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A special treatment shall be applied to all imported and locally manufactured wines beer, porter, spirits, tobacco products and narcotics, which shall, whether disposed of at the open ports or in the interior, pay in addition to the import duties levied on imports by the Maritime Customs Administration, and the excise levied on local manufactures by the Wine and Tobacco Administration, an inland tax of 10 per cent. ad valorem to the Wine and Tobacco Administration. Such goods, not being entitled to the use of transit passes, and having paid import duty or excise and inland tax, shall be free of all further taxation whatsoever, direct or indirect, or on their conveyance, sale, or consumption; and the amount of any taxation levied in violation of the provisions of this paragraph shall be refunded by the Wine and Tobacco Administration, or be deducted from any further sums due to the said administration by the firms or individuals who may have paid such irregular taxation.
The revenues from the inland tax on wine and tobacco products shall accrue to the provinces as provided for in article 6.
Existing agreements between the Wine and Tobacco Administration and Chinese or foreign tobacco interests in regard to the detailed procedure for the payment of inland tax and excise on tobacco products shall, if the parties concerned so desire, continue in force subject to the provisions of the present treaty.
(Note. Wine and tobacco products have to be dealt with separately owing to the existence of the taxation agreements between the Wine and Tobacco Administration and the tobacco companies, which already provide for an inland tax, clearing the goods of all further taxation, including destination tax, &c. The arrangements regarding wine and tobacco products in Part I of the treaty, therefore, in a way anticipate those to be applied to all goods under Part II and will constitute a useful test of the ability of the Chinese to abolish completely internal taxation as far as this limited class of goods are concerned. The existing agreements have broken down largely because the taxation was too low and because no provision was made for securing the goodwill of the provinces by allocating part of the revenues to them. For the provisions affecting wine and tobacco products as regards import duties and excise, see articles 2 and 4, and as regards the reorganisation of the administration and the allocation of the revenues to the provinces, article 6. Wines, &c., are included as it seems reasonable that they should bear the same increased taxation as tobacco products, and because they are already, as far as internal taxation is concerned, dealt with by the Wine and Tobacco Administration.)
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It is understood that the expression 'open port" in the present treaty means any port or city or locality already opened or which may in the future be opened to foreign residence and trade. whether under the treaties or by the Chinese Govern- ment of their own volition. A list of such open ports, at all of which Maritime Customs stations are or will be established, is attached (see Annex I).
The provisions of this article shall come into force simultaneously with the enforcement of the surtaxes provided for in article 2.
(Note-It might be desirable, in view of the difficulties the Post Office have had with barriers such as that of the Peking octroi, to provide specifically for the carriage of transit pass and inland tax goods by the Post Office and for the collection of transit pass and inland tax dues by the Post Office on behalf of the Customs and Wine and Tobacco Administrations,)
ARTICLE 2.
It is agreed that the following surtaxes shall be levied on dutiable imports in accordance with the procedure outlined in article 3 of the China Customs Tariff Treaty signed at Washington on the 6th February, 1922.
Imported articles of luxury (ie., of a non-essential nature) as specified in the attached schedule (see Annex II) shall be liable to a surtax at a uniform rate of 5 per cent. ad valorem, bringing the total import duty to be levied thereon up to 10 per cent. ad valorem. All wines, beers, porter, spirits, tobacco products, and narcotics shall be liable to a surtax at a uniform rate of 10 per cent. ad valorem, bringing the total import duty levied thereon up to 15 per cent. ad valorem. All other imported goods shall be liable to a surtax at a uniform rate of 24 per cent. ad valorem, bringing the total import duty levied thereon up to 7 per cent. ad valorem. Imports from and exports to all countries shall enjoy most-favoured-nation duty
treatment.
The schedule of luxury articles referred to in this article shall be liable to modification at the will of the Chinese Government on obtaining the consent of a two-thirds majority of the Governments of the other contracting Powers.
The surtaxes provided for in this article shall come into force within one year from the date of the signature of the present treaty on a date to be determined by the Chinese Government; but at least three months' notice of such enforcement shall be given to the Governments of the other contracting Powers.
Goods carried by junks or sailing vessels trading to and from the open ports shall not pay lower duties than the duties (including surtax) on similar cargo carried by steamers.
(Note-It seems doubtful whether any useful purpose will be served by pressing for the substance of the last sentence, reproduced from the Mackay Treaty.)
ARTICLE 3.
The surtaxes provided for in article 2 of the present treaty shall be levied for the following purposes and subject to the following conditions in accordance with the stipulations of article 3 of the China Customs Tariff Treaty signed at Washington on the 6th February, 1922.
The customs revenues, that is to say, the proceeds of the import duties (and surtaxes) and export duties and all other revenues now collected by the Maritime Customs Administration, with the exception of the proceeds of transit pass and tonnage dues, shall, in the first instance, be completely devoted to the service of the national debt, both internal and external, that is to say, to the indemnity and loan services, which shall be met in the order of their priority. A list of the indemnity and internal and external loan obligations charged on the customs revenues in accordance with this article, showing the order of their priority, and indicating the revenues other than customs revenues earmarked for their services and the amount of such original security, is attached (see Annex III). Such loans as are specifically secured on revenues other than customs revenues shall continue to be met as far as possible out of such earmarked revenues; but if funds are not forthcoming from the earmarked revenues these loans will also be met out of customs revenues in the order of their priority as laid down in the list above referred to.
On the coming into force of the supplementary provisions of the present treaty, resulting in the further increase of the customs revenues by the further raising of the tariff, all internal and external loan obligations, irrespective of their original security, will, as far as possible, be met out of customs revenues, thus freeing completely or pro tanto for the general purposes of the Chinese Government and Provincial Administrations the other revenues earmarked for their services; with the exception only of railway loans, which shall continue to be met out of railway revenues, while remaining a charge on the customs revenues, in the order of priority laid down above, should funds for their services not be available from railway
revenues.
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(Note. The arrangements indicated in the preceding and following paragraphs represent an alternative to the Padoux Plan, which deals with the unsecured debt by the issue of new consolidated bonds secured on the customs revenues, and are designed to cover the problem of the partially secured loans, Possibly a combination of the two procedures will be found to provide the best solution.)
In accordance with the intention of the Washington Conference that the Special Conference should provide for the establishment of machinery to ensure that the proceeds of the surtaxes are applied to the purposes determined by the Special Conference, the following arrangement for the custody and disposal of customs revenues is agreed upon. The customs revenues shall be lodged, less expenses of collection and administration. in the Shanghai offices of the banks principally interested in the internal and external loan services of the Chinese Republic, that is to say, the Bank of China, the Hong Kong and Shanghai Banking Corporation, the Yokohama Specie Bank. the Banque de l'Indo-Chine, and the International Banking Corporation, in equal shares. The said revenues shall lie in special accounts in these banks at the disposal of a commission composed of the Minister of Finance (chairman), the head of the Revenue Council, the Inspector-General of Customs, and one representative each of the custodian banks named above. This commission, whose decisions will be taken with not more than two dissentient voices, will apply the customs revenues to the
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