At 07.56 hours on 3 Sep 1942, U-517 fired torpedoes at convoy LN-7 northeast of Cape Whittle in the Gulf of St.Lawrence, heard one detonation after 2 minutes 35 seconds and later observed burning superstructure. Härtwig thought that he had hit two ships. In fact only the Donald Stewart (Master Daniel Percy Nolan) was hit by one torpedo just forward of the engine room. The ship caught fire and sank shortly afterwards. Three crew members were lost. The master, 15 crew members and one passenger were picked up by HMCS Shawinigan (K 136) (Lt C.P. Balfry) and HMCS Trail (K 174) (Lt G.S. Hall) and landed at Quebec.
The loss of the Donald Stewart set back vital construction at the Goose Bay airfield for months.
The escorting HMCS Weyburn (K 173) (Lt Tom Golby) spotted U-517 on the surface and went full ahead on a ramming course. But the distance was too great and after a few rounds with the gun, the U-boat submerged and escaped the following depth charge attack.

Some hours after the attack, U-517 was attacked by a Digby aircraft (RCAF-Sqdn 10), piloted by FO J.H. Sanderson. He flew a fast attack from only 45 metres altitude, but the depth charges exploded prematurely causing more damage to his aircraft than to the U-boat.