[Federal Register Volume 79, Number 153 (Friday, August 8, 2014)]
[Notices]
[Pages 46558-46559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18766]



[[Page 46557]]

Vol. 79

Friday,

No. 153

August 8, 2014

Part III





 Office of Management and Budget





-----------------------------------------------------------------------





2017 North American Industry Classification System (NAICS) Revision; 
Notice

  Federal Register / Vol. 79 , No. 153 / Friday, August 8, 2014 / 
Notices  

[[Page 46558]]


-----------------------------------------------------------------------

OFFICE OF MANAGEMENT AND BUDGET


2017 North American Industry Classification System (NAICS) 
Revision

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

ACTION: Notice Regarding Implementation of the Factoryless Goods 
Producer Classification in NAICS 2017.

-----------------------------------------------------------------------

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) is 
announcing that the Factoryless Goods Producer (FGP) recommendation 
will not be implemented in the 2017 NAICS revision. The August 17, 
2011, Federal Register notice (76 FR 51240-51243) announcing OMB's 
final decisions for NAICS 2012 required Federal statistical agencies to 
implement the FGP classification beginning no later than 2017. However, 
the Economic Classification Policy Committee (ECPC), which advises OMB 
on periodic revisions to NAICS, recently reported to OMB that results 
of preliminary research on the effectiveness of survey questions 
designed to identify Factoryless Goods Producers (FGP) shows 
inconsistent results. These results indicate that questions tested in 
the 2012 Economic Census fail to yield responses that provide accurate 
and reliable identification and classification of FGPs. The ECPC has 
advised that additional research, testing, and evaluation are required 
to find a method for accurate identification and classification of 
FGPs, and that this process could take several years. Given these 
initial research results and the large number of public comments 
submitted on the topic of FGPs, OMB here announces that the FGP 
recommendation will not be implemented in 2017. OMB is taking this 
action now in order to give the affected agencies notice that the 
directive of the August 17, 2011, Federal Register notice (76 FR 51240-
51243) is no longer in force. Without the deadline imposed by the 2017 
NAICS revisions, the relevant statistical agencies will now have the 
opportunity to complete the additional research, testing, and 
evaluation needed to determine the feasibility of developing methods 
for the consistent identification and classification of FGPs that are 
accurate and reliable. This process will also be informed by questions 
raised in public comments. Results of this research, testing, and 
evaluation could lead to a different FGP proposal for consideration or 
implementation. More information about this announcement may be found 
in the SUPPLEMENTARY INFORMATION section below.

DATES: Issue date: August 8, 2014.

ADDRESSES: Correspondence concerning this announcement may be sent to: 
Paul Bugg, 10201 New Executive Office Building, Washington, DC; 
Telephone: 202-395-3095; fax: 202-395-7245; email: [email protected].

FOR FURTHER INFORMATION CONTACT: Paul Bugg, 10201 New Executive Office 
Building, Washington, DC; Telephone: 202-395-3095; fax: 202-395-7245; 
email: [email protected].

SUPPLEMENTARY INFORMATION:
    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 latest 
revision of the United Nations' International Standard Industrial 
Classification (ISIC, Revision 4).
    For these three countries, NAICS provides a consistent hierarchical 
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. Under 
NAICS, each domestic establishment receives a six-digit code that is 
generally comparable across the three countries at the five digit 
level. The sixth digit is reserved for country-specific detail that can 
vary across the three countries. Thus, under NAICS United States, each 
domestic establishment physically located in the United States is 
assigned a six-digit code. Establishments located outside the United 
States, regardless of ownership, are outside the scope of NAICS United 
States and are not coded or included in information collections using 
NAICS.
    Implementation of the Factoryless Goods Producer Classification: 
The August 17, 2011, Federal Register notice (76 FR 51240-51243) 
announcing OMB's final decisions for NAICS 2012 required Federal 
statistical agencies to implement the FGP classification beginning no 
later than 2017. In response to the May 22, 2014, Federal Register 
notice soliciting comments on possible changes to NAICS for 2017 (79 FR 
29626-29629), OMB's ECPC received input from a wide variety of parties. 
These comments included approximately 22,000 individual comments 
addressing Part V of the notice--``Update on the Treatment of 
Manufacturing Units that Outsource Transformation'' (also commonly 
identified in responses as the ``ECPC Factoryless Goods Producer'' 
proposal). Additional information about NAICS, the ECPC, and the FGP 
recommendation is available at www.census.gov\naics.
    OMB appreciates the time and effort that went into preparing these 
responses and offers thanks to all who submitted comments and 
participated in the consultation. The comments will help inform the 
ECPC as it works to find a solution to identifying and classifying FGPs 
consistently. The ECPC, through OMB, will address the comments 
submitted as part of the regular NAICS review process to develop a full 
set of recommendations for the 2017 NAICS revision. However, continuing 
research on agencies' ability to identify FGPs through survey questions 
combined with the large number of comments on this topic indicate that 
agencies need an opportunity to perform additional research, testing, 
and evaluation on FGPs without the burden of simultaneously 
implementing an unsatisfactory approach to the 2012 NAICS FGP decision 
for 2017 reference year data. This announcement to remove the 
requirement for agencies to implement the FGP recommendation by 2017 is 
designed to provide agencies with that opportunity.
    The FGP proposal resulted from the fact that there was no guidance 
on

[[Page 46559]]

where to classify FGPs and, consequently, they could be classified in 
different industries and different sectors by different programs. This 
inconsistent classification and the resulting ambiguity in source data 
may affect the reliability of statistical estimates for these 
industries throughout the statistical system and thereby affect 
measures of economic activity such as GDP, employment, and 
productivity. Inconsistent classification can result in statistical 
estimates that provide false signals to data users and policy makers 
relating to both the magnitude and direction of any economic changes.
    As indicated in the May 22, 2014, Federal Register notice, the 
agencies represented on the ECPC have been conducting research for 
several years on how to consistently identify and classify business 
establishments that are factoryless goods producers. This research 
included special questions in the 2012 Economic Census. During the 
comment period that ran from May 22, 2014, to July 21, 2014, this 
research continued with interviews of 2012 Economic Census respondents 
who answered inquiries on the purchase of contract manufacturing 
services (i.e., outsourcing transformation) from manufacturing, 
wholesale trade, and enterprise support establishments. The interview 
results exhibited enough inconsistency to convince the ECPC that the 
questions, as tested in the 2012 Economic Census, would not yield 
accurate and reliable identification and classification of FGP 
establishments by industry. Additional research is continuing and 
further research, testing, and evaluation are being planned that will 
take place over the next few years to develop a solution for the 
consistent identification and classification of FGPs that is accurate 
and reliable. Results of this research, testing, and evaluation could 
lead to a different FGP proposal for consideration or implementation.

Howard A. Shelanski,
Administrator, Office of Information and Regulatory Affairs.
[FR Doc. 2014-18766 Filed 8-7-14; 8:45 am]
BILLING CODE P