693.002/621: Telegram
The Secretary of State to the Ambassador in Japan (Grew)
153. Your 286, May 1, 9 a.m., and 287, May 1, 11 a.m.; Hankow’s 224, April 30, 11 a.m., and the Department’s 152, April 30, 2 p.m., in regard to the Chinese Maritime Customs. From the beginning our position with regard to the question of the Chinese customs has revolved around two objectives: (a) that the integrity of the customs [Page 691] be preserved, and (b) that the customs revenue be safeguarded with special reference to the servicing of foreign loan and indemnity quotas. If and as losses are occasioned to American interests in China by the military and other activities of the Chinese or Japanese Government, this Government must look for indemnification to the Government responsible for such losses. In this customs issue we have consistently held that we did not wish to espouse any particular plan toward attaining the objectives in which we are interested. If a particular plan is put forward, is carried into effect, and operates in such a way as to bring about reasonable attainment of our objectives, we would not expect to make objection. If, however, any particular plan should not in practical operation have that result, we would wish to be free to offer objection. Moreover, should a particular plan when brought to our attention appear to be seriously objectionable we would probably so indicate to the authors or sponsors of that plan.
With the foregoing general outline of our position in mind, the Department offers certain specific observations as follows:
- 1.
- The Department naturally assumes that in any arrangement effected in regard to the Chinese Maritime Customs there would be no discrimination against the American obligations secured on customs revenues, including the flood relief surtax.
- 2.
- The Department does not understand the basis of the British Ambassador’s statement that “the Japanese Government could not be expected to provide the foreign exchange necessary to cover” the quotas of the Chinese ports under Japanese military occupation for the servicing of the foreign obligations secured upon the Chinese Maritime Customs revenue. The régime set up in north China following the Japanese military occupation of that area is receiving the benefit of the foreign exchange accruing from trade and other commercial transactions in that area. As illustrative of the latter there may be mentioned an agreement between Major General Kita and the “Federal Reserve Bank” on one side and the Yee Tsoong Tobacco Company on the other for the purchase by the latter with foreign currencies of “Federal Reserve Bank notes” for the purpose of buying tobacco in Shantung. Under these circumstances it would appear to be entirely reasonable for the authorities controlling the area under Japanese military occupation to provide the foreign exchange necessary to cover the quotas of the customs ports in such area.
- 3.
- There arises the question whether, if the arrangement arrived at between the British Ambassador and the Japanese were agreed to by the American Government and if that arrangement collapsed because of China’s refusal to agree thereto (and this would seem to be a not improbable contingency), would not the American Government be thereby placed at a disadvantage in its attitude of holding the Japanese [Page 692] Government responsible for losses occasioned by the acts of the latter’s forces or other agents in China?
- 4.
- In as much as the arrangement must, according to Craigie, collapse if the Chinese Government should refuse to provide the foreign exchange called for therein, the Department desires to withhold any further comment until the Chinese Government has made known its attitude toward the whole arrangement.
- 5.
- Please discuss the matter with Craigie in the light of the foregoing.
Please repeat to American Embassy, Hankow, through Shanghai.