393.1141/1
The Minister in China (Johnson) to
the Consul at Tsingtao (Dorsey)78
Peiping, February 25, 1930.
Sir: The Legation has received your despatch
No. 369, of January 24, 1930,79 regarding diplomatic protection for property
disposed of under conditional sale contracts. You point out that, from
the nature of such contracts, the purchase being made by the payment of
a small initial sum and of the balance of the purchase price in such
monthly instalments as may be agreed upon, the actual American interest
in the car passes through cycles of importance, giving way to and being
gradually absorbed by that of the Chinese buyer as later instalments are
paid, and you inquire as to the degree of American financial interest
which would entitle the American seller to diplomatic intervention in
his behalf. The Legation transmits herewith for your information and
guidance a copy of despatch No. 1719, of April 17, 1928, from the
American Consul at Harbin,79 and of the Legation’s instruction in reply of April
28, 1928,79 and of the
Department’s instruction to the Legation, No. 939, of August 1, 1928.
Your attention is particularly invited to the Department’s statement on
page 2 of its instruction mentioned above to the effect that “the
principle of the conditional sale contract is well recognized in
American law and the Department is unable to concur in a general ruling
which in effect would deny protection to an undoubted American legal
right.”
The Legation is to-day transmitting a copy of your despatch under reply
and of its instruction to the Department for a ruling as to the extent
of American interest necessary in order to warrant diplomatic
intervention in the case of American property sold by instalments to
Chinese.
I am [etc.]
For the Minister:
Mahlon F.
Perkins
Counselor of
Legation[Enclosure]
The Secretary of
State to the Minister in China (MacMurray)
Washington, August 1, 1928.
No. 939Sir: The Department has received a copy of
despatch No. 1719, dated April 17, 1928, from the Consul at Harbin,
together with a copy of the Legation’s reply of April 28, 1928,
concerning the seizure and
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sale by the Harbin police authorities of two motor cars which had
been sold by Messrs. Bashkiroff and Company, an American concern, to
a Russian national, the title in the cars remaining in the American
vendor because final payment had not been made.
The Legation expresses the opinion that the Consul should not have
interposed in the matter, as the seized cars had been used in the
commission of a crime.
In Mr. Hanson’s despatch reporting the seizure of the cars, he states
“There is no doubt but that one of the cars in the case was used in
committing a very daring highway robbery. The Chinese police claim
that the two cars were used”. This statement implies that while the
Consul was satisfied that one of the cars had been used in the
perpetration of an illegal act, he does not admit that the second
car was involved. It would seem that this may have some bearing on
the point upon which the Legation has taken exception to the action
taken by the Consul. The rights of the interested American firm may
differ in respect to the two cars.
In the instruction under consideration, the Legation has not confined
its ruling to the case in point, but has outlined a general position
to be taken with respect to the granting of extraterritorial
protection to American importers of motor cars. The Legation
intimates that supervision over the uses to which a car is put and
physical possession of the vehicle are a sine qua
non to protection. This theory of protection is much more
restricted than the Department is inclined to entertain. As the
Legation is aware, American business in China is conducted to a
considerable extent upon the basis of delivering physical possession
of an American commodity to the vendee, but retaining title with the
vendor until final payment. The principle of the conditional sale
contract is well recognized in American law and the Department is
unable to concur in a general ruling which in effect would deny
protection to an undoubted American legal right. There may be
particular circumstances in an individual case which will render it
advisable to withhold the protection of the executive branch of the
Government, but the decision to withhold protection should be made
as each instance arises and in view of all the pertinent
particulars.
In the case in question, the Department is inclined to the opinion
that the Consul acted properly in making representations. The
Consul’s action drew from the Chinese a statement in explanation and
defense of their action. If that statement is accepted, the
Department considers that the American firm can have no reasonable
ground for complaint if neither the Consul nor the Legation chooses
to make further representations; the proper course for the firm
would seem to be, if it chooses to risk it, an action in law.
I am [etc.]
For the Secretary of State:
Nelson Trusler Johnson
