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H&M Embroiled in Russian Probe Over $42M in Customs Duties

Hennes & Mauritz has another legal headache on its hands.

The Russian division of the fast-fashion chain allegedly failed to report some license fees it pays to its Swedish parent over a three-year period between 1996 to 1999. The fees should have been listed in declarations when the goods were imported.

Not doing so enabled the company to allegedly avoid paying customs duties totaling 3.1 billion rubles, or $42 million. While a Bloomberg report earlier this month said that the $42 million was paid in 2019, it also said that Russia’s Federal Customs Service has nevertheless launched a criminal probe into the matter. The Moscow Times last week reported that the probe was launched in December 2020, one year after H&M paid the $42 million. The probe could result in jail sentences for senior executives or a fine of up to two times the $42 million that went unreported.

“We have not received any information from the local authorities. H&M always strives to pay taxes and customs fees in accordance with international rules and guidelines and the corresponding translation thereof in local rules and guidelines,” an H&M spokeswoman said.

The criminal matter is the latest in a series of headaches for the fast-fashion chain.

Last week it was learned that apparel workers at one of H&M’s Indian suppliers had fired unionized workers at the height of the coronavirus pandemic. The manufacturer, Gokaldas Exports, had claimed the firing was due to cancellation of orders. H&M said it had paid for all orders that were produced. Upon the union and manufacturer reaching an agreement, the workers were able to regain their jobs.

At the start of the month, H&M said it investigate sexual harassment claims at a supplier factory in southern India.

Separately, the company said at the end of January that pandemic lockdowns hurt its fourth quarter sales. About 1,800, or 36 percent, of its roughly 5,000 global stores are now closed, which will impact net sales by 23 percent for the first two months of the first quarter of fiscal 2021. The company also reiterated plans to close 350 stores, while opening 100 stores this year. The chain is also planning to open its first Arket store in China later this year.

What’s more, other fashion companies have faced similar probes of their own. In December, French luxury titan Kering confirmed French authorities were looking into issues involving Gucci’s finances related to a Swiss subsidiary and Italian tax authorities.