693.94244/161: Telegram

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

523. Embassy’s 506, October 19, 11 a.m.51 Consulate General [at] Tientsin reports that according to good authority smuggling into the East Hopei autonomous region reached considerable proportions during September, duty which is set at one-fourth Chinese duty having [Page 369]been collected on only about three-fourths of goods entering that region, East Hopei thus collecting only $750,000 during September instead of $1,000,000 and the Chinese Government losing thereby $4,000,000.

Smuggled goods continued to pass out of Tientsin by roads and canals to the interior in large quantities and the real authority for such traffic continues to be the guards composed of Japanese subjects who accompany trucks and boats, the traffic apparently being handled principally by a Japanese firm, the Gitaiyoko.

The Commissioner of Customs, Tientsin, has informed Berger that an office for the prevention of smuggling on the railways will be established in Tientsin about November 1st. Service of such an office appears doubtful however since local authorities are making use of situation for their further financial benefit. Private Japanese interests are reliably reported to have paid over $26,000 last week to a subordinate of General Sung. Local authorities could undoubtedly terminate distribution of smuggled goods from Tientsin by cooperating with customs but such action would involve them in conflict with Japanese and would cut off considerable income.

Consulate [at] Tsinanfu reports serious dispute last week between large group of alleged Korean smugglers and local customs unit over two truckloads of rayon and cigarette paper which were seized near Tsinanfu and brought into that city, goods finally being returned smugglers none of whom received any punishment. Tsinanfu businessman, who recently returned from motor trip in northern Shantung, states that he twice passed groups of 20 or 30 trucks carrying smuggled goods south.

Consul General Gauss has learned from an official source that the Chinese Maritime Customs has recently despatched three Chinese customs preventive cruisers north to waters along the Chinese coast where they have heretofore been forbidden by Japanese to function with instructions to make seizures of smuggling vessels. This is unconfirmed but if true represents a stiffening of the attitude of the Central Government toward smuggling in the demilitarized zone.

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