The deaths caused widespread anger in Canada
The United States Air Force has dropped manslaughter and assault charges against an American pilot who mistakenly bombed Canadian troops in Afghanistan killing four soldiers.
Major Harry Schmidt, 37, now faces charges of dereliction-of-duty, which carry a maximum sentence of six months instead of the 60 years he could have served if found guilty of manslaughter.
Major Schmidt and co-pilot Major William Umbach said they thought they had seen enemy fire as they returned from a mission over Afghanistan last April.
Instead of Taleban fighters, they killed four allied infantry troops and injured eight others - prompting an angry reaction in Canada and a public apology from President George W Bush.
The two pilots also apologised for the incident and blamed the fog of war and the air force for giving pilots amphetamines to keep them alert.
While the decision to investigate the two pilots did something to placate US-Canadian relations, the latest moves most certainly will not, says the BBC's Washington correspondent Ian Pannell.
A US military hearing had found there was sufficient evidence to bring the two to trial, but it recommended non-judicial punishment in the interest of good order and discipline.
All charges were dropped last week against Major Umbach who accepted a letter of reprimand and was allowed to retire from the force.
But Major Schmidt rejected administrative punishment, choosing instead to face a court martial in a bid to clear his name.
His lawyer, Charles W Gittins, said the military's decision to drop the more serious charges "reinforces the fact that Harry didn't act criminally and shouldn't have been charged criminally".
The dereliction charge alleges that Major Schmidt "wilfully failed to exercise appropriate flight discipline over his aircraft", according to a statement by the Barksdale Air Force Base in Louisiana.
It also alleges he did not comply with the rules of engagement issued to airmen in effect on the date of the incident.
No date has yet been set for the trial.
Canadian troops were on a night-time training exercise near the southern Afghan city of Kandahar on 17 April 2002 when the F-16 passed overhead.
Thinking they had spotted enemy positions, the pilots dropped a 500-pound (230-kg) laser-guided bomb onto the target.
The case sparked outrage in Canada, which at the time had more than 800 troops serving in Afghanistan, and prompted questions being asked about its role as a junior partner to the US in its Afghanistan campaign.