Posted on: Thursday, August 14, 2003

U.S. must review Canada timber tariff

By Matthew Daly
Associated Press

WASHINGTON — An international trade panel yesterday rejected Canada's claim that the United States had no basis to impose tariffs on softwood lumber used to build homes but said the duties may be too high.

The panel of three American and two Canadian judges, set up under the North American Free Trade Agreement to deal with such disputes, upheld U.S. claims that Canada subsidizes its timber industry and therefore is subject to tariffs.

The legally binding ruling means the Commerce Department must recalculate — and likely reduce — the tariffs within 60 days. The decision also could put pressure on Canada to reshape its timber industry and move toward a more market-based system.

A Commerce Department official, speaking on condition of anonymity, said the United States prevailed on the key issue of whether Canadian lumber is subject to U.S. tariffs.

"We hope that the resolution of this fundamental issue will encourage the process of (Canadian timber) market reforms," the official said.

Canada's international trade minister, Pierre Pettigrew, applauded the decision, which he predicted would result in lower duties for Canadian lumber. He even held out hope that the United States eventually would eliminate the duties.

"We think that if we have an honest method in keeping with American law, the countervailing duty should be zero," he said.

Experts do not believe that will happen, saying the ruling will more likely send U.S. and Canadian negotiators back to the bargaining table to work out a compromise.