Federal maritime officials are keeping close watch on an extraordinary increase in ship detentions by Chinese authorities, which appears linked to an ongoing dispute over control of key Panama Canal ports.
The U.S. Federal Maritime Commission announced Thursday it’s monitoring the situation after Panama’s highest court struck down the legal basis for a 1997 agreement that allowed Hong Kong-based CK Hutchison’s Panama Ports Company to run the Balboa and Cristobal terminals. These facilities sit on opposite sides of the Panama Canal.
After the court decision in late January, Panama’s government named American subsidiaries Maersk APM Terminals and Mediterranean Shipping Company’s Terminal Investment Limited as temporary operators through 18-month contracts.
The port takeover came after growing pressure from Washington to reduce Chinese control around the vital waterway, which handles roughly 5% of worldwide shipping traffic.
FMC Chair Laura DiBella noted that China’s detention of Panama-registered vessels has far surpassed typical levels, with Lloyd’s List Intelligence reporting almost 70 ships held since March 8.
“These intensified inspections were carried out under informal directives and appear intended to punish Panama after the transfer of Hutchison’s port assets,” DiBella said in a statement.
She warned that since Panama-flagged vessels transport a substantial portion of U.S. containerized cargo, the detentions “could result in significant commercial and strategic consequences to U.S. shipping.” DiBella added that the FMC has authority to examine whether foreign government actions might damage American trade interests.
Chinese transport officials have also called Maersk and MSC representatives to Beijing for senior-level meetings, according to DiBella.
CK Hutchison, which ran the ports for almost three decades, has firmly disputed Panama’s court decision and accused the country’s officials of illegally confiscating assets. The company has initiated international arbitration proceedings against Panama, seeking more than $2 billion in compensation.
The conflict has also created complications for CK Hutchison’s proposed $23 billion deal to sell a controlling interest in its worldwide port operations to a group headed by BlackRock and MSC.
China’s Ministry of Transport has not yet provided a response to requests for comment on the situation.
