Since the very beginning of Imperial Post, postal rate to Japan had been under the UPU tariff category. Letter rate was 10c per ½ oz. This rate did not change until 1903 when a special rate to Japan was established. Effective from July 18, 1903, letter rate to Japan had been reduced to 3c per ½ oz. Since the cover in question was sent in Oct. 1898, according to the rate of that time, 10c should be the correct Chinese postage. I could not find an explanation on the 5c franking and why it was not treated as a postage due item after checked several books on Chinese postal rate.
What is the postage rate shown on this cover?
Mr. Marc Symens suggested that I should looked into the Japanese (IJPO) rate for an explanation.
I suddenly saw the light. I checked Meiso Mizuhara's The Magnificent Collection of Chinese Stamp - Second Series,
Vol. III, "Imperial Japanese Post Office in Chinese Mainland" and confirmed that the IJPO rate for letters from China
to Japan was indeed 5 sen until the end of 1898.
At that time, the rate for Chinese silver dollar and Japanese Yen was about the same value as far as the post offices were concerned, 10 cents Chinese dollar was equivalent to 10 sen Japanese Yen. In case of international mail, if senders put 10 cents Chinese stamp(s), the IPO would add 10 sen Japanese stamp(s) before handing the letter to the IJPO in Shanghai. The IJPO letter rate was 10 sen except for mail to Japan that was only 5 sen. Some sender knew of the lower IJPO rate to Japan and the equivalent amount in Chinese dollar. They took advantage of the difference between the two rates and therefore saved half the postage. Although I have not found confirmation of this in writing yet, there should be documentation that exist referring to this. For the time being, we are assuming that since the sender already paid 5 cents in Chinese stamp (equivalent to 5 sen), the IPO would not lose money on the item, it was therefore an acceptable practice. By the way, any mail matter items to Japan originated from IPO was quite rare, and you can check Mr. Mizuhara's collection.
After July 18, 1903
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