Thursday's request by the EU's executive commission could cost the US hundreds of millions of dollars in duties on its goods.
It may also force Washington to revoke a scheme under which local companies unfairly benefit from anti-dumping duties imposed on foreign competitors.
The WTO has repeatedly ruled the measure - known as the Byrd Amendment - illegal and had given the US administration until 27 December 2003 to repeal it.
The amendment was approved by Congress in 2000, but was immediately challenged by the EU and several nations as a violation of WTO rules.
Complainants - which also include Canada, Mexico, Australia, Japan, South Korea, India, Indonesia, Thailand, Brazil and Chile – hope to have the issue on the agenda of the WTO's disputes settlement body on Friday.
Million dollar bail-outs
Opponents charge that the provision encourages US companies to file more anti-dumping cases by giving them a government subsidy in addition to import protection.
In the past three years, the Bush administration has doled out about $710 million to US ball bearing, steel, seafood, pasta, candle and other companies under the programme.
According to diplomats from complainant countries, the amount of sanctions being sought would be in line with the benefits accrued to US firms.
"The EU is increasingly concerned about the perception of the WTO which seems to be gaining in the United States... (which has) sometimes tended to be dismissive of WTO findings"
EU ambassador to Washington
The programme enjoys strong support in Congress. However, the administration is expected to recommend eliminating it as part of its annual budget plan due out by early February.
The latest move to sanctions comes in one of a series of transatlantic trade disputes.
The EU has given Washington until March to repeal another disputed trade law, which gives tax breaks to exporters, or face sanctions over that too.
Addressing the World Trade Organization (WTO) on Wednesday, EU ambassador Carlos Trojan said Washington was quick to demand action when it won in trade disputes, but slow to obey when it lost.
"The EU is increasingly concerned about the perception of the WTO which seems to be gaining in the United States... (which has) sometimes tended to be dismissive of WTO findings," he said.
It was just one of a number of measures that have run foul of the WTO in recent years, prompting some senior US politicians to accuse the trade body of bias.
But ambassador Trojan warned against questioning the right of the WTO to issue its verdicts and said failure to abide by them could undermine the multilateral trading system.