Canada has won a major victory in the three-year-long softwood lumber dispute with the U.S. But Washington may not be ready to give up the fight.

A NAFTA panel has upheld an earlier ruling that said the U.S. has no legitimate reasons to impose duties on Canadian softwood.

The decision could mean hundreds of millions of dollars in refunds for producers.

Trade Minister Jim Peterson says he's "extremely pleased" with the decision and says he expects the U.S. to obey the ruling and refund Canadian lumber producers.

"This is a binding decision that clearly eliminates the basis for U.S.-imposed duties on Canadian softwood lumber," Peterson said in a statement.

"We fully expect the United States to abide by this ruling, stop collecting duties and refund the duties collected over the past three years.''

But Washington insists more negotiations are needed before the dispute can end.

Neena Moorjani, press secretary for U.S. Trade Representative Rob Portman, says the ruling is disappointing but "will have no impact on the anti-dumping and countervailing duty orders.''

"We continue to have concerns about Canadian pricing and forestry practices. We believe that a negotiated solution is in the best interests of both the United States and Canada, and that litigation will not resolve the dispute,'' Moorjani said.

Another Canadian trade official points out that the American lumber industry could still pursue a formal constitutional challenge.

Canada has been fighting the combined countervail and antidumping duties since 2002, when Washington began collecting the duties, claiming that Canadian softwood was unfairly subsidized.

The dispute has already seen Canadian producers pay about $5 billion in duties, despite numerous Canadian legal challenges and attempts at negotiations.

Canada has won many legal battles under the North American Free Trade Agreement, as well as at the World Trade Organization. But the victories have had little real effect in the dispute.

Canadian producers sell about $10 billion worth of lumber a year to the U.S. home-construction and renovation sectors.