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 user 2008-12-29 at 10:04:33 am Views: 57
  • #21058
    HP uses third party to sell printers in Iran
    Calif. firm’s sales soar in embargo
    - Behind an unmarked door on a crowded side street in Tehran, a stack
    of Hewlett-Packard printers rises to the ceiling. A fleet of motorbikes
    swarms outside, as deliverymen wait to deliver printers to buyers
    across this sprawling capital.HP printers have become a top seller
    here, despite a comprehensive embargo that prohibits the
    California-based company from sending its products to Iran.The
    prevalence of such American-made goods in Iran has led US officials to
    crack down on the cottage industry of smugglers in nearby Dubai who
    purchase everything from iPhones to Bratz dolls to sell in Iran. But
    the lion’s share of HP printers, among the most visible of US goods
    here, come not through smugglers, but through a series of international
    transactions that enable HP to sidestep US sanctions.

    In 1997,
    two years after President Clinton banned trade with Iran, HP struck a
    partnership with a newly formed company in Dubai to sell its products
    in the Middle East. At the time, the company, called Redington Gulf,
    had only three employees and its sole purpose was to “sell HP supplies
    to the Iran market,” says a history on Redington Gulf’s website and
    Rajesh Chandragiri, the administrative manager in Redington Gulf’s
    Dubai office.If American executives at HP cut the deal knowing the
    printers were destined for Iran, it would be in violation of the law,
    sanctions specialists said. But despite the crackdown on US companies
    who sell their products in Iran, some American firms whose products are
    sold through third-party distributors like Redington Gulf have so far
    avoided scrutiny.”Using a distributor makes it much more difficult to
    prove that the manufacturer has knowledge of the sales to Iran,” said
    Robert Clifton Burns, a Washington-based lawyer who specializes in
    export law.

    An HP spokeswoman declined to say how much the
    company knows about its printers’ popularity in Iran, offering only a
    statement that HP has “a policy of complete compliance with all US
    export laws.”But in 1999, before sanctions enforcement became as
    rigorous as it is today, Albrecht Ferling, the general manager of HP
    Middle East, was quoted in the press as estimating HP’s growth rate in
    Iran to be about 50 percent per year.”Iran is a big market for
    Hewlett-Packard printers,” he was quoted as saying in Gulf News, an
    English-language newspaper in the United Arab Emirates. Attempts to
    reach Ferling, who has left HP, were unsuccessful.In any case, HP’s
    ability to avoid sanctions undermines the impact of the US economic
    boycott of Iran, which President Clinton announced in 1995 to pressure
    the country to stop funding militant groups Hamas and Hezbollah, and to
    curb its nuclear program, which the US government fears is aimed at
    building a nuclear weapon.

    In recent years, the Bush
    administration has cracked down even harder on companies that find ways
    to do business with Iran, making HP’s sales there increasingly out of
    step with the rest of the US business community.”The easier it is for
    the targeted country or entity to avoid or circumvent the sanctions
    measures, the lesser their impact and utility,” said Victor D. Comras,
    who supervised sanctions policy for the US State Department.”Computers
    and related products are keystone items in today’s economy,” Comras
    added. “Inhibiting trade in such products imposes a greater cost than
    more mundane and easily substituted products. That makes inhibiting the
    availability of such products an important part of US trade sanctions
    program. HP is an important player in this sector.”

    The vehicle
    for all HP’s sales in Iran remains Redington Gulf, an Indian-owned firm
    that is therefore not obliged to follow US laws. Redington Gulf laid
    the foundation for HP’s popularity about a decade ago when it opened a
    cluster of small second-floor offices in Tehran decorated with huge,
    colorful maps created by HP printers.Since then, it has opened a fully
    equipped service center for HP products in Tehran and licenses Iranian
    retail firms to sell HP printers at their own stores.One firm that says
    it got a license is Bamdad Rayne, on Khosro Alley in downtown Tehran,
    where deliverymen on motorbikes mill around all afternoon, waiting to
    carry printers to clients around the city.

    One client of Bamdad
    Rayne’s, a retail office equipment store on a corner nearby, displays a
    series of HP deskjet 2180s for $61 and an HP5610 all-in-one for $150,
    both slightly older models than those currently on the shelf in the
    United States.This system of sales has helped HP dominate the printer
    market in Iran, a country of 65 million people.A poll published in 2007
    by Tehran’s Taliya News estimated that HP had 41 percent of the printer
    market in Iran, while the second bestseller had 24 percent.

    types of sophisticated printers and servers are on a Commerce
    Department list of items with possible military applications, which
    therefore may never be sold to Iran, even if no Americans are involved
    in the sales. But a Redington Gulf employee who spoke on condition of
    anonymity said that HP does not provide Redington Gulf with any of
    those sensitive products.But if HP is aware enough of Redington Gulf’s
    sales in Iran to control the types of products that are offered there,
    it could be in violation of US export laws, according to sanctions

    Andrew DeSouza – a spokesman for the US Treasury
    Department, which is charged with administering the sanctions – said US
    companies are barred from selling their goods to a distributor if they
    have “knowledge or reason to know” that the goods are intended for
    Iran.If, for example, a US company dealt with a distributor that
    operates predominantly in Iran, then the US company could be held
    liable for violating sanctions laws, he said.Chandragiri, the Redington
    Gulf manager in Dubai, confirmed that the company had started off
    selling only HP printers in Iran. But since then, he said, Redington
    Gulf has grown to a thriving business that sells numerous name bands
    across the Middle East and Africa.Using Redington Gulf to distribute
    its products in Iran has helped keep HP out of the spotlight of bad
    publicity that has struck American companies that used their own
    overseas subsidiaries to avoid US sanctions. Such activity is legal, as
    long as no Americans are involved.

    But the pressure on US
    companies to terminate all business ties to Iran has been intense since
    2004, when Congress directed the Securities and Exchange Commission to
    uncover and publicize the names of publicly traded companies that have
    any ties to Iran on the grounds that such activity is an “investment
    risk.”Several US companies announced a halt to their Iran work after
    receiving letters from the SEC. In February 2006, SEC officials wrote
    to Xerox, the Connecticut-based manufacturer, asking about the
    third-party distributors Xerox used to sell its copiers in Iran, Sudan,
    and Syria, according to SEC filings.”We note from your website that you
    may have operations associated with Iran, Syria, and Sudan, which are
    identified as state sponsors of terrorism by the US State Department
    and subject to economic sanctions imposed,” stated the letter from
    Cecilia D. Blye, chief of the SEC’s Office of Global Security Risk. “We
    note also a public media report that Xerox products are sold in Iran.”

    responded by explaining that it had entered into agreements with
    foreign distributors who were within their legal rights to sell in
    Iran. But by August of that year, Xerox announced that it was
    voluntarily terminating those distributor agreements in those
    countries, forgoing more than $7 million in annual revenues.HP does not
    mention Iran sales in any of its public filings. Its 2006 annual report
    said only: “Our products and services are available worldwide.”In Iran,
    HP is a well-recognized brand. Medhi Hussein, 30, a salesman at a
    printer store in Tehran’s upscale Vanak Square, said he sells twice as
    many HPs as other printers because of their excellent reputation.

    half the population of Iran, Hussein is too young to remember much
    about life before US sanctions hit in 1995. He said he has never heard
    of Redington Gulf and assumes that all American products have come to
    Iran illegally. That gives HP printers the allure of the forbidden.The
    real impact of sanctions, he said, is not in any shortage of ink or
    spare parts, but rather in the mindset of people.”There is
    psychological impact,” he said, but perhaps not the impact that the US
    government has in mind: Iranian customers are drawn to American
    products in part because the US government tries to prevent them from
    reaching Iran. And that makes HP an especially hot seller.