The Acting Secretary of State to the American Minister.

No. 104.]

Sir: The Department is in receipt of your No. 124, of November 22 last, relating to the numerous complaints that are being made, particularly in the Manchurian Provinces, regarding the imposition of illegal taxes on foreign products.

A despatch has been received from the Antung consulate; also its No. 43 S, with copies of the legation’s Nos. 162, of September 6, 1910, and 208, of October 19, 1910, to Antung; and Antung’s No. 30 L, of October 12, 1910, to the legation, relating to the discrimination against American goods shown in the collection at that port of the consumption tax.

The American Government sympathizes with China in its desire to obtain an increase of revenue which is undoubtedly needed to meet the increased expenditures made necessary by the program of reform which has been undertaken, and desires to assist that program in every legitimate way; but the consistent attitude of this Government toward the questions involved can not be lightly abandoned.

For more than half a century the United States has steadily opposed the levy and collection of taxes in contravention of the treaties. The clearest statement of the legitimate procedure in regard to the internal taxation of foreign imports, and of exports to foreign countries is that stipulated in Articles XI and XII of the Japanese treaty of commerce and navigation of 1896. Under the provisions of these articles the payment of the transit tax exempts the goods from all further inland charges whatsoever.

These privileges appear to have been granted by China to Japan freely, without any consideration, and in that case may undoubtedly be claimed by Americans under the favored-nation clauses of our own treaties; otherwise American trade is made to suffer serious discrimination. The Department and the legation, therefore, have heretofore uniformly insisted upon the refunding of all taxes and dues collected in excess of those provided by the treaties.

You are of course aware that neither section 8 of the British commercial treaty of 1902 nor Article IV of our own treaty of 1903 are in force. Until likin is abolished these provisions of the treaties are inoperative.

The situation in Manchuria is made more serious according to the dispatches of Consul Baker by the discrimination shown in the collection of a consumption tax upon sales of foreign goods. Some foreign firms resist payment and are exempt. The Japanese goods are apparently exempt entirely from the tax, probably because sales are made through Japanese agents only who refuse to pay the tax. [Page 75] This works great injustice to certain American goods which are thus greatly handicapped in their competition with Japanese products of the same class.

The Department has received a number of letters from the Cotton Goods Export Association of New York complaining of the injustice with which they are treated in Manchuria.

The Department can not but regard as a matter of serious importance the disposition of the Chinese local authorities to disregard the plain provisions of the treaties.

You are instructed, therefore, to continue to protest against any taxation of American goods in excess of that allowed by the treaties and to urge upon the Chinese Government the duty of securing equality of commercial opportunity in Manchuria no less than in other Provinces of the empire by avoiding all discrimination in the levy and collection of such duties and taxes as are legal. You will point out to the Chinese Government the serious effect upon American trade of any such discrimination as is mentioned in the dispatches from Antung.

In this connection, your attention is called again to the telegraphic instruction of November 25 asking for full report by mail of present conditions at Dalny and along the South Manchurian Railway respecting the import of foreign goods.

The Department is anxiously awaiting this report and trusts its receipt may not be unduly delayed.

I am, etc.,

Huntington Wilson.