NORTH

AMERICAN

INDUSTRY

CLASSIFICATION

SYSTEM

United States, 2017

EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET

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Foreword

The Instituto Nacional de Estadstica y Geografa (INEGI) of Mexico, Statistics Canada, and the

United States Office of Management and Budget, through its Economic Classification Policy

Committee, have jointly updated the system of classification of economic activities that makes the

industrial statistics produced in the three countries comparable. The North American Industry

Classification System (NAICS) revision for 2017 is scheduled to go into effect for reference year

2017 in Canada and the United States, and 2018 in Mexico. NAICS was originally developed to

provide a consistent framework for the collection, analysis, and dissemination of industrial statistics

used by government policy analysts, by academics and researchers, by the business community, and

by the public. Revisions for 2017 were made to account for our rapidly changing economies.

Classifications serve as a lens through which to view the data they classify. NAICS is the first

industry classification system that was developed in accordance with a single principle of

aggregation, the principle that producing units that use similar production processes should be

grouped together. 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.

Though NAICS differs from other industry classification systems, the three countries continue to

strive to create industries that do not cross two-digit boundaries of the United Nations International

Standard Industrial Classification of All Economic Activities (ISIC).

The actual classification reveals only the tip of the work carried out by dedicated staff from

INEGI, Statistics Canada, and U.S. statistical agencies. It is through their efforts, painstaking

analysis, and spirit of accommodation that NAICS has emerged as a harmonized international

classification of economic activities in North America.

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Preface

The North American Industry Classification System (NAICS) represents a continuing

cooperative effort among Statistics Canada, Mexico's Instituto Nacional de Estadstica y Geografa

(INEGI), and the Economic Classification Policy Committee (ECPC) of the United States, acting on

behalf of the Office of Management and Budget, to create and maintain a common industry

classification system. With its inception in 1997, NAICS replaced the existing classification of each

countrythe Standard Industrial Classification (1980) of Canada, the Mexican Classification of

Activities and Products (1994), and the Standard Industrial Classification (1987) of the United

States. Since 1997, the countries have collaborated in producing five-year revisions to NAICS in

order to keep the classification system current with changes in economic activities.

The North American Industry Classification System is unique among industry classifications in

that it is constructed within a single conceptual framework. Economic units that have similar

production processes are classified in the same industry, and the lines drawn between industries

demarcate, to the extent practicable, differences in production processes. This supply-based, or

production-oriented, economic concept was adopted for NAICS because an industry classification

system is a framework for collecting and publishing information on both inputs and outputs, for

statistical uses that require that inputs and outputs be used together and be classified consistently.

Examples of such uses include measuring productivity, unit labor costs, and the capital intensity of

production, estimating employment-output relationships, constructing input-output tables, and other

uses that imply the analysis of production relationships in the economy. The classification concept

for NAICS leads to production of data that facilitate such analyses.

In the design of NAICS, attention was given 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. These special emphases are embodied in the particular

features of NAICS, discussed below. These same areas of special emphasis account for many of the

differences between the structure of NAICS and the structures of industry classification systems in

use elsewhere. NAICS provides enhanced industry comparability among the three North American

Free Trade Agreement (NAFTA) trading partners, while also increasing compatibility with the two-

digit level of the International Standard Industrial Classification (ISIC, Rev. 4) of the United

Nations.

NAICS divides the economy into 20 sectors. Industries within these sectors are grouped

according to the production criterion. A key feature of NAICS is the Information sector that groups

industries that primarily create and disseminate a product subject to copyright. The NAICS

Information sector brings together those activities that transform information into a commodity that

is produced and distributed, and activities that provide the means for distributing those products,

other than through traditional wholesale-retail distribution channels. Industries included in this

sector are telecommunications; broadcasting; newspaper, book, and periodical publishing; motion

picture and sound recording industries; libraries; and other information services.

Another feature of NAICS is a sector for Professional, Scientific, and Technical Services that

comprises establishments engaged in activities where human capital is the major input. The

industries within this sector are each defined by the expertise and training of the service provider.

The sector includes such industries as offices of lawyers, engineering services, architectural

services, advertising agencies, and interior design services.

A sector for Arts, Entertainment, and Recreation includes a wide range of establishments that

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operate facilities or provide services to meet varied cultural, entertainment, and recreational interests

of their patrons.

Another key sector, Health Care and Social Assistance, recognizes the merging of the boundaries

of health care and social assistance. The industries in this sector are arranged in an order that reflects

the range and extent of health care and social assistance provided. Some important industries are

family planning centers, outpatient mental health and substance abuse centers, and continuing care

retirement communities.

In the Manufacturing sector, an important subsector, Computer and Electronic Product

Manufacturing, brings together industries producing electronic products and their components. The

manufacturers of computers, communications equipment, and semiconductors, for example, are

grouped into the same subsector because of the inherent technological similarities of their

production processes, and the likelihood that these technologies will continue to converge in the

future. NAICS acknowledges the importance of these electronic industries, their rapid growth over

the past several decades and the likelihood that these industries will, in the future, become even

more important in the economies of the three North American countries.

This NAICS structure reflects the levels at which data comparability was agreed upon by the three countries' statistical agencies. The boundaries of all the sectors of NAICS are delineated. In

most sectors, NAICS provides for comparability at the industry (five-digit) level. However, for one

of the three subsectors in Mining, Quarrying, and Oil and Gas Extraction, one of the three

industry groups in Utilities, one of the ten industry groups in Construction, two of the four

subsectors in Finance and Insurance, one of the three industry groups in the Real Estate

subsector, and two of the four subsectors in Other Services (except Public Administration),

three-country comparability occurs either at the industry group (four-digit) or subsector (three-

digit) level. For these sectors or subsectors, differences in the economies of the three countries

prevent full comparability at the NAICS industry level. For Retail Trade, Wholesale Trade, and

Public Administration, the three countries' statistical agencies have agreed, at this time, only on the

boundaries of the sector (two-digit level). Below the agreed upon level of comparability, each

country may add additional detailed industries, as necessary to meet national needs, provided that

this additional detail aggregates to the NAICS level.

The United States has adopted the revised classification in their statistical programs for the

reference year beginning in 2017.

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Acknowledgments

This 2017 revision of the North American Industry Classification System (NAICS) was an

immense undertaking requiring the time, energy, creativity, and cooperation of numerous people

and organizations throughout the thr