The Federal Maritime Commission (FMC) is investigating a significant increase in the detention of Panama-flagged vessels at Chinese ports. These actions are raising concerns about potential economic coercion and repercussions for global trade.

Investigation Launched Amidst Rising Tensions

FMC Chairman Laura DiBella stated that the surge in detentions, which began escalating in March, significantly exceeds historical norms. The commission is closely monitoring the situation to assess its impact on the stability of global supply chains.

Panama Court Ruling as Potential Catalyst

These intensified inspections appear to be a response to Panama's Supreme Court ruling in January. The ruling declared Hong Kong-based CK Hutchison's operation of the Balboa and Cristóbal port terminals unconstitutional. The detentions have impacted a substantial number of Panama-flagged ships.

Impact on U.S. Shipping and Global Trade

The detentions could have considerable commercial and strategic implications for U.S. shipping interests. Panama-flagged vessels handle a significant portion of U.S. containerized trade. The situation has drawn international attention.

Dramatic Increase in Detentions

In the first three days of April, seven out of thirteen detained vessels were Panama-flagged, according to Tokyo MOU, a regional ship inspection association. Throughout March, 93 out of 125 detained vessels – nearly 75 percent – were registered under the Panamanian flag. This is a significant increase compared to February, when less than half of the detained ships were Panama-registered.

Official Responses and Operational Adjustments

The FMC believes these actions may be prompted by informal directives intended to penalize Panama following the court's decision regarding CK Hutchison’s port operations. China’s Foreign Ministry spokesperson Mao Ning dismissed accusations of detainments as groundless, suggesting the U.S. was attempting to control the Panama Canal.

China’s Transport Ministry also issued a summons following the naming of temporary operators for the Balboa and Cristóbal terminals for the next 18 months. The meetings focused on international shipping business conduct, but details of the discussions were not disclosed.

Shipping Company Responses

Following the court’s decision, Cosco, a major shipping company, canceled confirmed bookings to Balboa and rerouted empty containers to alternative terminals. Import cargo at Balboa was released as usual, but transshipment cargo was shifted to other ports. Panama’s minister for canal affairs, Jose Ramon Icaza, expressed concern about Cosco’s decision.

Legal Challenges and Broader Context

CK Hutchison, whose subsidiary operated the Panama ports, has contested the court's ruling and filed an international arbitration complaint seeking substantial damages. The developments surrounding the Panama Canal began to garner attention in December 2024 when then-President elect Donald Trump expressed his interest in the canal.

This situation occurs alongside other trade issues, including Maersk’s battle with the FMC over a 3.5 percent fuel surcharge, and logistical shifts by companies like Walmart and Saks Global.