693.003/818
The Commercial Attaché in China (Arnold) to the Legation in China77
Memorandum
The Chinese members of the tariff valuations revision commission appear to be bent upon increasing the values of the 1922 tariff schedules irrespective of the relation of these increases to the Shanghai wholesale market values for the year 1925, which was the period selected by the Chinese commission as a basis for the revisions. Naturally there are instances in connection with items in the tariff which would show decreases in values for the year 1925 as compared with those for 1922.
Chinese members of the commission are reluctant to admit these decreased values. Confidentially one of the members of the commission stated that they had instructions not to lower any of the values which appear in the 1922 tariff. Naturally when the foreign delegates agreed to the acceptance of the average Shanghai wholesale market values for the year 1925 as a basis of the revisions they anticipated that the commission would accept lower values where market conditions justified as would the foreign delegates be obliged to accept higher values where these market conditions warranted.
Chinese members of the commission are apparently very sensitive to the possible criticisms of the Nationalists in the south in what might be termed by them an attitude of leniency toward foreign interests in accepting lower values than those which appear in the 1922 tariff schedules.
It is not an easy matter in all cases to determine the Shanghai wholesale market values. In certain commodities there are certain ranges in qualities and prices so that it is difficult to fix upon an average for the year. This is especially true with commodities which experienced during that year considerable fluctuations in price.
The Chinese have been working through the Bureau of Markets of the Ministry of Finance which has its headquarters at Shanghai and which has been functioning some years. This Bureau compiles monthly and quarterly reports on Shanghai market prices. But the reports of this bureau are in some cases inaccurate as socalled wholesale prices have been found in reality in some cases to be retail prices. [Page 387] Furthermore, there are commodities concerned for which it is difficult to arrive at a fixed wholesale market price.
The Chinese commission also uses the customs returns values in its efforts to arrive at the Shanghai wholesale market value. These are not always reliable for the reason that importers often give prices on their applications which are nominal and which do not represent the Shanghai Wholesale market value. These importers pay duties on a specific basis hence are not particularly careful about the values they place on their invoices. In some cases they will purposely put on a higher price with the idea of realizing on the commodity in question as much as competitive market conditions will allow hoping to approximate the price stated on their customs application. Thus, there are times when the customs returns values cannot be relied upon.
The American delegate is experiencing considerable difficulty in trying to persuade the commission to accept the Shanghai wholesale market values for petroleum products. These it appears were lower in 1925 than they have been since that year. They were also lower in 1925 than they were in 1922. Certified copies of contracts and other certified data regarding the prices of petroleum products for the year 1925 have been produced for the commission. Members of the commission have been unable to dispute the inaccuracy [accuracy?] of these values. However, they are insistent upon the acceptance by the American delegate of higher values than the 1925 market conditions warranted. The American petroleum companies are averse to the idea of accepting a 5% ad valorem basis for petroleum products. The customs authorities are also unfavorably inclined toward putting petroleum products on an open ad valorem basis. Thus, it will be necessary to come to some agreement in regard to the valuations on these products.
As for importers of synthetic indigo, the American delegate is also confronted with a similar situation as that obtaining in connection with petroleum products, but in this case the American dye stuffs companies appear to be willing to accept an ad valorem basis although they greatly prefer to have the valuation fixed. The difference between the proposed Chinese values and the actual Shanghai wholesale values is too great to permit of the acceptance of the Chinese proposal. Thus, it may be necessary in this case to accept a 5% ad valorem duty rather than to try to arrive at some settlement on a fixed value basis.
- Copy transmitted to the Department by the Chargé in China in his despatch No. 1446, March 23; received April 28.↩