  Following the recent observation of the quantum spin Hall (QSH) effect in
HgTe quantum wells, an important issue is to understand the effect of
impurities on transport in the QSH regime. Using linear response and
renormalization group methods, we calculate the edge conductance of a QSH
insulator as a function of temperature in the presence of a magnetic impurity.
At high temperatures, Kondo and/or two-particle scattering give rise to a
logarithmic temperature dependence. At low temperatures, for weak Coulomb
interactions in the edge liquid the conductance is restored to unitarity with
unusual power-laws characteristic of a `local helical liquid', while for strong
interactions transport proceeds by weak tunneling through the impurity where
only half an electron charge is transferred in each tunneling event.
