693.002/1151: Telegram
The Ambassador in China ( Gauss ) to the Secretary of State
[Received 1:05 p.m.]
855. C. B. Joly, [Acting] Inspector General of Customs, informs me that customs affairs are approaching a grave crisis because of decision of government to apply the treasury law to the customs and that apart from removing loan funds from control of Inspector General the step will undermine the inspectorate system and disrupt the service as, under the law, each customs district is treated as a financial entity which will deprive the commissioner and the inspectorate of the flexibility and adaptability essential to successful administration of a modern civil service on national line[s]. Inspectorate would have no control over expenditures in each port; expansion and retrenchment according to trade requirements would be completely localized; staff remuneration and transfers would be subject to local conditions; and the raison d’être of the inspectorate would disappear.
Minister of Finance2 has stated he has no authority [to] postpone application of the law to the customs (although there has already been continual postponement for several years). Inspector General says it has not been possible to arrange for application of the law in a form which will not completely undermine inspectorate system. Note continuing efforts to that end but it is expected if he is not successful he will be obliged to point out that there is no room for inspectorate, that administration of service should be placed under direct control of the Ministry of Finance and he and other foreign officers should be paid off as it would be useless to attempt to operate under the law as the service would break down and the foreign officers then would be made scapegoats.
Inspector General has made no request for our intervention in the matter but says he considers that the situation should be known to us and to British Embassy. Being without reference library at Chungking, this Embassy is unable to study the matter in the light of any treaty or other stipulations but I do not believe that the existence [Page 681] of any such stipulations would deter the Chinese Government at this time from pursuing whatever course it wishes. Advice or representation from the American or other governments would not likely be well received.
The Treasury Law contemplates modern fiscal arrangements along lines of those in well organized government administrations but in present state of China’s administrative organization and development it will, if applied to the customs, disrupt that service which is the one outstandingly efficient organization of the government reasonably free from politics and a service which through control of the customs revenues offered as security for loans and indemnities has established China’s international and domestic credit on a sound basis.
- H. H. Kung.↩