21242 Federal Register / Vol. 65, No. 77 / Thursday, April 20, 2000 / Notices

OFFICE OF MANAGEMENT AND

BUDGET

North American Industry Classification

System—Update for 2002

AGENCY: Office of Management and

Budget, Executive Office of the

President.

ACTION: Notice of solicitation of

comments on the Economic

Classification Policy Committee’s

recommendations for the 2002 revision

of the North American Industry

Classification System.

SUMMARY: Under Title 44 U.S.C. 3504(e),

the Office of Management and Budget

(OMB) seeks public comment on the

advisability of adopting the proposed

North American Industry Classification

System (NAICS) updates for 2002.

OMB’s Economic Classification Policy

Committee (ECPC) recommends an

update of the industry classification

system to extend the harmonized threecountry classification structure to

construction and to recognize important

changes in the retail trade and

information sectors. In addition, as an

interim measure in the United States,

the ECPC recommends restructuring of

the Wholesale Trade sector to reflect

differences in production functions and

to capture more accurately the rapidlygrowing business-to-business electronic

markets developing in the United States.

This notice: (1) Summarizes the

background for the proposed revisions

to NAICS 1997 in Part I; (2) contains a

summary of public comments in Part II;

(3) details the proposed structure

changes agreed upon by the three

countries in Part III; and (4) provides a

comprehensive listing of proposed

changes for national industries and their

link to NAICS 1997 industries in Part

IV.

OMB published a notification of

intention to complete portions of NAICS

in a February 25, 1999, Federal Register

notice (64 FR 9416–9419). That notice

solicited comments on the advisability

of revising the NAICS 1997 structure for

2002 and solicited comments on the

creation of new industries in the

Construction and Wholesale Trade

Sectors, modifications to the national

industries for department stores and

nonstore retailers, and other changes

identified as necessary during the initial

implementation of NAICS 1997. The

deadline for submitting comments was

April 26, 1999.

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 Statistics Canada and

Mexico’s Instituto Nacional de

Estadı ́stica, Geografı ́a e Informa ́tica

(INEGI), the ECPC, INEGI, and Statistics

Canada developed a revised structure

for both the Construction and

Information sectors of NAICS that

would apply to all three North

American countries.

For Wholesale Trade, after extensive

discussions with Statistics Canada and

INEGI, the representatives of the three

countries’ statistical agencies decided to

delay three-country changes to this

sector and instead plan for a complete

restructuring of the distribution network

industries (wholesale, retail,

transportation, and warehousing) in

2007. In the interim the ECPC

recommends restructuring the

Wholesale Trade sector to reflect

differences in production functions

between those wholesalers that take title

to goods and those that do not, and to

capture more accurately the rapidlygrowing business-to-business electronic

markets developing in the United States.

The ECPC also developed proposed

additional U.S. industry detail in the

Retail Trade sector for NAICS United

States. The ECPC recommends that

NAICS United States 2002 incorporate

these changes as shown in Parts III and

IV.

Following an extensive process of

development and discussions by the

ECPC, with maximum possible public

input, OMB seeks comment on the

advisability of revising NAICS to

incorporate the changes published in

this notice. The modified NAICS would

be employed in relevant data collections

by all U.S. statistical agencies beginning

with the reference year 2002. Statistics

Canada and INEGI are recommending

acceptance of the proposed revision of

the NAICS system for industry

classification in the statistical programs

of their national systems and are seeking

comments in their respective countries.

Representatives of the three countries

will hold further discussions to consider

public comments that they receive.

DATES: To ensure consideration of

comments on the adoption and

implementation of the NAICS revisions

detailed in this notice, comments must

be in writing. You should submit them

as soon as possible, but no later than

June 19, 2000. This proposed revision to

NAICS would become effective in the

U.S. on January 1, 2002.

ADDRESSES: You should send

correspondence about the adoption and

implementation of NAICS revisions as

shown in this Federal Register notice

to: Katherine K. Wallman, Chief

Statistician, Office of Management and

Budget, 10201 New Executive Office

Building, Washington, DC 20503,

telephone number: (202) 395–3093, FAX

number: (202) 395–7245.

You should address inquiries about

the content of industries or requests for

electronic copies of the tables to: Carole

Ambler, Chair, Economic Classification

Policy Committee, Bureau of the

Census, Room 2633–3, Washington, DC

20233, telephone number: (301) 457–

2668, FAX number: (301) 457–1343.

Electronic Availability and

Comments: This document is available

on the Internet from the Census Bureau

via WWW browser and E-mail. To

obtain this document via WWW

browser, connect to http://

www.census.gov/naics. This WWW

page also contains previous NAICS

Federal Register notices and related

documents.

You may send comments via E-mail to

pbugg@omb.eop.gov with subject

NAICS02. OMB will include in the

official record comments received via Email at this address with this subject by

the date specified above.

FOR FURTHER INFORMATION CONTACT: Paul

Bugg, 10201 New Executive Office

Building., Washington, DC 20503, Email address: pbugg@omb.eop.gov,

telephone number: (202) 395–3093, FAX

number: (202) 395–7245.

SUPPLEMENTARY INFORMATION:

Part I: Background of NAICS 1997

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 and analysis of

statistical data describing the economy.

Federal statistical agencies use NAICS

to collect or publish data by industry. It

also is used widely by State agencies,

trade associations, private businesses,

and other organizations.

INEGI of Mexico, 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 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. NAICS

also reflects in a much more explicit

way the enormous changes in

technology and in the growth and

diversification of services that have

Federal Register / Vol. 65, No. 77 / Thursday, April 20, 2000 / Notices 21243

marked recent decades. Industry

statistics presented using NAICS are

also 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.

For the three countries, NAICS

provides 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.

However, because of different national

economic and institutional structures as

well as limited resources and time for

constructing the 1997 NAICS, the

NAICS structure was not made entirely

comparable at the individual industry

level across all three countries at that

time. The completion effort represented

in this notice originally focused on the

construction and wholesale trade

sectors. In the 1997 NAICS these two

sectors were comparable at the two-digit

level for all three North American

countries.

Throughout its development, NAICS

has been guided by four principles:

(1) NAICS is erected on a productionoriented or supply-based 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, given

the need to reflect changes in the

economy and proposals from data users.

Adjustments will be required for sectors

where the United States, Canada, and

Mexico have incompatible industry

classification definitions in order to

produce a common industry system for

all three North American countries.

(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.

For example, the proposed split in the

national industry for department stores

will separately identify two distinct and

economically significant types of

operations in the United States in

accordance with principle 1. The ECPC

is recommending the revisions for

nonstore retailers and new Internet

information businesses based on NAICS

principle 2. The rapid growth of Internet

companies and the lack of a structural

method for identifying these emerging

industries justify the additional NAICS

and U.S. national detail. The current

round of completion activities is limited

in scope based on NAICS principle 3

regarding time series continuity. The

ECPC believes that the narrow focus of

the completion activities and the

importance of Construction and

Information to the economies of all

three countries justify the resulting time

series breaks. Users are encouraged to

implement the most current structure of

NAICS as it becomes available.

Part II: Summary of Public Comments

In response to the February 25, 1999,

Federal Register notice, the ECPC

received 28 comments regarding

specific industries and recommended

changes to the structure of NAICS 1997.

Twenty-two of the comments focused

on the Construction Sector, three

focused on the Wholesale Trade Sector,

and three were outside the scope of

revision as defined by the ECPC.

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 the

system. When a proposal was not

accepted, it was usually because: (a) The

resulting industry would have been too

small in the U.S., (b) data indicated that

the specialization ratio was low (the

specialization ratio indicates the extent

to which the establishments in a given

industry concentrate on the activities

that define the industry), or (c) the

proposal did not meet the productionoriented criterion for forming an

industry in NAICS.

The ECPC received a number of

comments that suggested changes to

NAICS that were not accepted. All of

these suggestions were carefully

considered. Some suggestions were

modified at the request of the ECPC to

better meet the objectives of NAICS.

Other suggestions proposed products

(rather than industries); these will be

considered in the future development of

a product system. Still other suggestions

for change could not be justified on a

production basis, or could not be

implemented in statistical programs, for

various reasons, and thus were not

accepted. The ECPC is preparing

individual responses to these

suggestions, carefully explaining why

they were not accepted.

Many of the twenty-two comments

that related to the Construction sector

requested changes or structures that

were contradictory. For this reason

alone, the ECPC was not able to

implement all of the requested changes.

Other comments requested detail that

was not supported by specialization

studies performed using 1997 Census of

Construction data. A final constraint on

the acceptability of proposals was the

necessity for three-country

comparability. A comment that was

justified on a production function basis

in the United States was not always

supportable by either Canada or Mexico.

The proposed structure of the

Construction Sector has limited threecountry comparability. In most areas,

the representatives of the three

countries attained comparability at the

five-digit level. The Specialty Trade

Contractors subsector is comparable at

the four-digit level. This was the result

of a desire to allow U.S. agencies to

develop separate residential and

nonresidential data for Specialty Trade

Contractors without creating special

aggregations outside of the NAICS

structure. Although separate residential

and nonresidential specialty trade

industries were not created because of

production function considerations, the

structure does allow for residential and

nonresidential data collection by U.S.

statistical agencies. The sixth digit of

the structure is reserved for this

purpose. This information can be

derived from Census Bureau data in

Economic Census years. The Bureau of

Labor Statistics will provide this

information in the Covered Employment

and Wages Program when the NAICS

2002 changes are implemented.

A second major proposal in the

Construction sector related to project

delivery methods. In recent years,

Federal and State procurement laws

have been changed to allow designbuild as an alternative to the traditional

design-bid-build process for

construction projects in the public

arena. This project delivery method

alternative to structuring the

Construction sector was not accepted in

the three-country negotiations for a

variety of reasons. First, the designbuild terminology is used differently by

various practitioners. The variation in

use and meaning will cause difficulties

in classification and the development of

homogeneous industry groupings

without extremely detailed

questionnaires. Such a level of detail is

not practical. Next, while of growing

importance in the United States and

Canada, design-build is not so

prominent in Mexico. Finally, a project

delivery method structure would have

greatly expanded the number of

industries at the lowest level of the

classification. The proposed structure

has 31 detailed industries for the United

21244 Federal Register / Vol. 65, No. 77 / Thursday, April 20, 2000 / Notices

States. A further split by project

delivery method would further expand

the number of detailed industries and

reduce the size of each.

The majority of the comments

received that related to Wholesale Trade

requested a change in the previously

agreed upon scope of the sector. After

extensive discussions with Canada and

Mexico, the representatives decided to

recommend that the basic delineation

between Wholesale Trade and Retail

Trade should remain unchanged.

Further, the representatives agreed to

undertake a complete restructuring of

the distribution network industries

(wholesale, retail, transportation, and

warehousing) in NAICS 2007. In the

interim, the United States has

restructured NAICS United States 1997,

Sector 42, Wholesale Trade to more

closely align with the existing treatment

in Canada and Mexico. For the United

States, the ECPC has created three new

subsectors: 423, Merchant Wholesalers,

Durable Goods; 424, Merchant

Wholesalers, Nondurable Goods; and

425, Wholesale Electronic Markets and

Agents and Brokers. These subsectors

more clearly separate types of wholesale

trade businesses and will lead to more

homogeneous statistical data. The

merchant wholesaler subsectors are

characterized by establishments that

take title to goods and play the role of

principal in the buying and selling of

goods. The Wholesale Electronic

Markets and Agents and Brokers

subsector is characterized by

establishments that act on behalf of

sellers or facilitate wholesale

transactions but do not actually take

title to the goods.

Wholesale trade is rapidly changing.

Many traditional wholesale trade

functions are being outsourced to

storage, finance, logistics, or

transportation specialists. In addition to

these changes, the Internet has greatly

expanded markets and supplier

customer bases. In order to identify

these changes to the extent possible, the

ECPC recommends that subsector 425,

Wholesale Electronic Markets and

Agents and Brokers be split into two

separate industries. The first would

include the wholesale trade electronic

markets while the second would

include agents and brokers. The

electronic markets provide guidance

and assistance to both buyers and

sellers. They also provide a unified, one

stop, purchasing environment with

common requirements across a large

number of suppliers. The rapid growth

of the business to business (B2B)

electronic markets reflects the

considerable efficiencies that can be

obtained through the use of advanced

technology. Separate identification of

this rapidly growing activity will allow

a more thorough and reflective analysis

of wholesale trade in relation to the

overall changes in distributive trades in

2007.

In addition to working on the sectors

described in the February 25, 1999,

Federal Register notice that were

explicitly targeted for completion, the

rapid growth of the Internet and

electronic commerce resulted in a

decision by the three countries to reevaluate the Information sector as well.

Although new in 1997, the Information

sector lacked finite categories related to

new Internet activities such as Internet

service providers, web search portals,

and Internet publishing and

broadcasting. The second NAICS

principle specifically targets new and

emerging industries. The North

American partners in NAICS agreed that

the importance of statistical data related

to new Internet businesses outweighed

the time series continuity criterion also

used in NAICS development. A full

description of the recommended

provisional changes to the Information

sector is included in Part III.

In addition to the changes listed

above, the ECPC is proposing several

minor changes to titles of NAICS

industries that have no impact on the

content of those industries. The ECPC

recommends the following title changes:

NAICS 32611, Unsupported Plastics

Film, Sheet, and Bag Manufacturing,

will be changed to Plastics Packaging

Materials and Unlaminated Film and

Sheet Manufacturing.

NAICS 326111, Unsupported Plastics

Bag Manufacturing, will be changed to

Plastics Bag Manufacturing.

NAICS 326112, Unsupported Plastics

Packaging Film and Sheet

Manufacturing, will be changed to

Plastics Packaging Film and Sheet

(including Laminated) Manufacturing.

NAICS 326113, Unsupported Plastics

Film and Sheet (except Packaging)

Manufacturing, will be changed to

Unlaminated Plastics Film and Sheet

(except Packaging) Manufacturing.

NAICS 32612, Plastics Pipe, Pipe

Fitting, and Unsupported Profile Shape

Manufacturing, will be changed to

Plastics Pipe, Pipe Fitting, and

Unlaminated Profile Shape

Manufacturing.

NAICS 326121, Unsupported Plastics

Profile Shape Manufacturing, will be

changed to Unlaminated Plastics Profile

Shape Manufacturing.

NAICS 326130, Laminated Plastics

Plate, Sheet, and Shape Manufacturing,

will be changed to Laminated Plastics

Plate, Sheet (except Packaging), and

Shape Manufacturing.

NAICS 444220, Nursery and Garden

Centers, will be changed to Nursery,

Garden Center, and Farm Supply Stores

to describe more completely the content

of the industry.

NAICS 452910, Warehouse Clubs and

Superstores, will be changed to

Warehouse Clubs and Supercenters. The

term supercenter more adequately

describes the content of the NAICS

industry.

NAICS 561330, Employee Leasing

Services, will be changed to

Professional Employer Organizations to

more closely reflect common industry

terminology.

The United States is also taking this

opportunity to create additional

national level detail for department

stores and nonstore retailers. These

changes will create more meaningful,

homogeneous industries for the United

States. Department Stores, NAICS

45211, will be split into two new 6-digit

industries: Department Stores (except

Discount), NAICS 452111, and Discount

Department Stores, NAICS 452112.

Electronic Shopping and Mail-Order

Houses, NAICS 45411, will be split into

three new 6-digit industries: Electronic

Shopping, NAICS 454111; Electronic

Auctions, NAICS 454112; and MailOrder Houses, NAICS 454113. The

proposed changes for electronic

shopping acknowledge the rapid growth

of these activities in the United States.

The proposed industry for Electronic

Shopping includes separate

establishments engaged in primarily

providing electronic shopping services.

The structure and codes for these new

industries are detailed in Part IV of this

notice.

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, analysts can

assess the full impact of the revision.

Data producers then may measure the

reallocation of the data at aggregate

industry levels and develop a

concordance between the old and new

series for that given point in time. The

concordance creates a crosswalk

between the old and new classification

systems. Statistical agencies in the U.S.

are planning links between the 1997

NAICS and 2002 NAICS (with U.S.

national detail).

Federal Register / Vol. 65, No. 77 / Thursday, April 20, 2000 / Notices 21245

ECPC Recommendations for the

Hierarchical Structure, Industries, and

Coding System for the 2002 NAICS

Revisions

Parts III and IV below present the

ECPC’s final recommendations for how

United States statistical agencies would

revise the affected sectors and industries

in the 2002 NAICS classification system

for the United States. The tables show

the proposed 2002 hierarchy, including

NAICS and U.S. national detail

industries, and the proposed coding

system in 2002 NAICS sequence, for the

affected sectors and industries. Parts III

and IV include all ECPC recommended

changes to the structure based on public

comment and discussions with INEGI

and Statistics Canada.

John T. Spotila,

Administrator, Office of Information and

Regulatory Affairs.

Part III—Proposed Revisions to the

NAICS Structure

Section A—NAICS Structure—

Construction

North American Industry Classification

System (NAICS 2002) Agreement

Number 32

This document represents the

proposed agreement on the structure of

the North American Industry

Classification System (NAICS) for the

construction sector. The detailed NAICS

structure along with a brief description

of the structure is attached (Attachments

1 and 2). Each country agrees to release

a copy of the proposed NAICS structure

to interested data users. Comments

received will be shared among the

countries and additional discussions

will be held before a final decision on

the structure is made. Each country may

add additional detailed industries below

the internationally agreed upon level of

NAICS, as necessary to meet national

needs, so long as this additional detail

aggregates to an internationally agreed

upon level in order to ensure full

comparability among the three

countries. This NAICS structure was

presented and accepted at the NAICS

Committee meeting held on November

30 through December 2, 1999, in

Ottawa, Canada.

Accepted Signature Date

Canada ...................... llllRichard Barnabellllllllll 12/2/1999

Mexico ....................... llllEnrique Ordazllllllllll 12/2/1999

United States ............. llllCarole Amblerllllllllll 12/2/1999

ATTACHMENT 1—NAICS STRUCTURE

23 ............................... Construction

236 ............................. Construction of Buildings

2361 ........................... Residential Building Construction

23611 ......................... Residential Building Construction

2362 ........................... Nonresidential Building Construction

23621 ......................... Industrial Building Construction

23622 ......................... Commercial and Institutional Building Construction

237 ............................. Heavy and Civil Engineering Construction

2371 ........................... Utility System Construction

23711 ......................... Water and Sewer Line and Related Structures Construction

23712 ......................... Oil and Gas Pipeline and Related Structures Construction

23713 ......................... Power and Communication Line and Related Structures Construction

2372 ........................... Land Subdivision

23721 ......................... Land Subdivision

2373 ........................... Highway, Street, and Bridge Construction

23731 ......................... Highway, Street, and Bridge Construction

2379 ........................... Other Heavy and Civil Engineering Construction

23799 ......................... Other Heavy and Civil Engineering Construction

238 ............................. Specialty Trade Contractors

2381 ........................... Foundation, Structure, and Building Exterior Contractors

2382 ........................... Building Equipment Contractors

23821 ......................... Electrical Contractors

23822 ......................... Plumbing, Heating, and Air-Conditioning Contractors

23829 ......................... Other Building Equipment Contractors

2383 ........................... Building Finishing Contractors

2389 ........................... Other Specialty Trade Contractors

Attachment 2—Description of

Construction Sector

Draft Classification for Construction

Representatives of the statistical

agencies of Canada, Mexico, and the

United States agree to a draft industrial

classification for the Construction

sector. The draft classification of the

construction sector is divided into

subsectors covering Construction of

Buildings, Heavy and Civil Engineering

Construction, and Specialty Trade

Contractors. These subsectors are

further subdivided into 10 four-digit

industry groups and 12 five-digit

industries.

A General Outline

Establishments in the Construction

Sector erect buildings, perform heavy

and civil engineering construction, and

perform specialized construction trade

activities. The classification

distinguishes between establishments

that are responsible for an entire

building or building renovation project

and those that perform specific

functions during the erection of a

building or building renovation project.

A subsector is provided for each group.

The classification further distinguishes

all establishments performing civil

engineering and heavy construction

activities, whether the complete project

or a portion of the project, in a third

subsector.

In Construction of Buildings, the

classification distinguishes between the

21246 Federal Register / Vol. 65, No. 77 / Thursday, April 20, 2000 / Notices

erection of residential buildings and the

erection of nonresidential buildings.

Each of these industry groups includes

establishments that are responsible for

an entire building or building

renovation project. These industry

groups include general contractors and

design-builders working for owners and

operative builders who undertake the

entire project on a speculative basis.

Establishments in the Construction of

Buildings subsector may perform

specific construction activities or

subcontract for specific tasks.

Additionally, each industry group

includes establishments that are hired to

manage the project, including oversight

of the design, financing, bidding, and

review processes, and/or act as a liaison

between the owner and a general

contractor, designer, architect, or

engineer.

The classification makes no

distinctions in the residential buildings

industry group because of differences in

the organization of construction

establishments among the three

countries. National level detail will

provide specific information based on

the type of structure (single family or

multi-family), type of project (new

structures or alterations and renovations

of existing structures), or type of

establishment (general contractor or

operative builder) as appropriate in each

country. Consideration was given to

each of these breakouts but national

differences in the operating

characteristics of establishments

prevented three-country level

comparability. Establishments erecting

nonresidential buildings are segregated

into establishments erecting commercial

and institutional buildings and

establishments erecting industrial

buildings and manufacturing plants.

This NAICS industry level distinction

recognizes the differences inherent in

erecting the various types of buildings.

Establishments performing heavy

construction are separated into four

industry groups: Utility System

Construction; Land Subdivision;

Highway, Street, and Bridge

Construction; and Other Heavy and

Civil Engineering Construction.

Industries in these groups are engaged

in large-scale projects and have related

production characteristics. Heavy and

Civil Engineering Construction

establishments can perform the work or

subcontract the work to specialized

establishments.

Establishments in the Utility System

Construction industry group construct

lines and related structures for utility

systems. For example, Water and Sewer

Line and Related Structures

Construction establishments that

construct pipelines, distribution lines,

irrigation systems, water treatment

plants, sewage treatment plants, and

pumping stations are grouped together.

This recognizes the fact that these

buildings and structures are interrelated in a network environment and

are not meaningfully separated based on

the particular type of structure.

Land Subdivision is included in

Heavy and Civil Engineering

Construction because of the similarity of

activities involved with land

subdivision and the other industry

groups. For example, improved

subdivisions often require installation of

basic utilities, roads, and similar

improvements that are also included

elsewhere in the Heavy and Civil

Engineering Construction subsector. The

production similarities for construction

of highways, streets, and bridges

justified the third industry group.

The fourth, residual, industry group

includes other heavy and civil

engineering construction. Examples

include marine construction, such as

the building of ports and harbors, and

construction of dams for retaining

water, flood control, or hydroelectric

power generation purposes. Heavy and

Civil Engineering Construction includes

general contractors, design-builders,

operative builders, and those specialty

trade contractors whose activities

generally only apply to the Heavy and

Civil Engineering Construction

subsector. The activities performed by

the specialty trade contractors in this

subsector are rarely performed

elsewhere.

In Specialty Trade Contractors,

NAICS recognizes the highly specialized

nature of a large number of small

construction establishments. These

establishments concentrate on a

particular construction activity or group

of activities rather than accepting

responsibility and risk for an entire

project. This difference separates these

establishments from the first two

subsectors. Establishments in the

Specialty Trade Contractors subsector

usually act as subcontractors for the

general contractors, operative builders,

design-builders, and other

establishments that assume the risk for

an entire construction project that takes

place in the Construction of Buildings

subsector. In this capacity, they can

perform work as subcontractors or work

directly for owners. Specialty Trade

Contractors also perform repair,

renovation, and maintenance on various

systems that fall within their specialty.

The skills and equipment used by

specialty trade contractors in this

subsector have more general application

than skills and equipment used by the

specialty trade contractors included in

Heavy and Civil Engineering

Construction.

Limitations and Constraints of the

Classification

Climatic and geological differences

within and among the three countries

lead to different construction techniques

and practices for various types of

structures. While wood is a significant

input for residential housing in the

Northern United States and Canada,

concrete and stone are more common in

the Southwest United States and in

Mexico. Concrete and stone do not

require siding and various other

protections that are required with wood

sheathing. Geological instability results

in different structural and foundation

requirements. Climate conditions

dictate more insulation in northern

areas while less insulation is

appropriate in drier and warmer

climates. These conditions lead to

differing size and importance of various

industries throughout North America.

Each subsector varies across geographic

lines based on the availability of raw

materials and the environmental

conditions that dictate construction

practices.

Relationship to ISIC

Most of the industries in the NAICS

Construction Sector are contained in

Division 45, Construction, of the

International Standard Industrial

Classification of All Economic Activities

(ISIC, Revision 3) of the United Nations.

There are, however, some differences

between the two systems. Both NAICS

and ISIC exclude preparation of oil and

gas fields from Construction. NAICS

includes construction management

activities within each of the industries

in the Construction Sector while ISIC

classifies construction management

activities in Division 74, Other Business

Activities. NAICS includes land

subdivision in Construction, while ISIC

classifies land subdivision in Division

70, Real Estate Activities.

Some Changes to the National

Industries

During the initial NAICS development

effort, the three countries agreed to the

boundary and scope of the Construction

sector at the two-digit level. Each of the

countries developed its own national

structure at the three-, four-, five-, and

six-digit levels. The changes discussed

are identified as NAICS with a prefix of

C for Canada, U for the United States,

and M for Mexico for previous national

detail and NAICS02 for the draft

classification.

Federal Register / Vol. 65, No. 77 / Thursday, April 20, 2000 / Notices 21247

For Canada, CNAICS 23 was broken

into two subsectors: CNAICS 231, Prime

Contracting; and CNAICS 232, Trade

Contracting. NAICS02 comprises three

subsectors: 236, Construction of

Buildings: 237, Heavy and Civil

Engineering Construction; and 238,

Specialty Trade Contractors.

CNAICS 23141, Construction

Management, will be distributed

throughout all of the new NAICS02

Construction industries.

Land Subdivision and Development,

CNAICS 23111 will be moved from the

subsector for Building Construction to

NAICS02 23721 within the Heavy and

Civil Engineering Construction

subsector. This move reflects the

similarity of the activities performed in

the land subdivision industry and other

industries in the Heavy and Civil

Engineering Construction subsector.

The construction of structures, such

as sewage treatment plants and water

treatment plants will be moved from

CNAICS 23139, Other Engineering

Construction, to NAICS02 2371, Utility

System Construction, and distributed to

the proper industries within the

industry group.

For Mexico, the NAICS02 structure is

very similar to the MNAICS structure

developed in 1997. While there were

various minor reaggregations below the

industry group level, the subsector

levels remained largely unchanged.

MNAICS 236 contained one industry

group, 2361 Buildings. NAICS02 now

contains two industry groups: 2361,

Residential Buildings; and 2632,

Nonresidential Buildings.

MNAICS 237 was made up of two

industry groups: 2371 Construction of

Structures for Water, Electricity,

Telecommunications, Petroleum, and

Gas; and 2372, Construction of Urban

Infrastructure and Transportation

Systems. NAICS02 is divided into four

industry groups: 2371, Utility Systems

Construction; 2372, Land Subdivision;

2373, Highway, Street, and Bridge

Construction; and 2379, Other Heavy

and Civil Engineering Construction.

As is the case for Canada, MNAICS

23822, Supervision and Management of

Construction projects will be distributed

throughout the construction industries

in NAICS02.

For the United States, the subsector

structures for UNAICS and NAICS02 are

very similar. Most changes occurred

below the subsector level. Of particular

note, UNAICS 23311, Land Subdivision

and Land Development moved from the

subsector for construction of buildings

to NAICS02 237, Heavy and Civil

Engineering Construction.

UNAICS 23499, All Other Heavy

Construction, included water treatment

plants, sewage treatment plants and

similar buildings that are now included

in NAICS02 2371, Utility System

Construction.

At the national level, the United

States has reinstituted an industry for

operative residential builders that were

not separately identified in UNAICS.

This industry had existed in the US SIC.

The United States also created a new

national industry for residential

remodeling establishments. In previous

classifications, residential remodelers

were classified together with new

residential construction.

Achievement of Objectives

The classification meets the objectives

for the North American Industry

Classification System (NAICS). It

includes industries that group

establishments with similar production

processes, that is, it applies the

production-oriented economic concept.

In the main, the hierarchical structure of

the classification also follows the

production concept.

The industries are highly specialized,

and they are economically significant.

Disruptions to time series are minimal.

The classification achieves

comparability at most five-digit levels

for the three participating countries. All

three countries agree on the detailed

definitions of the industries.

Other objectives of the NAICS project

are not as relevant in this area of the

classification as in others. These

objectives are the delineation of new

and emerging industries, service

industries, and industries engaged in

the production of new technologies.

Section B—NAICS Structure—

Information

PROVISIONAL STRUCTURE PROPOSED FOR SECTOR 51, INFORMATION

51 ............................... Information

511 ............................. Publishing Industries (except Internet)

5111 ........................... Newspaper, Periodical, Book, and Directory Publishers

51111 ......................... Newspaper Publishers

51112 ......................... Periodical Publishers

51113 ......................... Book Publishers

51114 ......................... Directory and Mailing List Publishers

51119 ......................... Other Publishers

5112 ........................... Software Publishers

51121 ......................... Software Publishers

512 ............................. Motion Picture and Sound Recording Industries

5121 ........................... Motion Picture and Video Industries

51211 ......................... Motion Picture and Video Production

51212 ......................... Motion Picture and Video Distribution

51213 ......................... Motion Picture and Video Exhibition

51219 ......................... Postproduction Services and Other Motion Picture and Video Industries

5122 ........................... Sound Recording Industries

51221 ......................... Record Production

51222 ......................... Integrated Record Production/Distribution

51223 ......................... Music Publishers

51224 ......................... Sound Recording Studios

51229 ......................... Other Sound Recording Industries

515 ............................. Broadcasting (except Internet)

5151 ........................... Radio and Television Broadcasting

51511 ......................... Radio Broadcasting

51512 ......................... Television Broadcasting

5152 ........................... Cable and Other Subscription Programming

51521 ......................... Cable and Other Subscription Programming

516 ............................. Internet Publishing and Broadcasting

5161 ........................... Internet Publishing and Broadcasting

51611 ......................... Internet Publishing and Broadcasting

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PROVISIONAL STRUCTURE PROPOSED FOR SECTOR 51, INFORMATION—Continued

517 ............................. Telecommunications

5171 ........................... Wired Telecommunications Carriers

51711 ......................... Wired Telecommunications Carriers

5172 ........................... Wireless Telecommunications Carriers (except Satellite)

51721 ......................... Wireless Telecommunications Carriers (except Satellite)

5173 ........................... Telecommunications Resellers

51731 ......................... Telecommunications Resellers

5174 ........................... Satellite Telecommunications

51741 ......................... Satellite Telecommunications

5175 ........................... Cable and Other Program Distribution

51751 ......................... Cable and Other Program Distribution

5179 ........................... Other Telecommunications

51791 ......................... Other Telecommunications

518 ............................. Internet Service Providers, Web Search Portals, and Data Processing Services

5181 ........................... Internet Service Providers and Web Search Portals

51811 ......................... Internet Service Providers and Web Search Portals

5182 ........................... Data Processing, Hosting, and Related Services

51821 ......................... Data Processing, Hosting, and Related Services

519 ............................. Other Information Services

5191 ........................... Other Information Services

51911 ......................... News Syndicates

51912 ......................... Libraries and Archives

51919 ......................... All Other Information Services

Draft Classification for Information

Representatives of the statistical

agencies of Canada, Mexico, and the

United States provisionally agree to a

draft industrial classification for the

Information sector. The draft

classification of the Information sector

is divided into subsectors covering

Publishing Industries (except Internet);

Motion Picture and Sound Recording

Industries; Broadcasting (except

Internet); Internet Publishing and

Broadcasting; Telecommunications;

Internet Service Providers, Web Search

Portals and Data Processing; and Other

Information Services. These subsectors

are further subdivided into 16 four-digit

industry groups and 30 five-digit

industries.

The Information sector comprises

establishments primarily engaged in (a)

producing and distributing cultural

information, (b) providing the means to

transmit or distribute these products as

well as data or communications, and (c)

processing data.

Many of the industries in the NAICS

Information sector are engaged in either

producing and manipulating products

protected by copyright law, or in

distributing them (other than

distribution by traditional wholesale

and retail methods). Examples are

traditional publishing industries,

software publishing industries, and film

and sound industries. Also included are

broadcasting industries,

telecommunication industries, and

information access providers and

processors that process and distribute

information and provide access to

facilities for transmission of

information. Although many new

industries have been created for this

sector, most of the activities it contains

have existed for some time. A new

feature of the revised Information Sector

is the inclusion of new industries for

activities that have recently appeared in

the economy due to the rapid expansion

of the Internet. When NAICS was

initially conceived, Internet service

providers, web search portals, and other

forms of Internet distribution of content

were in their infancy. These activities

are now separately identified in the

classification.

The following paragraphs provide a

brief description of the individual

components of this sector.

The Publishing Industries (except

Internet) subsector groups

establishments engaged in the

publishing of newspapers, periodicals,

and books, as well as directory, mailing

list, and software publishing. In general,

publishers issue copies of works for

which they possess copyright for sale to

the general public, in one or more

formats including traditional print form

or in electronic copy such as diskette or

CD–ROM. Publishers may publish

works originally created by others for

which they have obtained the rights,

and/or works that they have created inhouse.

In NAICS, publishing—the reporting,

writing, editing, and other processes

that are required to create an edition of

a newspaper, for example—is treated as

a major economic activity in its own

right, and classified in the Information

sector, whereas printing remains in the

NAICS Manufacturing sector. In part,

the NAICS classification reflects the fact

that publishing increasingly takes place

in establishments that are physically

separate from the associated printing

establishments. More crucially, the

NAICS classification of book and

newspaper publishing is intended to

portray their roles in a modern

economy, where they do not resemble

manufacturing activities.

Software publishing is included here

because the activity—creation of a

copyrighted product and bringing it to

market—is equivalent to the creation

process for other types of intellectual

products. Reproduction of pre-packaged

software is treated in NAICS as a

manufacturing activity and custom

design of software to client

specifications remains in Professional,

Scientific, and Technical Services.

These distinctions arise because of the

different ways that software is created,

reproduced, and distributed. The only

change to this subsector for 2002 is the

new title for Industry 51114 that has

been renamed from Database and

Directory Publishers to Directory and

Mailing List Publishers. This new title

and an updated definition better

describe the activities included in this

industry.

The Motion Picture and Sound

Recording Industries subsector groups

establishments involved in producing

and distributing motion pictures and

sound recordings (those involved

exclusively in the wholesaling of sound

recordings are classified in Wholesale

Trade). While motion picture and sound

recordings are also ‘‘published,’’ the

processes involved are sufficiently

different from those traditional

publishing industries to warrant placing

them in the Motion Picture and Sound

Recording Industries subsector.

Federal Register / Vol. 65, No. 77 / Thursday, April 20, 2000 / Notices 21249

The production and distribution of

these products involves a complex

process and several distinct industries.

The Motion Picture and Video

Industries industry group includes

separate industries for Motion Picture

and Video Production, Motion Picture

and Video Distribution, Motion Picture

and Video Exhibition, Postproduction

Services, and Other Motion Picture and

Video Industries. The distribution

industry includes establishments

primarily engaged in acquiring the

distribution rights (major input) for

films and programs, and charging such

clients as movie theaters and

broadcasters to show them; those

engaged in wholesaling videos to retail

stores and rental outlets are classified in

Wholesale Trade. The Sound Recording

Industries industry group contains

classes for Record Production

Companies, Integrated Record

Production/Distribution, Music

Publishers, Sound Recording Studios,

and Other Sound Recording Industries.

Record production companies are

primarily engaged in searching out,

identifying and contracting artists for

whom they arrange and finance the

production of master tapes for which

they hold the reproduction rights.

Establishments in this industry do not

own duplication facilities or have

distribution capabilities, so they

commercialize these rights through

leasing/licensing agreements with third

parties. Integrated record production

companies (major record labels)

integrate the production, manufacturing

and/or distribution functions,

commercializing reproduction rights

through these vertically integrated

operations. While establishments

engaged in record production derive

most of their revenues from leasing/

licensing the reproduction rights of

master recordings and from mechanical

royalties, integrated record companies

derive most of their revenues from the

exploitation of their rights to distribute

duplicate sound recordings. No changes

were made to this subsector for 2002.

In NAICS 2002, Telecommunications

and Broadcasting are split into separate

subsectors. This structural change

acknowledges that the production and

distribution of information or cultural

content is significantly different from

the creation of the infrastructure used in

distribution.

The new Broadcasting (except

Internet) subsector, NAICS 515,

distinguishes between radio

broadcasting, television broadcasting,

and cable and other subscription

programming. These industry groups are

based on differences in the methods of

communication and in the nature of

services provided. Broadcasting (except

Internet) includes establishments that

operate broadcasting studios and

facilities for over the air, cable, or

satellite delivery of audio and video

programming such as music,

entertainment, news, talk, and the like.

These establishments are often engaged

in producing and purchasing programs

and generating revenues from the sale of

time to advertisers, and from donations,

subsidies, and/or the sale of programs.

Cable and Other Subscription

Programming establishments operate

studios and facilities for the

broadcasting of programs that are

typically narrow cast in nature (limited

format such as news, sports, education,

and youth-oriented programming). The

services of these establishments are

typically sold on a subscription or fee

basis.

NAICS 2002 recognizes for the first

time the significant differences between

traditional publishing and broadcasting

and similar activities using the Internet

in a new subsector for Internet

Publishing and Broadcasting, NAICS

516. The unique combination of text,

audio, video, and interactive features

present in informational or cultural

products on the Internet justifies the

creation of the new subsector. NAICS

separates Internet Publishing and

Broadcasting in order to identify and

statistically characterize this area of

rapid growth in the economies of the

three North American partners in

NAICS.

The new Telecommunications

subsector, NAICS 517, is primarily

engaged in operating, maintaining, and/

or providing access to facilities for

transmitting voice, data, text, sound,

and full motion picture video between

network termination points. In contrast

to the Broadcasting subsector, the

Telecommunications subsector

generally does not produce information

or cultural content.

Telecommunications includes

groupings and industries based on the

technologies used. As such, there are

separate industry groups for Wired

Telecommunications Carriers, Wireless

Telecommunications Carriers (except

Satellite), Telecommunications

Resellers, Satellite Telecommunications,

Cable and Other Program Distribution,

and Other Telecommunications. All of

these industry groups, except

Telecommunications Resellers, operate

transmission facilities that may be based

on a single technology or a combination

of technologies. The Cable and Other

Program Distribution industry group

includes establishments that operate

cable systems, direct-to-home satellite

systems, or other similar systems.

Another new subsector in NAICS

groups establishments that provide

Internet access; Internet search services;

and data processing, hosting, and

related services. The Internet Service

Providers, Web Search Portals, and Data

Processing Services subsector, NAICS

518, is subdivided into two industry

groups. The Internet Service Providers

and Web Search Portals industry group

includes establishments that provide

access to the Internet or provide the

means to search for information on the

Internet. The Data Processing, Hosting,

and Related Services industry group

includes establishments that process

data for others. Mainframe computer

time-share facilities and web hosting

establishments are included with Data

Processing, Hosting, and Related

Services.

The final subsector, Other Information

Services, NAICS 519, provides a

classification for other information

providers, such as news syndicates, as

well as repositories of information

products in the form of libraries and

archives. Libraries and archives provide

access to information products stored in

their physical facilities. Museums,

however, are classified in sector 71,

Arts, Entertainment, and Recreation.

Section C—NAICS United States—

Wholesale Trade

Representatives of the statistical

agencies of Canada, Mexico, and the

United States conducted extensive

discussions on the content and

conceptual structuring of industries for

wholesale trade of goods. Due to the

complexity of this dynamic sector and

structural differences among the three

countries, no additional three-country

comparability was obtained for

wholesale trade. Canada, Mexico, and

the United States agree on the overall

content of Wholesale Trade but will

retain unique national industry detail

within the sector. However, the United

States has taken the insights gained

from these discussions and incorporated

them into a new national structure for

Wholesale Trade.

As in the 1997 NAICS United States

there are two main types of wholesalers

included in Wholesale Trade for the

2002 NAICS United States: those that

sell goods on their own account and

those that arrange sales and purchases

for others for a commission or fee.

(1) Establishments that sell goods on

their own account are known as

wholesale merchants, distributors,

jobbers, drop shippers, import/export

merchants, and sales branches. These

establishments typically take title to the

goods being sold and maintain their

own warehouse, where they receive and

21250 Federal Register / Vol. 65, No. 77 / Thursday, April 20, 2000 / Notices

handle goods for their customers. Goods

are generally sold without

transformation, but may include integral

functions, such as sorting, packaging,

labeling, and other marketing services.

Throughout this notice, these

establishments are referred to as

merchant wholesalers.

(2) Establishments arranging for the

purchase or sale of goods owned by

others or the purchase of goods on a

commission basis are known as agents

and brokers, commission merchants,

import/export agents and brokers,

auction companies, and manufacturer’s

representatives. These establishments

do not take title to the goods being sold.

Throughout this notice, these

establishments are referred to as

business to business electronic markets

and agents and brokers.

Sector 42, Wholesale Trade, would be

divided into three subsectors in the

United States: subsector 423, Merchant

Wholesalers, Durable Goods; subsector

424, Merchant Wholesalers, Nondurable

Goods; and subsector 425, Wholesale

Electronic Markets and Agents and

Brokers. Each of these subsectors is

further divided into industry groups and

industries to meet the detailed needs of

the U.S. statistical community.

Subsector 423, Merchant Wholesalers,

Durable Goods, is split into nine

industry groups that follow the structure

of NAICS 1997. These industry groups

are further divided into thirty-seven

national level industries. The key

difference between the content of

subsector 421, Wholesale Trade,

Durable Goods in 1997 and subsector

423, Merchant Wholesalers, Durable

Goods, is the exclusion of electronic

markets, and agents, brokers, and other

intermediaries that do not take title to

the goods being sold in subsector 423.

Merchant wholesalers in NAICS 2002

are defined to include those

establishments that buy or sell goods on

their own account. Included are

wholesale merchants, distributors,

jobbers, drop shippers, import/export

merchants, and manufacturer’s sales

branches. The key characteristic of

wholesale establishments included in

subsector 423 is ownership of the goods

that are being sold.

Subsector 424, Merchant Wholesalers,

Nondurable Goods, mirrors the structure

of NAICS 1997 subsector 422,

Wholesale Trade, Nondurable Goods.

Again, the significant difference is the

exclusion of electronic markets, and

agents and brokers and other

intermediaries that do not take title to

the goods being sold. Subsector 424 is

split into nine industry groups that are

further divided into thirty-two national

level industries classifying merchant

wholesalers of nondurable goods.

Subsector 425, Wholesale Electronic

Markets and Agents and Brokers is a

new subsector for NAICS United States

2002. Establishments in the Wholesale

Electronic Markets and Agents and

Brokers subsector arrange for the sale of

goods owned by others on a fee or

commission basis. These

establishments, unlike those in

subsectors 423, do not take title to the

goods being sold. They are acting on

behalf of the buyers and sellers of goods.

This subsector is being created to

classify agents and brokers as well as

electronic markets that facilitate

wholesale trade. Over the past two

years, the explosive growth of wholesale

trade on the Internet has radically

changed the role of agents and brokers

and greatly expanded potential markets

for suppliers. While a wholesale trade

business was previously constrained by

geography and the cost of initiating

contact with potential customers, the

Internet has created inexpensive,

efficient national markets for suppliers.

The United States proposal for subsector

425, therefore, creates a new national

industry for these electronic markets in

wholesale trade, separate from the more

traditional agents and brokers. The

outsourcing of storage, transportation,

finance, and other traditional wholesale

trade functions is immensely eased with

the advent of these new national

electronic wholesale markets. In order

to gather data to better understand these

changes in the context of all distributive

trade industries, they will be separately

identified and categorized in NAICS

United States 2002.

NAICS United States 1997 included

69 separate national industries in

Wholesale Trade. NAICS United States

2002, includes 71 national industries in

Wholesale Trade. With the addition of

only two national industries, the

restructuring of Wholesale Trade creates

more homogeneous statistical data for

users, eases the burden of code

assignment for sales representatives and

wholesale trade brokers, and separately

identifies emerging trends for study and

analysis. Although additional

international comparability was not

obtained, the changes to Sector 42,

Wholesale Trade, in the United States

represent a major improvement in the

statistics generated for wholesale trade

using NAICS. These changes also

position the United States to measure

and analyze more completely all

distributive trade industries during

future NAICS revisions.

The entire proposed structure for

Wholesale Trade is detailed in Part IV

of this notice.

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[FR Doc. 00–9816 Filed 4–19–00; 8:45 am]

BILLING CODE 3110–01–C