[Federal Register Volume 79, Number 99 (Thursday, May 22, 2014)]
[Notices]
[Pages 29626-29629]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11914]



[[Page 29625]]

Vol. 79

Thursday,

No. 99

May 22, 2014

Part IV





Office of Management and Budget





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2012 North American Industry Classification System (NAICS)--Updates for 
2017; Notices

  Federal Register / Vol. 79 , No. 99 / Thursday, May 22, 2014 / 
Notices  

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OFFICE OF MANAGEMENT AND BUDGET


2012 North American Industry Classification System (NAICS)--
Updates for 2017

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

ACTION: Notice of Solicitation for Proposals To Revise Portions of 
NAICS for 2017.

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SUMMARY: Under the authority of the Budget and Accounting Procedures 
Act of 1950 (31 U.S.C. 1104(d)) and the Paperwork Reduction Act of 1995 
(44 U.S.C. 3504(e)), the Office of Management and Budget (OMB), through 
its Economic Classification Policy Committee (ECPC), is soliciting 
proposals from the public for changes to the structure and content of 
the North American Industry Classification System (NAICS) for inclusion 
in a potential 2017 revision. There are six parts in the SUPPLEMENTARY 
INFORMATION section below. Part I provides background on NAICS. Part II 
includes a solicitation of proposals for new and emerging industries. 
Part III solicits public comments on electronic dissemination of the 
potential revision of NAICS for 2017. Part IV solicits public comments 
on updating the structure of the oil and gas industries in NAICS 2012. 
Part V provides an update on the classification of manufacturing units 
that outsource. Part VI presents notification of a method to publicize 
corrections for errors and omissions that are identified in NAICS.
    In soliciting comments about revising NAICS, the ECPC does not 
intend to open the entire classification for substantial change in 
2017. The ECPC will consider public comments and proposals for changes 
or modifications that advance the goals of NAICS as outlined in Part I 
of the SUPPLEMENTARY INFORMATION section below. The ECPC is also 
seeking and will consider comments related to consistent classification 
in an era of greater specialization and globalization.

DATES: To ensure consideration of your comments or proposals related to 
the potential revision of NAICS for 2017 as detailed in this notice, 
comments must be in writing and received no later than July 21, 2014. 
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 email (discussed in Addresses below).

ADDRESSES: Correspondence concerning the ECPC's intent to review and 
possibly revise NAICS for 2017, comments on the business organization 
clarifications, and all proposals for new industries in NAICS for 2017 
should be sent to John Murphy, Chair, Economic Classification Policy 
Committee, Census Bureau, Room 8K157, Washington, DC 20233-6500. 
Because of delays in the receipt of regular mail related to security 
screening, respondents are encouraged to also submit comments by email 
to [email protected] or by fax at (301) 763-8744. Mr. Murphy 
can be reached at (301) 763-5172.
    Comments may also be sent via http://www.regulations.gov--a Federal 
E-Government Web site that allows the public to find, review, and 
submit comments on documents that agencies have published in the 
Federal Register and that are open for comment. Simply type ``NAICS for 
2017'' (in quotes) in the Rules, Comments, Adjudications or Supporting 
Documents search box, click Search, click Comment Now!, and follow the 
instructions for submitting comments.
    All comments regarding this notice received via the Web site, 
email, fax, hardcopy, or other means, are part of the public record as 
submitted. For this reason, do not include in your comments information 
of a confidential nature, such as sensitive personal information or 
proprietary information. If you send an email comment, your email 
address will be automatically captured and included as part of the 
comment that is placed in the public docket. Please note that responses 
to this public comment request containing any routine notice about the 
confidentiality of the communication will be treated as public comments 
that may be made available to the public notwithstanding the inclusion 
of the routine notice.
    Please consider including contact information and a phone number or 
email address with your comments to facilitate follow-up if necessary.
    Electronic Availability: This document is available on the Census 
Bureau Web site at http://www.census.gov/naics. This site contains 
previous NAICS United States Federal Register notices, ECPC Issues 
Papers, ECPC Reports, the structure and industry definitions for NAICS 
United States 2012, 2007, 2002, and 1997, and related documents.
    Public Review Procedure: All comments and proposals received in 
response to this notice will be available for public inspection at the 
Census Bureau, 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 2017 
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, Census Bureau, Room 8K157, Washington, 
DC 20233-6500. Mr. Murphy can be reached at (301) 763-5172, by fax at 
(301) 763-8744, or by email at [email protected].

SUPPLEMENTARY INFORMATION: The SUPPLEMENTARY INFORMATION section of 
this notice is divided into six parts. Part I provides background on 
NAICS; Part II includes a solicitation for proposals for new and 
emerging industries; Part III requests public input on electronic-only 
dissemination of the potential revision of NAICS for 2017; Part IV 
requests public input on updating the structure of the oil and gas 
industries; Part V provides an update on the classification of units 
that outsource manufacturing transformation activities; and Part VI 
notifies the public of the location where corrections of identified 
errors or omissions in NAICS will be publicized.

Part I. Background of NAICS

    NAICS is a system for classifying establishments (individual 
business locations) by type of economic activity. Its purposes are: (1) 
To facilitate the collection, tabulation, presentation, and analysis of 
data relating to establishments; and (2) to promote uniformity and 
comparability in the presentation and analysis of statistical data 
describing the North American economy. Federal statistical agencies use 
NAICS to collect or publish data by industry. It is also widely used by 
State agencies, trade associations, private businesses, and other 
organizations.
    Mexico's Instituto Nacional de Estad[iacute]stica y 
Geograf[iacute]a (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 changes in 
technology and in the growth and diversification of services in recent 
decades. Industry statistics presented using NAICS 2012 are comparable, 
to a large extent, with statistics compiled according to the

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latest revision of the United Nations' International Standard 
Industrial Classification (ISIC, Revision 4).
    For these 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. Please note 
that NAICS is designed and maintained solely for statistical purposes 
to improve and keep current this Federal statistical standard. 
Consequently, although the classification may also be used for various 
nonstatistical purposes (e.g., for administrative, regulatory, or 
taxation functions), the requirements of government agencies or private 
users that choose to use NAICS for nonstatistical purposes play no role 
in its development or revision.
    The four principles that guided the initial development of NAICS 
were:
    (1) NAICS is erected on a production-oriented conceptual framework. 
This means that producing units that use the same or similar production 
processes are grouped together in NAICS.
    (2) NAICS gives special attention to developing production-oriented 
classifications for (a) new and emerging industries, (b) service 
industries in general, and (c) industries engaged in the production of 
advanced technologies.
    (3) Time series continuity is maintained to the extent possible.
    (4) The system strives for compatibility with the two-digit level 
of the International Standard Industrial Classification of All Economic 
Activities (ISIC, Rev. 3) of the United Nations.
    The ECPC is committed to maintaining the principles of NAICS as it 
develops further refinements. NAICS uses a hierarchical structure to 
classify establishments from the broadest level to the most detailed 
level using the following format:

------------------------------------------------------------------------
 
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Sector........................  2-digit..........  Sectors represent the
                                                    highest level of
                                                    aggregation. There
                                                    are 20 sectors in
                                                    NAICS.
Subsector.....................  3-digit..........  Subsectors represent
                                                    the next, more
                                                    detailed level of
                                                    aggregation. There
                                                    are 99 subsectors in
                                                    NAICS.
Industry Group................  4-digit..........  Industry groups are
                                                    more detailed than
                                                    subsectors. There
                                                    are 312 industry
                                                    groups in NAICS
                                                    2012.
NAICS Industry................  5-digit..........  NAICS industries, in
                                                    most cases,
                                                    represent the lowest
                                                    level of three-
                                                    country
                                                    comparability. There
                                                    are 713 five-digit
                                                    industries in NAICS
                                                    2012.
National Industry.............  6-digit..........  National industries
                                                    are the most
                                                    detailed level, and
                                                    represent the
                                                    national level
                                                    detail. There are
                                                    1,065 national
                                                    industries in NAICS
                                                    United States 2012.
------------------------------------------------------------------------

    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). OMB's final 
decisions for the adoption of NAICS for the United States were 
published in the Federal Register on April 9, 1997 (62 FR 17288-17337). 
Subsequent NAICS revisions in 2002, 2007, and 2012 were more modest. 
Complete details of those revisions were published in the Federal 
Register. Revisions for 2002 were published on April 20, 2000 (65 FR 
21242-21282), revisions for 2007 were published on March 16, 2006 (71 
FR 28532-28533), and revisions for 2012 were published on August 17, 
2011 (76 FR 51240-51243).
    The development of NAICS represented a significant improvement over 
the previous industry classification systems used in North America. To 
ensure the accuracy, timeliness, and relevance of the classification, 
NAICS is reviewed every five years to determine what, if any, changes 
are required. The ECPC recognizes the costs involved when implementing 
industry classification revisions in statistical programs and the costs 
for data users when there are disruptions in the availability of data. 
The ECPC also recognizes the economic, statistical, and policy 
implications that arise when the industry classification system does 
not identify and account for important economic developments. Balancing 
the costs of change against the potential for more accurate and 
relevant economic statistics requires significant input from data 
producers, data providers, and data users.

Part II. New and Emerging Industries

    NAICS was developed to be a dynamic industry classification. Every 
five years, the classification is reviewed to determine the need to 
identify new and emerging industries. The ECPC is soliciting public 
comments on the advisability of revising NAICS for new and emerging 
industries in 2017 and soliciting proposals for these new industries.
    When developing proposals for new and emerging industries, please 
note that there are two separate economic classification initiatives 
underway in the United States. NAICS, the industry classification, is 
the subject of this notice, while the complementary North American 
Product Classification System (NAPCS) initiative is currently in 
development. The NAPCS product system described below will complement 
the NAICS industry system and provide an alternate way of classifying 
output.
    NAICS was developed to classify units according to their production 
function. NAICS results in industries that group units undertaking 
similar activities using similar resources but does not necessarily 
group all similar products or outputs. NAPCS is being developed to 
classify the outputs of units, or in other words their products or 
transactions, within a demand-based conceptual framework. For example, 
the hypothetical product of a flu shot can be provided by a doctor's 
office, a hospital, or a walk-in clinic. Because these three units are 
classified to three different NAICS industries, data users who want 
information about all flu shots provided must be able to identify the 
individual products coming out of the units, which NAPCS is designed to 
do. Thus, in many cases, the need for specific statistical data can be 
met by aggregating product data across industries rather than by 
creating a new industry. This is particularly true with NAICS, which 
groups establishments into industries based on their primary production 
function. Proposals for new industries in NAICS for 2017 will be 
evaluated within the context of the industry classification system to 
determine the most appropriate resolution. For a detailed description 
of the NAPCS initiative, see the April 16, 1999, Federal Register 
notice (64 FR 18984-18989) available at http://www.census.gov/napcs.
    Proposals for new industries will be evaluated using a variety of 
criteria. As previously mentioned, each proposal will be evaluated 
based on the

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application of the production function concept, its impact on 
comparability within North America and with other regions, and its 
impact on time series. For any proposals that cross three-country 
levels of agreement, negotiations with Canada and Mexico, our partners 
in NAICS, will also influence the ECPC's recommendations on those 
proposals. In addition, other criteria may affect recommendations for 
adoption. From a practical standpoint, industries must be of 
appropriate size. At the national level, this is generally not a major 
concern but there are a variety of statistical programs that produce 
industry data at the regional, State, metropolitan area, or even county 
or local level. Proposed industries must include a sufficient number of 
establishments so that Federal agencies can publish industry data 
without disclosing information about the operations of individual 
firms. The ability of government agencies to classify, collect, and 
publish data on the proposed basis will also be taken into account. 
Proposed changes must be such that they can be applied by agencies 
within their normal processing operations. Any recommendations for 
change forwarded by the ECPC for consideration will also take into 
account the cost of making the changes. These costs can be considerable 
and the availability of funding to make changes is critical. The 
budgetary environment will be considered when the ECPC makes 
recommendations. As mentioned above, certain proposals may be more 
adequately addressed through the identification and collection of 
product data.
    Proposals for new or revised industries should be consistent with 
the production-oriented conceptual framework incorporated into the 
principles of NAICS. When formulating proposals, please note that an 
industry classification system groups the economic activities of 
producing units, which means that the activities of similar producing 
units cannot be separated in the industry classification system.
    Proposals must be in writing and include the following information:
    (a) Specific economic activities to be covered by the proposed 
industry, the proposed industry's production processes, its specialized 
labor skills, and any unique materials used. This detail should 
demonstrate that the proposed industry will group establishments with 
similar production processes that are unique and clearly separable from 
the production processes of other industries.
    (b) Relationship of the proposed industry to existing NAICS United 
States 2012 six-digit national industries.
    (c) Documentation of the size and importance of the proposed 
industry in the United States.
    (d) Information about the proposed industry in Canada and Mexico if 
available.
    Proposals will be collected, reviewed, and analyzed. As necessary, 
proposals for change will be negotiated with our partners in Canada and 
Mexico. When this process is complete, the OMB will publish a Federal 
Register notice that contains the ECPC recommendations for additional 
public comment prior to a final determination of changes to NAICS for 
2017.

Part III. Electronic Dissemination of NAICS 2017

    Due to increasing printing costs and the accessibility of 
information on the Internet, the ECPC is considering disseminating 
NAICS United States 2017 electronically on the official NAICS Web site 
(http://www.census.gov/naics) and discontinuing printed publications. 
The ECPC believes that this is an appropriate time to solicit public 
input on the advisability of such a change.

Part IV. Updating the Structure of the Oil and Gas Industries

    The ECPC is soliciting proposals for updating the structure of the 
oil and gas industries in Subsector 211, Oil and Gas Extraction. Since 
first defined in NAICS 1997, these industries continue to advance in 
the equipment and processes employed to produce oil and gas. With these 
changes, the ECPC is soliciting proposals on how the NAICS structure in 
this area can better reflect these advancements. Of particular interest 
are comments concerning onshore and offshore extraction, as well as 
conventional and unconventional methods of extraction. Proposals for 
change will be negotiated with our partners in Canada and Mexico, as 
trilateral agreement extends to the 5-digit NAICS industry level in 
this area of the structure.

Part V. Update on the Treatment of Manufacturing Units That Outsource 
Transformation

    Recent years have witnessed rapid and widespread specialization in 
goods manufacturing as global competition has motivated producers to 
seek more efficient production methods. This has resulted in 
outsourcing manufacturing transformation activities (i.e., the actual 
physical, chemical or mechanical transformation of inputs into new 
outputs) to specialized establishments, both foreign and domestic. 
NAICS 2007 did not provide clear guidance on classification of units 
that control the entire process but subcontract out all manufacturing 
transformation activities. To address this shortcoming, the ECPC 
chartered a subcommittee to study the issue and provide classification 
guidance that would result in consistent classification of outsourcing 
establishments and comparable data for these outsourcing establishments 
across various statistical programs. As a result of that research, the 
ECPC recommended to OMB a classification of establishments that bear 
the overall responsibility and risk for bringing together all processes 
necessary for the production of a good in the manufacturing sector, 
even if the actual transformation is 100 percent outsourced.
    OMB recognized that, from a conceptual standpoint, at the most 
aggregate level, goods producers arrange for and bring together all of 
the factors of production necessary to produce a good. Goods producers 
accept the entrepreneurial risk of producing and bringing goods to 
market. When individual steps in the complete process are outsourced, 
an establishment should remain classified in the manufacturing sector. 
Accordingly, OMB accepted the ECPC recommendation that factoryless 
goods producers (FGPs) be classified in manufacturing.
    Implementing the guidance to classify establishments that outsource 
manufacturing transformation in the manufacturing sector of NAICS will 
potentially affect multiple agencies and programs within those 
agencies. Variations in classification from differing interpretations 
prior to OMB's guidance will result in differing impacts.
    It is important to both statistical agencies and other data users 
to be able to distinguish between definitional and economic changes so 
that they can create continuous time series and accurately analyze data 
changes over time. The inclusion of revenues from FGP activities in 
manufacturing will effectively change the traditional definition of 
manufacturing, and is expected to affect statistical estimates at the 
national, State and regional levels. This includes statistical outputs 
such as the value of shipments for manufacturing industries, value of 
sales for wholesale trade industries, product data, material costs and 
other expenses, price indexes, labor and multifactor productivity 
series, and the national accounts. The ability to consistently identify 
establishments as FGPs and the

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potential impact on various programs are currently being evaluated.
    The following paragraphs present a partial list of the statistics 
that are subject to change based on this decision.

Bureau of Labor Statistics (BLS)

    Quarterly Census of Employment and Wages (QCEW), Current Employment 
Statistics (CES), Job Openings and Labor Turnover Survey (JOLTS), 
Producer Price Index Program (PPI), Major Sector Productivity, Industry 
Productivity, Occupational Employment Statistics (OES), and other BLS 
programs that produce estimates using the NAICS classification system.

Bureau of Economic Analysis (BEA)

    Industry Accounts (including Input-Output tables), International 
Area, National Income and Product Accounts, Regional Accounts, and 
other BEA programs that produce estimates using the NAICS 
classification system.

Census Bureau

    Industry statistics from the Economic Census; Annual and Monthly 
Wholesale Trade Surveys; the Annual Survey of Manufacturers; Monthly 
Manufacturers' Inventories, Shipments, and Orders (M3); Manufacturing 
and Energy Consumption Survey (MECS); County Business Patterns (CBP); 
Quarterly Survey of Plant Capacity Utilization (QPC); Annual Capital 
Expenditures Survey (ACES); Business R&D and Innovation Survey (BRDIS); 
Business Expense Survey (BES); Quarterly Financial Report (QFR); and 
other series that are published using NAICS.
    The level of impact will vary across programs and agencies based on 
the intensity of outsourcing.
    The decision to classify FGPs in manufacturing was included in the 
NAICS United States 2012 Manual. OMB understood the considerable cost 
and lead-time required to implement this decision consistently across 
statistical programs using statistically sound methods. Thus, 
statistical programs were allowed to delay implementation while 
studying and analyzing the issue. If FGP identification and data 
collection are determined to be feasible, statistical programs are 
expected to implement this change for data reference year 2017.
    While research is continuing, the ECPC is soliciting additional 
public comments on the advisability of classifying FGPs in the 
manufacturing sector of NAICS. A more complete discussion of the 
recommendation is available at: http://www.census.gov/eos/www/naics/fr2010/ECPC_Recommendation_for_Classification_of_Outsourcing.pdf. 
To the extent possible, comments should address the conceptual 
conclusions presented in the recommendation referenced above. While the 
final impact of this recommendation is not yet known, the scope of 
program and data changes, including breaks in time series, must be 
weighed against the value of more comparable statistics related to this 
phenomenon. The ECPC is also soliciting public comments on the balance 
between change and comparability.

Part VI. Changes to Account for Errors and Omissions in NAICS

    No significant errors or omissions have been identified in NAICS 
2012. Any errors or omissions that are identified in NAICS in the 
future will be corrected and posted on the official NAICS Web site at 
http://www.census.gov/naics.

Howard A. Shelanski,
Administrator, Office of Information and Regulatory Affairs.
[FR Doc. 2014-11914 Filed 5-21-14; 8:45 am]
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