China vs US: Row Over Panama-Flag Ship Inspections

A Deepening Dispute Over Port State Control

A diplomatic disagreement between Beijing and Washington over the treatment of Panama-flagged vessels in Chinese waters has escalated further. According to a report by Maritime Executive, China’s Foreign Ministry has again pushed back against US allegations that Beijing is using inspections and detentions to pressure Panama, following Panama’s cancellation of CK Hutchison’s port concession.

US Ambassador to the UK and the IMO, Warren Stephens, used his first address to the International Maritime Organization on July 7 to accuse China of using its maritime and economic power to “coerce, intimidate, and punish” nations that assert sovereign rights. He urged the IMO not to overlook what he described as a systematic pattern of behavior, arguing the evidence for it is substantial and increasing.

Panama’s President Jose Raul Mulino had already raised similar concerns in June, telling the Organization of American States that inspections and detentions of Panama-flagged ships had risen sharply, with no safety or technical basis for the increase.

Beijing’s Defense: Accident Statistics

China’s response, delivered by Foreign Ministry spokesperson Lin Jian, leaned heavily on casualty data rather than political rebuttal. Lin maintained that China’s port state inspections are conducted lawfully and in line with international regulatory requirements for visiting vessels. He argued that Panama-flagged ships have recorded accidents in Chinese waters that meet or exceed statutory thresholds more often than vessels under any other flag.

According to the figures cited, Panama-flagged vessels represent under 20 percent of foreign ship calls at Chinese ports in 2026 so far, yet account for roughly half of accident-related deaths and missing persons involving foreign-flagged ships. China has pointed specifically to incidents involving coastal fishing vessels as justification for its heightened scrutiny.

US Regulators Signal Possible Action

The dispute has also drawn in US regulatory bodies. Federal Maritime Commission Chairman Laura DiBella indicated the FMC may get involved, noting that Panama-flagged vessels carry a significant volume of US trade. She pointed to the FMC’s statutory authority to investigate whether foreign government practices create unfavorable conditions for US foreign trade shipping, and said the commission has remedial tools available if warranted.

Flag Registries Feeling the Effects

Perhaps the most concrete evidence of market impact comes from Lloyd’s Intelligence, which reported that owners are shifting vessels away from the Panama registry toward the Bahamas and Marshall Islands flags. Notably, this shift is occurring even as the apparent frequency of Chinese inspections and detentions has reportedly declined — suggesting the reputational and operational disruption already caused may be prompting owners to act preemptively rather than wait for the dispute to resolve.

What It Means for Owners and Managers

Regardless of which side’s framing is accurate, the practical takeaway for ship owners, managers, and charterers is the same: geopolitical friction is translating directly into operational risk at the port state control level. Vessels calling at Chinese ports under any flag implicated in a bilateral dispute could face heightened scrutiny, longer inspection times, and greater detention risk — costs that fall on operators regardless of the underlying political motive.

This episode is a reminder that flag choice is not purely a matter of registry fees and regulatory regime; it can become a geopolitical liability almost overnight. For technical superintendents, it reinforces the value of maintaining rigorous, well-documented vessel condition and safety records that can withstand increased inspection frequency without triggering deficiencies or detentions. Independent condition and pre-arrival surveys can help owners identify and correct issues before a vessel is caught up in politically charged enforcement activity, reducing exposure to delays and reputational damage regardless of which flag a ship flies.

Reviewed by Ibrahim Halil Ceylan, Marine Surveyor at Apeks Marine.