[Federal Register Volume 64, Number 37 (Thursday, February 25, 1999)]
[Notices]
[Pages 9416-9419]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4663]



[[Page 9415]]

_______________________________________________________________________

Part IV





Office of Management and Budget





_______________________________________________________________________



1997 North American Industry Classification System--Completion 
Activities for 2002; Notice

  Federal Register / Vol. 64, No. 37 / Thursday, February 25, 1999 / 
Notices  

[[Page 9416]]



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: [email protected], 
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__J[email protected], 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__J[email protected], 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 Estadistica, Geografae Informatica 
(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

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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

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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............................  Masonry Construction.
Industry Group 2321......................    Masonry Residential
                                            Buildings.
Industry Group 2322......................    Masonry 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

[[Page 9419]]

the production-oriented conceptual framework used in NAICS.
Donald R. Arbuckle,
Acting Administrator and Deputy Administrator, Office of Information 
and Regulatory Affairs.
[FR Doc. 99-4663 Filed 2-24-99; 8:45 am]
BILLING CODE 3110-01-U