File No. 8602/6–10.

Chargé Fletcher to the Secretary of State.

No. 801.]

Sir: I have the honor to inclose copies of recent correspondence with the Wai-wu Pu in relation to the imposition at Nanking and at Shun Te Fu of certain taxes on American kerosene oil, which seem to me to be in violation of treaty rights and against which I have protested.

The facts fully appear in the correspondence. Briefly stated, they are as follows:

At Nanking a contribution, called voluntary, but collection of which was enforced by fine and imprisonment, was levied by the local authorities on kerosene oil, the proceeds being devoted to the maintenance of a hospital. Nanking being an open port, I have taken the position that the taxes and charges which may be levied on American goods there are only those provided for by treaty, irrespective of whether in foreign or Chinese hands and whether the duty certificates have been canceled or not.

At Shun Te Fu the case differs slightly. There the tax has been imposed on kerosene oil by the local magistrate in aid of a girls’ school, and under Article XI of the commercial treaty of 1896 between China and Japan, which provides that—

It shall be at the option of any Japanese subject desiring to convey duly imported articles to an inland market to clear his goods of all transit duties by payment of a commutation transit tax or duty, equal to one-half of the import duty in respect of dutiable articles, and 2½ per cent upon the value in respect of duty-free articles, and on payment thereof a certificate shall be issued which shall exempt the goods from all further inland charges whatsoever—

seems to be in contravention of our treaty rights. To my note in reference to this case I have as yet received no reply.

In the Nanking case the principal question involved is whether the duty-free area of an open port includes the whole area of the port or city. This point has never been definitely settled, except in the case of Changsha, when China agreed to the British contention, but the treaty powers have always insisted that it includes the whole area of the port, and my protest is based on this assumption.

The fact that the taxes are collected from Chinese subjects complicates the question and makes effective protest and action on the part of the legation difficult, but in view of the far-reaching consequence of the exercise of this alleged right of local taxation, if allowed to [Page 135] go unchallenged, I have felt obliged, while disclaiming any desire or intention of interfering in purely Chinese questions, to point out its effect on American trade and to protest against it as in violation of our treaty rights. I have not asked for a restitution of the money collected, but merely that orders be given to the local authorities to refrain from the collection of the taxes.

Cases of this kind may be expected to recur, and I have the honor to request the department’s instructions in the premises.

I have, etc.,

Henry P. Fletcher.
[Inclosure 1.]

Chargé Fletcher to the Prince of Ch’ing.

No. 321.]

Your Imperial Highness: I have the honor to call Your Highness’ attention once more to the case of the levy at Nanking of a tax on American kerosene oil in the hands of native dealers under the name of a voluntary contribution for the support of a hospital.

On September 27, 1906, Mr. Rockhill addressed a note to Your Highness with reference to this taxation and requested Your Highness “to instruct the central likin office at Nanking that the levy of any tax whatsoever upon foreign goods which have already paid the inland transit duty is in violation of existing treaties and must be discontinued.”

To this note Your Highness replied on October 20, 1906, by communicating the reply of the superintendent of southern trade to the effect that the sums referred to had been collected as a “voluntary contribution “of Chinese merchants in aid of charity and has nothing in the world to do with the duty and likin collected by the Government. The officials simply allow the people to do as they please in the matter and certainly can not either compel them to pay or prevent it.

Relying upon this statement the legation regarded the matter as settled and closed. It is now, however, reported by the American consul at Nanking that two native dealers, Heng Ieng-jun and Liu Shen Kuan, have been arrested and imprisoned by orders of the central likin office for refusing to pay this contribution, and compelled to sign a written statement that they will always, hereafter, pay this tax or contribution willingly.

This legation, therefore, while disclaiming any intention of interfering in purely Chinese questions, feels in duty bound to protest earnestly against the imposition of any additional tax or charges whatsoever, either in the form of a contribution or otherwise, upon American goods, whether in Chinese or foreign hands, which have paid the duties provided for by treaty.

That the tax referred to is such a charge seems clear, and it can not be admitted that because the proceeds of the contribution are devoted to a charitable institution and not received by the Government that it is not any the less a tax.

It has been designated in previous correspondence as “a voluntary contribution,” but the arrest and imprisonment by the local authorities of dealers who have refused to pay it divests it of any voluntary character and proves it a tax under another name.

Under these circumstances I have the honor to again request Your Highness to instruct the local authorities to refrain from enforcing the collection of this so-called contribution.

I avail, etc.,

Henry P. Fletcher.
[Inclosure 2.]

The Prince of Ch’ing to Chargé Fletcher.

Your Excellency: I have the honor to acknowledge the receipt of Your Excellency’s note of November 6, 1907, with regard to the collection of a voluntary contribution in aid of charity by the central likin office at Nanking. In [Page 136] the note under acknowledgment you state that you have received a communication from the American consul in Nanking to the effect that two native dealers, Heng Feng-jun and Liu Shen-kuan, have been arrested and imprisoned by order of the central likin office, and compelled to sign a written statement that they will always hereafter pay the contribution willingly; that such action proves this contribution nothing more nor less than a tax, and that you must, therefore, again request that the local authorities be directed to refrain from enforcing the collection of this so-called contribution.

Upon receipt of your note my board telegraphed immediately to the superintendent of trade for the south, directing that the matter be investigated and a report made of the action taken. His reply has now been received and is to the following effect:

“The central likin station reports that this contribution was voluntarily levied on themselves by the merchants; that recently one or two dealers, selfishly seeking their own private gain and having no regard for the public welfare, had refused to pay their contributions; that after urgent exhortations, however, these men had paid the money as before, and the affair had been closed; that the likin station had arrested no one and taken no compulsory measures; and finally, that this contribution was levied after the cancellation of the duty certificate and the delivery of the goods to Chinese firms, and, therefore, was no concern whatever of any foreign merchant.

“Since the case has thus been settled, then the collection of the contribution should go on as formerly. And as the money is used for the charitable purpose of assisting the Chinese foreign hospital, the American minister will be glad to give us his hearty cooperation at all times.

“Please transmit to him this reply.”

It appears from the above, then, that no arrests have been made and no compulsion brought to bear; and as the case in question has been settled, the collection of the contribution will be continued as formerly. Since the money is collected for a worthy cause I think that Your Excellency can not but be glad to assist in the accomplishment of an effort to benefit the public at large.

It becomes necessary for me to send this reply for Your Excellency’s information.

[Seal of the Waiwu Pu.]
[Inclosure 3.]

Chargé Fletcher to the Prince of Ch’ing.

Your Imperial Highness: I have the honor to acknowledge the receipt of Your Highness’ note of November 20 last, in reply to my note of November 6, 1907, with regard to the collection of a contribution or tax on American kerosene oil by the central likin office at Nanking.

In my note of November 6, last, to which I have the honor to refer, I called Your Highness’ attention to the case of two native dealers in American kerosene oil who had been arrested for nonpayment of this contribution, and compelled to pay it, as well as to give security that they would pay it in the future.

In reply, Your Highness quoted the reply from the superintendent of southern trade to the following effect:1

Your Highness stated in conclusion that it appeared that no arrests had been made and no compulsion brought to bear, and that as the case in question had been settled, the collection of the contribution will be continued as formerly.

Upon receipt of Your Highness’ reply, the American consul at Nanking was again instructed to investigate the case and to make a full report, and his attention was called to the fact that it had been reported to Your Highness that no arrests had been made. I am now in receipt of his reply, informing me that two native dealers (Na Ting Liang and Fang Lien-chen) were on the 22d of the 8th moon of this year, arrested by the Kiang Ling magistrate at the request of the likin office and incarcerated in the magistrate’s jail because of their refusal to pay this oil contribution. The former was detained 14 and the latter 9 days, and were only released upon signing a written statement that they [Page 137] would in future pay this tax and were compelled to give security to that effect. They were then assessed $283 and $168, respectively, and informed that if in future they refused to pay this tax they would be severely punished and their shops closed. Since then they have refused to deal in American kerosene oil and the American trade has thus suffered a severe injury.

The superintendent of southern trade, in his reply above quoted, states that:

“This contribution was levied after the cancellation of the duty certificate and delivery of the goods to Chinese firms, and therefore was no concern whatever of any foreign merchant.”

Against this position the legation feels bound to enter its protest, and, as stated in my note of November 6 last, can not agree to the imposition of any additional tax or charge whatsoever, in the form of a contribution or otherwise, upon American goods which have paid the duties prescribed for by treaty, irrespective of whether the duty certificates have been canceled or not.

It becomes my duty therefore to again request Your Highness to instruct the local authorities to refrain from the collection of this so-called contribution.

I avail, etc.,

Henry P. Fletcher.
[Inclosure 4.]

Chargé Fletcher to the Prince of Ch’ing.

No. 333.]

Your Highness: I have the honor to call Your Highness’ attention to the imposition at Chun Te Fu of a tax of 60 cash a case on American oil, which in the opinion of this legation, is in violation of Article XI of the commercial treaty of 1896 between China and Japan.

The facts of the case as reported to the legation are as follows:

The local magistrate at Shun Te Fu has lately issued a proclamation to the effect—

“That whereas the establishment of girls’ schools is very important, and whereas there are no funds on hand to meet the expenses of such schools, the magistrate has decided to levy a tax of 60 cash upon all persons who purchase a case of oil, or 60 cash for each case he purchases; the said tax, moreover, to be collected by the seller of the oil and turned over to the local tax office which collects the tax on skins and furs. Further, in order to prevent any mistake in the collecting whereby full returns would not be made, the seller is ordered to produce his invoices for each consignment of oil which he may receive, have them stamped at the local tax office, and then each month pay to this office the 60 cash which he has collected from the purchasers of oil; and if his tax receipts show any shortage he is to be fined ten times the amount of such shortage.”

and has proceeded to levy the tax mentioned. While the tax is stated in the first part of the proclamation to be on the purchaser, this seems a mere subterfuge, as the seller is made entirely responsible for the amount of the tax, and in any event it is clearly a tax on American goods which have already paid the import and inland transit charges, and are therefore exempt from all further taxation.

In similar cases which have arisen the argument has been brought forward by the local authorities that after the transit passes have been produced and canceled the interest of the foreign merchant ceases and they are at liberty to impose whatever taxes they may choose to levy. This position can not be agreed to by the legation.

It is hardly necessary to recall to Your Highness the provisions of Article XI of the treaty above referred to, reading as follows:

“It shall be at the option of any Japanese subject desiring to convey duly imported articles to an inland market to clear his goods of all transit duties by payment of a commutation transit tax or duty equal to one-half of the import duty in respect of dutiable articles and 2£ per cent upon the value in respect of duty-free articles, and on payment thereof a certificate shall be issued which shall exempt the goods from all further inland charges whatsoever.”

[Page 138]

As stated by Mr. Rockhill in his note to Your Highness dated September 2f, 1906—

“It is plain, from the above language, that it makes no difference whether or not the goods be already sold to a Chinese firm and delivery of them taken, the goods are free of all further inland charges whatsoever after the inland transit tax has once been paid.”

The growing use in the interior of kerosene oil, one of the principle American imports to China, gives the question a more than local importance, for if this article is singled out for taxation locally the trade in it will soon be extinguished at all nontreaty places and the transit-pass provisions of the treaties with respect to this important item of American trade will be rendered useless and void.

This case has been taken up by the American consul general with the customs taot’ai at Tientsin without result, and it now becomes my duty to bring the matter to the attention of Your Highness, and I do so with the earnest hope that Your Highness will agree with me that this taxation, no matter how laudable the object to which the revenue derived therefrom is applied, is not according to treaty nor consistent with the good trade relations which we hope to see maintained between our respective countries, and that Your Highness will give the necessary instructions that the local authorities concerned shall cease to tax locally goods which have already paid the full charges stipulated in the treaties.

I avail, etc.,

Henry P. Fletcher.
  1. Supra.