The Minister in China (Johnson) to the Acting Secretary of State
[Received July 12—8:25 a.m.]
591. 1. Following from American Consul General at Canton:
“July 8, 11 p.m. The Commissioner of Customs on July 3 orally informed the British Consul General and myself that he had been instructed by the Southwest Political Council that, in accordance with the regulations for the relief of the native refining kerosene oil trade approved by the Council, liquid fuel above 32 degrees imported into Kwangtung would not be released by the customs unless covered by a permit to import issued by the Special Liquid Fuel Registration Bureau.
Regulations have been issued providing that such permits can only be granted to importers registered with the bureau. There have also been promulgated regulations, announced as now effective, requiring the registration of all factories and providing that no factory not under Chinese management and having less than 60 percent Chinese capital shall be allowed to operate.
The above regulations are an outcome of the developments reported in my despatch No. 175 of February 4,82 and are evidently designed to prevent competition from the Socony Vacuum Corporation and the Asiatic Petroleum Company with native refiners. The two firms were forced 2 months ago to commence local refining as business in imported brands had ceased owing [to] competition from native refiners who avoid high import duties on refined oil and sell at prices prohibitive to importers of foreign kerosene; now however the two foreign companies are practically out of the market. Accordingly [Page 570]authorities orally state that they will not be able to refine kerosene locally and sell it.
Although the British Consul General and I have been making joint representation to the authorities we have not succeeded in inducing them to delay enforcement of the regulations pending reference of the question to our Governments but the mayor has promised that he will take up immediately with the Southwest Political Council the question of whether the regulations violate article 3 of our commercial treaty of 190383 and he has expressed confidence that if they believe this to be the case they will change the regulations accordingly.
The Legation’s instructions are requested whether I should insist that these regulations are in contravention of the treaty. British Consul General is telegraphing in a similar purport.”
2. The Legation has replied as follows:
“July 12, 4 p.m. Your July 8, 11 p.m. The Legation considers provisions of the regulations preventing American firms from refining oil locally have been in direct contravention of article 3 of our commercial treaty of 1903 and that refusal to permit importation liquid fuel is contrary to international usage and the spirit of the Sino-American treaty of 1928,84 You may insist upon this interpretation.”
3. British Legation has replied similarly to British Consul General.