Unified Enterprise Survey

5-3600-151.3 STC/UES-375-75376

Reporting Guide

This guide is designed to assist you as you complete the 2011 Annual Retail Trade Survey. If you need more information, please call the Statistics Canada Help Line at the number below.

Help Line: 1- 800-972-9692

Table of contents

General information
Part A
A - Introduction
Reporting instructions
Main business activity
Reporting period information
Revenue, cost of goods sold and expenses
B - Revenue
C - Cost of goods sold
D - Expenses
E - Distribution of total operating revenue
F - Events that may have affected your business unit
H - Comments
J - Contact information
Part B - Location details
APPENDIX 1 - GASOLINE SERVICE STATION GUIDE
I - Independent retail dealer
II - Retail commissionned agent
III - Lessee
IV - Oil refinery or other wholesale supplier
APPENDIX 2 - BEER, WINE AND LIQUOR CHAINS

General information

Survey purpose

Statistics Canada uses your survey responses to compile operating and financial statistics for the retail sector by province/territory and Canada as a whole. By accurately reporting your business units activity, you contribute to measuring provincial/territorial and Canadian economic output - the gross domestic product (GDP), as well as provide an accurate portrait of the store retailing sector in Canada.

Retailers also make significant use of the data from these surveys to:

• track their performance against industry averages;
• evaluate expansion plans;
• prepare business plans for investors;
• determine payments with respect to performance based contracts;
• plan marketing strategies.

Your answers are confidential.

Statistics Canada is prohibited by law from releasing any information from this survey which would identify a person, business, or organization, without their prior consent. The confidentiality provisions of the Statistics Act are not affected by either the Access to Information Act or any other legislation. Therefore, for example, the Canada Revenue Agency cannot access identifiable survey data from Statistics Canada.

These survey data will only be used for statistical purposes and will be published in an aggregate form only.

Data-sharing agreements

To reduce respondent burden, Statistics Canada has entered into data-sharing agreements with provincial and territorial statistical agencies and other government organizations, who must keep the data confidential and use them only for statistical purposes. Statistics Canada will only share data from this survey with those organizations that have demonstrated a requirement to use the data.

Section 11 of the Statistics Act provides for the sharing of information with provincial and territorial statistical agencies that meet certain conditions. These agencies must have the legislative authority to collect the same information, on a mandatory basis, and the legislation must provide substantially the same provisions for confidentiality and penalties for disclosure of confidential information as the Statistics Act. Because these agencies have the legal authority to compel businesses to provide the same information, consent is not requested and businesses may not object to the sharing of the data.

For this survey, there are Section 11 agreements with the provincial and territorial statistical agencies of Newfoundland and Labrador, Nova Scotia, New Brunswick, Quebec, Ontario, Manitoba, Saskatchewan, Alberta, British Columbia, and the Yukon.

The shared data will be limited to business establishments located within the jurisdiction of the respective province or territory.

Section 12 of the Statistics Act provides for the sharing of information with federal, provincial or territorial government organizations. Under Section 12, you may refuse to share your information with any of these organizations by writing a letter of objection to the Chief Statistician and returning it with the completed questionnaire. Please specify the organizations with which you do not want to share your data.

For this survey, there are Section 12 agreements with the statistical agencies of Prince Edward Island, the Northwest Territories and Nunavut.

For agreements with provincial and territorial government organizations, the shared data will be limited to business establishments located within the jurisdiction of the respective province or territory.

Record linkage

To enhance the data from this survey, Statistics Canada may combine it with information from other surveys or from administrative sources.

Questionnaire

This guide is designed to provide additional information and to assist you in completing the questionnaire.

The Annual Retail Trade Survey is comprised of 2 parts. Part A of the questionnaire requests information on revenue earned and expenses incurred by your business unit, information typically found on the income statement of the business unit. Part A is divided into six sections identified with capital letters A to F. Each section is further subdivided by headings and letters.

Part B of the questionnaire requests detailed information on individual locations. Part B serves 2 important purposes:

• First, if you operate in more than one province or territory, the data you provide are used to allocate your economic activity to the provinces/territories in which it actually takes place. This is important for measuring the GDP for each province/territory.
• Second, by having data on individual stores, aggregate performance measures can be developed that allow you to make comparisons of the performance of your company against industry standards for similar types of operations.

Electronic reporting

The Retail Trade questionnaire is available in both a paper and an electronic format. The electronic version is particularly useful for companies with a large number of locations and allows the location detail to be loaded from a variety of software formats. Should you wish to change from the paper questionnaire to the electronic questionnaire, or the reverse, please call the Help Line number on the front page. Guideline items in this guide correspond to sections and question numbers on the survey questionnaire.

D - Expenses

1. Salaries and wages of employees

Please report all salaries and wages (including taxable allowances and employment commissions as defined on the T4 – Statement of Remuneration Paid) before deductions.

Include:

• vacation pay;
• bonuses (including profit sharing);
• commissions;
• taxable allowances (e.g., room and board, vehicle allowances, gifts such as airline tickets for holidays);
• retroactive wage payments;
• direct employee labour costs (e.g., related to any manufacturing activity or installation service).

Exclude all payments and expenses associated with outside contract workers and casual labour for whom a T4-Statement of Remuneration Paid was not issued such as:

• the cost of a receptionist or a filing clerk under direct contract to you;
• payments to employment agencies or personnel suppliers, (e.g., pay for temporary workers paid through an agency and charges for personnel search services under direct contract to you).

Please report these amounts in this section, at question 8.

2. Employer portion of employee benefits

Include :

• employee life and extended health care insurance plans (e.g., medical, dental, drug and vision care plans);
• Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) contributions;
• employer pension contributions;
• workers’ compensation (provincial or territorial plan applicable to this business unit);
• employment insurance premiums (EI);
• retiring allowances or lump sum payments to employees at time of termination or retirement;
• all other employee benefits and supplementary unemployment benefit (SUB) plans;
• contributions to provincial and territorial health and education payroll taxes.

3. Total labour remuneration

The sum of questions 1 and 2 or the total if you cannot provide the above breakdown.

4. Rental and leasing expenses

Include:

• rent of office space or other real estate;
• motor vehicles (without driver);
• computers and peripherals (without operator);
• other machinery and equipment (without operator);
• furniture and fixtures.

Exclude:

• rental and leasing of vehicles, machinery and equipment with driver or operator; please report these items at question 8 below.

5. Advertising and promotion

Include:

• planning, creating and placement services of advertising;
• purchase of sale of advertising space or time;
• other advertising services;
• trade fair and exhibition organization services.

6. Amortization and depreciation expenses

Include the amortization and depreciation expenses on this business unit’s:

• capital assets;
• intangible assets;
• capital lease obligations.

Exclude:

• amortization and depreciation expenses on vehicles owned by this business unit that are leased to others.

7. Management fees and other service fees charged by head office and other business support units

Include:

• any management or service fees paid to head office.

8. All other operating expenses

Please report all other operating expenses not specified and reported above.

Include:

• all payments and expenses associated with outside contract workers;
• rental and leasing of vehicles, machinery and equipment with driver or operator;
• goods transportation, warehousing and storage expenses;
• bad debt;
• donations;
• other costs (these are non-labour costs related to any manufacturing activity or installation service).

Exclude:

• interest expenses; please report these amounts at question 10 below.

9. Total operating expenses

The sum of questions 3 to 8 in this section.

10. Other expenses

Include:

• interest expenses on capital lease obligations;
• interest on loans;
• the interest portion of mortgage payments.

11. Total expenses

The sum of questions 9 and 10 in this section.

E - Distribution of total operating revenue

Statistics Canada recognizes that this may be a difficult section to answer. If precise numbers are not available, please provide your best estimates.

1. By type of customer

In this section you are asked to indicate the percentage of total operating revenue (reported in Section B, at question 9) from individuals and households and from all other customers.

Data on your revenue by type of customer are used to determine the percentage of revenue in the retail trade sector that originates from end use consumption by individuals and households and the percentage that is derived from purchases for other uses.

2. By method of sale

In this section you are asked to indicate the percentage of total operating revenue earned from in-store sales, e-commerce, catalogue, mail-order and telephone and all other methods.

Data on your revenue by method of sale are used to measure the evolving means by which traditional store retailers reach their clientele.

a) In-store sales

Please report the percentage of total operating revenue of goods or services which are purchased in a fixed point-of-sale location accessible to the public. Sales at pumps for gasoline stations are considered in-store sales.

b) E-commerce

Please report the percentage of total operating revenue of goods or services, whether between businesses, households, individuals, governments, conducted over internet applications. The goods and services are ordered over those networks, but the payment and ultimate delivery of the good or service may be conducted on or off-line.

c) Catalogue, mail order or telephone

Please report the percentage of total operating revenue generated from customers ordering their goods from catalogues and mail order flyers. Include sales purchased via telephone and fax.

d) All other methods

Please report the percentage of total operating revenue of goods or services from all other methods. This includes trade shows, special events, in-home sales and card lock.

Unified Enterprise Survey

5-3600-143.3 STC/UES-380-75374

Reporting Guide

This guide is designed to assist you as you complete the 2011 Annual Wholesale Trade Survey. If you need more information, please call the Statistics Canada Help Line at the number below.

Help Line: 1- 800-972-9692

Table of contents

A - Introduction
Reporting instructions
Main business activity
Revenue,cost of goods sold and expenses
B - Revenue
C - Cost of goods sold
D - Expenses
E - Distribution of operating revenue by location and type of customer
F - Events that may have affected your business unit
G - Key variables by province/territory of operation
H - Province/country of origin and destination of goods sold
I - Comments

This guide is designed to provide additional information to assist you in completing the questionnaire. The Annual Wholesale Trade Survey is divided into nine sections identified with capital letters A to I. Each of the sections is further subdivided into headings and question numbers. Guideline items in this guide correspond to sections and question numbers that are on the survey questionnaire.

B - Revenue

All revenue reported should exclude sales taxes (GST/HST, PST and TVQ) and be net of returns, discounts, sales allowances, and charges for outward transportation by common or contract carriers. Do not deduct the value of trade-ins.

1. Sales of all goods purchased for resale, net of returns and discounts or rebates provided to your clients

Include:

• excise taxes (such as those on gasoline, liquor, and tobacco) and other taxes that are levied on the manufacturer/importer and included in the cost of products purchased by this business unit;
• sales of all goods purchased for resale; please report gross sales of new and used goods less returns, discounts and rebates;
• parts used in generating repair and maintenance revenue; report the labour portion of repair and maintenance at question 4 below;
• any sales made to any member company of your enterprise.

Do not deduct the value of trade-ins.

Exclude:

• taxes collected directly from customers and paid directly by this operating unit to provincial and federal tax agencies.

2. a) Commission revenue and fees earned selling merchandise on behalf of others

Please report the gross amount of commission and fees earned by this business unit while acting as an agent or broker selling goods owned by other businesses.

2. b) Value of goods where commission and fees were earned by you acting as an agent or broker

As supplementary information to the reported commission revenue, please report the sale value of those goods upon which you have reported earning a commission or fee.

3. Sales of goods manufactured as a secondary activity by this wholesaling business unit

Please report revenue from sales of goods of own manufacture.

4. Labour revenue from repair and maintenance

Include:

• labour revenue from installation, repair and maintenance work.

Parts used in generating installation, repair and maintenance revenue are to be included at question 1 above.

5. Revenue from rental and leasing of office space, other real estate, goods and equipment

Include:

• rental and leasing of office space, other real estate, goods and equipment, whether or not they have been produced by your business unit.

6. All other operating revenue

Report all other operating revenue not reported above.

Include:

• revenue from warranties;
• revenue from shipping, and handling and storing goods for others that has not been included in the price of the goods.

Exclude:

• interest and dividend income.

Please report these amounts at question 8 below.

7. Total operating revenue

The sum of questions 1 to 6 above, excluding 2b.

8. Non-operating revenue

Non-production-related revenue of this business unit.

Include:

• interest and dividend income.

9. Total revenue

The sum of questions 7 and 8 below.

C - Cost of goods sold

1. Opening inventory and 3. Closing inventory

Report inventories at book value (i.e., the value maintained in your accounting records).

Include opening and closing inventories of all types such as:

• raw materials;
• goods in process;
• finished products;
• parts used in generating repair and maintenance revenue;
• goods purchased for resale;
• inventory owned by this business unit within or outside Canada (including inventory at any warehouse, selling outlet, in transit, or out on consignment).

Closing inventory should reflect all inventory adjustments.

Exclude:

• inventory held on consignment for others.

2. Purchases of goods

Please report the purchases of new and used goods for resale and, if applicable, raw materials.

Please report the laid-down cost to this business unit (including shipping and handling, if applicable).

Include:

• shipping and handling charges, and the cost of insurance, if applicable;
• import duties and all taxes paid, except for the deductible GST/HST/TVQ;
• transfer of goods received from within your own company.

If your accounting records do not permit you to make the distinction between goods purchased from outside the firm and goods manufactured by business units of your own firm, please provide your best estimate.

4. Cost of goods sold

The sum of questions 1 and 2 minus question 3.

D - Expenses

1. Salaries and wages of employees

Please report all salaries and wages (including taxable allowances and employment commissions as defined on the T4 - Statement of Remuneration Paid) before deductions.

Include:

• vacation pay;
• bonuses (including profit sharing);
• commissions;
• taxable allowances (e.g., room and board, vehicle allowances, gifts such as air tickets for holidays);
• retroactive wage payments.

Exclude all payments and expenses associated with outside contract workers and casual labour for whom a T4 – Statement of Remuneration Paid was not issued such as:

• a receptionist or a filing clerk under direct contract to you;
• pay for temporary workers paid through an agency;
• charges for personnel search services under direct contract to you.

Please report these amounts at question 8, next page.

2. Employer portion of employee benefits

Please report the employer portion of employee benefits.

Include:

• employee life and extended health care insurance plans (e.g., medical, dental, drug and vision care plans);
• Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) contributions;
• employer pension contributions;
• workers’ compensation (provincial or territorial plan applicable to this business unit);
• employment insurance premiums (EI);
• retiring allowances or lump sum payments to employees at time of termination or retirement;
• all other employee benefits and supplementary unemployment benefit (SUB) plans;
• contributions to provincial and territorial health and education payroll taxes.

3. Total labour remuneration

The sum of questions 1 and 2 or the total if you cannot provide the breakdown for Salaries and wages of employees and the Employer portion of employee benefits

4. Rental and leasing expenses

Include:

• rent of office space or other real estate;
• motor vehicles (without driver);
• computers and peripherals (without operator);
• other machinery and equipment (without operator);
• rental or leasing services concerning other goods (videotapes, televisions, furniture, etc.).

Exclude:

• rental and leasing of vehicles, machinery and equipment with driver or operator; report those costs with the associated function (e.g., the rental of a transportation company truck and driver to deliver a product to a customer at your business unit’s expense would be charged to other operating expenses).

Please report this amount at question 8 next page.

5. Advertising and promotion

Include:

• planning, creating and placement services of advertising;
• purchase of advertising space or time;
• other advertising services;
• trade fair and exhibition services (e.g., booth space, tables, temporary telephone, fax or computing services and equipment).

6. Amortization and depreciation expenses

Include the amortization and depreciation expenses on this business unit’s:

• capital assets;
• intangible assets;
• capital lease obligations.

7. Management fees and other service fees charged by head office and other business support units

Include:

• any management or service fees paid to head office.

8. All other operating expenses

Report all other operating expenses not specified and reported above.

Include  for example:

• property and business taxes, licences and other permits, including building permits and development changes;
• legal and audit expenses;
• bad debt expenses;
• donations;
• office supplies;
• rental and leasing of vehicles, machinery and equipment with driver or operator.

Exclude:

• interest expenses.

Please report these amounts at question 10 below.

9. Total operating expenses

The sum of questions 3 to 8 of this section.

10. Other expenses

Include:

• interest expenses on capital lease obligations;
• interest on loans;
• the interest portion of mortgage payments.

11. Total expenses

The sum of questions 9 and 10 above.

E - Distribution of total operating revenue by location and type of customer

1.You are asked to indicate the percentage distribution of total operating revenue by the location of your customers within or outside Canada. For example, 70% of total operating revenue is from customers in Canada and 30% is from customers outside of Canada.

2. For your Canadian customers, you are asked to report the percentage distribution of total operating revenue by the type of customer.

F - Events that may have affected your business unit

In the space provided, please make note of any factors (e.g., strike, layoffs, weather) that affected your business unit as compared to last year. Your response reduces the likelihood of further inquiries seeking to understand significant changes, from one year to the next, in reported values.

G - Key variables by province/territory of operation

Section G applies only if you are reporting for more than one wholesale operation and the wholesale operations are located in more than one province/territory.

For example, if you are reporting for wholesale operations located in Nova Scotia and Ontario, you would report for the province/territory where your wholesale operations are located.

Please indicate whether you are reporting in either Canadian dollars ($) or in percentages (%) by ticking the appropriate box.

If you report in Canadian dollars, the Canada Totals should equal the totals reported in Sections B, C and D, at the indicated questions. If you report in percentages, the Canada Totals should equal 100%.

H - Province/country of origin and destination of goods sold

Why is Section H so important?

• to apportion harmonized sales tax revenues and to distribute various other federal funds like equalization payments, for example. The information you provide us with has an impact on the sources of provincial/territorial government revenues which contribute to the financing of various provincial/territorial activities such as building roads and running schools and hospitals.
• to measure the provincial/territorial gross domestic product - an indicator of the performance of provincial/territorial economies. Businesses depend on such indicators to make a number of important decisions such as where to expand their operations and to identify new markets for their goods and services.
• to assess regional disparities, the resolution of which may result in various government programs such as providing business assistance and initiating investment such as construction of wharves or airports.
• to assess the movement of goods and services among provinces/territories and the impact of any trade barriers.

How to complete this section

In this section you are asked to provide – for your

total goods and for each province/territory in which you have wholesale business operations – the province/territory/country where your supplier is located (origin) and the province/territory/country where your customer is located (destination).

Please note that your best estimates are acceptable.

For costs of goods sold and sales of goods:

In dollars or percentages, report for each product the proportion of total cost of goods sold and sales of goods in each province/territory.

For origin:

Please provide the percentages that the cost of goods sold represented in each province/territory or foreign country where your supplier(s) is/are located. The supplier is the last business from whom you purchased your goods, that is, the wholesaler’s point of purchase.

For destination:

Please provide the percentages of total sales in each province/territory or foreign country where your customer(s) is/are located.

Please note:

• Intermediate shipping points do not affect the origin and destination of a product.
• “Total sales” is equal to question 1 + question 3 in Section B - Revenue.
• If the supplier(s) and/or customer(s) have/has a shipping address different from the invoicing address, use the shipping address to determine origin and destination.

Example of a company that has business units with wholesale operations in two provinces:

Figure 1

You would complete Section H as follows:

I - Comments

Statistics Canada invites you to comment on any aspect of the survey. All comments are appreciated and reviewed.

Preface and acknowledgements

• Foreword
• Preface
• Acknowledgements

Foreword

Statistics Canada, the Instituto Nacional de Estadística y Geografía (INEGI) (formerly the Instituto Nacional de Estadística, Geografía e Informática) of Mexico 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 2012 is scheduled to go into effect for reference year 2012 in the United States, 2013 in Canada and 2014 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 2012 were made to account for our changing economies.

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 significant changes in technology and in the growth and diversification of services in recent decades. Though NAICS differs from other international 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 staff from INEGI, Statistics Canada, and U.S. statistical agencies. It is through their regular efforts, analysis, and co-operation that NAICS has emerged as a harmonized international classification of economic activities in North America.

Preface

The North American Industry Classification System (NAICS) represents a continuing cooperative effort among Statistics Canada, Mexico's Instituto Nacional de Estadística y Geografía (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 country, the 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 5-year revisions to NAICS in order to keep the classification system current with changes in economic activities. The NAICS changes for 2012 represent a minor revision and all occur within sector boundaries.

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 labour costs, and 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 a production-oriented classification 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 twenty sectors. Industries within these sectors are grouped according to the production criterion. Though the goods/services distinction is not explicitly reflected in the structure of NAICS, four sectors are largely goods-producing and sixteen are entirely services-producing industries.

A key feature of NAICS is the information and cultural sector that groups industries that primarily create and disseminate a product subject to copyright. This 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; software publishing; motion picture and sound recording industries; libraries; internet publishing and broadcasting; and other information services.

Another feature of NAICS is a sector for professional, scientific and technical services. It 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 groups facilities or services that meet the cultural, entertainment and recreational interests of patrons.

The health care and social assistance sector recognizes the merging of the boundaries of these two types of services. 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 centres, outpatient mental health and substance abuse centres, and community care facilities for the elderly.

In the manufacturing sector, the computer and electronic product manufacturing subsector 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. The reproduction of packaged software is placed in this sector, rather than in the services sector, because the reproduction of packaged software is a manufacturing process, and the product moves through the wholesale and retail distribution systems like any other manufactured product. NAICS acknowledges the importance of these electronic industries, their rapid growth over the past several years and the likelihood that these industries will, in the future, become even more important in the economies of the three NAICS partner countries.

The NAICS structure reflects the levels at which data comparability was agreed upon by the three statistical agencies. The boundaries of all the sectors of NAICS have been delineated. In most sectors, NAICS provides for comparability at the industry (five-digit) level. However, for real estate, and finance and insurance, three-country comparability will occur either at the industry group (four-digit) or subsector (three-digit) levels. For these sectors, differences in the economies of the three countries prevent full comparability at the NAICS industry level. For utilities, 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.

Acknowledgements

The third revision of the North American Industry Classification System (NAICS) required the time, energy and co-operation of numerous people and organizations in three countries: Canada, Mexico and the United States. The work that has been accomplished is a testament to the individual and collective willingness of many persons and organizations in the public and private sectors to contribute to its development.

In Canada, NAICS was revised under the guidance of Alice Born, Director of Standards Division. NAICS Canada could not have been revised without input from the subject matter divisions of Statistics Canada, federal and provincial government departments and agencies, business and trade associations, and economic analysts, the contribution of all of whom is gratefully acknowledged.

NAICS Canada 2012 is published by Standards Division. The publication was prepared by Michael Pedersen under the supervision of Alice Born and Johanne Pineau-Crysdale and with major contributions from JoAnn Casey, Karen Milligan-Vata and Robert Smith. The Internet version of this publication was created jointly by Sylvain Boucher and Niloufar Zanganeh.

Systems Engineering Division and Administrative and Dissemination Systems Division were responsible for the systems development of the PDF and HTML formats of the classification.

Introduction

• Status
• Purpose of NAICS
• Forward
• Preface
• Acknowledgements
• Historical background
• Revision of NAICS for 2012
• Development of NAICS
• Conceptual framework of NAICS
• Use of the North American Product Classification System (NAPCS)
• Structure of NAICS
• 2012 NAICS Canada structure
• Definition of the establishment
• Determining the industry classification of an establishment
• Relationship between NAICS and ISIC Revision 4
• Classification structure

Status

This standard was approved as a departmental standard on November 21, 2011.

Purpose of NAICS

The North American Industry Classification System (NAICS) is an industry classification system developed by the statistical agencies of Canada, Mexico and the United States. Created against the background of the North American Free Trade Agreement, it is designed to provide common definitions of the industrial structure of the three countries and a common statistical framework to facilitate the analysis of the three economies. NAICS is based on supply-side or production-oriented principles, to ensure that industrial data, classified to NAICS, are suitable for the analysis of production-related issues such as industrial performance.

Economic statistics describe the behaviour and activities of economic transactors and of the transactions that take place among them. The economic transactors for which NAICS is designed are businesses and other organizations engaged in the production of goods and services. They include farms, incorporated and unincorporated businesses and government business enterprises. They also include government institutions and agencies engaged in the production of marketed and non-marketed services, as well as organizations such as professional associations and unions and charitable or non-profit organizations and the employees of households.

NAICS is a comprehensive system encompassing all economic activities. It has a hierarchical structure. At the highest level, it divides the economy into 20 sectors. At lower levels, it further distinguishes the different economic activities in which businesses are engaged.

NAICS is designed for the compilation of production statistics and, therefore, for the classification of data relating to establishments. It takes into account the specialization of activities generally found at the level of the producing units of businesses. The criteria used to group establishments into industries in NAICS are similarity of input structures, labour skills and production processes.

NAICS can also be used for classifying companies and enterprises. However, when NAICS is used in this way, the following caveat applies: NAICS has not been specially designed to take account of the wide range of vertically- or horizontally-integrated activities of large and complex, multi-establishment companies and enterprises. Hence, there will be a few large and complex companies and enterprises whose activities may be spread over the different sectors of NAICS, in such a way that classifying them to one sector will misrepresent the range of their activities. However, in general, a larger proportion of the activities of each complex company and enterprise is more likely to fall within the sector, subsector and industry group levels of the classification than within the industry levels. Hence, the higher levels of the classification are more suitable for the classification of companies and enterprises than are the lower levels. It should also be kept in mind that when businesses are composed of establishments belonging to different NAICS industries, their company- and enterprise-level data will show a different industrial distribution, when classified to NAICS, than will their establishment-level data, and the data will not be directly comparable.

While NAICS is designed for the classification of units engaged in market and non-market production, as defined by the System of National Accounts, it can also be used to classify own-account production, such as the unpaid work of households.

NAICS has been designed for statistical purposes. Government departments and agencies and other users that use it for administrative, legislative and other non-statistical purposes are responsible for interpreting the classification for the purpose or purposes for which they use it.

Forward

Instituto Nacional de Estadística y Geografía (INEGI) (formerly the Instituto Nacional de Estadística, Geografía e Informática) of Mexico 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 2012 is scheduled to go into effect for reference year 2012 in the United States, 2013 in Canada and 2014 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 2012 were made to account for our changing economies.

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 significant changes in technology and in the growth and diversification of services in recent decades. Though NAICS differs from other international 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 staff from INEGI, Statistics Canada, and U.S. statistical agencies. It is through their regular efforts, analysis, and co-operation that NAICS has emerged as a harmonized international classification of economic activities in North America.

Preface

The North American Industry Classification System (NAICS) represents a continuing cooperative effort among Statistics Canada, Mexico's Instituto Nacional de Estadística y Geografía (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 country, the 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 5-year revisions to NAICS in order to keep the classification system current with changes in economic activities. The NAICS changes for 2012 represent a minor revision and all occur within sector boundaries.

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 labour costs, and 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 a production-oriented classification 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 twenty sectors. Industries within these sectors are grouped according to the production criterion. Though the goods/services distinction is not explicitly reflected in the structure of NAICS, four sectors are largely goods-producing and sixteen are entirely services-producing industries.

A key feature of NAICS is the information and cultural sector that groups industries that primarily create and disseminate a product subject to copyright. This 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; software publishing; motion picture and sound recording industries; libraries; internet publishing and broadcasting; and other information services.

Another feature of NAICS is a sector for professional, scientific and technical services. It 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 groups facilities or services that meet the cultural, entertainment and recreational interests of patrons.

The health care and social assistance sector recognizes the merging of the boundaries of these two types of services. 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 centres, outpatient mental health and substance abuse centres, and community care facilities for the elderly.

In the manufacturing sector, the computer and electronic product manufacturing subsector 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. The reproduction of packaged software is placed in this sector, rather than in the services sector, because the reproduction of packaged software is a manufacturing process, and the product moves through the wholesale and retail distribution systems like any other manufactured product. NAICS acknowledges the importance of these electronic industries, their rapid growth over the past several years and the likelihood that these industries will, in the future, become even more important in the economies of the three NAICS partner countries.

The NAICS structure reflects the levels at which data comparability was agreed upon by the three statistical agencies. The boundaries of all the sectors of NAICS have been delineated. In most sectors, NAICS provides for comparability at the industry (five-digit) level. However, for real estate, and finance and insurance, three-country comparability will occur either at the industry group (four-digit) or subsector (three-digit) levels. For these sectors, differences in the economies of the three countries prevent full comparability at the NAICS industry level. For utilities, 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.

Acknowledgements

The third revision of the North American Industry Classification System (NAICS) required the time, energy and co-operation of numerous people and organizations in three countries: Canada, Mexico and the United States. The work that has been accomplished is a testament to the individual and collective willingness of many persons and organizations in the public and private sectors to contribute to its development.

In Canada, NAICS was revised under the guidance of Alice Born, Director of Standards Division. NAICS Canada could not have been revised without input from the subject matter divisions of Statistics Canada, federal and provincial government departments and agencies, business and trade associations, and economic analysts, the contribution of all of whom is gratefully acknowledged.

NAICS Canada 2012 is published by Standards Division. The publication was prepared by Michael Pedersen under the supervision of Alice Born and Johanne Pineau-Crysdale and with major contributions from JoAnn Casey, Karen Milligan-Vata and Robert Smith. The Internet version of this publication was created jointly by Sylvain Boucher and Niloufar Zanganeh.

Systems Engineering Division and Administrative and Dissemination Systems Division were responsible for the systems development of the PDF and HTML formats of the classification.

Historical background

Over the years, Statistics Canada has developed and used a number of industrial classification systems. In 1948, the first Canadian Standard Industrial Classification (SIC) was developed. This was done to meet the government's need to establish a more comprehensive and fully-integrated system of economic reporting, in support of the key objectives of its post-war reconstruction programme outlined in the 1945 White Paper (on employment and income). The 1948 SIC brought together different industry descriptions in use at the time, each of which was applied to data about different aspects of the economy based on different definitions. It facilitated data comparability, by providing a framework of common concepts, terminology and groupings of industries. The introduction to the 1948 SIC manual stated that it was designed for the classification of the establishment but a precise definition was not provided.

In the major revision of the SIC in 1960, the importance of the need for a standard unit of observation was emphasized by the provision of a standard definition of the establishment. The variables needed to assemble the "basic industrial statistics" required for the analysis of the different sectors of the economy were specified and the establishment became the smallest unit capable of reporting that set of variables. The 1970 revision updated the industry groupings to reflect changes in the industrial structure of the economy.

The 1980 revision of the SIC was again a major one. This revision more directly linked the SIC to the System of National Accounts (SNA). It specified the universe of production to be as defined for the production accounts of the SNA. It drew a picture of all the variables that needed to be collected from or allocated to the establishment, in order to calculate value added by establishment for the Input Output accounts and Real Domestic Product by industry. It gave more emphasis to the role of "ancillary" activities in the collection of an integrated system of economic statistics and emphasized the difference between technical and ancillary activities and the role of ancillary units in accounting for total production. By using available statistics, it more explicitly used measures of specialization and coverage to delineate manufacturing industries. It recommended the use of the 1980 SIC for the classification of establishments and the compilation of production statistics.

In 1980, a separate classification, the Canadian Standard Industrial Classification for Companies and Enterprises, was produced for the compilation of financial statistics related to companies and enterprises. This classification took account of vertically-integrated companies and enterprises and created special classes for them at the lowest level of the classification. The higher levels of the classification cut across the traditional groupings of industrial classifications based on separating primary, secondary and tertiary activities in the economy and created sector groupings that drew together single and vertically-integrated companies and enterprises engaged in the production of similar product groups.

It was customary to revise the SIC at ten-year intervals; however, by 1990 not all the economic statistics programs of Statistics Canada had implemented the 1980 SIC. It was decided to postpone the revision and to take into account the statistical needs of the North American Free Trade Agreement signed in January 1994. The needs were met by developing NAICS, an industrial classification common to Canada, Mexico and the United States. The first version, NAICS Canada 1997, was released in March 1998.

NAICS was revised for 2002 to achieve increased comparability among the three countries in selected areas and to identify additional industries for new and emerging activities. To that end, the construction sector was revised and comparability achieved, for the most part, at the industry (five-digit) level. Industries were created for Internet services providers and web search portals, and Internet publishing and broadcasting.

Changes to Canadian and world economies continue to impact on classification systems. NAICS was revised for 2007 to reflect these changes. In particular, the information sector was once again updated. The updates took into account the rapid changes within this area, including the merging of activities. As a result, Internet publishing and broadcasting and web search portals have been combined, as have Internet service providers and data processing, hosting, and related services. Telecommunications resellers and other telecommunications have also been merged.

The 2012 NAICS revision was undertaken to achieve one main goal: to modify or create industries to reflect new, emerging, or changing activities and technologies.

Revision of NAICS for 2012

A public consultation was launched on Statistics Canada's website on July 3rd, 2008 through a call for proposals for changes to the 2007 NAICS version. The deadline for receipt of proposals was September 30th, 2009. Review of the proposals and consultations within Statistics Canada and with our Mexican and American counterparts were undertaken starting in 2008 and ending in 2010. NAICS revisions for 2012 were finalized early in 2011.

A summary document of the changes was published on Statistics Canada's website on April 1st 2011 in the form of a notice of provisional NAICS changes for 2012. This document served to notify interested stakeholders of the changes at a high level.

Various kinds of changes are brought into NAICS for 2012. Many changes involve clarification of the definition and boundary of classes through changes to the descriptive text of the definition; the illustrative examples; the exclusions; and titles of industries. Some changes involve the reduction of industry detail, while other industries are detailed further. Several other changes involve code numbering changes, by pushing 5-digit detail down to the 6-digit level, with otherwise no changes in content. This was done to keep the NAICS coding consistent at the trilateral level. Among the most notable changes are changes relating to outsourcing of manufacturing production, video game publishers and developers, book publishing exclusive agents, and crafts.

Outsourcing of manufacturing

The treatment of factoryless goods producers (FGPs) - units that outsource the transformation process for manufactured goods - is being clarified for NAICS 2012. The activities of FGPs will be classified to manufacturing if the units own the inputs to production. Otherwise the units will be classified to wholesale trade. This treatment is consistent with the ISIC Rev. 4 treatment of factoryless goods producers.

Video game publishers and developers

Two new 6-digit industries have been created to cover the video game publishers and developers industries: one under 51121 Software publishers and one under 54151 Computer systems design and related services.

Book publishing exclusive agents

Exclusive agents are a concept particular to the Canadian book publishing industry. Exclusive agents will be classified in 511130 Book publishers rather than 414420 Book, periodical and newspaper merchant wholesalers.

Crafts

The production of crafts by artisans and craftpersons will be classified in 711511 Independent visual artists and artisans rather than in manufacturing.

Development of NAICS

NAICS was developed by Statistics Canada, Mexico's Instituto Nacional de Estadística y Geografía (INEGI) and the Economic Classification Policy Committee (ECPC) of the United States Office of Management and Budget.

The three countries agreed upon the conceptual framework of the new system and the principles upon which NAICS was to be developed.

1. NAICS would be based on a production-oriented or supply-based conceptual framework. This means that producing units using similar production processes would be grouped together in NAICS.
2. Special attention would be given to developing production-oriented classifications for
   1. new and emerging industries
   2. service industries in general and
   3. industries engaged in the production of advanced technologies.
3. Time-series continuity would be maintained to the extent possible. However, changes in the economy and proposals from data users would be considered. In addition, in order to create a common system for all three countries, adjustments would be made where the United States, Canada and Mexico had incompatible definitions.
4. In the interest of a wider range of international comparisons, the three countries would strive for greater compatibility with the International Standard Industrial Classification of All Economic Activities (ISIC Revision 3) by minimising the extent to which the lowest levels of NAICS crossed the boundaries of the 2-digit level of ISIC Revision 3.

To help with the development of NAICS, a user committee meeting was called in November 1994 and extensive consultation was undertaken in Canada with federal and provincial government departments and agencies, business and trade associations, economic analysts and the advisory committees of Statistics Canada.

A co-ordinating committee and subcommittees, which covered agriculture, mining and manufacturing, construction, distribution networks (retail and wholesale trade, transportation, communications and utilities), finance, insurance and real estate, business and personal services and health, social assistance and public administration, were responsible for developing the proposed structure of NAICS, in co-operation with representatives from INEGI and the U.S. statistical agencies. Proposals from all three countries concerning individual industries were considered for acceptance, if the proposed industry was based on the production-oriented concept of the system. The structure of NAICS was developed in a series of three-country meetings and formally accepted by the senior representatives of the ECPC, INEGI and Statistics Canada.

The final structure of NAICS was accepted by the heads of Statistics Canada, INEGI and the Office of Management and Budget of the United States on December 10, 1996.

Conceptual framework of NAICS

NAICS is based on a production-oriented, or supply-based conceptual framework in that establishments are grouped into industries according to similarity in the production processes used to produce goods and services. Here the definition of production process refers to the combination of inputs used in producing a certain quantity of outputs. The inputs are capital, labour, energy, materials and services, a concept known as KLEMS. A production-oriented industry classification system ensures that statistical agencies in the three countries can produce information on inputs and outputs, industrial performance, productivity, unit labour costs, employment, and other statistics that reflect structural changes occurring in the three economies.

The activity of an establishment can be described in terms of what is produced, namely the type of goods and services produced, or how they are produced, namely, the mix of inputs (KLEMS) used.

To create industries, establishments can be grouped using the criterion of similarity of output or the criterion of similarity of inputs, processes, skills and technology used. The various versions of the Canadian SIC and of the International Standard Industrial Classification of All Economic Activities (ISIC) of the United Nations have all used mixed criteria to create the industries of the classification.

NAICS is based on a single production-oriented concept. Producing units are grouped into industries according to similarities in their production processes as defined earlier. The boundaries between industries demarcate, in principle, differences in input structures and production technologies. This means that, in the language of economics, producing units within an industry have similar production functions that differ from those of producing units in other industries.

The unit of observation of the industrial classification is the producing unit or establishment, and the industrial classification groups producing units, not products. Groupings of producing units permit the collection of data on inputs and outputs on a comparable basis. Because establishments each produce a number of products in different combinations and using different technologies, it is hardly possible to group all the establishments producing a particular product. It is more useful to use a production-oriented approach to bring together, into industries, establishments with common input structures, and to compile data on their outputs. This permits the compilation of comprehensive data on the total output of each product by industry and across all industries.

Use of the North American Product Classification System (NAPCS)

The needs of analysts to study market shares and the demand for products can more effectively be met by compiling data relating to the products produced by industries and using a product classification based on demand-oriented criteria to group products by markets served. Users of NAICS may want to consider and evaluate whether the classification they require is industry-based or product-based and whether a product classification would best suit their needs.

The North American Product Classification System (NAPCS) is a classification that organizes goods and services throughout the economy in a systematic fashion. It will become a departmental standard classification for goods and services once completed in 2012. A description of NAPCS is available at the following link: Standard product classifications.

Structure of NAICS

The structure of NAICS is hierarchical. It is composed of sectors (two-digit codes), subsectors (three-digit codes), industry groups (four-digit codes), and industries (five-digit codes).

NAICS agreements define the boundaries of the twenty sectors into which the classification divides the economies of the three countries. Although, typically, agreement has been reached that comparable data will be made available for Canada, Mexico and the United States up to the five-digit industry level of NAICS, differences in the organization of production in the economies of the three countries necessitated certain exceptions. For some sectors, subsectors and industry groups, three-country agreement was reached only on their boundaries rather than on detailed industry structures.

NAICS agreements permit each country to create national industries below the industry level to meet national needs.

The numbering system that has been adopted is a six-digit code, of which the first five digits are used to describe the NAICS levels that will be used by the three countries to produce comparable data. The first two digits designate the sector, the third digit designates the subsector, the fourth digit designates the industry group and the fifth digit designates the industry. The sixth digit is used to designate national industries. A zero as the sixth digit indicates that there is no further national detail.

In general, the use of the same code across the three countries indicates that the class is comparable, even if the title is not identical because of differences in the use of language.

NAICS with Canadian detail is designated NAICS Canada while NAICS with the United States and Mexico's own six-digit detail are designated NAICS United States and Sistema de Clasificación Industrial de América del Norte (SCIAN) México, respectively.

Comparability among the three countries is indicated by superscripts at the end of class titles. The abbreviation "CAN" indicates a Canadian-only class, "MEX" indicates that the Canadian and Mexican classes are comparable, and "US" indicates that the Canadian and United States classes are comparable. When no superscript appears, the Canadian, Mexican and United States classes are comparable.

2012 NAICS Canada structure

NAICS Canada 2012 consists of 20 sectors, 102 subsectors, 323 industry groups, 711 industries and 922 Canadian industries, and replaces NAICS Canada 2007. The following summary table shows the counts of subsectors, industry groups, industries, and Canadian industries for each of the NAICS sectors.

Definition of the establishment

NAICS is a classification system for establishments. The establishment is defined as the smallest operating entity for which records provide information on the cost of inputs - capital, labour, energy, materials and services - employed to produce the units of output. The output may be sold to other establishments and receipts or sales recorded, or the output may be provided without explicit charge, that is, the good or service may be "sold" within the company itself.

The establishment in NAICS Canada is generally a single physical location, where business is conducted or where services or industrial operations are performed (for example, a factory, mill, store, hotel, movie theatre, mine, farm, airline terminal, sales office, warehouse, or central administrative office).

There are cases where records identify distinct and separate economic activities performed at a single physical location (e.g., shops in a hotel). These retailing activities, operated out of the same physical location as the hotel, are identified as separate establishments and classified in retail trade while the hotel is classified in accommodation. In such cases, each activity is treated as a separate establishment provided that: no one industry description in the classification includes such combined activities; separate reports can be prepared on the number of employees, their wages and salaries, sales or receipts, and expenses; and employment and output are significant for both activities.

Exceptions to the single location exist for physically dispersed operations, such as construction, transportation, and telecommunications. For these activities the individual sites, projects, fields, networks, lines, or systems of such dispersed activities are not normally considered to be establishments. The establishment is represented by those relatively permanent main or branch offices, terminals, stations, and so forth, that are either (1) directly responsible for supervising such activities, or (2) the base from which personnel operate to carry out these activities.

Although an establishment may be identical with the enterprise (company), the two terms should not be confused. An enterprise (company) may consist of more than one establishment. Such multi-unit enterprises may have establishments in more than one industry in NAICS. If such enterprises have a separate establishment primarily engaged in providing headquarters services, these establishments are classified in NAICS Sector 55, Management of companies and enterprises.

Although all establishments have output, they may or may not have receipts. In large enterprises, it is not unusual for establishments to exist to solely serve other establishments of the same enterprise (auxiliary establishments). In such cases, these units often do not collect receipts from the establishments they serve. This type of support activity is found throughout the economy and involves goods producing activities as well as services. Units that carry out support activities for the enterprise to which they belong are classified, to the extent feasible, according to the NAICS code related to their own activity. This means that warehouses providing storage facilities for their own enterprise will be classified as warehouses.

Determining the industry classification of an establishment

An establishment is classified to an industry when its principal activity meets the definition for that industry. This is a straightforward determination for establishments engaged in a single activity, but where establishments are engaged in more than one activity, it is necessary to establish procedures for identifying its principal activity.

In cases where there is more than one activity, the industry code is assigned based on the relative share of value-added. The activity with the largest value-added is identified as the establishment's principal activity, and the establishment is classified to the industry corresponding to that activity. For example, if the value added within an establishment consists of 40% from manufacturing dishwashers, 30% from manufacturing airspeed instruments and 30% from assembling clocks, it will be classified to NAICS 335223, Major kitchen appliance manufacturing. The assignment of the industry code is performed at the 6-digit level of the classification.

In most cases, when an establishment is engaged in more than one activity, the activities are treated independently. However, in some cases, the activities are treated in combination. There are two types of combined activities that are given special attention in NAICS. They are vertical integration and joint production (horizontal integration). These combined activities have an economic basis and occur in both goods-producing and services-producing sectors. In some cases, there are efficiencies to be gained from combining certain activities in the same establishment. Some of these combinations occur so commonly or frequently that their combination can be treated as a third activity in its own right and explicitly classified in a specific industry.

One approach to classifying these activities would be to use the primary activity rule, that is, whichever activity is largest. However, the fundamental principle of NAICS is that establishments that employ the same production process should be classified in the same industry. If the premise that the combined activities correspond to a distinct third activity is accepted, then using the primary activity rule would place establishments performing the same combination of activities in different industries, thereby violating the production principle of NAICS. A second reason for NAICS recognizing combined activities is to improve the stability of establishment classification, both over time and among the various parties that implement the classification. An establishment should remain classified in the same industry unless its production process changes; and different parties should code the same establishment or type of establishment in the same way. A consistent treatment of establishments with combined activities is more likely if they are classified to a single industry.

Vertical integration involves consecutive stages of fabrication or production processes in which the output of one step is the input of the next. In general, establishments will be classified based on the final process in a vertically-integrated production environment, unless specifically identified as classified in another industry. For example, paper may be produced either by establishments that first produce pulp and then consume that pulp to produce paper or by those establishments producing paper from purchased pulp. NAICS specifies that both of these types of paper-producing processes should be classified in NAICS 32212, Paper mills rather than in NAICS 32211, Pulp mills. In other cases, NAICS specifies that vertically-integrated establishments be classified in the industry representing the first stage of the manufacturing process. For example, steel mills that make steel and also perform other activities such as producing steel castings are classified in NAICS 33111, Iron and steel mills and ferro-alloy manufacturing, the first stage of the manufacturing process.

The joint production of goods or services represents the second type of combined activities. In some cases, these combined activities have been assigned to a specific NAICS industry. For example, establishments that both engage in the sale of new cars and also provide repair services are coded to NAICS 44111, New car dealers. In other cases, specific industries have been identified for these combined activities, such as NAICS 44711, Gasoline stations with convenience stores.

In some complex businesses, there are units that exclusively produce services in support of other units within the same company or enterprise. Examples of such units are transportation units, central administrative units and head offices. Such units are known as ancillary units and are classified according to the NAICS code related to their own activity. This means that a warehouse providing storage facilities for its own company or enterprise will be classified as a warehouse. Similarly, a head office providing headquarters services for its own company or enterprise will be classified to the head office industry.

Relationship between NAICS and ISIC Revision 4

Recognizing that economic statistics are substantially more useful if they are also internationally comparable, the Economic and Social Council of the United Nations (UN) first adopted an International Standard Industrial Classification of All Economic Activities (ISIC) in 1948. Since then, ISIC has been revised in 1958, 1968, 1989, and, most recently, in 2008. This 2008 version of the classification is referred to as ISIC Revision 4. With these various revisions, the Council has recommended that member states adopt, as soon as possible, the latest version of the classification, with such modifications as necessary to meet national requirements, without disturbing the framework of the classification.

Similar to NAICS, ISIC was designed primarily to provide a classification for grouping activities (rather than enterprises or firms), and the primary focus for the ISIC classification system is the kind of activity in which establishments or other statistical entities are engaged. Whereas the main criteria employed in delineating the divisions, groups and classes of ISIC are: (a) the character of the goods and services produced; (b) the uses to which the goods and services are put; and (c) the inputs, the process and technology of production, it is the third criterion of ISIC that corresponds to the conceptual basis of NAICS.

ISIC Rev. 4 groups economic activity into 21 broad sections, 88 divisions, 238 groups, and 419 classes. In the coding system, sections are distinguished by the letters A through U and the divisions, groups, and classes are identified as the two-digit, three-digit, and four-digit groupings, respectively. As was the case with NAICS, the most recent revision of ISIC also focused on improvements to the detail in services sections.

In the development and subsequent revision of NAICS industries, the statistical agencies of the three countries strove to create industries that did not cross ISIC two-digit boundaries. The 2007 revision of NAICS and revision 4 of ISIC increased comparability beyond previous levels. The 2012 NAICS revision maintains the same level of comparability with ISIC Rev. 4.

The third and fourth versions of ISIC put increased emphasis on harmonization with other activity classifications. ISIC Rev. 4 in particular was intended to have improved comparability with NAICS. The ISIC Rev. 4 revision process spanned several years and involved contributions from classification experts and users around the world, including NAICS experts. The revised ISIC structure is more detailed than the previous version, especially in the area of services. As well, to improve comparability explanatory notes have been extended to provide additional detail. This improved comparability reflects ISIC's central role in international comparison and analysis of industry statistics.

In addition to working to maintain coherence between NAICS and ISIC, international efforts have also focused on moving towards greater coherence between NAICS, ISIC and the Statistical Classification of Economic Activities in the European Community (NACE, Nomenclature statistique des activités économiques dans la Communauté européenne). NACE is very similar to ISIC, so improved convergence of NAICS with ISIC benefits convergence with NACE as well.

Classification Structure

The structure of NAICS Canada displays the codes and titles of the sectors, subsectors, industry groups, industry, and Canadian industries. In general, comparable sectors, subsectors, industry groups, industries carry the same code in NAICS Canada, NAICS Mexico and NAICS United States.

The superscripts at the end of NAICS class titles are used to signify comparability:

The concordance of the North American Industry Classification System (NAICS) Canada 2012 to the International Standard Industrial Classification of all Economic Activities Revision 4 (ISIC Rev . 4) is shown in the table below. The table shows the Canadian interpretation of the relationships between the two classifications.

The concordance is shown at the lowest level of both classifications, namely at the 6-digit level in NAICS and the 4-digit level in ISIC except in the three cases where the link is to a 3-digit ISIC code, where more precise links to ISIC are not possible.

The relationships between the two classifications can be simple or complex. The following examples are presented to illustrate how the table should be read.

In the first example, a NAICS class(first two columns: code, title) links exactly to one ISIC class (third and fourth columns: code, title), their coverage of activities being the same. All of the activities in NAICS 212210 are found in ISIC B0710.

In the second example, each NAICS class(first two columns: code, title) links to a portion of the same ISIC class (third and fourth columns: code, title). Each of NAICS 311340, 311351 and 311352 is a subset of ISIC C1073. The last column contains explanatory notes.

An asterisk attached to the ISIC alpha-numeric code indicates that a NAICS class is equal to a portion of an ISIC class. The explanatory note provides a short description of the nature of the overlap between the NAICS and ISIC classes.

In the third example, a NAICS class(first two columns: code, title) is equivalent to more than one ISIC class. NAICS 115210 is equal to ISIC A0162 plus a portion of ISIC M7500. The last column contains explanatory notes.