Follow closely, this gets confusing: For more than a year, Canadian sawmills have been skirting a trade agreement designed to stem the flow of cut-rate unfinished lumber into this country by drilling holes in their 2X4s and calling them finished.

Now, Canada — aided and abetted by American home builders — is squawking at a loophole-closing rules change proposed by the U.S. Customs Service. Here’s the good part — this is the same Customs Service that caved in to Canada and American home builders last year and created the loophole.

What this serpentine tale demonstrates, beside the well-known fact that not all studs are created equal, is that bad things happen when policy is set by pressure instead of common sense.

The intent of 1996 U.S.-Canada Softwood Lumber Agreement was to level the playing field American mills share with the heavily subsidized Canadians. The agreement placed a quota and stiff tariffs on raw lumber, but left processed, finished products open to free trade.

The definition of processed, finished products clearly was meant to cover such labor-intensive items as trim, windows and doors. Those clever Canadians, suddenly up to their earflaps in raw framing lumber, thought drilling a hole or two for plumbing and wiring ought to count, too. The National Association of Home Builders, drooling at the thought of increasing their profit on the average home by $2,000, agreed and started looking for a champion in Congress. It found one in Sen. Rod Grams of Minnesota, who, when not making laws is — surprise, surprise — building homes.

So, after much arm-twisting, Customs, in February of 1997, decided drilling a hole adds just as much value as a whole lot of sanding, lathing and planing. Imports of Canadian lumber immediately shot up 185 percent. The drilled stud trade now represents annually about $156 million worth of business, $156 million American sawmills used to earn but now are not.

Fortunately, other members of Congress know a hole is a hole is a hole. Sen. Richard Shelby of Alabama managed to tie a small part of this year’s Customs Service budget to a moratorium on enforcing the silly rule. Maine’s Sen. Olympia Snowe and Rep. John Baldacci joined in the hammering that seems to have knocked some sense into Customs.

The proposed new rule, which returns the definition of processed, finished products to something based in reality, now is open for 30 days of public comment. Canada is blustering about retaliation, home builders are predicting soaring prices and the end of the American dream, Grams is muttering about dangerous precedents. Customs fell for this routine once before and ended up looking foolish. Perhaps this time it will recognize a hole for what it is — nothing.