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North American
Industry Classification
System
America has a new system for classifying industries. The US
Government is retiring the familiar Standard Industrial Classification (SIC) system in
favor of the new North American Industry Classification System (NAICS), developed jointly
by the United States, Canada, and Mexico.
New Industries
NAICS (pronounced "nakes") identifies dozens of
new-industries recognized for the first time. Some new industries reflect "high
tech" developments, such as fiber optic cable manufacturing and satellite
telecommunications. Other new industries simply recognize changes in the way business is
done: bed and breakfast inns, environmental consulting, warehouse clubs and superstores,
HMO medical center, and diet and weight reduction centers. For a complete list,
please visit http://www.census.gov/epcd/www/naicsind.htm.
New Sectors
NAICS groups industries into 20 broad sectors (see Table
1), up from the 10 divisions of the SIC system. Many of the new sectors reflect
recognizable parts of SIC divisions, such as the Utilities and Transportation sectors.
Other sectors represent combinations of pieces from more than one SIC division. The new
Information Sector brings together broadcasting and telecommunications, publishing, and
computer-related services that were parts of the old SIC. A few sectors, like
Manufacturing and Retail Trade, will retain familiar titles but be revised in scope.
An example of the change impacting the software industry is:
| Description |
Old |
New |
| Software Publishers Prepackaged Software (software
publishing) |
7372 |
51121 |
New Numbering System
NAICS industries are identified by a 6-digit code, in
contrast to the 4-digit SIC code. The longer code accommodates the larger number of
sectors and allows more flexibility in designating subsectors. The number of industries is
increasing overall, with 1170 industries identified in the US. under NAICS, compared to
1004 SICS.
Publication of Data
The first major data source to classify data according to
the new NAICS system will be the 1997 Economic Census. In early 1999, an
"advance" report from the 1997 Economic Census will include the first data on a
NAICS basis, albeit only for broad categories (2-digit sectors for the US. and for states,
and 3-digit subsectors at the national level only). The more detailed industries and
geographic areas - will appear during 1999 and 2000.
Most current economic surveys from the Census Bureau, such
as Monthly Retail Sales, will switch to NAICS in 2000 or 2001. Other Federal agencies will
start publishing on a NAICS basis in 2001 or thereafter. Clearly, there will be a
transitional period of several years during which some data are available on a NAICS basis
while others continue with SIC.
Implications for Time Series
More than two-thirds of all 4-digit SICs can be
reconstructed from NAICS categories, either because the industry was not changed (other
than in code), or because new industries were defined as subdivisions of old ones.
On the other hand, many other industries have been changed
more profoundly, leading to breaks in the availability of time series data. For example,
some office supply stores previously classified as wholesalers are being reclassified into
corresponding retail industries if they sell primarily through storefront locations
similar to other retail establishments. This change affects not only the comparability of
individual industries, but whole sectors as well.
User Reaction
Comparability issues notwithstanding, the initial public
reaction to the introduction of NAICS has been positive. Business leaders and trade
associations recognize that the new industry classification system will be better than the
SIC and will serve as a better foundation for business statistics at the beginning of the
21 St. century. Those involved in studying the international economy are excited to gain
new tools for examining production and sales across Canada, Mexico and the US.
How to Prepare
A great deal of information is now available about NAICS on
the World Wide Web. The Census Bureau's Web site is one of them - http://www.census.gov/epcd/www/naics.html
- The full contents of Federal Register notices defining NAICS,
- Detailed correspondence tables (in HTML, ASCII, PDF, and database
formats)
- Defining each NAICS category in terms of SICs or parts thereof showing
for each SIC the corresponding NAICS category
- An implementation schedule listing when various Federal statistical
products are expected to convert to NAICS
- Background papers, including, "How NAICS Will Affect Data
Users."
The next major development will be the publication, at the
end of 1997, of the North
American Industry Classification System-United States, otherwise known as the NAICS
Manual. The NAICS manual, in print and on CD-ROM, will include a narrative description for
each NAICS category and a comprehensive alphabetic index to NAICS codes.
What does this mean to me?
The 1997 Economic Census will track manufacturing, services
and retail activity. It will be the first to use the new classification system. Among
other things impacted by the new classification system are:
- Industry statistics which are used for market research, job
training grants, industrial reporting, wage and hours reporting, corporate SEC reporting.
- Private industry classification systems such as those used
by Dun & Bradstreet and Harris Publishing, printers of the "Michigan
Manufacturers Directory."
NAICS will not change the manner in which exports are
reported. However, NAICS will become essential in compiling statistics for market
research. For more information on NAICS, please refer to the website or contact
your closest office of the US
Commercial Service.
Date
Updated: March 27, 2007
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