Wal-Mart May Face Sanctions Over Cuban PJs

WASHINGTON —  Escalating a foreign policy spat with Canada, the Clinton administration said Friday that the Treasury Department is considering sanctions against the giant Wal-Mart retail chain because its Canadian stores are selling $9 pajamas made in Cuba.

State Department spokesman Nicholas Burns said that a 3-decade-old U.S. law prohibits foreign subsidiaries of U.S. corporations from engaging in financial transactions with Fidel Castro’s government.

“We have a law that we have to fulfill,” Burns said. “The Treasury has this under consideration.”

“Our interest is in enforcing the embargo,” added Howard Schloss, the Treasury Department’s assistant secretary for public affairs. “We’ve had discussions, and we will have more discussions with Wal-Mart on this, and that’s about where we are right now.”

The stakes obviously are far greater than cut-rate sleepwear.

U.S. policy is to isolate Cuba and to strangle its economy, hoping that the economic pain eventually will force Castro to relinquish power. Canada has adopted a diametrically opposed strategy, seeking to promote democracy and human rights in the communist country by “constructive engagement” with Havana. Canada is one of Cuba’s top trading partners.

Although the dispute has simmered since Castro took power in 1959, matters heated up last year, when Congress passed the Helms-Burton Act, a law intended to tighten the embargo. Among other things, it allows U.S. citizens to sue foreign companies that profit from U.S. property expropriated in the early days of Castro’s rule. The law also bars top executives of companies dealing in expropriated property from entering the United States.

In retaliation, the Canadian Parliament voted to punish Canadian firms that comply with the Helms-Burton Act.

Last month, cotton pajamas bearing Cuba’s Puritan brand label were discovered on the shelves of a Wal-Mart store in Winnipeg. Since then, the Bentonville, Ark.-based retailer has tried to comply with both the U.S. and Canadian laws, only to find that it is impossible to do so.

At first, Wal-Mart pulled the 80,000-pair inventory from its shelves across Canada. That seemed to satisfy U.S. officials. Then, faced with the Canadian statute, Wal-Mart decided this week to resume selling the pajamas.

Burns insisted that the possible U.S. action against Wal-Mart is based on a “Kennedy-era” embargo law, not on the more recent Helms-Burton law. That might allow Wal-Mart to drop the product, since the Canadian law applies only to Helms-Burton.

In a related development, the administration announced that four members of the board of directors of the Canadian firm, Sherritt International Corp., will be denied visas to enter the United States because the company operates a nickel mine in Cuba that was expropriated from a U.S. corporation. Seven other Sherritt officials were banned last year.

Burns conceded that the ban on visits to the United States was “one of the more controversial aspects of the Helms-Burton law.” But he added: “It is the law of the land.”

Burns declined to identify the executives. The ban also applies to members of the immediate families of the corporate executives.