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a.

The Inspector General is, I am sure, both ready to and will be pleased to meet H. E. the Governor so far as he can. That is, ad- ministrative changes which affect primarily the use of existing Customs documents and which can be made after reference to the Peking Government, could be introduced at once.

The protection of the Salt revenue is of great importance and in view of foreign loans secured on that revenue arrangements that will undoubtedly increase collection and improve control will be welcomed.

As Commissioner of Customs, however, and representative of the large commercial interests that are affected by the Customs Administra -tion I am most anxious to see first laid a sound foundation upon which improved administrative and executive machinery can be built up. I therefore propose to His Excellency that Article I of the Convention, Article 4 and Article 10 should be brought into operation, with a few modifications suggested in Mr. Lowder's Memorandum of the 6th. Mary, 1916 - regarding obligatory payment of duties, punitive powers, Shumchun River and Hirs Bay waters together with Article 9.

Regarding the privilege to be accorded at the importer's option to Chinese goods en route through the Colony, envisaged by Article 9, the following points must be noted :-

(a) The Russian Goverment a few years ago desired to have this

privilege accorded to Chinese goods en route through Vladivostock but the request was not acceded to. If the privilege is now given to Hongkong it cannot be long with- held from Vladivostock. The Chinese Goverment must there- fore be in a position to point to substantial advantages given to it in Hongkong as a raison d'être for a change in attitude and as a basis for negotiation with the Vladivostock authorities.

(b) The procedure to be adopted in Hongkong would doubtless be

very analogous to that obtaining in Treaty Ports when deal- ing with Bonded cargo. That is, agreed-upon Godowns would be constituted Customs Bonded Warehouses. The rules would be simple and of the same nature as those proposed for

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