17288 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices

OFFICE OF MANAGEMENT AND

BUDGET

1997 North American Industry

Classification System—1987 Standard

Industrial Classification Replacement

AGENCY: Office of Management and

Budget, Executive Office of the

President.

ACTION: Notice of final decision.

SUMMARY: This notice presents the

Office of Management and Budget’s

final decisions for the adoption of the

North American Industry Classification

System (NAICS) for the United States, a

new economic classification system that

replaces the 1987 Standard Industrial

Classification (SIC) for statistical

purposes. NAICS is a system for

classifying establishments by type of

economic activity. Its purposes are: (1)

to facilitate the collection, tabulation,

presentation, and analysis of data

relating to establishments, and (2) to

promote uniformity and comparability

in the presentation of statistical data

describing the economy. NAICS will be

used by Federal statistical agencies that

collect or publish data by industry. It is

also expected to be widely used by State

agencies, trade associations, private

businesses, and other organizations.

The Instituto Nacional de Estadı ́stica,

Geografı ́a e Informatı ́ca (INEGI) of

Mexico, Statistics Canada, and the

United States Office of Management and

Budget (OMB), through its Economic

Classification Policy Committee (ECPC),

have collaborated on NAICS to make the

industrial statistics produced in the

three countries comparable. NAICS is

the first industry classification system

developed in accordance with a single

principle of aggregation, the principle

that producing units that use similar

production processes should be grouped

together in the classification. The fresh

view of establishment data that this

restructuring will provide should

engender insights into the increasingly

interrelated evolution of our economies.

NAICS also reflects in a much more

explicit way the enormous changes in

technology and in the growth and

diversification of services that have

marked recent decades. Industry

statistics compiled using NAICS will

also be comparable with statistics

compiled according to the latest

revision of the United Nations’

International Standard Industrial

Classification (ISIC, Revision 3) for

some sixty high level groupings.

NAICS will provide a consistent

framework for the collection, tabulation,

presentation, and analysis of industrial

statistics used by government policy

analysts, by academics and researchers,

by the business community, and by the

public. Because of differing national

economic and institutional structures as

well as limited resources and time for

constructing NAICS, however, the

NAICS structure has not been made

entirely comparable at the individual

industry level across all three countries.

For some sectors and subsectors, the

statistical agencies of the three countries

have agreed to harmonize NAICS based

on sectoral boundaries rather than on a

detailed industry structure. Those

sectors or subsectors are: utilities;

construction; wholesale trade; retail

trade; finance and insurance; real estate;

waste management and remediation

services; other services that include

personal and laundry services, and

religious, grantmaking, civic, and

professional and similar organizations;

and public administration. To ensure

comparability between Canada and the

United States, the two countries have

agreed on an industry structure and

hierarchy for each sector listed above

except for construction, wholesale trade,

and public administration. In some

cases within these sectors, the United

States will provide for additional

industries at the national level to reflect

important industries in the United

States that will not be shown separately

in Canada. To distinguish the three

countries’ versions of NAICS, they are

called NAICS Canada, NAICS Mexico

(SCIAN Mexico, in Spanish), and

NAICS United States.

In developing NAICS United States,

OMB has published a total of seven

previous Federal Register notices

advising the public of the work of the

ECPC and seeking comment on that

work. The March 31, 1993, Federal

Register notice (pp. 16990–17004)

announced OMB’s intention to revise

the SIC for 1997, the establishment of

the Economic Classification Policy

Committee, and the process for revising

the SIC. The July 26, 1994, Federal

Register notice (pp. 38092–38096) set

forth the concepts for the new system

and the decision to develop NAICS in

cooperation with Statistics Canada and

INEGI. That notice also included a

request for the public to submit

recommendations for the industries to

be included in the new system. The

deadline for submitting proposals for

new or revised industries was

November 7, 1994.

After considering all proposals from

the public, consulting with a large

number of U.S. data users and industry

groups, and undertaking extensive

discussions with INEGI and Statistics

Canada, a new industrial structure for

NAICS that would apply to all three

North American countries was

developed. A series of five Federal

Register notices sought comment on the

structure of the system. These notices

are described in more detail in the

SUPPLEMENTARY INFORMATION section

below.

As intimated by the description below

of the NAICS development process, the

actual classification presented at the

end of this notice in Tables 1 and 2

reveals only the tip of the work carried

out by dedicated individuals from

INEGI, Statistics Canada, and U.S.

statistical agencies. It is through their

efforts, painstaking analysis, and spirit

of accommodation that NAICS has

emerged as a harmonized international

classification of economic activities.

This has been an immense undertaking

that has required the time, energy,

creativity, and cooperation of numerous

people and organizations throughout the

three countries. The work that has been

accomplished is a testament to the

individual and collective willingness of

many persons and organizations both

inside and outside government to

contribute to the development of

NAICS.

EFFECTIVE DATE: Federal statistical data

published for reference years beginning

on or after January 1, 1997, will be

published using the new NAICS United

States codes. NAICS is scheduled to go

into effect in 1997 in Canada and the

United States, and in 1998 in Mexico.

Publication of the 1997 NAICS United

States Manual is planned for December

1997. Use of NAICS for nonstatistical

purposes (e.g., administrative,

regulatory, or taxation) will be

determined by the agency or agencies

that have chosen to use the SIC for

nonstatistical purposes. Readers

interested in the effective dates for the

use of NAICS for nonstatistical purposes

should contact the relevant agency to

determine its plans, if any, for a

transition from use of the SIC to NAICS.

ADDRESSES: Please send correspondence

about the final decisions to: Katherine

K. Wallman, Chief Statistician, Office of

Management and Budget, New

Executive Office Building, 725 17th

Street, NW., Room 10201, Washington,

D.C. 20503, telephone number: (202)

395–3093, FAX number: (202) 395–

7245.

ELECTRONIC AVAILABILITY AND

CORRESPONDENCE: This document is

available on the Internet from the

Census Bureau Internet site via WWW

browser, ftp, and E-mail.

To obtain this document via WWW

browser, connect to ‘‘http://

www.census.gov’’ then select ‘‘Subjects

A to Z,’’ then select ‘‘N,’’ then select
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17289

‘‘NAICS (North American Industry

Classification System).’’ This WWW

page contains previous NAICS United

States Federal Register notices and

related documents as well.

To obtain this document via ftp, log

into ftp.census.gov as anonymous, and

retrieve the files ‘‘naicsfr8.pdf,’’

‘‘naicsfr8tbl1.pdf,’’ and

‘‘naicsfr8tbl2.pdf’’ from the ‘‘/pub/epcd/

naics’’ directory. (That directory also

contains previous NAICS United States

Federal Register notices and related

documents.)

To obtain this document via Internet

E-mail, send a message to

majordomo@census.gov with the body

text as follows: ‘‘get gatekeeper

naics.txt’’. Instructions for obtaining this

and other NAICS United States

documents will be delivered as a

message attachment.

Correspondence may be sent via

Internet E-mail to OMB at

naics@a1.eop.gov (do not include any

capital letters in the address).

FOR FURTHER INFORMATION CONTACT: Paul

Bugg, 10201 New Executive Office

Bldg., Washington, D.C. 20503, E-mail

address: bugglp@a1.eop.gov, telephone

number: (202) 395–3093, FAX number:

(202) 395–7245. Inquiries about the

content of industries or requests for

electronic copies of the tables should be

made to Carole Ambler, Coordinator,

Economic Classification Policy

Committee, Bureau of the Census, Room

2633–3, Washington, D.C. 20233, E-mail

address: cambler@ccmail.census.gov,

telephone number: (301) 457–2668, FAX

number: (301) 457–1343.

SUPPLEMENTARY INFORMATION:

NAICS Development Process

The Standard Industrial Classification

(SIC) was originally developed in the

1930’s to classify establishments by the

type of activity in which they are

primarily engaged and to promote the

comparability of establishment data

describing various facets of the U.S.

economy. The SIC covers the entire field

of economic activities by defining

industries in accordance with the

composition and structure of the

economy. Over the years, it was revised

periodically to reflect the economy’s

changing industry composition and

organization. OMB last updated the SIC

in 1987.

In recent years, rapid changes in both

the U.S. and world economies brought

the SIC under increasing criticism. The

1991 International Conference on the

Classification of Economic Activities

provided a forum for exploring the

issues and for considering new

approaches to classifying economic

activity.

In July 1992, the Office of

Management and Budget established the

Economic Classification Policy

Committee chaired by the Bureau of

Economic Analysis, U.S. Department of

Commerce, with representatives from

the Bureau of the Census, U.S.

Department of Commerce, and the

Bureau of Labor Statistics, U.S.

Department of Labor. OMB charged the

ECPC with conducting a ‘‘fresh slate’’

examination of economic classifications

for statistical purposes and determining

the desirability of developing a new

industry classification system for the

United States based on a single

economic concept. A March 31, 1993,

Federal Register notice (pp. 16990–

17004) announced OMB’s intention to

revise the SIC for 1997, the

establishment of the Economic

Classification Policy Committee, and the

process for revising the SIC. The ECPC

published six issue papers relating to

industrial classification for comment.

Those papers are as follows:

Issues Paper No. 1—Conceptual Issues

Issues Paper No. 2—Aggregation

Structures and Hierarchies

Issues Paper No. 3—Collectibility of

Data

Issues Paper No. 4—Criteria for

Determining Industries

Issues Paper No. 5—The Impact of

Classification Revisions on Time

Series

Issues Paper No. 6—Services

Classifications

In addition to these issue papers, two

research reports were published

providing further information on

industry classifications. The first report

was part of a comparative review of

Canadian and U.S. SIC concepts. The

ECPC and Statistics Canada reviewed

the existing structure of detailed ‘‘4-

digit’’ industries in the 1987 U.S. SIC

and the 1980 Canadian SIC for

conformance to economic concepts. The

results of the U.S. review are contained

in ECPC Report No. 1, ‘‘Economic

Concepts Incorporated in the Standard

Industrial Classification Industries of

the United States,’’ and the Canadian

results are contained in ‘‘The

Conceptual Basis of the Standard

Industrial Classification,’’ Standards

Division, Statistics Canada. The second

ECPC report evaluated U.S. industries

using the new ‘‘index of heterogeneity’’

to assess whether establishments in

existing 1987 4-digit industries met the

conditions for the production-oriented

classification concept, as presented in

ECPC Issues Paper No. 1. The ECPC

Report No. 2 is titled ‘‘The

Heterogeneity Index: A Quantitative

Tool to Support Industrial

Classification.’’

A July 26, 1994, Federal Register

notice (pp. 38092–38096) announced

that the ECPC was developing NAICS in

cooperation with INEGI and Statistics

Canada and proposed that NAICS

replace the 1980 Canadian SIC, the

Mexican Classification of Activities and

Products (1994) (CMAP), the industry

classification system of Mexico, and the

1987 SIC in the United States. The

notice requested comments on that

proposal and on the structure of the new

system. That notice also included the

concepts of the new system and the

principles upon which the three

countries proposed to develop NAICS,

as follows:

(1) NAICS will be erected on a

production-oriented, or supply-based,

conceptual framework. This means that

producing units that use identical or

similar production processes will be

grouped together in NAICS.

(2) The system will give special

attention to developing productionoriented classifications for (a) new and

emerging industries, (b) service

industries in general, and (c) industries

engaged in the production of advanced

technologies.

(3) Time series continuity will be

maintained to the extent possible.

However, changes in the economy and

proposals from data users must be

considered. In addition, adjustments

will be required for sectors where

Canada, Mexico, and the United States

presently have incompatible industry

classification definitions in order to

produce a common industry system for

all three North American countries.

(4) The system will strive for

compatibility with the 2-digit level of

the International Standard Industrial

Classification of All Economic Activities

(ISIC, Rev. 3) of the United Nations.

In response to the July 26, 1994,

Federal Register notice, the ECPC

received 125 public responses to the call

for proposals for new and revised

industries, plus 8 responses from 6 State

government agencies, and 9 responses

from 6 Federal Government agencies.

These formal responses contained

several hundred proposals. Additional

proposals and suggestions for change

arose from the extensive ECPC public

outreach program, which consisted of

meetings and other communications

with industry, data user, and data

respondent groups. Other proposals for

modifications such as changing industry

definitions and clarifying boundaries,

came from U.S. statistical agency

personnel who worked on NAICS,

reflecting accumulated public
17290 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices

comments and criticism, over a number

of years, of the U.S. SIC system. The

ECPC also received a number of

proposals to eliminate U.S. industries,

or to combine them with other

industries.

Comments to the ECPC from these

sources ranged over many aspects of the

1987 SIC system. For example,

approximately 20 percent of the formal

letters received concerned ambiguities

in the titles and definitions of the 1987

SIC industries, and incomplete or outof-date product lists. More than 40

respondents requested better-defined

product detail within existing

industries, without necessarily

requesting changes to industry

boundaries. These product-oriented

requests and suggestions are being

handled through the redesign of forms

where product information is collected

in the 1997 Economic Censuses.

Another group of responses to the

notice were proposals for a ‘‘separate,

market-oriented product grouping

system’’ (July 26, 1994, Federal

Register, p. 38095). These proposals

were submitted as industry proposals

but, after analysis by the ECPC, were

found more appropriately to be marketoriented product groupings, and have

been held over for action during

production of the product coding

system discussed below.

Proposals were also received for

changing or modifying the boundaries of

existing industries, without necessarily

creating a new industry. In addition,

changes to 1987 SIC industry definitions

were frequently required to bring about

compatibility with the Canadian and

Mexican classifications (as were

corresponding changes in those

countries’ classification systems). Those

changes are listed and described in five

Federal Register notices that portray

portions of the proposed NAICS United

States system. These notices are

described more fully below. Some

changes that were required for

international compatibility interacted

with proposed changes from the U.S.

public, and in some cases the two kinds

of changes resulted in a broader

rethinking of the entire portion of the

structure.

The ECPC established seven

subcommittees composed of senior

economists, statisticians, and

classification specialists representing 14

of the Federal agencies that use the SIC.

Subcommittees were established for

Agriculture; Mining and Manufacturing;

Construction; Distribution Networks

(retail trade; wholesale trade; and

transportation, communications, and

utilities); Finance, Insurance, and Real

Estate; Business and Personal Services;

and Health, Social Assistance, and

Public Administration. They were

responsible for developing the proposed

structure of NAICS in cooperation with

representatives from INEGI and

Statistics Canada. The ECPC also

established the U.S. Coordinating

Committee that was responsible for

coordinating the work of the U.S.

subcommittees and the work with INEGI

and Statistics Canada.

The structure of NAICS was

developed in a series of meetings among

the three countries. Public proposals for

individual industries from all three

countries were considered for

acceptance if the proposed industry was

based on the production-oriented

concept of NAICS.

As groups of subsectors of NAICS

were completed and agreed upon by the

three countries, the ECPC published the

proposed industries for those subsectors

for public comment in the Federal

Register. Five successive Federal

Register notices were published asking

for comment. A first notice published in

the Federal Register, July 26, 1995 (pp.

38436–38452), requested comment on

proposed industry structures for

petroleum and coal product

manufacturing, chemical

manufacturing, and rubber and plastics

manufacturing; for broadcasting and

telecommunications; and for food

services and drinking places and

accommodations. A second Federal

Register notice published on February

6, 1996 (pp. 4524–4578), requested

comment on proposed industry

structures for crop production, animal

production, forestry and logging; textile

mills, textile product mills, apparel

manufacturing, and leather and allied

product manufacturing; food

manufacturing and beverage and

tobacco product manufacturing;

fabricated metal product manufacturing;

machinery manufacturing; electrical

equipment, appliance and component

manufacturing; and transportation

equipment manufacturing. A third

Federal Register notice published on

May 28, 1996 (pp. 26558–26668),

requested comment on proposed

industry structures for health and social

assistance; educational services;

computers and electronics product

manufacturing; furniture manufacturing;

printing and related support activities;

professional, technical and scientific

services; performing arts, spectator

sports and related industries; museums,

historical sites and similar institutions;

recreation, amusement and gambling;

information; wood product

manufacturing, except furniture; rental

and leasing; repair and maintenance;

management and support;

transportation; mining; paper

manufacturing; nonmetallic minerals

manufacturing; primary metal

manufacturing; miscellaneous

manufacturing; and postal service and

couriers. A fourth Federal Register

notice published on July 5, 1996 (pp.

35384–35515), requested comment on

proposed industry structures for finance

and insurance; wholesale trade; retail

trade; construction; utilities; waste

management and remediation services;

real estate; lessors of other nonfinancial

assets; personal and laundry services;

and religious, grant making, civic, and

other membership organizations. That

notice also requested comments on the

proposed hierarchy and coding system

for NAICS. Finally, a fifth Federal

Register notice published on November

5, 1996 (pp. 57006–57183), announced

the ECPC’s final recommendations to

OMB for the complete structure of

NAICS United States, including the

hierarchy and coding system, and asked

for public comments. Final comments

were due on December 20, 1996.

Changes incorporated into the new

system based on comments in response

to the November 5, 1996, notice are

presented in the section below

containing OMB’s Final Decisions.

In response to those notices, the ECPC

received approximately 400 additional

comments. A significant number of

these comments supported the

development of NAICS, expressed the

view that NAICS is a significant

improvement over the SIC system, or

supported the inclusion in NAICS of

specific industries. Other comments

requested clarification of a concept or

industry title. Of the few who

commented on the proposed coding

system, over one-half supported the 6-

digit system that has been adopted. Over

one-half of the comments received

requested changes to the proposed

system. Some of these proposed changes

were requests for new or revised

industries even though the deadline for

receiving such requests was November

7, 1994. However, the ECPC did

consider these new requests. There were

also requests for title changes. Each

comment was carefully considered, as

were comments received by INEGI and

Statistics Canada. After consultation

with INEGI and Statistics Canada,

changes based on the comments were

incorporated into the ECPC’s final

recommendations to OMB for NAICS

United States as presented in the

November 5, 1996, Federal Register

notice (pp. 57006–57183).

NAICS Structure

NAICS is organized in a hierarchical

structure, much like the existing U.S.
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17291

SIC. The 1987 SIC employs a 4-digit

coding system, in which the first two

digits designate a ‘‘major group’’ that in

NAICS is known as a ‘‘subsector,’’ the

third digit designates the industry

group, and the fourth digit designates

the industry. For example, in the 1987

U.S. SIC, the two digits 26 designate the

major group for the manufacture of

‘‘Paper and Allied Products,’’ within

which the digits 262 designate an

industry group titled ‘‘Paper Mills,’’

which contains one 4-digit industry, SIC

2621, also titled ‘‘Paper Mills.’’

NAICS employs a 6-digit coding

system in which the first two digits

designate the sector (the NAICS term

‘‘sector’’ is replacing the term

‘‘division’’ used in the 1987 SIC), the

third digit designates the subsector, the

fourth digit designates the industry

group, the fifth digit represents the

NAICS industry (the most detailed level

at which comparable data will be

available for Canada, Mexico, and the

United States), and the sixth digit

designates individual country-level

national industries. Using the paper mill

example above, in NAICS United States

industry 322121 the two initial digits 32

designate a manufacturing sector and

the three digits 322 designate the paper

manufacturing subsector. Within 322 is

the industry group 3221, Pulp, Paper,

and Paperboard Mills, within which is

NAICS industry 32212, Paper Mills.

There are two U.S. national industries

under Paper Mills: 322121, Paper

(except Newsprint) Mills, and 322122,

Newsprint Mills.

The NAICS coding system was

expanded to six digits from the four

digits used in the SIC for two reasons.

First, it is desirable that the first

character or characters in a coding

system designate the sector. A modern

economy is too complex to be described

adequately with the nine or ten sectors

permitted by using only a single digit in

a coding system. For example, NAICS

has 20 sectors. Accordingly, the first

two digits are used to designate the

sector in NAICS.

Second, the NAICS agreements among

the ECPC, INEGI, and Statistics Canada

permit each country to designate

detailed industries, below the level of a

five-digit NAICS industry, to meet

national needs. The United States will

have such national industry detail in

many places in the new classification.

The sixth digit in the NAICS United

States codes designates the U.S. detailed

national industries.

Thus NAICS will have a six-digit

coding system in which the first two

digits designate the NAICS sector, and

the third, fourth, fifth, and sixth digits

designate, respectively, the NAICS

subsector, industry group, and industry,

and U.S. national industry (if any).

Although the 1997 NAICS United States

industries will now have six digits

compared with four digits for 1987 U.S.

SIC industries, there will not be a

uniform corresponding increase in

classification detail that the 1997 NAICS

United States provides compared with

the 1987 U.S. SIC. As explained above,

the two additional digits primarily

allow for more sectors and for

individual country-level detailed

national industries.

NAICS United States Highlights

The 1987 U.S. SIC (excluding

Nonclassifiable Establishments)

includes 10 divisions subdivided into

1004 4-digit industries, of which 125 are

nonmanufacturing goods producing

industries (agriculture, mining,

construction, and electric, natural gas,

and water utility industries); 459 are

manufacturing industries; and 420 are

service producing industries. In

contrast, the 1997 NAICS United States

(excluding Unclassified Establishments)

has 20 sectors subdivided into 1174 5-

digit and/or 6-digit industries, of which

132 are nonmanufacturing goods

producing industries (agriculture,

mining, construction, and electric,

natural gas, and water utility

industries); 473 are manufacturing

industries; and 569 are service

producing industries. Most of the 170

industry increase between the 1987 U.S.

SIC and the 1997 NAICS United States

is in the service producing industries

with a net increase of 149 industries,

although there are net increases of seven

industries in the Agriculture, Forestry,

Hunting, and Fishing sector; one in

Utilities; two in Construction; and 14 in

Manufacturing. There is a net decrease

of three industries in Mining.

Most of the changes in the

Agriculture, Forestry, Hunting, and

Fishing sector and the Mining sector are

the result of changes necessary to

achieve comparability with Canada and

Mexico. The Utilities sector was

reorganized to reflect the changing

regulatory and technological structure of

the industries within that sector.

The Manufacturing sector was

reorganized to promote international

comparability and to recognize

technological changes occurring in that

sector. For example, a new subsector,

Computer and Electronic Product

Manufacturing, was created to bring

together industries producing electronic

products and their components. The

manufacture of computers,

communications equipment, audio and

video equipment, and semiconductors is

grouped into the same subsector

because of the inherent technological

similarities of their production

processes, and the likelihood that these

technologies will continue to converge

in the future. An important change is

that the reproduction of packaged

software is placed in this sector, rather

than in the services sector, because the

reproduction of packaged software is a

manufacturing process, and the product

moves through the wholesale and retail

distribution systems like any other

manufactured product. NAICS

acknowledges the importance of these

electronic industries, their rapid growth

over the past several years, and the

likelihood that these industries will, in

the future, become even more important

in the economies of the three North

American countries.

NAICS creates a new sector,

Information, that groups industries that

primarily create and disseminate

products with intellectual property

content. In addition, the NAICS

Information sector brings together those

activities that transform information

into a commodity that is produced and

distributed, and activities that provide

the means for distributing those

products, other than through traditional

wholesale-retail distribution channels.

A few of the newly revised industries in

this sector include: database and

directory publishers; software

publishers; music publishers; paging

services; cellular and other wireless

telecommunications services;

telecommunications resellers; and

satellite telecommunications. Also

included in the Information sector are

newspaper, periodical, and book

publishers (but not printing, which is

still included in manufacturing); motion

picture and sound recording industries;

and libraries and archives. There are 34

industries in the Information sector, 20

of which are new.

NAICS divides the 1987 SIC Services

division into eight new sectors. One of

the new sectors is the Professional,

Scientific and Technical Services sector,

which comprises establishments

engaged in activities where human

capital is the major input. The

industries within this sector are defined

by the expertise and training of the

service provider. The sector includes

such industries as offices of lawyers;

engineering services; environmental

consulting services; advertising

agencies; and translation and

interpretation services. Forty-eight

industries comprise this sector, 29 of

which are recognized for the first time.

The new sector, Health Care and

Social Assistance, recognizes the

merging of the boundaries of health care

and social assistance. The industries in
17292 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices

this new sector are arranged in an order

that reflects the range and extent of

health care and social assistance

provided. Some new industries are

family planning centers, out-patient

mental health and substance abuse

centers, HMO medical centers,

diagnostic imaging centers, continuing

care retirement communities, and

homes for the elderly. This sector has 39

industries, 27 of which are new.

A new sector for Arts, Entertainment,

and Recreation greatly expands the

number of industries provided for these

services. There are 25 industries in this

sector, 19 of which are new.

Another new sector is

Accommodation and Foodservices that

combines eating and drinking places

(formerly in Retail Trade) with

accommodations (formerly in the

Services division). There are 15

industries in this sector, 10 of which are

new. Some new industries recognized in

this sector are casino hotels, bed and

breakfast inns, full-service restaurants,

and limited-service restaurants.

Other new sectors that were created

from industries in the 1987 SIC Services

division are Real Estate and Rental and

Leasing that has 24 industries, 15 of

which are new; Administrative and

Support, Waste Management and

Remediation Services that has 43

industries, 29 of which are new;

Educational Services that has 17

industries, 12 of which are new; and

Other Services (except Public

Administration) that has 52 industries,

19 of which are new.

Product Classification System

The July 26, 1994, Federal Register

notice (p. 38095) specifies that marketoriented, or demand-based groupings of

economic data are required for many

purposes; some of these purposes may

not be well served by a productionoriented industry classification system.

The ECPC committed to a program that

will provide improved data for purposes

that require market-orient groupings.

The first part of that commitment was

to expand the lists of commodities and

services that would be available from

the 1997 Economic Census. A Product

Code Task Force was formed and

charged with improving the basic lists

of products and commodities and with

constructing new detailed codes that

will be compatible across U.S. statistical

agencies and that will also mesh to the

extent possible with international

detailed commodity or product systems.

In the manufacturing area, the

investment goods product detail (1987

SIC major groups 35–38) has been

revised to better compare to the

international Harmonized System

product detail. In addition, the Census

Bureau and Bureau of Labor Statistics

have developed a plan to provide more

comparable product data from their

statistical programs. In the nongoods

producing industries, additional

product detail has been added for

certain industries, including

professional, scientific, and technical

services; software publishing; and

communications.

The second part of the ECPC

commitment was to develop a product

classification system for use by all U.S.

government statistical agencies in 2002.

Preliminary plans are now being

developed to begin the process of

creating a product classification system.

It is planned to develop this system in

cooperation with INEGI and Statistics

Canada.

OMB’s Final Decisions

After taking into consideration

comments submitted in response to the

November 5, 1996, Federal Register

notice, as well as benefits and costs, and

after consultation with the ECPC, INEGI,

and Statistics Canada, OMB has made

the final determination of the scope and

substance of NAICS United States. In

general, OMB accepted the ECPC’s final

recommendations published in the

November 5, 1996, Federal Register

notice. However, in response to public

comment and additional information

gained in consultation with the ECPC,

INEGI, and Statistics Canada, OMB

made some changes to the ECPC’s

recommendations for NAICS United

States.

OMB received 37 public responses

and 6 responses from State government

agencies to the November 5, 1996,

Federal Register notice. Comments to

OMB from these sources can be grouped

into a few categories. Almost half the

letters requested further changes to the

NAICS United States structure,

including title changes. OMB carefully

considered these requests and any

changes accepted are noted below.

Seven of the letters specifically

supported NAICS United States and

thanked the ECPC for its work. Three of

the letters objected to the

reclassification of auxiliaries, which

also is addressed below. The remainder

of the letters requested clarification of

industry content, discussed detailed

implementation issues, or spoke of

regulatory concerns. The ECPC is

currently preparing a response for each

of these letters.

In response to comments and

consultation, OMB has made the

following determinations:

Mining—NAICS United States

213112, Support Activities for Oil and

Gas Field Exploration, and 213113,

Other Oil and Gas Field Support

Activities, have been combined and

numbered and titled, 213112, Support

Activities for Oil and Gas Field

Operations. Since geophysical mapping

and surveying has been moved to

NAICS 54136, Geophysical Survey and

Mapping Services, the remaining

activities in the original NAICS United

States 213112, Support Activities for Oil

and Gas Field Exploration, are too small

to support a separate industry. Because

of the above change, the following

industries have been renumbered:

Support Activities for Coal Mining, is

now 213113; Support Activities for

Metal Mining is now 213114; and

Support Activities for Non-Metallic

Minerals (except Fuels) is now 213115.

Manufacturing—NAICS subsector 337

Furniture and Related Product

Manufacturing has been revised. The

new structure changes from an

emphasis on furniture manufacture by

type of material, i.e., wood, metal, and

other materials, to one by type of

furniture, i.e., household, office and

other. A separate NAICS industry also

was created for kitchen cabinet and

countertop manufacturing. This change

better represents the way the furniture

industry is structured and is consistent

with the production principle on which

NAICS is based. The creation of many

detailed furniture manufacturing NAICS

industries for the three countries was

not possible, however, because the

internal structure of furniture

manufacturing differs from country to

country. For example, the production of

institutional furniture (furniture for

schools, libraries, etc.) combined with

the production of household furniture

takes place in a significant number of

establishments in one country and does

not in another; similarly, the combined

production of custom architectural

woodwork and millwork and of office

furniture takes place in a significant

number of establishments in one

country and does not in another.

NAICS United States 321912,

Hardwood Dimension Mills, and

321913, Softwood Cut Stock, Resawing

Lumber, and Planing, are combined into

NAICS United States 321912, Cut Stock,

Resawing Lumber, and Planing. The

processes used to produce the products

of these industries are the same or

similar, the major difference being the

use of hardwood versus softwood.

Therefore, the industries are combined.

NAICS United States 339117, Eyeglass

and Contact Lens Manufacturing, is

combined with NAICS United States

339115, Ophthalmic Goods

Manufacturing. There is no production
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17293

distinction between these two industries

and thus they are combined.

NAICS United States 331421 has been

renamed Copper Rolling, Drawing, and

Extruding and NAICS United States

331422 has been renamed Copper Wire

(except Mechanical) Drawing. This

clarifies the fact that brass mills

producing mechanical wire are included

in 331421 and wire mills producing

wire are classified in 331422. Other title

changes in manufacturing are: 311225 is

retitled Fats and Oils Refining and

Blending; 325188 is retitled All Other

Basic Inorganic Chemical

Manufacturing; 325199 is retitled All

Other Basic Organic Chemical

Manufacturing; 325221 is retitled

Cellulosic Organic Fiber Manufacturing;

32552 is retitled Adhesive

Manufacturing; 32731 is retitled Cement

Manufacturing; 336322 is retitled Other

Motor Vehicle Electrical and Electronic

Equipment Manufacturing; and 339911

is retitled Jewelry (except Costume)

Manufacturing.

Retail—NAICS United States 453999,

All Other Miscellaneous Store Retailers

(except Tobacco Stores) is renumbered

to 453998. There is no change in the

title.

Transportation and Warehousing—

NAICS 48121, Nonscheduled Chartered

Air Transportation, and NAICS 48122,

Nonscheduled Specialty Air

Transportation, have been combined

and numbered and titled, 48121,

Nonscheduled Air Transportation. Since

some of the typical activities performed

by establishments providing a

combination of specialty air

transportation or flying services overlap

with establishments providing

nonscheduled chartered air

transportation of passengers and/or

cargo, the three countries agreed to

combine these establishments into one

NAICS industry. The U.S. national

industries within NAICS 48121,

Nonscheduled Air Transportation, are

as follows: NAICS United States 481211,

Nonscheduled Chartered Passenger Air

Transportation; NAICS United States

481212, Nonscheduled Chartered

Freight Air Transportation; and NAICS

United States 481219, Other

Nonscheduled Air Transportation.

The following NAICS industry groups

and industries are retitled: 4852 is

retitled Interurban and Rural Bus

Transportation; 48521 is retitled

Interurban and Rural Bus

Transportation; 4854 is retitled School

and Employee Bus Transportation;

48541 is retitled School and Employee

Bus Transportation; NAICS United

States 488112 is retitled and

renumbered 488119, Other Airport

Operations; 49311 is retitled General

Warehousing and Storage Facilities;

49312 is retitled Refrigerated

Warehousing and Storage Facilities;

49313 is retitled Farm Product

Warehousing and Storage Facilities; and

49319 is retitled Other Warehousing and

Storage Facilities.

Finance and Insurance—NAICS

52593 has been retitled Real Estate

Investment Trusts.

Professional, Scientific, and

Technical Services—NAICS United

States 541199 has been retitled All

Other Legal Services; NAICS 54143 has

been retitled Graphic Design Services;

and 54182 has been retitled Public

Relations Agencies.

Management of Companies and

Enterprises—NAICS United States

551113 has been renumbered 551114,

Corporate, Subsidiary and Regional

Managing Offices.

Administrative and Support

Services—NAICS United States 561431

has been renumbered and retitled

561439, Other Business Service Centers

(including Copy Shops) and NAICS

United States 561432 has been

renumbered 561431, Private Mail

Centers.

Accommodation and Foodservices—

NAICS 72233 has been retitled Mobile

Foodservices.

Other Services (except Public

Administration)—NAICS United States

811121 has been retitled Automotive

Body, Paint, and Interior Repair and

Maintenance and NAICS industry group

8122 has been retitled Death Care

Services.

Auxiliaries—Three private sector

commentors and one State agency

objected to classifying auxiliary

establishments (those establishments

that primarily produce support services

not intended for use outside the

enterprise) based on their primary

activity rather than maintaining the

historic SIC treatment of classifying

auxiliary establishments based on the

industry classification of the

establishments they primarily serve.

Two State government agencies

supported the change. Those who

objected acknowledge that there are

problems associated with the 1987 SIC

classification of auxiliaries, but are

concerned about the loss of employment

in manufacturing industries if auxiliary

establishments such as accounting

offices, administrative and corporate

offices, and warehouses are classified

according to their primary activity.

NAICS, however, is based on the

economic principle that establishments

should be grouped together based on

their production processes, i.e., units

that use identical or similar production

processes in producing a good or service

should be grouped together. For

example, classifying a data processing

services establishment of an automobile

producer that performs services for its

automobile assembly plants in the

automobile industry violates that

principle. The data processing center’s

production process is much more like

that of establishments in NAICS 51421,

Data Processing Services, than those

establishments in NAICS United States

336111, Automobile Manufacturing.

In addition, more and more of these

auxiliary establishments are selling their

services to establishments outside their

enterprise. For example, the 1992

Economic Censuses reported that

auxiliary establishments had more than

$142 billion in outside sales, more than

doubling the $64 billion reported in

1987. These sales are not reflected in the

industries in which they occur, but

rather in the industries that the

auxiliary establishment primarily

serves, thereby understating the receipts

of many service industries. Therefore,

NAICS will classify auxiliary

establishments based on their primary

activity.

To address the concern about the

apparent loss of manufacturing

employment, the Census Bureau will

code auxiliary establishments for the

1997 Economic Censuses both by

primary activity and by the industry of

the establishments they primarily serve,

thereby providing a link between the

1992 and 1997 data.

NAICS United States Implementation

The NAICS United States replacement

of the SIC is effective January 1, 1997.

The first data to be available on a NAICS

United States basis will be from the

1997 Economic Censuses to be

published in early 1999. For most

programs, data will be introduced over

several years. Data series may not

always be revised for years before the

respective program’s implementation of

NAICS United States.

INEGI, OMB, and Statistics Canada

have put in place a process for ensuring

that the implementation of NAICS is

comparable across all three countries.

Regularly scheduled meetings among

the three countries will ensure that

there is a smooth transition to NAICS in

all three countries. In addition, the three

countries plan to continually review

and update NAICS to ensure that new

activities are promptly recognized and

to extend NAICS to the 5-digit industry

level in those sectors where agreement

is now at only the sector, subsector, or

industry group level.
17294 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices

Time Series Continuity

The standard approach to preserving

time series continuity after classification

revisions is to create linkages where the

series break. This is accomplished by

producing the data series using both the

old and new classifications for a given

period of transition. With the dual

classifications of data, the full impact of

the revision can be assessed. Data

producers then may measure the

reallocation of the data at aggregate

industry levels and develop a

concordance between the new and old

series for that given point in time. The

concordance creates a crosswalk

between the old and new classification

systems. This link between the 1987

U.S. SIC and the 1997 NAICS United

States will be developed by the

statistical agencies in the U.S.

NAICS Nonstatistical Use

NAICS was designed, as was the SIC

before it, solely for statistical purposes.

Although it is expected that NAICS, like

the SIC, will also be used for various

nonstatistical purposes (e.g.,

administrative, regulatory, or taxation),

the requirements of government

agencies that use it for nonstatistical

purposes have played no role in its

development.

Consequently, as has been the case

with the SIC (Statistical Policy Directive

No. 8, Standard Industrial Classification

of Establishments), NAICS shall not be

used in any administrative, regulatory,

or tax program unless the head of the

agency administering that program has

first determined that the use of such

industry definitions is appropriate to

the implementation of the program’s

objectives. If the terms, ‘‘North

American Industry Classification

System,’’ ‘‘NAICS,’’ or ‘‘NAICS United

States’’ are to be used in the operative

text of any law or regulation to define

industry (or trade or commerce),

language similar to the following should

be used to assure sufficient flexibility:

‘‘An industry or grouping of industries

shall mean a North American Industry

Classification System industry or

grouping of industries as defined by the

Office of Management and Budget

subject to such modifications with

respect to individual industries or

groupings of industries as the Secretary

(Administrator) may determine to be

appropriate for the purpose of this Act

(regulation).’’

1997 NAICS United States Industry

Structure and Relationship to 1987 SIC

Table 1 below presents the final

decisions for the entire structure of the

1997 NAICS United States classification

system including both 5-digit NAICS

and 6-digit NAICS United States

national detail industries. It shows the

hierarchy and the coding system in 1997

NAICS United States sequence; it also

relates the 1997 NAICS United States to

the 1987 U.S. SIC.

Table 2 is in 1987 U.S. SIC sequence

and relates the 1987 U.S. SIC industries

to the 1997 NAICS United States

including the 6-digit U.S. national detail

industries. All OMB final changes to the

structure of the 1997 NAICS United

States based on public comment and

consultation with the ECPC, INEGI, and

Statistics Canada are included in Tables

1 and 2.

BILLING CODE 3110–01–P
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17466 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17467
17468 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17469
17470 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17471
17472 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17473
17474 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17475
17476 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17477
17478 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices

Sally Katzen,

Administrator, Office of Information and

Regulatory Affairs.

[FR Doc. 97–8101 Filed 4–8–97; 8:45 am]

BILLING CODE 3110–01–C