893.6363 Manchuria/195
The Consul General at Mukden (Ballantine) to the Minister in China (Johnson)88
Sir: I have the honor to refer to my despatch No. 77 of April 5, 1935 in regard to the institution of the “Manchukuo” Petroleum Monopoly, and to enclose a translation made in this office of Notification No. 42 of the Kwantung Bureau of April 10, 1935, in which publicity [Page 895] is given to a notice received from the Dairen Customs regarding procedure to be followed for the import into or export from “Manchukuo” of petroleum products.
The notice of the Dairen Customs will by its terms not only prohibit foreign oil companies from importing fresh stocks into “Manchukuo” but also from exporting what they have on hand out of the country unless they obtain a permit from the Monopoly authorities. Since native dealers are prohibited from taking any further stocks from the foreign oil companies, it is apparent that the Monopoly authorities are in a very strong position in any negotiations that they may propose for buying the companies’ stocks. In any case the companies would have been reluctant to export their stocks after having paid entry and inland freight charges.
Since the notice of the Dairen Customs is merely an administrative measure to give effect to policy already defined in the Petroleum Products Monopoly Law and regulations based upon it, the probability that the foreign oil companies would not be able to dispose locally except to the Monopoly of stocks on hand when the monopoly went into force was anticipated by the oil companies, as was the possibility of measures being taken to prevent exportation, and the representatives of the American companies here inform me that they had not failed to keep their head offices informed of the position. As I stated in the last paragraph of my despatch No. 77 of April 5, the general attitude of the companies was that they were averse to selling even indirectly to a monopoly. On the basis of this policy, I am now informed, definite instructions were sent by the Standard-Vacuum Oil Company to their agents not to declare to the monopoly stocks belonging to the company held on consignment. I understand from the British Consul General that the Asiatic Petroleum Co. did the same. Apparently the Texas Company did not take the same action; the Manager understands that its agents did declare their stocks. The Standard-Vacuum Oil Company have about 950,000 gallons of kerosene and gasolene on consignment to their agents and 550,000 gallons on storage in their several installations in “Manchukuo”. The corresponding figures for the Texas Company are 360,000 gallons and 100,000 gallons.
The Standard-Vacuum Oil Company state that they are protected by a cash guarantee against any defalcations by their agents in connection with these stocks, but that this guarantee would not be applicable to stocks which their agents desire to turn in because of their inability to sell. The Texas Company state that they expect their agents will be able to sell all their consigned stocks.
The representatives of neither of the two American companies appear to be very much concerned over the question of the disposal of the stocks, the attitude of Standard-Vacuum Company being that, [Page 896] as they have long ago advised their Shanghai office of the position, the latter may have some policy in mind of which they have no information.
There is another point in regard to the customs notification which also merits mention. The Texas Company state that they have been refused permission by the Dairen Customs to import a shipment of lubricating oil, although my interpretation of the text of the notice would exclude lubricating oil from its provisions. Moreover, lubricating oil is not specifically mentioned in the Monopoly law, and it has always been understood by the oil companies that it was not to be a subject of the monopoly. I therefore advised the Texas Company to make oral representations to the Customs in Dairen, since it was possible that their action was the result of a misunderstanding.
Respectfully yours,
- Copy transmitted to the Department by the Consul General in his unnumbered despatch of April 12; received May 6.↩