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

1256. From standpoint of legal and policy considerations Govt should not assume obligation to pay taxes incidence of which would not otherwise fall upon it. This especially true at present time in China in view uncertainty as to exemption Amer Govt properties and in view Dept’s desire to arrive at satisfactory basis for tax treatment of Govt properties. Therefore not considered wise to complicate subject by having Govt agencies assume responsibility for taxes on contractual basis which ordinarily would fall on other persons. (Urtels 643 & 79210)

Leases Development Bldg and Hamilton House with proposed tax clauses should not be signed pending determination tax issue. In meantime suggest informal interim agreement be made by exchange [Page 1339] letters or memorandum of agreement so that rent, exclusive of taxes, can be paid. This interim agreement should be assigned contract number and furnished Dept in original and duplicate. (Repeated Nanking.11)

  1. Telegram No. 792, May 6, not printed.
  2. As No. 439.