893.512/723: Telegram
The Chargé in China (Mayer) to the Secretary of State
[Received 1 p.m.]
1063. 1. Following from consul general at Shanghai:
“November 30, 9 a.m. Referring to my telegram[s] of November 17, noon, and November 22, noon.74 Standard Oil Company after extended negotiations plans to conclude direct friendly agreement with Kerosene Tax Bureau of Nanking, Ministry of Finance, which has emphatically stated to the company bureau’s full intention to levy tax irrespective of any protests or even unlikely use of armed force by foreign governments.
- (2)
- This consulate general has urged that such private agreement avoid any acceptance in principle of this extra treaty tax particularly in reference to shipments into this or other foreign concessions. Company willing to comply insofar as possible but states Nanking representatives most sensitive relative to definite references to foreign settlements. Details of the proposed agreement are being forwarded by mail. Standard Oil Company states its New York office has reported salient features of proposed agreement to Department.
- (3)
- All companies at Nanking pay $1 per case tax indirectly through their native agents but Standard Oil Company agreement provides for 60 cents direct tax if accepted. Recognizing inability of American Government to protect distribution of petroleum products throughout China, proposed agreement is considered quite favorable to Standard Oil Company and while such written recognition of tax on oil is regrettable, the treaties are not threatened to a greater degree than they were by similar tobacco company agreements of 1920, other than that in proposed agreement the foreign concessions are not specifically referred to as excepted from operation of tax.
- (4)
- Agreement provides for advance payment of approximately one month’s normal taxes and while this company arrangement is undesirable it is characteristic of such agreements. When this credit is exhausted by accrued taxes, company will make payments at stated intervals, normally being debtor to tax authorities. Agreement reached appears as a surprisingly satisfactory reconciliation of the points of view of the company and the Nationalist authorities as stated in paragraph 1.
- (5)
- The above transmitted on this office’s initiative and not as protest on the part of Standard Oil Company, although the company is now preparing a formal protest at levy of direct tax on American goods in the hands of American company. This office will transmit such protest to authorities unless otherwise instructed.”
2. Am authorizing Cunningham to enter general protest but to refrain from transmitting Standard Oil Company protest until definitely so instructed by Department. The company’s attitude appears inconsistent and its request entirely unreasonable in that, while impliedly recognizing the principle of the tax by its private agreement with Nanking regime made without consultation with Department or Legation, it now seemingly desires American official protest on its behalf.
3. The Department is respectfully referred to the Legation’s 131, March 16, 10 a.m., 1926,75 and mail despatch number 776, October 4, 1926.76 Like action is recommended at this time as set forth in last sentence of above telegram.
- See telegram No. 1044, Nov. 29, from the Chargé in China, p. 426.↩
- Foreign Relations, 1926, vol. i, p. 1095.↩
- Not printed.↩