File No. 893.512/71

The Secretary of State to Minister Reinsch

No. 529

Sir: The department acknowledges the receipt of your despatch No. 1215 of September 29, 1916, with enclosure, in regard to the so-called 99 Mercantile Tax.

In the Department’s No. 324 of September 16, 1915, the Department stated that it would be well to obtain a copy of the pao-shang-piao regulations or a receipt showing the payment of such a tax in order to determine the propriety of the Standard Oil Company’s refusal to pay the 99 Mercantile Tax.

The Department infers from your despatch under acknowledgment that no evidence of the character mentioned has been obtained nor has any other evidence of a definitive character been submitted relative to the first-named tax.

However, in this connection it is observed that the Legation’s No. 686 of July 12, 1915, quotes from a communication addressed by the Governor of Kiangsi to the American Consulate General at Hankow on January 12, 1915, the statement that when goods have paid the pao-shang-piao, “the goods will not be taxed a second time.” It would seem that the governor of the province which levies the two taxes mentioned might well be accepted as good authority with regard to the scope and effect of one or both of these taxes, especially when, as appears, the regulations putting the tax or taxes in effect are not obtainable.

Therefore, the Department is constrained to observe that it cannot fully approve of the instructions issued by you on August 21, 1916, on the subject of the 99 Mercantile Tax. The Department is of the opinion that you would have been justified in accepting the statement before quoted of the Governor of Kiangsi as a sufficient basis for a protest against the attempt to collect a second tax from the Standard Oil Company of New York.

It is suggested that you instruct the Consul General at Hankow that, if no later evidence of a contradictory character has come to light, the Legation is prepared to protest, in reliance upon the said interpretation placed upon the pao-shang-piao tax by the Governor of Kiangsi.

I am [etc.]

For the Secretary of State:
Frank L. Polk