693.002/982: Telegram
The Ambassador in China (Johnson) to the Secretary of State
[Received March 7—10:20 a.m.]
115. Department’s 28, February 29, 3 p.m.,45 customhouses at Chinkiang and Nanking. On March 6, 3 p.m., I orally informed the Minister of Finance of the substance of the informal statement set forth in the telegram under reference.
The Minister in reply made the comment that among the parties concerned China was naturally foremost in being anxious to maintain the administrative independence and integrity of the customs and at the outset of the hostilities had made the suggestion that the revenues collected by the customs in territories occupied by the Japanese be deposited in neutral custody, that loan obligation be met therefrom and that the balance be immobilized until the end of the hostilities. This suggestion was not adopted and furthermore the British acting without any authorization from the Chinese Government came to an arrangement with the Japanese whereby such revenues were deposited in a Japanese bank on the understanding that the Japanese would hand over loan quotas for payment to holders of China’s obligations. He informed me not only had the Japanese not handed over any such funds but they had actually utilized deposits of customs revenues to support puppet governments and bogus currencies and to conduct military operations against the Chinese Government. He professed astonishment that in view of these past occurrences it should be supposed that China would acquiesce in the reopening of customhouses under Japanese control to continue the practices he had just described.
Kung then observed that the American Government had a legal interest in the disposition of customs receipts and in the administrative integrity and independence of the customs organization and he appreciated the expression of this interest which he had just received from me. He inquired whether I would be in a position to transmit to the Department a suggestion from him that the Department give its attention to the fundamental point involved in the whole question, that is, the custody and use of customs revenue and making appropriate representations at Tokyo along with other concerned [Page 720] powers. After all it was Japan and not China that was destroying the integrity of the customs. He added that the administrative integrity of the customs was, of course, closely related to equality of opportunity as between American merchants and those of Japanese and other nationalities.
I said that I would transmit his suggestion to the Department.
Repeated to Peiping, Shanghai. Peiping please mail to Tokyo.