File No. 893.773/44

The Secretary of State to Ambassador Guthrie

No. 236

Sir: The Department acknowledges the receipt of your despatch No. 378 of November 4, 1915, relating to the subject of preferential [Page 447] freight rates allowed certain goods shipped into Manchuria over the South Manchuria Railway.

In reply to your request, you are instructed that the question at issue is obscured by any discussion of forms of contract between the Railway Administration and shipping companies. The very existence of such contracts granting reduced rates is the sort of thing to which objection has been made and it is unfortunate that our Consul at Dalny allowed himself to admit the need of any such agreement as he appears to have done in his letter to Baron Nakamura dated May 5, 1915, wherein he says:

As I did not understand that simply an agreement was desired but an agreement identical with that now in operation with at least two Japanese shipping companies, the Nippon Yusen Kaisha and the Osaka Shosen Kaisha, I should be grateful for any information your excellency can give me as to why a new form of agreement is necessary.

Still more objectionable is his letter of May 19, 1915, to Mr. Kubo. It would have been better, had he taken the position which he defined in his despatch of June 16 to your Embassy wherein he very pertinently observes:

There is discrimination, whatever the means by which American goods arrive—whatever the nationality of the vessel—if Japanese goods are granted cheaper rates. The importing vessel is simply a subterfuge which does not affect the fact of discrimination one way or another.

The Railway Administration has several times altered the conditions under which the reduced rates will be granted.

At first they were made applicable to specific goods shipped from Japan. To obtain these special rates American goods would have had to be shipped via Japan. Subsequently, after objection made by various interests, the special rates were made applicable to goods carried in vessels of certain Japanese lines. This being equally objectionable and not in harmony with the agreements into which Japan has entered for the preservation of equality of opportunity, it is now sought to make the enjoyment of reduced rates a matter of special contract, the approval of which by this Government would apparently make it a party to the discrimination.

You are instructed to bring the matter once more to the attention of the Foreign Office and point out that, in view of this Government, the right of American goods to receive the reduced rates can not be made to depend upon the route of shipment, the nationality of the importing vessel nor upon the signature by shipping companies of a contract with the railway, granting preferential rates. The American Government trusts that the Imperial Japanese Government may be disposed to instruct the authorities or the South Manchuria Railway that the conditions under which reduced freight rates are allowed must be such as will afford real equality of treatment for the goods and shipping of all nationalities.

In this connection your attention is called again to the Department’s instructions No. 140 of April 17, 1915,8 particularly to the paragraphs relating to shipments through Newchwang. The statement of the Nippon Yusen Kaisha, quoted by Mr. Wheeler in the Embassy’s despatch No. 296 of June 9, to the effect that the company maintains a regular service on the Shanghai-Newchwang route is [Page 448] contradicted by a report of Mr. Pontius, while stationed there as Consul, in a dispatch to the Legation at Peking, dated November 7, 1914. At that time Mr. Pontius said: “The Nippon Yusen Kaisha maintains no regular steamship service between Shanghai and Newchwang.” It was to shipments from Shanghai to Newchwang that the Department referred in its statement in instruction No. 140 that no regular service to the latter port was maintained by Japanese steamers.

I am [etc.]

Robert Lansing