VANCOUVER — Canada has won another round in the legal wrangling over U.S. softwood lumber duties, this time before the World Trade Organization.

A WTO appeal panel released a decision Tuesday overturning an earlier ruling that upheld the U.S. Commerce Department's right to use a method called zeroing in determining anti-dumping duties levied on Canadian lumber imports.

Canada argued the U.S. use of zeroing artificially inflated anti-dumping rates by tossing out transactions that showed Canadian lumber selling above domestic prices.

Canada won its argument initially but the WTO sided with the Americans in an appeal last May. Now the world body has reversed itself again and ruled the practice of zeroing is inconsistent with U.S. obligations under WTO agreements.

Anti-dumping duties currently comprise less than two per cent of the roughly 12 per cent in punitive tariffs being imposed on Canadian lumber at the U.S. border -- the rest comes from countervailing duties aimed at offsetting alleged subsidies to Canadian lumber exports.

The combined duties, which were set in 2002 at about 27.2 per cent, are subject to an annual review by the Commerce Department.

The American lumber industry, which crowed when the WTO upheld the U.S. position in May, dismissed the impact of Tuesday's ruling.

"This is just another example of WTO over-reaching,'' said Steve Swanson, chairman of the U.S. Coalition for Fair Lumber Imports, the Washington lobby group whose trade complaint triggered the duties.

"Zeroing was a common practice when the current WTO rules were put into place, and there is nothing in those rules that forbids it.''

Swanson said zeroing ensures that dumping of particular products is not masked or diluted by the absence of dumping of other products.

"The U.S. courts have approved Commerce's zeroing approach, so Commerce would not be expected to change its practice,'' he said.

Canada and the United States have battled before WTO and North American Free Trade Agreement panels over softwood duties since 2001.

Canada has won the lion's share of decisions, though the WTO has often sided with the Americans. However, Canada has leaned more heavily on NAFTA rulings because under the agreement they have the force of domestic law.

All those decisions essentially would be set aside if the Canada-U.S. Softwood Lumber Agreement initialled July 1 is implemented. It replaces U.S. duties with a Canadian border tax and export quota system.

Critics of the deal have argued Canada will throw away five years of legal victories if it signs on.

Canadian lumber exporters have paid more than $5 billion US in duties since they were confirmed in May 2002. Under the softwood agreement, they would get back 80 per cent of the money.