693.002/840: Telegram

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

214. 1. Inspector General of Customs has informed me that he has received instructions from the Minister of Finance to the effect [Page 819]that the Executive Yuan understands that the Japanese intend to reopen the Yangtze River to navigation but intend to control steamer routes and aids to navigation to supervise outdoor customs activities, to increase authority of Japanese pilots, and to negotiate with Inspector General for recruitment of additional Japanese staff to meet the new conditions, wherefore the Executive Yuan had directed the Minister of Finance to instruct the Inspector General not to come to any understanding respecting additional Japanese employees and that the customs should employ means to destroy the Yangtze aids to navigation and block the fairway. At the same time the Foreign Office is instructed to invite the attention of the American and British Governments to the question, pointing out that if the customs is placed under the control of the Japanese employees the trade with Europe and America will be adversely affected, loans secured on the customs will be less adequately protected, and should the war be prolonged Japan would probably use the customs revenue for her own advantage.

2. Inspector General proposes to reply that he has reached no understanding with Japanese in regard to reopening of Yangtze customshouses and recruitment of staff therefor but when these ports are to be reopened he expects to receive demands for additional Japanese staff and he has received information that Japanese will demand appointment of a number of Japanese commissioners and deputies for work in customshouses in occupied areas and he will make every endeavor to reduce these demands when presented but if he is compelled by the imperious necessities of the hostilities to appoint a few more senior Japanese he will endeavor to do so on a contract basis and not on a permanent basis.

3. Inspector General informs me that the best terms he is likely to be able to secure will be that the customs controlling authority in the majority of the ports will remain in the hands of non-Japanese commissioners, that no individual port will be staffed entirely by Japanese, and if he is compelled to appoint a few more senior Japanese to the service he will endeavor to do so on the contract basis.

4. Inspector General tells me orally that he cannot continue to maintain the integrity of the Customs Administration if he receives mandatory instructions from the Chinese Government prohibiting the further employment of Japanese. Under the circumstances he asks me to request that our Embassy at Chungking make representations in the matter to the Ministry of Finance. He states that the British Ambassador has agreed to instruct his representative at Chungking to that end.

5. I consider that so far the Inspector General has been able to do exceptionally well in resisting Japanese pressure and while he has necessarily had to employ number of Japanese junior customs officers for outdoor customs work and to assign senior Japanese members of [Page 820]the customs to more important work, no port is definitely under Japanese control and the integrity of the service is being maintained. If he is to receive mandatory instructions from the Executive Yuan such as those outlined in paragraph 1, it is of course impossible for him to continue to function. If he resigns it is not likely that he could be replaced by an appointee of the Chinese Government and the customs would definitely fall into Japanese hands. He must be allowed a reasonable latitude and discretion if he is to continue to function, and I am therefore personally of the opinion that representations at Chungking should be authorized.

Repeated to Chungking and Peiping.