"The tribunal agreed that a number of provincial assistance programs put into place by Quebec and Ontario circumvent the Softwood Lumber Agreement and breach the deal struck by the United States and Canada in 2006," said U.S. Trade Representative Ron Kirk in a statement. He urged Canada to quickly implement the decision.

The Canadian government is "closely reviewing" the arbitration panel's decision, Trade Minister Peter Van Loan said Friday. "I note that the tribunal rejected 97% of the United States' $1.86 billion claim as having no basis," he said in a statement.

Mr. Van Loan said the government remains committed to the 2006 softwood lumber agreement with the U.S. which he said provided for a "fair and independent ruling on these claims."

He said the agreement has brought "much-needed stability and predictability" to the lumber industry and returned more than C$5 billion to Canadian exporters.

On Tuesday, the U.S. requested arbitration over its claims that timber from public lands in British Columbia is being underpriced.

The U.S. has sought help from the tribunal three times since the 2006 Softwood Lumber Agreement was reached in an attempt to resolve the long-simmering dispute between the neighboring countries over lumber.

In the first challenge, a tribunal ordered Canada to impose additional export duties on lumber.

Eoin Treacy's view Lumber prices have more than doubled since bottoming in 2009. Prices hit a medium-term peak in April 2010 and retested the $340 level earlier this month. The subsequent pullback was relatively similar sized to that posted in November and lumber traded limit up on Friday; having bounced from near the psychological $300 level. A sustained move below that area would be required to question potential for some additional upside. (Also see Comment of the Day on October 29th).

Rayonier remains a leading lumber share and has held a consistent progression of rising reaction lows since March 2009. While currently somewhat overextended relative to the 200-day MA, a sustained move below $50 would be required to question medium-term upside potential.

West Fraser Timber has also been among some of the sector's better performers. It found support in the region go the 200-day MA from June and has since rallied impressively. It has become quite overextended relative to the 200-day MA as it approaches the 2004 peak near C$55 but a sustained move below C$45 would be required to check medium-term upside potential.

Weyerhaeuser, Plum Creek Timber and Potlatch have all rallied impressively over the last three weeks and downward dynamics would be required to check medium-term upside potential.

Sino Forest retested its 2007 peak near C$25 in late December and continues to revert towards it mean, represented by the 200-day MA, currently near C$20. A sustained move below that area would be required to question the consistency of the medium-term uptrend.

The iShares S&P Global Timber & Forestry ETF and the Claymore/Clear Global Timber Index ETF have both broken out of relatively lengthy ranges and clear downward dynamics would be required to check current scope for additional upside.

Both the Phaunos Timber Fund and Cambium Global Timberland Limited have both come under selling pressure over the last few weeks and at a minimum require upward dynamics to check potential for some additional downside.