393.115 Tung or Wood Oil/249: Telegram
The Consul General at Shanghai (Gauss) to the Secretary of State
[Received 1:50 p.m.]
816. Following is text of letter dated yesterday received this morning from the Japanese Consul General at Shanghai:
“I have the honor to acknowledge the receipt of your letter of August 9th concerning the shipment of American owned wood oil which is now at Hankow.
This question, as I informed you at our conversation on the matter on the above date, had long been a matter of special and careful consideration by the Japanese authorities concerned. They have studied the possibility of allowing the American owned wood oil to be shipped down the Yangtze River without coming in contradiction with the present state of the navigation on the river.
Your letter above referred to was brought at once to the attention of my Government, and I now have the honor to state that I have been instructed to inform you that they have taken the matter up again and have come to the decision that the bulk of wood oil, as was ascertained as American owned in your letter dated September 6th, is to be given facilities to be shipped from Hankow.
I believe you will readily appreciate the difficulties placed in the way of this decision owing to the present restrictions for military necessities on the river navigation. Accordingly, several devices had to be worked out, viz: the wood oil in question is to be first purchased by the Japanese military authorities as a sort of military supply, to be [Page 457] repurchased by the American firms, the owners, upon clearance of the Yangtze River, for which purpose the transport had to be selected from among those vessels which have the accommodation for vegetable oils, which, on its down river voyage, is scheduled to cease to be the transport at the moment when the oil is repurchased by the American firms, to be shipped direct to the American coast.
Instructions have already been given to a Japanese shipping company along the above mentioned practical arrangement, who, on their part, will soon be ready to discuss the matter into [in?] detail with the American firms.
You would also appreciate that one of the suggestions put in your letter of August 14th contributed much towards this satisfactory decision, together with questions of favorable capacity available as military transport.
There are some more minor points to be adjusted in this arrangement before the wood oil is to be actually shipped at Hankow, probably at the end of this month, which may be left with the companies concerned. I am writing to you in order to inform you as soon as possible of the principle of our decision so far reached. Therefore, this communication might be supplemented later when deemed necessary.
I might add that the above decision is the outcome of what had long been considered by the Japanese authorities concerned and that, but for the unexpected abrogation of the commercial treaty of 1911, it would have been reached sooner and with less difficulty.”
While the foregoing communication refers only to the American-owned oil we have subsequently been informed orally that it may be considered as extended also to cover the oil under contract of sale. We are also [informed] that the Japanese shipping company concerned is the Nippon Yusen Kaisha and that the arrangements are to be made at Shanghai with possible reference of any details to Hankow.
I am very much concerned regarding the “device” of purchase of the cargo by the Japanese military and repurchase by the American owners. This matter has been taken up informally with the Japanese Consulate General who tell us that this was a point insisted upon by the Japanese military. I have pointed out that even though it may be said that the transfer of ownership is merely nominal, and aside from the fact that a principle is involved, there is the practical consideration that a transfer of title to the Japanese military would affect the ability of the owners of the oil to obtain adequate insurance and there is also involved the question of responsibility for any losses which might be incurred during the transit of the oil from Hankow to Shanghai. I shall report developments as soon as possible.
Repeated to Tokyo, Chungking and Peiping.