611.937/21
The Consul General at Hankow (Lockhart) to the Minister in China (MacMurray)47
Sir: I have the honor to refer to my telegram No. 26, March 28, 3 p.m.,48 reporting further developments on the wood oil tax question at Hankow and to enclose herewith copy of a letter, addressed to me under date of March 28, 1929, by Mr. O. E. Vongehr of McKesson and Robbins, enclosing notices received by him from the Wood Oil Export Special Tax Bureau.49 It will be observed that in the last paragraph of the tax bureau’s letter of March 27 a threat to fine the company is made and that a peremptory demand for a reply in two days is communicated.
I regret that this Consulate General has not been able to be of any assistance to American wood oil exporters in connection with this controversy beyond that which is represented by an exchange of telegrams between this office and the Legation. The local authorities, as in other matters, are completely ignoring the instructions of the Nanking Government and are bringing every possible pressure to bear on local exporters of wood oil to pay the special tax on all shipments of that product. While some foreign firms have apparently evaded the payment of the tax by private arrangements, it seems clear that this situation will soon cease to exist and that a general payment of the tax will be forced unless there is a change in the local government in the near future.
Inasmuch as wood oil is a speculative product and in many cases is sold under future contracts, the imposition of a special tax is particularly burdensome and often wipes out the small profits that [Page 806] might accrue under the regular tax rates. In addition the evasion of payment of the tax by some exporters and its payment by others adds confusion to a sensitive price market and the net result is that the trade is extremely timid and is finding itself under increasing handicaps in conducting its business.
As suggested in the Legation’s telegram No. 18 of March 29, 6 p.m.,50 the Consulate General will continue its efforts with the local authorities with a view to having the tax abolished.
I have [etc.]