(Adds Canadian reaction)
By Eric Beech and David Lawder
WASHINGTON, June 26 (Reuters) - Escalating a trade dispute with Canada in the run-up to talks on renegotiating NAFTA, the U.S. Commerce Department on Monday imposed preliminary anti-dumping duties on Canadian softwood lumber of up to 7.72 percent.
When combined with preliminary anti-subsidy duties issued in April, the new measures will bring total duties on Canadian lumber to between 17.41 percent and 30.88 percent.
The announcement, which was largely expected, prompted an angry reaction from the Canadian government against what it called unfair and punitive duties.
“We will vigorously defend Canada’s softwood lumber industry, including through litigation,” the government said in a statement.
The bilateral dispute is the fifth over lumber in less than 40 years.
U.S. producers asked the Commerce Department last November to investigate what they viewed as unfair subsidies to Canadian competitors, many of whom procure their timber from government lands at cheaper rates.
U.S. lumber producers generally cut timber grown on private land. Canada, which denies it subsidizes producers, said earlier this month it would give C$867 million ($654 million) in aid to the domestic industry.
Earlier on Monday, the Commerce Department said it made a preliminary decision to exclude Newfoundland and Labrador, Nova Scotia and Prince Edward Island from its investigation into whether Canada is dumping or unfairly subsidizing softwood lumber.
Until the decision is confirmed, U.S. Commerce Secretary Wilbur Ross said the duties would still be collected on lumber from the three provinces. The exclusion does not include New Brunswick, an Atlantic province bordering Maine that is also a major producer of softwood lumber.
The U.S. anti-subsidy and anti-dumping probes affect about $5.66 billion worth of imports of the construction material, and they show the United States taking a tough stance on trade with Canada as the two countries and Mexico prepare to renegotiate the 23-year-old North American Free Trade Agreement.
Much of the wood in the excluded Canadian provinces is also harvested from private land, and the three provinces had argued they operate under more of a free-market model.
Commerce said it is scheduled to announce a final decision on the anti-dumping duties on Sept. 7. Its preliminary duties were 7.72 percent for Canfor Corp and related firms, 4.59 percent for Resolute FP Canada, 7.53 percent for Tolko Industries, 6.76 percent for West Fraser Mills and 6.87 percent for all others.
NAFTA talks are expected to begin around Aug. 16.
$1 = 1.3253 Canadian dollars Additional reporting by Eric Walsh in Washington and David Ljunggren in Ottawa and Nicole Mordant in Vancouver; Editing by Clive McKeef and Bill Trott