Plastics bag manufacturer Redi-Bag USA and its chief executive have agreed to pay $7.3 million to resolve allegations that they evaded customs duties by falsely reporting that their PE retail carrier bags (PRCBs) were made in Hong Kong instead of China.
Federal prosecutors alleged that Redi-Bag USA and Jeffrey Rabiea concealed the PRCBs’ true country of origin by hiding information from others, including the company’s customs broker and US Customs and Border Protection, thereby violating the False Claims Act.
During the relevant time period, PRCBs from the China were subject to antidumping duties – levies that protect against foreign companies ‘dumping’ products on US markets at below cost.
According to the US Department of Justice, Redi-Bag employees were directed to cover up ‘Made in China’ markings, while manufacturers were ordered to remove them. Orders that were scheduled for inspection by customs authorities were also said to have been cancelled.
The settlement resolves allegations that Redi-Bag USA and Rabiea knew that PRCBs they imported and supplied to customers across the US were manufactured in China and transhipped through Hong Kong.
Sales rep whistleblower
It resolves a civil lawsuit filed by John Maierhoffer, a former contracted sales representative for Redi-Bag USA, under the whistleblower provision of the False Claims Act. He will receive approximately $1,332,250 of the settlement proceeds.
Whistleblower Law Collaborative’s Bruce Judge, who acted as the lead attorney in the False Claims Act case, said: “Over a number of years, New York Packaging, Redi-Bag USA and Jeffrey Rabiea made significant profits by fraudulently underpaying customs duties on merchandise manufactured in China and destined for US markets.
“That fraud was invisible to US Customs until our client brought it to the government’s attention. After alerting the government to the significant customs fraud violations, our client worked with investigators and supported federal law enforcement efforts to bring the case to a successful conclusion.”
According to the Justice Department, an importer entering goods into the US must declare the country of origin, the value of the goods, and whether the goods are subject to duties, and the amount of duties owed.
US Customs and Border Protection collects applicable duties, including antidumping duties assessed by the Department of Commerce.
Trade Fraud Task Force
The Department of Justice launched a cross-agency Trade Fraud Task Force last year, designed to enhance efforts to combat and prevent trade fraud that it said, ‘deprives the government of vital revenue, threatens critical domestic industries, undermines consumer confidence, and weakens national security’.
“Companies that benefit from access to US markets must follow US law, including by paying import duties that protect American manufacturers and workers from unfair foreign competition,” said Brett Shumate, assistant attorney general of the Justice Department’s Civil Division.
“The Justice Department will hold accountable those who evade duties owed to the US.”
CBP commissioner Rodney Scott added: “With this settlement, we are protecting the integrity of our nation’s borders and holding those who attempt to evade customs duties accountable.
“We continue to work closely with our partners to safeguard fair trade and support lawful commerce.”
Located in Tukwila, Washington state, Redi-Bag was founded in 1992 as a manufacturer of PE film and protective packaging serving the food distribution, food processing and general industrial markets.
