Panel Rejects U.S. Claim of Lumber Bias : Trade: The ruling may mean a refund to Canada of hundreds of millions of dollars in duties.

A binational panel Wednesday rejected a U.S. claim that Canadian members on another binational committee were biased when they overturned U.S. duties on imported softwood lumber.

The decision may mean that the United States will have to refund hundreds of millions of dollars in duties to Canada’s lumber industry.

The United States, claiming unfair Canadian subsidies, has collected 6.51% duties on the lumber since mid-1992.

A U.S. government source said the adverse ruling means the duties will have to stop, but the government has not decided if it must refund those fees collected in the past.

Although U.S. trade agencies said the duties were justified because of unfair Canadian subsidies, previous panels invoked under the U.S.-Canada Free Trade Agreement have twice overruled the U.S. position.

The three-member panel with representatives from both Canada and the United States, affirmed rulings made by previous binational reviews in 1993 and earlier this year.

The so-called Extraordinary Challenge Committee is made up of three retired judges, two from Canada and one from the United States. Both Canadians ruled against the U.S. complaint, with the U.S. member dissenting.

Canada provides about one-fourth of the lumber used in the United States. Canadian forestry companies hailed the panel’s ruling, saying it will mean a refund of about $576 million in duties.

“It has taken nearly three years, but our position has been fully and finally vindicated,” said Tom Buell, chairman of the Canadian Forest Industries Council in Vancouver.

In Ottawa, Canadian Trade Minister Roy MacLaren welcomed the ruling. MacLaren said he expects the United States to return the duties now that the Extraordinary Challenge Committee has dismissed the allegations of conflict of interest and incorrect application of U.S. law.

“We expect the U.S. Administration to implement the findings as quickly as possible, which will result in refunds, with interest, of the approximately $800 million (Canadian) in cash deposits that have been paid to date,” he said.

The news triggered a selloff in lumber prices on the Chicago Mercantile Exchange.

September lumber closed $7.30 lower at $334.30 per thousand board feet.

Washington requested the formation of the Extraordinary Challenge Committee on April 6. It contended that two Canadian members of the binational panel were biased and that the group overstepped its authority in deciding that neither of two Canadian subsidy programs were subject to duties.

At issue were so-called stumpage fees and a log export ban in British Columbia.

Canadian Justice Gordon Hart, a member of the challenge committee, rejected U.S. charges that the two Canadians on the panel had not revealed possible conflicts of interest.

“In this case, it is my view that there was no intentional refusal to reveal any matter that would justify the opposite party in removing either panelist, and the request by the U.S. government for an extraordinary challenge should be rejected,” he said.

Hart said that because the decision was made by the Canadian majority with the American member dissenting, he hoped it would not be interpreted as “based on national interest.”