It has been shown that it is not derogatory to the dignity of a Sovereign Power to have a foreign Customs Agent, stationed within its boundaries, to safeguard the revenue interests of a contiguous friendly State. I do not know how many of the precedents, quoted by Lord Palmerston still hold good, but I believe that a mutual arrangement of this kind exists between Canada and the United States.
What I would propose is that a section of the Hongkong Harbour be set apart for all junks and other craft, except foreign vessels desiring to load or discharge at Treaty Ports in direct trading with China, where they shall load and discharge under the supervision of the Imperial Maritime Customs, the offices of the latter to be on board a hulk, moored within the section so set apart. The ordinary junk traffic with China will there pay such dues as they have hitherto paid at the Kowloon and Lappa Stations, or as may hereafter, under another system, be imposed. They will not, however, be allowed the privilege of steam navigation.
The fundamental principle underlying taxation on goods circulating on the inland water ought, in my opinion, to correspond with that which is in operation on the Coast, i.e., uniformity of tariff for all goods carried in vessels of foreign type. Ocean-going steamers under the Chinese Flag pay duty to the Maritime Customs on the same basis as vessels under a foreign flag. And similarly, Chinese launches - seeing that they avail themselves of European methods of propulsion - should be placed on the same footing, subject to the same disabilities and participants in the same privileges as foreign launches. Any craft purely native ought, of course, to be allowed to trade as before.
All vessels, irrespective of nationality, using steam as a method of traction or propulsion, trading with points on the Coast of China, the inland waters of that country, or with Treaty Ports on the West River, should pay on their cargo as follows:
1. If reported for shipment to a Treaty Port, the ordinary tariff duty of 5%.
2. If the destination be not specified, a duty at the rate of 7-1/2%, of which 5% should go to the Imperial Exchequer, and 2-1/2% to the provincial Treasury of the Province wherein landed. Should the goods, however, be eventually landed at a Treaty Port, they will receive a drawback for the 2-1/2% excess duty paid on shipment.
3. All goods, which have paid 7-1/2% duty, shall be accompanied by a transit certificate, which will free them from all further dues whatsoever, and enable them to proceed to any point in the interior, near or remote. They will thus be placed on a footing of equality with goods imported at Canton or other Treaty Ports proceeding up country.
In order to ensure, as far as possible, that the goods in question shall enjoy the contemplated immunity from further taxation, a clause might be introduced into the agreement, revoking the grant of a harbour section in Hongkong in the event of the undertaking not being adhered to.