The Minister in China (Johnson) to the Secretary of State

No. 3779

Sir: I have the honor to enclose for the Department’s information copies of various telegrams, despatches and instructions2 regarding difficulties which the Dollar Steamship Company has recently had with the Chinese Maritime Customs at Shanghai.

These difficulties appear to have resulted from an attempt by the Maritime Customs authorities suddenly and without prior notice to enforce strictly manifest regulations which had previously been enforced with apparent laxity. As a result, numerous unmanifested articles found in various places on board several vessels of the Dollar Steamship Company arriving in Shanghai were confiscated by the Customs and fines were imposed upon the Company. Although no settlement of the matter has yet been possible, it has been thought desirable to report the subject to the Department.

The information gleaned from the enclosed correspondence inclined the Legation to the view that at least some of the articles confiscated were found under circumstances which might have caused a reasonable suspicion on the part of the Maritime Customs that there was an intention to smuggle them into China, and, although the vessels of other nationalities appeared not to have been subjected to similar penalties [Page 793] by the Customs, there was no evidence that similar conditions existed on those vessels. Accordingly, although the Legation has denied to the Chinese Government any right of the Customs to impose fines upon American vessels, it has at the same time suggested to the Consul General at Shanghai that the best interests of the steamship company would be served by viewing the matter from a practical standpoint and endeavoring to avoid the imposition of future penalties by taking steps to remove the conditions of which the Customs has complained.

In telegrams dated May 23, 4 p.m., and May 24, 3 p.m., copies of which are enclosed, the Consul General at Shanghai reported the confiscation by the Maritime Customs of various articles found in the No. 1 Boy’s cabin, in the beauty parlor and in the steerage of several vessels of the Dollar Steamship Company, and in his despatches No. 8528 of May 27, 1935, and No. 8530 of May 28, 1935, copies of which are enclosed, he gave more detailed information regarding the circumstances surrounding these confiscations.

In a telegraphic instruction of May 24, 5 p.m., the Legation directed the Consul General to be guided in his action by the Legation’s Circular Instruction to Consular Officers No. 229 of July 21, 1933, upon this subject, and under cover of an instruction to the Secretary of Legation at Nanking, dated May 31, 1935, a copy of which is enclosed, the Legation transmitted to Mr. Atcheson3 an aide-mémoire upon the subject which it directed that he hand to an officer of the Ministry of Foreign Affairs, at which time he should endeavor to impress upon the official with whom he discussed the matter that the American Government could not under any circumstances acquiesce in any action of the Maritime Customs in contravention of the Rules of 1868 governing the joint investigation of customs controversies. Mr. Atcheson was directed at the same time to reiterate that the American Government was willing at all times to give sympathetic consideration to any revision of those rules which the Chinese Government might deem necessary.

In his despatches No. 8535 of May 31, 1935, and No. 8536 of May 31, and his telegram of June 1, 3 p.m., copies of which are enclosed, the Consul General reported his unsuccessful efforts to obtain a settlement of the difficulties with the Shanghai Customs authorities and requested that further representations be made to the National Government.

In its telegraphic instruction of June 8, 4 p.m., a copy of which is enclosed, the Legation informed Mr. Cunningham that representations had been made to the National Government, but requested further details concerning the nature of the goods confiscated and the circumstances surrounding their presence on board.

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In his despatch No. 708–Diplomatic of June 5, 1935, a copy of which is enclosed, Mr. Atcheson reported the result of his unsuccessful interview upon the subject at the Foreign Office, and in a memorandum dated June 10, 1935, a copy of which is enclosed, the Ministry of Foreign Affairs replied to the Legation’s aide-mémoire re-asserting the Chinese position with regard to the right of the Maritime Customs to confiscate goods and impose fines upon American vessels.

In his further despatch No. 8557 of June 8, 1935, a copy of which is enclosed, the Consul General at Shanghai gave further details surrounding the confiscation of the various articles, and in his telegram of June 11, 1 p.m., he suggested that he be authorized to advise the Dollar Steamship Company to refuse to pay the fines which it was sought to impose upon their vessels.

In its telegraphic instruction in reply of June 12, 2 p.m., a copy of which is enclosed, the Legation informed the Consul General that it was not in a position to suggest any course of action to the shipping company, but that although the shipping interests concerned were of course under no legal obligation to pay fines imposed upon them, they might, as a matter of business expediency, prefer to pay under protest. The Legation also requested that the Consul General endeavor to clarify the question of whether the Customs was in fact discriminating against American vessels.

In his despatch in reply No. 8679 of June 15, 1935, a copy of which is enclosed, the Consul General gave further information regarding the circumstances under which the articles in question were confiscated, and in his telegram of July 8, 4 p.m., a copy of which is enclosed, he supplemented his despatch with information concerning the attitude of his colleagues towards the question, again suggesting that payment of the fines be resisted.

In its telegraphic reply of July 10, 2 p.m., a copy of which is enclosed, the Legation outlined briefly its views of the matter and directed that the Consul General call personally upon the Inspector General of Customs in an endeavor to reach some solution of the matter which would be satisfactory to both sides without prejudicing the position of the American or the Chinese Governments in respect of fundamental issues involved.

In his despatch No. 8807 of August 12, 1935, a copy of which is enclosed, the Consul General reported his action taken in compliance with the Legation’s instruction mentioned just above. However, inasmuch as the Consul General’s despatch indicated that he had not called upon the Inspector General of Customs, but had instead merely addressed a further written communication to him, the Legation, in an instruction of August 21, 1935, a copy of which is enclosed, directed that he explain his reasons for not calling upon the Inspector General [Page 795] of Customs as directed, and expressed a desire to be informed whether any satisfactory solution of the matter had been found. A further despatch from the Consul General, No. 8827 of August 28, a copy of which is enclosed, indicated that the Consul General had in fact made oral representations as directed.

In his telegram of August 29, 2 p.m., a copy of which is enclosed, the Consul General reported information to the effect that the Customs had offered to settle with the steamship company if the company would pay two of the four fines which it was sought to impose, and requested the Legation’s instructions as to the desirability of the company settling the matter on that basis.

The Legation has replied in a telegram of August 31, 12 noon, a copy of which is enclosed, to the effect that it cannot advise the company in any arrangement it may deem it advisable to reach with the Customs, but that practical considerations and business expediency might persuade the company to settle the case by compromise. It was also suggested that further representations might result in further concessions to the company.5

Respectfully yours,

Nelson Trusler Johnson
  1. None printed.
  2. George Atcheson, Jr., Second Secretary of Legation in China at Nanking.
  3. The Consul General at Shanghai, in his despatch No. 10347, October 2, reported that the matter had been settled to the mutual satisfaction of the company and the Chinese Government (693.11245/37).