WINSTON-SALEM, N.C. (AP) -- A federal appeals court upheld the dismissal of a lawsuit accusing R.J. Reynolds Tobacco Holdings Inc. of smuggling cigarettes into Canada through an Indian reservation to evade taxes.

The 2-1 decision Friday by the 2nd U.S. Circuit Court of Appeals in New York City was ``clearly good news for RJR as well as the broad tobacco industry,'' said Martin Feldman, a tobacco industry analyst at Salomon Smith Barney. A spokesman at the Canadian Embassy in Washington referred calls Saturday to the country's Department of Foreign Affairs in Ottawa, which had no comment. Spokesmen for Canada's departments of health and justice could not be reached for comment. A district judge in Syracuse, N.Y., last year dismissed Canada's lawsuit, ruling that American courts have no jurisdiction. An 18th-century English common-law rule adopted by the United States prohibits using federal courts to collect another country's revenue. The lawsuit alleged that RJR and related companies set up an elaborate network of smugglers and a shell company -- Northern Brands International -- to flood Canada with cheap cigarettes after the government doubled taxes and duties on tobacco in 1991. RJR denied it played any role in the smuggling ring. Daniel W. Donahue, senior vice president and deputy general counsel for R.J. Reynolds Tobacco Co., said in a statement that the ruling has implications for other cases filed by other nations. ``... The court affirmed that foreign governments cannot use our country's judicial system to enforce their revenue laws,'' he said.

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