Redi-Bag's $7.3M Deception: Inside the Scheme to Defraud U.S. Trade Law

WASHINGTON, D.C. – July 22, 2026 – The U.S. Department of Justice has secured a $7.3 million settlement with New York Packaging II LLC, a major packaging supplier operating as Redi-Bag USA, and its CEO, Jeffrey Rabiea. The settlement resolves explosive allegations that the company engaged in a deliberate scheme to defraud the U.S. government by evading millions in import duties on plastic shopping bags. The case, brought to light by a whistleblower, highlights the intricate challenges of enforcing international trade law and the critical role insiders can play in upholding fair competition.

A Scheme of Misdirection and Concealment

At the heart of the government's case are allegations that between December 2015 and July 2018, Redi-Bag USA systematically misrepresented the country of origin for its imported polyethylene retail carrier bags (PRCBs). According to the lawsuit, the company knowingly imported bags manufactured in China but falsely declared them on customs forms as originating from Hong Kong. This deception allowed the company to illegally avoid a steep 77.57 percent antidumping duty specifically levied on PRCBs from China.

Antidumping duties are a crucial tool used by the U.S. to protect domestic industries from foreign companies selling products in the American market at less than fair value—a practice known as "dumping." By circumventing these tariffs, an importer can gain a significant and unfair price advantage over domestic manufacturers and law-abiding competitors.

The Department of Justice alleged that the scheme was not a passive oversight but an active effort in concealment. Court documents claim that Redi-Bag and its leadership directed employees to cover or physically remove "Made in China" markings from packaging. The company allegedly went so far as to instruct its Chinese manufacturers to remove origin markings before shipment and, on at least one occasion, canceled an order that was flagged for a customs inspection. This conduct falls under the "reverse false claims" provision of the False Claims Act (FCA), which holds parties liable for knowingly avoiding their financial obligations to the government.

"The Department of Justice will hold accountable those who seek to profit by evading duties owed to the United States," said a senior official in a statement regarding the settlement. This case sends a clear signal that attempts to defraud the U.S. customs system carry severe financial consequences.

The Insider Who Blew the Whistle

The multi-million dollar fraud may have continued undetected if not for the actions of a company insider. The civil lawsuit was initiated in 2021 by John Maierhoffer, a former contracted sales representative for Redi-Bag USA. Maierhoffer filed the suit under the qui tam provision of the False Claims Act, a powerful legal mechanism that allows private citizens to sue on behalf of the government and share in any recovered funds.

As a sales representative, Maierhoffer was positioned to have visibility into the company's sourcing and customs practices, providing the federal government with the evidentiary foundation it needed to launch a full investigation. For his role in exposing the fraud, he will receive approximately $1.33 million of the settlement proceeds, plus an additional $225,000 to cover attorneys' fees and costs.

This outcome underscores the effectiveness of whistleblower provisions in uncovering complex fraud. Customs evasion schemes are notoriously difficult for authorities to detect without internal knowledge. The Redi-Bag resolution demonstrates how one individual's willingness to report misconduct can trigger a federal investigation, restore millions to the public treasury, and hold corporate wrongdoers accountable.

Protecting the Domestic Playing Field

For the U.S. plastic bag manufacturing industry, the settlement is more than just a financial penalty; it's a validation of the trade laws designed to ensure their survival. The Polyethylene Retail Carrier Committee (PRCC), an ad hoc coalition of U.S. manufacturers, has long advocated for robust enforcement of these laws.

Michael Taylor, a partner at King & Spalding and counsel to the PRCC, applauded the government's action. "The domestic producers of retail carrier bags genuinely appreciate the government's efforts to enforce the trade laws and to make sure that importers do not shirk their border obligations," said Mr. Taylor. "Antidumping duties are intended to preserve the relief afforded to domestic producers and workers when imports are sold at unfairly traded prices, and enforcement actions help ensure that companies cannot gain an unlawful competitive advantage by disguising where covered merchandise is made."

The U.S. International Trade Commission (USITC) has repeatedly affirmed that revoking the antidumping orders on PRCBs from China and other countries—including Indonesia, Malaysia, Taiwan, Thailand, and Vietnam—would likely lead to a recurrence of material injury to the U.S. industry. This settlement reinforces the critical importance of those protections and the government's resolve to enforce them.

A Pattern of Enforcement

The Redi-Bag USA case is not an isolated incident but part of a broader, intensified crackdown on customs fraud by federal authorities. The Department of Justice's Trade Fraud Task Force, working in close collaboration with U.S. Customs and Border Protection (CBP), has made tariff evasion a top enforcement priority.

This focus has yielded significant results, with the task force recovering over $1 billion in civil and criminal penalties in less than a year. The Redi-Bag settlement follows several other high-profile customs fraud cases, including a landmark $549.5 million settlement with Perfectus Aluminum for evading duties on Chinese aluminum and a $54.4 million settlement with Ceratizit USA for similar allegations. Many of these successful enforcement actions, like the one against Redi-Bag, were initiated by whistleblowers.

As U.S. Attorney Robert Frazer for the District of New Jersey affirmed, his office will continue to "vigorously investigate and pursue allegations of duty evasion to protect the integrity of the nation's markets." For businesses involved in global supply chains, the message is clear: the cost of deception is rising, and the government is more equipped and determined than ever to collect.