The WTO, after seven months of arbitration, on Tuesday ruled that the EU could slap sanctions against the US amounting to 72% of the sums reaped from the legislation.
EU Trade Commissioner Pascal Lamy welcomed the ruling. "This was as we expected," Lamy said.
However, Lamy said the 25-nation EU had not yet decided whether to follow up on the ruling and impose the sanctions.
"This is a decision that still has to be taken," he told reporters in Brussels.
Reacting to the WTO decision, the Bush administration said it would work with Congress to avoid US exports being hit.
The US promises to comply with
its WTO obligations
"The United States will comply with its WTO obligations, and the Administration will work closely with Congress to do so in a way that supports American jobs and American workers," Christopher Padilla, a spokesman for the US Trade
Representative's office, said in a statement.
The EU, on its part, may prefer to use the threat of sanctions as a "smoking gun" to force the United States to repeal the legislation more quickly or to obtain concessions in other trade negotiations.
Named for its sponsor, US Senator Robert Byrd, the three-year-old amendment allows the United States give US companies money collected in fines against foreign exporters judged to be selling products in the United States at artificially low prices.
The WTO ruled the measure illegal in 2002, backing claims that it punishes exporters to the United States twice because they are fined first, and then those fines are passed on to their competitors.
"This was as we expected"
trade commissioner, EU
The US steel industry has been the major beneficiary of the hundreds of millions of dollars handed out under the law. Other recipients include makers of pasta and candles.
The WTO had given the United States until the end of last year to change the law, but although the Bush administration recommended the amendment should be repealed, US Congress has yet to act.
Japan, Brazil, Canada, Chile, India, South Korea and Mexico joined the EU in contesting the laws. They sought the right to impose sanctions by increasing import tariffs on selected US goods by the same amount that was collected in fines charged on their exporters in the previous year.