CO129-362 - Public Offices - 1909 — Page 788

C.0.

36185

This Docament is the Property of His Britannic Majesty's Government.]

AFFAIRS OF CHINA.

CONFIDENTIAL

(REG: 3 NOVOS [October 11.]

SECTION 6,

786

[37588]

(No. 343.) Sir,

No. 1.

Sir J. Jordun to Sir Edward Grey.—(Received October 11.)

Peking, September 21, 1909. I HAVE the honour to transmit herewith copy of a despatch which I have received from the acting British consul-general at Mukden, calling attention to the disproportion apparent between the amount of foreign goods imported duty free into Dairen (Dalny) and the amount forwarded thence into the interior under exemption certificates, which seems to indicate that such goods, chiefly Japanese, find their way in considerable quantities into Manchuria without paying any import duty whatever.

Mr. Willis's calculations are based upon the published customs returns of the trade of Dairen for the year 1908, and he points out that after deducting from the total value of foreign imports (a) the value of those that paid import duty and were forwarded to the trade marts in the interior under exemption certificate, and (4) the value of "railway material" which is passed duty free by special arrangement, there remained duty unpaid foreign imports to the value of 8,459,755 Haikwan taels (1,127,967). He mentions that the leased territory contains a total population of less than 500,000, and draws the inference that many foreign goods declared for the leased territory are afterwards forwarded into Manchuria without paying customs duties. He advocates the establishment of a customs station on the northern frontier of the leased territory where goods can be examined, so that only those can pass which are provided with exemption certificate, proving that import duty has been paid; and he condemns as inefficacious the remedy proposed by the provincial authorities, namely, to levy li-kin and inland dues on goods unaccompanied by exemption certificates.

LK

After carefully comparing Mr. Willis's figures with those of the Dairen customs returns, I am of opinion that, although his estimate of the value of foreign goods supposed to be consumed in the leased territory might be reduced by some 2,000,000 Haikwan taels (by deducting as for railway construction part of the value of "machinery" and timber" imported as well as that of "railway material"), still the balance of over 6,000,000 Haikwan taels represents a quantity of foreign imports far too great to be consumed in the leased territory, and the conclusion is irresistible that a large proportion is smuggled into Manchuria either surreptitiously or under a systein which allows foreign goods to pass without exemption certificates, but subject to iuland taxation on demand. Not only is such subjection to inland taxation futile in the absence of li-kin stations on the railway, but even if it were practicable, British and other foreign importers of goods into Manchuria might reasonably complain that foreign goods were imported into Manchuria on two dissimilar systems of taxation, and that their Japanese competitors, with the help of the South Manchurian Railway under Japanese control and the connivance of the Dairen customs under a Japanese commissioner, had an unfair advantage not only as regards freights, but as regards the payment of the prescribed import duties.

To explain the situation it may be well to recall the provisions of article 5 of the agreement regarding the Dairen customs, signed by Baron Hayashi and Sir Robert Hart at Peking on the 30th May, 1907, copy of which was forwarded in my despatch No. 274 of the 10th June, 1907 :-

"On merchandise brought by sea to Dairen no import duty shall be levied. Import duty according to existing treaties shall be levied by the maritime customs on all merchandise or products passing the frontier of the Japanese leased territory into the interior of China. The Japanese authorities agree to take suitable measures to assist as far as possible in the prevention of merchandise passing the frontier of the Japanese leased territory when not provided with a permit or pass by the maritime customs office."

There is thus every reason to expect the co-operation of the Japanese authorities, if necessary, in devising a remedy for the smuggling that at present appears to prevail. Whether the proper remedy is to be found in the establishment of a customs station

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