The Customs Authorities attach great importance to having Customs House inside our Territory.

I don't see that it might not be permitted in exchange for some concession and under an agreement similar to the Kiaochan one.

The Military is averse at present to having it always sited at Wei Hai Wei.

§9 "Chinese merchandise shipped from Tsunglão under §6 has paid Export duty shall when landed at a Chinese Treaty port pay coast trade duty.

Non-Chinese merchandise shipped to Tsunglão from a Treaty Port shall be given a drawback of the original import duty paid at the Treaty Port & shall pay duty at Tsunglão unless it passes into China.

§13 And the import duty on opium imported into Tsunglão and consumed in German territory shall be paid over to Germany.

I think that this agreement gives us a fair claim to insist on the Chinese giving a drawback on goods re-exported to Wei Hai Wei from a Treaty Port.

Because the Chinese have not got a Customs House at just outside the leased territory, is no reason for their penalizing Wei Hai Wei trade in comparison to Kiao-Chow. They had better see about establishing one as soon as possible. And if there were a Chinese Customs house in the leased territory, but under proper arrangements the disadvantage might not be so great.

In any case, the best line would seem to be to insist that Chinese convenience is no reason for treating Wei Hai Wei as a non-Chinese port, so that if China cannot look after her customs by means of House in her own territory she must have to give something for permission to establish one in Wei Hai Wei.

7. Send copy of this to Commo for his information in dealing with the Wei Hai Wei question in short.

Conf-desp.

So proceed when 7.0.

H.K. 12419

34170, guguh aluni

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§9

34

324 always

34178

Page 341

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