[Federal Register Volume 67, Number 249 (Friday, December 27, 2002)]
[Notices]
[Pages 79500-79506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32663]



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Part IX





Office of Management and Budget





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2002 North American Industry Classification System--Updates for 2007; 
Notice

  Federal Register / Vol. 67, No. 249 / Friday, December 27, 2002 / 
Notices  

[[Page 79500]]


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OFFICE OF MANAGEMENT AND BUDGET


2002 North American Industry Classification System--Updates for 
2007

AGENCY: Office of Management and Budget, Executive Office of the 
President.

ACTION: Notice of request for comments related to potential revisions 
to the North American Industry Classification System (NAICS) for 2007.

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SUMMARY: Under Title 44, U.S.C. 3504(e), the Office of Management and 
Budget, through its Economic Classification Policy Committee (ECPC), is 
soliciting public comment on several questions related to a potential 
revision of the North American Industry Classification System (NAICS) 
for 2007. First, the ECPC is requesting feedback on the relative 
priority that should be assigned to each of the four underlying 
principles of NAICS. Second, the ECPC is seeking public comment on 
three potential goals for NAICS: increasing NAICS comparability within 
North America; accounting for new and emerging industries; and 
assessing the desirability of achieving greater future comparability 
with the industry classification systems used in Europe and the United 
Nations. The ECPC is soliciting public comment on each of these goals 
and how they should be ranked. Background information about NAICS' 
underlying principles and potential goals, as well as specific 
questions soliciting comments and suggestions, are provided in Parts I 
through IV below. Third, the ECPC is seeking proposals for new and 
emerging industries for consideration in potential revisions to NAICS 
for 2007. Finally in this notice the ECPC is notifying the public about 
procedures to announce updates to NAICS 2002 for any identified errors 
and omissions.
    In Part I, the ECPC is soliciting public comment on the priority or 
weight that should be assigned to the four principles of NAICS: apply 
the production-oriented conceptual framework; recognize new and 
emerging industries; maintain time series continuity to the extent 
possible; and strive for international comparability. In Part II, the 
ECPC is soliciting public comment on the need to expand North American 
comparability during a 2007 revision of NAICS. Part III includes a 
solicitation for comment on the need to identify new and emerging 
industries. Part IV solicits public comment on the desirability of 
increasing international comparability and approaches that could be 
used. Part V solicits proposals that identify new and emerging 
industries. Part VI presents notification of a method to publicize 
corrections for errors and omissions that are identified in NAICS 2002.
    In soliciting public comment about revising NAICS, the ECPC does 
not intend to open the entire classification for substantial change in 
2007. The ECPC will consider public comments and proposals for changes 
or modifications that advance the goals of greater comparability within 
North America and that identify new and emerging industries. The ECPC 
is also seeking comments on the desirability of greater comparability 
with the industry classifications used in Europe and the United Nations 
as well as the preferred approach for obtaining greater international 
comparability. Although changes to NAICS solely for the purpose of 
enhancing international comparability are not expected to be a part of 
the NAICS 2007 revision, changes that improve NAICS in other ways and 
also enhance comparability will be considered. The comments received by 
the ECPC regarding the desirability of international comparability will 
be used to compile a set of recommendations for change to the 
international classification systems.

DATES: To ensure consideration of comments or proposals related to the 
potential revision of NAICS for 2007 detailed in this notice, comments 
must be submitted in writing. Comments on Parts I through IV should be 
submitted as soon as possible but no later than January 27, 2003. 
Comments on Part V should be submitted as soon as possible but no later 
than March 28, 2003. Please be aware of delays in mail processing at 
Federal facilities due to tightened security. Respondents are 
encouraged to send both a hard copy and a second copy via fax or e-
mail.

ADDRESSES: Comments and proposals in response to this notice should be 
addressed to John Murphy, Chair, Economic Classification Policy 
Committee, Bureau of the Census, Room 2641-3, Washington, DC 20233-
6500. It is suggested that written submissions be provided by e-mail to 
[email protected] or by fax at (301) 457-1343. Mr. Murphy 
can be reached at (301) 763-5172.
    Electronic Availability: This document is available on the Internet 
from the Census Bureau Internet site at http://www.census.gov/epcd/naics07/naics07fr.pdf. The NAICS site <http://www.census.gov/epcd/www/naics contains previous NAICS United States Federal Register 
notices, ECPC Issues Papers, ECPC Reports, the current structure of 
NAICS United States 2002, and related documents.
    Public Review Procedure: All comments and proposals received in 
response to this notice will be available for public inspection at the 
Bureau of the Census, Suitland, Maryland. Please telephone the Census 
Bureau at (301) 763-5172 to make an appointment to enter the Federal 
Center. OMB will publish all ECPC recommendations for changes to NAICS 
for 2007 resulting from this notice in the Federal Register for review 
and comment prior to final action.

FOR FURTHER INFORMATION CONTACT: John Murphy, Chair, Economic 
Classification Policy Committee, Bureau of the Census, Room 2641-3, 
Washington, DC 20233-6500. Mr. Murphy can be reached at (301) 763-5172, 
by fax at (301) 457-1343, or by e-mail at [email protected].

SUPPLEMENTARY INFORMATION: The supplementary information section of 
this notice is divided into six parts and an appendix. Part I provides 
background on NAICS 2002 and solicits comments on the prioritization of 
the four principles of NAICS; Part II solicits views regarding the 
advisability of increasing North American comparability; Part III 
solicits comments on the advisability of revising the classification 
for new and emerging industries; Part IV solicits input on the 
desirability of increased international comparability of industry 
statistics; Part V solicits proposals for new and emerging industries; 
and Part VI notifies the public of the location where the correction of 
errors or omissions for NAICS 2002 will be publicized.

Part I: Background of NAICS 2002

    The North American Industry Classification System (NAICS) is a 
system for classifying establishments (individual business locations) 
by type of economic activity in Canada, Mexico, and the United States. 
Its purposes are: (1) to facilitate the collection, tabulation, 
presentation, and analysis of data relating to establishments, and (2) 
to promote uniformity and comparability in the presentation and 
analysis of statistical data describing the North American economy. 
NAICS is used by Federal statistical agencies that collect or publish 
data by industry. It is also widely used by State and local agencies, 
trade associations, private businesses, and other organizations.
    Mexico's Instituto Nacional de Estad[iacute]stica, Geograf[iacute]a 
e Inform[iacute]tica (INEGI), Statistics Canada, and the United States 
Office of Management and

[[Page 79501]]

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 are 
comparable, to a limited extent, 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 meaning of sectors and subsectors is provided below.) 
The portions of NAICS that are not comparable at the detailed industry 
level are delineated in Part II, below.
    The four principles of NAICS are:
    (1) NAICS is erected on a production-oriented conceptual framework. 
This means that producing units that use the same or similar production 
processes are grouped together in NAICS.
    (2) NAICS gives special attention to developing production-oriented 
classifications for (a) new and emerging industries, (b) service 
industries in general, and (c) industries engaged in the production of 
advanced technologies.
    (3) Time series continuity is maintained to the extent possible.
    (4) The system strives for compatibility with the two-digit level 
of the International Standard Industrial Classification of All Economic 
Activities (ISIC Rev. 3) of the United Nations.
    The ECPC is committed to maintaining the principles of NAICS as it 
develops further refinements. The current request for public comment on 
questions related to a potential revision of NAICS in 2007 results 
directly from the application of the four NAICS principles.
    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 100
                                                                 subsectors in NAICS.
Industry Group......................  4-digit.................  Industry groups are more detailed than
                                                                 subsectors. There are 317 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 725 five-digit
                                                                 industries in NAICS.
National Industry...................  6-digit.................  National industries are the most detailed level
                                                                 of NAICS. These industries represent the
                                                                 national level detail necessary for economic
                                                                 statistics in an industry classification. There
                                                                 are 1179 U.S. industries in NAICS United
                                                                 States, 2002.
----------------------------------------------------------------------------------------------------------------

    The implementation of the first vintage of NAICS--NAICS 1997--
affected almost half of the industries that were available for use 
under the 1987 Standard Industrial Classification (SIC). The 
application of new concepts, new definitions, and the new structure was 
very disruptive to all users of the industry classification. By 
comparison, the changes for 2002 were limited in number and confined to 
three of the twenty NAICS sectors and 10 percent of the NAICS 
industries. In 2002, NAICS was revised to improve comparability in the 
Construction sector for the three countries and changes were made to 
identify Internet service providers (ISPs), web search portals, 
Internet auctions, and other activities not adequately addressed in 
NAICS 1997. Complete details on the 2002 revisions were published in an 
April 20, 2000, Federal Register notice (65 FR 21242-21282). The 
industry changes for 2002 did lead to additional disruption in Federal 
statistics because of varying implementation schedules for statistical 
agencies. Implementation of NAICS has extended from 1997 with complete 
implementation of the NAICS 2002 changes anticipated in 2006 or later. 
During this time period, various statistics will continue to be 
produced using the 1987 SIC, NAICS 1997, or NAICS 2002. The variation 
in implementation schedules is unavoidable because of program 
requirements but does cause problems for data users when their source 
data are based on different classifications or different versions of 
the classification. Additional time series disruptions have been 
limited because industry changes for 2002 did not significantly cross 
sector lines. A current implementation schedule for the agencies 
participating in the ECPC is available at: http://www.census.gov/epcd/www/naicsfed.htm.
    NAICS represents a significant improvement over the previous 
classification systems used in North America. To ensure the relevance, 
accuracy, and timeliness of the classification, NAICS is reviewed every 
five years to determine what, if any, changes are required. The ECPC 
recognizes the costs involved when implementing industry classification 
revisions in statistical programs and the costs for data users when 
there are disruptions in the comparability of data. The ECPC also 
recognizes the economic, policy, and statistical implications that 
arise when the industry classification system does not identify and 
account for important economic developments. Balancing the costs of 
change against the potential for more relevant and accurate economic 
statistics requires significant input from data producers, data 
providers, and data users.
    As the ECPC considers possible changes for NAICS 2007, it wants to 
ensure that changes to the industrial classification match the needs of 
data producers and users over time. The ECPC is soliciting comments on 
the priority and weight that should be assigned to each of the four 
principles of NAICS:
    1. Apply the production-oriented conceptual framework;
    2. Recognize new and emerging industries;
    3. Maintain time series continuity to the extent possible; and
    4. Strive for international comparability.

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Part II. Increasing the North American Comparability of NAICS

    The following NAICS sectors are currently comparable only at the 
sector (two-digit) level: utilities, wholesale trade; retail trade; and 
public administration. Other areas where comparability is somewhere 
between the sector level and the NAICS industry (five-digit) level are: 
finance and insurance; 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 increasing the comparability of 
the NAICS structures being used in the three countries. The ECPC also 
recognizes the time sensitive nature of any revisions for 2007 and the 
costs of change. For this reason, the ECPC is soliciting public comment 
on the advisability of work to complete those areas of NAICS where 
comparability is currently at the two-digit (sector) level only. It 
should be noted that although there is only two-digit comparability for 
Public Administration, the governmental structures in each of the three 
countries are very different, and a need for comparable statistics 
within the Public Administration sector at the detailed industry level 
in all three countries has not been identified. Furthermore Wholesale 
Trade was revised during the NAICS 2002 review and is not a priority 
for the ECPC unless change is needed based on proposals for new and 
emerging industries. In addition, there is a separate agreement between 
Canada and the United States in the Retail Trade sector at the five-
digit level. Although the Utilities sector is of considerable interest 
throughout North America, the current NAICS United States structure is 
appropriate for the current level of deregulation in the utility 
industries, and we have complete agreement with Canada at the five-
digit (NAICS industry) level.
    Because of resource constraints, the ECPC does not plan to increase 
North American comparability at this time. The ECPC is soliciting 
public comment on this position.

Part III. New and Emerging Industries

    NAICS was developed to be a dynamic industry classification. Every 
five years, the classification is reviewed to determine the need to 
identify new and emerging industries. The ECPC has not, to date, 
identified specific changes that are needed. The ECPC is soliciting 
public comments on the advisability of revising NAICS for new and 
emerging industries in 2007 and soliciting proposals for these new 
industries.
    When developing proposals for new and emerging industries, please 
note that there are two separate economic classification initiatives 
underway in the United States. NAICS, the industry classification, is 
the subject of this notice. The North American Product Classification 
System (NAPCS) will complement the NAICS industry system and provide an 
alternate way of classifying output. Comments on NAPCS are not being 
sought through this notice. NAICS was developed to classify units 
according to their production function. NAICS results in industries 
that group units undertaking similar activities using similar resources 
but does not necessarily group all similar products or outputs. NAPCS 
is being developed to classify the productive economic activities of 
units through their products or transactions, within a demand-based 
conceptual framework. For example, the hypothetical product of a flu 
shot can be provided by a doctor's office, a hospital, or a walk-in 
clinic. These three units are classified to three different NAICS 
industries; if data users want information about all flu shots 
provided, they must be able to identify the individual products coming 
out of the units. In many cases, the need for specific statistical data 
is better addressed with product data crossing industries rather than 
with the creation of a new industry. This is particularly true with 
NAICS, which groups establishments into industries based on their 
production function. Proposals for new industries in NAICS for 2007 
will be evaluated within the context of both the industry and product 
classification systems to determine the most appropriate resolution. 
Certain proposals may be more adequately addressed through the 
identification and collection of product data. For a detailed 
description of the NAPCS initiative, see the April 16, 1999, Federal 
Register notice (64 FR 18984-18989) available at http://www.census.gov/napcs.

Part IV. Comparability With the Industry Classifications Used in Europe 
and the United Nations

    As described in Part I of this notice, one of the principles of 
NAICS is comparability with the International Standard Industrial 
Classification (ISIC) of the United Nations. The Statistical 
Classification of Economic Activities in the European Community (NACE) 
is derived directly from ISIC. Over the past two years, an 
international working group with representatives from Eurostat, INEGI 
of Mexico, Statistics Canada, the United Nations, and the United States 
has studied ISIC, NACE, and NAICS. This group has identified the 
current classification systems' similarities and differences, beginning 
with underlying concepts and continuing to the detailed levels. The 
study is a multi-year initiative beginning with a detailed review of 
the systems and continuing in future years with recommendations for 
change to ISIC and potentially changes to NACE and/or NAICS that would 
lead to greater comparability of data resulting from the application of 
these systems. Each year, a review of the status and recommendations 
from this study is conducted with a decision to continue or stop made 
by the sponsoring agencies. The current phase of the study calls for 
public input on the advisability of modifying industrial 
classifications to foster greater international comparability.
    Improved international comparability for NAICS can be attained 
using several different approaches:
    [sbull] Concordance--The simplest approach for improving 
comparability is to create a concordance between ISIC and NAICS and a 
concordance between NACE and NAICS showing differences and similarities 
of the classification systems. While straightforward to construct, 
concordances become problematic because industries or combinations of 
industries in one classification do not link directly to an industry in 
the other classification. Rather it is common for parts of multiple 
industries in one system to link to one or more industries in the other 
system, making it very difficult to separate the ``parts'' from the 
industry total. As one aspect of the comparability study, the working 
group is developing these concordances. Upon their completion, the full 
concordances between ISIC and NAICS U.S. and NACE and NAICS U.S. will 
be available for review at: http://www.census.gov/epcd/naics02/concordances.
    [sbull] Limited Changes in NAICS--A second approach is to aim for

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comparability at sectoral levels such as manufacturing, retail trade, 
and services or at some level below the sector level. This approach 
will require changes to the underlying classification systems and would 
require changes to specific industries, sometimes creating new 
industries or moving part of one industry to another industry. The 
international working group has developed an illustrative hypothetical 
scenario that represents one way that the differences in 
classifications could be resolved. The scenario, summarized in Appendix 
I of this notice, creates a structure separate from NAICS that could 
form the basis for a recommendation for a new structure for ISIC. With 
this scenario, comparability could be obtained for 290 detailed 
groupings and 94 related aggregations of those detailed groupings by 
making adjustments to 45 NAICS U.S. national industries. The scenario 
structure would redefine the ISIC industries and bring them into 
agreement with the principles and concepts of NAICS. When combined with 
the 45 changes to NAICS U.S. summarized in Appendix I, the results 
would reduce or eliminate the many-to-many relationships associated 
with moving parts of industries. This scenario is presented as an 
illustration of how comparability could be improved while minimizing 
changes to NAICS. It does not represent the position of the United 
States or the statistical agencies represented on the ECPC. The 
scenario is exactly that, an illustration developed using the 
principles of NAICS as one possible way to resolve the differences 
presented in the concordances prepared by the working group if 
comparability beyond those concordances is determined to be desirable 
based on the comments received in response to this notice.
    [sbull] New Common Classification System--Another approach would be 
to adopt a single classification system and associated numbering system 
that all countries and all statistical agencies would use. This 
approach is deemed to be infeasible because of its cost, significant 
differences in the underlying conceptual foundations of existing 
classification systems, and the time it would take to negotiate and 
implement.
    The ECPC is soliciting public comment on several issues related to 
comparability of international statistical data:
    1. The need for greater comparability of international data;
    2. The preferred approach for improving comparability--concordance, 
limited changes in NAICS, or a new common classification system;
    3. The advisability of making changes to NAICS in order to obtain 
greater comparability with NACE and ISIC and the relative amount of 
change that would be supported in order to align with a new 
international standard based on the principles of NAICS; and
    4. The usefulness of the scenario discussed in Appendix I. 
Responses to this query will be used in formulating future 
recommendations for changes to ISIC.

Part V. Proposals To Identify New and Emerging Industries for NAICS 
2007

    The ECPC is soliciting proposals for changes to NAICS United States 
to account for new and emerging industries. Proposals will be 
collected, reviewed, and analyzed. As necessary, proposals for change 
will be negotiated with our partners in Canada and Mexico. When this 
process is complete, OMB will publish a Federal Register notice that 
presents the ECPC recommendations for additional public comment prior 
to a final determination of changes to NAICS for 2007.
    Proposals for new industries will be evaluated using a variety of 
criteria. As previously mentioned, all proposals will be evaluated 
based on the application of the production function, their impact on 
comparability with North America and others, and their effect on time 
series. For any proposals that cross three-country levels of agreement, 
negotiations with Canada and Mexico, our partners in NAICS, will also 
affect the recommendations for those proposals. In addition, other 
criteria may influence recommendations for adoption. From a practical 
standpoint, industries must be of appropriate size. At the national 
level, this is generally not a major concern but there are a variety of 
statistical programs that produce industry data at the regional, State, 
MSA, or even county or local level. Proposed industries must include a 
sufficient number of establishments so that Federal agencies can 
publish industry data without disclosing information about the 
operations of individual firms. The ability of government agencies to 
classify, collect, and publish data on the proposed basis will be taken 
into account. Proposed changes must be such that they can be applied by 
agencies within their normal processing operations. Any recommendations 
for change forwarded by the ECPC for consideration will also take into 
account the cost of making the changes. These costs can be considerable 
and the availability of funding to make changes is a critical 
consideration.
    Proposals for new or revised industries should be consistent with 
the production-oriented conceptual framework incorporated into the 
principles of NAICS. When formulating proposals, please note that an 
industry classification system groups the economic activities of 
producing units, which means that the activities of similar producing 
units cannot be separated in the industry classification system. 
Proposals for changes to NAICS industry classifications must be in 
writing and include the following information:
    (a) Specific detail about the economic activities to be covered by 
the proposed industry, especially its production processes, specialized 
labor skills, and any unique materials used. This detail should 
demonstrate that the proposal groups establishments that have similar 
production processes that are unique and clearly separable from the 
production processes of other industries.
    (b) Specific indication of the relationship of the proposed 
industry to existing NAICS United States six-digit industries.
    (c) Documentation of the size and importance of the proposed 
industry in the United States.
    (d) Information about the proposed industry in Canada and Mexico, 
if available.
    The ECPC is soliciting proposals for specific new and emerging 
industries for consideration during a potential revision to NAICS for 
2007 that conform to the NAICS principles and provide the supporting 
information listed above.

Part VI. Changes To Account for Errors and Omissions in NAICS 2002

    No significant errors or omissions have been identified in NAICS 
2002. Any errors or omissions that are identified in the future will be 
corrected and posted on the official NAICS Web site at http://www.census.gov/naics.

Appendix I. A Possible Scenario for Greater Comparability of Industrial 
Statistics

    A working group with representation from Eurostat, INEGI, 
Statistics Canada, the United Nations Statistics Division, and the 
United States has generated an illustrative scenario of one way to 
bridge the differences between NAICS and ISIC, the international 
standard of the United Nations. This scenario provides differing levels 
of comparability based on the perceived need for comparable data for 
analytical purposes. The hypothetical scenario incorporates 
approximately 94 aggregate categories and 290 comparable

[[Page 79504]]

groupings at the most detailed level. The structure below is a summary 
of the scenario structure compared to NAICS.

------------------------------------------------------------------------
                 NAICS                               Scenario
------------------------------------------------------------------------
11 Agriculture, Forestry, Fishing and    A. Agriculture, Forestry,
 Hunting.                                 Fishing, and Hunting.
21 Mining..............................  B. Mining.
22 Utilities...........................  C. Utilities.
23 Construction........................  D. Construction.
31-33 Manufacturing....................  E-F. Manufacturing.
42 Wholesale Trade.....................  G. Wholesale and Retail Trade.
44-45 Retail Trade.....................
48-49 Transportation and Warehousing...  H. Transportation and Storage.
51 Information.........................  I. Information.
52 Finance and Insurance...............  K. Finance and Insurance.
53 Real Estate and Rental and Leasing..  L. Real Estate and Rental and
                                          Leasing.
54 Professional, Scientific and          M. Professional, Scientific and
 Technical Services.                      Technical Services, (including
                                          management of companies and
                                          enterprises).
55 Management of Companies and
 Enterprises.
56 Administrative and Support and Waste  N. Administrative and Support
 Management and Remediation Services.     Services.
                                         R. Sanitation.
61 Educational Services................  O. Education.
62 Health Care and Social Assistance...  P. Health and Social Services.
71 Arts, Entertainment, and Recreation.  Q. Arts, Entertainment, and
                                          Recreation.
72 Accommodation and Food Services.....  J. Hotels and Restaurants.
81 Other Services (except Public         S. Repair and Maintenance
 Administration).                        T. Other Services.
92 Public Administration...............  U. Public Administration
                                         V. Extra-territorial
                                          Organizations and Bodies
                                         W. Private Households with
                                          Employed Persons.
------------------------------------------------------------------------

    The main concepts of NAICS, including the production function 
orientation, formed the basis for the hypothetical scenario. A number 
of these concepts, as reflected in the scenario, will represent 
considerable disruption for ISIC and NACE but do not affect NAICS. For 
example, the repair and maintenance of all manufactured goods (except 
personal and household goods) is currently included in manufacturing 
for ISIC and NACE but is already a separate sector in NAICS. The 
scenario includes a separate aggregation for repair and maintenance 
facilities that would potentially pull from all manufacturing 
industries in NACE and ISIC. In addition, the repair and maintenance of 
personal and household goods is currently included in the trade area of 
both ISIC and NACE. That would also have to be separately identified or 
moved to a new category under the scenario presented above. A similar 
situation exists for installation of machinery, generally in 
construction in the scenario but in manufacturing for ISIC and NACE.
    Under the scenario, ISIC and NACE would adopt the NAICS treatment 
of the Information sector. This would cause disruption to their 
services and manufacturing sectors (as was the case when NAICS was 
implemented in the United States.) Additionally, ISIC and NACE do not 
currently distinguish between electrical and electronic goods. One of 
the hallmarks of NAICS was an aggregation for ``high tech'' 
manufacturing which includes computers, electronic components, 
technical instrumentation, and similar manufacturing. The scenario 
presented by the working group retains this concept.
    The scenario also contains groupings for mining support services 
and educational support services. These groupings do not currently 
exist in ISIC or NACE. ISIC and NACE would also face considerable 
disruption in creating a grouping for scenic and sightseeing 
transportation that is currently dispersed by mode of transportation.
    On the NAICS side, there are a smaller number of concepts that 
would have to be modified or adopted. The most significant would be the 
creation of a cargo handling grouping that is not dependent on the mode 
of transportation. Currently, NAICS separates cargo handling by the 
mode of transportation served. This change would acknowledge that large 
portions of cargo handling activities are actually multi-modal.
    One potential result of this study is the adoption of a new ISIC 
structure based on the scenario and the concepts of NAICS. NACE is 
derived from ISIC and represents a more detailed breakdown of the ISIC 
structure. This summary of the hypothetical scenario and its impacts is 
based on the concept of the international standard (ISIC) changing and 
the impact on North America and Europe that would be necessary to 
provide data comparable to the new structure of ISIC.

Impacts of the Hypothetical Scenario on the Existing Classifications 
Used in the United States and Europe

    There are 1179 industries in NAICS United States 2002. Of these 
detailed industries, the hypothetical scenario would require 45 to 
split (4 percent). Each affected NAICS sector is listed followed by the 
number of 6-digit industries in that sector. These splits are 
distributed as follows:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Sector 11, Agriculture,        4 (of 64) industry splits.
 Forestry, Fishing and
 Hunting.
Sector 21, Mining............  3 (of 29) industry splits.
Sector 22, Utilities.........  1 (of 10) industry split.
Sector 31-33, Manufacturing..  25 (of 473) industry splits.
Sector 42, Wholesale Trade...  1 (of 71) industry split.
Sector 48-49, Transportation   4 (of 57) industry splits.
 and Warehousing.
Sector 54, Professional,       2 (of 47) industry splits.
 Scientific, and Technical
 Services.

[[Page 79505]]

 
Sector 56, Administrative and  1 (of 43) industry split.
 Support and Waste Management
 and Remediation Services.
Sector 81, Other Services      1 (of 49) industry split.
 (except Public
 Administration).
Sector 92, Public              2 (of 29) industry splits.
 Administration.
                              ------------------------------------------
    Total U.S. industry        45 (of 1179) industry splits.
     splits.
------------------------------------------------------------------------

    Resolution of these splits could involve the identification of new 
separate industries or moving part of one industry to another industry. 
The ECPC prefers the approach of identifying separate industries if at 
all possible within the constraints on industry definition that exist 
in NAICS. Industry classifications must cover the universe of economic 
activities. Splits in the list above may be technical splits that would 
have little or no impact on NAICS time series if moved. For example, 
the split of an industry for manufacturing electric trackless trolley 
buses is not anticipated to affect any NAICS industries because no 
evidence has been found that this activity actually takes place in the 
United States. Similarly, a split for the production of town gas would 
not affect NAICS United States because that activity, while occurring 
in other parts of the world, is no longer significant in the US, if it 
exists at all. These, as well as more significant splits, are included 
in the 45 splits listed above.
    It is important to note that major concepts in NAICS and major 
accomplishments in the identification of service industries are largely 
untouched by this scenario. There are no changes in Sector 51, 
Information; there are two splits in Sector 54, Professional, 
Scientific, and Technical Services (one marginal, one that could create 
two new industries minimizing its impact). Of the 45 industries that 
would need to be split under this scenario, over half are ``other'' or 
``all other'' industries. There are several cases where the industry 
splits are of sufficient size to consider creation of new industries 
for the parts rather than combining the parts with existing industries 
and disrupting additional industries. In the balance of the cases, 
there is either a strong production function justification for the move 
or the industry did not conform to the production function criteria 
used in NAICS. Changes were considered based on the production function 
during the initial development of NAICS but existing industries with no 
request for change were not completely recast, particularly in the 
manufacturing sector. In summary, the 45 split industry portions 
represent various levels of significance. Many of the significant 
changes could represent new industries, thereby minimizing 
implementation effects; smaller changes would need to be added to 
existing industries in NAICS, thereby increasing the number of detailed 
industries with content changes and potential time series breaks.
    There are a number of sectors in NAICS United States that have no 
split industries under the hypothetical scenario. These include Sector 
23, Construction; Sector 44-45, Retail Trade; Sector 51, Information; 
Sector 52, Finance and Insurance; Sector 53, Real Estate and Rental and 
Leasing; Sector 55, Management of Companies and Enterprises; Sector 61, 
Education; Sector 62, Health Care and Social Assistance; Sector 71, 
Arts, Entertainment, and Recreation; and Sector 72, Accommodation and 
Food Services.
    If the detailed changes were implemented as described in the 
scenario by all parties, each would be able to maintain its own 
nomenclature and coding structure but aggregate to a common standard 
using predetermined industry relationships. Comparable building blocks 
would allow automated regrouping or aggregation of NAICS U.S. data to a 
common international standard. The key to this type of conversion is 
the comparability of the building blocks. The scenario developed by the 
working group is one possible way to align the content of the building 
blocks. This scenario represents a minor adjustment to industry details 
for NAICS United States.
    If there were a desire to make only those changes necessary for 
comparability at the aggregated structure level shown in the summary 
above, approximately 10 industries would be split across existing NAICS 
sectors. These splits may or may not be of appropriate size to create 
separate industries. In cases where they are not of sufficient size or 
specialization, the split portion would need to move from one sector to 
another and be combined with an existing industry in the target sector. 
The remaining 35 split industries identified in the scenario would 
require resolution within an existing NAICS sector. Examples of cross 
sector changes included in the scenario are:
    [sbull] Integrated growing of grapes and production of wine would 
move from manufacturing to agriculture;
    [sbull] Long distance water pipelines with no treatment activity 
would move from utilities to transportation;
    [sbull] Factory fish processing ships that also fish (rather than 
serve as collection points for a fleet of related fishing vessels) 
would move from manufacturing to fishing;
    [sbull] Ship hold cleaning services would move from transportation 
to administrative and support services; and
    [sbull] Automobile emission and safety inspection services would 
move from repair and maintenance to professional services.
    The examples above are not exhaustive, but they are reflective of 
the type and significance of changes required under the scenario. A 
full list of the 45 industries that would require content splits under 
this scenario is available for review at: http://www.census.gov/epcd/naics/internatworkgrp.
    There are 503 industries in NACE Rev 1. Of these detailed 
industries, the hypothetical scenario would require 246 to split (49 
percent). These splits are distributed as follows:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Section A, Agriculture,        7 (of 14) industry splits.
 hunting and forestry.
Section B, Fishing...........  2 (of 2) industry splits.
Section C, Mining and          14 (of 16) industry splits.
 quarrying.
Section D, Manufacturing.....  143 (of 241) industry splits.
Section E, Electricity, gas    1 (of 4) industry split.
 and water supply.
Section F, Construction......  7 (of 17) industry splits.
Section G, Wholesale and       9 (of 77) industry splits.
 retail trade; repair of
 motor vehicles, motorcycles
 and personal and household
 goods.
Section H, Hotels and          1 (of 9) industry split.
 restaurants.
Section I, Transport, storage  11 (of 21) industry splits.
 and communication.
Section J, Financial           8 (of 12) industry splits.
 intermediation.

[[Page 79506]]

 
Section K, Real estate,        16 (0f 37) industry splits.
 renting, and business
 activities.
Section L, Public              7 (of 10) industry splits.
 administration and defense;
 compulsory social security.
Section M, Education.........  1 (of 6) industry split.
Section N, Health and social   4 (of 7) industry splits.
 work.
Section O, Other community,    15 (of 28) industry splits.
 social and personal service
 activities.
    Total European NACE        246 industry splits.
     splits.
------------------------------------------------------------------------

    Only 10 of the 20 NAICS sectors include split industries while all 
sections of NACE (except private households and extraterritorial 
organizations and bodies) contain splits.
    A detailed listing of this scenario is available for review at: 
http://www.census.gov/epcd/naics/internatworkgrp. It is important to 
note that this is one view of how comparability could be increased, but 
it does not represent the only option that could be considered during 
future revisions of NAICS in the United States. In addition to the 
detailed hypothetical scenario, the web page contains the detailed 
reports of the working group and other related documentation for 
review.

John D. Graham,
Administrator, Office of Information and Regulatory Affairs.
[FR Doc. 02-32663 Filed 12-26-02; 8:45 am]
BILLING CODE 3110-01-P