Universal Leaf Tobacco Company of China, Federal, Inc., U.S.A.

Tobacco has been an important part of Virginia’s economy for centuries, starting with the Virginia Indians who cultivated native plants and John Rolfe’s attempts in 1611 to grow Spanish tobacco. Soon tobacco was being shipped to England, used as currency within Virginia, and became so popular that the General Assembly had to limit how many plants a person could cultivate and create laws concerning inspection that called for the destruction of lower-grade tobacco. Ultimately, Virginia was part of an international network of growers, dealers, and manufacturers of tobacco products. The story of Universal Leaf Tobacco Company, Inc. (Universal Corporation since 1987),¹ and one of its subsidiaries, Universal Leaf Tobacco Company of China, Federal, Inc., U.S.A., provide a window into this history.

While still a teenager, Jacquelin P. Taylor (1861-1950) of Orange County, Virginia, set out on a quest that would take him through Virginia and North Carolina to learn about all aspects of the tobacco industry. In 1886, he formed J. P. Taylor and Company in Henderson, N.C., to ship and export tobacco. He officially relocated his business to Richmond on 11 July 1916. At that point, he developed a plan to merge his company with the companies of other leaders in the tobacco industry—Patrick H. Gorman, Oscar C. Gregory, C. B. Cheatham, and W. H. Winstead.²

On 25 January 1918, Universal Leaf Tobacco Company, Inc., was chartered in Richmond’s chancery court. The law firm of Williams and Mullen handled the incorporation, and three attorneys with the firm became the first board members: James Mullen was president, Cyrus W. Beale was vice president, and Lewis C. Williams was secretary and treasurer. The purpose of the company was “To buy, sell, handle and deal with tobacco in any form, and any and all products thereof, and to prepare same and any and all other tobacco products for market use or other disposition, and in general to do any and all things necessary or incident to the conduct of a general tobacco business in any and all of its branches.” Several weeks later, on 1 March 1918, a new board was formed with Jacquelin P. Taylor as chairman and Thomas B. Yuille as president. All members were from either the J. P. Taylor Company or the former American Tobacco Company, which had recently been ordered to break up as a result of the Sherman Antitrust Act.

The new company was a holding company, meaning that it held shares of other companies that were a part of the tobacco industry and essentially managed them because of the quantity of stock that they held. In addition to the Richmond office, they opened an office in New York City, which was a center of the tobacco industry.³

The 1 January 1923 “Directory Universal Organization” contains entries for 25 companies based in Kentucky, Maryland, New York, North Carolina, Tennessee, and Virginia. There was also a presence internationally with companies in Canada and Puerto Rico. Universal’s trade reached as far as East Asia, the Caribbean, western Europe, and South America.⁴

Universal took a particular interest in East Asia early in their history, and they cultivated trade with the Nanyang Brothers in Shanghai and the Japanese government. Eventually, George Happer, who was based in Shanghai, became the agent for China, Japan, and Korea.⁵

On 16 May 1924, Universal Leaf formally expanded its network into China when a subsidiary company, Universal Leaf Tobacco Company of China, Inc., received its charter in Richmond’s chancery court. It had the same purpose as Universal Leaf Tobacco Company, Inc., and was to have its headquarters in Richmond. Its leadership was divided between the United States and China, with president J. P. Harrison and treasurer J. F. Henderson located in Richmond, and vice president George D. Happer and secretary F. H. Brown located in Shanghai. The board consisted of the president, vice president, and treasurer, as well as L. E. Bradsher of Shanghai and C. M. Dozier of Richmond. Until the beginning of World War II, the company imported tobacco from the United States, purchased and sold tobacco from China, processed tobacco, and traded in other items that were not necessarily related to the tobacco industry. On 21 June 1935, it was incorporated again under the China Trade Act, which changed its name to Universal Leaf Tobacco Company of China, Federal, Inc., U.S.A.⁶

The act “made it possible for American business concerns operating in China to be on the same favorable basis as their foreign competitors in respect to the exemption of taxes to their respective governments on net trading profits derived from operation in China.” It also allowed businesses to be chartered, have legal protection by federal U.S. courts, and to have Chinese investors.⁷

North Carolinian James E. Covington (1891-1977) was sent to China soon after the company was created to be its director and later its president. He started his career in the tobacco industry in North Carolina and Pennsylvania, and eventually went to China as an employee of the British American Tobacco Company before returning to Danville, Virginia; he was no stranger to the tobacco industry in China. He and his wife, Annie Stuart James Covington, resided in China for about a decade for his work with the Universal Leaf Tobacco Company of China, and he travelled between the United States and China 52 times during the 21 years that he led the company. He was one of several Americans who supervised a mostly-Chinese labor force. After he returned to the United States permanently, he became a vice president with Universal Leaf in 1941, executive vice president in 1955, and executive president in 1956, which was the year that he retired.⁸

Tobacco has a long history in China, but it was popularized in the late 19th and early 20th centuries by James Buchanan Duke’s American Tobacco Company, and through its joint venture with Imperial Tobacco Company: British American Tobacco Company. The industry was centered in Shanghai and came to include many other manufacturers, both from China and elsewhere abroad.⁹

According to the authors of a history of Universal, Maurice Duke and Daniel P. Jordan, “In its heyday in the 1930s, the China Company consisted of the corporate headquarters at Number One, The Bund, two redrying plants, two or three storage facilities, and three or more buying stations in the country’s interior.”¹⁰ The stations were located in Shandong Province on the rail line from Qingdao, where a plant was established in 1934, and another station was later added in Henan Province.  By the late 1930s or early 1940s, they also had a presence in Anhui Province. The business expanded significantly in 1935 to create a separate company, Lien Hwa Leaf, for rehandling. Duke and Jordan argue that this subsidiary helped to compensate for the losses that Universal Leaf Tobacco Company sustained during the Great Depression.¹¹

Ongoing conflict between China and Japan threatened the existence of Universal Leaf Tobacco Company of China. Duke and Jordan wrote, “In 1931 the Japanese invaded northern China, and the resulting war, though spasmodic and short-lived, reached Shanghai with tragic results. [American employees] in time became part of a volunteer militia force, a kind of instant home guard, called out to help the 4th U.S. Marines and other regulars protect the International Settlement from intrusion. Home guard soldiers were issued arms, barriers were constructed, curfews enforced, and defensive positions established.”¹²

Six years later, the Second Sino-Japanese War began and lasted through the end of World War II. On 13 August 1937, intense fighting began between the Chinese and Japanese reached Universal’s headquarters in Shanghai and trapped employees inside of the building. They were possibly saved by the U.S. flag that they placed outside of the building. The Japanese took the area, but Universal was permitted to continue business. However, Japanese businessmen frequently attempted to acquire international businesses in China, and that further threatened Universal Leaf Tobacco Company of China.¹³

The military also thwarted their operations. According to annexes to President Franklin D. Roosevelt’s 15 December 1941 address to Congress, “The company has been continuously obstructed and harassed in the conduct of its operations by the Japanese military authorities.” For example, “buyers have been excluded from purchasing operations in Anhwei [Anhui] and Honan [Henan] and other interior points” because of military activity when there was, in fact, none near to where the Universal Leaf Tobacco Company of China employees wished to be. And, the “company has been faced with demands that it accept virtual Japanese management and direction of the company, including all its branches, but these demands, after much negotiation, were withdrawn.”¹⁴ The company was not even able to settle its books enough to determine dividends for the year 1941.¹⁵

Universal Leaf Tobacco Company of China employee Alan Ian McOwan was ultimately incarcerated by the Japanese in a British American Tobacco Company cigarette factory from at least 10 July 1942 until August of 1945, and this event was considered by Universal Leaf to be the end of that corporation. But upon his release, McOwan returned to Universal Leaf Tobacco Company of China’s headquarters, demanded an inventory from the Japanese businessmen who occupied the building, and then reestablished the corporation. In compliance with decisions made by the Board of Directors, the company then resumed operations. Their work included being among the first 102 U.S. businesses to be permitted by the U.S. Commerce Department’s Office of International Trade to travel to and trade with Japan in August of 1947.¹⁶

When the Communist takeover occurred in 1949, an attempt was made to control the business from Hong Kong after it was forced out of China.¹⁷ By the time of the 1950 Board of Directors meeting, the conflict “had necessitated the removal of the head office, records and personnel to Hong Kong for protection; that the operating plants at Tsingtao and Shanghai were forced to close down and that the only employees left in China were natives or minor employees who were endeavoring to look after the physical properties.”

The directors “hoped with the establishment of the head office at Hong Kong the officers and employees would be able to do business from that point throughout the Far East other than China.”¹⁸ In addition to the conflict, the United States imposed an embargo on China from 1949 through 1969 and the holding company, Universal Leaf, was even involved in a lawsuit for accidentally sending a shipment to China instead of Hong Kong in 1958. Even though the company remained in Universal Leaf’s directory of its holdings through at least 1954, the business was forced to break ties with China and was ultimately dissolved.¹⁹

In 1972 when the United States began to loosen its restrictions on trade with China, Universal began to reestablish its base in China, and today Universal Corporation may be found in Beijing and Kunming.²⁰

-Cara Griggs, Reference Archivist