The World Trade Organization has ruled in favour of Canada in its softwood lumber dispute with the United States.

The preliminary ruling, which is not binding, was released to the federal government Tuesday.

"Yet again, it appears that the U.S. is being told that its attempts to prove our softwood industry is subsidized are flawed," International Trade Minister Pierre Pettigrew said in a news release.

A final report on the dispute is expected in July.

The crux of the dispute is an American claim that Canada's system of charging low "stumpage" fees the fees lumber companies pay to the government for the right to cut trees on Crown-owned land amounted to a subsidy.

The current dispute was triggered in April 2001 when the United States Department of Commerce (DOC) launched an investigation of Canadian softwood lumber. It was the fourth such investigation in the past 20 years.

In August 2001, the DOC imposed a countervailing duty of 19.31 per cent on softwood lumber imports from Canada. Canada sells approximately $10 billion worth of lumber each year to the U.S.

That duty was later reduced to 18.79 per cent.

Canada's challenge to the WTO was launched in October after other efforts to resolve the dispute were unsuccessful.

The dispute is estimated to have cost Canadian lumber producers up to $1.5 billion in duties and cost thousands of jobs. Some sawmills closed.

It might not be over yet, either. Washington can appeal the WTO ruling, a process that some experts say could take another six to eight months.

The North American Free Trade Agreement dispute resolution body is to rule on it in July. That group's ruling would be binding.