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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: April 20, 2000

FROM: Barry McVay, CPCM

SUBJECT: Office of Management and Budget; North American Industry Classification System -- Update for 2002

SOURCE: Federal Register, April 20, 2000, Vol. 65, No. 77, page 21241

AGENCIES: Office of Management and Budget (OMB)

ACTION: Notice

SYNOPSIS: OMB is seeking comments 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 (United States, Canada, and Mexico) 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 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 proposed NAICS revision would become effective in the U.S. on January 1, 2002.

EDITOR'S NOTE: NAICS is a system devised by the United States, Canada, and Mexico 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. The NAICS was first published in 1997, and it is replacing the Standard Industrial Classification (SIC), which was originally developed in the 1930s and last updated by OMB in 1987. The NAICS reflects the enormous changes in technology and the growth and diversification of services that have marked recent years much better than does the SIC.

The NAICS uses a 6-digit hierarchical structure to classify establishments, as follows:

SectorFirst two digitsSector 21 -- Mining
SubsectorFirst three digitsSubsector 212, Mining (except Oil and Gas)
Industry GroupFirst four digitsIndustry Group 2122 -- Metal Ore Mining
NAICS IndustryFirst five digitsNAICS Industry 21223 -- Copper, Nickel, Lead, and Zinc (in general, this is the lowest level of compatibility among the three countries)
National IndustryAll six digitsU.S. Industry 212231 -- Lead Ore and Nickel Ore (the sixth digit provides the necessary detail for national economic statistics, and reflects the fact that the economies of the three countries are structured very differently)

On October 22, 1999, the Small Business Administration (SBA) published a proposal to amend its small business size regulations by replacing the SIC-based size standards with NAICS-based size standards. This change is expected to be effective October 1, 2000.

DATES: Submit comments no later than June 19, 2000.

ADDRESSES: Submit comments on the proposed NAICS changes to Katherine K. Wallman, Chief Statistician, Office of Management and Budget, 10201 New Executive Office Building, Washington, DC 20503, 202-395-3093, fax: 202-395-7245, or send e-mail comments to pbugg@omb.eop.gov with the subject "NAICS02".

Send inquiries about the contents of industries to Carole Ambler, Chair, Economic Classification Policy Committee, Bureau of the Census, Room 2633-3, Washington, DC 20233, 301-457-2668, fax: 301-457-1343.

The NAICS, previous NAICS notices, and related documents are available on the Internet from the Census Bureau at http://www.census.gov/naics.

FOR FURTHER INFORMATION CONTACT: Paul Bugg, 10201 New Executive Office Building, Washington, DC 20503, 202-395-3093, fax: 202-395-7245, e-mail: pbugg@omb.eop.gov.

SUPPLEMENTAL INFORMATION: OMB published a notification of intention to complete portions of NAICS on February 25, 1999, soliciting 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 ECPC received 28 comments in response to the February 25, 1999, request: 22 on the construction sector, 3 on the wholesale trade sector, and 3 that were outside the scope of the request for comments. Many of the comments, particularly those regarding the construction sector, were contradictory (for instance, one comment might suggest combining two industries together, another comment might suggest further subdividing the two industries). Some comments that were acceptable to the United States were not acceptable to Canada or Mexico, and vice versa. After considering all proposals from the public, consulting with a large number of U.S. data users and industry groups, and having extensive discussions with Statistics Canada and Mexico's Instituto Nacional de Estadistica, Geografia e Informatica (INEGI), the ECPC, INEGI, and Statistics Canada developed a revised structure for both the construction (Sector 23) and information sectors (Sector 51) of NAICS that would apply to all three North American countries (of particular note is that all Internet publishing would be moved to new Subsector 516, Internet Publishing and Broadcasting, and Internet service providers would be in Subsector 518, Internet Service Providers, Web Search Portals, and Data Processing Services).

The following are the proposed structures for Sectors 23 and 51:

Sector 23, Construction

236Construction of Buildings
2361Residential Building Construction
23611Residential Building Construction
2362Nonresidential Building Construction
23621Industrial Building Construction
23622Commercial and Institutional Building Construction
237Heavy and Civil Engineering Construction
2371Utility System Construction
23711Water and Sewer Line and Related Structures Construction
23712Oil and Gas Pipeline and Related Structures Construction
23713Power and Communication Line and Related Structures Construction
2372Land Subdivision
23721Land Subdivision
2373Highway, Street, and Bridge Construction
23731Highway, Street, and Bridge Construction
2379Other Heavy and Civil Engineering Construction
23799Other Heavy and Civil Engineering Construction
238Specialty Trade Contractors
2381Foundation, Structure, and Building Exterior Contractors
2382Building Equipment Contractors
23821Electrical Contractors
23822Plumbing, Heating, and Air-Conditioning Contractors
23829Other Building Equipment Contractors
2383Building Finishing Contractors
2389Other Specialty Trade Contractors

Sector 51, Information

511Publishing Industries (except Internet)
5111Newspaper, Periodical, Book, and Directory Publishers
51111Newspaper Publishers
51112Periodical Publishers
51113Book Publishers
51114Directory and Mailing List Publishers
51119Other Publishers
5112Software Publishers
51121Software Publishers
512Motion Picture and Sound Recording Industries
5121Motion Picture and Video Industries
51211Motion Picture and Video Production
51212Motion Picture and Video Distribution
51213Motion Picture and Video Exhibition
51219Postproduction Services and Other Motion Picture and Video Industries
5122Sound Recording Industries
51221Record Production
51222Integrated Record Production/Distribution
51223Music Publishers
51224Sound Recording Studios
51229Other Sound Recording Industries
515Broadcasting (except Internet)
5151Radio and Television Broadcasting
51511Radio Broadcasting
51512Television Broadcasting
5152Cable and Other Subscription Programming
51521Cable and Other Subscription Programming
516Internet Publishing and Broadcasting
5161Internet Publishing and Broadcasting
51611Internet Publishing and Broadcasting
517Telecommunications
5171Wired Telecommunications Carriers
51711Wired Telecommunications Carriers
5172Wireless Telecommunications Carriers (except Satellite)
51721Wireless Telecommunications Carriers (except Satellite)
5173Telecommunications Resellers
51731Telecommunications Resellers
5174Satellite Telecommunications
51741Satellite Telecommunications
5175Cable and Other Program Distribution
51751Cable and Other Program Distribution
5179Other Telecommunications
51791Other Telecommunications
518Internet Service Providers, Web Search Portals, and Data Processing Services
5181Internet Service Providers and Web Search Portals
51811Internet Service Providers and Web Search Portals
5182Data Processing, Hosting, and Related Services
51821Data Processing, Hosting, and Related Services
519Other Information Services
5191Other Information Services
51911News Syndicates
51912Libraries and Archives
51919All Other Information Services

For Sector 42, Wholesale Trade, after extensive discussions with Statistics Canada and INEGI, the representatives of the three countries' statistical agencies decided to delay 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 (new Subsector 423, Merchant Wholesalers, Durable Goods; and new Subsector 424, Merchant Wholesalers, Nondurable Goods) and those that do not (new Subsector 425, Wholesale Electronic Markets and Agents and Brokers), and to capture more accurately the rapidly-growing business-to-business electronic markets developing in the United States (Subsector 425). The following are the proposed structures for Sector 42:

Sector 42, Wholesale Trade

423Merchant Wholesalers, Durable Goods
4231Motor Vehicle and Motor Vehicle Parts and Supplies Merchant Wholesalers
42311Automobile and Other Motor Vehicle Merchant Wholesalers
42312Motor Vehicle Supplies and New Parts Merchant Wholesalers
42313Tire and Tube Merchant Wholesalers
42314Motor Vehicle Parts (Used) Merchant Wholesalers
4232Furniture and Home Furnishing Merchant Wholesalers
42321Furniture Merchant Wholesalers
42322Home Furnishing Merchant Wholesalers
4233Lumber and Other Construction Materials Merchant Wholesalers
42331Lumber, Plywood, Millwork, and Wood Panel Merchant Wholesalers
42332Brick, Stone, and Related Construction Material Merchant Wholesalers
42333Roofing, Siding, and Insulation Material Merchant Wholesalers
42339Other Construction Material Merchant Wholesalers
4234Professional and Commercial Equipment and Supplies Merchant Wholesalers
42341Photographic Equipment and Supplies Merchant Wholesalers
42342Office Equipment Merchant Wholesalers
42343Computer and Computer Peripheral Equipment and Software Merchant Wholesalers
42344Other Commercial Equipment Merchant Wholesalers
42345Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers
42346Ophthalmic Goods Merchant Wholesalers
42349Other Professional Equipment and Supplies Merchant Wholesalers
4235Metal and Mineral (except Petroleum) Merchant Wholesalers
42351Metal Service Centers and Other Metal Merchant Wholesalers
42352Coal and Other Mineral and Ore Merchant Wholesalers
4236Electrical and Electronic Goods Merchant Wholesalers
42361Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers
42362Electrical and Electronic Appliance, Television, and Radio Set Merchant Wholesalers
42369Other Electronic Parts and Equipment Merchant Wholesalers
4237Hardware, Plumbing and Heating Equipment and Supplies Merchant Wholesalers
42371Hardware Merchant Wholesalers
42372Plumbing and Heating Equipment and Supplies (Hydronics) Merchant Wholesalers
42373Warm Air Heating and Air-Conditioning Equipment and Supplies Merchant Wholesalers
42374Refrigeration Equipment and Supplies Merchant Wholesalers
4238Machinery, Equipment, and Supplies Merchant Wholesalers
42381Construction and Mining (except Oil Well) Machinery and Equipment Merchant Wholesalers
42382Farm and Garden Machinery and Equipment Merchant Wholesalers
42383Industrial Machinery and Equipment Merchant Wholesalers
42384Industrial Supplies Merchant Wholesalers
42385Service Establishment Equipment and Supplies Merchant Wholesalers
42386Transportation Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers
4239Miscellaneous Durable Goods Merchant Wholesalers
42391Sporting and Recreational Goods and Supplies Merchant Wholesalers
42392Toy and Hobby Goods and Supplies Merchant Wholesalers
42393Recyclable Material Merchant Wholesalers
42394Jewelry, Watch, Precious Stone, and Precious Metal Merchant Wholesalers
42399Other Miscellaneous Durable Goods Merchant Wholesalers
424Merchant Wholesalers, Nondurable Goods
4241Paper and Paper Product Merchant Wholesalers
42411Printing and Writing Paper Merchant Wholesalers
42412Stationery and Office Supplies Merchant Wholesalers
42413Industrial and Personal Service Paper Merchant Wholesalers
4242Drugs and Druggists' Sundries Merchant Wholesalers
42421Drugs and Druggists' Sundries Merchant Wholesalers
4243Apparel, Piece Goods, and Notions Merchant Wholesalers
42431Piece Goods, Notions, and Other Dry Goods Merchant Wholesalers
42432Men's and Boys' Clothing and Furnishings Merchant Wholesalers
42433Women's, Children's, and Infants' Clothing and Accessories Merchant Wholesalers
42434Footwear Merchant Wholesalers
4244Grocery and Related Product Merchant Wholesalers
42441General Line Grocery Merchant Wholesalers
42442Packaged Frozen Food Merchant Wholesalers
42443Dairy Product (except Dried or Canned) Merchant Wholesalers
42444Poultry and Poultry Product Merchant Wholesalers
42445Confectionery Merchant Wholesalers
42446Fish and Seafood Merchant Wholesalers
42447Meat and Meat Product Merchant Wholesalers
42448Fresh Fruit and Vegetable Merchant Wholesalers
42449Other Grocery and Related Products Merchant Wholesalers
4245Farm Product Raw Material Merchant Wholesalers
42451Grain and Field Bean Merchant Wholesalers
42452Livestock Merchant Wholesalers
42459Other Farm Product Raw Material Merchant Wholesalers
4246Chemical and Allied Products Merchant Wholesalers
42461Plastics Materials and Basic Forms and Shapes Merchant Wholesalers
42469Other Chemical and Allied Products Merchant Wholesalers
4247Petroleum and Petroleum Products Merchant Wholesalers
24271Petroleum Bulk Stations and Terminals
42472Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)
4248Beer, Wine, and Distilled Alcoholic Beverage Merchant Wholesalers
42481Beer and Ale Merchant Wholesalers
42482Wine and Distilled Alcoholic Beverage Merchant Wholesalers
4249Miscellaneous Nondurable Goods Merchant Wholesalers
42491Farm Supplies Merchant Wholesalers
42492Book, Periodical, and Newspaper Merchant Wholesalers
42493Flower, Nursery Stock, and Florists' Supplies Merchant Wholesalers
42494Tobacco and Tobacco Product Merchant Wholesalers
42495Paint, Varnish, and Supplies Merchant Wholesalers
42499Other Miscellaneous Nondurable Goods Merchant Wholesalers
425Wholesale Electronic Markets and Agents and Brokers
4251Wholesale Electronic Markets and Agents and Brokers
42511Business to Business Electronic Markets
42512Wholesale Trade Agents and Brokers

In addition, the ECPC is proposing to create additional national level detail for department stores and nonstore retailers. These changes would create more meaningful, homogeneous industries for the United States. The ECPC proposes splitting NAICS Industry 45211, Department Stores, into two new 6-digit industries: 452111, Department Stores (except Discount), and 452112, Discount Department Stores.

Finally, the ECPC is proposing to split NAICS Industry 45411, Electronic Shopping and Mail-Order Houses, into three new 6-digit industries: 454111, Electronic Shopping; 454112, Electronic Auctions; and NAICS 454113, Mail-Order Houses. The proposed changes for electronic shopping acknowledge the rapid growth of these activities in the United States.

EDITOR'S NOTE: This is not some "make work" exercise -- the NAICS will have a direct effect on federal acquisitions because the SBA is using the NAICS as the basis for its revised small business size standards. It is hard to believe that Industry 51611, Internet Publishing and Broadcasting, or Industry 51811, Internet Service Providers and Web Search Portals, can't be further subdivided. Lumping all the Internet publishers (for example) into a single category means the SBA will set a uniform, industry-wide small business size standard despite all the different kinds of Internet publishing that are conducted. What might be an appropriate small business size standard for Internet newspaper publishing might not be appropriate for Internet map publishing -- a small business size standard that is right for one would probably be wrong for the other. So this is the time to speak up!

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

Copyright 2000 by Panoptic Enterprises. All Rights Reserved.

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