On Tuesday, R.J. Reynolds Tobacco Company and JTI-Macdonald Corp., a subsidiary of Japan Tobacco International, agreed to pay the Canadian government a combined $550 million to resolve allegations in the Ontario Court of Justice that the companies engaged in a tobacco smuggling scheme in the 1980s and early 1990s.

The Canadian government alleged in essence that the companies shipped cigarettes to the United States from Canada and then smuggled them back into Canada, where they were sold on the cheap, without the proper excise taxes being paid. The Canadian government earlier claimed that billions of dollars in tax revenue were lost in the scheme.

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