CHICAGO, Jan 13 (Reuters) - Lumber futures at the Chicago Mercantile Exchange tumbled early on Tuesday as traders believed a U.S. proposal to lower the duties on Canadian lumber could allow more wood to cross the border, traders said.
 
  At 10:13 a.m. CST, CME lumber was off $9.40 to $7.00, with limitless January (LBF4) off most at $318.50 per thousand board feet after trading down to $316.20 earlier. March (LBH4) was off $7.10 at $323.00.

  Much of the trading in January was liquidation ahead of that contract's expiration on Thursday.

  Late on Monday, the U.S. Commerce Department said it had recalculated countervailing duties on Canadian softwood lumber, a move that could drop the duty to 13.23 percent from 18.79 percent.

  CME traders sold futures on Tuesday amid concerns the lower duty could prompt Canadian sawmills to increase exports to the United States.

  Also bearish for futures was talk among traders that wholesale lumber dealers had cut lumber prices to increase sales. Wholesale dealers had bought a lot of lumber recently and apparently were now trying to sell it by cutting prices, traders said.

  On Friday, the weekly Random Lengths cash lumber report quoted cash spruce at $335 per tbf, up $15 from Wednesday and up $27 from a week ago.