Why Was NAICS Developed?

The North American Industry Classification System (NAICS) is used by U.S. statistical agencies to facilitate the collection, tabulation, presentation, and analysis of data relating to establishments; and to provide uniformity and comparability in the presentation of statistical data describing the U.S. economy. NAICS United States is designed for statistical purposes. Although the classification also may be used for various administrative, regulatory, and taxation purposes, the requirements of government agencies that use it for nonstatistical purposes, played no role in its development or subsequent revision.

In July 1994, OMB announced plans to develop a new industry classification system in cooperation with Mexico's INEGI and Statistics Canada. The new system—NAICS—replaced the U.S. SIC for statistical purposes. The concepts of the new system and the principles upon which NAICS was to be developed were announced in a July 26, 1994, Federal Register notice (59 FR 38092-38096) and were as follows:

  • NAICS will be erected on a production-oriented or supply-based conceptual framework. This means that producing units that use identical or similar production processes will be grouped together in NAICS.
  • The system will give special attention to developing production-oriented classifications for:
    • new and emerging industries,
    • service industries in general, and
    • industries engaged in the production of advanced technologies. 
  • Time series continuity will be maintained to the greatest extent possible. However, changes in the economy and proposals from data users must be considered. In addition, adjustments will be required for sectors where the United States, Canada, and Mexico have incompatible industry classification definitions in order to produce a common industry system for all three North American countries.
  • The system will strive for compatibility with the two-digit level of the International Standard Industrial Classification of All Economic Activities (ISIC) of the United Nations.