The government reduced punitive tariffs on imports of Canadian softwood lumber yesterday, but by less than Canada had wanted, extending a heated cross-border dispute. Canadian officials denounced the...

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WASHINGTON — The government reduced punitive tariffs on imports of Canadian softwood lumber yesterday, but by less than Canada had wanted, extending a heated cross-border dispute.

Canadian officials denounced the decision and said they would challenge it.

The Commerce Department decision would cut tariffs from an average of 27.2 percent to 21.2 percent. A preliminary U.S. decision had recommended that tariffs be cut in half for easy-to-saw pine, spruce and other softwood lumber used to build homes.

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Commerce said the final decision accurately reflected subsidies by six Canadian provinces that allow their producers to sell lumber in the United States at below-normal value — at prices that compete unfairly with U.S. producers.

While the U.S. timber industry has generally applauded the tariffs, homebuilders on both sides of the border say they have driven up the cost of new homes in the United States and hurt Canadian lumber exporters and communities that depend on them.

The United States imported about $4.6 billion of softwood lumber from Canada in 2003, about a third of the American market.

“Canada categorically rejects the Department of Commerce determination,” said Jim Peterson, the nation’s international trade minister.

He said the decision differed from those issued by panels of the North American Free Trade Agreement and World Trade Organization. “Panel after panel have consistently said the Canadian softwood lumber producers are fair traders,” Peterson said.

Canada will “pursue every recourse available” through NAFTA and the WTO, Peterson said.

Despite the angry response from Canada, a Commerce Department spokeswoman said U.S. officials still hope to reach a negotiated settlement with their Canadian counterparts.