[Federal Register Volume 85, Number 38 (Wednesday, February 26, 2020)]
[Notices]
[Pages 11120-11124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03797]
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OFFICE OF MANAGEMENT AND BUDGET
2017 North American Industry Classification System (NAICS)--
Updates for 2022; Update of Statistical Policy Directive No. 8,
Standard Industrial Classification of Establishments; and Elimination
of Statistical Policy Directive No. 9, Standard Industrial
Classification of Enterprises
AGENCY: Office of Information and Regulatory Affairs, Office of
Management and Budget, Executive Office of the President.
ACTION: Notice of solicitation for proposals to revise portions of
NAICS for 2022, solicitation of comments on the update of Statistical
Policy Directive No. 8, and solicitation of comments on the elimination
of Statistical Policy Directive No. 9.
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SUMMARY: The Office of Management and Budget OMB, through its Economic
Classification Policy Committee (ECPC), is seeking comment on potential
changes to the structure and content of the North American Industry
Classification System (NAICS). There are seven 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 the NAICS
treatment of Electronic Shopping in Retail Trade. Part IV asks for
comments on the concept of internet Publishing and Broadcasting and the
potential to eliminate the industry in NAICS 2022. Part V solicits
comments on a proposed revision to OMB's Statistical Policy Directive
No. 8, Standard Industrial Classification of Establishments. Part VI
requests comments on the advisability of withdrawing OMB Statistical
Policy Directive No. 9, Standard Industrial Classification of
Enterprises. Finally, Part VII 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
[[Page 11121]]
open the entire classification system for substantial change in 2022.
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.
DATES: To ensure consideration of comments on this Notice, comments
must be provided in writing no later than 60 days from the publication
date of this notice. Because of delays in the receipt of regular mail
related to security screening, respondents are encouraged to send
comments electronically (see ADDRESSES, below).
ADDRESSES: Submit comments through www.regulations.gov--a Federal E-
Government website 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 ``USBC-2020-0004''
(in quotes) in the Comment or Submission search box, click Go, and
follow the instructions for submitting comments. Comments received by
the date specified above will be included as part of the official
record. Please include the Docket ID (USBC-2020-0004) and the phrase
``2017 North American Industry Classification System (NAICS)--Updates
for 2022 Comments'' at the beginning of your comments. Please also
indicate which questions described in the SUPPLEMENTARY INFORMATION of
this notice are addressed in your comments.
Comments submitted in response to this notice may be made available
to the public and subject to disclosure under the Freedom of
Information Act. For this reason, please 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; however,
www.regulations.gov does include the option of commenting anonymously.
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.
Electronic Availability: Federal Register notices are available
electronically at www.federalregister.gov/. This document is also
available on the NAICS website at 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 2017, 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. OMB
will publish all ECPC recommendations for changes to NAICS for 2022
resulting from this notice in the Federal Register for review and
comment prior to final action.
FOR FURTHER INFORMATION CONTACT: NAICS classification staff may be
reached by email at [email protected]. Please note:
Communication through this email will not be included in the record for
USBC-2020-0004. Comments should be submitted through
www.regulations.gov, as described in the ADDRESSES section above.
For information about this request for comments, contact Kerrie
Leslie, Office of Management and Budget, 9215 New Executive Office
Building, 725 17th St. NW, Washington, DC 20503, telephone (202) 395-
1093.
SUPPLEMENTARY INFORMATION: 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 2022 revision. OMB, through
the ECPC, is also soliciting comments on updating Statistical Policy
Directive No. 8 and eliminating Statistical Policy Directive No. 9.
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 and/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 the 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--
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 2017 are extensively
comparable 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 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.
Four principles that guide NAICS development 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. 4) 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 311 industry
groups in NAICS
2017.
NAICS Industry................ 5-digit.......... NAICS industries, in
most cases,
represent the lowest
level of three-
country
comparability. There
are 709 five-digit
industries in NAICS
2017.
National Industry............. 6-digit.......... National industries
are the most
detailed level and
represent the
national level
detail. There are
1,057 national
industries in NAICS
United States 2017.
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 2022 review will be the fifth since
OMB adopted NAICS in 1997. 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.
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NAICS version Date published Federal Register
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1997............................ April 9, 1997..... 62 FR 17288-17337.
2002............................ January 16, 2001.. 66 FR 3826-3827.
2007............................ May 16, 2006...... 71 FR 28532-28533.
2012............................ August 17, 2011... 76 FR 51240-51243.
2017............................ August 8, 2016.... 81 FR 52584.
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Over time, as the internet became an integral part of conducting
business, two industries in NAICS were created (454111, Electronic
Shopping, and 519130, Internet Publishing and Broadcasting and Web
Search Portals) that delineate based on mode of delivery. As
utilization of the internet evolved, the structure and coding of these
industries in NAICS has also evolved. This leads the ECPC to request
comments on the continued usefulness of the mode of delivery (online
versus in store/print) as an industry delineation criterion in Sections
III and IV.
II. New and Emerging Industries
NAICS is 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 2022
and soliciting proposals for these new industries.
When developing proposals for new and emerging industries, please
note that there are two separate economic classifications in the United
States. NAICS, the industry classification, is the subject of this
notice, while the North American Product Classification System (NAPCS)
is a product classification. The NAPCS product system described below
complements the NAICS industry system and provides an alternate way of
classifying output.
NAICS classifies units according to their production function.
NAICS industries group units undertaking similar activities using
similar resources but does not necessarily group all similar products
or outputs. NAPCS classifies 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 2022 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
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 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
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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 2017 six-digit national industries.
(c) Documentation of the size and importance of the proposed
industry in the U.S.
(d) Information about the proposed industry in Canada and Mexico if
available.
Proposals will be collected, reviewed, and analyzed by the ECPC. 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 2022.
III. E-Commerce and Electronic Shopping in Retail Trade
The ECPC is soliciting comments on the current treatment of
electronic shopping in NAICS and proposals for industry structure
change in the Retail Trade sector. NAICS currently delineates Subsector
454, Nonstore Retailers, for establishments exclusively engaged in
nonstore retail trade. Data users are increasingly interested in the
growth of electronic shopping. However, NAICS Subsector 454 does not
present a clear picture of all online retail trade activity because it
does not include online sales of store retailers. The growth of e-
commerce and the pervasive nature of electronic shopping creates
confusion in classification and results in aggregate data that is hard
to interpret and use for strategic business decisions, policy
decisions, and analysis of changes to industry practices. NAICS
Industry 45411, Electronic Shopping and Mail Order Houses, is defined
as comprising units that sell exclusively from a nonstore format. This
distinction is problematic based on changes in retail trade practices
over the past decade. In short, the industry structure in retail trade
does not necessarily result in all e-commerce retail revenue being
included in nonstore retail. It also does not necessarily result in all
store retail revenue being included in store retail.
Changes in the use of technology and the impacts on the usefulness
of the resulting data require an evaluation of the industry structure
in retail trade. Currently, store retail is delineated by broad product
lines, such as groceries, apparel, hardware, etc. and by specialized
stores versus general merchandise stores such as department stores.
Store retail includes all transactions associated with the location--
in-store customer transactions as well as online transactions credited
to the store even if shipped directly from a distribution center to a
customer.
The growth of online intermediaries performing functions such as
storage, pick and pack, and billing on behalf of retailers creates
additional problems. The expansion of these third party services using
online platforms on behalf of stores further clouds the content and
interpretation of data using the retail trade industry structure in
NAICS broken out by store and nonstore.
Retailers perform an intermediary function to get a product from
the producer to the consumer. It is no longer clear whether the store
vs. nonstore distinction should be determinative for classification
purposes. The increasing prevalence of omni-channel distribution and
variations in reporting patterns result in significant ambiguity in the
interpretation and use of the industry data.
Recent developments include pop up stores, delivery lockers, online
ordering with in-store pick up, store inventory fulfillment of online
orders, online orders in stores when an item is out of stock, and
similar practices. Each of these cases presents ambiguity for
classification of in store and nonstore data.
Any change to the current industry treatment will impact time
series and potential uses of the resulting data presented using NAICS.
While the sector level total will include all retail sales and will not
change, the distribution of those sales at lower levels of aggregation
will change. Changes to the content of store and nonstore retail will
have an impact on industry metrics like same store sales on a year over
year basis and total location sales. Changes could also affect
retailers due to existing terms of leasing arrangements.
There are several possible changes to the retail trade structure to
account for the blurring of modes of sale. The first is to redefine
NAICS 45411 to include establishments primarily rather than exclusively
engaged in online retail sales, with no further changes. This has the
benefit of low disruption to the retail structure but will not
necessarily clarify the content of the resulting data. Another option
is to simply eliminate NAICS Industry 45411, and broadly use the NAICS
industry structure for store retailers, maintaining separate industries
for vending machine operators, fuel dealers, and other direct selling
establishments. This approach would require a product or mode of sale
inquiry below the industry level to identify and track online retail
activity. Some programs that use NAICS could accommodate subindustry
inquiries but major employment and productivity programs generally
produce data at the industry level only.
IV. Internet Publishing and Broadcasting
NAICS 51931, internet Publishing and Broadcasting and Web Search
Portals, includes a wide range of activities presenting content over
the internet. This NAICS industry includes online publications, online
video services, social media sites, and even data brokers. The
classification is easy to implement but there is growing concern that
distribution of content via the internet is no longer a useful industry
classification delineation.
As more entities use various modes of content delivery including
over the air, via wired telecommunications networks, and over wireless
telecommunications networks, it is not clear that a separation of all
activities exclusively providing content over the internet is
appropriate. The rise of on-demand programming through apps, the move
to cord cutting, and changes in the distribution mode of traditional
newspapers and periodicals can result in data that is hard to interpret
and can vary based on changes in business models. The ECPC is
soliciting comments on the usefulness of NAICS
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51931 and proposals for changes to the concept that underlies the
existing information industries. The ECPC is requesting comments on
whether the internet is still a relevant industry distinction or if
internet distribution should be treated as a mode of delivery with a
goal of consistent treatment in Sector 44-45, Retail Trade, and Sector
51, Information. As is the case for retail trade, any changes to the
industry structure in Sector 51, Information, are expected to create
possibly significant time series breaks.
V. OMB Statistical Policy Directive No. 8, Standard Industrial
Classification of Establishments
The ECPC is soliciting public comments at the request of OMB on the
advisability of formally updating Statistical Policy Directive No. 8,
Standard Industrial Classification of Establishments, and seeking
comments on the proposed text of the update. The current Statistical
Policy Directive text mandates the use of the Standard Industrial
Classification Manual, 1972, for the classification of establishments
by type of industrial activity. Statistical Policy Directive No. 8
incorporates amendments and further revisions of the SIC. OMB adopted
NAICS as the replacement for the SIC for statistical purposes in 1997.
(62 FR 17288-17337) The SIC has not been amended or revised since 1987.
The text of Statistical Policy Directive No. 8 is available for review
at: https://www.census.gov/eos/www/naics/federal_register_notices/fedregister.html. It is also available for review as a supplementary
document on www.regulations.gov within the same docket as this Federal
Register Notice.
The ECPC proposes to update the text of Statistical Policy
Directive No. 8 and is soliciting public comments on the proposed
language included below:
Statistical Policy Directive No. 8
North American Industry Classification System; Classification of
Establishments
The North American Industry Classification System (NAICS) is to be
used to classify reporting establishments by types of industrial
activity in which they are engaged. Details are presented in the North
American Industry Classification System, United States, issued by the
Office of Management and Budget as amended and revised in the future.
Revisions are considered every five years in calendar years ending with
2 and 7.
1. Use for Federal Nonstatistical Program Purposes
NAICS shall not be used in the administration of any regulatory,
administrative, or tax program unless the Secretary (Administrator) has
first determined that the use of such industry definition is
appropriate to the implementation of the program's objectives.
If the term ``North American Industry Classification System''
(NAICS) is to be used in the operative text of the law or regulation to
define industry (or trade or commerce), language similar to the
following should be used to assure sufficient flexibility: ``An
industry or grouping of industries shall mean a North American Industry
Classification System industry or grouping of industries as defined by
the Office of Management and Budget subject to such modifications with
respect to individual industries or groupings of industries as the
Secretary (Administrator) may determine to be appropriate for the
purpose of this Act (regulation).''. The use, interpretation, and
application of NAICS for nonstatistical purposes is controlled by and
defined by the agencies or regulations that use the statistical
standard for those nonstatistical purposes.
2. Titles and Descriptions
The North American Industry Classification System, United States,
manual includes titles and descriptions of the industries and an
alphabetic index of illustrative activities classified to industries.
It is available online at: www.census.gov/naics.
VI. OMB Statistical Policy Directive No. 9, Standard Industrial
Classification of Enterprises
The ECPC proposes elimination of Statistical Policy Directive No.
9, Standard Industrial Classification of Enterprises. OMB presented the
Enterprise Standard Industrial Classification of Enterprises in 1974.
The classification is static and has not been updated or widely adopted
over the past 45 years. NAICS United States does not include a similar
variant for classification of enterprises. The current text of this
policy directive is available for review at: https://www.census.gov/eos/www/naics/federal_register_notices/fedregister.html. It is also
available for review as a supplementary document on www.regulations.gov
within the same docket as this Federal Register Notice.
The ECPC is soliciting comments on the advisability of eliminating
Statistical Policy Directive No. 9.
VII. Errors and Omissions In NAICS
No significant errors or omissions have been identified in NAICS
2017. Any errors or omissions that are identified in NAICS in the
future will be corrected and posted on the official NAICS website at
www.census.gov/naics.
Paul J. Ray,
Administrator, Office of Information and Regulatory Affairs.
[FR Doc. 2020-03797 Filed 2-25-20; 8:45 am]
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