Redington speaks out over HP Iran saga

Redington has legitimate contract with HP for authorised business with approved Iran customers says CEO

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By  Andrew Seymour Published  January 18, 2009

IT distributor Redington Gulf has moved to clarify its position following recent reports that HP could have violated US trade sanctions by using it as a vehicle to sell printing products in Iran.

An article published by The Boston Globe last month identified Redington as a sales channel for HP printers in Iran and quoted a US Treasury Department official as saying US companies are prohibited from selling goods to a distributor if they know the products are intended for Iran.

But Redington Gulf has angrily hit back at suggestions it has been serving as an illicit conduit for HP in Iran, insisting the company has an authorised contract with HP that permits the sale of certain printer lines and supplies to approved Iranian customers.

Raj Shankar, CEO at Redington Gulf, explained: “We have a separate contract for Iran and we are allowed to sell a certain type of products, which they classify as EAR99. But irrespective of that, the fact is there is a certain class of products in what HP would call IPG hardware — that is printers — which you are allowed to sell. And you are allowed to sell supplies, this is how it is.”

Under the terms of the contract that Redington has with HP, Shankar says the distributor is authorised to fulfil and execute sales of specific printer lines to approved Iranian customers in Jebel Ali or the UAE.

“We therefore only sell to [those customers] and they are allowable products which can go into Iran,” said Shankar. “But we do not take the product there because we are not engaged in commercial activity in Iran. We fulfil those products here, and it is then for the customer to take the product into the country and engage in local commerce. But we do not get involved in that part of the deal.”

Shankar points out that products from HP’s PC and networking portfolios are expressly forbidden from being sold to Iran, but said the company receives regular correspondence from HP containing permitted printer lines and approved customers. He confirms it is not uncommon for as many as 50 printer models to be listed at any one time and said HP carries out audits to ensure compliance.

Shankar stresses that Redington does not conduct sales, stocking or import activities inside Iran, nor does it transact payments from any customer or bank in-country.

“The fact is we don’t have any commercial activity in Iran,” he said. “We do not receive payments from any customer in Iran to a point where we don’t even have a banking relationship with any Iranian bank in the UAE, let alone Iran. Redington is very clear that it abides by HP’s policy guidelines and though the policy guidelines do not stipulate having accounts, we have actually taken our own precautionary steps of saying that we will not even have a bank account with any Iranian banks.”

The India-based distributor, which recently sold a 36% stake in its Middle East business to private investors for $98m, continues to operate an office in Tehran employing four people. Shankar says it was set up many years ago and acts purely as a liaison branch to support a services business.

“Redington is also an authorised service provider for the Iran market and because a foreign company cannot engage in local commerce we have a model where the services are being done through a third party service provider and these are in different locations in Iran,” he explained. “This office, therefore, doesn’t even get into repair or break-fix, it is pure co-ordination activity.”

Redington is also upset that reports allude to it as the sole vehicle for HP sales in Iran. Shankar claims two other distributors — thought to mean authorised HP disties Emitac and Almasa — are also addressing the Iran market.

“I am feeling a little disappointed that there has been no effort taken by anybody so far to clarify that we are not the only ones,” said Shankar. “There are two other distributors addressing the Iran market and we are operating against a firm written contract so I find it very strange that it is only our name that keeps going around.”

A statement released by HP’s US subsidiary in the wake of The Boston Globe article said the vendor planned to clarify contracts with distributors “to explicitly prohibit the sale of HP products in Iran”.

Shankar, however, says Redington has not received any official communication from HP up to now, although it has been informed that the situation is being evaluated and any decision will apply to all channel partners serving the Iran market. He says HP’s Middle East management “understood, accepted and agreed” with certain concerns he had expressed to them, but that the matter was being handled centrally.

The Iran contract is worth around 2.5% — or approximately $25m — of the distributor’s $1.03 billion Middle East and Africa revenues, according to Shankar, but he insists the company’s immediate priority is making it explicitly clear that it has done nothing more than uphold the terms and conditions of its contract with HP.

“All we want is clarity and for Redington to be absolved of any negative publicity that has happened as though we are a conduit of HP, as though we are the only distributor [addressing Iran] and as though we are doing something very mischievous,” said Shankar. “The point is we are an authorised distributor of HP selling to approved customers of HP and in authorised territories. That is our business model and our statement.”

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