Office of the Historian

893.61331/125: Telegram

The Ambassador in Japan (Grew) to the Secretary of State

Tokyo, October 31, 1938—2 p.m.
[Received October 31—7:10 a.m.]

695. Department’s 372, October 29, 3 p.m., Universal Leaf Tobacco Company.

1.
During Covington’s call at the Embassy on October 20, he read our note of September 26 to the Foreign Office and was informed of the contents of paragraph 1 of Peiping’s 611, October 8 [9], noon. He stated that he could not understand how the Japanese obtained the impression that the company had withdrawn its offer to purchase “a certain larger amount of exchange,” as the company has all along been prepared to make such purchase. He was inclined to believe, as we are, that the obstructive attitude of the Japanese authorities in [Page 79] Shantung is highly important measure due to their misunderstanding of the company’s position. He emphasized the need, in view of the approaching end of the tobacco season, for removing as soon as possible that misunderstanding by presenting clearly to the Japanese the position which the company has taken from the very beginning. It is that position, we understand, which is set forth in paragraph 2 of our 676, October 20, 7 p.m.
2.
It has been our thought that, as little time remains for the company to operate in Shantung this season, we in Tokyo and the Embassy in Peiping should at once take steps to assure that the difficulty does not arise out of Japanese misunderstanding of the position taken by the company, and that if the Japanese should show any disposition to reach a settlement on the basis of the proposition outlined by Covington, to transfer the negotiations to the company representative. However, we will take no action unless, in the light of the foregoing, the Department authorizes us to proceed as proposed in our 676.
3.
Covington is en route to the United States and may be reached in a few days at the office of the company in Richmond, Virginia.

Repeated to Peiping.

Grew