[Federal Register Volume 74, Number 4 (Wednesday, January 7, 2009)]
[Notices]
[Pages 764-768]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-60]



[[Page 763]]

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Part II





Office of Management and Budget





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2007 North American Industry Classification System (NAICS)--Updates for 
2012; Notice

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

[[Page 764]]


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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.

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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 
<a href="/cdn-cgi/l/email-protection#460c292e28680433342835680b3334362e3f0625232835333568212930"><span class="__cf_email__" data-cfemail="d09abfb8befe92a5a2bea3fe9da5a2a0b8a990b3b5bea3a5a3feb7bfa6">[email protected]</span></a> 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 
E-Government 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 
e-mail 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 <a href="/cdn-cgi/l/email-protection#cf85a0a7a1e18dbabda1bce182babdbfa7b68facaaa1bcbabce1a8a0b9"><span class="__cf_email__" data-cfemail="cb81a4a3a5e589beb9a5b8e586beb9bba3b28ba8aea5b8beb8e5aca4bd">[email protected]</span></a>.

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 Estad[iacute]stica, 
Geografi[iacute]a Inform[aacute]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

[[Page 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 production-oriented 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.
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    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

[[Page 766]]

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 three-country 
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

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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 production-
oriented 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\
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    \1\ For 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.
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    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:
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    \2\ This 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.
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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:
    <bullet> Performs transformation activities;
    <bullet> Owns rights to the intellectual property or design 
(whether independently developed or otherwise acquired) of the final 
manufactured product;
    <bullet> Owns the product they manufacture;
    <bullet> Controls and facilitates the production process; and
    <bullet> 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:
    <bullet> Performs transformation activities;
    <bullet> Receives contract to perform transformation activities;
    <bullet> Does not own rights to the intellectual property or the 
design of the new product;
    <bullet> Does not own the manufactured products contracted to 
produce;
    <bullet> Controls the facility but does not control the production 
process (i.e., the manufactured product is made to the contract's 
specifications); and
    <bullet> 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:
    <bullet> Does not perform transformation activities;
    <bullet> Contracts with manufacturing service provider to perform 
transformation activities to its specifications;
    <bullet> Owns rights to the intellectual property or design 
(whether independently developed or otherwise acquired) of the final 
manufactured product;
    <bullet> Owns the manufactured product it contracted another 
establishment to produce;
    <bullet> Controls and facilitates the production process; and
    <bullet> 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

[[Page 768]]

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]
BILLING CODE 3110-01-P


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