GENEVA – A World Trade Organization appeals panel gave a boost to the United States Monday, reversing most of an earlier ruling that said U.S. special duties on Canadian lumber were illegal.

The panel agreed with U.S. claims that lumber from state-owned lands in Canada can be unfairly subsidized if provincial governments sell the wood at below-market price. Therefore, the United States has the right to impose extra duties to prevent cheap Canadian wood from harming U.S. manufacturers, the panel said.

It stressed, however, that Washington would still have to carry out more extensive investigations before it could justify imposing duties on some imports of logs.

The decision was applauded by U.S. trade representative spokesman Richard Mills, who labeled Canadian lumber policies as unfair subsidies.

“The United States remains committed to finding a durable solution in this 20-year dispute. But in the meantime we will continue to use our trade laws to ensure a level playing field,” Mills said.

The ruling is a second boost in less than a week from the WTO for the U.S. lumber industry. On Friday, officials said a confidential WTO ruling in a related dispute upheld steep antidumping tariffs imposed by the United States on Canadian imports.

A third ruling, in December, ruled in favor of Canada on the question of how to assess damage to the American lumber industry.

Monday’s appeals ruling follows a decision by a panel of WTO experts last August. Canada had complained that the anti-subsidy duties of 18.7 percent imposed in May 2002 were illegal, claiming Canadian lumber is not subsidized.

Most U.S. timber is harvested from private land at market prices, while in Canada the government owns 90 percent of timberlands and charges fees – called stumpage – for logging. The fee is based on the cost of maintaining and restoring the forest.

U.S. timber companies contend that Canada’s stumpage fees are artificially low and amount to subsidies that allow Canadian mills to sell wood below market value.

The August panel issued a mixed ruling, agreeing with the United States that stumpage could be a subsidy but disagreeing with its calculations. Both countries appealed against different parts of the ruling.

In 2002, the United States imported nearly $6 billion of softwood lumber from Canada – about a third of the American market. Softwood lumber, from pine, spruce and other trees, is a key product in home construction.

The battle between the United States and Canada over lumber has been building up steam since the expiry of their Softwood Lumber Agreement in March 2001.

Under that agreement, Canada had been allowed to ship 14.7 billion board feet of duty-free lumber to the United States each year, with tariffs set for shipments beyond that level. A board foot is equivalent to 144 cubic inches of wood. In return, the United States agreed not to launch any trade action, including the imposition of protective duties.

When the agreement ran out, the United States, under pressure from domestic producers, moved quickly to impose extra duties on Canadian imports. Canada is fighting the duties both at the WTO and in the North American Free Trade Agreement.