North American Industry Classification System-Update for 2007, 12390-12399 [05-4848]
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Federal Register / Vol. 70, No. 47 / Friday, March 11, 2005 / Notices
OFFICE OF MANAGEMENT AND
BUDGET
North American Industry Classification
System—Update for 2007
Office of Management and
Budget, Executive Office of the
President.
AGENCY:
Notice of solicitation of
comments on the Economic
Classification Policy Committee’s
recommendations for the 2007 revision
of the North American Industry
Classification System.
ACTION:
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 2007.
NAICS is a system for classifying
establishments (individual business
locations) by type of economic activity.
Mexico’s Instituto Nacional de
´
´
´
Estadıstica, Geografıa e Informatica
(INEGI), Statistics Canada, and the
United States Office of Management and
Budget, through its Economic
Classification Policy Committee (ECPC),
collaborated on NAICS to make the
industry statistics produced by the three
countries comparable. OMB’s Economic
Classification Policy Committee
recommends an update of the industry
classification system to clarify existing
industry definitions and content,
recognize new and emerging industries,
and correct errors and omissions.
This notice: (1) Summarizes the
background for the proposed revisions
to NAICS 2002 in Part I, (2) contains a
summary of public comments in Part II,
(3) details multiple requests and major
changes in the proposed structure
agreed to by the three countries in Part
III, and (4) provides a comprehensive
listing of proposed changes for national
industries and their links to NAICS
2002 industries in Part IV.
OMB published a notification of
intention to revise portions of NAICS in
a December 27, 2002, Federal Register
notice (67 FR 79500–79506). That notice
solicited comments on the advisability
of revising maximum possible public
input, OMB seeks comment on the
advisability of revising the NAICS 2002
structure for 2007 to account for new
and emerging industries and solicited
comments on the advisability of making
changes to improve international
comparability, and other changes
identified as necessary during the initial
implementation of NAICS 2002. The
deadline for submitting comments was
March 28, 2003.
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After considering all proposals from
the public, consulting with U.S. data
users and industry groups, and
undertaking extensive discussions with
Statistics Canada and Mexico’s INEGI,
the ECPC in collaboration with INEGI
and Statistics Canada developed
recommendations for revisions to
NAICS that would apply to all three
North American countries. These
revisions focus on improving the
description of current industries,
identifying new and emerging
industries, and recommending changes
to industry content based on research
and implementation experience. There
are no changes specifically
recommended to increase international
comparability.
The ECPC recommends that NAICS
United States 2007 incorporate changes
as shown in Parts III and IV of this
notice.
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 2007. Statistics
Canada and INEGI are recommending
acceptance of the proposed revisions 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. Please submit comments
as soon as possible, but no later than
June 9, 2005. Please be aware of delays
in mail processing at Federal facilities
due to heightened security. Respondents
are encouraged to send both a hard copy
and a second copy via fax or e-mail.
This proposed revision to NAICS would
become effective in the U.S. for
publication of establishment data that
refer to periods beginning on or after
January 1, 2007.
ADDRESSES: Please send correspondence
about the adoption and implementation
of proposed 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. Please send E-
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mail comments to naics@omb.eop.gov
with subject NAICS07. OMB will
include in the official record all
comments received via facsimile or via
e-mail, at this address with this subject,
by the date specified above.
Please address inquiries about the
content of industries or requests for
electronic copies of the tables to: John
Murphy, Chair, Economic Classification
Policy Committee, Bureau of the
Census, Room 2641–3, Washington, DC
20233, telephone number: (301) 763–
5172, fax number: (301) 457–1343, email: John.Burns.Murphy@census.gov.
Electronic Availability and
Comments: This document is available
on the Internet from the Census Bureau
Internet site via WWW browser. To
obtain this document via WWW
browser, connect to https://
www.census.gov/naics. This WWW page
also contains links to previous NAICS
Federal Register notices and related
documents.
Paul
Bugg, 10201 New Executive Office
Building., Washington, DC 20503, email address: pbugg@omb.eop.gov,
telephone number: (202) 395–3095, fax
number: (202) 395–7245.
SUPPLEMENTARY INFORMATION:
FOR FURTHER INFORMATION CONTACT:
Part I: Background of NAICS
NAICS is a system for classifying
establishments (individual business
locations) by type of economic activity.
Its purposes are: (1) To facilitate the
collection, tabulation, presentation, and
analysis of data relating to
establishments, and (2) to promote
uniformity and comparability in the
presentation and analysis of statistical
data describing the North American
economy. NAICS is used by Federal
statistical agencies that 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
´
´
´
Estadıstica, Geografıa e Informatica,
Statistics Canada, and the United States
Office of Management and Budget,
through its Economic Classification
Policy Committee, collaborated on
NAICS to make the industry statistics
produced by the three countries
comparable. NAICS is the first industry
classification system developed in
accordance with a single principle of
aggregation, the principle that
producing units that use similar
production processes should be grouped
together in the classification.
NAICS also reflects in a much more
explicit way the enormous changes in
technology and in the growth and
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the production of advanced
technologies.
(3) Time series continuity is
maintained to the extent possible.
(4) The system strives for
compatibility with the two-digit level of
the International Standard Industrial
Classification of All Economic Activities
(ISIC Rev. 3) of the United Nations.
The ECPC is committed to
maintaining the principles of NAICS
during revisions. The December 27,
2002, solicitation for public comment
on questions related to a potential
revision of NAICS in 2007 was directly
tied to the application of the four NAICS
principles.
NAICS uses a hierarchical structure to
classify establishments from the
broadest level to the most detailed level
using the following format:
diversification of services that have
marked recent decades. Industry
statistics presented using NAICS are
comparable, to a limited extent, with
statistics compiled according to the
latest revision of the United Nations’
International Standard Industrial
Classification (ISIC, Revision 3.1).
For the three countries, NAICS
provides a consistent framework for the
collection, tabulation, presentation, and
analysis of industry statistics used by
government policy analysts, by
academics and researchers, by the
business community, and by the public.
However, because of different national
economic and institutional structures as
well as limited resources and time for
constructing NAICS, its structure was
not made entirely comparable at the
individual industry level across all three
countries. For some sectors and
subsectors, the statistical agencies of the
three countries agreed to harmonize
NAICS based on sectoral boundaries
rather than on a detailed industry
structure. NAICS comparability is
limited to the sector level for wholesale
trade, retail trade, and public
administration.
The four principles of NAICS are:
(1) NAICS is erected on a productionoriented 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
Sector ........................
2-digit ........................
Subsector ..................
3-digit ........................
Industry Group .........
NAICS Industry ........
4-digit ........................
5-digit ........................
National Industry .....
6-digit ........................
Sectors represent the highest level of aggregation. There are 20 sectors in NAICS representing broad levels of aggregation.
Subsectors represent the next, more detailed level of aggregation in NAICS. There are 100
subsectors in NAICS.
Industry groups are more detailed than subsectors. There are 317 Industry groups in NAICS.
NAICS industries are the level that, in most cases, represents the lowest level of three country comparability. There are 725 five-digit industries in NAICS.
National industries are the most detailed level of NAICS. These industries represent the national level detail necessary for economic statistics in an industry classification. There are
1179 U.S. industries in NAICS United States, 2002.
Part II: Summary of Public Comments
Regarding Priorities for Changes to
NAICS in 2007
In response to the December 27, 2002,
Federal Register notice, the ECPC
received a total of 68 comments. Each
submission was assigned a unique
docket number. These 68 comments
addressed the advisability of making
changes based on the principles of
NAICS and/or included comments
proposing changes to the structure of
NAICS 2002.
The ECPC received nine comments
that addressed the issue of priorities for
a potential revision of NAICS in 2007
based on the four principles. The ECPC
recognized that the application of one
principle, such as international
comparability, could be at the expense
of another principle, such as time series
comparability. The ECPC sought public
comment on the relative priority of each
principle or a ranking of priorities for
the principles. The response to the
Federal Register notice was insufficient
to reliably gauge the general public’s
position on the priorities for a 2007
revision of NAICS. In the small number
of comments received, the same items
were listed as high priorities for some
respondents and low priorities for
others.
The ECPC recommends and has
applied the following general guidance
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when considering changes to NAICS in
2007:
(1) Because of the cost of change and
disruption of statistical data that has
already resulted from the ongoing
implementation of NAICS, the ECPC
will limit the scope of the changes for
2007 and recommend only essential
changes to the system;
(2) The ECPC will recommend new
and emerging industries identified
through public comment that are
supported by the guiding principles of
NAICS;
(3) The ECPC will approach
improvements in international
comparability using a better
concordance approach rather than
making structural changes to NAICS to
improve comparability; and
(4) The ECPC will make changes to
account for errors and omissions as well
as recommending narrative
improvements to clarify the content of
existing industries.
The ECPC also relied on the policy
direction of the Office of Management
and Budget and the positions of the
ECPC member agencies (Bureau of
Economic Analysis, Bureau of Labor
Statistics, and Bureau of the Census)
when evaluating specific proposals for
changes to NAICS in 2007. The ECPC
reviewed each individual proposal
within the existing framework of the
principles of NAICS. Additional
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considerations that resulted in
recommendations for or against change
included issues of relevance, size, and
time series continuity.
The ECPC received 60 comments that
requested specific changes to NAICS
industries for 2007. Twenty-two of those
comments requested industries for
biotechnology, three requested changes
to the definition of optometrists, and
three requested a new industry for
design/build in the construction sector
of NAICS. The balance of the comments
addressed single issues, such as requests
for new industries or clarifications for
activities including wedding
videography, rope and cordage
manufacturing, simulation, e-learning,
denturists, rental and leasing of
recreational vehicles, physical therapy,
travel goods wholesaling, and similar
requests.
The ECPC received a number of
comments that suggested changes to
NAICS that were not accepted. Each of
these suggestions was carefully
considered. Some suggestions were
modified by the ECPC to better meet the
objectives of NAICS. Other suggestions
proposed products (rather than
industries); these will be considered in
the North American Product
Classification System (NAPCS), a new
product classification system currently
under development. Still other
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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.
When a proposal was not accepted, it
was usually because: (a) The resulting
industry would have been too small in
the U.S.; (b) the specialization ratio of
the resulting industry, a measure of the
degree to which establishments in the
industry are similar to one another and
different from establishments in other
industries, was too low; or (c) the
proposal did not meet the productionoriented criterion for forming an
industry in NAICS.
Part III: Recommendations on Specific
Requests for Change
The ECPC received 22 separate
responses requesting the creation of new
industries for medical biotechnology
products, food and agricultural
biotechnology products, and industrial
biotechnology products. The proposals
were assigned docket numbers: 07–
0013, 07–0014, 07–0015, 07–0016, 07–
0018, 07–0019, 07–0020, 07–0022, 07–
0023, 07–0024, 07–0025, 07–0026, 07–
0027, 07–0028, 07–0029, 07–0030, 07–
0031, 07–0036, 07–0037, 07–0041, 07–
0044, and 07–0049. The proposals did
not contain information regarding the
size of the potential industries,
importance of the industries in Canada
or Mexico, or any information regarding
the separate production function
justification for creating the new
industries. In order to evaluate the
proposals, the ECPC consulted with an
industry trade association to clarify the
requests for new industries.
The ECPC clarified the requests as
proposals to create industries for
establishments that use biotechnology
inputs, use biotechnology processes, or
produce biotechnology outputs. The
practical impact of these proposals
would be to group a number of
establishments that are currently
classified in the Agriculture, Forestry,
Fishing, and Hunting; Manufacturing;
and Professional, Scientific and
Technical Services sectors of NAICS.
The ECPC used the principles of
NAICS to evaluate these requests. The
ECPC recommends against creating the
three industries requested based on the
mixture of production processes that
would be involved. These activities are
currently classified throughout the
NAICS system. For example, growing
genetically-modified crops is in farming,
production of biotech enzymes is in the
chemicals subsector of NAICS, and
manufacturing foods from biotech
inputs is classified in food
manufacturing. The ECPC considered
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the production processes and
similarities to other production
processes already separately identified
in NAICS. Growing a geneticallymodified crop may require a different
production function from growing a
more traditional version of the crop
because of decreased need for pesticides
or other inputs. Nevertheless, the
production process is still closer to
other agriculture production processes
than it is to manufacturing production
processes or professional service
production processes. A similar
rationale applies to food manufacturing
production processes, pharmaceutical
manufacturing production processes,
and industrial manufacturing
production processes.
The ECPC recognized the importance
of biotechnology as an emerging
technology that should be accounted for
in NAICS. While recommending against
the proposals received in response to
the Federal Register notice, the ECPC
does recommend creation of a new sixdigit national industry for
Biotechnology Research and
Development. This industry will
contain units that are using
biotechnology processes to develop
general knowledge, new products, and
processes using biotechnology. The new
biotechnology research and
development industry is in conformance
with the principles of NAICS because:
(1) The new industry will group similar
establishments using biotechnology
processes in experimental research and
development; (2) the new industry
addresses a new and emerging activity
resulting in the production of advanced
technologies, and (3) the new industry
is expected to be comparable with a
biotechnology research and
development industry proposed in the
ongoing revision of the International
Standard Industrial Classification of All
Economic Activities of the United
Nations. In order to minimize time
series disruptions, the new industry for
Biotechnology Research and
Development can be added to the
revised industry for research and
development in the physical,
engineering, and life sciences to create
a continuous time series for NAICS
United States 2002 industry 541710,
Research and Development in the
Physical, Engineering, and Life
Sciences.
The ECPC also reviewed the results of
a biotechnology use survey conducted
by the Department of Commerce and
reviewed preliminary survey results
regarding biotechnology research and
development from the 2002 Economic
Census. Both sources indicate that the
proposed industry will be supportable
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in collection and publication. The ECPC
recommends that public commenters on
this issue work with statistical data
collection programs in order to ensure
that adequate biotechnology product
detail is included in future data
collection efforts.
Three public comments requested
changes to the definition of optometrist
used in the NAICS United States 2002
manual. These proposals were assigned
docket numbers 07–0001, 07–0004, and
07–0035. The ECPC reviewed the
proposals and information from the
American Optometric Association and
is recommending changes to the
definition that would more accurately
describe the industry but would not
change the content of the industry in
NAICS 2007.
Three public comments requested a
new industry for design/build firms.
These proposals were assigned docket
numbers 07–0052, 07–0053, and 07–
0054. Similar proposals were received
in both 1997 and 2002. The ECPC
remains opposed to using project
delivery methods to define industries in
the construction sector. The concept of
using project delivery methods was
exhaustively reviewed with Canada and
Mexico during the 2002 revision of the
construction sector. During the 2007
revision process, the ECPC met on
several occasions with those who
requested this new industry and
discussed the criteria for industries in
NAICS, providing background on the
use of products in Census Bureau
programs and the development of the
North American Product Classification
System currently underway. The ECPC
recommends that interested parties
work with statistical data collection
programs in order to ensure that more
exhaustive survey items for the design/
build delivery method are included in
future data collection efforts.
The ECPC also reviewed the structure
of the telecommunications industries in
NAICS 2002 in light of continuing
change in the industry. The ECPC is
recommending changes in the
subsectors for Telecommunications
(517); Internet Service Providers, Web
Search Portals, and Data Processing
Services (518); and Other Information
Services (519).
Infrastructure operators increasingly
provide a bundle of voice, data, and
video services. Traditional telephone
companies are providing broadband
Internet access and video services, along
with telephone service. Traditional
television cable companies are also
providing broadband Internet access
services and telephone services. While
there is considerable interest in tracking
changes in these industries over time, it
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is becoming increasingly difficult to
distinguish between a cable company
and a telephone company. The
convergence of technologies is expected
to continue.
The proposal for telecommunications
creates three groupings based on the
infrastructure operated to provide a
variety of audio, video, data, and
telephony services. The three primary
infrastructure types are wired, wireless,
and satellite. In addition, there is a
fourth industry group that includes
some support activities and resellers
who directly buy and resell time on
networks (e.g., dial around long distance
resellers, mobile virtual network
operators) to provide their services. This
fourth group would also include units
providing services over a connection
provided by others (e.g., pure voice over
Internet protocol (VoIP) providers).
The wired telecommunications
carriers would include units that build
and operate their own wired networks,
as well as those that lease access to lines
and then provide services to customers
using those facilities. This
categorization is to acknowledge that
the infrastructure used to provide
services can be leased or purchased. The
services provided would include
telephony, data, and video services, as
well as any future services provided
using the infrastructure. The grouping
would exclude units who are pure
resellers—units that buy a block of
minutes and resell them without
providing any additional service; these
units would be included in the ‘‘all
other telecommunications’’ grouping.
Wired telecommunications carriers
would also include those that use a
fixed wireless ‘‘connection’’ for the last
mile. By exception, satellite television
providers will be included in this
industry.
The wireless telecommunications
carriers would include the units that
have spectrum licenses and provide
telephony, Internet access, or video
services using that spectrum. Wireless
telecommunications carriers would not
include pure resellers. Mobile virtual
network operators (MVNO) providing
mobile telephony or other services will
be defined as resellers and excluded
from this industry. MVNO’s do not have
infrastructure or spectrum licenses;
rather they resell the services of wireless
telecommunication carriers.
The satellite telecommunications
industry will remain defined as units
primarily engaged in providing point-topoint telecommunications services to
other establishments in the
telecommunications and broadcasting
industries by forwarding and receiving
communications signals via a system of
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satellites or reselling satellite
telecommunications.
The fourth grouping of other
telecommunications services would
include the current content of NAICS
51791, Other Telecommunications, and
the pure resellers in separate national
industries. Resellers will be classified in
NAICS 517911, Telecommunications
Resellers, and other telecommunications
services will be classified in NAICS
517919, All Other Telecommunications.
This industry will include pure VoIP
providers (providing VoIP to customers
who already have a broadband
connection), as well as dial-up Internet
service providers (providing access to
the Internet through a customerinitiated connection to the telecom
system).
Web search portals would be
combined with Internet publishing and
broadcasting. These types of units were
identified separately in NAICS 2002,
because they are different from either
publishers or broadcasters. The
definition of Internet publishing and
broadcasting is limited to exclusively
publishing and broadcasting on the
Internet and the ECPC continues to
support the classification of Internet
publishers and broadcasters separate
from the traditional publishing and
broadcasting industries. These
establishments will be placed in 519,
Other Information Services, as a fivedigit NAICS class.
This proposal to restructure the
telecommunications industries in
NAICS reduces or eliminates industry
distinctions based on the product being
offered in the telecommunications
section of NAICS. The anticipated
growth of VoIP, the continued
expansion of broadband Internet access,
the development of bundles of services
provided over available infrastructures,
and a desire for a robust structure that
will remain relevant, all affected the
development of this proposal. It is
difficult to predict what the
telecommunications industries will look
like in the future. This production
function approach, based on the
infrastructure used rather than the
current regulatory constraints or
product distinctions, should withstand
industry changes better than the current
product-oriented structure.
The downside to this proposal is that
separate data for cable distribution and
telephone service providers will not be
available at the industry level. The
ECPC understands that this will result
in a loss of data. The application of new
technologies, such as Internet
telephony, is expected to further blur
existing lines. The industry
classification will not be updated again
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until 2012. The ECPC has concluded
that the existing industry structure will
not be viable in the years ahead and
therefore recommends that these
changes be made now. The ECPC
particularly encourages comments
supporting or opposing this
recommendation. Although separate
national industries are expected to
cause problems based on regulatory
actions in the future, industries for
wired telecommunications carriers and
for cable and other program distribution
could be reinstated at the six-digit level.
This would not affect continuity at the
five-digit level if separate collection
becomes impossible.
A tabular summary of changes to the
Information Sector is included in Part
IV.
The balance of the comments
represented single requests for specific
changes. While these requests and the
associated ECPC recommendations are
not listed in this notice unless a
structure or industry content change
was recommended, a summary of the
decision for each docket received is
available on the World Wide Web at
https://www.census.gov/naics.
The ECPC is recommending several
NAICS industry title changes to more
clearly describe the existing content of
industries. These title changes do not
change the content of industries but
rather refine how they are described.
Part IV below presents the ECPC
recommendations for revisions to
NAICS United States for 2007.
NAICS Sector 21, Mining, will be
changed to ‘‘Mining, Quarrying, and Oil
and Gas Extraction.’’
NAICS 23821, Electrical Contractors,
will be changed to ‘‘Electrical
Contractors and Other Wiring
Installation Contractors.’’
NAICS 238210, Electrical Contractors,
will be changed to ‘‘Electrical
Contractors and Other Wiring
Installation Contractors.’’
NAICS 316999, All Other Leather
Good Manufacturing, will be changed to
‘‘All Other Leather Good and Allied
Product Manufacturing.’’
NAICS 322221, Coated and Laminated
Packaging Paper and Plastics Film
Manufacturing, will be changed to
‘‘Coated and Laminated Packaging Paper
Manufacturing.’’
NAICS 322223, Plastics, Foil, and
Coated Paper Bag Manufacturing, will
be changed to ‘‘Coated Paper Bag and
Pouch Manufacturing.’’
NAICS 326111, Plastics Bag
Manufacturing, will be changed to
‘‘Plastics Bag and Pouch
Manufacturing.’’
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NAICS 441221, Motorcycle Dealers,
will be changed to ‘‘Motorcycle, ATV,
and Personal Watercraft Dealers.’’
NAICS 492110, Couriers, will be
changed to ‘‘Couriers and Express
Delivery Services.’’
NAICS 541612, Human Resources and
Executive Search Consulting Services,
will be changed to ‘‘Human Resources
Consulting Services.’’
NAICS Industry Group 5418,
Advertising and Related Services, will
be changed to ‘‘Advertising, Public
Relations, and Related Services.’’
NAICS 56131, Employment
Placement Agencies, will be changed to
‘‘Employment Placement Agencies and
Executive Search Services.’’
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NAICS 722212, Cafeterias, will be
changed to ‘‘Cafeterias, Grill Buffets,
and Buffets.’’
Time Series Continuity
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
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concordance creates a crosswalk
between the old and new classification
systems. Statistical agencies in the U.S.
are planning links between the 2002
NAICS and 2007 NAICS (with U.S.
national detail).
Part IV: Tabular Recommendations for
Changes to NAICS United States
Effective for 2007
Table 1 presents the proposed NAICS
2007 industries defined by their NAICS
United States 2002 content. Table 2
lists, in NAICS United States 2002
order, the disposition of all industries
recommended for change and their
resulting relationship to NAICS United
States 2007 proposed industries.
BILLING CODE 3110–01–P
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John D. Graham,
Administrator, Office of Information and
Regulatory Affairs.
[FR Doc. 05–4848 Filed 3–10–05; 8:45 am]
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BILLING CODE 3110–01–C
Agencies
[Federal Register Volume 70, Number 47 (Friday, March 11, 2005)]
[Notices]
[Pages 12390-12399]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-4848]
[[Page 12389]]
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Part IV
Office of Management and Budget
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North American Industry Classification System--Update for 2007; Notice
Federal Register / Vol. 70, No. 47 / Friday, March 11, 2005 /
Notices
[[Page 12390]]
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OFFICE OF MANAGEMENT AND BUDGET
North American Industry Classification System--Update for 2007
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 2007 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 2007. NAICS is a system for classifying establishments (individual
business locations) by type of economic activity. Mexico's Instituto
Nacional de Estad[iacute]stica, Geograf[iacute]a e Inform[aacute]tica
(INEGI), Statistics Canada, and the United States Office of Management
and Budget, through its Economic Classification Policy Committee
(ECPC), collaborated on NAICS to make the industry statistics produced
by the three countries comparable. OMB's Economic Classification Policy
Committee recommends an update of the industry classification system to
clarify existing industry definitions and content, recognize new and
emerging industries, and correct errors and omissions.
This notice: (1) Summarizes the background for the proposed
revisions to NAICS 2002 in Part I, (2) contains a summary of public
comments in Part II, (3) details multiple requests and major changes in
the proposed structure agreed to by the three countries in Part III,
and (4) provides a comprehensive listing of proposed changes for
national industries and their links to NAICS 2002 industries in Part
IV.
OMB published a notification of intention to revise portions of
NAICS in a December 27, 2002, Federal Register notice (67 FR 79500-
79506). That notice solicited comments on the advisability of revising
maximum possible public input, OMB seeks comment on the advisability of
revising the NAICS 2002 structure for 2007 to account for new and
emerging industries and solicited comments on the advisability of
making changes to improve international comparability, and other
changes identified as necessary during the initial implementation of
NAICS 2002. The deadline for submitting comments was March 28, 2003.
After considering all proposals from the public, consulting with
U.S. data users and industry groups, and undertaking extensive
discussions with Statistics Canada and Mexico's INEGI, the ECPC in
collaboration with INEGI and Statistics Canada developed
recommendations for revisions to NAICS that would apply to all three
North American countries. These revisions focus on improving the
description of current industries, identifying new and emerging
industries, and recommending changes to industry content based on
research and implementation experience. There are no changes
specifically recommended to increase international comparability.
The ECPC recommends that NAICS United States 2007 incorporate
changes as shown in Parts III and IV of this notice.
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 2007. Statistics Canada and INEGI are recommending
acceptance of the proposed revisions 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. Please submit comments as soon as possible, but no
later than June 9, 2005. Please be aware of delays in mail processing
at Federal facilities due to heightened security. Respondents are
encouraged to send both a hard copy and a second copy via fax or e-
mail. This proposed revision to NAICS would become effective in the
U.S. for publication of establishment data that refer to periods
beginning on or after January 1, 2007.
ADDRESSES: Please send correspondence about the adoption and
implementation of proposed 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.
Please send E-mail comments to naics@omb.eop.gov with subject NAICS07.
OMB will include in the official record all comments received via
facsimile or via e-mail, at this address with this subject, by the date
specified above.
Please address inquiries about the content of industries or
requests for electronic copies of the tables to: John Murphy, Chair,
Economic Classification Policy Committee, Bureau of the Census, Room
2641-3, Washington, DC 20233, telephone number: (301) 763-5172, fax
number: (301) 457-1343, e-mail: John.Burns.Murphy@census.gov.
Electronic Availability and Comments: This document is available on
the Internet from the Census Bureau Internet site via WWW browser. To
obtain this document via WWW browser, connect to https://www.census.gov/
naics. This WWW page also contains links to previous NAICS Federal
Register notices and related documents.
FOR FURTHER INFORMATION CONTACT: Paul Bugg, 10201 New Executive Office
Building., Washington, DC 20503, e-mail address: pbugg@omb.eop.gov,
telephone number: (202) 395-3095, fax number: (202) 395-7245.
SUPPLEMENTARY INFORMATION:
Part I: Background of NAICS
NAICS is a system for classifying establishments (individual
business locations) by type of economic activity. Its purposes are: (1)
To facilitate the collection, tabulation, presentation, and analysis of
data relating to establishments, and (2) to promote uniformity and
comparability in the presentation and analysis of statistical data
describing the North American economy. NAICS is used by Federal
statistical agencies that 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, Geograf[iacute]a
e Inform[aacute]tica, Statistics Canada, and the United States Office
of Management and Budget, through its Economic Classification Policy
Committee, collaborated on NAICS to make the industry statistics
produced by the three countries comparable. NAICS is the first industry
classification system developed in accordance with a single principle
of aggregation, the principle that producing units that use similar
production processes should be grouped together in the classification.
NAICS also reflects in a much more explicit way the enormous
changes in technology and in the growth and
[[Page 12391]]
diversification of services that have marked recent decades. Industry
statistics presented using NAICS are comparable, to a limited extent,
with statistics compiled according to the latest revision of the United
Nations' International Standard Industrial Classification (ISIC,
Revision 3.1).
For the three countries, NAICS provides a consistent framework for
the collection, tabulation, presentation, and analysis of industry
statistics used by government policy analysts, by academics and
researchers, by the business community, and by the public. However,
because of different national economic and institutional structures as
well as limited resources and time for constructing NAICS, its
structure was not made entirely comparable at the individual industry
level across all three countries. For some sectors and subsectors, the
statistical agencies of the three countries agreed to harmonize NAICS
based on sectoral boundaries rather than on a detailed industry
structure. NAICS comparability is limited to the sector level for
wholesale trade, retail trade, and public administration.
The four principles of NAICS are:
(1) NAICS is erected on a production-oriented conceptual framework.
This means that producing units that use the same or similar production
processes are grouped together in NAICS.
(2) NAICS gives special attention to developing production-oriented
classifications for (a) new and emerging industries, (b) service
industries in general, and (c) industries engaged in the production of
advanced technologies.
(3) Time series continuity is maintained to the extent possible.
(4) The system strives for compatibility with the two-digit level
of the International Standard Industrial Classification of All Economic
Activities (ISIC Rev. 3) of the United Nations.
The ECPC is committed to maintaining the principles of NAICS during
revisions. The December 27, 2002, solicitation for public comment on
questions related to a potential revision of NAICS in 2007 was directly
tied to the application of the four NAICS principles.
NAICS uses a hierarchical structure to classify establishments from
the broadest level to the most detailed level using the following
format:
Sector..................... 2-digit................... Sectors
represent the
highest level
of
aggregation.
There are 20
sectors in
NAICS
representing
broad levels
of
aggregation.
Subsector.................. 3-digit................... Subsectors
represent the
next, more
detailed level
of aggregation
in NAICS.
There are 100
subsectors in
NAICS.
Industry Group............. 4-digit................... Industry groups
are more
detailed than
subsectors.
There are 317
Industry
groups in
NAICS.
NAICS Industry............. 5-digit................... NAICS
industries are
the level
that, in most
cases,
represents the
lowest level
of three
country
comparability.
There are 725
five-digit
industries in
NAICS.
National Industry.......... 6-digit................... National
industries are
the most
detailed level
of NAICS.
These
industries
represent the
national level
detail
necessary for
economic
statistics in
an industry
classification
. There are
1179 U.S.
industries in
NAICS United
States, 2002.
Part II: Summary of Public Comments Regarding Priorities for Changes to
NAICS in 2007
In response to the December 27, 2002, Federal Register notice, the
ECPC received a total of 68 comments. Each submission was assigned a
unique docket number. These 68 comments addressed the advisability of
making changes based on the principles of NAICS and/or included
comments proposing changes to the structure of NAICS 2002.
The ECPC received nine comments that addressed the issue of
priorities for a potential revision of NAICS in 2007 based on the four
principles. The ECPC recognized that the application of one principle,
such as international comparability, could be at the expense of another
principle, such as time series comparability. The ECPC sought public
comment on the relative priority of each principle or a ranking of
priorities for the principles. The response to the Federal Register
notice was insufficient to reliably gauge the general public's position
on the priorities for a 2007 revision of NAICS. In the small number of
comments received, the same items were listed as high priorities for
some respondents and low priorities for others.
The ECPC recommends and has applied the following general guidance
when considering changes to NAICS in 2007:
(1) Because of the cost of change and disruption of statistical
data that has already resulted from the ongoing implementation of
NAICS, the ECPC will limit the scope of the changes for 2007 and
recommend only essential changes to the system;
(2) The ECPC will recommend new and emerging industries identified
through public comment that are supported by the guiding principles of
NAICS;
(3) The ECPC will approach improvements in international
comparability using a better concordance approach rather than making
structural changes to NAICS to improve comparability; and
(4) The ECPC will make changes to account for errors and omissions
as well as recommending narrative improvements to clarify the content
of existing industries.
The ECPC also relied on the policy direction of the Office of
Management and Budget and the positions of the ECPC member agencies
(Bureau of Economic Analysis, Bureau of Labor Statistics, and Bureau of
the Census) when evaluating specific proposals for changes to NAICS in
2007. The ECPC reviewed each individual proposal within the existing
framework of the principles of NAICS. Additional considerations that
resulted in recommendations for or against change included issues of
relevance, size, and time series continuity.
The ECPC received 60 comments that requested specific changes to
NAICS industries for 2007. Twenty-two of those comments requested
industries for biotechnology, three requested changes to the definition
of optometrists, and three requested a new industry for design/build in
the construction sector of NAICS. The balance of the comments addressed
single issues, such as requests for new industries or clarifications
for activities including wedding videography, rope and cordage
manufacturing, simulation, e-learning, denturists, rental and leasing
of recreational vehicles, physical therapy, travel goods wholesaling,
and similar requests.
The ECPC received a number of comments that suggested changes to
NAICS that were not accepted. Each of these suggestions was carefully
considered. Some suggestions were modified by the ECPC to better meet
the objectives of NAICS. Other suggestions proposed products (rather
than industries); these will be considered in the North American
Product Classification System (NAPCS), a new product classification
system currently under development. Still other
[[Page 12392]]
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.
When a proposal was not accepted, it was usually because: (a) The
resulting industry would have been too small in the U.S.; (b) the
specialization ratio of the resulting industry, a measure of the degree
to which establishments in the industry are similar to one another and
different from establishments in other industries, was too low; or (c)
the proposal did not meet the production-oriented criterion for forming
an industry in NAICS.
Part III: Recommendations on Specific Requests for Change
The ECPC received 22 separate responses requesting the creation of
new industries for medical biotechnology products, food and
agricultural biotechnology products, and industrial biotechnology
products. The proposals were assigned docket numbers: 07-0013, 07-0014,
07-0015, 07-0016, 07-0018, 07-0019, 07-0020, 07-0022, 07-0023, 07-0024,
07-0025, 07-0026, 07-0027, 07-0028, 07-0029, 07-0030, 07-0031, 07-0036,
07-0037, 07-0041, 07-0044, and 07-0049. The proposals did not contain
information regarding the size of the potential industries, importance
of the industries in Canada or Mexico, or any information regarding the
separate production function justification for creating the new
industries. In order to evaluate the proposals, the ECPC consulted with
an industry trade association to clarify the requests for new
industries.
The ECPC clarified the requests as proposals to create industries
for establishments that use biotechnology inputs, use biotechnology
processes, or produce biotechnology outputs. The practical impact of
these proposals would be to group a number of establishments that are
currently classified in the Agriculture, Forestry, Fishing, and
Hunting; Manufacturing; and Professional, Scientific and Technical
Services sectors of NAICS.
The ECPC used the principles of NAICS to evaluate these requests.
The ECPC recommends against creating the three industries requested
based on the mixture of production processes that would be involved.
These activities are currently classified throughout the NAICS system.
For example, growing genetically-modified crops is in farming,
production of biotech enzymes is in the chemicals subsector of NAICS,
and manufacturing foods from biotech inputs is classified in food
manufacturing. The ECPC considered the production processes and
similarities to other production processes already separately
identified in NAICS. Growing a genetically-modified crop may require a
different production function from growing a more traditional version
of the crop because of decreased need for pesticides or other inputs.
Nevertheless, the production process is still closer to other
agriculture production processes than it is to manufacturing production
processes or professional service production processes. A similar
rationale applies to food manufacturing production processes,
pharmaceutical manufacturing production processes, and industrial
manufacturing production processes.
The ECPC recognized the importance of biotechnology as an emerging
technology that should be accounted for in NAICS. While recommending
against the proposals received in response to the Federal Register
notice, the ECPC does recommend creation of a new six-digit national
industry for Biotechnology Research and Development. This industry will
contain units that are using biotechnology processes to develop general
knowledge, new products, and processes using biotechnology. The new
biotechnology research and development industry is in conformance with
the principles of NAICS because: (1) The new industry will group
similar establishments using biotechnology processes in experimental
research and development; (2) the new industry addresses a new and
emerging activity resulting in the production of advanced technologies,
and (3) the new industry is expected to be comparable with a
biotechnology research and development industry proposed in the ongoing
revision of the International Standard Industrial Classification of All
Economic Activities of the United Nations. In order to minimize time
series disruptions, the new industry for Biotechnology Research and
Development can be added to the revised industry for research and
development in the physical, engineering, and life sciences to create a
continuous time series for NAICS United States 2002 industry 541710,
Research and Development in the Physical, Engineering, and Life
Sciences.
The ECPC also reviewed the results of a biotechnology use survey
conducted by the Department of Commerce and reviewed preliminary survey
results regarding biotechnology research and development from the 2002
Economic Census. Both sources indicate that the proposed industry will
be supportable in collection and publication. The ECPC recommends that
public commenters on this issue work with statistical data collection
programs in order to ensure that adequate biotechnology product detail
is included in future data collection efforts.
Three public comments requested changes to the definition of
optometrist used in the NAICS United States 2002 manual. These
proposals were assigned docket numbers 07-0001, 07-0004, and 07-0035.
The ECPC reviewed the proposals and information from the American
Optometric Association and is recommending changes to the definition
that would more accurately describe the industry but would not change
the content of the industry in NAICS 2007.
Three public comments requested a new industry for design/build
firms. These proposals were assigned docket numbers 07-0052, 07-0053,
and 07-0054. Similar proposals were received in both 1997 and 2002. The
ECPC remains opposed to using project delivery methods to define
industries in the construction sector. The concept of using project
delivery methods was exhaustively reviewed with Canada and Mexico
during the 2002 revision of the construction sector. During the 2007
revision process, the ECPC met on several occasions with those who
requested this new industry and discussed the criteria for industries
in NAICS, providing background on the use of products in Census Bureau
programs and the development of the North American Product
Classification System currently underway. The ECPC recommends that
interested parties work with statistical data collection programs in
order to ensure that more exhaustive survey items for the design/build
delivery method are included in future data collection efforts.
The ECPC also reviewed the structure of the telecommunications
industries in NAICS 2002 in light of continuing change in the industry.
The ECPC is recommending changes in the subsectors for
Telecommunications (517); Internet Service Providers, Web Search
Portals, and Data Processing Services (518); and Other Information
Services (519).
Infrastructure operators increasingly provide a bundle of voice,
data, and video services. Traditional telephone companies are providing
broadband Internet access and video services, along with telephone
service. Traditional television cable companies are also providing
broadband Internet access services and telephone services. While there
is considerable interest in tracking changes in these industries over
time, it
[[Page 12393]]
is becoming increasingly difficult to distinguish between a cable
company and a telephone company. The convergence of technologies is
expected to continue.
The proposal for telecommunications creates three groupings based
on the infrastructure operated to provide a variety of audio, video,
data, and telephony services. The three primary infrastructure types
are wired, wireless, and satellite. In addition, there is a fourth
industry group that includes some support activities and resellers who
directly buy and resell time on networks (e.g., dial around long
distance resellers, mobile virtual network operators) to provide their
services. This fourth group would also include units providing services
over a connection provided by others (e.g., pure voice over Internet
protocol (VoIP) providers).
The wired telecommunications carriers would include units that
build and operate their own wired networks, as well as those that lease
access to lines and then provide services to customers using those
facilities. This categorization is to acknowledge that the
infrastructure used to provide services can be leased or purchased. The
services provided would include telephony, data, and video services, as
well as any future services provided using the infrastructure. The
grouping would exclude units who are pure resellers--units that buy a
block of minutes and resell them without providing any additional
service; these units would be included in the ``all other
telecommunications'' grouping. Wired telecommunications carriers would
also include those that use a fixed wireless ``connection'' for the
last mile. By exception, satellite television providers will be
included in this industry.
The wireless telecommunications carriers would include the units
that have spectrum licenses and provide telephony, Internet access, or
video services using that spectrum. Wireless telecommunications
carriers would not include pure resellers. Mobile virtual network
operators (MVNO) providing mobile telephony or other services will be
defined as resellers and excluded from this industry. MVNO's do not
have infrastructure or spectrum licenses; rather they resell the
services of wireless telecommunication carriers.
The satellite telecommunications industry will remain defined as
units primarily engaged in providing point-to-point telecommunications
services to other establishments in the telecommunications and
broadcasting industries by forwarding and receiving communications
signals via a system of satellites or reselling satellite
telecommunications.
The fourth grouping of other telecommunications services would
include the current content of NAICS 51791, Other Telecommunications,
and the pure resellers in separate national industries. Resellers will
be classified in NAICS 517911, Telecommunications Resellers, and other
telecommunications services will be classified in NAICS 517919, All
Other Telecommunications. This industry will include pure VoIP
providers (providing VoIP to customers who already have a broadband
connection), as well as dial-up Internet service providers (providing
access to the Internet through a customer-initiated connection to the
telecom system).
Web search portals would be combined with Internet publishing and
broadcasting. These types of units were identified separately in NAICS
2002, because they are different from either publishers or
broadcasters. The definition of Internet publishing and broadcasting is
limited to exclusively publishing and broadcasting on the Internet and
the ECPC continues to support the classification of Internet publishers
and broadcasters separate from the traditional publishing and
broadcasting industries. These establishments will be placed in 519,
Other Information Services, as a five-digit NAICS class.
This proposal to restructure the telecommunications industries in
NAICS reduces or eliminates industry distinctions based on the product
being offered in the telecommunications section of NAICS. The
anticipated growth of VoIP, the continued expansion of broadband
Internet access, the development of bundles of services provided over
available infrastructures, and a desire for a robust structure that
will remain relevant, all affected the development of this proposal. It
is difficult to predict what the telecommunications industries will
look like in the future. This production function approach, based on
the infrastructure used rather than the current regulatory constraints
or product distinctions, should withstand industry changes better than
the current product-oriented structure.
The downside to this proposal is that separate data for cable
distribution and telephone service providers will not be available at
the industry level. The ECPC understands that this will result in a
loss of data. The application of new technologies, such as Internet
telephony, is expected to further blur existing lines. The industry
classification will not be updated again until 2012. The ECPC has
concluded that the existing industry structure will not be viable in
the years ahead and therefore recommends that these changes be made
now. The ECPC particularly encourages comments supporting or opposing
this recommendation. Although separate national industries are expected
to cause problems based on regulatory actions in the future, industries
for wired telecommunications carriers and for cable and other program
distribution could be reinstated at the six-digit level. This would not
affect continuity at the five-digit level if separate collection
becomes impossible.
A tabular summary of changes to the Information Sector is included
in Part IV.
The balance of the comments represented single requests for
specific changes. While these requests and the associated ECPC
recommendations are not listed in this notice unless a structure or
industry content change was recommended, a summary of the decision for
each docket received is available on the World Wide Web at https://
www.census.gov/naics.
The ECPC is recommending several NAICS industry title changes to
more clearly describe the existing content of industries. These title
changes do not change the content of industries but rather refine how
they are described. Part IV below presents the ECPC recommendations for
revisions to NAICS United States for 2007.
NAICS Sector 21, Mining, will be changed to ``Mining, Quarrying,
and Oil and Gas Extraction.''
NAICS 23821, Electrical Contractors, will be changed to
``Electrical Contractors and Other Wiring Installation Contractors.''
NAICS 238210, Electrical Contractors, will be changed to
``Electrical Contractors and Other Wiring Installation Contractors.''
NAICS 316999, All Other Leather Good Manufacturing, will be changed
to ``All Other Leather Good and Allied Product Manufacturing.''
NAICS 322221, Coated and Laminated Packaging Paper and Plastics
Film Manufacturing, will be changed to ``Coated and Laminated Packaging
Paper Manufacturing.''
NAICS 322223, Plastics, Foil, and Coated Paper Bag Manufacturing,
will be changed to ``Coated Paper Bag and Pouch Manufacturing.''
NAICS 326111, Plastics Bag Manufacturing, will be changed to
``Plastics Bag and Pouch Manufacturing.''
[[Page 12394]]
NAICS 441221, Motorcycle Dealers, will be changed to ``Motorcycle,
ATV, and Personal Watercraft Dealers.''
NAICS 492110, Couriers, will be changed to ``Couriers and Express
Delivery Services.''
NAICS 541612, Human Resources and Executive Search Consulting
Services, will be changed to ``Human Resources Consulting Services.''
NAICS Industry Group 5418, Advertising and Related Services, will
be changed to ``Advertising, Public Relations, and Related Services.''
NAICS 56131, Employment Placement Agencies, will be changed to
``Employment Placement Agencies and Executive Search Services.''
NAICS 722212, Cafeterias, will be changed to ``Cafeterias, Grill
Buffets, and Buffets.''
Time Series Continuity
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 2002 NAICS and 2007
NAICS (with U.S. national detail).
Part IV: Tabular Recommendations for Changes to NAICS United States
Effective for 2007
Table 1 presents the proposed NAICS 2007 industries defined by
their NAICS United States 2002 content. Table 2 lists, in NAICS United
States 2002 order, the disposition of all industries recommended for
change and their resulting relationship to NAICS United States 2007
proposed industries.
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[GRAPHIC] [TIFF OMITTED] TN11MR05.040
John D. Graham,
Administrator, Office of Information and Regulatory Affairs.
[FR Doc. 05-4848 Filed 3-10-05; 8:45 am]
BILLING CODE 3110-01-C