764 Federal Register / Vol. 74, No. 4 / Wednesday, January 7, 2009 / Notices 

OFFICE OF MANAGEMENT AND 

BUDGET 

2007 North American Industry 

Classification System (NAICS)— 

Updates for 2012 

AGENCY: Office of Management and 

Budget, Executive Office of the 

President. 

ACTION: Notice of Solicitation for 

Proposals to Revise Portions of NAICS 

for 2012. 

SUMMARY: Under the authority of the 

Budget and Accounting Procedures Act 

of 1950 (31 U.S.C. 1104(d)) and 44 

U.S.C. 3504(e), the Office of 

Management and Budget, through the 

Economic Classification Policy 

Committee (ECPC), is soliciting 

proposals from the public for changes to 

the North American Industry 

Classification System (NAICS) structure 

and content to be included in a 

potential 2012 revision. The ECPC is 

also seeking public input on several 

clarifications to the existing 

classification system (please see Parts I– 

VI in the SUPPLEMENTARY INFORMATION

section, below). The clarifications relate 

to ongoing changes in how businesses 

organize and structure themselves to 

efficiently provide goods and services in 

the economy. 

In Part I, the ECPC provides 

background on the NAICS classification 

system. In Part II, the ECPC is soliciting 

public comments on the advisability 

and desirability of reducing national 

industry detail in the manufacturing 

sector during a 2012 revision of NAICS. 

Part III includes a solicitation of 

proposals for new and emerging 

industries. Part IV presents notification 

of a method to publicize corrections for 

errors and omissions that are identified 

in NAICS 2007. Part V solicits public 

comments on the classification of 

distribution centers, logistics service 

providers, and sales offices of 

publishers within NAICS. Part VI 

solicits public comments and 

suggestions to clarify the classification 

of establishments that outsource 

manufacturing transformation activities 

and provide manufacturing services in 

the market given the increasing 

specialization and globalization of 

business activities in the economy. 

In soliciting comments about revising 

NAICS, the ECPC does not intend to 

open the entire classification for 

substantial change in 2012. The ECPC 

will consider public comments and 

proposals for changes or modifications 

that advance the goals of NAICS. The 

ECPC is also seeking and will consider 

comments related to consistent 

classification in an era of greater 

specialization and globalization. 

DATES: To ensure consideration of your 

comments or proposals related to the 

potential revision of NAICS for 2012 

detailed in this notice, comments must 

be in writing and received no later than 

April 7, 2009. Please be aware of delays 

in mail processing at Federal facilities 

due to tightened security. Respondents 

are encouraged to send both a hard copy 

and a second copy via fax or e-mail. 

ADDRESSES: Correspondence concerning 

the ECPC intent to review and possibly 

revise NAICS for 2012, comments on the 

business organization clarifications, and 

all proposals for new industries in 

NAICS for 2012 should be sent to John 

Murphy, Chair, Economic Classification 

Policy Committee, Bureau of the 

Census, Room 8K157, Washington, DC 

20233–6500. Responses may also be 

submitted by e-mail to 

John.Burns.Murphy@census.gov or by 

fax at (301) 763-8636. Mr. Murphy can 

be reached at (301) 763–5172. 

Comments may also be sent via http:// 

www.regulations.gov—a Federal EGovernment Web site that allows the 

public to find, review, and submit 

comments on documents that agencies 

have published in the Federal Register 

and that are open for comment. Simply 

type ‘‘NAICS for 2012’’ (in quotes) in 

the Comment or Submission search box, 

click Go, and follow the instructions for 

submitting comments. 

All comments regarding this notice 

received via the Web site, e-mail, fax, 

hardcopy, or other means, are part of the 

public record as submitted. For this 

reason, do not include in your 

comments information of a confidential 

nature, such as sensitive personal 

information or proprietary information. 

Please consider including contact 

information and a phone number or email address with your comments to 

facilitate follow-up if necessary. 

Electronic Availability: This 

document is available on the Internet 

from the Census Bureau Internet site at 

http://www.census.gov/naics. This 

WWW page contains previous NAICS 

United States Federal Register notices, 

ECPC Issues Papers, ECPC Reports, the 

current structure of NAICS United 

States 2007, and related documents. 

Public Review Procedure: All 

comments and proposals received in 

response to this notice will be available 

for public inspection at the Bureau of 

the Census, Suitland, Maryland. Please 

telephone the Census Bureau at (301) 

763–5172 to make an appointment to 

enter the Federal Center. OMB will 

publish all ECPC recommendations for 

changes to NAICS for 2012 resulting 

from this notice in the Federal Register 

for review and comment prior to final 

action. 

FOR FURTHER INFORMATION CONTACT: John 

Murphy, Chair, Economic Classification 

Policy Committee, Bureau of the 

Census, Room 8K157, Washington, DC 

20233–6500. Mr. Murphy can be 

reached at (301) 763–5172, by fax at 

(301)763–8636, or by e-mail at 

John.Burns.Murphy@census.gov. 

SUPPLEMENTARY INFORMATION: The 

SUPPLEMENTARY INFORMATION section of 

this notice is divided into six parts. Part 

I provides background on NAICS 2007; 

Part II solicits views regarding the 

advisability of reducing industry detail 

in the manufacturing sector; Part III 

includes a solicitation for proposals for 

new and emerging industries; Part IV 

notifies the public of the location where 

corrections of identified errors or 

omissions in NAICS 2007 will be 

publicized; Part V requests public input 

on the classification of distribution 

centers, logistics service providers, and 

sales offices of publishers; and Part VI 

solicits public comment and proposals 

for the classification of establishments 

that outsource manufacturing 

transformation activities in light of 

increasing specialization and 

globalization. 

Part I: Background of NAICS 2007 

NAICS is a system for classifying 

establishments (individual business 

locations) 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 and analysis of statistical 

data describing the North American 

economy. NAICS is used by Federal 

statistical agencies that collect or 

publish data by industry. It is also 

widely used by State agencies, trade 

associations, private businesses, and 

other organizations. 

Mexico’s Instituto Nacional de 

Estadı ́stica, Geografiı ́a Informa ́tica 

(INEGI), Statistics Canada, and the 

United States Office of Management and 

Budget (OMB), through its Economic 

Classification Policy Committee (ECPC), 

collaborated on NAICS to make the 

industry statistics produced by 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. NAICS 

also reflects in a much more explicit 

way the enormous changes in 

Federal Register / Vol. 74, No. 4 / Wednesday, January 7, 2009 / Notices 765 

technology and in the growth and 

diversification of services that have 

marked recent decades. Industry 

statistics presented using NAICS are 

comparable, to a large extent, with 

statistics compiled according to the 

latest revision of the United Nations’ 

International Standard Industrial 

Classification (ISIC, Revision 4). 

For the three countries, NAICS 

provides a consistent framework for the 

collection, tabulation, presentation, and 

analysis of industry statistics used by 

government policy analysts, by 

academics and researchers, by the 

business community, and by the public. 

The four principles that guided the 

initial development of NAICS were: 

(1) NAICS is erected on a productionoriented conceptual framework. This 

means that producing units that use the 

same or similar production processes 

are grouped together in NAICS. 

(2) NAICS gives 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 is 

maintained to the extent possible. 

(4) The system strives for 

compatibility with the two-digit level of 

the International Standard Industrial 

Classification of All Economic Activities 

(ISIC Rev. 3) of the United Nations. 

The ECPC is committed to 

maintaining the principles of NAICS as 

it develops further refinements. NAICS 

uses a hierarchical structure to classify 

establishments from the broadest level 

to the most detailed level using the 

following format: 

Sector ............................. 2-digit ................ Sectors represent the highest level of aggregation. There are 20 sectors in NAICS representing 

broad levels of aggregation. 

Subsector ........................ 3-digit ................ Subsectors represent the next, more detailed level of aggregation in NAICS. There are 99 subsectors in NAICS. 

Industry Group ................ 4-digit ................ Industry groups are more detailed than subsectors. There are 313 Industry groups in NAICS. 

NAICS Industry ............... 5-digit ................ NAICS industries are the level that, in most cases, represents the lowest level of three country 

comparability. There are 721 five-digit industries in NAICS. 

National Industry ............. 6-digit ................ National industries are the most detailed level of NAICS. These industries represent the national 

level detail necessary for economic statistics in an industry classification. There are 1175 U.S. 

industries in NAICS United States, 2007. 

The implementation of the first 

vintage of NAICS—NAICS 1997— 

affected almost half of the industries 

that were available for use under the 

1987 Standard Industrial Classification 

(SIC). Subsequent NAICS revisions in 

2002 and 2007 were more modest. 

Complete details of those revisions were 

published in the Federal Register. 

Revisions for 2002 were published on 

April 20, 2000 (65 FR 21242–21282), 

and the revisions for 2007 were 

published on March 16, 2006 (71 FR 

28532–28533). 

The development of NAICS 

represented a significant improvement 

over the previous classification systems 

used in North America. To ensure the 

accuracy, timeliness, and relevance of 

the classification, NAICS is reviewed 

every five years to determine what, if 

any, changes are required. The ECPC 

recognizes the costs involved when 

implementing industry classification 

revisions in statistical programs and the 

costs for data users when there are 

disruptions in the comparability of data. 

The ECPC also recognizes the economic, 

statistical, and policy implications that 

arise when the industry classification 

system does not identify and account for 

important economic developments. 

Balancing the costs of change against 

the potential for more accurate and 

relevant economic statistics requires 

significant input from data producers, 

data providers, and data users. 

Part II. Detail in the Manufacturing 

Sector of NAICS United States 2007 

NAICS is the Federal standard used to 

produce government economic 

statistics. Its structure and detail must 

be appropriate for large-scale programs, 

such as economic censuses or censuses 

of employment and wages as well as for 

sample survey programs of smaller size 

or more frequent periodicity. The 

greater the number of industries 

included in these surveys, the greater 

their costs in terms of reporting burden 

imposed on respondents and in terms of 

the resources used to collect, collate, 

and disseminate the individual industry 

data. The manufacturing sector of 

NAICS United States 2007 contains 472 

six-digit industries. Of these, 407 are 

national level detail that is used only in 

the United States. In 2003, to reduce 

both respondent burden and production 

costs, the Annual Survey of 

Manufactures (ASM) produced by the 

U.S. Census Bureau collapsed separate 

industry data for 239 six-digit industries 

into higher level aggregates. (The details 

are available at http://www.census.gov/ 

mcd/asmind/.) 

While the ECPC recognizes that the 

loss of some level of detail in 

manufacturing will affect a wide range 

of data users in government, business, 

and academia, the ECPC is soliciting 

comments on the advisability and 

desirability of making similar changes to 

the structure of NAICS for 2012. 

Specifically, the ECPC is soliciting 

comments on the desirability of 

reducing the number of detailed 

national (six-digit) U.S. manufacturing 

industries while adhering to the 

structure of the 184 NAICS five-digit 

industries. 

Part III. New and Emerging Industries 

NAICS was developed to be a 

dynamic industry classification. Every 

five years, the classification is reviewed 

to determine the need to identify new 

and emerging industries. The ECPC is 

soliciting public comments on the 

advisability of revising NAICS for new 

and emerging industries in 2012 and 

soliciting proposals for these new 

industries. 

When developing proposals for new 

and emerging industries, please note 

that there are two separate economic 

classification initiatives underway in 

the United States. NAICS, the industry 

classification, is the subject of this 

notice, while the complementary North 

American Product Classification System 

(NAPCS) initiative is also underway. 

The NAPCS product system described 

below will complement the NAICS 

industry system and provide an 

alternate way of classifying output. 

NAICS was developed to classify 

units according to their production 

function. NAICS results in industries 

that group units undertaking similar 

activities using similar resources but 

does not necessarily group all similar 

products or outputs. NAPCS is being 

developed to classify the outputs of 

units, or in other words their products 

or transactions, within a demand-based 

conceptual framework. For example, the 

766 Federal Register / Vol. 74, No. 4 / Wednesday, January 7, 2009 / Notices 

hypothetical product of a flu shot can be 

provided by a doctor’s office, a hospital, 

or a walk-in clinic. Because these three 

units are classified to three different 

NAICS industries, data users who want 

information about all flu shots provided 

must be able to identify the individual 

products coming out of the units, which 

NAPCS is designed to do. Thus, in 

many cases, the need for specific 

statistical data is better addressed by 

aggregating product data across 

industries rather than by creating a new 

industry. This is particularly true with 

NAICS, which groups establishments 

into industries based on their primary 

production function. Proposals for new 

industries in NAICS for 2012 will be 

evaluated within the context of both the 

industry and product classification 

systems to determine the most 

appropriate resolution. For a detailed 

description of the NAPCS initiative, see 

the April 16, 1999, Federal Register 

notice (64 FR 18984–18989) available at 

http://www.census.gov/napcs. 

Proposals for new industries will be 

evaluated using a variety of criteria. As 

previously mentioned, each proposal 

will be evaluated based on the 

application of the production function 

concept, its impact on comparability 

within North America and with other 

regions, and its impact on time series. 

For any proposals that cross threecountry levels of agreement, 

negotiations with Canada and Mexico, 

our partners in NAICS, will also 

influence the ECPC’s recommendations 

on those proposals. In addition, other 

criteria may affect recommendations for 

adoption. From a practical standpoint, 

industries must be of appropriate size. 

At the national level, this is generally 

not a major concern but there are a 

variety of statistical programs that 

produce industry data at the regional, 

State, MSA, or even county or local 

level. Proposed industries must include 

a sufficient number of establishments so 

that Federal agencies can publish 

industry data without disclosing 

information about the operations of 

individual firms. The ability of 

government agencies to classify, collect, 

and publish data on the proposed basis 

will also be taken into account. 

Proposed changes must be such that 

they can be applied by agencies within 

their normal processing operations. Any 

recommendations for change forwarded 

by the ECPC for consideration will also 

take into account the cost of making the 

changes. These costs can be 

considerable and the availability of 

funding to make changes is critical. The 

budgetary environment will be 

considered when the ECPC makes 

recommendations. As mentioned above, 

certain proposals may be more 

adequately addressed through the 

identification and collection of product 

data. 

Proposals for new or revised 

industries should be consistent with the 

production-oriented conceptual 

framework incorporated into the 

principles of NAICS. When formulating 

proposals, please note that an industry 

classification system groups the 

economic activities of producing units, 

which means that the activities of 

similar producing units cannot be 

separated in the industry classification 

system. 

Proposals must be in writing and 

include the following information: 

a) Specific detail about the economic 

activities to be covered by the proposed 

industry, especially its production 

processes, specialized labor skills, and 

any unique materials used. This detail 

should demonstrate that the proposal 

groups establishments that have similar 

production processes that are unique 

and clearly separable from the 

production processes of other 

industries. 

b) Specific indication of the 

relationship of the proposed industry to 

existing NAICS United States six-digit 

industries. 

c) Documentation of the size and 

importance of the proposed industry in 

the United States. 

d) Information about the proposed 

industry in Canada and Mexico if 

available. 

Proposals will be collected, reviewed, 

and analyzed. As necessary, proposals 

for change will be negotiated with our 

partners in Canada and Mexico. When 

this process is complete, the OMB will 

publish a Federal Register notice that 

contains the ECPC recommendations for 

additional public comment prior to a 

final determination of changes to NAICS 

for 2012. 

Part IV. Changes to Account for Errors 

and Omissions in NAICS 2007 

No significant errors or omissions 

have been identified in NAICS. Any 

errors or omissions that are identified in 

the future will be corrected and posted 

on the official NAICS Web site at 

http://www.census.gov/naics. 

Part V. Clarification of Distribution 

Centers, Publishers’ Sales Offices, and 

Logistics Service Providers in NAICS 

United States 

Clarification on the classification of 

distribution centers is relatively 

straightforward. Options might include 

wholesale trade because of the function 

of breaking bulk, storage and 

warehousing because of the 

characteristics of the facilities, or even 

trucking terminals as cross-docking 

practices develop and improve. Sales 

offices of publishers could be classified 

either to publishing or to wholesale 

trade. Classification of logistics services 

may hinge on the treatment of 

outsourcing or the separate 

identification of logistics products. 

Clarification of the classification of 

these units is intended to improve the 

consistency of classification and the 

comparability of data from various 

producers using the NAICS 

classification. The ECPC is soliciting 

comments or proposals related to the 

classification of distribution centers, 

publishers’ sales offices, and logistics 

service providers for the 2012 revision. 

Part VI—Clarification of the Treatment 

of Manufacturing Units That Outsource 

Transformation 

The structure and organization of 

many businesses engaged in the 

production of goods continues to change 

as they attempt to increase efficiency 

and reduce costs by employing new and 

improved processes. One very 

noticeable and rapidly growing activity 

is and has been the outsourcing of part 

or all of the manufacturing production 

process of goods. The growth in 

outsourcing of the manufacturing 

transformation of goods to specialized 

providers is now quite commonplace as 

firms continue to explore new paths to 

increase revenues and reduce costs of 

production. The expansion of 

competition globally and the formation 

of highly specialized business activities 

create unique problems for an industrial 

classification system such as NAICS. 

When producers subcontract portions of 

the production process to separate 

affiliated or unaffiliated units, the 

production function changes at the 

establishment level. As described in 

Parts I and III, above, the production 

functions define the industries in 

NAICS to the extent possible. 

In this particular case, NAICS United 

States 2007 does not provide clear or 

adequate guidance on the classification 

of units that perform only part of the 

complete production process for goods. 

Further, because there is no clear 

guidance for NAICS to provide a 

consistent and transparent classification 

framework for the development of 

comparable statistics across programs 

and agencies, differences in 

classification practices across programs 

may lead to erroneous signals on the 

direction of the economy that could 

potentially result in faulty policy 

decisions. For example, if employment 

is classified in manufacturing in one 

Federal Register / Vol. 74, No. 4 / Wednesday, January 7, 2009 / Notices 767 

1For more information see The Economic 

Classification Policy Committee ‘‘Issue Paper No. 1’’ 

http://www.census.gov/eos/www/naics/history/ 

docs/issue_paper_1.pdf. 

2This terminology appeared in a 2004 discussion 

paper ‘‘Outsourcing Manufacturing Activities— 

Measurement and Classification Implications’’ by 

John Murphy, Assistant Division Chief for 

Classification Activities at the United States Bureau 

of the Census. 

program while the associated output is 

classified by another program in 

wholesale trade, estimates of 

productivity and GDP may potentially 

provide erroneous signals if the 

differences are not well understood and 

accounted for when developing the 

relevant statistics. 

Because of this concern, the Economic 

Classification Policy Committee (ECPC) 

chartered a Manufacturing 

Transformation Outsourcing 

Subcommittee to review options for the 

consistent classification of 

establishments that outsource 

manufacturing transformation. The 

ECPC is soliciting public input to assist 

the subcommittee in its work. 

As noted earlier in this document, 

NAICS is based on a productionoriented or production function 

conceptual framework. A production 

function describes any economic 

activity in which inputs, such as the 

services of types of labor and capital 

equipment, raw and intermediate 

materials, and, in many cases, intangible 

inputs such as intellectual property are 

used to manufacture a material good or 

to render a service.1

In describing the production process, 

the preliminary work of the 

subcommittee has identified three 

general types of units involved in the 

production of goods: (a) Traditional or 

integrated manufacturers, (b) 

manufacturing service providers, and (c) 

‘‘factoryless’’ goods producers.2 Below 

we broadly define and list the 

characteristics of these units: 

A. Traditional or Integrated 

Manufacturers 

The traditional or integrated 

manufacturer utilizes inputs such as 

capital, labor, and energy to transform 

material inputs into a new product to be 

sold. Characteristics of integrated 

manufacturers include: 

• Performs transformation activities; 

• Owns rights to the intellectual 

property or design (whether 

independently developed or otherwise 

acquired) of the final manufactured 

product; 

• Owns the product they 

manufacture; 

• Controls and facilitates the 

production process; and 

• Sells the final product. 

An integrated manufacturer can 

provide a full accounting of input costs 

and output values. 

B. Manufacturing Service Providers 

The manufacturing service provider 

provides contract manufacturing 

services—defined tasks specified by a 

contract—that utilize inputs such as 

capital, labor, and energy to transform 

material inputs according to the contract 

specifications. Characteristics of 

manufacturing service providers 

include: 

• Performs transformation activities; 

• Receives contract to perform 

transformation activities; 

• Does not own rights to the 

intellectual property or the design of the 

new product; 

• Does not own the manufactured 

products contracted to produce; 

• Controls the facility but does not 

control the production process (i.e., the 

manufactured product is made to the 

contract’s specifications); and 

• Does not sell the final product. 

The manufacturing service provider 

can provide information on the value of 

the contract work, the types of 

transformation activities it performed, 

and the value of the labor and the plant 

and equipment utilized in the 

transformation activities. However, this 

type of provider cannot report the 

market value of the final product. 

C. Factoryless Goods Producers 

The factoryless goods producer 

outsources all of the transformation 

steps that traditionally have been 

considered manufacturing, but 

undertakes all of the entrepreneurial 

steps and arranges for all required 

capital, labor, and material inputs 

required to make a good. Characteristics 

of factoryless goods producers include: 

• Does not perform transformation 

activities; 

• Contracts with manufacturing 

service provider to perform 

transformation activities to its 

specifications; 

• Owns rights to the intellectual 

property or design (whether 

independently developed or otherwise 

acquired) of the final manufactured 

product; 

• Owns the manufactured product it 

contracted another establishment to 

produce; 

• Controls and facilitates the 

production process; and 

• Sells the final product. 

A factoryless goods provider can 

provide information on the purchase of 

the manufacturing service, that is, the 

cost of the contract, but would not 

necessarily have production worker 

payroll or capital expenditures on plant 

and equipment. However, this type of 

provider can provide data on the 

number of units that were arranged to be 

produced and the market value of the 

final product. 

In reality, businesses producing goods 

use a variety of strategies that can 

involve outsourcing some or all of the 

transformation steps to one or more 

manufacturing service providers. 

Substitution of one input for another is 

inherently part of many production 

processes within the manufacturing 

sector. Sector classification does not 

change if raw materials are produced 

within a unit or purchased from 

independent companies. Regardless of 

whether a manufacturer leases the 

factory where the transformation occurs 

or uses its own, it remains classified 

within manufacturing. If a manufacturer 

hires independent contractors or uses 

the services of a professional employer 

association rather than hiring and 

managing employees directly, it would 

remain classified in the manufacturing 

sector. Input substitution decisions 

affect the establishment production 

function but not the overall process of 

producing goods. A producing unit 

could be considered as changing the 

payment method of acquiring the inputs 

of capital, labor, and materials used in 

production. 

As noted in NAICS United States 

2007, units that perform chemical, 

physical, or mechanical transformation 

of inputs into new outputs are usually 

classified in manufacturing. This 

includes integrated manufacturers and 

manufacturing service providers that 

operate factories, plants, or mills, even 

if they outsource or subcontract some 

transformation to others. The growth of 

manufacturing service providers 

domestically and overseas is the result 

of traditional integrated manufacturers 

substituting away from direct 

expenditures on capital and labor (that 

is, factories and production workers) to 

purchases of capital services and labor 

services and new producers choosing 

this input mix from the beginning. With 

the exception of the apparel industries, 

NAICS classifies integrated 

manufacturers and manufacturing 

service providers together by industry. 

One classification option to consider is 

whether integrated manufacturers and 

manufacturing service providers should 

be separately identified in the structure 

of NAICS. 

As noted above, the classification of 

units that do not operate factories, 

plants, or mills, yet are a driving force 

behind goods being available in the 

market, is not clearly defined in NAICS. 

A preliminary review of classification 

768 Federal Register / Vol. 74, No. 4 / Wednesday, January 7, 2009 / Notices 

choices for factoryless goods producers, 

that is, units that perform all of the 

entrepreneurial functions of a 

manufacturer but outsource the actual 

transformation to one or more partners 

or manufacturing service providers, was 

narrowed down to two possibilities by 

the ECPC. First, these units could be 

classified within the manufacturing 

sector because without these units, the 

goods would not be produced and 

brought to market. Alternatively, these 

units could be classified within the 

wholesale trade sector, because they 

purchase critical input transformation 

services from others and are more like 

a traditional wholesaler who buys and 

sells goods. In addition, the ECPC 

considered classification in Sector 54, 

Professional, Scientific, and Technical 

Services, because factoryless goods 

producers could produce their own 

designs or intellectual property. 

However, unless the designs or 

intellectual property are sold or licensed 

to others, the production would not be 

measurable as manufactured output. 

Further, factoryless goods producers 

could acquire designs or intellectual 

property developed by others, thus 

bearing no resemblance to research and 

development units. The ECPC also 

considered classification to Industry 

551114, Corporate, Subsidiary, and 

Regional Managing Offices. In this case, 

a single establishment arranging for and 

overseeing the production of goods (i.e., 

an operating unit) would be classified to 

the industry defined by enterprise 

support units or auxiliaries, e.g., central 

administrative offices in the former 

Standard Industrial Classification. A 

single operating unit cannot be a 

domestic support or auxiliary unit by 

definition. 

Classification of factoryless goods 

producers to the manufacturing sector 

would result in the full value of goods, 

including returns to intellectual 

property and entrepreneurial risk, being 

included in manufacturing. 

Classification to wholesale trade would 

result in margins that include the 

returns to intellectual property and 

entrepreneurial activities, but limit 

manufacturing to units that are 

undertaking physical transformation. 

When the domestic production 

boundary is crossed, the ability to 

properly identify transactions for goods 

and transactions for services will be 

difficult, yet critical. Once a sector 

classification for factoryless goods 

producers is chosen, they could be 

merged into the existing NAICS 

industries or separately identified at the 

industry level. 

Classification of factoryless goods 

producers to either manufacturing or 

wholesale trade will affect current 

statistical programs and the estimates 

that they produce. All of the agencies 

represented on the ECPC share a 

concern about the ability to identify and 

consistently classify factoryless goods 

producers regardless of the ultimate 

classification. Beyond that common 

concern, specific impacts on statistical 

programs addressing input/output 

analysis, industry gross domestic 

product, trade in goods, trade in 

services, producer prices, productivity, 

and balance of payments must be 

considered. 

Additionally, the impact on 

international standards such as the 2008 

revision to the System of National 

Accounts and the Balance of Payments 

Manual must be considered. 

In summary, the ECPC is soliciting 

public comments regarding the 

classification of units that outsource all 

transformation activities within the 

NAICS system, taking into consideration 

the framework of existing statistical 

programs and the interrelationships and 

interdependencies of economic data 

produced in the United States. 

Susan E. Dudley, 

Administrator, Office of Information and 

Regulatory Affairs. 

[FR Doc. E9–60 Filed 1–6–09; 8:45 am] 

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