693.002/603: Telegram
The Consul General at Shanghai (Gauss) to the Secretary of State
[Received 10:40 a.m.]
572. [Following from Tokyo:]
267. “April 23, 8 p.m. Subject to the approval of the British Government the British Ambassador has now reached agreement with the Vice Minister for Foreign Affairs on the following texts relating to the service of foreign obligations secured on the Chinese Maritime Customs. The arrangement consists of a note with enclosure from the Minister for Foreign Affairs and the British Ambassador’s reply. In addition there is a confidential exchange of letters with the Vice Minister relating to the provision of exchange to facilitate the transfer of the North China quotas.
My British colleague has suggested that the texts be cabled to the Department. He considers the matter urgent because if the arrangement is not concluded soon it may not be possible to apply it to the March customs collections which he feels would greatly complicate matters.
I shall take no action unless or until instructed.
[Page 679]Documents. 1. Draft note from the Minister for Foreign Affairs to the British Ambassador as revised at interview with the Vice Minister on April 23.
‘Your Excellency, As a result of the conversations which have recently taken place between Your Excellency and Mr. Horinouchi respecting the service of the foreign obligations secured on the Chinese Maritime Customs and other relevant matters, I have the honor to inform Your Excellency that the Japanese Government, after obtaining the concurrence of the proper Chinese authorities in the occupied areas, are now desirous of dealing with the matter on the lines set forth in the accompanying document and are prepared to effect the measures described therein. It is understood that the measures are of a temporary nature for the duration of the present hostilities and will be subject to reconsideration in the event of a radical change in the economic conditions under which the above measures are proposed.
I trust these arrangements will prove acceptable to His Majesty’s Government in the United Kingdom.
I have the honor to be, et cetera.’
2. Text of draft customs arrangement:
‘All duties, surtaxes, dues and other revenues collected by the Chinese Maritime Customs at each port within the areas under Japanese occupation shall be deposited in the name of the Commissioner of Customs with the Yokohama Specie Bank or, where the bank has no branch, with any other bank or banks to be agreed upon.
- (2)
- From the import, export and inter-port duties thus deposited, foreign loan quotas shall be remitted, at intervals which should not exceed 10 days, Inspector General’s account at the Yokohama Specie Bank in Shanghai in order to meet in full on due dates the service of the foreign loans and indemnities which were secured on the customs revenue in July 1937.
- (3)
- The service of foreign loans and indemnities secured on the customs revenues shall be treated at all ports in China as a first charge on the revenues after deducting the maintenance expenses of the Customs Administration (including the share of the expenses of the Inspectorate General) as certified by the Inspector General of Customs, and such customs payments and grants (hitherto deducted from gross revenues before payment of foreign obligations) as are similarly certified.
- (4)
- (a) Foreign loan quotas for each port shall be determined monthly in proportion to the share of that port in the total gross collections for all ports during the preceding month.
- (b) Calculations in respect of foreign loan quotas shall be based on the gross import, export, and inter-port duty collections of the Chinese Maritime Customs and these quotas shall be determined as set out in (a) above by the Inspectorate General of Customs, with the agreement of Japan and the other powers concerned.
- (c) Any insufficiency of customs revenue to meet quota of a port within the area under Japanese occupation in North China and in Central China shall be made up out of customs revenue of other ports in the respective areas.
- (5)
- (a) The arrears on the Japanese portion of the Boxer indemnity held in a suspense account at the Hong Kong and Shanghai Bank since September 1937, shall be paid to the Japanese Government.
- (b) Future payments of the Japanese portion of the Boxer indemnity as well as the Japanese share of the Reorganization Loan of 1913 shall be made in the same manner as in the servicing of all foreign loans and indemnities secured on the customs revenue.
- (c) The balance of the customs accounts with the Hong Kong and Shanghai Bank in each port under Japanese occupation shall be transferred to the account of the Commissioner of Customs at the branch of the Yokohama Specie Bank in each port and utilized for future foreign loan quota payments.
- (6)
- This arrangement shall come into effect on (agreed date) and shall apply to the customs collections beginning with March 1938.’
3. Draft reply by the British Ambassador to the Minister for Foreign Affairs.
‘Your Excellency, I have the honor to acknowledge the receipt of the note which Your Excellency was good enough to address to me on the [date] respecting the service of the foreign obligations secured on the Chinese Maritime Customs revenues and other relevant matters.
His Majesty’s Government in the United Kingdom recognize that the present position creates great difficulties for which it is urgently necessary in the interest of all countries concerned to find a solution and I have accordingly been authorized to state that the arrangements set forth in Your Excellency’s note and its enclosure are regarded by His Majesty’s Government, for their part, as acceptable.
I am further instructed to take this opportunity to emphasize once more to Your Excellency the interest which my Government take in the maintenance in every respect of the authority and integrity of the Maritime Customs service.
I avail, et cetera.’
4. Draft letter from Sir Robert Craigie to the Vice Minister for Foreign Affairs.
‘Confidential. My dear Vice Minister, With reference to the formal notes which are being exchanged today in regard to the Chinese Maritime Customs, I should be glad if, in order to avoid future misunderstanding, Your Excellency would be so good as to give me an assurance that the quotas for foreign obligations payable by the northern ports in Japanese occupation will be remitted in a currency which will enable the Inspector General to effect the necessary transfer into the currencies in which the foreign obligations are serviced. This question arises particularly in connection with the recent decline [decision?] to create a new currency in Northern China. I may add that I feel sure that the British authorities in China will lend such assistance as they properly can in overcoming transfer difficulties in connection with the payment of the foreign loan obligations due from the northern ports. Believe me, my dear Vice Minister, yours very sincerely.’
5. Draft reply from the Vice Minister for Foreign Affairs to Sir Robert Craigie.
‘Confidential. My dear Ambassador, With reference to your letter of today I am glad to be able to give you the assurance that the quotas for foreign obligations payable by the northern ports in Japanese occupation will be paid in Chinese national currency, on the understanding that the Inspector General of Customs will arrange for the supply of the necessary amount of foreign exchange for the conversion of these sums into currencies in which the foreign obligations are serviced. I also take note with pleasure of your assurance that the British authorities will take such steps as they properly can to overcome transfer difficulties in connection with the payment of the foreign obligations due from the northern ports. Believe me, my dear Ambassador, yours very sincerely.’
Please repeat to Department as our 267, April 23, 8 p.m. Grew.”