File No. 893.512/54.
Chargé MacMurray to the Secretary of State.
Peking , July 16, 1915 .
Sir: I have the honor to transmit herewith a translation of a note, under date of May 15 last, with which the Ministry of Finance, at the request of the Legation, communicated a copy of certain regulations under which it is proposed to levy destination taxes upon foreign goods imported into the Province of Kiangsu and particularly into the walled city of Nanking; also a copy of the note which the Legation yesterday addressed to the Wai Chiao Pu, protesting against the imposition of that tax.[Page 227]
I beg to request the instructions of the Department on the issues thus raised, more especially upon the contention that it is not competent to the Chinese Government to impose upon foreign goods, as such and in contradistinction to native goods, any taxes or dues other than the import duty and optional transit-pass clues expressly stipulated in the treaties, on the ground that such a differentiation would imply the right (as in fact it would afford the opportunity and the temptation) to discriminate against foreign imports.
Under the strict interpretation of the treaties upon which our Government has insisted, transit-pass goods should be held to be exempt from all other inland charges whatsoever, being thus entitled to conditions more favorable than those of “national treatment.” Under the more liberal construction conceded by the British, which admits that such goods pass into the course of Chinese trade and become subject to “national treatment” upon the cancellation of their transit passes at destination, and therefore allows of the levy of such further taxes as may be indiscriminately imposed upon that trade, it has been found necessary to insist that all differentiation between foreign and native goods should thereupon cease.
In protesting against the proposed regulations, it has seemed to me advisable to adduce this further consideration, for two reasons:
- First, it seemed opportune to point out the fallacy of the Chinese position in claiming the right to levy a destination tax upon transit-pass goods after the completion of their transit on the ground that they are then “on the same basis as all other goods,” while at the same time taxing them under the terms of regulations expressly applicable to them as foreign goods. It is possible that a realization of the extent to which their general contention as to the legality of destination taxes is weakened by these regulations may be effective in inducing the Chinese Government to withdraw the regulations—as it could hardly be expected to do otherwise in view of the obduracy with which it has hitherto ignored the protests against the imposition of destination tax upon transit-pass goods and against treating Nanking City as “interior” rather than as an open port.
- Second, in the event of such a general adjustment of questions of taxation as was suggested in the Legation’s despatch No. 664 of June 11, 1915,17 it is possible that our Government might consent to adopt the more liberal construction, in which the British Government has acquiesced, as to the effect of the treaties in entitling foreign goods only to “national treatment” after completing their transit to an open port under exemption certificates or to their destination in the interior under transit pass. In that case it would be well to have on record the contention that no regulation differentiating foreign from native goods and imposing upon them other (even if not more onerous) conditions, can be considered as compatible with the “national treatment” which our Government might be disposed to accept as applicable to imports from the United States.
I have [etc.]
- Not printed.↩