China Is Escalating Panama Port Dispute With Surge in Ship Detentions, U.S. Regulator Warns

A simmering dispute over control of key Panama Canal terminals is now spilling into global shipping lanes, with China detaining Panama-flagged vessels in its ports and U.S. regulators warning of potential fallout for international trade.

In a statement issued Thursday, the Chairman of the Federal Maritime Commission(FMC), Commissioner Laura DiBella, said they are closely monitoring a surge in inspections and detentions of Panama-flagged ships at Chinese ports—actions that appear to go well beyond normal port state control practices and may be tied to escalating tensions between Beijing and Panama.

The developments follow Panama’s decision earlier this year to strip Hong Kong–based CK Hutchison Holdings of its long-standing concessions to operate the Balboa and Cristóbal container terminals at either end of the canal. The move came after Panama’s Supreme Court invalidated the legal framework underpinning the 1997 concession agreements, prompting authorities to seize control of the facilities and install new operators.

Under temporary arrangements, Maersk’s APM Terminals took over operations at Balboa on the Pacific side, while Terminal Investment Limited, part of Swiss shipping giant Mediterranean Shipping Company, assumed control of Cristóbal on the Atlantic side. Both are expected to manage the terminals for up to 18 months while Panama develops a new long-term concession structure.

Hutchison has strongly contested the takeover, escalating its legal response in recent weeks with arbitration claims that could exceed $2 billion. The dispute traces back further to a proposed $22.8 billion sale of Hutchison’s global ports business—including the Panama assets—to a consortium led by BlackRock and Mediterranean Shipping Company, a deal that drew scrutiny from Beijing amid broader U.S.–China tensions over control of the strategic maritime chokepoint.

“Actions by foreign governments that detain, delay, or otherwise impede the movement of vessels… are inconsistent with the Commission’s mandate to protect the reliability and integrity of America’s global supply chain,” Commissioner Laura DiBella said in her statement.

The agency said U.S. law gives it authority to investigate whether foreign regulations or practices create unfavorable conditions for shipping in the U.S. foreign trade, signaling that further action could follow if the situation escalates.

For now, the immediate concern for carriers and cargo owners is operational delays, inspections, and uncertainty tied to one of the the world’s largest ship registry. But the bigger question looming over the industry is whether this dispute remains contained—or becomes the latest flashpoint to directly disrupt global trade flows.

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