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

693.002/534: Telegram

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

Hankow, February 28, 1938—noon.
[Received 5:25 p.m.]

134. Shanghai’s 252, February 12, 8 p.m., Department’s 159, February 23, 5 p.m. and Shanghai’s 313, February 25, 1 p.m.⁷⁰ Following information imparted to me by Arthur Young may throw some light on situation:

Arthur Young states that in October there was discussion in Shanghai regarding instructions which should be sent to Commissioner of Customs at Tientsin in connection with discussions emanating from Tientsin as the result of instructions sent to the Commissioner quoted in my 804, October 13, 3 p.m.⁷¹ Young states that on October 15 British Consul, Tientsin, reported that strong objection was taken by Japanese authorities to the fact that arrangements for custodian bank covered all China and Consul doubted whether even the original proposal of putting the money into Yokohama Specie Bank would be acceptable. Maze appears to have suggested in view of the above that only safe way to ensure agreement would be to authorize the Commissioner to make the best local settlement of the case. Kung would not agree to this. Eventually, as the result of discussions in Shanghai between Kung, Hall-Patch, Hall⁷² and Young, Maze instructed Commissioner at Tientsin on October 19 that Minister of Finance was unable to authorize any concession beyond that set out in the six points which Department will find covered in my 804, October 13, 3 p.m. This instruction was followed by another on October 19 sent by Maze to the Commissioner of Customs at Tientsin which apparently had the approval of Kung. It stated that if Commissioner of Customs [at] Tientsin failed to secure agreement along lines of six points and in view of the difficult position in which he was, Commissioner of Customs was privately authorized as a final alternative to use his discretion in depositing the Tientsin and Chinwangtao customs revenue locally “in a reliable bank of good standing, but remittances for cost of collection, foreign and internal loans, and the indemnity and regular local obligations such as conservancy and quantity are to be made therefrom as due and if considered necessary by you. Any balance remaining is to be left to accumulate in the bank.” Arthur Young informs me that the “due and if” in the above quotation were omitted in the process of transmitting this instruction to Commissioner of Customs at Tientsin, and that Commissioner therefore interpreted message as giving him complete discretion. He deposited funds in the Yokohama Specie Bank without obtaining any assurances from the Japanese, hence situation which has now developed. Letter dated October 22 addressed by the Commissioner of Customs at Tientsin to the Japanese Consul General, quoted in Shanghai’s 252, February 12, 8 p.m., was doubtless the result of Commissioner of Customs’ exercise of discretion which he thought he had because of the instruction which he received from the Chinese representative and which was dated October 19.

Johnson

70. Telegram No. 313 not printed.
71. Foreign Relations, 1937, vol. iii, p. 873.
72. Monroe B. Hall, Consul at Shanghai.