On Thursday (March 26th), the US Federal Maritime Commission (FMC) released a statement saying it is closely monitoring recent developments at the Panama Canal ports and the retaliatory measures China has taken against Panama following the ruling on Hutchison’s concession in Panama by Hong Kong’s Cheung Kong Hutchison Holdings.
The ruling made by Panama’s Supreme Court on January 30th invalidated the concession rights of CK Hutchison for the Balboa on the Pacific side and Cristóbal on the Atlantic side of the Panama Canal. A prior audit revealed irregularities and raised legal concerns regarding the concession rights.
Following the ruling, the Panamanian government designated the US subsidiary Maersk APM Terminals and Terminal Investment Limited, a subsidiary of MSC, as interim operators for a period of 18 months.
Panama’s decision to cancel the Hutchison concession is seen as a response to pressure from the Trump administration to contain Chinese influence in the Panama Canal region. The Panama Canal handles approximately 5% of global maritime trade.
The FMC’s statement outlined the actions taken by Hutchison after rejecting the ruling, including filing lawsuits against the Panamanian government, escalating arbitration actions, and a recent lawsuit filed on March 24th seeking over $2 billion in compensation. Meanwhile, China’s Ministry of Transport summoned Maersk and MSC for high-level talks in Beijing. Subsequently, China’s state-owned shipping company, COSCO Shipping, suspended services at the Balboa port and adjusted routes.
FMC Chairman Laura DiBella stated in the release that China’s detention of Panamanian-flagged vessels far exceeds historical averages. She noted that China has significantly increased the detention of Panamanian-flagged vessels in Chinese ports under the guise of port state control, surpassing previous practices.
According to a report from Lloyd’s List Intelligence, with increased enforcement from China, the number of detained Panamanian-flagged vessels in Chinese ports in March could reach 100. The latest data shows that nearly 70 Panamanian-flagged vessels have been detained in Chinese ports since March 8th.
DiBella remarked, “These heightened inspections seem to be in retaliation against Panama following the transfer of assets at the Hutchison ports.”
“Considering the significant presence of Panamanian-flagged vessels in US container trade, these actions could have significant commercial and strategic implications for the US shipping industry,” she said.
DiBella added that the FMC has the legal authority to investigate whether foreign government regulations or practices would harm US trade.
The FMC’s statement concluded by stating that detaining, delaying, or otherwise obstructing vessels registered under US law or vessels from other countries engaged in trade with the United States is contrary to the Commission’s duty to protect the reliability and integrity of the US global supply chain.