[Federal Register Volume 62, Number 68 (Wednesday, April 9, 1997)]
[Notices]
[Pages 17288-17478]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8101]



[[Page 17287]]

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Part II





Office of Management and Budget





_______________________________________________________________________



1997 North American Industry Classification System--1987 Standard 
Industrial Classification Replacement; Notice

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

[[Page 17288]]



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 Estadistica, Geografia e Informatica 
(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 ``<a href="http://
www.census.gov">http://
www.census.gov</a>'' then select ``Subjects A to Z,'' then select ``N,'' 
then select

[[Page 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 
<a href="/cdn-cgi/l/email-protection#68050902071a0c070507280b0d061b1d1b460f071e"><span class="__cf_email__" data-cfemail="7b161a1114091f1416143b181e15080e08551c140d">[email protected]</span></a> 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 
<a href="/cdn-cgi/l/email-protection#f99798909a8ab998c8d79c9689d79e968f"><span class="__cf_email__" data-cfemail="9ef0fff7fdeddeffafb0fbf1eeb0f9f1e8">[email protected]</span></a> (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: <a href="/cdn-cgi/l/email-protection#492b3c2e2e161639092878672c2639672e263f"><span class="__cf_email__" data-cfemail="482a3d2f2f171738082979662d2738662f273e">[email protected]</span></a>, 
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: <a href="/cdn-cgi/l/email-protection#f794969a959b9285b794949a969e9bd9949299848284d9909881"><span class="__cf_email__" data-cfemail="b8dbd9d5dad4ddcaf8dbdbd5d9d1d496dbddd6cbcdcb96dfd7ce">[email protected]</span></a>, 
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 
production-oriented 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

[[Page 17290]]

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 out-of-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 market-oriented 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.

[[Page 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

[[Page 17292]]

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 market-oriented, or demand-based groupings of economic data are 
required for many purposes; some of these purposes may not be well 
served by a production-oriented 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

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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.

[[Page 17294]]

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.

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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


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