US biodiesel makers rap EU trade tariff extension

* U.S. biodiesel group says decision breaks EU law

* Duties to hit all U.S. blends, some Canadian shipments

* EU officials discussed risks of U.S. legal claim - source

By Juliane von Reppert-Bismarck

BRUSSELS, April 1 (Reuters) - U.S. biodiesel makers said on Friday that a European Union decision to extend tariffs on imported biodiesel blends was illegal, fuelling a transatlantic battle for a share in the world's renewable energy market.

On Thursday, EU government representatives backed a plan to extend tariffs on evidence that U.S. exporters have either been smuggling biodiesel to Europe via Canada or mixing it into weaker blends to avoid high tariffs at EU borders, diplomatic, EU and industry sources said.

"We think this would be a bad decision that runs directly counter to current EU law," said Manning Feraci, vice president of federal affairs at the U.S. National Biodiesel Board, the country's leading biodiesel industry group.

"We're waiting to get final confirmation of the decision and will go from there."

The fight over EU biodiesel duties, which sliced U.S. exports to less than a third of their 1.5 million tonne level when they launched in 2009, highlights the global race for a share of the world's booming renewable energy market.

EU firms accuse U.S. producers of being involved in a "splash and dash" scheme, whereby they may import cheap biodiesel from countries such as Brazil and add less than 5 percent of U.S. diesel. The producers then qualify for a subsidy from Washington before exporting it to Europe.

Sources said the extension, due to launch in May and apply until 2014, was approved by 25 votes to two.

LEGAL ROWS OVER BLENDS

Specifically, the plan foresees tariffs of up to 400 euros ($566.40) per tonne of biodiesel on all U.S. blends, regardless of strength, and some blends entering the EU from Canada in an effort to fight tariff evasion, the sources told Reuters.

So far duties have hit only U.S.-shipped blends made up of at least one fifth biodiesel. Exporters who can prove they have always exported weaker blends than that - rather than making a calculated switch - may be granted an exemption.

Previously sources said the EU had backed away from slapping the duty on weaker blends.

Sources said EU diplomats approved extending the duties after debating whether they risked U.S. legal action.

"The sense was that Canada wouldn't really mind the extension, because it only affects the imports that are coming from the United States," said a person familiar with the issue.

"The sense seemed to be that there was a higher risk of the United States challenging the extension," the person added.

An investigation into whether ports in Singapore had served as illegal trans-shipment sites was dropped after finding too little evidence that such smuggling was hurting EU industry.

Canadian exporters BIOX Corp and Rothsay Biodiesel, affiliated to Maple Leaf Foods Inc, are exempted under the plan, the sources said.

In 2009 the EU slapped duties of 305 euros per tonne on Archer Daniels Midland, 213 euros on Cargill's exports and 410 euros on Peter Cremer North America and many others, in dual anti-subsidy and anti-dumping duties.

(Reporting by Juliane von Reppert-Bismarck; editing by Jane Baird)