Office of the Historian

693.002/468: Telegram

The Consul General at Shanghai (Gauss) to the Secretary of State

Shanghai, January 26, 1938—7 p.m.
[Received 8:20 p.m.]

146. Reference my 126, January 23, 1 p.m., regarding Shanghai customs. At a meeting with French Ambassador and British Chargé d’Affaires this morning the latter stated British view on Japanese proposals substantially as follows:

(1)
That every effort should be made to resist deposit in Yokohama Specie Bank but he has authority to give way in the last resort at any time on condition that revenues so deposited in that bank be controlled by a board of officials in which case officials should be in joint names of the Inspector General and board of officials and not in name of Commissioner of Customs. In response to my inquiry it was stated that the proposed board of officials would be nominated by interested governments.
(2)
Withdrawals for expenses should include appropriate share for expenses of Inspector General.
(3)
Quotas should be determined not by Japanese in consultation with customs but by representatives of interested powers including Japan in consultation with customs or by the proposed board of officials if that system is adopted. Quotas should be subject to frequent [Page 636] and regular revision, his suggestion being review every month on basis of revenue collected for previous 2 or 3 months.
(4)
Domestic loans should continue to be serviced from any customs surplus but if Japanese will not agree he is authorized not to insist but should do all he can to insure that any surplus is held in suspense account definitely earmarked for domestic loans.

2.
The British earnestly desire however that we should all insist that foreign loan and indemnity quotas shall be deposited directly into the neutral bank or banks and only the excess revenue go into Yokohama Specie Bank if necessary. British Chargé d’Affaires agrees.
3.
Japanese authorities have not yet informed or discussed proposals with any of the interested foreign representatives.

Repeated to Tokyo, Hankow, and Peiping.

Gauss