The Senate narrowly agreed to repeal the so-called Byrd amendment as part of a sweeping $40-billion US budget-cutting bill. Vice-President Dick Cheney cast the tie-breaking vote in the 51-50 decision.
But proponents of the law, named for Senator Robert Byrd of West Virginia, struck a deal to delay ending the provision until Oct. 1, 2007.
That will allow the U.S. Treasury to continue funnelling money from duties on Canadian imports directly to American competitors for two more years. The Byrd amendment is the mechanism for distributing billions in Canadian softwood lumber penalties to rival U.S. firms, although that money is still being held by U.S. Customs.
The World Trade Organization has declared the five-year-old law illegal and several countries, including Canada, have imposed retaliatory duties. American critics have attacked the law as a prime example of corporate welfare and government waste.
U.S. Congress drops trade law opposed by Canada but delays it for two years