H&M Faces Russian Criminal Investigation Over Customs Duties

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H&M Faces Russian Criminal Investigation Over Customs Duties
Credit: © Reuters.

(Bloomberg) -- Russian authorities opened a criminal investigation into clothing retailer Hennes & Mauritz (ST: HMb ) for allegedly avoiding 3.1 billion rubles ($42 million) of customs duties.

The Federal Customs Service opened the case in December against H&M’s Russian unit for not including some of the license fees it pays to its Swedish parent in declarations when importing goods from 2016 to 2019, according to documents seen by Bloomberg News.

H&M paid 3.1 billion rubles in 2019 to cover the discrepancy after an audit, a person with knowledge of the matter said, asking not to be identified because of the sensitivity of the issue. The payment did not forestall the criminal case, which could result in fines of as much as twice the calculated discrepancy or even jail sentences for senior executives, the person said.

H&M’s press office in Stockholm confirmed there is an investigation, but couldn’t provide details because they had not received information from local authorities. The Federal Customs Service didn’t immediately respond to requests for comment.

H&M sales in Russia were 6.23 billion kronor ($745 million) in the financial year ending Nov. 30, according to a company report. The retailer had 155 stores in the country, which is its seventh biggest market.

In 2014, Swedish beauty-products producer Oriflame was fined 1 billion rubles by Russian authorities for tax violations in a case that “seriously concerned the European business community,” the Association of European Businesses in Moscow said at the time.

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