WASHINGTON, D.C. — The U.S. is expected to slap staggering penalties on Canadian lumber later today driving up its cost and threatening thousands of jobs.

The U.S. Commerce Department is expected to rule that Canadian softwood producers have an unfair trade advantage because of low royalties and fees charged for cutting timber on public lands.

Trade Minister Pierre Pettigrew says Ottawa is bracing for the first U.S. attack in what could be a nasty battle. American lumber producers have asked for a 39.9 per cent countervailing duty on Canadian softwood to blunt the effect of alleged provincial subsidies.

“Realistically, we know we’re going to get a determination we like,” says Luke Popovich, spokesman for the U.S. lumber lobby. “What we don’t know is whether the sentence (duty) will fit the crime.”

A ruling of a “finding of critical circumstance” would allow U.S. Customs to impose tariffs retroactively on all Canadian wood shipped to the U.S. since Mar. 31 — the day the agreement expired.

American lumber barons have been calling for duties on Canadian wood since the 1930s. International trade bodies have upheld Canada’s timber policies three times in the last 20 years.