US duties on imported steel introduced last year are illegal under international trade rules, a World Trade Organisation appeals panel ruled.

The officials said the panel upheld the major findings of a July ruling, issued following a complaint from the European Union and seven other countries, that said the duties broke WTO rules.

The EU threatened to impose sanctions on US imports if it failed to drop the duties within weeks, and other countries may also take action.

President George W Bush introduced the three-year duties of up to 30 per cent in March last year, saying it would help protect the industry during a period of restructuring.

The officials said the appeals panel upheld the major findings of the July report which said the US failed to prove that its industry had been harmed by a sudden flood of cheap imports - a precondition for imposing such duties under WTO rules.

The EU has drafted a list of £300m-worth of US imports, ranging from cigarettes to frozen vegetables to paper products, on which it is threatening to impose 100 per cent import duties, effectively pricing the goods out of the EU market.

Brussels said it would retaliate if the US steel duties were still in place five days after the report had been formally adopted by the WTO, probably at the end of the month.

Anglo-Dutch steelmaker Corus welcomed the decision by the WTO against the tariffs, which it described as a "significant and wholly unwarranted burden" on business.

A spokesman said: "We hope, in light of this decision, that President Bush will act quickly to remove the restrictions, so that we can get on with supplying our US customers on a fair and equitable basis."

Digby Jones, director general of the Confederation of British Industry, urged the US government to abandon quickly its "mutually damaging" steel tariffs.

He said: "These illegal tariffs are not only damaging to industry outside the US.

"They are actually harming America's reputation and American industry, which is paying above the odds for steel both from home and abroad. They are holding back US manufacturers as they struggle to lead the global economy out of choppy waters."