The federal government's aid package for the softwood lumber industry is expected to go before cabinet Tuesday for final approval.

Sources tell CBC News the package will contain a "substantial" envelope of money — just under a billion dollars — to help the sector struggling to cope with new tariffs recently imposed by the U.S. Department of Commerce.

Sources, speaking on a not for attribution basis because they were not authorized to speak publicly, said the aid package will likely include money for employment insurance (EI) benefits for workers in affected regions.

It will also contain funds to help companies innovate, including transitioning into other value-added products, rather than simply exporting raw lumber.

The final package could yet change based on input from members of Prime Minister Justin Trudeau's cabinet.

Cabinet to decide on loan guarantees

There is one controversial issue that will be left for cabinet to decide — whether or not the federal government should offer loan guarantees to help producers pay duties.

"This is the country working together to ensure that workers who are affected, communities who will be impacted, producers who are under stress, will have the full attention of the government of Canada and the government of Quebec, and all of the other provinces who are equally concerned, to protect the workers in the forestry sector," Natural Resources Minister Jim Carr said in the House of Commons Monday when asked about support for the industry.

Carr has previously acknowledged that job losses are likely because of the new, higher duties.

'We have to be very cautious not to overreact, but in this case we are reacting,' says the Natural Resources Minister. 8:26

Provincial governments in Ontario and Quebec have written to Ottawa, asking the federal government to set up a program to help companies offset the tariffs, which range from three per cent to 24 per cent for five major importers, with all other companies facing countervailing duties of 19.88 per cent.

(Countervailing duties are used to level the playing field when a country believes that another country's product is unfairly subsidized.)

U.S. lumber companies oppose the import of softwood, claiming Canadian companies have an unfair advantage with their preferential access to Crown-owned lands with lower stumpage fees.

"As you know, Canadian softwood lumber producers were forced to pay approximately $5-billion worth of duties during the last round of trade negotiations," Kathryn McGarry, Ontario's minister for natural resources and forestry, wrote in a February 2017 letter to Carr. The letter was sent before the U.S. duties were announced in April.

"The legal process is a lengthy one and many companies will struggle to stay in business should the U.S. implement unreasonably high duties," she added.

But New Brunswick Premier Brian Gallant has urged the federal government to be careful with loan guarantees.

"It's very crucial for us to always understand as a government, whether its provincial or federal, that if we do something to try to help the industry during these difficult times they have ahead, it could be seen as a subsidy and then perpetuate this problem even more drastically," Gallant said the day tariffs were announced.

New Brunswick's largest producer, J.D. Irving Ltd., is facing a relatively small duty of just three per cent on its imports into the U.S.

There are concerns that federal support may be seen by U.S. officials as further subsidization of the industry, which could then in turn lead to further tariff hikes on Canadian products.

If cabinet approves the aid package tomorrow, it's still unclear when the details will be made public.

Carr then heads to China early next month to sell Canadian wood products to that market, as the Liberal government looks to expand export markets beyond the U.S.