Fuss over HP and Redington doesn't change the bigger picture

I'm intrigued to see how HP resolves the commotion over its relationship with Redington Gulf for the Iran market following global media reports on the subject

Tags: ComplaintHewlett-Packard CompanyIranRedington GulfUnited Arab Emirates
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By  Andrew Seymour Published  January 18, 2009

I’m intrigued to see how HP resolves the commotion over its relationship with Redington Gulf for the Iran market following the flood of reports that have swept through the global media on the subject.

The supposed revelation that HP uses Redington to distribute printing products to Iran isn’t exactly a secret to most industry people in this part of the world, perhaps because the notion has always been that it is not unlawful, even though that is now being suggested otherwise.

For as long as I can remember, the understanding has been that certain authorised HP distributors are allowed to sell selected printer models and supplies to approved reseller accounts, knowing they are intended for use in Iran.

In the case of Redington, it strongly maintains that it carries out no commercial activity in Iran but has a written contract with HP that permits it to sell designated hardware from the vendor’s IPG portfolio to a list of endorsed customers, invariably based in Jebel Ali.

It has also been made perfectly clear by numerous parties that no such arrangement exists for PCs, software or networking equipment — only printer lines specifically authorised by HP.

I had a conversation last year with a senior manager at HP Middle East about the territories within his domain. The executive in question openly cited Iran as one of the markets — but took the time to point out that it was only for selected IPG products.

Therefore, the statement produced by HP’s headquarters following the initial report highlighting the HP-Redington Iran partnership — in which it vowed to “explicitly prohibit” the sale of HP products in Iran — somewhat contradicts the line followed locally and the fact that working contracts are in place.

There are two ways of interpreting this, the first being that the statement from HP was a knee-jerk reaction designed to show it is taking the issue seriously. After all, given the sensitivity of US-Iranian trade sanctions — and the potential penalties imposed on companies found violating them — HP could be forgiven for wanting to act quickly by publicly expressing its commitment to observing export laws.

On the other hand, there is the possibility that somewhere down the line a communication breakdown has occurred inside HP as far as the precise definition of what can and can’t be sold to Iran is concerned. Certainly the comments coming out of HP’s HQ differ wildly from what has always been articulated locally.

In that case, the blame lies squarely with HP, not a distributor such as Redington, which has been made to look as though its actions have been wrong.

The sentiment in the US appears to be that all American companies are prohibited from selling their products to Iran — either directly or through a third party. In the recent conclusion of a case implicating a vendor that sold software to Iran via a Dubai distributor, the US Bureau of Industry and Security, which oversees the enforcement of export control, reiterated that a “comprehensive” trade embargo is maintained against Iran.

And on the website of the US Office of Foreign Assets Control (OFAC), which also administers trade sanctions, documents can be accessed that state: “In general, a person may not export from the US any goods, technology or services, if that person knows or has reason to know such items are intended specifically for supply, transhipment or re-exportation to Iran.”

However, text in the same passage of regulations appears to suggest that there are exceptions to this ruling, providing it is licensed by OFAC.

If that is the situation with HP and the printing products at the heart of this saga then the vendor has a duty to come out and clarify that.

It is conceivable that even if HP has been playing by the rules, it will still elect to put an end to any authorised dealings with distributors that involve Iran just to err on the side of caution and prevent any further unwanted publicity. Should that be the outcome, it will be very unfortunate for disties such as Redington, which will have been made the fall-guys even though they claim simply to have followed guidelines set out by HP.

In terms of what it means for the bigger picture — namely the resale of volume IT products into Iran — the answer is nothing in my opinion. Powerful supply and demand dynamics mean that embargoed goods, not only from HP but other US manufacturers, will always find their way into the market if the current is strong enough.

The existence of multiple sub-distribution layers within the Middle East channel — a factor that isn’t necessarily comprehended by those from outside the region — leaves vendors powerless to prevent kit ending up where it shouldn’t, even if they have processes designed to track product flow.

Let’s not forget why the size of the UAE IT market is as large as it is given the comparatively small population. IDC estimates that as much as 40% of IT sales carried out in the UAE involve products that are eventually destined for re-export into markets such as Iran.

The reality of the situation is that irrespective of HP’s response to the recent outcry on its distribution policy, US technology products will continue to be traded by computer dealers in Iran, just as they are everywhere else.

3669 days ago
H. Dadlani

It was quite surprising to note that , inspite of US products being sold in the local market here for more than a decade , HP has awoken now to the fact! I personaly know of several incidents where Containers full of HP products are off loaded in Tehran!! Happy selling to Iran .....directly during the near future.

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