Winston-Salem, North Carolina, Dec. 22 (Bloomberg) -- R.J. Reynolds Tobacco Holdings Inc., the No. 2 U.S. tobacco company, said smuggling allegations levied against it by the Canadian government relate solely to its former international affiliates.

Canada yesterday sued R.J. Reynolds for at least US$1 billion, claiming the company smuggled cigarettes into the country to undercut a government plan to discourage smoking with high taxes. R.J. Reynolds said the companies at the core of Canada's case -- R.J. Reynolds International, Northern Brands International Inc. and RJR MacDonald Inc. -- have been under investigation by the Canadian and U.S. governments for several years. R.J. Reynolds Tobacco Co., its U.S. cigarette-making unit, has ``never been implicated in those investigations,'' the company said in a statement. R.J. Reynolds sold its international operations to Japan Tobacco Inc. in May. At the time of the sale, it agreed to pay for ``certain potential liabilities'' against R.J. Reynolds International tied to an investigation of alleged smuggling in Canada, the company said. The civil suit, which was filed in Syracuse, New York, builds on a U.S. case against Northern Brands, a former RJR Nabisco Holdings Corp. unit. Northern Brands pleaded guilty in December 1998 to charges it helped smugglers evade U.S. taxes.

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