693.002/988
The Japanese Ministry for Foreign Affairs to the American Embassy in Japan
Note Verbale
The Imperial Ministry of Foreign Affairs presents its compliments to the American Embassy at Tokyo and, having carefully perused the contents of the Embassy’s memorandum no. 1370, September 6, 1939, in which representations were made concerning the use of Hwa [Page 752] Hsing notes by the Shanghai Maritime Customs, has the honor to state the views of the Imperial Government in the following addendum:
Addendum
The Imperial Government, of course, does not believe that the responsibility for a direct reply concerning a notification of the Shanghai Maritime Customs rests with this Government. However, in the opinion of the Japanese Government, in view of the fact that the Shanghai Customs are located within territory occupied by the Japanese army and within the sphere of jurisdiction of the Provisional Government, it is natural the notification in question should not be made with the approval of the Chungking régime. Accordingly, it is difficult to understand the remarks made by the American Government concerning the integrity of the Chinese Maritime Customs, which remarks were made simply for the reason that the assent of the Chungking authorities was lacking. We are informed that the publication was considered as the result of prior investigations of the problem, particularly as a practical question, made by the Shanghai Maritime Customs and the office of the Superintendent of General Revenue, and it must be stated that the investigations were completed in a technical manner and from the just standpoint of the internal and external effects which would result.
There are previous instances in which local currency has been used in the actual payment of customs tariffs levied by the Chinese Maritime Customs. This recognition of the collection of revenue in Hwa Hsing notes by the Shanghai Maritime Customs is considered appropriate not only in view of the previous instance mentioned above but also from the standpoint of the stability of the currency.
Information has been received to the effect that the measures taken in this instance were for the purpose of rectifying the disadvantageous conditions under which the collection of duties (reflecting the tendency of the municipal market for legal currency (fapi) to fluctuate and decline) tended to be unstable and to decrease owing to the fact that until recently the Shanghai Maritime Customs in the levying of customs duties pegged the exchange ratio of customs gold units and legal currency (fapi) on the basis of a “nominal” quotation having no connection with the market quotation for the fapi (actually all collections were converted into fapi and tax collection in customs gold notes and customs gold checks were also converted into fapi at the above-mentioned nominal quotation). At the same time a primary objective was to prevent the occurrence of the inexpediency which would follow if the above-mentioned ratio were suddenly to be changed to the market rate for the fapi by which action the payment of duties in fapi currency would become comparatively very high amounting [Page 753] to an increase in customs duties. Therefore, not only was the motive for this action entirely right, but also these expedient measures are well suited to present conditions and, being expected to be equitable with respect to native and foreign businessmen, they are regarded as successfully meeting the technical difficulties.
In this connection it is hoped that the American Government too will understand the purport of the above statements and, after studying the actual advantages and disadvantages, will be brought to change its antagonistic attitude toward this question.