The Commercial Attaché in China (Arnold) to the Minister in China (MacMurray)82

Sir: I have the honor to report that the commission for the revision of the values in the China tariff schedule completed its labors on June 28. The commission convened for its first session early in September, 1926. On March 9, 1927, the Chinese proposal that the Shanghai wholesale market values for the year 1925 be used as the basis for the revised tariff was formally accepted by the delegates to this commission.

With the taking over of Shanghai by the Nationalists the latter part of March, 1927, the sessions of the commission were temporarily adjourned. The Chinese members returned to Peking and in July the commission reconvened at Peking. The commission was about to conclude its labors when on June 8 of this year the Nationalists took over the control of Peking.

Recently the chairman of the commission, Chan Lun, informed me that Mr. Chang Fu-yun, the Nationalist successor to the post of Director of the Shuiwuchu (now known as the Kwanwuchu) informally instructed him to complete the work of the commission, allowing [Page 391] until June 30 for this task. In accordance with these instructions the sessions of the commission have been completed and the commission adjourned sine die on June 28.

In an informal interview with Mr. Chang Fu-yun, the director of the Kwanwuchu, he informed me that he will submit a report on the commission to the Ministry of Finance of the Nationalist government and indicated that there is a likelihood that the report will be accepted and the new tariff schedules made effective. However, Mr. Chang is not authorized to anticipate the action of the Ministry of Finance of the Nationalist government, hence the attitude of the Nationalist government in connection with the work of the commission awaits an official statement from that government in regard to this matter.

Regarding the work of the commission I may state that in my opinion the values finally assessed are fair. The Japanese consistently and persistently put forth the contention that because of their goods being “cheap and inferior” they were at a disadvantage in being grouped with those of certain other countries in efforts to arrive at an average wholesale market value. While it is necessary to admit the justice of the Japanese contention within certain limits, yet it is patent that they were inclined to take greater advantage than the circumstances in some cases seemed to justify. Thus on the whole, the Japanese probably secured relatively more consideration for values of their commodities than did either the British or American delegates, who were inclined to be more liberal and less exacting in insisting upon the commission conforming with the true wholesale market values.

It is evident that the Chinese associated with the work of the commission were determined to produce a schedule of valuations which would guarantee increased revenues to the Customs. They are probably disappointed in the results which have finally been attained in that the revision was more one of a readjustment of valuations than one of increases which would aggregate greater revenues from the import tariff.

The American delegate tried to persuade the commission to adhere rigidly to the accepted basis of valuations, that is, the average Shanghai wholesale market values for the year 1925. Unfortunately in order to come to an agreement with the Japanese in connection with the valuations of certain commodities, the Chinese pursued the policy, which they may have found necessary, of trading values of one commodity with those of distinctly unrelated commodities. In other words, distinctly unscientific compromises were not infrequent in bringing about an agreement between the Chinese and Japanese delegates in connection with a number of commodities in which the Japanese were primarily interested.

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However, on the whole it may be said that the values are quite fair and represent the best that could be done under the circumstances. It was, indeed, unfortunate that the work of the commission dragged over such a long period of time. So far as the American delegate was concerned, the work might have been completed during the latter part of the year 1926.

There were on the commission, besides the Chinese members, delegates of the following countries: Denmark, France, Great Britain, Italy, Japan, Netherlands, Norway, Portugal, Sweden and the United States of America. I was fortunate in having the assistance in my work on the commission of Mr. M. R. Nicholson, United States Customs Attaché, who contributed a very considerable amount of valuable technical knowledge in the handling of the values and classifications of the various import commodities considered.

I have [etc.]

Julean Arnold
  1. Copy transmitted to the Department by the Minister in China in his despatch No. 1568, July 2, 1928; received August 20.