In a preliminary decision hailed by Canada, the Commerce Department has recommended that the United States cut in half steep tariffs on imports of Canadian softwood lumber.
The decision Thursday has no immediate impact, because a final ruling will not be made until December, but Canadian officials said it could severely weaken the American lumber industry's case for punitive duties averaging 27 percent on Canadian lumber.
"This shows that the duties imposed on the Canadian industry were unreasonable," said Canada's international trade minister, Jim Peterson.
"I'm pleased with the finding, but I won't be satisfied until all unfair duties are removed and the money is given back to our industry," Peterson said.
Mary Brown Brewer, a spokeswoman for the Commerce Department, emphasized that the decision is preliminary and was based on a change in methodology in determining the tariffs. She said the important fact is that tariffs are needed to counter what she called significant government subsidies of Canadian lumber.
"At the end of the day, no matter what methodology is used, it's clear Canada still significantly subsidizes their timber industry. We're committed to reaching a long-term durable resolution to this long-standing dispute for our forest products industry," Brewer said.
Softwood lumber from pine, spruce and other trees is commonly used to build homes. The United States imported nearly $6 billion of it from Canada in 2002, about a third of the American market.
In 2002, the United States imposed stiff duties on softwood imports from four Canadian provinces, after accusing Canada of subsidizing the industry. Canada called the duties unwarranted and protested to the World Trade Organization and a NAFTA dispute panel.
The antidumping and punitive tariffs average 27.2 percent. But after reviewing lumber shipments between the initial levy in 2002 and March 31, 2003, Commerce proposed cutting the total duties to 13.2 per cent.
The final rate will be determined after Commerce completes its final administrative review in December.
A spokesman for the British Columbia lumber industry, which pays the largest share of U.S. duties, called the ruling "a terrific result."
"It shows you the process and all its flaws," said John Allan, president of the B.C. Lumber Trade Council.
The Coalition for Fair Lumber Imports, which had brought a complaint against Canada, was disappointed. The methodology used by Commerce "is way undervaluing timber across Canada" and the group will take that up with the department, said coalition spokeswoman Deborah Burns.
The development comes on the heels of a string of favorable rulings in Canada's legal challenges to the duties before the WTO and a North American Free Trade Agreement appeal panel.
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