811.512394 Shipping/60
Memorandum by Mr. Eugene H. Dooman of the Division of Far Eastern Affairs of a Conversation With the Japanese Ambassador to Belgium (Kurusu)12
Mr. Kurusu said that he had not seen the Department’s note of April 27, 1936, on the above subject to the Japanese Embassy until he had arrived in Washington. He had noted that the position of the American Government in this matter could not be reconciled at several points with statements made to him by representatives of the Japanese steamship companies, but that he did not think that any useful purpose would be served by discussion of the differences. He hoped that it would be possible to strike a bargain on some mutually acceptable figure and bring to an end this unfortunate affair. He saw only one other course of action open to the steamship companies, and that would be to contest the tax assessments in the courts. He hoped that matters would not develop in this direction, for the reason that there would be created in Japan the feeling that the American Government had acted arbitrarily against the Japanese steamship companies.
Mr. Dooman stated that he, unlike Mr. Kurusu, felt that it would be useful to review the facts, for the reason that the notes of the Japanese Government in regard to the question under discussion seemed to indicate that the Japanese Government, and probably the steamship companies themselves, were not in possession of all the pertinent facts. Mr. Dooman then reviewed the case as set forth in the Department’s note above mentioned to the Japanese Embassy, pointing out that the formula set forth in the Revenue Act of 1921 was actually devised by the representatives of the foreign steamship companies. Mr. Dooman further stated that the principle underlying this formula was the same principle used in assessing the tax on the estimated capital of branches in Japan of foreign corporations.
Mr. Dooman then laid before Mr. Kurusu the information which had been telephoned to Mr. Dooman by Mr. Cox, of the Bureau of Internal Revenue, with regard to the proposed plan of settlement involving the payment by the steamship companies to the Treasury of approximately $650,000. Such plan would involve the payment to the Treasury by the Nippon Yusen Kaisha of $377,674, and by the Osaka Shosen Kaisha of $435,293, or a total of $812,967, and the payment by the Treasury to the Toyo Kisen Kaisha of $154,394, which subtracted from the total figure of $812,967, would leave a balance of $658,573. He stated that the accumulated interest would have to be added to all the foregoing figures, and that he believed that such [Page 959] interest would run to about seventy-five percent of the principal amounts. Mr. Kurusu uttered an exclamation of surprise and remarked that the addition of interest would involve the net payment by the steamship companies of about one million dollars, which amount he thought would be quite unsatisfactory to the steamship companies. He stated that, as a matter of fact, he had been authorized by the steamship companies to propose a settlement on the basis of payment by them to the Treasury of $500,000. He drew from his pocket tables of figures prepared by the Nippon Yusen Kaisha and the Osaka Shosen Kaisha, which purported to show that if certain counter-claims by the companies against the Treasury were deducted from the Treasury’s proposed figures of settlement, there would result an over-assessment of about $300,000. Mr. Dooman stated that the settlement proposed by the Treasury would involve the withdrawal by the steamship companies of all such counter-claims, and he could not therefore admit that the calculations made by the steamship companies were in any way valid.
Mr. Kurusu then asked whether this Government would favorably entertain a counter-proposal of settlement on the basis of the steamship companies paying the Treasury $500,000 and also “taking care” of the counter-claim of the Toyo Kisen Kaisha. Mr. Dooman asked how the figure of $500,000 was arrived at, and Mr. Kurusu said that it was a figure which appealed to the Japanese steamship companies as “fair”. Mr. Dooman stated that it had to be borne in mind that there existed three separate cases between each of the three steamship companies and the Treasury, and he did not know whether there would be any warrant in law for accepting such a plan of settlement even if agreement were reached upon a figure.
Mr. Kurusu then asked whether a flat payment of $650,000 would be acceptable to the Treasury, the interest element to be entirely eliminated. Mr. Dooman asked if that inquiry was to be taken as a formal and official counter-proposal of the Japanese Government. Mr. Kurusu replied that it was not to be so taken for the present, but that if Mr. Dooman could ascertain whether there would be any disposition on the part of the American Government to consider such an offer he would recommend to the Japanese Government that such a counter-proposal be made. Mr. Dooman said that he would make inquiries and give Mr. Kurusu such information in regard to that point as he could obtain.
Arrangements were made for Mr. Kurusu to call tomorrow on Mr. Dooman.
Note: Mr. Dooman later called on the telephone Mr. Cox of the Bureau of Internal Revenue and described briefly the conversation between Mr. Dooman and Mr. Kurusu.
[Page 960]Mr. Cox informed Mr. Dooman later in the day by telephone that the Bureau of Internal Revenue is desirous that the cases under reference be brought to an end as expeditiously as possible, and that, although no assurance could be given that any counter-proposal such as that above outlined of the Japanese Government would be favorably considered, the “door would not be shut” against consideration of such counter-proposal, if made.13