NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM

The detailed NAICS structure along with a brief description of the structure is attached (Attachments 1 and 2). Each country agrees to release a copy of the proposed NAICS structure to interested data users . Comments received will be shared among the countries and discussions held before a final decision on the structure is made. Each country may add additional detailed industries, below the 4-digit level of NAICS, as necessary to meet national needs, so long as this additional detail aggregates to a 4-digit NAICS level in order to ensure full comparability among the three countries. This NAICS structure was presented and provisionally accepted at the NAICS Committee meeting held on May 18 and 19 in Ottawa, Canada.


North American Industry Classification System
Draft Classification for: Petroleum and Coal Products Manufacturing Chemicals Manufacturing Rubber and Plastics Products Manufacturing Representatives of the statistical agencies of Canada, Mexico and the United States have agreed to a draft industry classification for these industries.
The draft classification provides for three industry subsectors, Petroleum and Coal Products Manufacturing; Chemicals Manufacturing; and Rubber and Plastics Products Manufacturing.These are further subdivided into ten industry groups and thirty industries.These industry subsectors will be part of the Manufacturing sector(s) of the NAICS classification.

Achievement of Objectives
The classification meets the objectives for the North American Industry Classification System.It is comprised of industries that group establishments with similar production processes, that is, it applies the production-oriented economic concept.In the main, the hierarchical structure of the classification also follows the production concept.
The classification achieves comparability for the three participating countries.Based on existing data, all three countries expect to be able to publish data regularly at the industry level of the structure.All countries agree on the detailed definitions of the industries.
The classification improves comparability with other countries.With the exception of the "miscellaneous" industries, all industries are compatible with the 2-digit level of the current International Standard Industrial Classification of All Economic Activities (ISIC, Revision 3) of the United Nations.This means that each NAICS industry is the same as, or part of, a single ISIC 2-digit Division.Therefore, data tabulated using NAICS can be readily retabulated according to ISIC.This comparability extends to higher levels of the NAICS.For example, there is little difference between the NAICS Chemical Industries, and ISIC 24, Manufacture of Chemicals and Chemical Products.
Other objectives of the NAICS project are not as relevant in this area of the classification as in others.These objectives are the delineation of new and emerging industries, service industries and industries engaged in the production of advanced technologies.The industry sector in question is relatively mature, generally produces goods, and has always employed relatively advanced technology.Therefore the emphasis was on the production concept and comparability.
The industries have high specialization ratios, and they are economically significant.The detail and structure of the classification are balanced in size.This enhances the classification's suitability for sampling, data-publishing and other aspects of survey operations.Finally, disruptions at the NAICS industry level to time series have been kept to a minimum.Most of the changes at the detail to existing classifications are marginal.The major changes are well-identified and can be taken into account in linking time series.

Limitations of the Classification
On the other hand, there are some analytical requirements which cannot be met by the industry classification.In particular, there is a demand for data on the production of all articles of plastic.This cannot be accommodated by the industry classification due to the ubiquity of plastic in manufactured products.Many industrial activities that incorporate plastics in combination with other materials are classified elsewhere in manufacturing.
Similarly, a breakdown of plastics industries which follows market lines cannot be produced.This arises from the fact that, in general, plastics fabricators can and do switch production from one type of product to another as market conditions change.In some cases a market or demand category does correspond to a distinct production process, in which case an industry can be defined which supports the needs of both supply-oriented and demandoriented analyses.An example of this is the NAICS Plastics Bottles Manufacturing industry.However, in general, this is not possible because of the way businesses have organized their production facilities.
Users requiring data for demand analysis can instead make use of statistics based on commodity classifications.Each country publishes such data.Efforts are underway to harmonize the commodity classifications to allow comparability of these statistics.

Constraints on the NAICS Classification
There were a few factors which constrained the structure and detail of the classification in the area under consideration.
An issue related to the coding structure is the ability to publish and the economic significance of the items defined in the classification.In the chemicals industry, most activities which were identified in one country exist in the others.However, often an activity is not economically significant to the same degree in all countries.Further, data for some significant activities cannot be published for a particular country for reasons of confidentiality, such as the matches manufacturing industry in Canada.Finally, the way activities are combined in establishments differs to some extent in the different countries.A structure could have been developed which specified such activities in NAICS, but the resulting statistical tables for any given country would have numerous insignificant or suppressed entries.It was preferable to adopt an operating rule that the NAICS industries for this area must be economically significant and publishable.It is anticipated that each country will publish additional categories which comprise sub-divisions of NAICS industries, to present data for activities which are nationally significant.
Other constraints did involve the nature of the industries to be classified.In the case of chemicals, it was essential for NAICS to include Petrochemicals Manufacturing as an industry, due to the significance of this activity in Mexico.This is a major change for the United States and Canada.It involves some extra work for these countries in implementing the classification, since the direct assignment of industry codes from commodity output information (a common technique for most manufacturing industries) cannot be used without modification.Nevertheless, the importance of the activity, and the fact that it is based on a well-defined production process, resulted in its inclusion in NAICS.

A General Outline
The Petroleum and Coal Products Manufacturing subsector is based on the transformation of crude petroleum and coal into usable products.The dominant process is petroleum refining, which involves the separation of crude petroleum into component products through such techniques as cracking and distillation.
The Chemicals Manufacturing subsector is based on the transformation of organic and inorganic raw materials by a chemical process, and the formulation of products.This subsector distinguishes the production of basic chemicals, which comprises the first industry group, from the production of intermediate and end products produced by further processing of basic chemicals, which make up the remaining industry groups.
Concerning Basic Chemicals Manufacturing industries, data users will note that a general distinction has not been made between organic and inorganic basic chemicals.The production of organic and inorganic industrial gases is a single activity.In Mexico, the production of organic and inorganic dyes and pigments commonly takes place in the same establishments.
The industry subsector Rubber and Plastics Products Manufacturing includes establishments which make goods by processing raw rubber and plastics materials.To the extent possible, this subsector is restricted to industrial activities whose core technology is the production of products made of just one material, rubber or plastic.Many manufacturing activities use rubber or plastic as one of several inputs, to the extent that the core technology relates to the type of product produced.An example of this is the manufacture of footwear.Typically, more than one material is used to produce shoes, so technologies which allow disparate materials to be formed and combined are of central importance in describing the footwear manufacturing activity.Such activities, for example footwear and furniture manufacture, are generally classified elsewhere than in the industry subsectors organized around the core technologies of rubber and plastic.
The main exception to this principle is Tires and Tubes Manufacturing.The production of tires is included in Rubber Products Manufacturing to minimize the disruption of time series and for comparability with ISIC, rather than because it particularly fits the general production process of the major group subsector.Tires are normally made from several materials.
A distinction is made between rubber and plastics products at the industry group level.It is not a rigid distinction, as can be seen from the definition of Rubber and Plastics Hose and Belting Manufacturing.As materials technology improves, plastics are increasingly being used as a substitute for rubber.Eventually, the distinction may disappear as a basis for defining establishments, and be limited to the commodity classification.
The Plastics Products Manufacturing industry subsector consists generally of activities involving the processing of plastics materials in forms such as pellets into intermediate or final products, using such processes as extrusion and injection moulding.Within most of these industries, the production process is such that a wide variety of products can be produced.

Some Changes to the National Classifications
This section highlights some of the significant changes to existing national classifications.In Petroleum and Coal Products Manufacturing, the main change to an existing classification is the inclusion of activities currently in CSIC 2721, Asphalt Roofing Industry, 1 in NAICS Asphalt Paving and Roofing and Saturated Materials Manufacturing.It is included here because the defining feature of the production process (the saturation of paper with asphalt) is the manipulation of asphalt.
The production of alumina from bauxite is currently classified in USIC 2819, Industrial Inorganic Chemicals, NEC.The production of alumina does involve the use of a chemical process, but it is analogous to the chemical activities involved in the processing of other ores in smelting and refining industries.It will therefore be treated as an activity in the primary metals, rather than in NAICS Other Inorganic Chemicals Manufacturing.
The production of artificial and synthetic fibers is treated as a textile activity in CSIC.While the outputs are a basic raw material for textile production, the fiber production itself is an activity with chemical characteristics.It is basically a polymerization process, similar to the production of synthetic resins.It is therefore included in the NAICS Chemicals Manufacturing subsector (Artificial and Synthetic Fibers and Filament Manufacturing).
The manufacture of photographic chemicals and sensitized paper is classified in CSIC 3912, Other Instruments and Related Products Industry and in USIC 3861, Photographic Equipment and Supplies.NAICS classifies the production of these goods in Miscellaneous Chemical Products Manufacturing, since their production process is a chemical products process, not an equipment manufacturing process.
The new classification eliminates the 2-digit distinction between rubber products and plastics products which was found in CSIC (groups 15 and 16).NAICS combines CSIC group 15, rubber products, and group 16, plastics products, into one subsector, Rubber and Plastics Products Manufacturing.
NAICS Tires and Tubes Manufacturing includes an activity--the retreading and recapping of tires--which in CSIC and USIC is classified as non-manufacturing.The tire retreading and recapping activity is included in manufacturing because it involves more than just a repair.This activity is an example of "re-building", which occurs when a manufactured article is returned to usability using processes similar to those used in the original manufacturing operation.Re-building activities will be included in manufacturing in NAICS.
NAICS Rubber and Plastics Products Manufacturing excludes the manufacture of footwear, furniture and toys of rubber and plastic.This is a significant change to CMAP, which includes these activities in CMAP 3550, Rubber Industry and 3560, Manufacture of Plastics Products.
NAICS Unsupported Plastics Films, Sheet and Bags Manufacturing includes the manufacture of plastic laminates for packaging and plastic bags, which are classified respectively in USIC 2671, Packaging Paper and Plastics Film, Coated and Laminated and 2673, Plastics, Foil and Coated Paper Bags.
NAICS Other Plastics Products Manufacturing includes the manufacture of most of the plastics motor vehicle parts, such as interior and exterior trim of plastics, which are classified in CSIC 3256, Plastics Parts and Accessories for Motor Vehicles.

Section B -Annex: United States National Industry Detail
As explained in the Structure presentation of this notice, for a number of reasons 4-digit industries in the three NAICS industry subsectors presented in Part 1, Section A -Attachment 1, contain less detail than is currently in the U.S. SIC system, and less detail than is required to meet important analytical requirements in the U.S. The three country agreement on NAICS envisions that each country may develop national detailed industries below the NAICS industry level, so long as the national detail can be aggregated to the NAICS classification, thus assuring full North American comparability.
The ECPC is proposing U.S. 5-digit industry detail for the three NAICS industry subsectors covered in Part I of this notice.In the following tables, proposed 5-digit detail is indicated in italics.For cases where no 5-digit detail is shown, the ECPC is proposing that the NAICS 4-digit industries will also represent the most detailed U.S. industries.Also, there were several activities that transferred within the rubber and plastics products industries.The number of rubber and plastics products industries increased from 15 in 1987 to 17 in 1997.For time series linkage, 13 of the 15 1987 industries are comparable within three percent of the 1997 industries.
CSIC refers to the Standard Industrial Classification of Canada, 1980 Revision.USIC refers to the Standard Industrial Classification of the United States, 1987 Revision.CMAP refers to the Classification of Activities and Products of Mexico.

TABLE 1
The definitions of status codes are as follows: E-existing industry; N-new industry; R-revised industry; and * means "part of".The abbreviation NEC is used for Not Elsewhere Classified.

TABLE 2
The abbreviation "pt" means "part of".@ means time series break has been created that is greater than 3%of the 1992 value of shipments for the 1987 SIC industry.The abbreviation NEC is used for Not Elsewhere Classified.