[Federal Register Volume 76, Number 159 (Wednesday, August 17, 2011)]
[Notices]
[Pages 51240-51243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20997]



[[Page 51239]]

Vol. 76

Wednesday,

No. 159

August 17, 2011

Part IV





Office of Management and Budget





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North American Industry Classification System; Revision for 2012; 
Notice

Federal Register / Vol. 76 , No. 159 / Wednesday, August 17, 2011 / 
Notices

[[Page 51240]]


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OFFICE OF MANAGEMENT AND BUDGET


 North American Industry Classification System; Revision for 2012

AGENCY: Executive Office of the President, Office of Management and 
Budget.

ACTION: Notice of NAICS 2012 Final decisions.

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SUMMARY: The North American Industry Classification System (NAICS) is a 
system for classifying establishments (individual business locations) 
by type of economic activity. Mexico's Instituto Nacional de 
Estad[iacute]stica y Geograf[iacute]a (INEGI), Statistics Canada, and 
the United States Office of Management and Budget (OMB), through its 
Economic Classification Policy Committee (ECPC), collaborate on NAICS 
to make the industry statistics produced by the three countries 
comparable. Under 31 U.S.C. 1104(d) and 44 U.S.C. 3504(e), the Office 
of Management and Budget is announcing its final decisions for adoption 
of NAICS revisions for 2012 as recommended by the Economic 
Classification Policy Committee in OMB's notice for solicitation of 
comments published in Part IV of the May 12, 2010, Federal Register (75 
FR 26856-26869). In the May 12, 2010, notice, OMB's ECPC recommended 
classification guidance for distribution centers, logistics service 
providers, sales offices of publishers, and units that outsource 
physical transformation activities. The ECPC also provided a list of 
recommended changes to the utilities, construction, manufacturing, 
wholesale trade, retail trade, and food services and accommodations 
sectors of NAICS United States for 2012. In response to public comments 
received on the recommendations, the ECPC withdrew the proposal to 
split the semiconductor industry into two new industries and OMB is 
modifying two additional ECPC recommendations to better align with the 
public comments. More details on these decisions are presented in the 
SUPPLEMENTARY INFORMATION section below.

DATES: Effective Date: Federal statistical establishment data published 
for reference years beginning on or after January 1, 2012, should be 
published using the 2012 NAICS United States codes. Publication of a 
2012 NAICS United States Manual or supplement is planned for January 
2012.

ADDRESSES: You should send correspondence about the adoption and 
implementation of the 2012 NAICS as shown in the May 12, 2010, Federal 
Register notice, and modified by Attachments 1 and 2 of this notice, 
to: Katherine K. Wallman, Chief Statistician, Office of Management and 
Budget, 10201 New Executive Office Building, Washington, DC 20503, 
telephone number: (202) 395-3093, FAX number: (202) 395-7245. Comments 
submitted in response to this notice may be made available to the 
public through relevant Web sites. For this reason, please do not 
include in your comments information of a confidential nature, such as 
sensitive personal information or proprietary information. If you send 
an e-mail comment, your e-mail address will be automatically captured 
and included as part of the comment that is placed in the public 
docket. Please note that responses to this public comment request 
containing any routine notice about the confidentiality of the 
communication will be treated as public comments that may be made 
available to the public notwithstanding the inclusion of the routine 
notice. You may send comments via e-mail to <a href="/cdn-cgi/l/email-protection#fc929d959f8fbc93919ed299938cd29b938a"><span class="__cf_email__" data-cfemail="5b353a3238281b343639753e342b753c342d">[email protected]</span></a> with 
subject NAICS12. Because of delays in the receipt of regular mail 
related to security screening, respondents are encouraged to use 
electronic communications.
    You should address inquiries about the content of industries or 
requests for electronic copies of the 2012 NAICS tables to: John B. 
Murphy, Assistant Division Chief for Classification Activities, Service 
Sector Statistics Division, Bureau of the Census, Room 8K157, 
Washington, DC 20233, telephone number: (301) 763-5172, FAX number: 
(301) 763-8636, or by e-mail: <a href="/cdn-cgi/l/email-protection#4f05202721610d3a3d213c61023a3d3f27360f2c2a213c3a3c61282039"><span class="__cf_email__" data-cfemail="afe5c0c7c181eddaddc1dc81e2dadddfc7d6efcccac1dcdadc81c8c0d9">[email protected]</span></a>.
Electronic Availability and Comments:
    This document and the May 12, 2010, Federal Register notice are 
available on the Census Bureau's Web site at http://www.census.gov/naics. The revision for 2012 will result in a number of code and title 
changes for NAICS. For that reason, a full list of NAICS 2012 industry 
codes and titles will be posted on the web site prior to publication of 
the NAICS United States, 2012 Manual for reference and implementation 
planning. This WWW page also links to previous NAICS Federal Register 
notices and related documents.

FOR FURTHER INFORMATION CONTACT: Paul Bugg, 10201 New Executive Office 
Building, Washington, DC 20503, e-mail address: <a href="/cdn-cgi/l/email-protection#5b2b392e3c3c1b343639753e342b753c342d"><span class="__cf_email__" data-cfemail="e8988a9d8f8fa887858ac68d8798c68f879e">[email protected]</span></a> with 
subject NAICS12, telephone number: (202) 395-3095, FAX number: (202) 
395-7245. Because of delays in the receipt of regular mail related to 
security screening, respondents are encouraged to use electronic 
communications.

SUPPLEMENTARY INFORMATION: NAICS was jointly developed by Canada, 
Mexico, and the United States for the 1997 NAICS. For the 2012 
revision, the three countries focused on refining the structure of the 
manufacturing sector and providing additional classification guidance 
in response to observed changes in the economies of each country.
    The May 12, 2010, Federal Register notice: (1) Summarized the 
background for the proposed revisions to NAICS 2012 in Part I; (2) 
contained a summary of public comments to the first Federal Register 
notice (74 FR 764-768, January 7, 2009) for the 2012 NAICS revision 
process in Part II; (3) detailed the structure changes recommended by 
the ECPC in Part III; and (4) provided a comprehensive listing of 
changes for national industries and their links to NAICS 2007 
industries in Part IV.
    In response to the ECPC recommendations in the May 12, 2010, 
Federal Register, the Semiconductor Industry Association (SIA) 
expressed opposition to the recommended split of NAICS 334413, 
Semiconductor and Related Device Manufacturing. The ECPC withdrew the 
recommended split based on those comments. The Semiconductor and 
Related Device Manufacturing industry will remain unchanged for NAICS 
2012.
    OMB will modify two additional ECPC recommendations as published in 
the May 12, 2010, Federal Register based on comments from the public. 
The first modification is for the structure but not the content of the 
ECPC recommendation for the printing industries. The following 
industries for printing will be used in NAICS United States, 2012: 
323111, Commercial Printing (except Screen and Book); 323113, Screen 
Printing; and 323117, Book Printing. The second modification is to the 
structure and content of the industries for nonferrous foundries. OMB 
will retain NAICS 331524, Aluminum Foundries (except Die-Casting) and 
will create a residual industry, 331529 for Other Nonferrous Metal 
Foundries (except Die-Casting).
    Two final changes are the correction of typographical errors in 
Tables 1 and 2 of the May 12, 2010, Federal Register notice. In Table 
1, NAICS 2007 industry 443111, Household Appliance Stores is being 
recoded to NAICS 2012 443141, Household Appliance Stores with no change 
in content. The May 12, 2010, Federal Register incorrectly included a 
``pt.'' indicator on that recoded industry. In Table 2, the titles for 
the 4-digit and

[[Page 51241]]

5-digit Restaurants and Other Eating Places were incorrectly listed as 
7225 Restaurants and 72251 Restaurants. In fact, the titles should be 
7225 Restaurants and Other Eating Places, and 72251 Restaurants and 
Other Eating Places. Each of these changes from the May 12, 2010, 
Federal Register is shown in the corresponding Table 1 or 2 at the end 
of this notice.

Factoryless Goods Producers

    Recent years have witnessed the rapid and widespread incorporation 
of specialization into goods manufacturing as global competition has 
motivated producers to seek more efficient production methods. This has 
resulted in outsourcing manufacturing transformation activities (i.e., 
the actual physical, chemical or mechanical transformation of inputs 
into new outputs) to specialized establishments, both foreign and 
domestic. Such outsourcing can lead to inconsistent classification of 
business establishments in official statistics when the standard 
classification systems used by those programs do not provide sufficient 
guidance.
    NAICS 2007 does not provide clear guidance on classification of 
units that control the entire process but subcontract out all 
manufacturing transformation activities. To address this shortcoming, 
the ECPC chartered a subcommittee to study the issue and provide 
classification guidance that will result in consistent classification 
of outsourcing establishments and comparable data for these outsourcing 
establishments across various statistical programs. The work involved 
defining the types of outsourcing units that exist and that require 
classification guidance, examining alternative classification schemes, 
and identifying their effects on existing economic statistics. As a 
result of this research, the ECPC decided to recommend classification 
of establishments that bear the overall responsibility and risk for 
bringing together all processes necessary for the production of a good 
in the manufacturing sector, even if the actual transformation is 100 
percent outsourced.
    OMB recognizes that, from a conceptual standpoint, at the most 
aggregate level, goods producers arrange for and bring together all of 
the factors of production necessary to produce a good. Goods producers 
accept the entrepreneurial risk of producing and bringing goods to 
market. When individual steps in the complete process are outsourced, 
an establishment should remain classified in the manufacturing sector. 
Accordingly, OMB has accepted the ECPC recommendation that factoryless 
goods producers (FGPs) be classified in manufacturing.
    Data users should note that the classification of establishments 
that outsource manufacturing transformation in the Manufacturing Sector 
of NAICS 2012 affects multiple agencies and programs within those 
agencies. OMB recognizes that, as with any new concept, there will 
likely be some differences in interpretation across agencies during the 
implementation process, and that differences in interpretation may lead 
to data inconsistencies. To address this challenge, OMB fostered the 
formation of a multi-agency subgroup of the ECPC to ensure consistent 
implementation of this clarification to the manufacturing sector of 
NAICS 2012. The implementation group includes members from various 
program offices in the Bureau of Economic Analysis, the Bureau of Labor 
Statistics, and the Census Bureau.
    It is important to both statistical agencies and other data users 
to be able to distinguish between definitional and economic changes so 
that they can create continuous time series and accurately analyze data 
changes over time. The inclusion of revenues from FGP activities in 
manufacturing will effectively change the traditional definition of 
manufacturing, and is expected to affect statistical estimates at the 
national, State and regional levels. This includes statistical outputs 
such as the value of shipments for manufacturing industries, value of 
sales for wholesale trade industries, product data, material costs and 
other expenses, price indexes, labor and multifactor productivity 
series, and the national accounts. The definitional clarification will 
be particularly important for industries that are characterized by 
significant amounts of manufacturing transformation outsourcing as 
indicated in the examples below.
    The following paragraphs present a partial list of the statistics 
that will be affected by the classification guidance for establishments 
that outsource transformation activities.

Bureau of Labor Statistics Producer Price Index Program (PPI)

    For lower level price indexes where the PPI does not currently 
price products that are produced using foreign contractors, products 
will be moved from wholesale trade with margin prices to manufacturing 
with product prices. For these products, the PPI will be able to 
reflect price changes when an establishment begins to outsource some of 
its production.
    The PPI uses Economic Census data to calculate weights for its 
aggregation structures. As a result, the price movements for products 
and industries with significant FGP activity will increase in relative 
importance and represent a greater share of aggregate price index 
movement.

Bureau of Labor Statistics Major Sector Productivity and Industry 
Productivity

    Manufacturing and wholesale trade industry outputs and inputs 
(quantity, cost) will be affected by the shift of establishments 
identified as FGPs from wholesale trade to manufacturing. This will 
affect both labor productivity and multifactor productivity measures. 
These changes will require a transitional adjustment (bridge) to 
exclude production that occurs in a foreign country for historical 
consistency in time series.

Bureau of Labor Statistics Quarterly Census of Employment and Wages

    The classification of FGP establishments in manufacturing will 
potentially shift monthly employment, total quarterly wages, and the 
number of establishments from other NAICS sectors into the 
manufacturing sector.

Bureau of Economic Analysis Industry Accounts

    In the Bureau of Economic Analysis (BEA) industry accounts, gross 
output for the manufacturing sector will be higher because FGP output 
will move from the wholesale trade sector to the manufacturing sector. 
Theoretically, the combined manufacturing and wholesale trade value 
added would remain unchanged. However, because shipments of FGPs that 
own their material inputs are currently not included in the Census 
manufacturing data and are instead classified to the wholesale trade 
industry, BEA is most likely not capturing all output or value added 
for these specific establishments. The classification of FGPs in 
manufacturing will capture these ``missed'' shipments and value added 
will be affected accordingly.

Bureau of Economic Analysis International Area

    BEA's international area uses NAICS-based classifications to 
publish enterprise statistics for multi-national companies (MNCs) by 
industry. NAICS is used to publish statistics on MNC research and 
development and on foreign-owned U.S. establishments from links of BEA 
and Census Bureau data. The international guidelines recommend 
ownership of the material inputs at the time of processing as the

[[Page 51242]]

key to determining whether cross-border manufacturing services occur. 
It is important to exclude any foreign production from GDP.

Bureau of Economic Analysis National Income and Product Accounts (NIPA)

    BEA's NIPA accounts benchmark their data to the Input-Output table 
every five years (I-O based on Economic Census data). A commodity-flow 
method is used in deriving many NIPA categories, such as investment in 
equipment. Classifying FGPs in manufacturing has the potential to 
significantly affect these estimates, especially if the trade flows are 
not appropriately accounted for. A fully consistent and integrated set 
of national and international accounts is important to avoid 
measurement inconsistencies.

Bureau of Economic Analysis Regional Accounts

    It is important that the output of FGPs and manufacturing service 
providers (MSPs) be recorded in the State (or Metropolitan Area) where 
the transformational activity takes place. An implementation that 
assigns this output to a headquarters location geographically separate 
from the location of activity will not be ideal.

Census Bureau Economic Programs

    The classification of FGPs to manufacturing will affect a wide 
range of statistical outputs from the Census Bureau including industry 
statistics from the Economic Census; Annual and Monthly Wholesale Trade 
Surveys; the Annual Survey of Manufacturers; Monthly Manufacturers' 
Inventories, Shipments, and Orders (M3); Manufacturing and Energy 
Consumption Survey (MECS); County Business Patterns (CBP); Quarterly 
Survey of Plant Capacity Utilization (QPC); Annual Capital Expenditures 
Survey (ACES); Business R&D and Innovation Survey (BRDIS); Business 
Expense Survey (BES); Quarterly Financial Report (QFR); and other 
series that are published using NAICS. The level of impact will vary 
based on the intensity of outsourcing.
    OMB understands the considerable cost and lead time required to 
implement this decision. The ECPC will continue the multi-agency 
subgroup and re-charter the subgroup to plan and oversee the 
implementation of this decision in a coordinated fashion that will keep 
definitions comparable across programs to the extent possible. OMB also 
acknowledges that this conceptual clarification will take time to 
implement consistently using statistically sound methods. The decision 
to classify factoryless goods producers in manufacturing will be 
mentioned in the NAICS United States 2012 Manual. Statistical programs 
are expected to begin the work of implementing this change as soon as 
possible, and to the extent possible apply the implementation to data 
releases as data collection and processing system changes allow, but 
beginning no later than 2017. In the interim, statistical agencies 
should undertake outreach prior to implementation, and include a clear 
statement for data users when the change is implemented. Users will 
find information about the plans and progress on implementation at 
http://www.census.gov/naics.

Final Decisions

    After taking into consideration other comments submitted in direct 
response to the May 12, 2010, Federal Register notice, as well as 
benefits and costs, and after consultation with the Economic 
Classification Policy Committee, Mexico's Instituto Nacional de 
Estad[iacute]stica y Geograf[iacute]a (INEGI) and Statistics Canada, 
OMB made no other changes to the scope and substance of the ECPC's 
recommendations outlined in the May 12, 2010, Federal Register notice. 
The other comments that were received supported proposed changes, 
suggested changes that would be incompatible with the production-based 
foundation of NAICS such as proposals for modeling and simulation 
industries, or suggested changes that would be incompatible with 
proposals that were accepted.
    OMB's final decisions regarding revision of NAICS for 2012 are to 
adopt the proposals contained in the May 12, 2010, Federal Register, 
with the changes detailed in the preceding paragraphs. Attachments 1 
and 2 below show the corrections for Tables 1 and 2 in the May 12, 
2010, Federal Register notice based on these changes.

Cass R. Sunstein,
Administrator, Office of Information and Regulatory Affairs.

Attachment 1

                      Table 1--2007 NAICS United States Matched to 2012 NAICS United States
----------------------------------------------------------------------------------------------------------------
                                                                                 2012
        2007 NAICS code           2007 NAICS description      Status code       NAICS     2012 NAICS description
                                                                                 code
----------------------------------------------------------------------------------------------------------------
323110.........................  Commercial Lithographic  pt................     323111  Commercial Printing
                                  Printing.                                               (except Screen and
                                                                                          Books).
323111.........................  Commercial Gravure       pt................     323111  Commercial Printing
                                  Printing.                                               (except Screen and
                                                                                          Books).
323112.........................  Commercial Flexographic  pt................     323111  Commercial Printing
                                  Printing.                                               (except Screen and
                                                                                          Books).
323114.........................  Quick Printing.........  pt................     323111  Commercial Printing
                                                                                          (except Screen and
                                                                                          Books).
323115.........................  Digital Printing.......  pt................     323111  Commercial Printing
                                                                                          (except Screen and
                                                                                          Books).
323116.........................  Manifold Business Forms  pt................     323111  Commercial Printing
                                  Printing.                                               (except Screen and
                                                                                          Books).
323118.........................  Blankbook, Looseleaf     pt................     323111  Commercial Printing
                                  Binders, and Devices                                    (except Screen and
                                  Manufacturing.                                          Books).
323119.........................  Other Commercial         pt................     323111  Commercial Printing
                                  Printing.                                               (except Screen and
                                                                                          Books).
331524.........................  Aluminum Foundries       ..................     331524  Aluminum Foundries
                                  (except Die-Casting).                                   (except Die-Casting).
331525.........................  Copper Foundries         pt................     331529  Other Nonferrous Metal
                                  (except Die-Casting).                                   Foundries (except Die-
                                                                                          Casting).
331528.........................  Other Nonferrous         pt................     331529  Other Nonferrous Metal
                                  Foundries (except Die-                                  Foundries (except Die-
                                  Casting).                                               Casting).
334413.........................  Semiconductor and        ..................     334413  Semiconductor and
                                  Related Device                                          Related Device
                                  Manufacturing.                                          Manufacturing.
443111.........................  Household Appliance      ..................     443141  Household Appliance
                                  Stores.                                                 Stores.
----------------------------------------------------------------------------------------------------------------
pt.--Part of 2012 NAICS United States industry.


[[Page 51243]]

Attachment 2

                      Table 2--2012 NAICS United States Matched to 2007 NAICS United States
----------------------------------------------------------------------------------------------------------------
                                                                                 2007
        2012 NAICS code           2012 NAICS description      Status code       NAICS     2007 NAICS description
                                                                                 code
----------------------------------------------------------------------------------------------------------------
323111.........................  Commercial Printing      R.................     323110  Commercial Lithographic
                                  (except Screen and                                      Printing
                                  Books).
                                                                                 323111  Commercial Gravure
                                                                                          Printing.
                                                                                 323112  Commercial Flexographic
                                                                                          Printing.
                                                                                 323114  Quick Printing.
                                                                                 323115  Digital Printing.
                                                                                 323116  Manifold Business Forms
                                                                                          Printing.
                                                                                 323118  Blankbook, Looseleaf
                                                                                          Binders, and Devices
                                                                                          Manufacturing.
                                                                                 323119  Other Commercial
                                                                                          Printing.
331524.........................  Aluminum Foundries       ..................     331524  Aluminum Foundries
                                  (except Die-Casting).                                   (except Die-Casting).
331529.........................  Other Nonferrous Metal   N.................     331525  Copper Foundries
                                  Foundries (except Die-                         331528   (except Die-Casting)
                                  Casting).                                              Other Nonferrous
                                                                                          Foundries (except Die-
                                                                                          Casting).
334413.........................  Semiconductor and        ..................     334413  Semiconductor and
                                  Related Device                                          Related Device
                                  Manufacturing.                                          Manufacturing.
7225...........................  Restaurants and Other                                   .......................
                                  Eating Places
72251..........................  Restaurants and Other
                                  Eating Places
----------------------------------------------------------------------------------------------------------------
R--2007 NAICS industry code reused with different content; N--new NAICS industry for 2012.

[FR Doc. 2011-20997 Filed 8-16-11; 8:45 am]
BILLING CODE P


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