File No. 893.512/39.
The Secretary of State to Chargé MacMurray.
Washington, September 30, 1914.
Sir: The Department encloses herewith for your information a copy of its instruction of the 23rd instant to the American Consul at Nanking in reply to his despatch transmitting a copy of his despatch to the Legation, dated August 11 [7], 1914, regarding the proposal of the Anhui provincial authorities to collect a consumption tax on liquor and tobacco.
The Legation’s telegram of July 20th reports numerous instances of the illegal levy of inland taxes in China. The Legation in 1912 and 1913 suggested that the United States should adopt a liberal construction of the treaty provisions under which we with other foreign powers have for years protested against such levies as are reported in this despatch from Nanking. The treaties provide that when foreign imports have paid the import duty and the inland transit commutation tax, or in the case of duty-free articles the 2½ per cent ad valorem inland transit duty, they shall be exempt from “all other inland charges whatever.”
The Chinese hold that the context shows this to be “all other inland charges while in transit,” but the foreign legations in China have unanimously held that the language is to be literally interpreted.
At various times the Legation has secured a removal of obnoxious taxes levied in violation of this provision, but recently the Chinese officials have adopted a firmer stand and the complaint of the Legation in the telegram referred to above shows the need of caution in yielding to Chinese demands respecting the question.
The heavy taxation in Chekiang is reported by Shanghai papers to have considerably checked the sale of foreign imports in that province. On the other hand, tobacco and liquors are dealt with by all governments in an exceptional manner. Many countries levy an excise and it may appear advisable to yield with reservations as to the treatment of other goods.
You will, therefore, endeavor to reach an understanding in which in return for China’s yielding on the question of whether or not Nanking City is open, you will agree to an excise on liquor and tobacco with reservations as to treatment of other goods.
I am [etc.]