File No. 611.9331/40

Minister Reinsch to the Secretary of State

No. 1348

Sir: Referring to previous correspondence concerning the export of flour by certain Chinese dealers in exception to the treaty stipulation forbidding such exports, I have the honor to enclose for the information of the Department the following copies of correspondence on the subject:

From Foreign Office, No. 428, of January 14, 1916.
To 411, 24, 1916.
491, Sept. 4, 1916.
From 508, 14, 1916.
To Shanghai 1919, October 21, 1916.
From 1058, Nov. 11, 1916.
To Foreign Office, 536, 22, 1916.
From 544, Dec. 6, 1916.
To 543, 16, 1916.
From Foreign Office, 555, January 10, 1917.

From this correspondence the Department will perceive that the attitude of the Chinese Government in this matter has been unsatisfactory—that it has throughout acted evasively and even disingenuously, and that it now stands obstinately on the fantastic contention that its exception to its own construction of the treaties—an exception made in discrimination against foreign interests, for the profit of a particular group of Chinese merchants—is justified by the [Page 277] facts that that discrimination has a definite though very large quantitative limit, and that it is made in favor of “reliable Chinese merchants.”

I cannot escape the conclusion that this attitude of the Chinese Government is dictated by subservience to the powerful Shanghai milling interests concerned: and although I am taking occasion to lay the case in person before the members of the Revenue Council, which has authority in this matter, and insist that the discrimination be discontinued as from the Chinese New Year (the 23d instant), I am not hopeful that the desired object can be attained without bringing to bear some such actual or threatened coercion as indicated in my telegram of today’s date.

I have [etc.]

Paul S. Reinsch
[Inclosure I—Translation]

The Vice Minister for Foreign Affairs to Minister Reinsch

No. 428

Sir: I have the honor to acknowledge the receipt of your note (No. 399 of December 11, 1915), relating to the application of American merchants to export flour, in which you state that should the exceptional permission to export be continued American merchants should enjoy the same privilege.

This Ministry communicated with the Revenue Council and has since received a reply, as follows:

“The export of grain is prohibited by the treaties. Because the Chinese residing at Hongkong, Singapore and other places were in urgent need of purchasing food the Chinese Government gave special permission to Chinese merchants to ship flour to these localities as a measure of assistance. The reason for this action being to relieve the Chinese residing abroad it should not on this account be suspected that the stipulations of the treaty are being defeated. Moreover, in shipping grain the Chinese merchants are restricted to a certain amount and they must furnish guaranties stating that the shipment is solely for the relief of Chinese residing abroad. It would be impossible for merchants of low character to export grain for sale in quantity and at their own pleasure.”

The temporary permission to Chinese merchants to export grain was given for the sincere purpose of relieving the Chinese residing abroad and is not different from the relieving of distress inside the country. The restrictions as to the amount and as to the furnishing of guaranties are very strict. The relief of Chinese residing abroad thus includes the idea of carefully respecting the law regarding the prohibition to export. The merchants of other nations cannot therefore rely on this as a precedent.

With compliments,

Ts’ao Ju-lin
[Inclosure 2]

Minister Reinsch to the Minister for Foreign Affairs

No. 411

Excellency: I have the honor to acknowledge the receipt of your note (No 428) of January 14, dealing with the matter of the export of flour and grain from Shanghai. I regret to state that the Revenue Council has entirely ignored the fact that the flour exported from China under special permit was freely sold to any purchaser in Hongkong and other southern ports. It cannot therefore be distinguished from general commercial export; nor does the treaty provide for exceptional export for the assistance of Chinese residing abroad, under any circumstances.

I have recently been informed that the flour export business from Shanghai * * * has been under the sole control of the chairman of the Chinese Chamber of Commerce in the native city at Shanghai who controls the output of the [Page 278] Lee Dah and the Sun Dah mills at Shanghai, that most of the flour exported comes from these mills, and that the whole arrangement is a result of political influence.

It is therefore necessary for me to insist either that this concession be immediately canceled, or that a similar permission to export grains and flour be given to foreign merchants. In default of such action, I should be compelled to lay the matter before the Diplomatic Corps in order that joint action might be taken for the enforcement of the treaties.

I avail [etc.]

Paul S. Reinsch
[Inclosure 3]

Minister Reinsch to the Acting Minister for Foreign Affairs

No. 491

Excellency: I have the honor to inform your excellency that it has been reported to me that your Government has issued a permit for the export of one hundred thousand bags of flour from China during the current season. Your excellency would greatly oblige me by informing me as to the correctness of this report. I assume, of course, that foreign merchants would be included within the scope of this permit so that they could export flour from China.

I avail [etc.]

Paul S. Reinsch
[Inclosure 4]

The Acting Vice Minister for Foreign Affairs to Minister Reinsch

No. 508

Sir: We have the honor to acknowledge the receipt of your note of the 4th instant (No. 491), in which you state that it has been reported that the Chinese Government has issued a permit for the export of one hundred thousand bags of flour during this year, and you ask if the report is correct.

This Ministry has made inquiry of the Revenue Council, which now replies that there is no truth in the report, and asks that you may be so informed. We now ask you to take note of the denial.

Hsia I-t’ing
[Inclosure 5]

Minister Reinsch to Consul General Sammons

No. 1919

Sir: Referring to your Consulate General’s despatches of November 13 and 17, 1915,4 in regard to the exportation of native milled flour from Shanghai in competition with the American product, I have to advise you that the Legation has now received the following information in regard to this matter:

The treaty prohibition against the exportation of grain and other cereals, which has in general been interpreted by the Chinese Government as including flour as well, was last year relaxed by the granting of a special permission to export a large but limited quantity of native-milled flour from Shanghai: the Maritime Customs at Shanghai were accordingly authorized last year to pass one million bags of such flour for export to Hongkong, Dairen, Singapore, Java and Vladivostok: this authority lapses on November 30 next. It is not known what proportion of the amount so authorized still remains unexported, but on or about the end of last June there was such a balance of two hundred and sixty-eight thousand (268,000) bags.

The Legation is furthermore informed that the flour whose exportation is thus authorized, while paying no export duty, nevertheless pays, for the exceptional privilege so granted, fees to the amount of thirty (30) Shanghai candareens per fifty-pound bag, twenty-five (25) candareens of which go to the Central Government and five (5) candareens to the chamber of commerce at Shanghai, through whose intermediation the matter was arranged.

[Page 279]

From the letter addressed to you by the Shanghai Superintendent of Customs on November 16 last (a copy of which was enclosed with your No. 649), and from certain references in the correspondence between the Foreign Office and the Legation on this subject, it would appear that special permission to export flour from Shanghai was granted by the Government to be availed of only by certain Chinese mills: the Legation has, however, understood from Mr. A. S. Fobes (Manager of Fobes Company, Limited) that this permission may be availed of by anyone upon payment of the fees specified.

The Legation desires you to make such inquiries of the Chinese chamber of commerce, of the office of the Shanghai commissioner of customs, of Mr. Fobes, and elsewhere, as will enable you to make a full report in regard to this relaxation of treaty stipulations in favor of native-milled flour, with a particular view to verifying or correcting the statements above quoted, and more especially establishing whether or not the special previlege of exportation has been reserved for the benefit of a Chinese monopoly, and its benefits denied to foreigners. It is desired that this report be submitted in triplicate.

I am [etc.]

Paul S. Reinsch
[Inclosure 6]

Consul General Sammons to Minister Reinsch

[Extract]
No. 1058

Sir: I have the honor to acknowledge the receipt of the Legation’s despatch (No. C. 1919), dated October 21, 1916, in regard to the exportation of native-milled flour from Shanghai in competition with the American product, and to report as follows:

I have learned from reliable sources that native flour, by special permission granted last year, is allowed to be exported through the Chinese customs to the extent of 1,000,000 bags, by anyone presenting a huchao issued by the local superintendent of customs. Originally a time limit of till November 30 of this year was fixed for the exportation of the above amount, but owing to the fact that in the latter part of October last, the unexported number of bags amounted to between 300,000 and 400,000, the time limit was ultimately indefinitely extended to suit the convenience of the exporter, although it is understood that the first proposal was to simply extend the limit till the end of the year. * * *

This special relaxation of treaty stipulations prohibiting the exportation of cereals, was brought about with the purpose of rendering assistance to the Chinese emigrants (Chiao hsiang) residing abroad, on account of the scarcity and high price of foreign flour, and at first applied only to shipments made to Hongkong and Singapore, but later was extended to apply to Java, Vladivostok and Dairen as well. However, it is known that some of the flour thus exported has simply been sent to Hongkong and Singapore, and from thence exported to other countries, some even reaching France.

Although flour thus exported is exempt from the payment of export duties, it pays fees of Mexican 50 cents per fifty-pound bag, or say Taels .30, and in addition a yun tan or transportation tax which varies in accordance with the size of the shipment, but works out at an approximate average of Mexican 50 cents per 500 bags.

I am informed that the customs is not aware of any discrimination against foreign firms, but that their concern is simply with the honoring of huchaos as presented.

Mr. Koo Shung-ih, Chairman of the Nantao chamber of commerce, Shanghai, from whom Mr. F. S. Fobes obtained the information which he later gave to the Legation, was interviewed and largely corroborated the statements made by Mr. Fobes. He stated that to his knowledge some ten or more native mills in Shanghai had availed themselves of the privilege, but that on account of the fact that each fifty-pound bag is taxed the sum of Mexican 50 cents, together with the additional consideration of the high valuation of silver, there has been no special “scramble” on the part of native millers to export under the special regulations. To the above charges should be added the cost of freight to Hongkong or other destination and the yun tan tax. According to Mr. Koo, there have been exported [Page 280] to date some 800,000 bags. This it will be noted is a greater amount than that stated by my informant * * *. He adds that he knows of no arrangement by which the chamber of commerce receives any portion of the special privilege tax, and that the arrangements were made on the petition of the Chinese residing abroad; further, that there is, so far as he knows, no discrimination against foreign exporters, they being free to avail themselves of the same privilege, by obtaining the necessary permission from the superintendent of customs, Shanghai.

The Fisher Flouring Mills Company of Hongkong, within the last few days made application through this office to the superintendent of customs to export a quantity of flour, but the latter replied to my despatch in part, as follows:

* * * “and in all those cases of exportation of flour by Chinese merchants to Hongkong and Singapore, it was only by special leave of the Government that limited quantities of this product were shipped as a food supply to the Chinese residents at these places. This cannot be alleged as a precedent by all other merchants applying for permission to ship such products, as stated in my letter of November 16, last, in reply to your previous request, made in behalf of Fisher Flouring Mills Company, for permission to export flour and wheat. I have reported on the matter to the Revenue Council (Shui Wu Chu) and received its official reply to the effect that the application may be denied in accordance with the treaty provisions. I have now received further instructions from the Shui Wu Chu that no more flour should be allowed to be shipped to the Chinese residents referred to, when the quantities exported arrive at the original limit. Under these instructions we shall have to stop in the immediate future the exportation of flour as a food supply to Chinese residents abroad, which has been done with the special authorization of the Government.

Under these circumstances, I am unable to comply with the request of the American firm—Fisher Flouring Mills Company—to export flour and wheat to Hongkong.”

The applicant has been informed that the matter is being referred to the Legation.

This reply is to the same effect as that received by this office under date of November 16, 1915, in response to a similar application. A copy of the reply was transmitted in our No. 649, dated November 17, 1915.

This letter does not bear out the assertions made by the chairman of the chamber of commerce * * *, that there is no discrimination affecting foreign firms.

It developed at the interview with Mr. Koo that the tax of Mexican 50 cents is paid to a Mr. Tau Lae-chuen, in the Bank of China Building, Shanghai, who it appears is a special officer designated by the Central Government to make these collections. It was stated that upon application being made to Mr. Tau, and upon the payment of the special fee, he issues a letter or certificate, which is presented to the superintendent of customs with the formal application for permission to export; and further that any firm, foreign as well as native, can obtain the necessary permission. This office has, however, been unable as yet to confirm this procedure, as Mr. Tau is at present absent in Tientsin.

I have [etc.]

Thomas Sammons
[Inclosure 7]

Minister Reinsch to the Vice Minister in Charge of the Ministry of Foreign Affairs

No. 536

Excellency: I have the honor to recall to your excellency that during the past year I have had occasion to address to you several inquiries in regard to the conditions of the special authorization granted by the Government for the exportation of flour milled in China. It has been a disappointment to me to find that the information given in reply to my various inquiries has been inadequate. In order that I may comply with the instructions of my Government to furnish it with information as to the essential facts of what appears to be a departure from treaty stipulations which discriminates against American trade, I have to request that you advise me on the following points:

1.
Does the Chinese Government contend that the exportation of flour or other products of grain is forbidden by the treaty provisions which forbid the exportation of grains of all sorts?
2.
If such an embargo on the exportation of flour is actually maintained by the Chinese Government, has any special authorization been granted to export flour from Shanghai? If so, what are the conditions of such special authorization—particularly as to the quantity which may be exported and the period during which such authorization is made available? The Legation is informed that last year special permission was granted to export, through the maritime customs, flour to the amount of 1,000,000 bags; that at least 200,000 bags of the amount so authorized remains still unexported; and that the time for which authorization is valid has been extended indefinitely.
3.
If such exportation is permitted, what duties, taxes, or fees are required to be paid upon it? The Legation is informed that no export tax is levied, but that a special officer, designated by the Central Government, collects in behalf of the Government a fee of fifty cents per fifty-pound bag of flour exported, and that there is, in addition, a transportation tax of approximately fifty cents per five hundred bags of flour.
4.
To whom, and upon what conditions, are huchaos issued to enable merchants to avail themselves of the authorization to export flour, and particularly, may American merchants avail themselves of the authorization in the same manner as Chinese merchants? I have to point out that the superintendent of customs at Shanghai has persistently refused to grant a request of the American firm—the Fisher Flouring Mills Company—that it be permitted to export flour from Shanghai in the same manner as Chinese merchants, and while acknowledging that Chinese merchants had been allowed to export flour to Hongkong and Singapore, he has stated that the Revenue Council has officially informed him that the application of the American Company “may be denied in accordance with the treaty provisions.”

I beg to request that your excellency take steps to put me in possession, without delay, of the replies to these questions, as desired by my Government.

I avail [etc.]

Paul S. Reinsch
[Inclosure 8]

The Vice Minister for Foreign Affairs to Minister Reinsch

No. 544

Sir: I have the honor to acknowledge the receipt of your note of the 22d ultimo (No. 536), relating to the application, based on precedent, of an American firm to export flour. Upon receipt thereof this Ministry wrote to the Revenue Council to make an investigation, and has now received a reply as follows:

“Answers to the four queries contained in the American Minister’s note, setting forth the exact facts, have been drawn up.

“The first query was as to whether the exportation of flour or other products of grain is forbidden by the treaties. The Revenue Council notes that the various grains of the country cannot, according to the treaties, be transported abroad, that therefore exportation is forbidden.

“The second query was as to whether any special authorization has been granted to export flour from Shanghai. The Revenue Council would state that owing to the difficulty experienced by the Chinese residents of Hongkong and Singapore in purchasing food supplies, as a result of the sudden outbreak of the European War, special permission was granted to Chinese merchants to ship flour from Shanghai to afford relief. The amount to be exported was fixed and permission to ship was granted for a fixed period, at the expiration of which it was to cease. This case is one of the Chinese themselves shipping grain to relieve Chinese residing abroad and does not differ from the relief of our own countrymen in our own country. It has never been forbidden by the treaties and no violation of the treaties can be pointed to.

“The third query was as to whether fees or transportation taxes were collected. The Revenue Council would state that as this exportation of flour is for the special purpose of affording relief no taxes are collected. How could a special fee and transportation tax be collected?

“The fourth query related to the issuance of huchaos and also as to whether American merchants might avail themselves of the authorization in the same manner as Chinese merchants. The Revenue Council would state that in this special case, whereby authorization is granted to relieve with grain the Chinese residing abroad, huchaos are issued only to the most reliable Chinese merchants. [Page 282] Other Chinese merchants cannot by making false representations receive them. Nor can foreign merchants rely on this as a precedent to make application to ship. There is no discrimination against American trade involved.

“It is requested that the contents of this communication be transmitted.”

I have accordingly the honor to send you this note.

Hsia L-t’ing
[Inclosure 9]

Minister Reinsch to the Minister for Foreign Affairs

No. 543

Excellency: I have the honor to acknowledge the receipt of your excellency’s note of December 6, relating to the export of flour and grain from China.

In its communication to your Ministry the Revenue Council states that the purpose of the flour shipments from Shanghai is to relieve Chinese residing abroad. We are, however, not concerned with the avowed purpose, but with the actual effect of the measure. The effect has been to place on the markets of Hongkong, Singapore, and other far eastern ports, huge quantities of Chinese flour as ordinary merchandise. This special measure is therefore in no way distinguished in its actual results from a general permission to export certain large quantities of flour.

The Revenue Council asks, “How could a special fee and tax be collected?” I would reply that it was collected by the chamber of commerce of shanghai or by a special agent of the Government at Shanghai, to whom the administration of this measure was entrusted, and that it amounted to fifty cents per fifty-pound bag of flour exported and, in addition, a transportation tax of approximately fifty cents per five hundred bags of flour was collected.

As the Revenue Council states that American merchants will not be permitted to avail themselves of the authorization to export grain in the same manner as Chinese merchants, I am forced to protest in the most emphatic manner, and I have to state that my Government will hold the Government of China responsible for any damages to American merchants through refusal to allow them to participate in such export of grain as may be permitted to others.

In order to avoid grave difficulties, there are only three alternatives to be considered: (a) either all export of grain and flour must remain forbidden; or (b) Americans must be allowed to share in any permission to export which may be granted; or (c) the export of grain and flour must be freely allowed to all. To permit Chinese merchants under the guise of a special arrangement to export, while prohibiting Americans, is a discrimination to which the American Government cannot submit. I therefore am forced to make a request that orders be immediately issued permitting Americans to share in the permission which is enjoyed by others to export flour or grain.

I avail [etc.]

Paul S. Reinsch
[Inclosure 10]

The Minister for Foreign Affairs to Minister Reinsch

No. 555

Sir: I have the honor to acknowledge the receipt of your note of December 16, 1916 (No. 543), in reference to the application, based on precedent, of American merchants for permission to export flour and wheat. Upon receipt thereof this Ministry communicated with the Revenue Council, and has now received a reply as follows:

“The export of flour is regarded by the council as being under a special, not a general, authorization. The four special reasons are here restated:

  • “1. This country formerly did not allow flour to be exported. Because of the outbreak of the European war the Chinese residing abroad were in want of food and special authorization was given for flour to go forward as a relief measure.
  • “2. The flour permitted to be exported is limited to a fixed amount, After it has all been shipped no exportation will be allowed.
  • “3. Special authorization is given for reliable Chinese merchants to export flour. Other Chinese merchants not being able to do so, foreign merchants naturally cannot.
  • “4. Last year the neighboring countries had a shortage of grain and China, actuated by a spirit of friendship, gave special authorization for grain to be exported as a measure of relief, no objections being raised by foreign countries. Now that our own people are short of food the Government has naturally specially authorized the export of grain as a measure of relief, and this does not constitute the least violation of the treaties. Foreign countries cannot rely on the rule regarding ordinary merchandise to demand similar treatment.

“Of the three proposals now made by the American Minister, the first is that the export of grain and flour must remain forbidden. This is the regular procedure and the Government recognizes it as the natural course to take. But it is necessary to wait until the full amount of the flour, for which authorization to export has previously been granted, has all been shipped, after which the Government will then issue a strict prohibition.

“It is requested that the contents of this communication be transmitted.”

I have the honor to request you to take note.

Wu T’ing-fang
  1. Not printed.