North American Industry Classification System--Update for 2002 AGENCY…

North American Industry Classification System--Update for 2002

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

ACTION: Notice of solicitation of comments on the Economic Classification Policy
Committee's recommendations for the 2002 revision of the North American
Industry Classification System.

SUMMARY: Under Title 44 U.S.C. 3504(e), the Office of Management and
Budget (OMB) seeks public comment on the advisability of adopting the proposed
North American Industry Classification System (NAICS) updates for 2002. OMB's
Economic Classification Policy Committee (ECPC) recommends an update of the
industry classification system to extend the harmonized three-country classification
structure to construction and to recognize important changes in the retail trade
and information sectors. In addition, as an interim measure in the United States,
the ECPC recommends restructuring of the Wholesale Trade sector to reflect
differences in production functions and to capture more accurately the rapidly-
growing business-to-business electronic markets developing in the United States.

        This notice: (1) summarizes the background for the proposed revisions to
NAICS 1997 in Part I; (2) contains a summary of public comments in Part II; (3)
details the proposed structure changes agreed upon by the three countries in Part
III; and (4) provides a comprehensive listing of proposed changes for national
industries and their link to NAICS 1997 industries in Part IV.

        OMB published a notification of intention to complete portions of NAICS in
a February 25, 1999, Federal Register notice (64 FR 9416-9419). That notice
solicited comments on the advisability of revising the NAICS 1997 structure for
2002 and solicited comments on the creation of new industries in the Construction
and Wholesale Trade Sectors, modifications to the national industries for
department stores and nonstore retailers, and other changes identified as
necessary during the initial implementation of NAICS 1997. The deadline for
submitting comments was April 26, 1999.

      After considering all proposals from the public, consulting with a large
number of U.S. data users and industry groups, and undertaking extensive
discussions with Statistics Canada and Mexico's Instituto Nacional de Estadística,
Geografía e Informática (INEGI), the ECPC, INEGI, and Statistics Canada
developed a revised structure for both the Construction and Information sectors of
NAICS that would apply to all three North American countries.
       For Wholesale Trade, after extensive discussions with Statistics Canada
and INEGI, the representatives of the three countries' statistical agencies decided
to delay three-country changes to this sector and instead plan for a complete
restructuring of the distribution network industries (wholesale, retail,
transportation, and warehousing) in 2007. In the interim the ECPC recommends
restructuring the Wholesale Trade sector to reflect differences in production
functions between those wholesalers that take title to goods and those that do
not, and to capture more accurately the rapidly-growing business-to-business
electronic markets developing in the United States. The ECPC also developed
proposed additional U.S. industry detail in the Retail Trade sector for NAICS
United States. The ECPC recommends that NAICS United States 2002
incorporate these changes as shown in Parts III and IV.

        Following an extensive process of development and discussions by the
ECPC, with maximum possible public input, OMB seeks comment on the
advisability of revising NAICS to incorporate the changes published in this notice.
The modified NAICS would be employed in relevant data collections by all U.S.
statistical agencies beginning with the reference year 2002. Statistics Canada
and INEGI are recommending acceptance of the proposed revision of the NAICS
system for industry classification in the statistical programs of their national
systems and are seeking comments in their respective countries. Representatives
of the three countries will hold further discussions to consider public comments
that they receive.


DATES: To ensure consideration of comments on the adoption and
implementation of the NAICS revisions detailed in this notice, comments must be
in writing. You should submit them as soon as possible, but no later than
Monday, June 19, 2000. This proposed revision to NAICS would become
effective in the U.S. on January 1, 2002.

ADDRESSES: You should send correspondence about the adoption and
implementation of NAICS revisions as shown in this Federal Register notice to:
Katherine K. Wallman, Chief Statistician, Office of Management and Budget,
10201 New Executive Office Building, Washington, DC 20503, telephone number:
(202) 395-3093, FAX number: (202) 395-7245.

       You should address inquiries about the content of industries or requests for
electronic copies of the tables to: Carole Ambler, Chair, Economic Classification
Policy Committee, Bureau of the Census, Room 2633-3, Washington, DC 20233,
telephone number: (301) 457-2668, FAX number: (301) 457-1343.



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Electronic Availability and Comments: This document is available on the Internet
from the Census Bureau via WWW browser and E-mail. To obtain this document
via WWW browser, connect to http://www.census.gov/naics. This WWW page
also contains previous NAICS Federal Register notices and related documents.

       You may send comments via E-mail to pbugg@omb.eop.gov with subject
NAICS02. OMB will include in the official record comments received via E-mail at
this address with this subject by the date specified above.

FOR FURTHER INFORMATION CONTACT: Paul Bugg, 10201 New Executive
Office Building., Washington, DC 20503, E-mail address: pbugg@omb.eop.gov,
telephone number: (202) 395-3093, FAX number: (202) 395-7245.

SUPPLEMENTARY INFORMATION:

Part I: Background of NAICS 1997

        NAICS is a system for classifying establishments by type of economic
activity. Its purposes are: (1) to facilitate the collection, tabulation, presentation,
and analysis of data relating to establishments, and (2) to promote uniformity and
comparability in the presentation and analysis of statistical data describing the
economy. Federal statistical agencies use NAICS to collect or publish data by
industry. It also is used widely by State agencies, trade associations, private
businesses, and other organizations.

        INEGI of Mexico, 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 industrial statistics
produced in 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 also comparable with statistics compiled
according to the latest revision of the United Nations' International Standard
Industrial Classification (ISIC, Revision 3) for some sixty high-level groupings.

        For the three countries, NAICS provides a consistent framework for the
collection, tabulation, presentation, and analysis of industrial statistics used by
government policy analysts, by academics and researchers, by the business
community, and by the public. However, because of different national economic


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and institutional structures as well as limited resources and time for constructing
the 1997 NAICS, the NAICS structure was not made entirely comparable at the
individual industry level across all three countries at that time. The completion
effort represented in this notice originally focused on the construction and
wholesale trade sectors. In the 1997 NAICS these two sectors were comparable
at the two-digit level for all three North American countries.

       Throughout its development, NAICS has been guided by four principles:

       (1) NAICS is erected on a production-oriented or supply-based 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, given the
       need to reflect changes in the economy and proposals from data users.
       Adjustments will be required for sectors where the United States, Canada,
       and Mexico have incompatible industry classification definitions in order to
       produce a common industry system for all three North American countries.

       (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. For
example, the proposed split in the national industry for department stores will
separately identify two distinct and economically significant types of operations in
the United States in accordance with principle 1. The ECPC is recommending the
revisions for nonstore retailers and new Internet information businesses based on
NAICS principle 2. The rapid growth of Internet companies and the lack of a
structural method for identifying these emerging industries justify the additional
NAICS and U.S. national detail. The current round of completion activities is
limited in scope based on NAICS principle 3 regarding time series continuity. The
ECPC believes that the narrow focus of the completion activities and the
importance of Construction and Information to the economies of all three countries
justify the resulting time series breaks. Users are encouraged to implement the
most current structure of NAICS as it becomes available.

Part II: Summary of Public Comments

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       In response to the February 25, 1999, Federal Register notice, the ECPC
received 28 comments regarding specific industries and recommended changes to
the structure of NAICS 1997. Twenty-two of the comments focused on the
Construction Sector, three focused on the Wholesale Trade Sector, and three
were outside the scope of revision as defined by the ECPC.

       Public proposals for individual industries from all three countries were
considered for acceptance if the proposed industry was based on the production-
oriented concept of the system. When a proposal was not accepted, it was
usually because: a) the resulting industry would have been too small in the U.S.,
b) data indicated that the specialization ratio was low (the specialization ratio
indicates the extent to which the establishments in a given industry concentrate on
the activities that define the industry), or c) the proposal did not meet the
production-oriented criterion for forming an industry in NAICS.

       The ECPC received a number of comments that suggested changes to
NAICS that were not accepted. All of these suggestions were carefully
considered. Some suggestions were modified at the request of the ECPC to
better meet the objectives of NAICS. Other suggestions proposed products
(rather than industries); these will be considered in the future development of a
product system. Still other suggestions for change could not be justified on a
production basis, or could not be implemented in statistical programs, for various
reasons, and thus were not accepted. The ECPC is preparing individual
responses to these suggestions, carefully explaining why they were not accepted.


       Many of the twenty-two comments that related to the Construction sector
requested changes or structures that were contradictory. For this reason alone,
the ECPC was not able to implement all of the requested changes. Other
comments requested detail that was not supported by specialization studies
performed using 1997 Census of Construction data. A final constraint on the
acceptability of proposals was the necessity for three-country comparability. A
comment that was justified on a production function basis in the United States was
not always supportable by either Canada or Mexico.

       The proposed structure of the Construction Sector has limited three-
country comparability. In most areas, the representatives of the three countries
attained comparability at the five-digit level. The Specialty Trade Contractors
subsector is comparable at the four-digit level. This was the result of a desire to
allow U.S. agencies to develop separate residential and nonresidential data for
Specialty Trade Contractors without creating special aggregations outside of the
NAICS structure. Although separate residential and nonresidential specialty trade

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industries were not created because of production function considerations, the
structure does allow for residential and nonresidential data collection by U.S.
statistical agencies. The sixth digit of the structure is reserved for this purpose.
This information can be derived from Census Bureau data in Economic Census
years. The Bureau of Labor Statistics will provide this information in the Covered
Employment and Wages Program when the NAICS 2002 changes are
implemented.

        A second major proposal in the Construction sector related to project
delivery methods. In recent years, Federal and State procurement laws have
been changed to allow design-build as an alternative to the traditional design-bid-
build process for construction projects in the public arena. This project delivery
method alternative to structuring the Construction sector was not accepted in the
three- country negotiations for a variety of reasons. First, the design-build
terminology is used differently by various practitioners. The variation in use and
meaning will cause difficulties in classification and the development of
homogeneous industry groupings without extremely detailed questionnaires. Such
a level of detail is not practical. Next, while of growing importance in the United
States and Canada, design-build is not so prominent in Mexico. Finally, a project
delivery method structure would have greatly expanded the number of industries
at the lowest level of the classification. The proposed structure has 31 detailed
industries for the United States. A further split by project delivery method would
further expand the number of detailed industries and reduce the size of each.

        The majority of the comments received that related to Wholesale Trade
requested a change in the previously agreed upon scope of the sector. After
extensive discussions with Canada and Mexico, the representatives decided to
recommend that the basic delineation between Wholesale Trade and Retail Trade
should remain unchanged. Further, the representatives agreed to undertake a
complete restructuring of the distribution network industries (wholesale, retail,
transportation, and warehousing) in NAICS 2007. In the interim, the United States
has restructured NAICS United States 1997, Sector 42, Wholesale Trade to more
closely align with the existing treatment in Canada and Mexico. For the United
States, the ECPC has created three new subsectors: 423, Merchant Wholesalers,
Durable Goods; 424, Merchant Wholesalers, Nondurable Goods; and 425,
Wholesale Electronic Markets and Agents and Brokers. These subsectors more
clearly separate types of wholesale trade businesses and will lead to more
homogeneous statistical data. The merchant wholesaler subsectors are
characterized by establishments that take title to goods and play the role of
principal in the buying and selling of goods. The Wholesale Electronic Markets
and Agents and Brokers subsector is characterized by establishments that act on
behalf of sellers or facilitate wholesale transactions but do not actually take title to
the goods.

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        Wholesale trade is rapidly changing. Many traditional wholesale trade
functions are being outsourced to storage, finance, logistics, or transportation
specialists. In addition to these changes, the Internet has greatly expanded
markets and supplier customer bases. In order to identify these changes to the
extent possible, the ECPC recommends that subsector 425, Wholesale Electronic
Markets and Agents and Brokers be split into two separate industries. The first
would include the wholesale trade electronic markets while the second would
include agents and brokers. The electronic markets provide guidance and
assistance to both buyers and sellers. They also provide a unified, one stop,
purchasing environment with common requirements across a large number of
suppliers. The rapid growth of the business to business (B2B) electronic markets
reflects the considerable efficiencies that can be obtained through the use of
advanced technology. Separate identification of this rapidly growing activity will
allow a more thorough and reflective analysis of wholesale trade in relation to the
overall changes in distributive trades in 2007.

        In addition to working on the sectors described in the February 25, 1999,
Federal Register notice that were explicitly targeted for completion, the rapid
growth of the Internet and electronic commerce resulted in a decision by the three
countries to re-evaluate the Information sector as well. Although new in 1997, the
Information sector lacked finite categories related to new Internet activities such
as Internet service providers, web search portals, and Internet publishing and
broadcasting. The second NAICS principle specifically targets new and emerging
industries. The North American partners in NAICS agreed that the importance of
statistical data related to new Internet businesses outweighed the time series
continuity criterion also used in NAICS development. A full description of the
recommended provisional changes to the Information sector is included in Part III.

       In addition to the changes listed above, the ECPC is proposing several
minor changes to titles of NAICS industries that have no impact on the content of
those industries. The ECPC recommends the following title changes:
NAICS 32611, Unsupported Plastics Film, Sheet, and Bag Manufacturing, will be
changed to Plastics Packaging Materials and Unlaminated Film and Sheet
Manufacturing.

NAICS 326111, Unsupported Plastics Bag Manufacturing, will be changed to
Plastics Bag Manufacturing.

NAICS 326112, Unsupported Plastics Packaging Film and Sheet Manufacturing,
will be changed to Plastics Packaging Film and Sheet (including Laminated)
Manufacturing.



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NAICS 326113, Unsupported Plastics Film and Sheet (except Packaging)
Manufacturing, will be changed to Unlaminated Plastics Film and Sheet (except
Packaging) Manufacturing.

NAICS 32612, Plastics Pipe, Pipe Fitting, and Unsupported Profile Shape
Manufacturing, will be changed to Plastics Pipe, Pipe Fitting, and Unlaminated
Profile Shape Manufacturing.

NAICS 326121, Unsupported Plastics Profile Shape Manufacturing, will be
changed to Unlaminated Plastics Profile Shape Manufacturing.

NAICS 326130, Laminated Plastics Plate, Sheet, and Shape Manufacturing, will
be changed to Laminated Plastics Plate, Sheet (except Packaging), and Shape
Manufacturing.

NAICS 444220, Nursery and Garden Centers, will be changed to Nursery, Garden
Center, and Farm Supply Stores to describe more completely the content of the
industry.

NAICS 452910, Warehouse Clubs and Superstores, will be changed to
Warehouse Clubs and Supercenters. The term supercenter more adequately
describes the content of the NAICS industry.

NAICS 561330, Employee Leasing Services, will be changed to Professional
Employer Organizations to more closely reflect common industry terminology.

        The United States is also taking this opportunity to create additional
national level detail for department stores and nonstore retailers. These changes
will create more meaningful, homogeneous industries for the United States.
Department Stores, NAICS 45211, will be split into two new 6-digit industries:
Department Stores (except Discount), NAICS 452111, and Discount Department
Stores, NAICS 452112.

        Electronic Shopping and Mail-Order Houses, NAICS 45411, will be split into
three new 6-digit industries: Electronic Shopping, NAICS 454111; Electronic
Auctions, NAICS 454112; and Mail-Order Houses, NAICS 454113. The proposed
changes for electronic shopping acknowledge the rapid growth of these activities
in the United States. The proposed industry for Electronic Shopping includes
separate establishments engaged in primarily providing electronic shopping
services. The structure and codes for these new industries are detailed in Part IV
of this notice.

Time Series Continuity

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        The standard approach to preserving time series continuity after
classification revisions is to create linkages where the series break. This is
accomplished by producing the data series using both the old and new
classifications for a given period of transition. With the dual classifications of
data, analysts can assess the full impact of the revision. Data producers then
may measure the reallocation of the data at aggregate industry levels and develop
a concordance between the old and new series for that given point in time. The
concordance creates a crosswalk between the old and new classification
systems. Statistical agencies in the U.S. are planning links between the 1997
NAICS and 2002 NAICS (with U.S. national detail).

  ECPC Recommendations for the Hierarchical Structure, Industries, and
            Coding System for the 2002 NAICS Revisions

        Parts III and IV below present the ECPC's final recommendations for how
United States statistical agencies would revise the affected sectors and industries
in the 2002 NAICS classification system for the United States. The tables show
the proposed 2002 hierarchy, including NAICS and U.S. national detail industries,
and the proposed coding system in 2002 NAICS sequence, for the affected
sectors and industries. Parts III and IV include all ECPC recommended changes
to the structure based on public comment and discussions with INEGI and
Statistics Canada.




             John T. Spotila
             Administrator,
             Office of Information and Regulatory Affairs.




                                         9                                            9
Part III--Proposed Revisions to the NAICS Structure

Section A--NAICS Structure - Construction

          NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM

                                  (NAICS 2002)

                            AGREEMENT Number 32

       This document represents the proposed agreement on the structure of the
North American Industry Classification System (NAICS) for the construction
sector. The detailed NAICS structure along with a brief description of the
structure is attached (Attachments 1 and 2). Each country agrees to release a
copy of the proposed NAICS structure to interested data users. Comments
received will be shared among the countries and additional discussions will be held
before a final decision on the structure is made. Each country may add additional
detailed industries below the internationally agreed upon level of NAICS, as
necessary to meet national needs, so long as this additional detail aggregates to
an internationally agreed upon level in order to ensure full comparability among the
three countries. This NAICS structure was presented and accepted at the NAICS
Committee meeting held on November 30 through December 2, 1999, in Ottawa,
Canada.


Accepted                   Signature                                 Date

Canada              _____Richard Barnabe______________               12/2/1999


Mexico              _____Enrique Ordaz________________               12/2/1999


United States       _____Carole Ambler________________               12/2/1999




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ATTACHMENT 1-- NAICS STRUCTURE

23      Construction

236           Construction of Buildings

2361                   Residential Building Construction
23611                        Residential Building Construction

2362                   Nonresidential Building Construction
23621                        Industrial Building Construction
23622                        Commercial and Institutional Building Construction

237           Heavy and Civil Engineering Construction

2371                   Utility System Construction
23711                          Water and Sewer Line and Related Structures
                                 Construction
23712                          Oil and Gas Pipeline and Related Structures
                                 Construction
23713                          Power and Communication Line and Related
                               Structures Construction
2372                   Land Subdivision
23721                          Land Subdivision

2373                   Highway, Street, and Bridge Construction
23731                       Highway, Street, and Bridge Construction

2379                   Other Heavy and Civil Engineering Construction
23799                        Other Heavy and Civil Engineering Construction

238           Specialty Trade Contractors

2381                   Foundation, Structure, and Building Exterior
                         Contractors

2382                   Building Equipment Contractors
23821                         Electrical Contractors
23822                         Plumbing, Heating, and Air-Conditioning Contractors
23829                         Other Building Equipment Contractors

2383                   Building Finishing Contractors


                                          11                                        11
2389   Other Specialty Trade Contractors




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ATTACHMENT 2 -- DESCRIPTION OF CONSTRUCTION SECTOR

Draft Classification for Construction

       Representatives of the statistical agencies of Canada, Mexico, and the
United States agree to a draft industrial classification for the Construction sector.
The draft classification of the construction sector is divided into subsectors
covering Construction of Buildings, Heavy and Civil Engineering Construction, and
Specialty Trade Contractors. These subsectors are further subdivided into 10
four-digit industry groups and 12 five-digit industries.

A General Outline

         Establishments in the Construction Sector erect buildings, perform heavy
and civil engineering construction, and perform specialized construction trade
activities. The classification distinguishes between establishments that are
responsible for an entire building or building renovation project and those that
perform specific functions during the erection of a building or building renovation
project. A subsector is provided for each group. The classification further
distinguishes all establishments performing civil engineering and heavy
construction activities, whether the complete project or a portion of the project, in
a third subsector.

       In Construction of Buildings, the classification distinguishes between the
erection of residential buildings and the erection of nonresidential buildings. Each
of these industry groups includes establishments that are responsible for an entire
building or building renovation project. These industry groups include general
contractors and design-builders working for owners and operative builders who
undertake the entire project on a speculative basis. Establishments in the
Construction of Buildings subsector may perform specific construction activities or
subcontract for specific tasks. Additionally, each industry group includes
establishments that are hired to manage the project, including oversight of the
design, financing, bidding, and review processes, and/or act as a liaison between
the owner and a general contractor, designer, architect, or engineer.

       The classification makes no distinctions in the residential buildings industry
group because of differences in the organization of construction establishments
among the three countries. National level detail will provide specific information
based on the type of structure (single family or multi-family), type of project (new
structures or alterations and renovations of existing structures), or type of
establishment (general contractor or operative builder) as appropriate in each
country. Consideration was given to each of these breakouts but national
differences in the operating characteristics of establishments prevented three-

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country level comparability. Establishments erecting nonresidential buildings are
segregated into establishments erecting commercial and institutional buildings and
establishments erecting industrial buildings and manufacturing plants. This NAICS
industry level distinction recognizes the differences inherent in erecting the various
types of buildings.

       Establishments performing heavy construction are separated into four
industry groups: Utility System Construction; Land Subdivision; Highway, Street,
and Bridge Construction; and Other Heavy and Civil Engineering Construction.
Industries in these groups are engaged in large-scale projects and have related
production characteristics. Heavy and Civil Engineering Construction
establishments can perform the work or subcontract the work to specialized
establishments.

        Establishments in the Utility System Construction industry group construct
lines and related structures for utility systems. For example, Water and Sewer
Line and Related Structures Construction establishments that construct pipelines,
distribution lines, irrigation systems, water treatment plants, sewage treatment
plants, and pumping stations are grouped together. This recognizes the fact that
these buildings and structures are inter-related in a network environment and are
not meaningfully separated based on the particular type of structure.

        Land Subdivision is included in Heavy and Civil Engineering Construction
because of the similarity of activities involved with land subdivision and the other
industry groups. For example, improved subdivisions often require installation of
basic utilities, roads, and similar improvements that are also included elsewhere in
the Heavy and Civil Engineering Construction subsector. The production
similarities for construction of highways, streets, and bridges justified the third
industry group.

       The fourth, residual, industry group includes other heavy and civil
engineering construction. Examples include marine construction, such as the
building of ports and harbors, and construction of dams for retaining water, flood
control, or hydroelectric power generation purposes. Heavy and Civil Engineering
Construction includes general contractors, design-builders, operative builders, and
those specialty trade contractors whose activities generally only apply to the
Heavy and Civil Engineering Construction subsector. The activities performed by
the specialty trade contractors in this subsector are rarely performed elsewhere.

         In Specialty Trade Contractors, NAICS recognizes the highly specialized
nature of a large number of small construction establishments. These
establishments concentrate on a particular construction activity or group of
activities rather than accepting responsibility and risk for an entire project. This

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difference separates these establishments from the first two subsectors.
Establishments in the Specialty Trade Contractors subsector usually act as
subcontractors for the general contractors, operative builders, design-builders,
and other establishments that assume the risk for an entire construction project
that takes place in the Construction of Buildings subsector. In this capacity, they
can perform work as subcontractors or work directly for owners. Specialty Trade
Contractors also perform repair, renovation, and maintenance on various systems
that fall within their specialty. The skills and equipment used by specialty trade
contractors in this subsector have more general application than skills and
equipment used by the specialty trade contractors included in Heavy and Civil
Engineering Construction.

Limitations and Constraints of the Classification

        Climatic and geological differences within and among the three countries
lead to different construction techniques and practices for various types of
structures. While wood is a significant input for residential housing in the Northern
United States and Canada, concrete and stone are more common in the
Southwest United States and in Mexico. Concrete and stone do not require siding
and various other protections that are required with wood sheathing. Geological
instability results in different structural and foundation requirements. Climate
conditions dictate more insulation in northern areas while less insulation is
appropriate in drier and warmer climates. These conditions lead to differing size
and importance of various industries throughout North America. Each subsector
varies across geographic lines based on the availability of raw materials and the
environmental conditions that dictate construction practices.

Relationship to ISIC

        Most of the industries in the NAICS Construction Sector are contained in
Division 45, Construction, of the International Standard Industrial Classification of
All Economic Activities (ISIC, Revision 3) of the United Nations. There are,
however, some differences between the two systems. Both NAICS and ISIC
exclude preparation of oil and gas fields from Construction. NAICS includes
construction management activities within each of the industries in the
Construction Sector while ISIC classifies construction management activities in
Division 74, Other Business Activities. NAICS includes land subdivision in
Construction, while ISIC classifies land subdivision in Division 70, Real Estate
Activities.

Some Changes to the National Industries



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        During the initial NAICS development effort, the three countries agreed to
the boundary and scope of the Construction sector at the two-digit level. Each of
the countries developed its own national structure at the three-, four-, five, and
six-digit levels. The changes discussed are identified as NAICS with a prefix of C
for Canada, U for the United States, and M for Mexico for previous national detail
and NAICS02 for the draft classification.

       For Canada, CNAICS 23 was broken into two subsectors: CNAICS 231,
Prime Contracting; and CNAICS 232, Trade Contracting. NAICS02 comprises
three subsectors: 236, Construction of Buildings: 237, Heavy and Civil Engineering
Construction; and 238, Specialty Trade Contractors.

CNAICS 23141, Construction Management, will be distributed throughout all of the
new NAICS02 Construction industries.

Land Subdivision and Development, CNAICS 23111 will be moved from the
subsector for Building Construction to NAICS02 23721 within the Heavy and Civil
Engineering Construction subsector. This move reflects the similarity of the
activities performed in the land subdivision industry and other industries in the
Heavy and Civil Engineering Construction subsector.

The construction of structures, such as sewage treatment plants and water
treatment plants will be moved from CNAICS 23139, Other Engineering
Construction, to NAICS02 2371, Utility System Construction, and distributed to the
proper industries within the industry group.

For Mexico, the NAICS02 structure is very similar to the MNAICS structure
developed in 1997. While there were various minor reaggregations below the
industry group level, the subsector levels remained largely unchanged.

MNAICS 236 contained one industry group, 2361 Buildings. NAICS02 now
contains two industry groups: 2361, Residential Buildings; and 2632,
Nonresidential Buildings.

MNAICS 237 was made up of two industry groups: 2371 Construction of
Structures for Water, Electricity, Telecommunications, Petroleum, and Gas; and
2372, Construction of Urban Infrastructure and Transportation Systems.
NAICS02 is divided into four industry groups: 2371, Utility Systems Construction;
2372, Land Subdivision; 2373, Highway, Street, and Bridge Construction; and
2379, Other Heavy and Civil Engineering Construction.




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As is the case for Canada, MNAICS 23822, Supervision and Management of
Construction projects will be distributed throughout the construction industries in
NAICS02.

For the United States, the subsector structures for UNAICS and NAICS02 are
very similar. Most changes occurred below the subsector level. Of particular
note, UNAICS 23311, Land Subdivision and Land Development moved from the
subsector for construction of buildings to NAICS02 237, Heavy and Civil
Engineering Construction.

UNAICS 23499, All Other Heavy Construction, included water treatment plants,
sewage treatment plants and similar buildings that are now included in NAICS02
2371, Utility System Construction.

At the national level, the United States has reinstituted an industry for operative
residential builders that were not separately identified in UNAICS. This industry
had existed in the US SIC. The United States also created a new national industry
for residential remodeling establishments. In previous classifications, residential
remodelers were classified together with new residential construction.


Achievement of Objectives

       The classification meets the objectives for the North American Industry
Classification System (NAICS). It includes industries that group establishments
with similar production processes, that is, it applies the production-oriented
economic concept. In the main, the hierarchical structure of the classification also
follows the production concept.

       The industries are highly specialized, and they are economically significant.
Disruptions to time series are minimal. The classification achieves comparability
at most five-digit levels for the three participating countries. All three countries
agree on the detailed definitions of the industries.

        Other objectives of the NAICS project are not as relevant in this area of the
classification as in others. These objectives are the delineation of new and
emerging industries, service industries, and industries engaged in the production
of new technologies.

Section B -- NAICS Structure - Information

Provisional structure proposed for Sector 51, Information


                                         17                                             17
51    Information
511         Publishing Industries (except Internet)
5111               Newspaper, Periodical, Book, and Directory Publishers
51111                 Newspaper Publishers
51112                 Periodical Publishers
51113                 Book Publishers
51114                 Directory and Mailing List Publishers
51119                 Other Publishers
5112               Software Publishers
51121                 Software Publishers

512             Motion Picture and Sound Recording Industries
5121                  Motion Picture and Video Industries
51211                     Motion Picture and Video Production
51212                     Motion Picture and Video Distribution
51213                     Motion Picture and Video Exhibition
51219                     Postproduction Services and Other Motion Picture and
                             Video Industries
5122                    Sound Recording Industries
51221                     Record Production
51222                     Integrated Record Production/Distribution
51223                     Music Publishers
51224                     Sound Recording Studios
51229                     Other Sound Recording Industries

515          Broadcasting (except Internet)
5151               Radio and Television Broadcasting
51511                     Radio Broadcasting
51512                     Television Broadcasting
5152                      Cable and Other Subscription Programming
51521                     Cable and Other Subscription Programming


516          Internet Publishing and Broadcasting
5161                Internet Publishing and Broadcasting
51611                       Internet Publishing and Broadcasting

517          Telecommunications
5171               Wired Telecommunications Carriers
51711                    Wired Telecommunications Carriers
5172               Wireless Telecommunications Carriers (except Satellite)
51721                    Wireless Telecommunications Carriers (except
                         Satellite)

                                       18                                        18
5173                 Telecommunications Resellers
51731                        Telecommunications Resellers
5174                 Satellite Telecommunications
51741                        Satellite Telecommunications
5175                 Cable and Other Program Distribution
51751                        Cable and Other Program Distribution
5179                 Other Telecommunications
51791                        Other Telecommunications

518           Internet Service Providers, Web Search Portals, and Data
                Processing Services
5181                 Internet Service Providers and Web Search Portals
51811                       Internet Service Providers and Web Search Portals
5182                 Data Processing, Hosting, and Related Services
51821                       Data Processing, Hosting, and Related Services

519           Other Information Services
5191                 Other Information Services
51911                       News Syndicates
51912                       Libraries and Archives
51919                       All Other Information Services

Draft Classification for Information

        Representatives of the statistical agencies of Canada, Mexico, and the
United States provisionally agree to a draft industrial classification for the
Information sector. The draft classification of the Information sector is divided into
subsectors covering Publishing Industries (except Internet); Motion Picture and
Sound Recording Industries; Broadcasting (except Internet); Internet Publishing
and Broadcasting; Telecommunications; Internet Service Providers, Web Search
Portals and Data Processing; and Other Information Services. These subsectors
are further subdivided into 16 four-digit industry groups and 30 five-digit industries.

        The Information sector comprises establishments primarily engaged in (a)
producing and distributing cultural information, (b) providing the means to transmit
or distribute these products as well as data or communications, and (c)
processing data.

        Many of the industries in the NAICS Information sector are engaged in
either producing and manipulating products protected by copyright law, or in
distributing them (other than distribution by traditional wholesale and retail
methods). Examples are traditional publishing industries, software publishing
industries, and film and sound industries. Also included are broadcasting

                                          19                                              19
industries, telecommunication industries, and information access providers and
processors that process and distribute information and provide access to facilities
for transmission of information. Although many new industries have been created
for this sector, most of the activities it contains have existed for some time. A
new feature of the revised Information Sector is the inclusion of new industries for
activities that have recently appeared in the economy due to the rapid expansion
of the Internet. When NAICS was initially conceived, Internet service providers,
web search portals, and other forms of Internet distribution of content were in
their infancy. These activities are now separately identified in the classification.

        The following paragraphs provide a brief description of the individual
components of this sector.
        The Publishing Industries (except Internet) subsector groups
establishments engaged in the publishing of newspapers, periodicals, and books,
as well as directory, mailing list, and software publishing. In general, publishers
issue copies of works for which they possess copyright for sale to the general
public, in one or more formats including traditional print form or in electronic copy
such as diskette or CD-ROM. Publishers may publish works originally created by
others for which they have obtained the rights, and/or works that they have
created in-house.

        In NAICS, publishing -- the reporting, writing, editing, and other processes
that are required to create an edition of a newspaper, for example -- is treated as
a major economic activity in its own right, and classified in the Information sector,
whereas printing remains in the NAICS Manufacturing sector. In part, the NAICS
classification reflects the fact that publishing increasingly takes place in
establishments that are physically separate from the associated printing
establishments. More crucially, the NAICS classification of book and newspaper
publishing is intended to portray their roles in a modern economy, where they do
not resemble manufacturing activities.

        Software publishing is included here because the activity -- creation of a
copyrighted product and bringing it to market -- is equivalent to the creation
process for other types of intellectual products. Reproduction of pre-packaged
software is treated in NAICS as a manufacturing activity and custom design of
software to client specifications remains in Professional, Scientific, and Technical
Services. These distinctions arise because of the different ways that software is
created, reproduced, and distributed. The only change to this subsector for 2002
is the new title for Industry 51114 that has been renamed from Database and
Directory Publishers to Directory and Mailing List Publishers. This new title and
an updated definition better describe the activities included in this industry.



                                         20                                             20
        The Motion Picture and Sound Recording Industries subsector groups
establishments involved in producing and distributing motion pictures and sound
recordings (those involved exclusively in the wholesaling of sound recordings are
classified in Wholesale Trade). While motion picture and sound recordings are
also "published," the processes involved are sufficiently different from those
traditional publishing industries to warrant placing them in the Motion Picture and
Sound Recording Industries subsector.

       The production and distribution of these products involves a complex
process and several distinct industries. The Motion Picture and Video Industries
industry group includes separate industries for Motion Picture and Video
Production, Motion Picture and Video Distribution, Motion Picture and Video
Exhibition, Postproduction Services, and Other Motion Picture and Video
Industries. The distribution industry includes establishments primarily engaged in
acquiring the distribution rights (major input) for films and programs, and charging
such clients as movie theaters and broadcasters to show them; those engaged in
wholesaling videos to retail stores and rental outlets are classified in Wholesale
Trade. The Sound Recording Industries industry group contains classes for
Record Production Companies, Integrated Record Production/Distribution, Music
Publishers, Sound Recording Studios, and Other Sound Recording Industries.

        Record production companies are primarily engaged in searching out,
identifying and contracting artists for whom they arrange and finance the
production of master tapes for which they hold the reproduction rights.
Establishments in this industry do not own duplication facilities or have distribution
capabilities, so they commercialize these rights through leasing/licensing
agreements with third parties. Integrated record production companies (major
record labels) integrate the production, manufacturing and/or distribution functions,
commercializing reproduction rights through these vertically integrated operations.
While establishments engaged in record production derive most of their revenues
from leasing/licensing the reproduction rights of master recordings and from
mechanical royalties, integrated record companies derive most of their revenues
from the exploitation of their rights to distribute duplicate sound recordings. No
changes were made to this subsector for 2002.

       In NAICS 2002, Telecommunications and Broadcasting are split into
separate subsectors. This structural change acknowledges that the production
and distribution of information or cultural content is significantly different from the
creation of the infrastructure used in distribution.

       The new Broadcasting (except Internet) subsector, NAICS 515,
distinguishes between radio broadcasting, television broadcasting, and cable and
other subscription programming. These industry groups are based on differences

                                           21                                             21
in the methods of communication and in the nature of services provided.
Broadcasting (except Internet) includes establishments that operate broadcasting
studios and facilities for over the air, cable, or satellite delivery of audio and video
programming such as music, entertainment, news, talk, and the like. These
establishments are often engaged in producing and purchasing programs and
generating revenues from the sale of time to advertisers, and from donations,
subsidies, and/or the sale of programs. Cable and Other Subscription
Programming establishments operate studios and facilities for the broadcasting of
programs that are typically narrow cast in nature (limited format such as news,
sports, education, and youth-oriented programming). The services of these
establishments are typically sold on a subscription or fee basis.

        NAICS 2002 recognizes for the first time the significant differences
between traditional publishing and broadcasting and similar activities using the
Internet in a new subsector for Internet Publishing and Broadcasting, NAICS 516.
The unique combination of text, audio, video, and interactive features present in
informational or cultural products on the Internet justifies the creation of the new
subsector. NAICS separates Internet Publishing and Broadcasting in order to
identify and statistically characterize this area of rapid growth in the economies of
the three North American partners in NAICS.

       The new Telecommunications subsector, NAICS 517, is primarily engaged
in operating, maintaining, and/or providing access to facilities for transmitting
voice, data, text, sound, and full motion picture video between network termination
points. In contrast to the Broadcasting subsector, the Telecommunications
subsector generally does not produce information or cultural content.
Telecommunications includes groupings and industries based on the technologies
used. As such, there are separate industry groups for Wired Telecommunications
Carriers, Wireless Telecommunications Carriers (except Satellite),
Telecommunications Resellers, Satellite Telecommunications, Cable and Other
Program Distribution, and Other Telecommunications. All of these industry
groups, except Telecommunications Resellers, operate transmission facilities that
may be based on a single technology or a combination of technologies. The
Cable and Other Program Distribution industry group includes establishments that
operate cable systems, direct-to-home satellite systems, or other similar systems.


       Another new subsector in NAICS groups establishments that provide
Internet access; Internet search services; and data processing, hosting, and
related services. The Internet Service Providers, Web Search Portals, and Data
Processing Services subsector, NAICS 518, is subdivided into two industry
groups. The Internet Service Providers and Web Search Portals industry group
includes establishments that provide access to the Internet or provide the means

                                           22                                              22
to search for information on the Internet. The Data Processing, Hosting, and
Related Services industry group includes establishments that process data for
others. Mainframe computer time-share facilities and web hosting establishments
are included with Data Processing, Hosting, and Related Services.

         The final subsector, Other Information Services, NAICS 519, provides a
classification for other information providers, such as news syndicates, as well as
repositories of information products in the form of libraries and archives. Libraries
and archives provide access to information products stored in their physical
facilities. Museums, however, are classified in sector 71, Arts, Entertainment, and
Recreation.




                                         23                                             23
Section C -- NAICS United States - Wholesale Trade

        Representatives of the statistical agencies of Canada, Mexico, and the
United States conducted extensive discussions on the content and conceptual
structuring of industries for wholesale trade of goods. Due to the complexity of
this dynamic sector and structural differences among the three countries, no
additional three-country comparability was obtained for wholesale trade. Canada,
Mexico, and the United States agree on the overall content of Wholesale Trade
but will retain unique national industry detail within the sector. However, the
United States has taken the insights gained from these discussions and
incorporated them into a new national structure for Wholesale Trade.

       As in the 1997 NAICS United States there are two main types of
wholesalers included in Wholesale Trade for the 2002 NAICS United States:
those that sell goods on their own account and those that arrange sales and
purchases for others for a commission or fee.

       (1) Establishments that sell goods on their own account are known as
wholesale merchants, distributors, jobbers, drop shippers, import/export
merchants, and sales branches. These establishments typically take title to the
goods being sold and maintain their own warehouse, where they receive and
handle goods for their customers. Goods are generally sold without
transformation, but may include integral functions, such as sorting, packaging,
labeling, and other marketing services. Throughout this notice, these
establishments are referred to as merchant wholesalers.

        (2) Establishments arranging for the purchase or sale of goods owned by
others or the purchase of goods on a commission basis are known as agents and
brokers, commission merchants, import/export agents and brokers, auction
companies, and manufacturer's representatives. These establishments do not
take title to the goods being sold. Throughout this notice, these establishments
are referred to as business to business electronic markets and agents and
brokers.

        Sector 42, Wholesale Trade, would be divided into three subsectors in the
United States: subsector 423, Merchant Wholesalers, Durable Goods; subsector
424, Merchant Wholesalers, Nondurable Goods; and subsector 425, Wholesale
Electronic Markets and Agents and Brokers. Each of these subsectors is further
divided into industry groups and industries to meet the detailed needs of the U.S.
statistical community.

       Subsector 423, Merchant Wholesalers, Durable Goods, is split into nine
industry groups that follow the structure of NAICS 1997. These industry groups

                                        24                                           24
are further divided into thirty-seven national level industries. The key difference
between the content of subsector 421, Wholesale Trade, Durable Goods in 1997
and subsector 423, Merchant Wholesalers, Durable Goods, is the exclusion of
electronic markets, and agents, brokers, and other intermediaries that do not take
title to the goods being sold in subsector 423. Merchant wholesalers in NAICS
2002 are defined to include those establishments that buy or sell goods on their
own account. Included are wholesale merchants, distributors, jobbers, drop
shippers, import/export merchants, and manufacturer's sales branches. The key
characteristic of wholesale establishments included in subsector 423 is ownership
of the goods that are being sold.

        Subsector 424, Merchant Wholesalers, Nondurable Goods, mirrors the
structure of NAICS 1997 subsector 422, Wholesale Trade, Nondurable Goods.
Again, the significant difference is the exclusion of electronic markets, and agents
and brokers and other intermediaries that do not take title to the goods being
sold. Subsector 424 is split into nine industry groups that are further divided into
thirty-two national level industries classifying merchant wholesalers of nondurable
goods.

        Subsector 425, Wholesale Electronic Markets and Agents and Brokers is a
new subsector for NAICS United States 2002. Establishments in the Wholesale
Electronic Markets and Agents and Brokers subsector arrange for the sale of
goods owned by others on a fee or commission basis. These establishments,
unlike those in subsectors 423, do not take title to the goods being sold. They are
acting on behalf of the buyers and sellers of goods.
        This subsector is being created to classify agents and brokers as well as
electronic markets that facilitate wholesale trade. Over the past two years, the
explosive growth of wholesale trade on the Internet has radically changed the role
of agents and brokers and greatly expanded potential markets for suppliers.
While a wholesale trade business was previously constrained by geography and
the cost of initiating contact with potential customers, the Internet has created
inexpensive, efficient national markets for suppliers. The United States proposal
for subsector 425, therefore, creates a new national industry for these electronic
markets in wholesale trade, separate from the more traditional agents and
brokers. The outsourcing of storage, transportation, finance, and other traditional
wholesale trade functions is immensely eased with the advent of these new
national electronic wholesale markets. In order to gather data to better
understand these changes in the context of all distributive trade industries, they
will be separately identified and categorized in NAICS United States 2002.

     NAICS United States 1997 included 69 separate national industries in
Wholesale Trade. NAICS United States 2002, includes 71 national industries in
Wholesale Trade. With the addition of only two national industries, the

                                         25                                            25
restructuring of Wholesale Trade creates more homogeneous statistical data for
users, eases the burden of code assignment for sales representatives and
wholesale trade brokers, and separately identifies emerging trends for study and
analysis. Although additional international comparability was not obtained, the
changes to Sector 42, Wholesale Trade, in the United States represent a major
improvement in the statistics generated for wholesale trade using NAICS. These
changes also position the United States to measure and analyze more completely
all distributive trade industries during future NAICS revisions. Part IV of this notice
includes the entire proposed structure for Wholesale Trade.




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