893.48/946: Telegram
The Secretary of State to the Consul at Nanking (Atcheson)
40. Reference your telegram of January 24, 1934, 4 p.m.,97 to Legation and previous correspondence in regard to the publication of the terms of the cotton and wheat credit agreement.
As the Reconstruction Finance Corporation desires to make public a statement in regard to the credit under reference and as Dr. Wei, having returned to China, is no longer available for consultation, please ascertain from the appropriate Chinese authorities whether there is objection to the publication by the Corporation of a statement as follows:98
“The terms of the agreement of May 29, 1933 between the Reconstruction Finance Corporation and The National Government of the Republic of China relative to the extension by the Corporation of a credit for the purchase of cotton and wheat were made available to the public today by Jesse H. Jones, Chairman of the Reconstruction Finance Corporation, with the approval of the Chinese Government.
[Page 586]By the terms of this agreement the Corporation agreed to extend to China a credit of $50,000,000, of which approximately $40,000,000 was to be used for the purchase of cotton in the United States and $10,000,000 for the purchase of wheat, including flour. Later the amount of the commitment was reduced to $20,000,000, of which $10,000,000 has been expended for the purchase of cotton, $6,000,000 for the purchase of wheat and $1,105,385.80 for the purchase of flour.
China named Dr. W. P. Wei as Purchasing Agent for the Government and Messrs. Charles L. Tarver, Dallas, Texas, and J. J. Lavin, Portland, Oregon, to be in charge of operations in connection with the purchasing and shipping of cotton and wheat, respectively. Recently the balance of the cotton was shipped to China, which concluded operations under the agreement, and Dr. Wei has now closed his offices and returned to China.
Under the terms of the agreement advances were made against the delivery of shipping documents evidencing cotton, wheat or flour c. i. f. paid to a port in China. Advances were made on the basis of the F. O. B. cost to China at the port of export. Provision was later made for the storing of the commodities for a limited time and the making of advances against warehouse receipts, but this was only utilized in the case of part of the cotton.
Advances were evidenced by notes of China payable on or before 3 years from the date thereof, with the understanding that China would probably request an extension for an additional 2 years on any balance then remaining unpaid. All notes carried interest at the rate of 5 per cent per annum payable semi-annually.
The agreement further provided for instalment payments on the notes. Twenty-five per cent of the amount advanced for the purchase of cotton was due within 12 months from the respective dates of the notes. Under this provision approximately $2,241,013.21 has been repaid to May 14, 1935. An additional 10 per cent is due the second year and 15 per cent the third year, provided the extension is granted for the further 2 year period. In the event of such an extension 20 per cent is due the fourth year and 30 per cent the fifth year. All funds advanced for the purchase of wheat and flour are due the third year unless the extension is granted, in which case the payments are 25 per cent for the fourth year and 75 per cent for the fifth year.
As security for the credit the Corporation was granted a first charge by China on its consolidated taxes, consisting of the rolled tobacco tax, the flour tax, the cotton yarn tax, match tax, cement tax, tobacco and wine tax and the stamp tax (excepting that the charge on the tobacco and wine tax is a junior charge), together with the second charge on its 5 per cent Flood Relief Customs Surtax, subject only to the payments required to service and retire the indebtedness due the Grain Stabilization Corporation until such indebtedness is paid in full.
Insurance coverage on the commodities shipped was placed with American insurance companies and approximately 50 per cent of the commodities were transported in United States flag vessels in accordance with the terms of the agreement.
[Page 587]Mr. Jones further stated that any one interested in obtaining further information relating to the details of the agreement should communicate with the Corporation.”
Please report promptly by naval radio.