(Updates with planned subsidy complaint)
BRUSSELS, Sept 19 (Reuters) - The European Union will lower import duties on Argentine biodiesel after the World Trade Organization (WTO) ruled against initial measures, prompting an EU producer group to put together a new challenge against cheap imports.
The EU will from Wednesday cut anti-dumping duties to between 4.5 percent and 8.1 percent, the EU official journal said. This came after the WTO ruled that the European Commission's decision to set initial rates of 22-25.7 percent in 2013 was unjust.
The Argentina biodiesel industry, which had been the main supplier to the EU, believes it will now be able to sell the product in Europe again at a time when the United States has just set its own measures to restrict imports.
The reduced rates will apply to imports from the Argentine businesses of Bunge, Cargill and Louis Dreyfus , as well as Molinos Rio de la Plata.
The EU's anti-dumping case was based on Argentina's imposition of an export duty on soybeans, a biodiesel feedstock, arguing that it allowed domestic producers to "dump" biodiesel at unfairly low prices - sometimes even below the cost of soybeans for European producers.
Olivier Prost, a lawyer representing the European Biodiesel Board, said the group would ask the Commission to consider these as illegal subsidies.
"Nobody contests the distortion. It is highlighted again in the paper this morning from the Commission," Prost said.
"What we are going to do is probably launch a type of proceeding to challenge the distortions that result particularly from the differential export tax."
The EU will keep in place tariffs of between 8.8 percent and 20.5 percent for Indonesian biodiesel, which were also set in 2013.
Indonesia, which uses palm oil to make biodiesel, has a case pending at the WTO and the Commission has therefore not proposed lowering import duties of the product for now. (Reporting by Philip Blenkinsop; Editing by Louise Heavens and David Goodman)