693.092/360: Telegram
The Ambassador in China (Johnson) to the Secretary of State
[Received August 31—1:38 p.m.]
576. I learn from British Consul General today that Commissioner of Customs at Tientsin has communicated to Inspectorate General in substance as follows regarding a conversation which he had in Tientsin [with the?] Japanese Consul General. The Japanese Consul General is said to have stated to the Commissioner of Customs that if the Customs Administration would agree after setting the quotas necessary to meet foreign, not domestic, obligations on customs, to deposit balance with designated (Yokohama Specie Bank) bank to be held untouched until disposed of by negotiations between the Japanese and Chinese Governments; and if the customs would not permit entry of arms for Chinese even though covered by permit of Central Government, then the Japanese would undertake not to interfere [Page 859] with the functioning of the Chinese customs within areas occupied by Japanese military. Japanese would also undertake to stop and prevent all smuggling within said areas. It was indicated that these terms applied only to Tientsin and Chinwangtao but that it seemed intended to extend same to Chefoo, Tsingtao and Shanghai. The alternative was that if Chinese refused to accept terms Japanese would take over functions of customs within those areas occupied by Japanese military forces. Commissioner is believed to have recommended acceptance of terms but would prefer deposits to be made in banks other than Japanese.
It seems to me that Chinese Government would be wise to accept terms as only way of possibly preserving [customs].
Repeated to Shanghai and Peiping.