Police arrested 28 people Wednesday in a crackdown on tobacco trafficking that allegedly involved the Italian Mafia and native organized crime.
They said the alleged fraud amounted to $30 million.
Authorities told a news conference they seized 40,000 kilograms of tobacco and confiscated $450,000 in cash.
Provincial police Sgt. Joyce Kemp said the Italian Mafia teamed up with aboriginal organized crime in what she described as massive illegal imports of bulk tobacco destined for Quebec.
The tobacco made its way into Canada in big trucks after being purchased by the Mafia in North Carolina, she told reporters.
"It was hidden with other merchandise (and) often what was used was cedar mulch to hide the (odour) of the tobacco."
Kemp said that after crossing the border, the truckloads were hidden for two or three days in a warehouse to make sure they hadn't been spotted. The tobacco was then transferred to factories where the contraband cigarettes were made.
The cigarettes were then allegedly sold on the Kahnawake reserve south of Montreal.
Police said the tobacco was imported into Canada through the Lacolle border crossing or through the Akwesasne Mohawk reserve.
Authorities were still looking for seven other people.
About 400 law-enforcement officers, including members of the Quebec provincial police, the RCMP, other police forces, customs agents and U.S. authorities, were involved in the operation.
Among those arrested was Montrealer Nicola Valvano, 53, who was described by authorities as an influential member of the Mafia.