(Adds comments by Trudeau, British Columbia's Lumber Trade Council , US builders group)
By Lesley Wroughton and Julie Gordon
WASHINGTON/VANCOUVER, Nov 2 (Reuters) - The U.S. Commerce Department, accusing Canada of unfairly subsidizing and dumping softwood lumber in the United States, on Thursday set final duties on imports and Canada said it would appeal the decision, which comes during tense NAFTA trade talks.
The duties would impose anti-dumping and anti-subsidy duties affecting about $5.66 billion worth of imports of the key building material, the department said.
The combined final duty rates range from about 10 percent to nearly 24 percent, lower than a preliminary range of about 17 percent to 31 percent.
Canadian Prime Minister Justin Trudeau denounced what he called the "unjust and punitive" final measures while acknowledging they could have been worse.
"We are, I guess, pleased that they are not as bad as they were before but they still represent a burden on forestry workers and communities all across this country," he told reporters in Brampton, Ontario. "We will continue to work with the American administration to resolve this in a negotiated way."
British Columbia's Lumber Trade Council called the measures protectionist and said it planned to challenge the decision.
"We will be immediately filing appeals of these final duties," Susan Yurkovich, president of the BC Lumber Trade Council told reporters.
The appeals, one under NAFTA and the other to the World Trade Organization, will be jointly filed, including the Canadian government and affected provinces, as soon as the rates are published in the U.S. Federal Register, a spokeswoman for British Columbia's Forestry Ministry said.
The U.S. International Trade Commission will make a final rule on the issue by Dec. 18.
The U.S. Commerce 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 was 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 neighbors.
"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," U.S. Commerce Secretary Wilbur Ross said in a statement.
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.
Jason Brochu, co-chair of the U.S. Lumber Coalition and president of Pleasant River Lumber Company, said the duties helped "to level the playing field" for U.S. lumber companies, which could now expand production to meet demand.
But the National Association of Home Builders denounced the move saying it would drive up lumber prices at a time when communities were trying to rebuild after hurricanes and California wildfires.
"This tariff only adds to the burden by harming housing affordability and artificially boosting the price of lumber," said NAHB Chairman Granger MacDonald. "It is nothing more than a thinly-disguised tax on American home buyers, home builders and consumers."
The decision is likely to further escalate tensions between the United States and Canada during talks between the United States, Canada and Mexico to modernize NAFTA, which U.S. President Donald Trump has threatened to withdraw from.
In September, 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. (Additional reporting by David Ljunggren in Ottawa and Eric Walsh in Washington; editing by David Alexander and Andrew Hay)