The European Union Thursday said it will place steep duties on biodiesel imported from the U.S. to offset a subsidy the U.S. government gives to its biodiesel producers.

Starting Friday, the 27-member bloc will impose two kinds of duties, one to counter the government subsidy and one for dumping the product at unfairly low prices onto the E.U. market, according to the announcement in the Official Journal of the E.U.

The subsidies will last four months while the European Commission, the E.U.'s executive arm, determines if multiyear duties are necessary, the Commission said Thursday.

"Anti-dumping and anti-subsidy measures aren't about protectionism, they are about fighting unfair trade," said E.U. trade spokesman Lutz Guellner in a statement. "This decision was taken on the basis of clear evidence that unfair subsidization and dumping of U.S. biodiesel has taken place."

The U.S. Congress and the Bush administration in 2004 passed the controversial subsidy, which is a tax credit of $1 for each gallon of biodiesel produced. Since then, biodiesel shipments from the U.S. to the E.U. soared from 2,634 metric tons in 2004 to 1.14 million metric tons in the year between April 2007 to March 2008.

The anti-dumping duties range from EUR23.6 to EUR208 per metric ton, and the anti-subsidy duties range from EUR211 to EUR237 a ton, depending on the company that produces the biodiesel. Companies importing biodiesel from the U.S. will have to pay both of these duties.

Archer Daniels Midland Co. (ADM), the giant U.S. agriculture company, will have to pay combined duties of EUR261 per metric ton. ADM rival Cargill will have to pay EUR275 per ton.

Imperium Renewables will have to pay EUR293 per ton, Green Earth Fuels EUR284 per ton, and World Energy Alternatives EUR294 per ton, according to the proposal.

Fifty-three companies that cooperated with the E.U.'s investigation will have to pay EUR342 per ton, including Louis Dreyfus Agricultural Industries, Vitol Inc., and U.S. Biofuels Inc.

Peter Cremer North America LP and all other companies will have to pay EUR419 per ton.

The surge of U.S. biodiesel imports into the E.U. caused the financial condition of the E.U. biodiesel industry to deteriorate drastically between 2005 and early 2008, according to the Commission's investigation. Profit margins dropped from 18% to below 6%.

Return on investments in the E.U. industry fell by 80%, as the industry's margins were squeezed between higher costs and low biodiesel prices, the commission said.

The duties were set based on the premise that E.U. biodiesel producers deserve profit margins of at least 15%, according to the announcement in the Journal. The commission will decide in mid-July whether to impose long-term duties.

-By Matthew Dalton, Dow Jones Newswires; +32 2 741 1487; matthew.dalton@dowjones.com