Global Perspective THE PAJAMA CAPER Six headlines illustrate the entanglements possible when U.S.

law, host-country law, and a multinational company collide: • “Wal-Mart’s Cuban-Made Pajamas Defy
Embargo” • “Wal-Mart Ignites Row by Pulling Cuban Pajamas off Shelves in Canada” • “Canada, U.S.
Wager Diplomatic Capital in a HighStakes Pajama Game” • “Cuban Quandary: Wal-Mart in Hot Water
for Yanking Pajamas” • “Canada Probes Wal-Mart Move against Cuban Pajamas” • “Wal-Mart Puts
Cuban Goods Back on Sale” The controversy arose over a U.S. embargo forbidding U.S. businesses to
trade with Cuba and concern whether or not the embargo could be enforced in Canada. Walmart was
selling Cuban-made pajamas in Canada. When Walmart offi cials in the United States became aware of
the origin of manufacture, they issued an order to remove all the offend ing pajamas because it is
against U.S. law (the Helms-Burton Act) for a U.S. company or any of its foreign subsidiaries to trade
with Cuba. Canada was incensed at the intrusion of U.S. law on Canadian citizens. The Canadians felt
they should have the choice of buying Cuban-made pajamas. Walmart was thus caught in the middle of
confl icting laws in Canada and the United States and a Canada–U.S. foreign policy feud over the
extraterritoriality of U.S. law. Walmart Canada would be breaking U.S. law if it continued to sell the
pajamas, and it would be subject to a million-dollar fi ne and possible imprisonment of its managers.
However, if the com pany pulled the pajamas out of Canadian stores as the home offi ce ordered, it
would be subject to a $1.2 million fi ne under Canadian law. After discussion with Canadian authorities,
Walmart resumed selling the pajamas. Canada was upset with the United States for attempting to
impose its laws on Canadian companies (Walmart Canada is a subsidiary of Walmart U.S.), while the
United States says that Walmart was violating its laws in not abiding by the boycott against Cuba. The
situation illustrates the reality of the legal environment and international marketing—companies are
subject to both home-country laws and host-country laws when doing busi ness in another country. The
federal government fi nally set tled with Walmart in 2003, and the pajama caper was fi nally closed.
However, as indicated in the previous chapter, the gov ernments of Cuba and the United States have
yet to settle. Sources: Boston Globe, March 3, 1997; St. Louis Post-Dispatch, March 9, 1997; Washington
Post, March 14, 1997, p. A6; The Wall Street Journal, March 14, 1997, p. B4; John W. Boscariol, “An
Anatomy of a Cuban Pyjama Crisis,” Law and Policy in International Business, Spring 1999, p. 439;
William Booth and Mary Beth Sheridan, “Cuba Detains U.S. Government Contractor,” Washington Post ,
December 13, 2009, p. A12.