H&M is coming under fire in Russia after allegedly failing to pay nearly $50 million in duties on garments and accessories imported into Russia between 2016 and 2019. According to a report from Bloomberg, Russia’s Federal Customs Service started an investigation into H&M’s Russian unit in December for “not including some of the license fees it pays to its Swedish parent in declarations when importing goods” for that 3-year period, thereby, potentially enabling the apparel giant to avoid paying $42 million in customs duties.
Bloomberg revealed last week that H&M reportedly paid the 3.1 billion rubles ($42 million) difference in 2019, but the Federal Customs Service – the arm of Russia’s Ministry of Finance that is tasked with regulating the nation’s customs operations – launched a formal probe, nonetheless, which “could result in fines of as much as twice the calculated discrepancy or even jail sentences for senior executives.”
Prior to the onset of the COVID-19 pandemic, which prompted the Organization for Economic Cooperation and Development to “drastically cut its forecast for the Russian economy” in March 2020, corporate consultancy Dezan Shira & Associates revealed that “the demand for foreign products into Russia has been significantly increasing,” as Russia was in the process of “recovering its economy from the drop in global oil prices and sanctions, and [was] moving into positive GDP growth rates.” More than that, “Pent up demand and a large consumer class are making the country an attractive proposition to sell to.”
A noteworthy market for H&M, Bloomberg stated that with 155 stores in the country and a total of $745 million in revenue for the fiscal year ending November 30, 2020, Russia is the retailer’s seventh biggest market.
No stranger to controversy as of late, H&M is currently in the midst of a government investigation in Sweden on the basis of alleged racial discrimination. In December, Sweden’s Equality Ombudsman – the government agency tasked with “combatting discrimination on grounds of sex, transgender identity or expression, ethnic origin, religion or other belief, disability, sexual orientation or age” – confirmed that it was investigating the fast fashion giant after Swedish newspaper Aftonbladet published footage that appeared to show an H&M sales associate discriminating against a customer on the basis of race.
At the same time, H&M is fresh off of a $41.5 million settlement in connection with its pattern of illegally surveilling employees in Germany. In October, H&M was slapped with the “record breaking” fine after the Hamburg Data Protection Commission, found that the retailer had been monitoring several hundred employees at its service center in Nuremberg, with some of the employees being subject to extensive recording of information related to their private lives since at least 2014, all of which was uncovered in conjunction with a security breach that took place a year ago. In its October opinion, the Commission found that the extensive – and ongoing – data collection about employees’ private lives amounts to “a serious disregard for employee data protection,” and against that background, Hamburg Commissioner for Data Protection Prof. Dr. Johannes Caspar levied the €35.26 million fine on H&M.