GENEVA (Reuters) - A stand-off between Japan and the United States over the way Washington calculates import duties has moved to World Trade Organisation (WTO) arbitration for resolution, diplomats said on Monday

Japan is seeking permission to impose nearly $250 million a year in extra duties or tariffs on American goods to retaliate against the U.S. method of setting duties on imports it says are unfairly sold more cheaply than in their home market.

That U.S. methodology, known as "zeroing", is opposed by all other 151 WTO member states who say it results in unfairly high anti-dumping margins on imported goods.

In its request for arbitration over Tokyo's proposed retaliation, circulated on Monday, the United States said it "objects to the level of suspension of concessions or other obligations under the covered agreements proposed by Japan".

The WTO arbitration panel should reach a conclusion about whether retaliation is merited in the case -- and if so, how much is justified -- around the end of February.

The WTO Appellate Body ruled against the United States in January 2007 in a Japanese-brought complaint which centered on U.S. anti-dumping measures against Japan's bearings industry.

Washington was given until the end of last year to bring its trade measures in line with the WTO's verdict. The United States has said it has fully implemented the ruling, while Japan argues it has only partially done so.