893.512/593: Telegram

The Minister in China ( MacMurray ) to the Secretary of State

691. Department’s 270, July 1, 5 p.m.

1. Following from American consul at Shanghai:

“56, July 2, 11 a.m. Referring to my telegram of June 30, 4 p.m. Regulations provide inter alia that all cigarettes manufactured in China or imported into China with the exception of those that are manufactured within, imported into Kwangtung or Chekiang Provinces are liable to new fifty percent consumption tax. Official portion published in native press states cigarette tax bureaus in Kwangsi, Anhwei and Fukien have been ordered to abide by new regulations as promulgated in Kiangsu.

Revenue stamps of Nanking Ministry of Finance to be affixed when cigarettes are packed for shipment at factories in China, and at import godown in case of cigarettes imported from abroad. Stamps to be sold by head tax office or its authorized agents.

Am filing formal protest because of drastic nature of tax and its violation of previous long agreements concluded between the national Wine and Tobacco Administration and American firms selling cigarettes and tobacco as well as on the grounds that the sudden imposition of this drastic tax will work a great hardship not only on marketing firms in China but on large number of American farmers producing tobacco for use in China trade.”

2. With a view to affording me opportunity for further consideration before deciding on expediency of protesting, I have telegraphed Cunningham that if he has not already protested to refrain from so doing until further instructed.