(Corrects first name of U.S. Lumber Coalition co-chair in paragraph 9 to Jason from James)
WASHINGTON, Nov 2 (Reuters) - The U.S. Commerce Department said on Thursday it made a final finding that imports of Canadian softwood lumber are being unfairly subsidized and dumped in the United States, escalating a trade dispute with Canada in the midst of NAFTA trade talks.
The decision imposes anti-dumping and anti-subsidy duties affecting about $5.66 billion worth of imports of the key building material.
The department said exporters from Canada have sold softwood lumber in the U.S. market at 3.20 percent to 8.89 percent less than fair value, and that Canada is providing unfair subsidies at rates of 3.34 percent to 18.19 percent.
The decision follows failed talks to end the decades-long lumber dispute between the United States and Canada.
"While I am disappointed that a negotiated agreement could not be made between domestic and Canadian softwood producers, the United States is committed to free, fair and reciprocal trade with Canada," U.S. Commerce Secretary Wilbur Ross said.
"This decision is based on a full and unbiased review of the facts in an open and transparent process that defends American workers and businesses from unfair trade practices."
The disagreement centers on the fees paid by Canadian lumber mills for timber cut largely from government-owned land. They are lower than fees paid on U.S. timber, which comes largely from private land.
The Canadian government argues that its fees are fair and is prepared to litigate the matter if a settlement cannot be reached.
Jason Brochu, co-chair of the U.S. Lumber Coalition and president of Pleasant River Lumber Company, said U.S. lumber companies can now expand production to meet demand in the United States.
"The massive subsidies the Canadian government provides to their lumber industries have caused real harm to U.S. producers and their workers," said Brochu.
The decision is likely to escalate tensions between the United States and Canada during already difficult negotiations to modernize the North American Free Trade Agreement.
In September, in the midst of the third round of NAFTA talks, the United States slapped preliminary anti-subsidy duties on Canadian jetmaker Bombardier Inc's CSeries jets after rival Boeing Co accused Canada of unfairly subsidizing the aircraft. (Reporting by Eric Walsh and Lesley Wroughton; editing by David Alexander and Andrew Hay)