FMC is “Closely Monitoring” China’s Detention of Panama-Flagged Vessels
The recently designated Chairman and a Commissioner of the Federal Maritime Commission, Laura DiBella, issued a statement regarding China’s current retaliation policies against Panama after the cancellation of CK Hutchison’s concession to operate the port terminals at the Panama Canal. Chairman DiBella, in a statement expressing her personal views, said the FMC is “closely monitoring” the recent developments, offering the first indirect response from the Trump administration to the escalating dispute.
Donald Trump had called for Panama to take action to reduce China’s influence at the Panama Canal after repeatedly saying, “China runs the Panama Canal.” The administration was known to be supportive of BlackRock’s deal to acquire the Panama Ports Company from CK Hutchison. After Panama’s Supreme Court ruled the enabling legislation for the port terminal concession unconstitutional, U.S. Ambassador to Panama Kevin Marino Cabrera issued a statement saying it strengthened Panama’s national security and “makes possible a review of port governance, as well as transparent and competitive processes.”
DiBella, in her statement, says the FMC is empowered to investigate if a foreign government is implementing practices that result in conditions unfavorable to shipping in the foreign trade of the United States. The statement notes that Panama-flagged ships “carry a meaningful share of U.S. containerized trade.”
The statement highlights that China has imposed a surge in detentions of Panama-flagged vessels in Chinese ports under “the guise of port state control, far exceeding historical norms.” The South China Post earlier this month cited “a source from the shipping industry” saying China’s government had quietly told officials to intensify inspections on Panama-flagged ships to increase the pressure on Panama.
By number of ships, Panama has the largest flag registry and plays a critical part in commercial shipping. Lloyd’s Intelligence reviewed Tokyo MOU data on port state control actions, reporting that more than three-quarters of the detentions since early March involved Panama-flagged ships in Chinese ports. It is an unheard-of surge in the number of detentions.
Unconfirmed reports said the Chinese government told other companies not to do business in Panama, while public statements have questioned Panama as an investment destination. China and the company have both accused Panama of not respecting contracts and the law and said the country was running a campaign against the company due to geopolitical pressure. State-owned COSCO Shipping also announced in March that it was suspending service to Balboa.
This comes as the Panama Ports Company reported it had escalated its arbitration claims against Panama to over $2 billion. CK Hutchison has vowed to use all the legal avenues against Panama, seeking penalties for the loss of its business.
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