. This stipulation secured no general right of commerce and was found to be of little practical value. The treaty of 1858 announced and secured a complete reversal of the previous policy of the Japanese Government. Absolute liberty of trade having been established by article 3 of the treaty, the conditions under which trade should in the future be carried on were defined in the next succeeding article.

Duties [so reads article 4 of the treaty] shall be paid to the Government of Japan on all goods landed in the country, and on all articles of Japanese production that are exported as cargo, according to the tariff hereunto appended.

Provision is then made for the valuation of goods, for the exemption from duty of supplies for the United States Government, and the importation ofofium is prohibited. Then follows this stipulation:

All goods imported into Japan and 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.

Viscount Aoki contends that under this stipulation the Japanese Government has the right to impose such internal taxes as it may deem proper upon foreign goods imported into the Empire and found in Japanese hands, provided no duty is levied upon their transportation, thus laying special and exclusive stress upon the words “may be transported.” These words he considers as defining and limiting the scope of the whole stipulation. After careful reflection, I find myself wholly unable to concur in Viscount Aoki’s interpretation. I am forced to the [Page 597] conclusion that it is excluded, not only by the general purpose, but also by the express terms of the treaty. It maybe true, as has been suggested, that the American negotiator of the treaty of 1858 had in mind in his negotiations with the Japanese Government the “likin” tax, or transit duty, imposed on foreign goods in the Chinese Empire. But, admitting this to be the case, the language of the treaty renders it clear that it was intended, while doing away with the transit duty, to prevent the imposition of equally onerous and distinctive taxes in other forms.

The objection to the “likin” tax was and is that it practically annuls the benefits intended to be secured to foreign nations by the establishment of a definite schedule of tariff duties. The objection to it rests, not upon the ground that it is a duty upon transportation, but upon the fact that it in reality increases to the extent of the tax imposed the amount of duties required to be paid upon foreign importations.

The words “may be transported” were employed merely for the purpose of preventing a differential treatment of the imported goods based upon a change of the place in which they might be found or of the hands into which they might come. In itself the matter of transportation amounted to little and was a mere incident. If the goods were to be transported, it was for some purpose, viz, one of those mentioned in article 3 of the treaty, to “purchase, sell, keep, or use.” It would have availed nothing to exempt the transit from duty if, the moment it was completed, the goods became liable to further taxes at the will of the Japanese Government. Hence it was provided that they might be transported without the payment of “any tax, excise, or transit duty whatever.” The argument of Viscount Aoki eliminates from this provision the words “taxes and excise,” and leaves only the words “transit duty,” or at most makes the former words merely synonymous with the term “transit duty.” I am unable to perceive any rule of interpretation by which such a construction can be admitted. The wordstax and excise” must be held to have been used advisedly and for some purpose. In the opinion of the Department the language of the whole stipulation shows that it was the clear intention of the contracting parties to preclude the assessment of duties, in addition to those provided in the treaty, by reason of the passage of the goods from American into Japanese hands.

It confirmed and secured the right guarantied by article 3 of the treaty, of the free sale of goods by Americans to Japanese, and of the right of all classes of Japanese to purchase, sell, keep, or use such goods.

If anything were needed to sustain thisofinion, ample confirmation of it would be found in the uniform practice of the Japanese Government during the 30 years that have elapsed since the treaty was concluded. Never before, within the knowledge of the Department, has it been claimed by that Government that goodshaving paid the duties prescribed by the treaty might further be burdened with internal taxes. Such, also, as your dispatch shows, has been the practice of the Japanese Government with respect to goods imported by other foreigners than Americans. Indeed, the efforts that have been put forth through so many years to reach a readjustment of the conventional tariffs have been, so far as Japan is concerned, misdirected and unnecessary if she possesses the power, immediately after goods have passed into Japanese hands, to subject them to such further duties as she may see fit to impose.

This Government is therefore compelled to regard the recent action of the Japanese Government as a clear and substantial violation of the [Page 598] provisions of the treaty of 1858; and it confidently relies, in its expectation of the reversal of that action, upon the expression found in the note of the Japanese chargé d’affaires of the readiness of the Japanese Government to abolish the taxes in question if shown to be in conflict with the treaties.

Your protest against these new exactions is therefore approved, and you are instructed to communicate the views herein expressed to the Japanese Government by leaving a copy of this communication with the minister for foreign affairs.

I am, etc.,

James G. Blaine.
  1. For note of Japanese chargé d’affairs of March 7, 1890, see correspondence with Japanese legation at Washington, page 116; for Viscount Aoki’s précis see inclosure 2 in No. 91, page 588.