Calling it a victory for free trade and housing affordability, the National Association of Home Builders (NAHB) recently applauded a unanimous decision by a North American Free Trade Agreement (NAFTA) panel finding that Canadian lumber exports into the U.S. are not subsidized.

"[The recent] verdict, the latest in a series of unanimous NAFTA rulings, shows once again that there is absolutely no justification for the Administration to continue imposing punitive tariffs on Canadian lumber shipments. It is time to eliminate this hidden tax that has cost American consumers billions of dollars," said David Wilson, president of the NAHB and a custom home builder from Ketchum, Idaho.

U.S. law allows countervailing duties to be imposed only upon two conditions: that a foreign supplier is benefiting from subsidies, and U.S. producers are being injured, or threatened with injury, as a result. An earlier unanimous NAFTA ruling found that there was no injury or threat of injury. This recent decision found that there was no subsidy.

For the fifth time, the NAFTA panel found that the calculations used by the U.S. Commerce Department to determine if Canadian lumber is subsidized are flawed. The NAFTA panel had previously called on the Commerce Department to reduce its countervailing duty. On July 13, the Commerce Department responded with a finding that Canadian lumber received a 1.21-percent subsidy, down significantly from the 17.2-percent rate it had previously calculated. Nevertheless, it has continued to collect countervailing duties of 17.2 percent, and anti-dumping duties averaging 4 percent on Canadian lumber.

This NAFTA ruling determined that the subsidy is below 1 percent, which under U.S. law is de minimus and not subject to duties. The NAFTA panel gave the U.S. until October 28 to comply.

The U.S. government imposed countervailing and anti-dumping duties totaling 27 percent on softwood lumber in May of 2002, charging that Canadian imports represented a "threat" to domestic lumber producers. The percentage was subsequently reduced but remained above 20 percent.

On August 10, a NAFTA Extraordinary Challenge Committee upheld a previous NAFTA verdict that found no threat of injury from Canadian imports. It also stipulated that the U.S. was required to refund the billions of dollars of duties that Canada had paid to date.

Although a NAFTA ruling carries the weight of law in Canada, the U.S. and Mexico, the Administration has failed to comply with its legal obligations to rescind the duties and return all duties paid out by Canadian firms.

"Several unanimous NAFTA verdicts by American and Canadian panelists have all come to the same conclusion-that Ottawa does not subsidize its timber industry and that domestic producers face no threat of injury from their northern counterparts. The rulings are crystal clear. There is nothing to negotiate and no reason not to have free trade. Therefore, the Administration should stop dragging its feet and allow these costly tariffs to disappear," said Wilson.