After more than a year of fractious negotiations, Canada and the U.S. have reached a tentative new North American Free Trade Agreement, a senior source told CBC News.

Prime Minister Justin Trudeau convened a late-night meeting of cabinet to brief ministers on the NAFTA progress, only hours before a U.S.-imposed midnight deadline.

Leaving the meeting about an hour and 15 minutes after it began, Trudeau said only that it was "a good day for Canada" and that he'd have more to say to reporters on Monday.

At the heart of the deal is a trade-off between greater U.S. access to Canada's dairy market, which is heavily protected by a system of supply management, and Canadian demands for the maintenance of a dispute resolution process, sources said.

The two sides have agreed to keep Chapter 19, NAFTA's dispute resolution mechanism, intact. That's a major victory for Canadian negotiators who have long sought to keep some sort of process to challenge anti-dumping and countervailing-duty cases — which Canada has deployed in the past over the softwood lumber file.

Chapter 19 preserved word for word, source says
A source with direct knowledge of the situation told CBC's Katie Simpson that Chapter 19 will be preserved, word for word.

U.S. Trade Representative Robert Lighthizer has steadfastly opposed this chapter as he believes it's a violation of U.S. sovereignty to have a multinational panel of arbiters decide on the acceptability of U.S. tariffs.

​In exchange for some U.S. concessions on a dispute mechanism, Canada is expected to give U.S. farmers greater access to Canada's dairy market by increasing the quota on foreign imports.

Under the current supply management system, Canada imposes tariffs on dairy imports — which can run as high as 300 per cent — that exceed the established quota. Trump has railed against these tariffs as unfair to American farmers, as they are designed to keep foreign products out while privileging Canadian sources.

Dairy concessions could be politically challenging
Sources said Canadian officials were going line by line through U.S. requests on dairy Sunday night before putting pen to paper on an agreement that could be politically challenging for the Liberal government, especially in Quebec, where dairy farmers hold electoral sway in certain ridings.

Under the new NAFTA, the U.S. will have roughly the same access to the Canadian dairy market as what was given up by Trudeau when he signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade deal with 10 Asia-Pacific countries earlier this year.

Under that agreement, those 10 countries will have market access that equals 3.25 per cent of Canada's annual milk production. The exact percentage extended to U.S. dairy exporters was not immediately clear.

At the outset of the NAFTA talks, the U.S. demanded Canada dismantle supply management entirely — something that Trudeau maintained is a non-starter.

Steel and aluminum imports still an open question
Canada is also expected to sign on to this new NAFTA without any reassurances that the U.S. will lift its so-called "section 232" tariffs on steel and aluminum imports, two sources told CBC News — a coup for the economic nationalists that surround Trump who believe that protectionist measures like these punitive tariffs can help salvage the declining U.S. steel industry.

Canadian sources told CBC News they hope to resolve the 232 issue before ratifying NAFTA.

Those tariffs were levied on "national security" grounds using presidential authority granted under Section 232 of the Trade Expansion Act of 1962, which gives the president broad powers to impose tariffs without consulting Congress. Canada responded to Trump's move with counter-tariffs on billions of dollars worth of U.S. goods.

While technically separate from NAFTA talks, the U.S. has used the threat of further 232 tariffs on autos to extract concessions from Canada and Mexico — a frightening proposition for the Canadians.

No hard limit on auto exports
Importantly for Canadian negotiators, Trump has agreed that no hard limit will be placed on Canadian auto exports to the U.S., sources told the CBC's Chris Hall.

That said, should the U.S. move forward with the imposition of worldwide 232 tariffs on autos, they would also apply to Canada. However, Ottawa has negotiated what is effectively an exemption, as it would still be able to export cars and parts tariff-free up to a certain amount that is well above what Canada sends south of the border.

Sources could not immediately confirm the exact number of cars of parts that would be allowable.

According to the U.S. Trade Representative, Canada ships more than $56 billion US worth of autos — cars and parts alike — to the U.S. each year. The auto industry employs more than 120,000 people in Canada, with most of those jobs concentrated in southwestern Ontario.

Canada has also secured exemptions for its creative industries. The existing NAFTA deals includes a cultural exemption clause, which means cultural goods are not treated like other commercial products — and that will continue under the new terms of the deal. Lighthizer has previously cited Canada's broadcasting content and telecommunication ownership rules as an irritant.

U.S. negotiators have been gunning for a new NAFTA by month's end to get a text of the agreement to Congress for its mandatory 60-day review period. That could allow for a deal to be signed before Dec 1., when Mexico's new, left-leaning president takes office.

Under U.S. law, while Congress can extend fast-track negotiating authority to Trump administration officials — as it has with NAFTA — legislators retain the right to review any proposed trade agreement and decide whether it will be implemented. That relationship is governed by a set of strict, legislated timelines that allow Congress enough time to study a deal before delivering a decision.

A Mexican intervention?
Last month, Trump announced his negotiators had reached a bilateral deal with Mexico.

He outlined the deadline  — Sept. 30 at midnight — for the text of that deal to be submitted to Congress. Canada would be allowed on board, he explained, but they'd have to agree to the terms spelled out in the bilateral agreement. 

Trump made it clear Canada's failure to join would be unacceptable, with hefty auto tariffs as a consequence.  

Mexico's new president-elect, however, said in an interview Friday that he has agreed to push the American side to make a deal with Canada.

President-elect Andres Manuel Lopez Obrador said Trudeau asked him during a Thursday phone call "to intervene and call on the U.S. government to reach an agreement" with Canada on the renegotiation of NAFTA.

"We agreed to that," Lopez Obrador told reporters in Mexico City. The president-elect also said he would insist on a trilateral pact.

However, later Friday evening, Lopez Obrador's Senate leader, Ricardo Monreal, said Mexico wouldn't walk away from a bilateral agreement. 

"The ideal is a trilateral deal, but we're prepared for the possible need of a bilateral," he told Bloomberg News.