893.512/946
The Consul at Tsingtao ( Dorsey ) to the Minister in China ( MacMurray )34
Sir: I have the honor to refer to the Consulate’s despatch No. 275 of February 15, 1929,35 concerning the opposition to the Chinese Customs Surtaxes by the local Japanese authorities.
It was reported therein how, pending negotiations between the Japanese and Chinese Governments for the solution of the question, the Commissioner of Customs was prepared to concede to foreign merchants of all nationalities the same treatment in respect of these surtaxes that the Japanese authorities had forced upon him for Japanese subjects, and that his decision had been submitted to the Inspector General of Customs for approval.
In a reply dated February 18, 1929, the Inspector General instructed the Commissioner of Customs that merchants of other than Japanese nationality were not to be accorded the privilege of paying on deposit during the period of negotiation but that all surtaxes collected from them were to be paid direct into revenues and not subject to refund in any event. The Commissioner of Customs was not advised as to the reasons for this attitude, but whatever shaped it the fact remains that, temporarily at least, all exports to America or elsewhere by Japanese will enjoy preferential treatment to the extent of 2½ per cent.
It is believed in commercial circles that Japan’s drastic action in the matter was prompted largely through the concern of Japanese exporters as to forward contracts which had been entered into without regard to the additional 2½ per cent surtax imposed with so little advance notice. It is felt by the Commissioner of Customs that if the Chinese Government yields at all in the matter it will be along the line conceding refunds of deposits made where it can be established [Page 800] that contracts had been actually entered into prior to the promulgation of the order applying the surtax at Tsingtao.
The Commissioner of Customs is prepared to seek to obtain from the Inspector General an order that all merchandise contracted for export prior to the date of the promulgation of the surtax should be entirely exempt from its operation. This the Legation will recall was the procedure followed in Tientsin in September, 1928, when the surtaxes were first applied there, the American Consulate General, upon representations as to hardship made by interested American firms, using its good offices with the Customs Surtax Bureau to secure such exemption which was eventually conceded.
The Japanese authorities in Tientsin raised no objection to this procedure and to my knowledge no formal protest was ever made by the Japanese Consul General there to either the surtaxes and luxury taxes on imports or to those imposed on exports and coast trade, both of which latter, it is understood, were not abolished in Tientsin with the coming into force of the new Chinese Import Tariff.
I therefore see no good reason why, if it is represented to the Consulate that American interests would suffer otherwise, good offices should not be used with the Commissioner of Customs to encourage him to seek an exemption to the extent indicated above. This, it is submitted, could in no wise be construed as taking advantage of an exemption due to the presence of the armed forces of any nation.
Of course the only way to secure full and certain equality of treatment would be through representations to the Chinese Government based on discrimination against which Americans were assured in the treaty of July 25, 1928,36 when the principle of tariff autonomy was recognized by the United States but conditioned upon equal treatment in the application of duties. In the Consulate’s opinion a protest so premised would be entirely justified, but, in view of the attitude of the Department towards benefits created by and based upon the presence of armed forces of other foreign countries (telegram to Legation of May 29, 1928, 1 P.M.37) the Consulate refrains from action on that ground pending the Legation’s instruction as to whether such representations are desirable and if so whether they should be made by the Consulate to the local Commissioner of Customs, or whether the Legation will put them forward to Nanking direct.
This is believed to be the first instance where the question of discrimination under the new customs treaty has arisen and it will be interesting to know whether the circumstances surrounding this episode are considered a sufficient justification for China’s seeming show [Page 801] of bad faith in disregarding its undertakings for most favored nation treatment under the first of its new era engagements.
The Legation’s views and instructions in the matter will be awaited with interest.
I have [etc.]
- Copy transmitted to the Department by the Minister in China in his despatch No. 1965, March 12; received April 15, 1929.↩
- Not printed.↩
- Foreign Relations, 1928, vol. ii, p. 475.↩
- No. 173, ibid., p. 504.↩