693.11245 Foster-McClellan Co./2
The Secretary of State to the Minister in China (MacMurray)
Sir: The Department has received your despatch No. 2217, dated July 19, 1929,99 in regard to the seizure of goods in transit belonging to the Foster-McClellan Company because of the firm’s failure to affix revenue stamps to the goods seized.
The Department approves that part of your instruction to the Consul General at Shanghai of July 19, 1929,1 in which you state that, in the absence of discrimination against this firm, the Consul General should refrain from any protest concerning the imposition of this stamp tax or the seizure of the goods for failure to affix the stamps.
In this general connection you refer to the issuance of transit passes by the Chinese Maritime Customs and state that you are disposed to consider that a protest may properly be made when goods which are covered by such passes are subjected to further taxation while en route to their destination. You base this view on the fact that, although transit passes are not provided for under the Tariff Treaty of July 25, 1928, between the United States and China, if the National Government continues to accept payment from merchants for documents purporting to free the goods from further inland taxation, then that Government is bound to carry out its part of the implied contract. You request the Department’s instructions in this matter for the guidance of consular officers in China.
Upon this point, the Department is disposed tentatively to approve the position taken, together with the reasoning in support thereof, in your instruction under reference. However, since, the former treaty provisions having been annulled and become inoperative, the only rights to which American merchants would be entitled in the matter of freeing their goods from internal charges in transit would be such rights as arise out of a contract or an implied contract between [Page 277] themselves and the Chinese Government, before instructing you definitely in the premises, the Department feels that it should be informed more precisely with regard to such contracts or implied contracts, if they exist, as have a bearing on the question, To this end you are instructed to transmit copies of such applications for inward and outward transit passes as are now in use and of such transit passes as are now issued by the Customs authorities, together with any other pertinent information which will assist the Department in determining whether, by the issuance of such passes or in any other way, the Chinese authorities enter into a contract or an implied contract with an American merchant which would entitle his goods to exemption from further inland charges in transit.
I am [etc.]