Update on the North American Trade Automation Prototype

By James R Giermanski -- Logistics Management, 3/1/1998

Although the North American Free Trade Agreement (NAFTA) has been amply criticized, the treaty has had its triumphs. One of these is the ongoing cooperation among the party nations' customs administrations.

This trilateral cooperation has led to the development of a demonstration project called the North American Trade Automation Prototype (NATAP). NATAP is designed to show how the flow of goods between NAFTA nations could be standardized and processed in an electronic environment, enabling the seamless movement of cargo across NAFTA borders.

Here's how NATAP works: A participating shipper and carrier transmit mandatory standardized trade data via the Internet to customs administrations in both the exporting and importing countries before a shipment leaves its country of origin. This is accomplished via three specially designed antennas located at the border crossing.

As the shipment nears the border crossing, one antenna triggers a transponder in the truck cab. This is the first or "advance read," which signals the intention to cross the border and triggers the transfer of import/export data to the appropriate customs administrations. For instance, a truck originating in Windsor, Ontario, and destined for the United States would first "register" in the exporting country (Canada) as well as in the importing country (the United States). Similarly, a truck leaving San Antonio, Texas, destined for Monterrey, Mexico, would register in both the United States and Mexico. A truck traveling from Canada to Mexico or vice versa would register in all three countries.

Once the customs administrations in both the exporting and importing countries have electronically received and processed the shipment information via the Internet, the "decision read" informs the driver (through a red light/green light system) of the shipment's status and whether the truck may proceed across the border. If the driver gets a green light, the shipment is allowed to proceed without an examination and the truck quickly crosses the border through a dedicated traffic lane. If a red light appears on the in-cab computer, that shipment has been selected for examination by either the exporting or importing country's enforcement system. (NATAP participation does not protect a shipment from being stopped by customs authorities for cause.)

The third and final read is the "exit read," which essentially cancels the shipper's and carrier's trip data. This read tells customs authorities on both sides of the border that the cargo has crossed over and the trip has been completed for customs purposes.

Clearly, NATAP allows the expedited movement of goods throughout North America and creates a seamless, easily monitored automated system that records statistical data in all three countries. NATAP reduces or eliminates certain types of paperwork and clearance delays, reduces congestion through pre-arrival processing, and improves the timeliness of communication regarding the cargo-clearance process among customs authorities and trading partners.

Other indirect but substantial benefits for traders who participate in NATAP include quicker billing, reductions in long-term warehousing requirements and associated space costs, and lower fuel and maintenance costs. Perhaps the biggest savings will come from the diminished use of local border drayage and the reduction or elimination of some transfer and customs brokerage fees, since shippers will be able to deal directly with the customs services.

Because it is a demonstration project, NATAP ultimately is destined for termination, but it still will be influential in the future. By providing a means of accurately exchanging information, NATAP has become the model for future efficiencies. After the demonstration project has been completed, shippers, consignees, carriers, and customs brokers will continue to use NATAP's electronic-commerce process among themselves, reaping the benefits of improved speed, accuracy, and efficiency. NATAP's proven effectiveness also means that it continues to have an effect on the progress of NAFTA's implementation and its accomplishments with respect to regulatory harmonization and customs cooperation.

Dr. Giermanski is professor and director for the study of transportation and logistics at the Center for the Study of Western Hemispheric Trade, Texas A&M International University in Laredo, Texas. He has frequently written, commented, and testified on issues affecting cross-border trade with Mexico.