Senate hearing raises alarms over Chinese-linked port deals, slot auctions and costs at the Panama Canal

The Senate Commerce, Science and Transportation Committee opened a hearing to examine what lawmakers called threats to U.S. economic and national security interests tied to recent developments around the Panama Canal.

Chairman Cruz framed the session around two concerns: that Chinese-linked firms operating major port terminals or building infrastructure adjacent to the Canal could gain leverage over transits, and that Canal fees and the auctioning of transit slots have imposed disproportionate costs on U.S. shippers. "We cannot afford to let American shippers be extorted," Cruz said in his opening remarks.

Federal Maritime Commission Chairman Luis Sola, who testified he has transited the Canal more than 100 times, described drought-driven operational changes in 2023 that reduced daily transits and forced the Canal Authority to allocate slots by auction during shortages. "The Panama Canal Authority is an independent agency of the Panamanian government," Sola said, but he warned that broader Panamanian maritime policies and concession arrangements complicate ACP operations and raise concerns about foreign influence.

FMC Commissioner Daniel Maay said the commission is reviewing whether the Canal Authority's auction and allocation procedures—which Maay said generated substantially greater revenue during the drought—create conditions unfavorable to U.S. shipping. On the specific point of special refunds for cruise lines, Maay said the commission found an executive decree that authorizes refunds when cruise ships stop at certain ports; that was the clearest example of differentiated treatment identified so far.

Joseph Kik, president and CEO of the World Shipping Council, gave commercial context: drought cut daily transits and forced carriers to carry fewer containers, reducing volume into U.S. Gulf and East Coast ports and increasing costs and voyage time. "A typical voyage from Asia to the U.S. East Coast can be made in under 30 days using the Canal," Kik said. When constraints occur, carriers must take lengthier routes that raise costs and delay deliveries.

Several senators pressed witnesses about two Chinese-linked developments that have drawn particular scrutiny: (1) long-term concessions for terminals on both the Pacific and Atlantic approaches to the Canal awarded to a Hong Kong-based port operator, and (2) construction by Chinese firms on a new bridge across or near Canal approaches. Witnesses described the Pacific terminal as handling roughly 4 million containers per year and the Atlantic terminal about 1 million, and noted that concession terms and low upfront payments make it difficult for U.S. firms to compete.

Law professor Eugene Korovich explained how the 1977 U.S.-Panama neutrality treaty frames the committee's legal questions: the treaty requires that the Canal "be open to all nations for transit," that tolls be "just, reasonable and equitable," and that "only the Republic of Panama shall operate the Canal." Korovich cautioned that whether a treaty violation has occurred depends on facts—including whether a foreign company's involvement amounts to de facto control by a foreign sovereign—and that the treaty leaves each party significant discretion to judge and act on threats to neutrality.

Committee members of both parties urged continued oversight: several senators asked for audits of contested concession contracts, classified briefings on specific security risks, and consideration of conditioning U.S. economic engagement on steps to protect Canal neutrality and supply-chain resilience. Ranking Member Cantwell and others pointed to the Ocean Shipping Reform Act as a tool that has helped U.S. shippers file complaints and seek remedies.

The hearing produced no formal action but established several near-term follow-ups: the committee will accept written questions through the deadline set in the hearing record and expects additional documentation from FMC and other witnesses. Republican and Democratic senators alike emphasized a two-track approach they said is needed: pressing Panama and the Canal Authority for transparency while also investing in U.S. port infrastructure and alternative supply-chain resilience.

The committee adjourned after setting deadlines for questions for the record and signaling potential subsequent hearings and classified briefings to probe the most sensitive security and treaty issues further.