Foreign Relations of the United States Diplomatic Papers, 1938, The Far East, Volume III

693.002/477: Telegram

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

Shanghai, February 1, 1938—9 p.m.
[Received February 1—6:50 p.m.]

179. Inspector General of Customs has today reported to the Minister of Finance that the Tientsin and Chinwangtao customs have been obliged to yield to force majeure and submit to enforcement of the reduced tariff rates. He has urged Government to defer any action or decision. Evidently anticipating some drastic move by the Minister of Finance, he asks that the foreign representatives use their influence to dissuade Chinese Government from any precipitate action.

2. Inspector General has also sent me précis of a long message from Commissioner of Customs at Tientsin⁴⁴ who says that the Peiping regime and the Japanese military are now moving to obtain the release of foreign loan quotas in order to separate such quotas from the remaining revenue which will be treated as surplus to be dealt with by the Peiping régime as it pleases. Commissioner believes Peiping regime would reject any move to reintroduce the 1931 tariff. He recommends that in order to prevent disruption of the customs service and consequent inevitable loss to foreign bondholders the customs be placed under international control. Inspector General points to the 1912 arrangement under which control was placed temporarily in the hands of the Inspector General and states that adoption of that plan or of the suggestion of the Tientsin Commissioner for International Control is a matter for the foreign powers to decide in collaboration with the Chinese Government and he asks that the matter be made known to our governments and their views obtained.

3. I report the matter as requested but consider it would be futile to attempt to induce China and Japan to agree to any scheme of international control of the customs or to reintroduce the arrangement of 1912. The Japanese military are determined to obtain customs revenues for use in areas under their control and apparently regard the release of foreign loan quotas as a liberal concession to foreign interests. The customs situation is moving rapidly to a crisis. I believe the full weight of foreign effort should be devoted to obtaining from the Japanese Government at Tokyo broad assurances similar to those being sought by the United States. The interest here seems to be in opposing the use of Japanese instead of British banks of deposit for the customs revenues collected at Japanese occupied ports. It is also evident that foreign customs officials are principally concerned as to their own future.

Repeated to Hankow and Peiping. Not repeated to Tokyo.

Gauss

44. W. R. Myers.