The Obama administration has restricted the U.S. Pacific Command from sending ships and aircraft within 12 miles of disputed Chinese-built islands in the South China Sea, bolstering Beijing’s illegal claims over the vital seaway, Pentagon leaders revealed to Congress on Thursday.

"The administration has continued to restrict our Navy ships from operating within 12 nautical miles of China’s reclaimed islands," Senate Armed Services Committee Chairman Sen. John McCain (R., Ariz.) said in opening remarks criticizing the failure to guarantee safe passage for international commercial ships in Asia.

"This is a dangerous mistake that grants de facto recognition of China’s man-made sovereignty claims," he said.

The South China Sea is a strategic waterway used to transport $5 trillion annually in goods, including $1.2 trillion in trade to the United States.

David Shear, assistant defense secretary for Asian and Pacific affairs, sought to play down the restrictions on Navy ship transits close to the islands. According to Shear, a regional freedom of navigation exercise took place in April and the tactic is "one tool in a larger tool box … and we’re in the process of putting together that tool box."

Shear acknowledged that "we have not recently gone within 12 miles of a reclaimed area," noting the last time a Navy ship sailed that close to a Chinese-built island was 2012.

The disclosure undermines statements made Wednesday by Defense Secretary Ash Carter who said the United States would not be coerced by China into not operating ships or aircraft in Asia. Carter said the United States "will continue to protect freedom of navigation and overflight."

Shear insisted that in recent years the U.S. military has challenged "every category of Chinese claim in the South China Sea, as recently as this year."

Blocking China from militarizing the new islands could include a range of options, including freedom of navigation operations, he said.

McCain, however, noted that the U.S. restrictions on close-in island military flights and ship visits were continuing despite the provocative dispatch of five Chinese warships in an unprecedented deployment to waters within 12 miles of Alaska’s Aleutian Islands—at the same time President Obama was concluding a recent visit to the state earlier this month.

A visibly angered McCain told Shear the best way to assert that international waters around the islands do not belong to China would be for American ships to make 12-mile passages by the disputed islands. "And we haven't done that since 2012. I don't find that acceptable, Mr. Secretary," he said.

Adm. Harry Harris, commander of the U.S. Pacific Command, was asked if he is authorized to order ships to travel within 12 miles of any of the man-made islands and answered, no. Harris also said no U.S. surveillance aircraft have flown directly over any of the islands.

Asked why not, Harris stated: "I'll just [say] that Pacom presents options, military options to the secretary. And those options come with a full range of opportunities in the South China Sea, and we're ready to execute those options when directed."

The restrictions appear to be an element of the Obama administration’s conciliatory policies toward China that have increased in the months leading up to the planned visit to Washington next week by Chinese President Xi Jinping.

The administration also has not taken steps to penalize China for large-scale hacking of U.S. government and private sector databases, although sanctions are planned.

China has been building islands on several reefs within the South China Sea for the past several years near the Paracels, in the northwestern sea, and near the Spratlys, near the Philippines. Several nations, including Vietnam, Philippines, and Malaysia have challenged Chinese claims to maritime sovereignty.

After ignoring the island building for several years, the Obama administration earlier this year began pressing the Chinese to halt the construction. The U.S. appeals were ignored.

A Chinese admiral recently declared that the entire South China Sea is China’s maritime territory.

"The South China Sea is no more China's than the Gulf of Mexico is Mexico's," said Harris, who described himself as critic of China’s maritime behavior and large-scale military buildup.

Harris made clear implicitly during the hearing he did not agree with the restrictions on transit near the disputed islands but has been overruled by the president and secretary of defense.

"I think that we must exercise our freedom of navigation throughout the region …," Harris said.

Pressed for his views on whether close passage of U.S. ships in the sea should be permitted, Harris said: "I believe that we should [be] allow[ed] to exercise freedom of navigation and flight—maritime and flight in the South China Sea against those islands that are not islands."

Asked if he has requested permission for close-in island transits, Harris would not say, stating only that he has provided policy options for doing so to civilian leaders.

Harris said Pacific command surface ship commanders and crews, as well as Air Force pilots and crews, have orders when operating near China to "insist on our right to operate in international airspace and maritime space" and to respond professionally when challenged by Chinese warships or interceptor jets.

The four-star admiral warned that more incidents, such as the dangerous aerial intercept of a P-8 surveillance jet by a Chinese jet in 2014, are possible after China finishes building runways on Fiery Cross Reef and two other reefs.

With missiles, jet fighters, and warships stationed on the islands, "it creates a mechanism by which China would have de facto control over the South China Sea in any scenario short of war," he said.

In a conflict the sites could be easily targeted, but "short of that, militarization of these features pose a threat, and certainly it poses a threat against all other countries in the region," he said.

Shear also said the island militarization is a concern.

"The Chinese have not yet placed advanced weaponry on those features and we are going to do everything we can to ensure that they don't," Shear said. "This is going to be a long-term effort. There are no silver bullets in this effort. But we're certainly complicating Chinese calculations already."

Shear said U.S. forces are continuing to operate freely in the region and have deterred Chinese coercion of regional states.

"That we freely operate in the South China Sea is a success? It's a pretty low bar, Mr. Secretary," McCain said.

China’s dispatch of five warships to waters near the Bering Strait followed recent joint exercises with the Russians, after which the Chinese ships sailed near Alaska to demonstrated the ships’ ability to operate in the far north, Harris said, noting that he viewed the timing to the president’s Alaska visit as "coincidental."

Sen. Dan Sullivan, (R., Alaska) said the Chinese action was a "provocation" and criticized the administration’s weak response. The Pentagon dismissed the Chinese ship transit as legal under international law.

"I thought it was more of a provocation and a demonstration of their interest in the Arctic," Sullivan said. "I'm not sure that this White House would recognize a provocation if it was slapped in the face, and we need to be aware of that."

Harris also said he is concerned by China deploying submarines, including nuclear missile submarines, further from its shores.

"We're seeing Chinese submarine deployments extend further and further, almost with every deployment," he said. "It has become routine for Chinese submarines to travel to the Horn of Africa region and North Arabian Sea in conjunction with their counter piracy task force operations. We're seeing their ballistic missiles submarines travel in the Pacific at further ranges and of course all of those are of concern."

China’s claims to have halted island construction and militarization on some 3,000 acres are false, McCain said.

"Recently released satellite images show clearly this is not true," the senator said. "What's more, China is rapidly militarizing this reclaimed land, building garrisons, harbors, intelligence, and surveillance infrastructure, and at least three air strips that could support military aircraft."

Surface-to-air missiles and radars also could be added enabling China "to declare and enforce an air defense identification zone in the South China Sea, and to hold that vital region at risk," McCain added.

Shear said the island building is nearly completed.

Meanwhile in the House, Rep. J. Randy Forbes (R., Va.), chairman of the House Armed Services subcommittee on seapower, led a group of 29 members of Congress in writing to President Obama and Carter, the defense secretary, urging the lifting of the restrictions on naval and air operations near the disputed islands.

"The longer the United States goes without challenging China’s unfounded claims to sovereignty over these artificial formations—and to territorial waters and exclusive economic rights in the surrounding water—the greater the consequences will be for regional security," the lawmakers stated in the Sept. 17 letter.

"It is our belief that the Defense Department should act immediately to reaffirm the United States’ commitment to freedom of navigation and the rule of law."