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OFFICE
OF MANAGEMENT AND BUDGET
1997
North American Industry Classification System Completion
Activities for 2002
AGENCY:
Office of Management and Budget, Executive Office of the President.
ACTION:
Notice of Intention to Complete Portions of the North American Industry
Classification System (NAICS) for 2002.
SUMMARY:
Under Title 44 U. S. C. 3504(e), the Office of Management and Budget
(OMB), through the Economic Classification Policy Committee (ECPC),
is seeking public comment (please see Part V of the Supplementary
Information section below) on a proposal to complete portions of
the North American Industry Classification System (NAICS) for 2002.
NAICS was jointly developed by Canada, Mexico, and the United States.
The proposed completion activities will focus on the Construction
and Wholesale Trade sectors of NAICS. Currently, these sectors are
comparable among all three countries only at the highest levels
of aggregation. The ECPC also will consider narrowly defined Retail
Trade issues related to the national industries for department stores
and nonstore retailers as well as specific problems that may be
identified in the implementation of NAICS 1997. It is not the intent
of the ECPC to open for consideration all areas of NAICS that currently
lack three-country comparability nor to revise sectors other than
those specifically listed above. Work is under way to determine
if 5-digit agreement can be reached among Canada, Mexico, and the
United States in Construction and Wholesale Trade.
DATES:
To ensure consideration, all proposals for sector hierarchies and
new industries must be made in writing and should be submitted as
soon as possible, but should be received no later than April 26,
1999. In addition, all comments on the usefulness and advisability
of completion of the Construction and Wholesale Trade sectors, modifications
to national industries for department stores and nonstore retailers,
changes to alleviate implementation problems, and timing of completion
activities must be submitted in writing and be received no later
than April 26, 1999.
ADDRESSES:
Correspondence concerning the usefulness and advisability of completion
of the Construction and Wholesale Trade sectors, modifications to
national industries for department stores and nonstore retailers,
changes to alleviate implementation problems, and timing of completion
activities should be made to Carole Ambler, Chair, Economic Classification
Policy Committee, Bureau of the Census, Room 2633-3, Washington,
D.C. 20233, E-mail address: cambler@ccmail.census.gov, Telephone
number: (301) 457-2668, FAX number: (301) 457-1343.
All
proposals for the hierarchical structure of the Construction sector
and Wholesale Trade sector as well as for new industries in these
sectors, or for changes to the national industries for department
stores and nonstore retailers based on the production-oriented conceptual
framework of NAICS, should be addressed to: John Murphy, Co-chair,
Administrative Subcommittee of the ECPC, Bureau of Labor Statistics,
2 Massachusetts Avenue N.E., Room 4840, Washington, DC 20212, E-mail
address: Murphy_John@bls.gov, Telephone number: (202) 606-6475,
FAX number (202) 606-6645.
ELECTRONIC
AVAILABILITY: This document is available on the Internet from
the Census Bureau Internet site via WWW browser. To obtain this
document, connect to "http://www.census.gov" then select "Subjects
A to Z," then select "N," then select "NAICS (North American Industry
Classification System)." This WWW page contains previous NAICS
United States Federal Register notices, ECPC
Issues Papers, ECPC Reports, the current structure of NAICS United
States, 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, U.S. Department of Commerce, Suitland
Federal Center, Suitland, Maryland. Please telephone the Census
Bureau at (301) 457-2672 to make an appointment to enter the Federal
Center. All proposals recommended by the ECPC will be published
in the Federal Register for review and comment
prior to final action by OMB. Those making proposals will be notified
directly of action taken by the ECPC; others will be advised through
the Federal Register.
FOR
FURTHER INFORMATION CONTACT: John Murphy, Co-chair, Administrative
Subcommittee of the ECPC, Bureau of Labor Statistics, 2 Massachusetts
Avenue NE, Room 4840, Washington, DC 20212, E-mail address: Murphy_John@bls.gov,
Telephone number: (202) 606-6475, FAX number (202) 606-6645.
SUPPLEMENTARY
INFORMATION:
The
Supplementary Information section of this notice is divided into
five parts: Part I summarizes the background for NAICS 1997; Part
II contains areas of less than full comparability at the individual
detailed industry level of NAICS; Part III details the process that
the ECPC will use to develop its recommended actions for the sectors
targeted for completion; Part IV outlines a work plan that will
be used for the proposed completion of the NAICS sectors for Construction
and Wholesale Trade, and the national industries for department
stores and nonstore retailers; and Part V highlights areas in which
the ECPC is soliciting public comment..
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. 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 Estadística, Geografía e Informática
(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 technology and
in the growth and diversification of services that have marked recent
decades. Industry statistics presented using NAICS also are 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 industry 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 NAICS, its structure
was not made entirely comparable at the individual industry level
across all three countries. For some sectors and subsectors, the
statistical agencies of the three countries agreed to harmonize
NAICS based on sectoral boundaries rather than on a detailed industry
structure. The portions of NAICS that are not comparable at the
detailed industry level are delineated in Part II of this section.
The
four principles of NAICS are:
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.
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.
Time
series continuity is maintained to the extent possible. Adjustments
will be required for sectors where Canada, Mexico, and the United
States have incompatible industry classification definitions in
order to produce a common industry system for all three North American
countries.
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. The current round of completion activities
is limited in scope based on the NAICS' principle regarding time
series continuity. The ECPC realizes that this completion activity
may occur before all users have initially implemented NAICS. The
narrow focus of the completion activities, and the importance of
Construction and Wholesale Trade to the economies of all three countries,
will outweigh the time series breaks and resulting noncomparability
of time series. Users are encouraged to implement the 2002 revision
of NAICS once it becomes official.
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 96 subsectors in NAICS. |
| Industry
Group..... |
4-digit............ |
Industry
groups are more detailed than subsectors. There are 311 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
5-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 1170 U.S.
industries in NAICS United States. |
Sectoral
hierarchies and specific industry proposals will be considered within
the structure presented above.
Part
II: NAICS Areas Without Full Comparability at the Detailed Industry
Level
The
NAICS sectors that currently are not comparable at the detailed
industry level are: utilities; construction; wholesale trade; retail
trade; finance and insurance; and public administration. The subsectors
that are not comparable at the detailed industry level are: Real
Estate; Waste Management and Remediation Services; as well as other
services including Personal and Laundry Services, and Religious,
Grantmaking, Civic, Professional and Similar Organizations. Separate
agreements providing for detailed industry comparability between
Canada and the United States were reached for the Utilities, Retail
Trade, and Finance and Insurance Sectors. To distinguish the three
countries' versions of NAICS, they are called NAICS Canada, NAICS
Mexico (SCIAN Mexico, in Spanish), and NAICS United States.
The
ECPC recognizes the need for complete comparability in the NAICS
structures being used in the three countries. The ECPC also recognizes
the time sensitive nature of any revisions for 2002. For this reason,
the ECPC will limit consideration of work for completion to those
areas of NAICS where there currently is comparability at the two-digit
(sector) level only. The Public Administration sector is not a priority
for the ECPC at this time. Although there is only two-digit comparability
for Public Administration, the governmental structures in each of
the three countries are very different, and there is no great need
for comparable statistics within the Public Administration sector
at the detailed industry level in all three countries. There is
agreement between NAICS Canada and NAICS United States in the Retail
Trade sector at the five-digit level. Further work in this area
also is not a priority for the ECPC. The Finance and Insurance sector
is currently comparable at the 3-, 4-, or 5-digit level with Canada
and Mexico. This sector is the subject of various legislative efforts
in the United States, and significant change in the structure of
the industry may occur in the next five years. For this reason,
the United States would recommend postponing any further work in
Finance and Insurance until 2007 or later.
Revisions
to Construction and Wholesale Trade will create significant disruptions
for data users but are considered worthwhile if lower level comparability
can be achieved with our partners in Canada and Mexico. The ECPC
will strive to minimize any disruptions by revising only those sectors
of critical importance in all three countries where there is currently
two-digit comparability.
Part
III: U.S. Procedures and Solicitation of Proposals for Hierarchies
and Detailed Industries
1.
Proposals for sectoral hierarchies in Construction and Wholesale
Trade should be consistent with the production-oriented conceptual
framework incorporated in the principles of NAICS. When formulating
proposals, please note the hierarchies should contain only those
activities currently included by all three countries in the sector
that is addressed by a proposal. The scope of existing sectors and
industries in NAICS is detailed in the NAICS United States Manual.
Copies of this manual can be purchased from the National Technical
Information Service (NTIS) at (800) 553-6847 or http://www.ntis.gov.
Proposals must be in writing and should include the following information:
(a)
Subsector(s) (3-digit level), and industry group(s) (4-digit level),
detail for the entire sector. These breakouts should be based on
a production-oriented breakout to be used at the higher levels of
the sectoral hierarchy. A narrative description of the production-oriented
justification that forms the basis for a sectoral hierarchy should
be included. These 3-digit and 4-digit breakouts will form the basis
used to create lower level industries. For example, a sectoral proposal
for Construction might include the following detail:
| Sector
23 |
Construction |
| Subsector
231........... |
Wood
Construction.
|
| Industry
Group 2311 |
Wood
Residential Buildings.
|
| Industry
Group 2312 |
Wood
Nonresidential Construction.
|
| Subsector
232.......... |
Masonary
Construction.
|
| Industry
Group 2321 |
Masonry
Residential Buildings.
|
| Industry
Group 2322 |
Masonary
Nonresidential Construction.
|
| Subsector
233........... |
Steel
and Concrete Construction.
|
| Industry
Group 2331 |
Steel
and Concrete Buildings.
|
| Industry
Group 2332 |
Other
Steel and Concrete Construction.
|
In
this hypothetical proposal, the building material and related processes
are the production-oriented justification for higher level breakouts
within the Construction sector. The sectoral hierarchy proposals
may contain information at the NAICS industry (5-digit level) as
well as the national industry level (6-digit), if desired.
(b)
Specific indication of the relationship of the proposed sectoral
hierarchy(ies) to the 1997 NAICS United States sector, subsector,
industry group, NAICS industry, and national level industry detail.
2.
Proposals for new or revised 6-digit industries in the Construction
and Wholesale Trade sectors and the detailed national level industries
for department stores and nonstore retailers 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 establishments or producing units, which means that products
and activities of the same producing unit cannot be separated in
the industry classification system. Proposals must be in writing
and should 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 in accordance with the NAICS production-oriented
industry concept (see ECPC Issues Paper No. 1, ECPC Reports Nos.
1 and 2).
(b)
Specific indication of the relationship of the proposed industry
to existing NAICS United States 6-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 would
be helpful, if available.
Evaluation
Criteria
Proposals
submitted to the ECPC recommending a sectoral hierarchy or requesting
the creation of, or a revision to, a 6-digit industry will be evaluated
using production-oriented criteria. The ECPC and its subcommittees
will evaluate proposals for sectoral hierarchies before evaluating
specific industry proposals. Please note that a detailed industry
proposal that meets the production-oriented conceptual framework
of NAICS may not be accepted if it is in conflict with an accepted
sectoral hierarchy proposal. ECPC Issues Paper No. 4, "Criteria
for Determining Industries," describes some measures that may be
used, e.g., the specialization ratio and the heterogeneity measure
(see also ECPC Report No. 2, "The Heterogeneity Index: A Quantitative
Tool to Support Industry Classification"). Other measures of the
similarity among establishments will be considered and developed
where necessary. For example, a coefficient of variation measure
may be applied where applicable. However, all these statistical
measures will supplement, not supplant, industry expertise and expert
judgments about industry production processes and similarities.
Proposed
industries must also include a sufficient number of companies 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 (see ECPC Issues
Paper No. 3). Proposed changes must be such that they can be applied
by agencies within their normal processing operations.
Proposals
will be exchanged with Statistics Canada and INEGI, and reviewed
jointly in the completion of NAICS. It would be helpful, although
not required, if written proposals for new industries in NAICS present
any available information on whether the proposed industry exists
in Canada or Mexico, and whether the proposal can be implemented
in those countries.
Part
IV: Work Plan
Within
the framework of Parts II and III above, the ECPC intends to begin
the completion of targeted sectors. This notice requests specific
proposals for NAICS. Public comments and input from government agencies
that collect, compile, and use data that are categorized by economic
classifications will contribute to the completion of targeted sectors
in NAICS. The ECPC will charter a subject matter subcommittee to
address wholesale trade proposals and a second subcommittee to address
construction proposals. The Administrative Subcommittee of the ECPC
will address proposals for national industries related to department
stores and nonstore retailers, as well as implementation problems
that may arise. The Administrative Subcommittee will coordinate
and review the efforts of the subject matter subcommittees and submit
detailed recommendations to the ECPC. The completion activities
will take a top down approach to the targeted sectors. First, a
subsector and industry group structure will be developed and agreed
upon by the ECPC, INEGI, and Statistics Canada. Creation of NAICS
and national level industries will be based on the sectoral structures
developed. The specific milestones for additional activities of
the ECPC are as follows:
Publish
Federal Register notice of proposed ECPC recommendations
for public comment. (Fall 1999)
Publish
Federal Register notice of final OMB decisions.
(Spring 2000)
Begin
implementation activities. (Fall 2000)
Part
V: Request for Comments
The
ECPC is seeking comments on: (1) the usefulness and advisability
of completing the Construction and Wholesale Trade sectors in NAICS,
modifying the national industries for department stores and nonstore
retailers, and addressing specific problems that may be identified
in the implementation of NAICS 1997; and (2) the timing of the proposed
completion activities. Using the procedures discussed in Part III
above, the ECPC is also seeking proposals for: (1) the hierarchical
structures of the Construction sector and the Wholesale Trade sector,
(2) new industries for the Construction and Wholesale Trade sectors,
and (3) modifications to the national industries for department
stores and nonstore retailers based on the production-oriented conceptual
framework used in NAICS.
Donald
R. Arbuckle
Acting Administrator and Deputy Administrator,
Office of Information and Regulatory Affairs
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